Nuffield Health v Merton London Borough Council

Rating – Non-domestic rates – Charitable purposes – Respondent registered charity claiming mandatory relief from non-domestic rates on gym premises – Appellant local authority refusing relief on basis that premises not wholly or mainly used for charitable purposes – High Court holding respondent entitled to mandatory relief – Court of Appeal upholding decision – Appellant appealing – Whether respondent entitled to relief in respect of occupation of members-only gym – Appeal dismissed The respondent was a registered charity established “to advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit”. It ran 112 fitness and wellbeing centres, including Merton Abbey, a members-only gym, in the London Borough of Merton. Section 43(5) and (6)(a) of the Local Government Finance Act 1988 provided for a mandatory 80% relief from business rates where “the ratepayer is a charity or trustees for a charity” and the premises are “wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”. The respondent applied to the appellant local authority for mandatory and discretionary rate relief. However, following a visit by its officers, the appellant considered that, viewed on its own, the Merton Abbey gym failed to qualify as being used for charitable purposes because the fees charged excluded those of modest means from enjoying its facilities. Accordingly, the public benefit requirement, an invariable condition of charitable status, was not satisfied. On the respondent’s appeal, the High Court held, among other things, that under section 43(6) the question was whether the respondent was using Merton Abbey for charitable purposes, viewed in the context of its charitable activities as a whole. On that test the respondent succeeded, even if persons of modest means were excluded from using the facilities at the gym because of the fees. The Court of Appeal upheld that decision: [2021] EWCA Civ 826; [2021] PLSCS 100. The appellant appealed. Held: The appeal was dismissed. (1) Section 43(6) imposed two conditions for entitlement to relief, to be tested by a two-stage enquiry. The first stage was whether the ratepayer was or was not a charity. If the ratepayer was (like the respondent) a registered charity, that was the end of the first-stage enquiry. The first condition would be satisfied since, by section 37(1) of the Charities Act 2011, the ratepayer was conclusively presumed to be a charity. If not registered, the question whether it was a charity would have to be determined by reference to its constitution and/or (if there was no constitution or the constitution was inconclusive) by a review of its activities and the purposes they served, looked at overall, including an assessment of whether the public benefit requirement was satisfied. (2) The second stage, that the hereditament be used wholly or mainly for charitable purposes, only arose for decision if the ratepayer was a charity, or trustees for a charity. At that second stage, the charitable purposes for which the hereditament had to be used were not charitable purposes generally, but the charitable purposes of that charity or of that charity and other particular charities. The explanatory words in parentheses “(whether of that charity or of that and other charities)” made that clear beyond question. Thus, the enquiry about the purposes for which the hereditament was used was not whether the purposes of the ratepayer were charitable. If the ratepayer was a charity, the purposes which it could lawfully pursue all had to be charitable. If the ratepayer was a registered charity, its purposes were irrebuttably presumed to be charitable because a body was only a charity if it was established for charitable purposes only. (3) The enquiry at that second stage was whether the hereditament was in fact being used for the (necessarily charitable) purposes of the charity or used for other activities lawfully carried on by the charity which did not directly serve those purposes, in which case the close connection test applied in Glasgow Corporation v Johnstone [1965] AC 609 and Oxfam v Birmingham City District Council [1976] 1 EGLR 112 might need to be applied. If, on the other hand, the activities being carried on at the hereditament were not wholly or mainly in pursuit of the charity’s purposes, for instance because the activity was to use the property for investment or fundraising, or because it allowed some other person to make use of its property or because the activities being carried on there were in fact conducted in breach of the fiduciary obligations of its trustees and not in pursuit of its charitable purposes, then the test in section 43(6) would not be satisfied. But that was not the case here. (4) The first stage of the enquiry, namely ascertaining whether the ratepayer was a charity, could only be undertaken by reference to charity law. By contrast, at the second stage the question was a factual one, namely whether the actual use of the hereditament was wholly or mainly for the fulfilment of the charity’s (necessarily charitable) purposes or, where it was not directly in fulfilment of those purposes, whether the close connection test was satisfied. (5) In this case, the respondent was a registered charity. Its essential purposes included the advancement, promotion and maintenance of health. It fulfilled those purposes in numerous hospitals, fitness and health centres and gyms. Those purposes were irrebuttably presumed all to be charitable, in all the places where they were carried on and, viewed overall, to satisfy the public benefit requirement. The respondent plainly used the Merton Abbey gym for the direct fulfilment of those charitable purposes. That was not a case of incidental activities. On the findings of the Court of Appeal, it did so only for those who were not of limited means. But the rich were as much a part of the section of the public benefited by the respondent’s charitable activities as the poor, and it had to be assumed from its registration as a charity and from the fact that the trustees were not in breach of their fiduciary obligations that the poor were not excluded from benefit, on a view of the respondent’s activities in the round, even if they were at the Merton Abbey gym.  It followed that the respondent used the gym (the relevant hereditament) wholly or mainly for its charitable purposes. Therefore, the respondent was entitled to mandatory relief from business rates under section 43(6). James Goudie KC, Jonathan Fowles and Cain Ormondroyd (instructed by South London Legal Partnership) appeared for the appellant; Daniel Kolinsky KC and Matthew Smith (instructed by BDB Pitmans LLP) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Nuffield Health v Merton London Borough Council