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A recent ruling in the Appeal Court has added a new twist to the law over rateable occupation, particularly in respect of warehouses.
It is a recognised principle that premises possession does not necessarily constitute occupation for business rates. But warehouses can remain empty while occupiers are sought and are treated as occupied for business rate purposes even when empty.
Now, Abbey Self Storage, of Newcastle-Upon-Tyne, has mounted a successful challenge to the council business rates levy. The company provides storage space in individual lockable units which are built to customer demand. Customers occupy the units under licence and are responsible for their own insurance and moving goods in and out.
Newcastle-upon-Tyne City Council issued a distress warrant for £39,265 against Abbey for non-payment of rates in respect of part of the premises. It had always been accepted that the premises comprised seven units to be considered individually for rating purposes.
Some of the units it was accepted were occupied, but the remainder were empty and no lockable units had been installed in them. Abbey disputed rates liability for those areas.
Newcastle magistrates took the view that because the company had a continuing intention to use the disputed units, even though they had not been fitted out for occupation, and because those areas could be made available at short notice, the company was in rateable occupation. That view was upheld by Mr Justice Macpherson in the High Court.
However, in a challenge to the decision mounted by Abbey, the Appeal Court has ruled the magistrates and the High Court were wrong.
Lord Justice Roch, sitting with Lord Justices Stuart-Smith and Evans, said four factors make up occupancy liability. They are: actual occupation or possession; exclusive occupation or possession for the purpose of the occupier; possession had to be of some value or benefit to the possessor; and possession should not be for too transient a period.
He said Abbey was not in actual occupation or possession, and possession of the empty units was not of value or benefit to it as there had been no enjoyment of the disputed areas for the purpose they had been acquired for. In those circumstances he did not consider Abbey was liable for the rates in question. Legal possession of land was insufficient to make an occupier liable for rates.
Catherine Montgomery, assistant solicitor with London firm McKenna & Co's planning team who spearheaded the battle, said the ruling has "refined" existing law.
She said it has created a situation where owners of similar premises could save substantial sums by rethinking their use along the lines of Abbey rather than for straightforward warehousing.
"The decision adds another twist to the law concerning rateable occupation. It is now clear that, on these facts, de facto rather than de jure occupation is required in order to constitute rateable occupation," Montgomery said.