Where a Local Authority (Billing Authority) has applied by way of complaint (the 'Complaint'), to the Magistrates Court, for a national non-domestic rates (Business Rates) liabilty order ('BRLO') against an alleged ratepayer, and the Complaint is opposed/defended as liability is in dispute, is the Billing Authority under any duty of disclosure during the course of the proceedings? and, if so, what is the scope of that duty?

This article will consider this issue of disclosure, in light of the recent judgment in Total Sprint Ltd v Swale BC [2023] EWHC 2968 (Admin); [2024] 1 WLR 1687 ('Total Sprint'), a decision of Eyre J on 19.11.23. Readers short on time can jump straight to the heading 'Duty of Disclosure' below.

Standard Directions

Where a Billing Authority has applied by way of complaint, to the Magistrates Court, for a BRLO, the Magistrates Court will issue a summons, requiring the alleged ratepayer/defendant to attend a court hearing '...to show why he has not paid the sum which is outstanding' (reg.12(2) Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations (SI 1989/1058) (the ‘1989 Regulations’)). Assuming the Complaint is opposed/defendant, and unless the Complaint is simply adjourned[1], the Magistrates Court is likely to make directions with a view to preparing the Complaint for a contested final hearing (outside the bulk application list). Directions might include directions that (sequentially):

(1) Billing Authority do file and serve the relevant demand notices, reminder notices and any final notices [not always specified as a separate direction]

(2) Defendant do file and serve its evidence in opposition to the Complaint [since the alleged ratepayer bears the initial evidential burden of justifying why it has not paid]

(3) Billing Authority do file and serve its evidence in response to the Defendant's evidence

(4) Defendant, if so advised, do file and serve its evidence in reply [not always directed]

Further, there will typically be directions for

(5) the preparation of a index paginated contested hearing bundle, and

(6) skeleton argument to be lodged at Court and exchanged between the parties (parties' advocates), and

(7) the Complaint will be listed for a contested hearing.

Standard directions for parties to file and serve their evidence, like those above, leaves open the question of quite what, if any, duty of disclosure a Billing Authority owes to the defendant/alleged ratepayer.

Total Sprint

While not essential to understanding the duty of disclosure, it is convenient to note a few of the facts from Total Sprint. In Total Sprint:

(1) Swale BC, as the relevant Billing Authority, applied by way of complaint to the Magistrates Court, for a BRLO against an alleged ratepayer Sprint Couriers (Southern) Ltd ('Couriers'), in respect to certain units on a trading estate (the 'Units') and liability periods 1.4.15 to 1.4.19 ('LPs 2015-2019');

(2) on 9.10.17 and 30.7.18, the Magistrates Court made the BRLOs against Couriers as sought (the 'Couriers BRLOs') (paragraph 4);

(3) on 9.9.19, the Billing Authority issued and sent to Couriers, demand notices for the (same) Units and for the (same) liability period LPs 2015-2019, but with zero balances (paragraph 4);

(4) on 12.9.19, the Billing Authority issued and sent demand notices to Total Sprint for the (same) Units for the (same) liability period LPs 2015-2019[2];

(5) on 13.1.20, the Billing Authority applied by way of Complaint to the Magistrates Court, for a BRLO against the alleged ratepayer Total Sprint, for the (same) Units and for the (same) liability period LPs 2015-2019. In that application, the Billing Authority did not disclose to the court the events described at (1) to (3) above (a breach of the Billing Authority's duty of candour[3]);

(6) In the normal way, in response, the Magistrates Court summoned the Total Sprint '...to show why he has not paid the sum which is outstanding' (reg.12(2) of the 1989 Regulations). At the first hearing, the Court prospectively moved the Complaint out of the bulk applications list and gave directions (by consent), including a direction that: 

'...the Council should ... conduct a search as if CPR 31.7 applied and should disclose the documents on which it relied together with those which adversely affected its case and those which supported Total Sprint's case.' (paragraph 105)

(7) Subsequently, the DJ held that the Billing Authority had '...had a duty of disclosure which it had broken.' (paragraph 106) (the duty arising from the court order but also existing anyway), in that the Billing Authority had failed '...to conduct a search for documents adverse to its case and/or supportive of Total Sprint's position.' and in particularly, had failed to disclose:

(a) '...the Couriers Liability Orders'

(b) 'the email exchanges between Mr Prior and Mr Mason' (which '...were relevant to the question of whether Total Sprint had been in occupation of the Units' (paragraph 24); Mr Prior being the Billing Authority's Rating Officer; and Mr Mason being, it seems, an agent for Couriers (paragraph 24));

(c) 'the records of Mr Prior's observations at the trading estate.' (paragraph 106)[4].

These failings formed part of a wider submission by Total Sprint, that these and other Billing Authority failings (for instance, breach of duty of candour to Magistrates Court when requesting a summons; collateral attack on existing BRLO/attempt to re-litigate a concluded issue[5]), meant that the DJ should set aside, or stay, the summons (in effect, the Complaint) as an abuse of process (paragraph 9). The DJ refused to set aside or stay the summons (paragraph 9), and subsequently made a BRLO against Total Sprint. Total Sprint then appealed, by way of Case Stated, that decision, particularly, certain component decisions/findings that led to the imposition of that BRLO[6].

Duty of Disclosure

Under the heading 'The Council's Disclosure Duty: what was the extent of the Duty...', Eyre J made a number of points:

(1) the disclosure provision in the Civil Procedure Rules ('CPR'), particularly Part 31 of the CPR, does not, without more, apply to BRLO Complaints (paragraph 105); but

(2) '...the Council had an obligation to disclose potentially adverse material once it knew that liability was being put in issue.'  (paragraph 109);

(3) The disclosure obligation set out in (2) above is not dependent on the Magistrates Court making an order for disclosure. While the Magistrates Court in Total Sprint had made a direction for the Billing Authority to conduct a search as if CPR 31.7 applied, and to disclose the documents on which it relied, together with those which adversely affected its case and those which supported Total Sprint's case (paragraph 105), this was not the source of the underlying disclosure obligation on the Billing Authority (paragraph 106). In other words, Billing Authorities are under an obligation (a duty[7]) to disclose to defendant/alleged ratepayers, potentially adverse material to the Billing Authority's case, once it knows that liability is in dispute; no court order or direction to that effect, is required[8].

(4) Eyre J agreed[9a] with the 1st instance DJ's judgment that 'the imperative of fairness and the needs of natural justice "required the parties to approach the issue as if standard disclosure under the CPR applied to these proceedings".' (paragraph 106). Eyre J said 'This was, indeed, an aspect of the requirement of fairness.' (paragraph 109). Eyre J referred to Newman v Commissioner of the Metropolitan Police [2009] EWHC 1642 (Admin) ('Newman'), wherein Richards LJ 'emphasised that the question was to be governed by "the imperative of ensuring fairness in the proceedings" [35]...'[9b].

(5) if disclosure were not so required, there would be a '...risk that the Magistrates Court will be misled' (paragraph 109).

(7) it is the duty of the Billing Authority to 'disclose such material' (paragraph 109), though it will '...ultimately be a matter for the court whether the material was in fact adverse to the [Billing Authority's] case and whether it should be admitted in evidence...' (paragraph 109);

Eyre J said his view was 'reinforced' (paragraph 109) by two observations:

(a) the Billing Authority was a public body acting as such to enforce a tax liability; and

(b) certain pieces of information can be, in essence, naturally just in the knowledge of a Billing Authority. Eyre J said 'just as questions of rateable occupation were peculiarly within the knowledge of the ratepayer so questions of the previous proceedings taken by the Council and of the communications with the Council were peculiarly within that body's knowledge.' (paragraph 109)

Scope of the Duty of Disclosure

In determining the scope of the duty of disclosure, requirement of fairness underlies the analysis. Eyre J:

(1) made reference to Newman, and to the fact that Richards LJ in Newman had:

(a) taken '...a restrictive view of the material which had to be disclosed in the circumstances of that case.' (paragraph 109); and

(b) found that '...although fairness did not require "wholesale disclosure" of the source material underlying the statement of a particular police officer it did require disclosure of material known to undermine the police commissioner's case or to assist the other party [37].' (paragraph 109)[10].

Fairness therefore, for the case before Richards LJ in Newman, required disclosure of two types of material; material which:

(a) undermined the Billing Authority's case; or

(b) assisted the defendant/alleged ratepayer.

To a degree, these two types of material can be seen as two sides of the same coin. Material that undermines the Billing Authority's case is likely to assist the defendant/alleged ratepayer, and vice versa[11].

(2) held, in effect, that the requirement of fairness in business rates cases, required that the Billing Authority be subject to an'...obligation to disclose potentially adverse material' (paragraph 109). At first blush, this would seem to raise a question of whether this obligation is the same as that found to arise in Newman, on the facts in Newman. However, in the author's view, the tenor of Eyre J's judgment is that Eyre J intended the scopes of each to be the same (co-extensive and coterminous). If that is correct, then the scope of the Billing Authority's duty of disclosure in business rates cases - is to '...disclose potentially adverse material' (paragraph 106), which in turn, breaks down into an obligation to disclose material which:

(a) undermines the Billing Authority's case; and/or

(b) assists the defendant/alleged ratepayer.

(3) agreed with the DJ's view at first instance, that 'the imperative of fairness and the needs of natural justice "required the parties to approach the issue as if standard disclosure under the CPR applied to these proceedings".' (paragraph 106). 'Standard disclosure' is a defined term in the CPR; CPR r.31.6 is entitled 'Standard disclosure—what documents are to be disclosed' and it provides:

'Standard disclosure requires a party to disclose only-

(a) the documents on which he relies; and

(b) the documents which—

(i) adversely affect his own case;

(ii) adversely affect another party’s case; or

(iii) support another party’s case; and

(c) the documents which he is required to disclose by a relevant practice direction.'

CPR r.31.6 (a), (b)(ii) and (c) can be ignored for present purposes, leaving (b)(i) and b(iii)[12], which are in substance, very similar to those stated to apply in Newman.

The Scope

Bringing these 3 aspects together, it seems clear that, in business rates cases in the Magistrates Court where liability has been put in dispute, the requirements of fairness (and the needs of natural justice), require the Billing Authority to disclose to the defendant/alleged ratepayer, material it has which:

(a) undermines the Billing Authority's case/adversely affects the Billing Authority's case; and/or

(b) assists/supports the defendant/alleged ratepayer's case.

Breach of the Duty of Disclosure

Where a Billing Authority fails to comply with its duty of disclosure, there is a risk that the Magistrates Court will be misled, because the evidence before it will not be all the evidence it could, and should, have before it, upon which to make a determination. Such a situation would be unfair.

On the facts in Total Sprint, the Billing Authority had breached its duty of disclosure. It had:

(a) failed '...to conduct a search for documents adverse to its case and/or supportive of Total Sprint's position' (paragraph 106); and

(b) failed to disclose:

(i) the Couriers Liability Orders (paragraph 106);

(ii) the email exchanges between Mr Prior and Mr Mason; and

(iii) the records of Mr Prior's observations at the trading estate.

The upshot from the failure to comply was that this '...meant that there was a risk of the court being misled.' (paragraph 109) (though, in the event, the disclosure was later brought before the Magistrates Court: 'all the material ultimately being available to the court' (paragraph 110))

As to this material which was not properly disclosed by the Billing Authority, Eyre J said, that '...the material in question...clearly was at least potentially adverse to the [Billing Authority's] case.' (paragraph 110). Eyre J said, at paragraph 110:

'The fact that the [Billing Authority] had previously taken the view that a company other than Total Sprint was the rateable occupier was at least potentially a factor in favour of Total Sprint's contention that it was not the occupier.

Consequently, Eyre J said, at paragraph 110: It follows that the material should have been disclosed and that the [Billing Authority] was in breach of its duty in not doing so.'

Non-compliance with duty of disclosure

Is a Billing Authority's failure to comply with its duty of disclosure, an abuse of process, such that the Complaint can be, and ought to be, dismissed/summons set aside or stayed? It is understandably to think that it might. Breaching an '...obligation to disclose potentially adverse material' will, after all, likely advantage the breaching party to the disadvantage of the innocent party. On this question, Eyre J held that, such a breach will not typically be seen as an abuse of process ('...a failure to make proper disclosure will not typically be seen as an abuse of process.' (paragraph 110)). Drawing on the approach adopted by the CPR in respect to non-compliance with disclosure obligations, it more usually is characterised non-compliance of the rules - for which the court can, in consequence, impose unless order and costs orders, with the innocent party given adequate time to consider the documents, when they are eventually produced. Eyre J said, at paragraph 110:

'In civil litigation governed by the CPR such a failure would be seen as a failure to comply with the rules rather than abuse. The remedy for such a failure would typically be costs orders; adjournments to give the other party an opportunity to consider the documents; and potentially unless orders. In effect the failure would be addressed through the trial process. [Counsel for the Total Sprint] was right to emphasise that this was what happened here .'

On the facts in Total Sprint, as the material had ultimately been made available to the Magistrates Court, no further non-compliance linked sanction/consequence was needed. Further, Eyre J held that the DJ had correctly held that the Billing Authority's failure had not itself amounted to an abuse of process.

I will consider below whether it was to be seen as such when considered together with the other failings of the [Billing Authority].'

Duty of Disclosure on Defendant/Alleged Ratepayer

While not the focus of this article, reader may have noticed that Eyre J in Total Sprint seemingly agreed with the 1st instance DJ's judgment that 'the imperative of fairness and the needs of natural justice "required the parties to approach the issue as if standard disclosure under the CPR applied to these proceedings".' [bold added] (paragraph 106). In other words, that both parties - the Billing Authority and the defendant/alleged ratepayer, were under a duty of disclosure to the other, as if standard disclosure under the CPR applied to the proceedings. Though the Billing Authority's counsel in Total Sprint made the point/submission that Total Sprint had 'not itself made any disclosure and had thereby failed to disclose documents which might be relevant to the issues and which might have been adverse to its case...' (paragraph 108), the issue of whether a defendant/alleged ratepayer was under a co-extensive and coterminous duty of disclosure was not really explored in Total Sprint.

Summary

A Billing Authority owes a duty of disclosure to a defendant/alleged ratepayer, when pursuing a Business Rates Complaint in the Magistrates Court where liability is put in dispute[13]. That duty exists whether or not the Magistrates Court has made a direction to that effect. The underlying basis for the duty is not contained in any statutory regime, but is founded upon the general imperative of ensuring the proceedings were fair, and the needs of natural justice. The duty of disclosure consists of an '...obligation to disclose potentially adverse material' (Total Sprint, paragraph 109) / duty to give standard disclosure, as if CPR r.31.7 applied. This in turn, breaks down into an obligation to disclose material to a defendant/alleged ratepayer which:

(a) undermines the Billing Authority's case/adversely affects the Billing Authority's case; and/or

(b) assists/supports the defendant/alleged ratepayer's case.

SIMON HILL © 2024*

BARRISTER 

33 BEDFORD ROW  

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