Aug 14, 2019

Super sharp spotters.


Sham legal documents are created for all sorts of nefarious purposes, but judges are well practised at uncovering them. In a case on point, a sham lease created with the intention of evading business rates failed to convince the High Court.

After receiving non-domestic rates demands for over £62,000 from a local authority, a commercial property owner claimed that it had not been in rateable occupation of the premises during the relevant period, having leased them to a corporate tenant. The purported lease did not, however, fool a district judge, who rejected the owner’s challenge to the bills.

In dismissing the owner’s appeal against that decision, the Court noted that the tenant was an off-the-shelf company that had been dormant throughout. It had nominal assets, no revenue or expenditure and was wound up for debt by a different local authority.

The lease as originally drafted was an inconsistent and nonsensical document, not least because it did not set a contractual term of months or years for which the lease would run. Untrue evidence had been given to the Court and the reality was that no commercial bargain had ever been entered into. The owner had granted licences of parts of the premises to other businesses in a manner that would have been invalid and illegitimate had the lease been anything other than a sham.

There was never any bona fide intention to pass rateable occupation to the tenant, which was a tenant of nominal means and had paid no rent. It never had the means to pay the rates, nor had it ever been intended that it would do so. The evidence that the lease was a sham was overwhelming and the Court found that it had not created either a contractual tenancy or a licence to occupy. The district judge was therefore right to find that the rates liabilities fell directly upon the owner.