Judgments - Principal and Fellows of Newnham College in the University of Cambridge (Respondents) v Her Majesty's Revenue and Customs (Appellants)

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59.  When considering that issue, assistance can be found in what was said by Lord Scott of Foscote in para 73 in the Sinclair Collis case about occupation for present purposes:

“So what are the characteristics that distinguish a licence to occupy from a mere licence to use? There are, in my opinion, two characteristics, one or other of which must, in some sufficient degree, be present. One is possession. The other is control. If neither is present, I find it difficult to understand how the licensee could be said to “occupy".

60.  There are two further points to be made before turning to the facts of this case. The first is that, as is clear from para 3A (13), occupation in the present context need not be exclusive. Indeed, that is implicit in what Lord Scott of Foscote said in para 79 in the Sinclair Collis case:

“[I]t seems to me unnatural to treat the room in which the vending machine is installed as being partly occupied by the owner and partly occupied by the company. In common sense and commercial terms the owner remains in occupation of the whole of the room".

Secondly, as the European Court said in its judgment in the Sinclair Collis case at para 26, “[r]egard must be had to all the circumstances in which the transaction in question takes place in order to identify its characteristic features.”

61.  In this case, there can be no doubt but that the company is “in occupation of” the library. It has a lease of the library; it has purchased most of the books in the library, albeit that it has hired them back to the college. The library is staffed by people who, though employed by the college, are seconded to the company. Access to the library is controlled by one of those people, namely the librarian.

62.  However, that is not necessarily the end of the matter. As already mentioned, more than one person can be in “occupation of” the library for the purposes of para 3A (7). I readily accept that it would be very unusual for a landlord to be occupying the demised property with (or indeed instead of) its tenant. However, as I have said, the arrangements between the college and the company are highly artificial, and, at least in the landlord and tenant context, very unusual. Artificial though they are, one must interpret them according to ordinary principles - that is, by reference to the words the parties have used in the documentation governing their relationship, and the position on the ground.

63.  So, is the college “in occupation of the land” together with the company, or is the company in sole “occupation of the land"? In order to resolve that question, it is important to bear in mind the nature of the land with which this appeal is concerned, as well as the nature of the two entities involved. The land is, of course, the library of the college. The college is a well known and distinguished academic institution, concerned with research and higher education. It is incorporated by Royal Charter, and all of its graduates and undergraduates (as well as fellows) are members of it in a real sense, as my noble and learned friend Lord Walker of Gestingthorpe (whose speech I have had the advantage of reading in draft) explains. As he also says, the company is in practice controlled by the governing body of the college.

64.  So I turn to the question of who is in possession and control of the library. As to possession, the principal physical components of the library are, as I see it, the users, the staff and the books. There is an ancillary component, namely the furniture and other equipment. With the exception of certain valuable rare books (“the Rare Books", which have been retained by the college and are kept in a separate room not forming part of the library), all the books in the library (“the Books”) have been sold by the college to the company and leased back to the college. The other chattels in the library (tables, chairs, shelving, microfiche readers, computers, printer, photocopier etc) have been sold to the company. The library is staffed by the college’s employees, albeit that they are seconded to the company. The library is used (almost exclusively) by fellows and graduate and undergraduate members of the college.

65.  So far as control is concerned, the position is as follows. Access to the library is controlled by the college, as well as by the librarian who is employed by the college, but seconded to the company. The day-to-day running of the library is in the hands of the librarian and other staff who are employed by the college and seconded to the company. The running of the library is overseen by a group which has representatives of the company and of the college.

66.  Because of the fact-sensitive nature of the enquiry required by the question, and because of the unusual nature of the arrangements, I think it is necessary to consider these aspects of possession and control in a little more detail.

67.  The centrally important feature of any library is of course, the books (albeit in future generations electronic records and publications may come to predominate). They are the sine qua non or the raison d'etre of a library. There is simply no comparison between the importance of books in a library and the importance of a cigarette vending machine in a club, which is what was being considered in the Sinclair Collis case. To put the point another way, not merely do the books take up a significant proportion of the space in the library, but the whole of the library, and all the people in the library, are effectively present because of the books, whether for the purpose of maintaining, reading, copying, cataloguing or borrowing them.

68.  Two agreements were entered into between the college and the company relating to the Books. In my view, they result not merely in the college and its nominees having the use of the Books: the Books are actually in the possession of the college. By the first of the agreements, the Books were sold by the college to the company. By the second agreement, “the company agrees to supply to the college the Services in connection with the [library]", and “the Services” are defined in para 1 of Schedule 1 as including:

“The provision of the Books on hire to the College for the use of the Fellows, undergraduates, graduate students and staff of the College or such other persons or authorities nominated by the College upon the terms and conditions from time to time in force".

69.  In my opinion, that paragraph makes it clear that the Books are “on hire” to the college, i.e. that they are rented to the college, and that the purpose of the hiring is that the Books are to be “use[d]” by people who are all selected by the college, either as “fellows, undergraduates, graduate students and staff” or because they are “nominated” by the college. Thus, the Books are in the possession of the college, and it is the college which selects the persons who can use them. Another agreement was also entered into which requires the company to “manage” the Rare Books, which remain the property of the college, but they are not in the library.

70.  As to the library staff, their position is rather unusual. They remain employed by the college but are seconded to the company. Clause 5.1 of the secondment agreement between the college and the company provides:

“Unless otherwise agreed the college will second the [current library staff] to the company on the terms and conditions under which they are from time to time employed by the college…. The college will notify the company of any changes to the terms and conditions of employment of the [staff]".

71.  The terms of employment require each employee to “act as [librarian, assistant librarian or library assistant as the case may be] for the company and be responsible with other members of staff for the provision of library services to members of the college". Thus, although the members of the library staff, when carrying out their functions, are acting, at least in part, on behalf of the company, they remain employees of the college and are obliged to provide library services to college members. It is the college which is responsible for their terms of service, their discipline, and their dismissal, and for the selection and employment of new staff members (who would then be seconded to the company). It is the college and its members whose requirements they are to satisfy.

72.  As to the users of the library, they are almost all selected by the college, when they became fellows, graduates or undergraduates at the college. (However, as para 1 of the schedule to the second agreement relating to the Books makes clear, the college can authorise others to use the Books, and therefore, by implication, the library). The presence in the library of members of the college is, in the present connection, of an entirely different order from, say, the presence in a bank of its customers, an example raised during argument. Analogies can be dangerous, but Lord Walker’s example of the presence of members in the premises of a members’ club is, to my mind, much closer to the present case.

73.  So much for possession; what about control? The evidence establishes that access to the library for members of the college is controlled in part by the college and in part by the librarian. The college issues its fellows, graduates and undergraduates and some of its employees with cards which enable access to be obtained to the library (and indeed to other parts of the college). Access to the library is limited to the hours of 7.00 am and 12.45 am seven days a week. However, the librarian, who is of course employed by the college and seconded to the company, can effectively override the use of a card by a person who is in breach of the rules. But it seems clear that she cannot revoke the use of a card without good reason, not least because of her duty to “be responsible…for the provision of library services to members of the college” The library is also open to the public for reference purpose during seven hours each weekday, but a member of the public needs the consent of the librarian to have access to the books. (Presumably, the terms of schedule 1 of the second of the agreements relating to the Books means that she could not deny access to someone nominated by the college, but that is a footnote point at best).

74.  The day-to-day running of the library is in the hands of the library staff, especially the librarian, and they are, as mentioned, employed by the college, but seconded to the company. Three times a year there is a meeting between the executive committee of the company and the library users’ committee of the college. The meeting considers reports on the running of the library and the library’s finances. The meeting also considers the position of those who have breached library rules, although the ultimate decision in such cases lies with the librarian.

75.  In my judgment, when one looks at the nature and use of this property, the college library, the ownership and use of the essential items in it, namely books, the individuals who actually use the books (whether by reading them in situ or borrowing them and returning them), the parties who control the people who can use the library and the times and occasions they can use it, and the parties to whom the library staff are answerable, and when one bears in mind that the college effectively controls the company, the sensible conclusion is that the college has a substantial degree of possession and control over the library.

76.  This is an exceptional case, where the unusual and artificial arrangements mean, at least in my opinion, that it is simply not right to resolve the issue under para 3A(7) by reference to the prima facie position. Normally, I accept, it would be enough to dispose of the Commissioners’ case to say that the owner of the library had leased it to a limited company, that the owner’s library employees were all seconded to the company, and that one of those employees had the ultimate control over who used the library. However, on the documentation and facts of the present case, such a broad approach is inappropriate: it is necessary to embark on a more detailed analysis of the contractual documentation, the position on the ground, the users of the library, the identity of the owner and the relationship between owner and company. Once one carries out that exercise, it is apparent, at least in my opinion, that the company does not have exclusive possession and control of the library: it effectively shares possession and control, and therefore occupation, with the college.

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