Are you being served?

UKI (Kingsway) Limited v Westminster City Council [2017] EWCA Civ 430

Summary

The Court of Appeal has agreed with a property owner who argued that it had not been properly served with a completion notice for the calculation of business rates. The decision will prove costly for the rating authority.

Although the property owner had been in fact provided with an emailed copy of the notice by a third party, this was not sufficient for the local authority to comply with the service requirements of the relevant legislation.

The Court did not prescribe a formula for what would and would not constitute valid service, but the case provides a useful illustration of the issues and pitfalls that can arise when serving legal notices.

The facts

This case concerned the validity of a completion notice for business rates (“the Notice”) served by Westminster City Council (“the Council”) in respect of premises on Kingsway, London.

The premises had been undergoing redevelopment by the owner UKI (Kingsway) Limited (“UKI”) and the Council wanted to serve Notice in anticipation of the works being completed. It intended to bring the newly developed property into the 2010 rating list, with rates payable from 1 June 2012.

Before serving the Notice, the Council asked UKI’s rating agent to confirm the identity of the building owner. The rating agent declined, stating that it would need client instructions to pass on that information.

UKI did not have any presence at the building, which was managed by Eco FM (“Eco”). Eco had no authority to accept service of any documents on behalf of UKI.

On 5 March 2012, notwithstanding the response from the rating agent, the Council delivered the Notice to the building. The Notice was given by hand to a receptionist employed by Eco, and it was addressed simply to: “Owner, 1 Kingsway, London WC2B 6AN“. The receptionist subsequently scanned and emailed a copy of the notice to UKI.

The Council then added the property to the rating list with a rateable value of £2,750,000. UKI duly appealed on the basis that the Notice was invalid because it did not give the name of the owner and because it had not been served on the owner.

Evidence before the Valuation Tribunal

The case went first before the Valuation Tribunal. The Tribunal held that:

  • The Notice was not necessarily invalid because it did not give the name of the building owner; but
  • In this case, the Notice had not been served validly.

The Tribunal found that a notice can be served if it is only addressed to “the owner” if the actual name cannot be ascertained after reasonable enquiry (Paragraph 8( c ), Schedule 4, Local Government Finance Act 1988 (“the Act”)). Where this is the case, service can be effected by fastening the notice to a prominent part of the building.

As the Council had not done this, but had handed the Notice to the receptionist, service was not valid.

The Council appealed.

Appeal to Upper Tribunal

The Upper Tribunal agreed with the Council and reversed the decision.

It found that there was no dispute over the fact that UKI had received the Notice and that the modes of service under the Act were not prescriptive – ie that other methods of service could be valid.

In summary, the panel adopted what might be described as a common sense approach, stating:

… “In my judgement a document which arrives in the hands of its intended recipient by an unorthodox route has still been served” …

In turn, UKI appealed to the Court of Appeal. In particular, there was a concern that the Upper Tribunal’s decision could lead to uncertainty if service by email, by a third party, could be valid. This could lead to other local authorities following suit with completion notices.

Court of Appeal

In a unanimous decision, the Court of Appeal reversed the Upper Tribunal’s decision and held that the Notice had not been validly served.

It was agreed before the hearing that the Council could have discovered the identity of UKI by making “reasonable enquiries”. In turn this meant that the Council could not rely on the Act as it had not made such enquiries.

This left the Court to consider whether service by email by the Eco receptionist was valid service. The Court found that it was not.

Boiling down the key requirements, the Court held that the Council needed to prove that it had served the Notice on the owner of the building, within the natural meaning of those words. Although the Notice had found its way to UKI, the words “service on the owner by the authority“ could not stretch to cover a situation where the Notice had been served on a third party who lacked authority to accept service on behalf of UKI, but who had then passed it on.

In support of this conclusion, the Court noted that:

  • There is no general rule for what will constitute valid service in each case. Even though the Act permits other acceptable forms of service to those expressly stipulated, indirect transmission of the kind used in this case would not comply with the basic meaning of the Act.
  • The purpose of the Act is to impose liability for tax on a property owner, together with a strict timetable for the owner to raise objections. From a policy perspective, these factors militated against the notion that a billing authority could purport to serve notices by leaving them with people not authorised to accept service.
  • The Court reviewed the well-established principle that service on a solicitor who does not have authority to accept service on behalf of his/her client is not valid, even if the notices do indeed reach the client. With this in mind, service on an unauthorised third party could not be valid.

Our comments

Property notices are used to engage a wide variety of important legal provisions, such as break options or rights to renew leases. Owing to the valuable nature of the subject matter, detailed case law has developed concerning property notices and it will be essential for the serving party to ensure that the notice is effective.

From a purely practical perspective, this result may seem unjust, as the Notice did reach its intended recipient. But as the consequences of not receiving a notice can be severe, the law must impose and enforce strict rules. If a notice is important, parties should seek early legal advice to ensure that they do not fall foul of the rules, and risk spending the next 5 years in litigation like the parties in this case.

The bottom line in this case is that the Council’s failure to get the Notice right will cost it a great deal in terms of missed rates. Whether the subject matter is rates, breaks, rent reviews or any other issue, the service of notices is a very serious business. Parties must abide by the rules if they don’t want to take a significant gamble.