Supreme Court refuses permission in Fortyseven Park Street appeal

The Supreme Court has refused the Appellant permission to appeal in Fortyseven Park Street Ltd [2019] EWCA Civ 849, thus concluding this long-running litigation.  The case concerned the VAT treatment of the sale of “Fractional Interests” relating to a property belonging to the Marriott group at 47 Park Street, Mayfair, London.  The question was whether the Appellant’s supplies to its Members of Fractional Interests were exempt as the leasing or letting of immovable property.

This was broken down into three issues:

1. Was the land exemption inapplicable because “the right to occupy property as if that person were the owner and to exclude any other person from enjoyment of such a right” was missing from the Appellant’s supplies to Members?
2. Was the land exemption inapplicable because the supplies did not involve merely a relatively passive activity but rather significant added value?
3. Supposing that the supplies were in principle capable of falling within the land exemption, were they excluded from the exemption by Item 1(d) in Group 1 of Schedule 9 to VATA 1994 (i.e. did the supplies amount to the provision of sleeping accommodation in a “hotel or similar establishment”)?

As to Issue 1, both tribunals and Court of Appeal found that the interest sold to Members constituted “the right to occupy property as if that person were the owner and to exclude any other person from enjoyment of such a right”.  The extent to which this conclusion can be applied to similar cases is questionable.  On the particular facts here, owning a Fractional Interest was not in itself sufficient to guarantee occupation.  A reservation had to be made.  If there was no availability at the relevant time such that the Member was unable to use up their allowance in any given year, the Member would not be entitled to a refund.  However, the evidence was that this situation rarely (if ever) arose because the Appellant had been careful not to “oversell” Fractional Interests.  Had the evidence been different, the opposite conclusion might well have been reached on this point.  The words of Lord Scott in CC&E v Sinclair Collis Ltd [2001] UKHL 30 at [71] should be borne in mind:

“A contract for parking space might entitle the grantee to the exclusive use of a specified parking space. Or it might do no more than entitle him, together with others to whom a similar right had been granted, to enter upon a piece of land and park wherever he could find space to do so. The former might constitute a “letting”. The latter arrangement could not possibly be held to do so.”

The Court of Appeal overturned the Upper Tribunal on Issue 2, holding that the Appellant did not merely grant its Members a bare interest in land.  On the contrary, the Appellant held out the prospect of “the amenities and service of a five-star hotel” in its marketing material, promising its Members an array of additional services during their stays which could not be regarded as merely incidental.  The Appellant also offered Additional Plan Benefits to Members (i.e. access to the Marriott rewards programme, and resale, rental and exchange programmes).  The Court of Appeal concluded that all this amounted to far more than the mere passive letting of land and generated significant added value to the Appellant’s supplies.  Accordingly, the land exemption did not apply.

Issue 3 did not therefore arise.  However, the Court of Appeal concluded that it would have found in favour of the Respondent on this point too.  Item 1(d) was not to be construed narrowly and it was open to the FtT to consider that the grant of a Fractional Interest, carrying with it rights to “sleeping accommodation” in an establishment similar to a hotel, is appropriately characterised as “the provision in an hotel … or similar establishment of sleeping accommodation” within the meaning of Item 1(d).  In particular, the FtT was entitled to have regard to the fact that Members’ individual stays were short term in nature.

Hui Ling McCarthy QC acted for the successful Respondent.  The Court of Appeal judgment can be found here.