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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> P & O Property Holdings Ltd v Glasgow City Council [1998] ScotCS 64 (11 November 1998) URL: http://www.bailii.org/scot/cases/ScotCS/1998/64.html Cite as: [1998] ScotCS 64, [2000] RA 447, 1999 SCLR 216

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In this action the pursuers seek declarator that they are not liable under section 24(3) of the Local Government (Scotland) Act 1966 or otherwise for any payment in respect of rates in relation to the shop property at 59 Kinfauns Drive, Drumchapel, Glasgow, formerly occupied by Pars Bakery Limited until the lease thereof under which that company is tenant is determined by the pursuers.

It is convenient to begin by noting the terms of section 24 of the 1966 Act, as substituted by section 154 of the Local Government etc. (Scotland) Act 1994. So far as material for present purposes, they are as follows.

It is matter of admission that the subjects with which this action is concerned are of a class prescribed for the purposes of section 24(3) under the Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1994.

The circumstances of the case may be summarised as follows. By lease dated 16 August and 14 September 1982 the shop premises at 59 Kinfauns Drive, Drumchapel, which form part of Drumchapel Shopping Centre, were let by Zip Properties Limited ("Zip") to Pars Bakery Limited ("Pars"). The lease was for the period from 24 June 1982 to 23 June 2002. Pars entered into occupation of the shop, and continued in such occupation until about March 1997. The pursuers (who in 1991 acquired by assignation the tenant's interest in the ground lease of the Drumchapel Shopping Centre granted in 1986 by the defenders' predecessors, the City of Glasgow District Council, in favour of Byrom Properties Limited) were by March 1997 the successors to Zip in the landlord's interest in the lease of the shop to Pars. In March 1997 Pars (who had changed their name to Starpro Limited, but whom I shall continue to call Pars) went into creditors' voluntary liquidation. Their liquidator wrote to the pursuers on 17 March 1997 intimating that he would not be adopting the lease, and returning the keys. The pursuers accepted return of the keys, but did so without prejudice to their rights against Pars, and stressed that they had not taken any steps to secure vacant possession. The pursuers aver, and the defenders believe it to be true, that the shop has been unoccupied since March 1997. It is further averred by the pursuers, and admitted by the defenders, that Pars has not been dissolved.

Clause TENTH of the lease provides inter alia that:

The pursuers aver that they have neither irritated the lease of the shop nor accepted a repudiation of it by the tenant. That averment is not known and not admitted by the defenders. The defenders aver that in June 1997 the pursuers' agents advised them that the pursuers were marketing the shop. The pursuers do not admit that averment, but do admit that in April 1998 they sought the consent of the defenders as head landlords to a proposed lease of the shop to the Victoria Wine Company, which consent was given. The grant of that lease has been held up by licensing difficulties, but these are now resolved. The defenders call upon the pursuers to specify on what basis they negotiated the proposed new lease with the Victoria Wine Company. The pursuers respond by averring that they received an unsolicited approach from that company's agents. They go on to explain that once the licence is granted, they "will then opt to determine the lease in favour of Pars ... and enter into a lease with the Victoria Wine Company".

The issue which arises for determination, and in respect of which the case was appointed to debate, is whether the pursuers are or are not "a person entitled to possession" of the shop. If they are, they are liable in terms of section 24(3) to pay rates on the unoccupied shop at the half rate provided for in that subsection. If they are not, they have no liability under section 24(3) or otherwise to pay rates in respect of the shop.

The pursuers' position is concisely stated in the first two sentences of article 6 of the condescendence. They aver:

Mr Abercrombie began his submissions for the defenders by seeking to put the amended version of section 24 in the context of its legislative history, which is set out in Armour on Valuation for Rating, 5th Edn., paragraph 14-12. Originally there was nothing to prevent an owner from avoiding liability for rates by leaving a property unoccupied (Greenock Corporation v Arbuckle Smith & Co Ltd 1960 SC (HL) 49, per Viscount Kilmuir at 55-6; Westminster Council v Southern Railway [1936] AC 511, per Lord Russell of Killowen at 529). Section 243 of the Local Government (Scotland) Act 1947, which was amended on a number of occasions, made provision for remission of rates when subjects were unoccupied for a period. The original form of section 24 of the Local Government (Scotland) Act 1966 provided that:

In 1994 that provision was replaced by the current provision quoted above. Mr Abercrombie stressed the change from "the person" in the original version of the section to "A person" in subsection (3) of the amended version. He drew attention, too, to the Schedule to the Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations, where, in defining those cases to which section 24(3) would not apply, categories are identified by the use of the phrase "the person entitled to possession". He submitted that the section was designed to prevent persons deliberately leaving lands and heritages vacant to avoid liability for rates. He submitted that the change from the definite to the indefinite article must be seen to be deliberate, that accordingly when seeking to apply section 24(3) it had to be recognised that Parliament had envisaged that there might be more than one person entitled to possession, and that liability would fall on the pursuers if they were one of the persons entitled to possession of the shop, even if they were not the only person so entitled. He submitted that the pursuers were "a person entitled to possession" by virtue of the facts (i) that they were Pars' landlords in succession to Zip, and (ii) that they were tenants under the head lease.

In developing his submission based in the change in the language of section 24, Mr Abercrombie recognised that only one person could be in actual possession, but submitted that that did not exclude the possibility of more than one person being entitled to possession. When the indefinite article was used in a context in which the definite article had previously been used, and when in another related context (the Schedule to the Regulations) the definite article was again used, it was to be inferred that in using the language which was used in the substituted version of section 24 Parliament intended a difference of meaning, which could only be a recognition of the possibility that more than one person might simultaneously be entitled to possession. As an example of account being taken of the use of the indefinite article in the construction of a statutory provision, Mr Abercrombie cited Motherwell District Council v Gliori 1986 SLT 444, per Lord Justice Clerk Ross at 447F-G.

Mr Abercrombie then submitted that while in a question between the landlord and tenant of a subsisting lease the tenant might be said to be "the" person entitled to possession, in a question with any third party the landlord was "a" person entitled to possession, although he might not have an immediate right to take possession from the tenant. In assessing the merit of the pursuers' contention that so long as the lease subsists Pars have a better right to possession than the pursuers, the court must pay attention to the fact that the liquidator has twice stated that he is not going to adopt the lease. The liquidator cannot be forced to take up the tenancy. If the pursuers, without giving formal notice of termination under Clause TENTH of the lease, were to proceed to re-let the shop, any attempt by the liquidator to change his mind and seek to assert a right to adopt the lease would surely be met by a plea of personal bar. But in any event, even if the liquidator had a better right to possession than the pursuers, that did not prevent the pursuers from being "a" person entitled to possession. Where there was a chain of leases, circumstances could be envisaged in which events had occurred which made the tenant at each level vulnerable to removal. In such circumstances there might be a number of persons each of whom, in a question with third parties, could be regarded as "a" person entitled to possession.

Mr Abercrombie further submitted that the pursuers' own actings were inconsistent with their denial that they were entitled to possession. They had accepted return of the keys of the shop. They had marketed the lease of the shop and reached agreement with a new tenant which had only been prevented from coming into effect by the licensing difficulties. In that connection they had presumably given access for inspection of the shop to the proposed new tenants. Those actings were the actings of a person entitled to possession.

Finally, even if the pursuers' averment that they had neither irritated the lease nor accepted a repudiation of it by the tenants was correct, that did not prevent the pursuers from being "a" person entitled to possession. Mr Abercrombie gave two examples to illustrate his submission. A person entitled to vote who chose not to vote did not thereby cease to be a person entitled to vote. A person injured by a wrongful act was entitled to damages from the wrongdoer, whether he chose to raise an action or not. The only thing standing between the pursuers and entitlement to possession was the pursuers' own act in refraining from terminating the lease. They were entitled to terminate the lease. If they did so they would, even on their own argument, be entitled to possession. It was therefore right to regard them as entitled to possession even before they terminated the lease. In the Concise Oxford Dictionary the meaning of "entitle" was given as "(of circumstances, qualities, etc.) give (person etc.) a claim (to a thing, to do)". The pursuers were a person entitled to possession because their rights, as they presently existed, enabled them, if they chose, to take possession. It did not matter that they required to take a preliminary step, namely terminating the lease, before taking possession, since that preliminary step was one they were entitled to take.

Mr Haddow for the pursuers submitted that the error which pervaded the defenders' submissions was the attempt to equate a person who is entitled to possession with a person who is entitled to take a step which would terminate another's entitlement to possession, and thus bring about his own entitlement to possession. So long as the lease had not been terminated, Pars remained the person entitled to possession. It would only be if and when the pursuers served notice terminating the lease, and thus brought to an end Pars' entitlement to possession, that they would themselves be a person entitled to possession of the shop.

In response to the argument that the use of the indefinite article in section 24(3) meant that there might be more than one person entitled to possession at the same time, Mr Haddow pointed out that the section contained no guidance to the rating authority as to how it should proceed if there were more persons than one entitled to possession. The language of the section did not appear to confer on the authority a discretion to select which person entitled to possession should be held liable. Nor was there any provision for the exercise of a right of relief or contribution by the one held liable against the other or others. The section provides that "[a] person entitled to possession ... shall be liable", and it is to "that person" that the enactments relating to rating are to apply as if he were in occupation. When regard was had to these considerations, the change from the definite to the indefinite article was to be seen as merely stylistic or grammatical, and not as expressing a change of legislative intent. With reference to Motherwell District Council v Gliori, Mr Haddow referred to Lord Dunpark's fuller treatment of the point about the use of the indefinite article at 449D-G.

Proceeding on the basis, therefore, that the section contemplated that there would be a single person entitled to possession at any given time, Mr Haddow submitted that the landlord was not entitled to possession where the lease had not been terminated and the tenant, although in liquidation, was not dissolved. The liquidator would only be entitled to possession as liquidator if he adopted the lease, and it was known that Pars' liquidator had not done that. But conversely, notification by the liquidator that he was not adopting the lease did not bring the lease, or the tenant company's right to occupation, to an end. The position was different where a liquidator disclaimed a lease as onerous property under section 178 of the Insolvency Act 1986 - then the effect of subsection (4)(a) was to determine the company's rights under the lease; but that section applies only to a company which is being wound up in England and Wales.

Mr Haddow went on to refer to two English cases decided under provisions of the English rating legislation which correspond in purpose to section 24, and to draw support from them for his submissions. The relevant provisions are sections 45(1) and 65(1) of the Local Government Finance Act 1988. Section 45(1) is in inter alia the following terms:

Section 65(1) provides:

The first of the two cases was Kingston upon Thames London Borough Council v Marlow [1996] RA 87. The respondent had been the tenant of office premises. A dispute arose between him and his landlord over repairs. The landlord raised proceedings seeking damages for non-payment of a repair charge and forfeiture of the lease for breach of contract. The respondent vacated the premises and wrote to the landlord stating that he was relinquishing the tenancy. The rating authority subsequently sought from the respondent rates for a period after he had vacated the premises. It was held, on appeal, that the respondent was no longer the person entitled to possession during the relevant period. The basis of the decision was set out by Simon Brown LJ (at 91) as follows:

In a subsequent passage in the judgment, on which Mr Haddow and Mr Abercrombie each sought to rely in support of their respective positions, Simon Brown LJ added:

Mr Haddow relied on the dictum that "in law only one of them is properly entitled to possession". Mr Abercrombie, on the other hand, sought to draw support from the observation that "both landlord and tenant ... have a better right to possession than anyone else".

The second case cited by Mr Haddow was Re Sobam BV and Satelscoop BV v City of London [1996] RA 93. There two companies, the landlords in a lease, had borrowed on security of debentures which created charges over the subjects of the lease. Receivers were appointed under the debentures. The lease expired and the tenants surrendered possession to the receivers. Thereafter the subjects were unoccupied. In their dealings with the subjects the receivers acted as agents of the companies. The rating authority sought to hold the receivers responsible for the payment of rates in respect of the unoccupied property. It was held that the receivers were not liable to pay rates because they were not the person entitled to possession. The reasons for that conclusion were set out by Arden J (at 108) as follows:

Mr Haddow founded in particular on the second paragraph of that passage.

The defenders' averments about the negotiation of the new lease with the Victoria Wine Company were, said Mr Haddow, irrelevant. Those negotiations did not yield the inference that the pursuers had terminated Pars' lease. They were consistent with the approach explained in the pursuers' pleadings, namely that once a licence had been issued in favour of the Victoria Wine Company the pursuers would then determine Pars' lease and enter into the new lease.

It is, in my opinion, an ordinary incident of a lease that during its subsistence entitlement to possession of the subjects of the lease rests with the tenant to the exclusion of the landlord. From the moment when the tenant is given entry to the subjects until the lease is validly terminated, in a question between the landlord and the tenant it is the tenant, and not the landlord, who is entitled to possession of the subjects. Once the lease comes to an end, or the tenant ceases to exist, entitlement to possession reverts to the landlord. There is, no doubt, a sense in which during the subsistence of the lease both the landlord and the tenant have, as Simon Brown LJ said in Kingston upon Thames LBC v Marlow (at 91), "a better right to possession than anyone else". That is so in the sense that, even when the tenant is entitled to possession as against the landlord, the landlord remains entitled to resist the claims of any third party to possession. It seems to me to be clear that Simon Brown LJ meant no more than that, since he went on at once to say of the landlord and tenant that "in law only one of them is properly entitled to possession". It is therefore in my opinion unsound to argue, as Mr Abercrombie sought to do, that the earlier passage justifies the conclusion that the landlord and the tenant have concurrent entitlement to possession, sufficient to enable them both at once to qualify as "a person entitled to possession" within the meaning of section 24(3).

It is clear that in terms of Clause TENTH of the lease when Pars went into liquidation the pursuers became entitled to terminate the lease. The lease did not, however, automatically come to an end. The pursuers acquired an option to terminate it. To exercise the option, the pursuers required to follow the procedure specified in the clause - they required to declare in writing that they had exercised their option. Unless and until such written declaration is made the lease remains in subsistence. So long as it remains in subsistence Pars remain vested in the tenant's entitlement to possession of the shop. The fact that the liquidator, having declined to adopt the lease, has no entitlement to possession, does not mean that the pursuers are by default the person entitled to possession. The liquidator's intimation that he was not adopting the lease had no effect on the continuing subsistence of the lease. It was not even, in my opinion, a repudiation of the lease which the pursuers might have accepted to the effect of terminating the lease. In these circumstances the distinction which the pursuers seek to draw between entitlement to possession, on the one hand, and entitlement to terminate the lease and thus bring about the cessation of the tenant's entitlement to possession and the re-emergence of their own entitlement to possession, on the other hand, is in my opinion sound. In that respect I agree with the view expressed by Arden J in the second paragraph of the passage from her judgment quoted above.

It might be thought that to make that distinction is to be over-analytical. There is a sense in which, once an event has occurred which entitles a landlord whenever he chooses to bring the lease to an end by simply declaring that he is exercising an option to do so conferred on him in the lease, the landlord might be said to be in substance entitled to possession. In my opinion, however, that broader sense of entitlement to possession is not what is contemplated in section 24(3). If that broad sense is to be adopted, one consequence is that there will, after the tenant's liquidation and before the landlord gives written intimation that he is exercising his option to terminate the lease, be two persons entitled to possession, namely the tenant in the narrow sense and the landlord in the broader sense. On a proper reading of section 24(3), however, it is in my opinion clear that it does not contemplate a situation in which more than one person may simultaneously be entitled to possession. That in my opinion follows from the fact that the subsection is expressed in absolute terms - "A person entitled to possession ... shall be liable to pay a rate", and does not contemplate or attempt to regulate the exercise of a discretionary choice by the rating authority of which of two or more persons entitled to possession is to be held liable to pay.

That construction of section 24(3) is, in my opinion, entirely consistent with the use of the definite article - "A person". I am unable to accept Mr Abercrombie's submission that the change from the definite article in the original version of section 24 to the indefinite article in the version substituted in 1994 is the reflection of an intention to introduce the possibility of there being simultaneously more than one person entitled to possession. It seems to me to be plain that the change is no more than a matter of drafting style. The fact that the definite article is used in the Schedule to the 1994 Regulations seems to me to militate against Mr Abercrombie's argument, rather than support it. The Schedule contains the criteria for determining whether or not the lands and heritages in question are prescribed and thus fall within the scope of section 24(3). These criteria (in particular, Part 1, paragraphs (c) and (d)) are expressed in terms of "the person entitled to possession", and therefore appear to contemplate that there will be a single person identifiable as "the person". Mr Abercrombie's submission contained no satisfactory explanation for that divergence between the Schedule and the section. Moreover, the fact that the corresponding English provision (section 65(1)) uses the definite article is a further obstacle to the acceptance of Mr Abercrombie's submission. It is no doubt right that, by itself, the use of the indefinite article would be consistent with the construction for which Mr Abercrombie contended, but it does nothing to support that construction in preference to the pursuers' construction, and is in my opinion quite insufficient to outweigh the other aspects of the language of the section which, as I have indicated, I regard as pointing clearly to the correctness of the pursuers' construction.

The defenders' averments about the re-letting of the shop are not, in my opinion, relevant. The explanation which the pursuers offer, that they intend in due course to intimate the exercise of their option to terminate Pars' lease and only thereafter to grant the new lease, illustrates that the defenders' averments on this point are quite consistent with the continuing subsistence of Pars' lease, and thus the continuation of the state of affairs in which Pars are the person entitled to possession of the shop.

I am therefore of opinion that, provided the pursuers' averment that they have not irritated or accepted repudiation of the lease is well founded in fact, the pursuers are not a person entitled to possession of the shop, and are consequently entitled to the declarator which they seek. Their case is, however, periled on the truth of that averment. It is not admitted by the defenders; their response is "not known and not admitted". I am therefore of opinion that decree cannot be granted until that factual issue is resolved. It would, however, in my opinion, be unsatisfactory to allow a proof restricted to that single issue. I shall therefore put the case out By Order with a view to ascertaining whether the defenders insist on the point and, if so, how it can most efficiently be resolved.