Money back guarantee? Claiming rate refunds after Atos v Fylde BC

Atos v Fylde BC [2020] EWHC 647 (QB), in which I represented the successful Claimants, established a right to require repayment of overpaid rates. The existence of this authoritative decision certainly makes it easier for ratepayers in a similar situation to claim back overpaid rates, but success is still not guaranteed. This article explains when such claims might be available, and discusses some of the potential defences and tactical considerations to be aware of.

Establishing an Atos claim

The High Court in Atos held that the The?Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 confer a right to repayment of overpaid rates. The claim does not depend on the council accepting that there has been an overpayment; the court can be asked to decide whether there has been and if so, order repayment.

In Atos itself, the 'overpayment' arose because a hereditament had effectively been wrongly identified in the list. It included areas which were sub-leased and therefore not in the same rateable occupation as the rest. As such, the tenant was not in fact in rateable occupation of the whole. They had nonetheless been paying rates.

The ratepayer pointed out the error in the list to the billing authority, but no action was taken to correct the list entry by splitting out the sub-let areas as separate hereditaments. The list then closed to alterations. At that point the ratepayer was able to bring a claim for repayment in full. In effect, a failure on the part of the billing authority and VOA to maintain the list accurately generated a windfall refund for the ratepayer. That was what made the claim worthwhile. Otherwise, the list could have been corrected and the money once again recovered from the ratepayer.

Where a ratepayer has been paying rates in respect of a hereditament which includes areas in fact sub-let to other parties, there is thus scope for similar claims. Claims in respect of the 2010 list will now be nearing the end of the relevant limitation period (6 years), and claims will not be worthwhile in respect of the 2017 list until it has closed.

Potential defences

The court in Atos left open the question of whether there might be any applicable defences to a claim. The case was then settled, the billing authority apparently having taken the view that there was in fact no defence with any prospect of success. So what defences might be available in other cases?

The counterfactual: a council might seek to argue that the majority of the rates would still have been payable if the list had been amended to show the correct hereditament. That argument has a degree of common sense and justice behind it. However, it appears to be prohibited by the decision of the Court of Appeal in Vodaphone Ltd v Ofcom [2020] EWCA Civ 183. The court should not speculate on what administrative steps might have been lawfully taken. Instead, it should give effect to the principle of legality and order a refund.

Misrepresentation: in Atos, the ratepayer had alerted the billing authority to the error in the list. But what if a ratepayer had deliberately or negligently misled the billing authority into believing that it is in fact in occupation? There is apparently no provision in the regulations to allow this to be taken into account. However, it seems very likely that a court would read in such a provision in a case of fraud. The situation where the billing authority/VOA had been misled by accident is less clear.

Passing on: the tenant may have recovered a contribution from the sub-tenants towards the rates that have been paid; i.e. the loss may have been 'passed on' (in part) to another, such that the ratepayer has not suffered loss to the full extent of the rates paid. English law has traditionally regarded this as irrelevant, however. The claim is intended to reverse an unlawful transfer of wealth, not to compensate the taxpayer for loss as such.

Tactical considerations

A ratepayer contemplating a potential Atos claim faces a series of tactical issues, particularly if the circumstances potentially giving rise to the claim are spotted before the list has closed. In that situation a decision will have to be made about whether to (1) continue paying without alerting the council to the issue (2) pay under protest (3) withhold payment and await recovery action in the magistrates' court or (4) take judicial review proceedings of the authority's stance.

In Atos the ratepayer took option (2), which ultimately allowed it to recover all the rates plus its costs of proceedings. However, the High Court has subsequently observed (in a different context) that ratepayers should not take this route and that if they do, they may not recover their costs even if successful. A ratepayer contesting liability in the magistrates' court will also not usually recover its costs if successful, pursuant to the principles in Bradford v Booth. This may make judicial review seem an attractive option, but the drawback of that option is that the court's ability to resolve disputes of fact is limited.

Ultimately, each ratepayer will have to make a careful evaluation of the situation, and of its own appetite for risk, before taking any action.