Beck Foods Ltd & Anor, Re v Mr Richard Rees & Anor [2001] EWCA Civ 1934 (20th December, 2001)

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England and Wales Court of Appeal (Civil Division) Decisions

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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1934.html
Cite as: [2002] BPIR 665, [2001] EWCA Civ 1934, [2002] 1 WLR 1304, [2002] NPC 8, [2002] 2 EGCS 101, [2002] RA 23, [2002] BCC 495, [2002] WLR 1304

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Beck Foods Ltd & Anor, Re v Mr Richard Rees & Anor [2001] EWCA Civ 1934 (20th December, 2001)

		Neutral Citation Number: [2001] EWCA Civ 1934 Case No: B2 2001 0028
		Neutral Citation No. [2001] EWCA Civ 1934 Case No: B2 2001 0028 CHANF

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (Mr Justice Jacob)

Royal Courts of Justice
Strand, London, WC2A 2LL

20 December 2001

B e f o r e :

LORD JUSTICE PILL
and
LORD JUSTICE JONATHAN PARKER
____________________

In the matter of BECK FOODS Ltd
Boston Borough Council
Appellants

and

Mr Richard Rees and Mr Gordon Bennett (Receivers)
Respondents

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr Robin Knowles QC and Miss Lucy Frazer (instructed by Messrs Chattertons for the Appellants)
Mr Gabriel Moss QC and Miss Hilary Stonefrost (instructed by Messrs Evershedsfor the Respondents)
____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________

Lord Justice Jonathan Parker :

INTRODUCTION

This is an appeal by Boston Borough Council (“the Council”), the respondent in the proceedings, against an order dated 21 December 2000 made by Jacob J, whereby he declared that Mr Richard Rees and Mr Gordon Bennett (“the Receivers”), the applicants in the proceedings, were not personally liable to pay non-domestic rates in respect of commercial premises at New Hammond Back Road, Wyberton Fen, Boston, Lincolnshire for the period from 18 April 1997 to 17 November 1997. The judge granted permission to appeal. The Receivers are the respondents to the appeal. By a Respondents Notice they seek to uphold the judge’s order on additional or alternative grounds.

The Council appears by Mr Robin Knowles QC and Miss Lucy Frazer; the Receivers by Mr Gabriel Moss QC and Miss Hilary Stonefrost.

FACTUAL AND PROCEDURAL BACKGROUND

The material facts are not in dispute and can be shortly stated. The Council is the local rating authority for the area in which the premises are situated. At all material times, the premises were owned by Beck Foods Limited (“the Company”), which carried on there the business of meat and burger processing. On 3 February 1997 National Westminster Bank plc appointed the Receivers administrative receivers of the Company pursuant to a Mortgage Debenture dated 7 September 1990. Clause 8 of the Mortgage Debenture provided (so far as material) that any receiver appointed thereunder should be the agent of the Company. Shortly after their appointment the Receivers closed down the meat processing business, but they continued to run the burger processing business at the premises. On 18 April 1997 the Company was placed in creditors’ voluntary liquidation.

The initiative for the liquidation of the Company came from the Receivers. The debenture-holder had largely been paid off, and the Receivers were concerned that the interests of the unsecured creditors should be protected.

Following the commencement of the voluntary liquidation, as the judge noted (in para 2 of his judgment):

“At the premises, there was no change: the burger processing continued as before with the [Receivers] making site visits about once a week. The former managing director was employed at the liquidator’s expense.”

As Mr Rees says in paragraph 12 of his first witness statement:

“There was no change in the operations carried on at the Premises, or to any part of the business carried on by the Company between the period immediately prior to the Company being placed in liquidation on 18 April 1997 and the period thereafter save that following the appointment of the Liquidators Mr Bond [the former managing director] was employed at the Liquidators’ expense.”

In his second witness statement Mr Rees says this (in paragraphs 3.8 and 3.9), in answer to questions raised by the Council:

“3.8 Did the Liquidator have any responsibility at all for running the business and did he ever enter the Premises?

The Liquidators did not have any responsibility for the running of the business from the Premises. This responsibility remained with the Administrative Receivers. I am aware that the Liquidators or their staff may have visited the Premises on certain occasions but these visits were not related to the running of the business of the Company.

3.9 Were the Administrative Receivers authorised by the Liquidators to continue running the business on behalf of the unsecured creditors?

The Administrative Receivers did not require nor did they seek authorisation from the Liqidators to continue running the business on behalf of the unsecured creditors or otherwise.”

On 18 November 1997 the assets of the Company (including the premises) were sold. The contract of sale was signed on behalf of the Company by both the Receivers and the liquidators.

In due course the Council made demand on the Receivers for payment of non-domestic (i.e. business) rates in respect of the premises for the seven-month period from the commencement of the liquidation on 18 April 1997 until the sale of the Company’s assets on 18 November 1997. The Receivers disputed liability. A final notice was issued on 9 June 1999, and on 12 July 1999 the Council issued an application in the Magistrate’s Court for a liability order. The application was subsequently withdrawn, in the light of the Receivers’ intention to issue an application for directions under section 35 of the Insolvency Act 1986 (“the 1986 Act”) as to their liability for rates. The Receivers duly issued such an application, which was heard by Jacob J and which led to the order against which the Council now appeals.

THE RELEVANT STATUTORY PROVISION

The only relevant statutory provision is section 43(1) of the Local Government Finance Act 1988 Act, which provides as follows (so far as material):

“A person (the ratepayer) shall as regards a hereditament be subject to a non-domestic rate in respect of the chargeable financial year if the following conditions are fulfilled in respect of any day in the year –

(a) on the day the ratepayer is in occupation of all or part of the hereditament ....

(b) .... ”.

There is no statutory guidance as to the meaning of “occupation” for the purposes of section 43(1).

THE ARGUMENTS BEFORE JACOB J

Before Jacob J it was common ground (as it is on this appeal) (a) that, prior to its liquidation, the Company was in occupation of the premises for the purposes of section 43(1) (“rateable occupation”); and (b) that by virtue of section 44(1)(a) of the 1986 Act on the commencement of the liquidation the Receivers’ authority to act as agents of the Company came to an end. (Section 44(1)(a) provides that an administrative receiver is deemed to be the company’s agent “unless and until the company goes into liquidation”.)

The Receivers referred to the four requirements for rateable occupation as set out in Halsbury’s Laws of England 4th Edition reissue Vol 39(1) para 613, that is to say: (1) actual occupation; (2) the occupation must be exclusive for the particular purposes of the possessor; (3) the possession must be of some value or benefit to the possessor; and (4) the possession must not be for too transient a period.

The Receivers submitted, citing Holywell Union Asssessment Committee v. Halkyn District Mines Drainage Co [1895] AC 117, 125 per Lord Herschell, that:

“[t]he question as to whether a person is an occupier for the purposes of rating law is a question of fact and does not depend on legal title”.

The Receivers further submitted that, since there cannot be two separate occupiers for rating purposes (see In re Briant Colour Printing Co Ltd [1977] 1 WLR 942, 952), and since it was common ground that pre-liquidation the Company was in rateable occupation of the premises notwithstanding the appointment of the Receivers, the issue to be determined was whether on the commencement of the liquidation the Receivers became the rateable occupiers in place of the Company. Given Mr Rees’ unchallenged evidence that nothing changed “on the ground”, the only factor upon which the Council could rely as achieving that result was the cesser of the Receivers’ authority to act as agents of the Company. The Receivers submitted, relying on the decision of the Court of Appeal in Ratford v. Northavon District Council [1987] QB 357, that the mere cesser of the Receivers authority to act as agents could not have had that effect. In Ratford, Slade LJ (with whom Ralph Gibson LJ and Sir John Megaw agreed) held that the facts that the receivers in that case had had representatives on the company’s premises from time to time during the receivership and that the receivers had managed the company’s business and controlled its assets were “quite consistent with the company remaining in legal possession and rateable occupation of the premises” (see ibid. p.379B). Accordingly, he held that the rating authority had not established that the receivers were in rateable occupation of the company’s premises. As Slade LJ said in Ratford (at p.376E-F), referring to the decisions of the Court of Appeal in Re Marriage Neave & Co [1896] 2 Ch 633, of Astbury J at first instance in National Provincial Bank of England v. United Electric Theatres [1916] All ER 106 and of the Divisional Court in Gyton v. Palmour [1944] 1 KB 426:

“.... they all clearly show that the mere fact that a receiver has entered upon the company’s premises for the purpose of managing and carrying on its business does not necessarily mean that the company has been dispossessed or has ceased to occupy the premises for rating purposes. If it is to be shown that a change of rateable occupation has occurred, this conclusion must be derived from the terms of the receiver’s appointment or from what he has actually done, or from both together.”

They also relied on Slade LJ’s observation in Ratford (at p.378G-H) that, the receivers in that case having demonstrated that their appointment did not oblige them to take possession, and that in carrying out their duties they were deemed to be the agents of the company:

“.... the onus .... shifted to the council to show that the receivers had dispossessed the company, or, to put it another way, to show that the quality of any possession of the premises which the receivers might have enjoyed was not that of mere agents. For possession held by a person in his capacity as agent is in law the possession of his principal.”

The Receivers also relied on a passage from the judgment of Rigby LJ in Marriage Neave, where he said (at p.676):

“The argument that, because a receiver and manager is appointed, then ipso facto the company or persons carrying on business are turned out, is neither reasonable nor plausible. It is quite conceivable that these receivers might have performed all their duties without even seeing this property. They were to carry on business: they could have appointed a manager to carry on that business under them, to take his instructions from them. It might never be necessary for them to go near the property at all.”

On the basis of these and other authorities, the Receivers submitted that their functions of managing the Company’s business, authorising its outgoings and controlling its assets were not inconsistent with the Company remaining in rateable occupation of the premises and that the cesser of the Receivers’ power to act as agents of the Company could not amount to a dispossession of the Company so as to put the Receivers in rateable occupation of the premises in place of the Company.

The Receivers further submitted that it would be anomalous if the Council could improve its position by reason of the Company being placed in liquidation such that it would be paid in priority to the debenture-holder. The corollary would be that receivers would be deterred from taking steps to ensure that the interests of unsecured creditors were properly protected.

The Council contended that since by virtue of section 44(1)(a) of the 1986 Act the Receivers ceased to be agents of the Company on the commencement of the liquidation, in continuing to manage the Company’s business after the liquidation as principals the Receivers were in occupation of the premises for the purposes of section 43(1). It further submitted that the imposition of liability on the Receivers was not unjust since they could protect themselves by appropriate indemnities.

The Council prayed in aid the principle that once a receiver’s agency has been determined the receiver is personally liable for his own acts as principal, submitting that liability for rates is not to be treated differently from other liabilities for this purpose. In support of this submission the Council relied on the following passage from the judgment of Slade LJ in Ratford (at p.371H)):

“It is a general principle of rating law that where an agent is required to occupy a hereditament in order to secure the better performance of his duties as agent, his occupation is for rating purposes ordinarily treated as that of his principal. If, on the other hand, an agent occupies his principal’s property otherwise than in his capacity as agent, the occupation will be treated as his own for rating purposes.”

The Council accordingly submitted that throughout the period following the commencement of the liquidation the Receivers satisfied the fourfold test for rateable occupation set out above, and that it was not necessary for the Receivers to have “dispossessed” the Company.

THE JUDGMENT OF JACOB J

After summarising the Council’s argument, the judge turned to Slade LJ’s judgment in Ratford, and in particular to his reasons for rejecting the submission that, on the facts of that case, the receivers were rateable occupiers of the premises in question (see Ratford at pp.378D-379D). Applying the decision in Ratford to the four requirements for rateable occupation, the judge said this (in paragraph 8 of his judgment):

“Miss Frazer [for the Council] said that the [Receivers] were in actual occupation in the sense that they were making some use of the property by continuing to manage that business from the property. She said the occupation was exclusive because there was no occupation by the liquidator. Moreover, she said there was value or benefit to the [Receivers] and in that connection it made no difference that the [Receivers] were ultimately exercising their powers for another party. Finally, the occupation was not for a transient period.”

The judge continued (in paragraphs 9 to 11 of his judgment) as follows:

“9. It seems to me that the 4-fold test cannot be a complete test for rateable occupation. It in particular omits consideration of occupation as agent for another as was recognised by Ratford. An agent in actual occupation may well satisfy the 4-fold test. For instance the [Receivers] in Ratford would do so. So I do not think the test is helpful in this case, although of course in general the guidance given by it is significant.

10. I return to the heart of Miss Frazer’s submission. It lies in the changed status of the [Receivers’] formal powers to bind the company in contract, see [s.44(1) of the 1986 Act] and Thomas v. Todd [1926] 2 KB 511. But that does not mean that they could not act for the company in any way. Take a simple example. Suppose the liquidator asked them to act as agents to enter into a contract on behalf of the company. Of course they could have so acted. Liquidators are as much permitted to appoint agents as directors. So a power to act for, or on behalf of the liquidator personally (personally or for the company), need not stem from the terms of the debenture or s.44(1)(a).

11. Thus I do not accept Miss Frazer’s submissions. I do not think the question of occupation turns on the [Receivers’] powers to bind the company in contract. I think a better analysis is that at all times their occupation was on behalf of another – the company before the liquidation and the company or the liquidator (I do not decide) after. Putting it another way, the [Receivers] at no time, either before or after the liquidation, occupied on their own behalf.”

The judge went on to accept the submission of Miss Stonefrost (for the Receivers) that the existence or otherwise of rateable occupation is a question of fact, saying this (in paragraph 12 of his judgment):

“It is clear that receivers who actually enter the company’s premises for the purpose of managing and carrying on the business are not necessarily in rateable occupation. The cases cited in Slade LJ’s paragraph [(5)] show this to be so. And it is noticeable that Slade LJ does not refer or rely upon section 44(1)(a) or the terms of the debenture in reaching his conclusion. So I think proof of entry, management and running of the business by [receivers] is not enough to prove rateable occupation by them. What more must be shown? I think it something along the lines of an intention to act, or acts only consistent with, acting as a principal. I accordingly accept Miss Stonefrost’s submission that one must examine all the circumstances, and particularly examine what it is the [Receivers] were doing and the terms of their appointment. All they were doing here was managing the company’s business. That was as true after the liquidation as before (I leave aside the difficult question of whether the employees had been dismissed by operation of law upon the liquidation – see The Law of Receivers and Admninistrators of Companies, Lightman & Moss, 2nd edition 2000 para 19-007). The [Receivers] were not occupying on their own behalf before liquidation. After liquidation their lack of a standing power to bind the company contractually does not mean they occupied on their own behalf.”

Finally, the judge turned to what he described as Miss Frazer’s “merit” point, to the effect that receivers who wish to continue to run a company’s business after liquidation can seek an indemnity from the creditors, and that if receivers so doing were not in rateable occupation the result would be unfair to the Council since had the liquidator been in rateable occupation the rates would have been an expense of the liquidation and thus payable in full. As to that, the judge said (in paragraph 13 of his judgment):

“She may well be right about this. On the other hand it may be that it was the company which remained in occupation – a result which Miss Frazer submitted would be unfair since the Council would only come in after all the unsecured creditors. I do not purport to decide the matter one way or [the] other. My decision is merely that the [Receivers] were not in occupation as principals – whether they were occupying on behalf of the company or the liquidator personally is not relevant.”

For those reasons, the judge concluded that the Receivers were not personally liable for rates during the period from the commencement of the liquidation until the sale of the premises.

THE ARGUMENTS ON THE APPEAL

Mr Knowles begins his submissions by setting the scene in terms of the legal relationships subsisting post-liquidation. He submits that the absence of any evidence that the debenture-holder authorised the Receivers to continue to manage the Company’s business post-liquidation as its agents, coupled with the positive evidence of Mr Rees (quoted earlier) to the effect that they were not acting as agents of the liquidator and the operation of section 44(1)(a) in determining their agency on behalf of the Company, leads inevitably to the conclusion that in so doing they were acting as principals.

Further, he submits that the power of the Receivers under paragraph 1 of Schedule 1 to the 1986 Act to carry on the business of the Company came to an end on the liquidation. In support of this submission he relies on Thomas v. Todd [1926] 2 KB 511. That was a decision under the Companies Act 1908, but Mr Knowles submits that the statutory framework was in all material respects the same as that which obtains under the 1986 Act. In Thomas v. Todd Wright J said (at p.516), following the House of Lords decision in Gosling v. Gaskell [1897] AC 575 (which in turn affirmed the dissenting judgment of Rigby LJ in the Court of Appeal):

“It appears to be quite clear that the authority of the receiver and manager of a company to bind the company is terminated by the compulsory winding up of the company.”

Later in his judgment in Thomas v. Todd Wright J held (also on p.516) that the same consequence followed on a voluntary liquidation.

Mr Knowles submits that on the appointment of the Receivers those assets which had belonged to the Company immediately prior to such appointment ceased to be assets of the Company and became, by virtue of the crystallisation of the floating charge created by the Mortgage Debenture, assets of the debenture-holder. He submits, nevertheless, that in the period between their appointment and the commencement of the liquidation the Receivers managed and controlled those assets as the Company’s agents. However, he submits, that changed on the commencement of the liquidation, in that the Receivers thereafter acted as principals. In support of these submissions he relies on In re ELS Ltd [1995] Ch 11, a decision of Ferris J. The issue in that case was whether goods covered by a floating charge ceased to be “the goods of the company” on the crystallisation of the floating charge for the purposes of the regulations authorising distress for rates. Ferris J held that they did so cease, with the consequence that the remedy of distress was not available to the rating authority. Mr Knowles submits that that decision, and the reasoning which led to it, is applicable in the instant case.

Turning to the question of rateable occupation, Mr Knowles submits that the judge was right in deciding that the Receivers were in rateable occupation of the premises during the relevant period (i.e. post-liquidation), but wrong in deciding that their occupation was “on behalf of” another and not as principals.

He submits that, on the judge’s own analysis, the activities of the Receivers prior to liquidation were sufficient to satisfy the four-fold test for rateable occupation referred to earlier, and that the only reason the Receivers were not themselves in rateable occupation pre-liquidation was that they were at that stage acting as agents for the Company. It follows, he submits, that since the Receivers were acting as principals post-liquidation there is no basis for concluding that they were not themselves in rateable occupation.

Mr Knowles repeats the submissions made to the judge in reliance on Ratford. He points out that in Ratford, in contrast to the instant case, the Receivers were acting throughout as agents for the company.

Mr Knowles also fastens on the language of Slade LJ in Ratford when he said (at p.374D) that the mere fact that the receiver has entered upon the company’s premises for the purpose of managing and carrying on its business “does not necessarily mean” (my emphasis) that the company has ceased to occupy the premises for rating purposes. He submits that Slade LJ was leaving open the possibility that in some cases it might mean that, and that the instant case is such a case.

As to the trilogy of cases referred to by Slade LJ in Ratford (viz. Marriage Neave, National Provincial and Gyton), Mr Knowles points out that in each of those cases the receivers were appointed by the court (albeit that in Gyton the appointment by the court succeeded an earlier out-of-court appointment), and that under the terms of their appointment their powers were limited: in particular, they had no power to take possession of the company’s premises. That, he submits, was a crucial factor which is not present in the instant case. He accordingly submits that those cases are distinguishable from the instant case on that ground.

Mr Knowles submits that in any event the Receivers satisfied the fourfold test of rateable occupation during the period in question, in that (1) they made use of the premises and were accordingly in actual occupation of them; (2) they were in exclusive occupation in that they exercised control to prevent strangers from interfering; (3) that the Receivers’ occupation was of some potential value or benefit to unsecured creditors; and (4) that their occupation was not “transient” but continuous throughout the period.

Mr Knowles also repeats, albeit in slightly different terms, the “merit” points which Miss Frazer sought to make to the judge. In particular, he points out that had the liquidator authorised the Receivers to act on his behalf post-liquidation, the rates during the period in question would in normal circumstances have been treated as an expense of the liquidation. He submits that it is unsatisfactory and unfair that the Council should be prejudiced by the mere fact that such authorisation has not been given.

Mr Moss QC (for the Receivers) submits that it does not follow from the fact that (as is accepted) the Receivers’ agency under the Mortgage Debenture terminated on the commencement of the liquidation that the Receivers thereupon “dispossessed” the Company and themselves became the rateable occupiers.

Mr Moss submits that on the facts they clearly did not do so. He points out that it is not suggested by the Council that the Receivers did anything in relation to the Company’s assets after the commencement of the liquidation which was any different from that which they were doing previously. Indeed, the evidence establishes that they did not. He submits that it is clear from the passage from the judgment of Slade LJ in Ratford (at p.376E-F), quoted earlier, that the mere fact of the Receivers managing and carrying on the business does not of itself mean that the company has been dispossessed or has ceased to occupy the premises for rating purposes.

As to Marriage Neave, Mr Moss submits that that decision shows that the management and carrying on of the company’s business by a receiver appointed by the court (that is to say, by a receiver who was acting as principal and not as agent of the company) does not constitute a change of rateable occupation: the company remains the rateable occupier. He submits that no sensible distinction can be drawn between a receiver who begins his management as principal (as in Marriage Neave) and one who begins as an agent but who continues, after the commencement of the liquidation of the company, as principal (as in the instant case).

Mr Moss points out that in Gyton, in which Marriage Neave was followed, the Divisional Court specifically rejected the appellant’s contention that Marriage Neave was wrongly decided, making it clear (at p.434) that possession as a receiver and manager “falls far short of the occupation which is necessary in order to constitute rateability”. In Gyton the Divisional Court decided that managing the company’s business as principal did not result in the receiver being in rateable occupation of the premises. Further, Mr Moss points out, in Gyton there was a change in the receiver’s status from a receiver appointed out of court to one appointed by the court. In the course of their submissions in Gyton, counsel for the appellants specifically relied (at pp.428-9) on that change of status, coupled with the lack of an agency under the court appointment, and on the control exercised the receiver over the company’s business. Nevertheless, the Divisional Court held that the receiver was not in rateable occupation. Mr Moss submits that Gyton is fatal to the Council’s case.

Accordingly Mr Moss submits that, on the authorities, the management and carrying on of a business by a receiver does not bring to an end the rateable occupation of the company, and in particular does not make the receiver the rateable occupier. He further submits that it makes no difference whether the receiver is appointed out of court and is therefore normally the agent of the company or whether he is appointed by the court and therefore acts as principal; nor does it matter if the receiver goes from being an agent to being a principal.

Mr Moss therefore submits that the judge was right to conclude that the Receivers were not in rateable occupation during the relevant period and thus not liable for rates during that period, but wrong to base that conclusion on agency. Hence the Respondents Notice. The right conclusion, submits Mr Moss, is that the Receivers were never in rateable occupation at all, either before or after the commencement of the liquidation.

CONCLUSIONS

I turn first to the authorities, beginning with the trilogy of cases cited in argument, namely Marriage Neave, National Provincial and Gyton.

In Marriage Neave receivers and managers were appointed by the court at the suit of the debenture-holders. The order did not include any direction that the company give up possession of its premises to the receivers and managers. The receivers and managers duly entered on the company’s premises for the purpose of managing and carrying on the company’s business. Shortly thereafter, the company was placed in voluntary liquidation. The rating authority demanded rates for a period which began before and ended after the date of the voluntary liquidation, and issued a summons seeking liberty to distrain upon the company’s goods to satisfy the liability. In the event the rates falling due in respect of that part of the period which fell after the receivers’ appointment were paid, so that the issue in the action was as to the availability of distress for rates falling due before the receivers’ appointment on assets in the hands of the receivers. That in turn depended on whether the appointment of the receivers and managers and their entry upon the company’s premises operated as a change of rateable occupation.

Lindley LJ began his judgment by saying this (at p.671):

“The first question we have to consider is whether there has been such a change of occupation as brings into operation the 16th section of the Poor Rate Assessment and Collection Act, 1869. On February 17, 1896, Messrs Paterson and Stephens were appointed by the Court receivers and managers in an action instituted by debenture-holders against Marriage, Neave & Co. That order does not contain – and the omission is, to my mind, very important – any direction whatever for delivery-up of possession of land to those gentlemen; and moreover it does not appear from the affidavits that they have taken possession of the land in any sense at all. What they have done is this: they have gone on to the property for the purpose of receiving and managing the income and business of the company, but they have not done anything to change the ostensible possession of the property in any way whatever; and, upon the facts, it appears to me that the possession and occupation have not been changed at all.

[Counsel for the debenture-holders] argued that, inasmuch as corporations can only occupy by their agents, the appointment of a receiver by an order of the Court is quite enough to create a change of possession. I do not take that view. A corporation can possess and occupy. The mere fact that a receiver is appointed by an order which does not in fact order the company to give up possession does not dispossess the company. I do not think, therefore, that there is such a change of occupation made out as is requisite to bring into operation the 16th section of the Act of 1869. ....

The real truth is that the company were and are still, in point of law, in occupation of the property, and the receivers are there as managers of the company’s business.”

Lopes LJ said (at p.674):

“What the receivers have to do is to go there and manage the property. The occupation, in my judgment, remained in the company in precisely the same way as it did before. The company continued to occupy notwithstanding [the order of the court appointing the receivers].

Rigby LJ said (at p.676):

“It is only where there is a change of occupation that [section 16 of the 1869 Act] has any operation. The argument that, because a receiver and manager is appointed, then ipso facto the company or persons carrying on business are turned out, is neither reasonable nor plausible. It is quite conceivable that these receivers might have performed all their duties without even seeing this property. They were to carry on the business: they could have appointed a manager of that business under them, to take his instructions from them. It might never be necessary for them to go near the property at all.

.... The receiver is the manager, that is all; and it may very well happen that as such manager, and for the purpose of management, the Court may direct that he shall be put into possession of the property, and if he is so put into possession it may be that he becomes the occupier within the meaning of section 16; but that is not the point we have to deal with now. No such order has been made, and the occupation of the company has not been interfered with; therefore section 16 does not apply.”

In my judgment, Marriage Neave is clear authority for the proposition that a receiver and manager appointed by the court does not, in carrying out his function of managing the company’s business, enter into rateable occupation of the company’s premises in place of the company, and that the company continues to be the rateable occupier. Although the point did not arise for decision in that case, the Court of Appeal indicated that the position may be different where a receiver takes legal possession of the company’s premises pursuant to an order which authorises him to do so.

The second case in the trilogy is National Provincial, a decision of Astbury J at first instance. In that case a receiver was appointed by the court at the suit of a mortgagee. At the date of the order the company was already in compulsory liquidation. The order directed the tenants of the various mortgaged properties to pay their rents to the receiver, and it ordered the company to deliver to the receiver all the stock-in-trade and effects of its business. Pursuant to the order, the receiver entered into possession of one of the mortgaged properties. Rates were demanded in respect of that property, and judgment was obtained against the receiver. The rating authority sought to distrain, on the footing that the receiver was in rateable occupation of the property.

In the course of his judgment, Astbury J said this (at p.112):

“.... [T]he sole question with regard to possession that I need to determine is whether under the order .... appointing a receiver and manager there was in fact a change of possession effected within the meaning of [the relevant] statutes. In my opinion there clearly was not. As far as the language of the order was concerned, the defendants in respect of the premises occupied by themselves are only ordered to deliver over to the receiver the stock-in-trade and effects of the business he has to manage.”

After referring to Marriage Neave, and citing the last two sentences of the first paragraph of the passage from Lindley LJ’s judgment in that case quoted above, Astbury J continued:

“I think that substantially applies to the present case. It is quite true that the receiver here states that he entered into possession. But the real point is what was the quality of the possession that was so taken. I think he only took the possession that he was entitled to take under the order, and that there was no change of possession as was contemplated under the statutes in question.”

National Provincial was a strong case, in the sense that in entering into possession of one of the company’s properties the receiver had done more than simply manage the company’s business; nevertheless Astbury J, following Marriage Neave, held that the receiver’s activities did not amount to a change in the rateable occupation of that property.

The last case in the trilogy is the decision of the Divisional Court in Gyton. In that case a receiver and manager was appointed by a debenture-holder. The report of the case does not indicate whether the debenture provided that a receiver should be the agent of the company. Subsequently, the receiver’s appointment under the debenture was superseded by a court order appointing him as receiver. The order did not contain any direction to the company to deliver possession of its assets to the receiver. The issue, once again, was whether the company remained in rateable occupation of its premises notwithstanding the receivership, or whether the receiver had displaced the company’s rateable occupation and was himself in rateable occupation. Viscount Caldecote CJ, delivering the judgment of the court, said this (at p.432):

“We are unable to distinguish the facts of In re Marriage Neave & Co from the facts in the present case. [Counsel for the rating authority] submitted, if I understood him aright, that in the case now before the court the amount due ... during the period when the respondent was receiver and manager by virtue of his appointment by the High Court, which had not been paid, was all that was in question, whereas in In re Marriage Neave & Co the amount claimed had been apportioned and the sum in respect of a similar period had been paid, but that is just what the Court of Appeal, by their declaration and their judgments, seem to me to have decided was wrong. The decision of the Court of Appeal was based on the view, which was clearly stated by all the members of the court, that the company remained, in point of law, in occupation of the premises, and that the receivers were merely there as managers of the company’s business. As Rigby LJ observed, they “might have performed all their duties without even seeing this property”.

Later in the judgment, Viscount Caldecote CJ said (at p.434):

“In the present case, whatever the nature of the possession into which the receiver and manager was put by the order of the court, it seems plain to us that it fell far short of the occupation which is necessary in order to constitute rateability. We may cite a short passage from the speech of Lord Herschell LC in Holywell Union v. Halkyn District Mines Drainage Co: ‘The question whether a person is an occupier or not within the rating law is a question of fact and does not depend on legal title’.”

It is of significance in the instant case to note that in each of the cases in the trilogy the receiver and manager was appointed by the court (in Gyton the receiver had previously acted under an appointment out of court by the debenture-holder); thus he was not acting as the company’s agent. Yet in each case the court held that the activities of the receiver and manager (being activities which did not include taking possession of the company’s premises pursuant to an order for the delivery up of possession by the company) did not amount to rateable occupation of those premises. Indeed, the Divisional Court in Gyton concluded that they “fell far short” of so doing.

Against that background of authority, I turn to the decision of the Court of Appeal in Ratford, and to the judgment of Slade LJ in that case.

In Ratford, the rating authority issued a distress warrant against the receivers and managers of a company, on the footing that they were in rateable occupation of the company’s premises. The receivers had been appointed out of court pursuant to a debenture which provided that the receivers were deemed to be the agents of the company. The justices upheld the warrant. On the application of the receivers the justices stated a case, the questions for the High Court being firstly whether the onus of proof lay upon the receivers to establish that they were not in rateable occupation; and secondly whether the warrant was good in law. The judge at first instance answered both questions in the affirmative, that is to say in favour of the rating authority. The receivers appealed, contending (among other things) that on the material before them it was not open to the justices to find that the receivers were in rateable occupation of the premises, and that the reasoning which had led them to that conclusion was wrong in law in that since the receivers were deemed to be the agents of the company their acts as receivers were in law the acts of the company. On the issue as to the burden of proof, the receivers contended that the burden of proof lay on the rating authority to establish liability on the part of the receivers, and that the fact that pursuant to section 97(1) of the General Rate Act 1967 the complaint leading to the issue of the distress warrant required the receivers to “show cause” why the rates had not been paid did not shift the burden of proof onto the receivers but merely called on them to give reasons as to why a warrant should not issue.

Thus, subsumed in the central issue before the Court of Appeal as to whether the receivers were in rateable occupation of the premises were three sub-issues, namely (1) the issue as to the burden of proof; (2) the issue as to whether the acts of the receivers were such as to amount in law to rateable occupation; and (3) if so, the issue as to whether, by virtue of the fact that the receivers were at all times acting as agents of the company, such occupation was in law the occupation of the company and not of the receivers.

In the course of his judgment, Slade LJ addressed each of these three sub-issues, subjecting them to the most detailed analysis. The issue as to the burden of proof does not arise in the instant case, and its relevance for present purposes is accordingly limited to setting the context in which Slade LJ addresses the other two issues.

On the issue whether the acts of the receivers amounted to rateable occupation, Slade LJ, after making extensive reference to the trilogy of cases (Marriage Neave, National Provincial and Gyton) said this (at p.376):

“The three decisions .... though they concerned appointments of receivers by the court and did not depend on the agency point, supported the receivers’ case on the present appeal, so far as they go. For they all clearly show that the mere fact that a receiver has entered upon the company’s premises for the purposes of managing and carrying on its business does not necessarily mean that the company has been dispossessed or has ceased to occupy the premises for rating purposes. If it is to be shown that a change of rateable occupation has occurred, this conclusion must be derived from the terms of the receiver’s appointment or from what he has actually done, or from both together.”

I respectfully agree with, and adopt, those observations. The terms of the receiver’s appointment, and hence the extent of his authority, may lend colour to his actions in relation to the premises in question and are accordingly relevant to the question whether those actions amount to rateable occupation of the premises. Thus in National Provincial Astbury J said (at p.112):

“I think he only took the possession that he was entitled to take under the order.”

Further, where under the terms of his appointment the receiver is deemed to be the agent of the company, there can be no change of rateable occupation by reason of acts done by the receiver within the scope of his authority since even if such acts amount to rateable occupation of the premises, the rateable occupation is that of the company and not of the receiver. As Slade LJ said when addressing the agency issue (in the passage at p.371H quoted earlier):

“It is a general principle of rating law that where an agent is required to occupy a hereditament in order to secure the better performance of his duties as agent, his occupation is for rating purposes ordinarily treated as that of his principal. If, on the other hand, an agent occupies his principal’s property otherwise than in his capacity as agent, the occupation will be treated as his own for rating purposes ....”

At p.378D Slade LJ sets out his conclusions in five numbered paragraphs.

Paragraphs (1) to (4) inclusive relate to the burden of proof issue. In paragraph (1) Slade LJ concludes that the council had reasonable grounds for applying for a distress warrant against the receivers under section 97(1) of the General Rate Act 1967.

In paragraph (2) Slade LJ concludes that, the council having shown that the rate had been duly made and demanded and that it had not been paid, the burden fell in the first instance on the receivers to show sufficient cause (a reference to the terms of section 97(1)) for not having paid the sum demanded.

In paragraph (3) Slade LJ concludes that the receivers prima facie discharged that burden by showing that under the terms of their appointment (a) they were not obliged to take possession of the company’s premises and (b) they were deemed to be the agents of the company. As already noted, the absence of an obligation to take possession of the company's premises was treated as a relevant factor in both Marriage Neave and National Provincial. As to the term of the receivers’ appointment which deemed them to be the agents of the company, as Slade LJ had earlier concluded (see the passage at p371H, quoted above), that provision afforded a complete answer to the allegation of change of rateable occupation, for, as he goes on say in paragraph (4):

“.... possession held by a person in his capacity as agent is in law the possession of his principal.”

In context, Slade LJ’s reference to “possession” in the sentence just quoted must clearly include a reference to “occupation” in the sense of rateable occupation.

I turn next to paragraph (4), on which much of the argument was focused. The paragraph reads as follows:

“This much having been shown, the onus, in my opinion, shifted to the council to show that the receivers had dispossessed the company, or, to put it another way, to show that the quality of any possession of the premises which the receivers might have enjoyed was not that of mere agents. For possession held by a person in his capacity as agent is in law the possession of his principal.”

By paragraph (4) Slade LJ concludes that, the receivers having shown that in acting within the terms of their appointment they were deemed to be the agents of the company, it was for the council to show that they were in rateable occupation of the premises otherwise than under the terms of that appointment. Slade LJ clearly envisages that should the council fail to discharge that burden the conclusion would follow that the actions of the receivers could not have given rise to a change in rateable occupation since any rateable occupation enjoyed by them would in law be rateable occupation by the company.

Finally, in paragraph (5), Slade LJ turns to the facts of the case. He expresses his conclusion on those facts as follows:

“The agreed statement of facts placed before the justices did no more than show that the receivers had had representatives on the property from time to time during their receivership, that they had managed the company’s business and authorised the payment of various out-goings, that the company had at their direction disposed of the company’s assets, including, eventually, the leasehold interest in the premises, and that during the receivership they had had control of those of the company’s assets covered by the debenture. However, in my opinion, the decisions in [Marriage Neave, National Provincial and Gyton] show that these facts are quite consistent with the company remaining in legal possession and rateable occupation of the premises.”

In my judgment Slade LJ’s conclusions in Ratford can, for present purposes, be condensed into two short propositions:

1. The actions of a receiver and manager in managing the company’s business do not, without more, amount to rateable occupation of the company’s premises by the receiver and manager (see also Marriage Neave, National Provincial and Gyton).

2. The actions of a receiver and manager as agent for the company cannot found a claim of rateable occupation by the receiver and manager, since for rating purposes any occupation enjoyed by the receiver and manager as agent of the company is occupation by the company.

Accordingly, I can find no support in Ratford for Mr Knowles’ central proposition that the cesser of the Receivers’ agency status in the instant case somehow operated of itself to produce a change in rateable occupation, notwithstanding that, as is common ground, the Receivers were throughout doing no more than managing the Company’s business pursuant to and within the terms of their appointment. Rather, Mr Knowles’ proposition seems to me to be contrary to the decision in Ratford, and in particular to proposition 1 above.

Nor am I persuaded that when he said (at p.374E and again at p.376E) that the mere fact that a receiver has entered on the company’s premises for the purpose of managing and carrying on its business “does not necessarily mean” (my emphasis) that the company has ceased to be in rateable occupation, Slade LJ intended to indicate that in certain cases it might mean that. Such a proposition would be directly contrary to the decisions in Marriage Neave, National Provincial and Gyton. As I read those passages in Slade LJ’s judgment, the point he is making is that the mere fact that a receiver has entered on the company’s premises for the purpose of managing and carrying on its business does not of itself mean that the company has ceased to be in rateable occupation (i.e. proposition 1 above).

As to Mr Knowles’ submission based on the proposition that the Receivers’ power to carry on the Company’s business ceased on the commencement of the liquidation, it is common ground that the power of the Receivers under the Mortgage Debenture to carry on the business of the Company as its agents came to an end on the liquidation, but I accept Mr Moss’ submission that, as it is put in Lightman and Moss The Law of Receivers and Administrators of Companies at para 11-036:

“The powers given by the debenture to exploit the company’s undertaking and assets, however, continue unaffected, save only that they cannot be exercised so as to create any new debt or liability. The receiver can, therefore, carry on the business of the company, get in and realise the company’s assets and take proceedings in the name of the company to recover assets.”

Nor do I derive any assistance in the instant case from the decision in In re ELS Ltd. The issue in that case was a different one, viz. whether on crystallisation of a floating charge the goods subject to the charge ceased to be “goods of the company” for the purposes of the relevant regulations relating to distress for rates.

Equally, the public policy considerations urged on us by Mr Knowles do not seem to me to carry matters any further, given that the relevant legal principles are clear.

I accordingly conclude, for the reasons which I have given, that there was no change of rateable occupation in this case, and that at all material times the Company remained in rateable occupation of the premises in question.

It will be apparent from the conclusions I have reached that whilst I agree with the judge’s decision that the Receivers are not liable for rates post-liquidation, I differ from his reasoning. In particular, I respectfully disagree with his conclusion that post-liquidation the Receivers were in rateable occupation, but “on behalf of” either the Company or the liquidator. The right analysis, in my judgment, is that they were not in rateable occupation at all.

RESULT

I would dismiss this appeal.

Lord Justice Pill:

I agree and add words only to express agreement with Jonathan Parker LJ’s analysis of the judgment of Slade LJ in Ratford vNorthavon District Council [1987] QB 357.

Slade LJ first considered the question of what amounted to rateable occupation of the company’s premises. Slade LJ then dealt with the agency issue. He stated at p 371H: “If, on the other hand, an agent occupies his principal’s property otherwise than in his capacity as agent, the occupation will be treated as his own for rating purposes.” That proposition assumes a rateable occupation by the party referred to. Slade LJ held that, in such circumstances, agency was a complete answer to the allegation that the receiver was in rateable occupation. That did not, however, detract from the other conclusion Slade LJ had reached. When the company had been in rateable occupation, the receiver’s entry on the company’s premises, albeit as principal, for the purposes of arranging and carrying on its business, did not of itself mean that the company had ceased to be in rateable occupation.

Order: appeal dismissed with costs in the sum of Ј18,000. Application for permission to appeal to the House of Lords refused.

(Order not part of approved judgment)

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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Beck Foods Ltd & Anor, Re v Mr Richard Rees & Anor [2001] EWCA Civ 1934 (20th December, 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1934.html Cite as: [2002] BPIR 665, [2001] EWCA Civ 1934, [2002] 1 WLR 1304, [2002] NPC 8, [2002] 2 EGCS 101, [2002] RA 23, [2002] BCC 495, [2002] WLR 1304

		Royal Courts of Justice Strand, London, WC2A 2LL
		20 December 2001

	In the matter of BECK FOODS Ltd Boston Borough Council	Appellants
	and
	Mr Richard Rees and Mr Gordon Bennett (Receivers)	Respondents