Life After Hurstwood

Image: Luke Ellis-Craven/lukeelliscraven/Unsplash
Image: Luke Ellis-Craven/lukeelliscraven/Unsplash

This question was recently considered by the Sheffield Magistrates Court in which two of our specialist ratings lawyers, Senior Associate Nicky Kinnear and Associate Director Alex Worthington assisted Rotherham Metropolitan Borough Council in securing the settlement of an unpaid Non-Domestic Rates debt and legal costs of £347,000.

The case

An office building situated in a business park in Rotherham was owned by a family trust based in Gibraltar.  The trust Company was registered as the leasehold owner of the building with HM Land Registry and a London property agent had been nominated to receive notices on the Company’s behalf.

The Council duly served demand notices for business rates addressed to the Company upon the agent.  A summons was issued following the Company’s failure to pay the rates.  The Company prepared a response to the complaint in which it argued that it was not liable to pay rates for the building because it had granted a lease to another Company. 

The Council rejected the lease as having effectively transferred the Company’s liability to pay business rates to the tenant. The tenant was a special purpose vehicle (SPV) that had been incorporated by the operator of a rates mitigation scheme with the sole purpose of assisting landlords with avoiding business rates.  

The lease

The lease in question had been granted for a 3-year term to the SPV which had a single director, Nicholas Gough.  The document included an express declaration that the Company and SPV had entered into the contract with the intention of business rates mitigation. A rent of £1 per year was payable and the agreement required the Company to pay the SPV a fee if it wished to terminate the lease before the end of 3 years.

The SPV was placed into members voluntary liquidation within a week from the date on which the lease was granted.  The SPV is understood to have taken on several other leases across the country before it entered liquidation.

There was no dispute that the Company had utilised a specific form of mitigation scheme that involved the grant of a lease to an SPV which was then placed into members voluntary liquidation.

A liquidator’s liability to pay NDR for an empty hereditament is exempt by regulations. Accordingly, the scheme used by the Company relied upon the lease remaining in place until disclaimed by the liquidator or the Company dissolved, thereby shielding the Company from a liability to pay NDR.

The lease specifically included a determination premium to justify the prolonged liquidation of the Company. 


A claim in which the effectiveness of an earlier variation of the SPV lease scheme reached the Supreme Court in 2021 (Hurstwood Properties (A) Limited and others v Rossendale Borough Council and another [2021] UKSC 16 as an appeal on an interim application (‘Hurstwood’).

Hurstwood has settled since the appeal however a cohort of associated proceedings are continuing in the High Court, including the matter of City of Bradford Metropolitan District Council v Inverworth (‘Inverworth’).

The Company argued that the Sheffield Magistrates Court could not adjudicate upon Rotherham’s complaint because the High Court was expected to set a precedent in the effectiveness of the SPV lease in the ongoing Hurstwood proceedings. Inverworth was said to be important because the scheme in that case was the same scheme used by the Company, and that the two cases were therefore identical.

The Hurstwood test

The effect of the Supreme Court’s judgment in Hurstwood has clarified the meaning of the word ‘owner’ for the purposes of Section 45 of the Local Government Finance Act 1992 being a person who:

  1. As a matter of the law of real property has the immediate legal right to possession of the property in question.


  1. Has a real and practical ability to bring the property back into use by either occupying it themselves or placing someone else into occupation of it.

Stay or go?

The Company argued that the Council’s claim had to be stayed because it was identical to Inverworth and furthermore, the High Court also had to decide whether the Hurstwood test was only intended for the types of leases considered by the Supreme Court in Hurstwood and not to every other ownership case.

In the face of repeated demands to stay the summons Rotherham, assisted by legal guidance and support from Greenhalgh Kerr pressed ahead.

An initial application to the Court to stay the claim was successfully fought off by Alex Worthington representing the Council at a case management hearing.  However, the Company successfully argued for a trial of the matter to be adjourned in order for further evidence in the case to be produced.

Despite having demanded permission to produce further witness evidence in the case the Company seized the time allowed to prepare statements as an opportunity to present another application to stay the proceedings. The second application argued that Inverworth was inextricably associated with the Council’s claim, such that it would be disproportionate and pointless for the Council’s case to proceed.

In continuing to represent the Council Alex Worthington argued the Court could not reasonably be expected to allow all proceedings in which the ownership was in dispute to be stayed until the residual Hurstwood cases, including Inverworth, have been tried.

In simple terms it is clear that each ownership case has to be considered on its own facts thus the Magistrates’ Court need not wait for the High Court to reach a decision in Inverworth, or any of the other cases proceeding in the cohort of test cases following Hurstwood. 

The judge refused the Company’s application for a stay rejecting the contention that a Magistrates Court could not hear Rotherham’s complaint before Inverworth had been decided commenting that:

‘Having reviewed the Supreme Court case of Hurstwood it remains clear that the criteria to apply is a purposive interpretation of section 65 LGFA-88, against the factual context of individual cases, utilising the guidance in Paragraph 46 of that Judgement. By their very nature, individual cases are individual and require a fact specific enquiry. It will involve an interpretation of the timeline of events and the conduct of the ‘parties’ in those individual cases.’



Following 2 years of legal dispute surrounding whether Rotherham could continue with a case against the Company, 3 directions hearings and an adjourned trial the Company’s legal representatives invited a without prejudice discussion to conclude the case. By this time all attempts by the Company to stay the case had been exhausted and it was clear that a trial of the matter would take place.

The Company initially offered to pay the business rates on a without prejudice basis without any order for costs.

The proposal was not acceptable to the Council because of the significant legal costs that had been incurred in its battle against the Company to continue with the proceedings including the cost of an adjourned trial.

Further negotiations led to a settlement including 90% of the Council’s legal costs being recovered.


What next?

Rotherham’s case did not reach trial but provides a firm indication that, as can be seen from the judges’ comments, the Magistrates Court need not wait for Inverworth to be heard before it can proceed with cases of this kind.

Each and every case where a dispute as to the identity of the owner arises, must be considered on its own facts and merits.

Notwithstanding this the application of the Hurstwood test continues to be subject to lines of attack by ratepayers, their agents and legal representatives who continue to argue that the test only applies to a special selection of cases.

Inverworth is understood to be proceeding in the High Court and the trial will take place in 2025.  The Court is expected to apply the Hurstwood test to the case specific facts in Inverworth but might provide local authorities, ratepayers and their agents with further guidance relating to the application of the Hurstwood test.

For the time being we say that disputes where the identification of the owner of an empty property are subject to the Hurstwood test and those where a PAG (3) lease has been used can be determined by a Magistrates court.


Further information

For further information regarding the case or assistance with a business rates dispute  or issue surrounding the identification of the owner, please do not hesitate to contact Alex Worthington or Nicky Kinnear of Greenhalgh Kerr Solicitors by email to or by phone on 0333 200 5200 who will be happy to assist.


Nicky Kinnear

Greenhalgh Kerr
Olympic House, Beecham Court,
Smithy Brook Rd,
Wigan WN3 6PR

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+44 (0)333 200 5200

We are confident in our work and we know that recoveries is a key part of a lender or creditor’s business

We are confident in our work and we know that recoveries is a key part of a lender or creditor’s business. We have designed our pilot projects to give lenders and creditors the comfort and confidence in our service before formally and fully switching recoveries providers. This time also allows new clients to benchmark our service levers and results against existing providers and others.

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