London Borough of Merton Council v Nuffield Health
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lord Sales,Lord Kitchin,Lord Hamblen,Lord Leggatt |
| Judgment Date | 07 June 2023 |
| Neutral Citation | [2023] UKSC 18 |
| Court | Supreme Court |
Lord Briggs
Lord Kitchin
Lord Sales
Lord Hamblen
Lord Leggatt
Appellant
James Goudie KC
Jonathan Fowles
Cain Ormondroyd
(Instructed by South London Legal Partnership)
Respondent
Daniel Kolinsky KC
Matthew Smith
(Instructed by BDB Pitmans LLP (London))
Heard on 7 and 8 March 2023
Lord Briggs AND Lord Sales ( with whom Lord Kitchin, Lord Hamblen and Lord Leggatt agree):
Section 43(5) and (6)(a) of the Local Government Finance Act 1988 (“section 43(6)”, for short, and “the LGFA 1988”, respectively) provides for a mandatory 80% relief from business rates where:
“the ratepayer is a charity or trustees for a charity and the hereditament is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”.
The respondent Nuffield Health is a registered charity, which operates some 31 hospitals, 112 fitness and wellbeing centres, five medical centres and over 200 further gyms and health assessment facilities in workplaces across the United Kingdom for the purposes described in its Memorandum of Association as follows:
“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.”
One of those fitness and wellbeing centres is a members-only gym known as Merton Abbey, located in the London Borough of Merton, the council of which is the appellant (“Merton”). Merton took the view that, viewed on its own, the Merton Abbey gym failed to qualify as being used for charitable purposes because the fees being charged to its members were set at a level which excluded those of modest means from enjoying its facilities. Accordingly the public benefit requirement, which is an invariable condition of charitable status, was not satisfied.
Nuffield Health challenged that view and succeeded, both at first instance and in the Court of Appeal. The judge (Stuart Isaacs KC) decided first that section 43(6) did not require the question whether the premises were used for charitable purposes to be decided by reference to the activities carried on there alone. Rather, the question was whether Nuffield Health was using the Merton Abbey gym for the pursuit of its charitable purposes, viewed in the context of its charitable activities as a whole. Applying that test Nuffield Health succeeded, even if persons of modest means were excluded from using the facilities at the Merton Abbey gym by reason of the fees charged there. But secondly he decided that, even viewed separately from the rest of Nuffield Health's activities, and looking only at the activities carried on at the Merton Abbey gym on its own, it satisfied the public benefit requirement because its fees did not in fact exclude persons of modest means.
The Court of Appeal (David Richards, Peter Jackson and Nugee LJJ) decided by a majority that the judge was right about the first point but unanimously reversed him on the second. The result was that Merton's appeal was dismissed. In this court Merton has renewed its challenge to the construction of section 43(6), while Nuffield Health maintains that the Court of Appeal ought not to have reversed the judge on the second point. This court has decided that Merton's appeal on the first point should be dismissed. The second point does not therefore arise and we say nothing more about it.
The construction of section 43(6) is of course a pure question of law, the outcome of which is not fact-sensitive. Nonetheless we summarise the relevant facts, most of which are either common ground or based on unchallenged evidence, so as to provide some real-life context against which the task of construction can be carried out.
Nuffield Health is a company limited by guarantee without share capital. Its purposes are “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.” Its focus is on the prevention of illness and the maintenance of health, principally through the provision of gym facilities. It also operates private hospitals and clinics, which charge fees. Its approach is to link the promotion of fitness, emotional wellbeing and health education as a means of maintaining good health with the identification, assessment and containment of health risks and the treatment of diagnosed health problems, including rehabilitation following treatment.
It is common ground that, as the judge found, the purposes of Nuffield Health are, taken together, for the public benefit, as is necessary for it to have charitable status. Also, Merton accepts that the trustees responsible for conducting Nuffield Health's affairs are acting in accordance with their fiduciary obligations and not in breach of trust.
Nuffield Health has claimed the mandatory 80% relief under section 43(6) from non-domestic rates in the period from 1 August 2016 onwards, on which date it acquired the Merton Abbey gym from a commercial gym operator, Virgin Active.
The facilities at the Merton Abbey gym are provided primarily to those with Nuffield Health gym membership. They include a swimming pool, spa pool and sauna; a gym with ancillary rooms for exercise classes and consultations; a crèche available to members' children only; and car parking for members. As at April 2019, when Nuffield Health issued these proceedings against Merton, the standard fee for membership was £80 per month, or £71 per month if one committed to a longer period of membership.
Certain limited free services are on offer at or through the Merton Abbey gym to non-members, comprising “Health MOTs” (basic health checks) at periodic intervals and for certain groups, “Meet our Experts” events offered about four times a year to provide health advice (together with a one-day gym pass) and a free 15 minute initial consultation with a physiotherapist and free one-month gym membership for those starting treatment. In addition, non-members can pay a fee for physiotherapy services at the gym. Two local schools use the swimming pool weekly during term time for a modest fee.
The question of construction raised by this appeal lies on the intersection between two venerable bodies of English law, namely charities and rating. They originated by coincidence in the same session of Parliament at the end of the reign of Queen Elizabeth I in the form of the Charitable Uses Act 1601 (for charities) and the Poor Relief Act 1601 (for rating). It is worth outlining the history of the development of both those streams of law, because it sheds some useful light on the question of construction of the legislation in its present-day form, in the LGFA 1988 and the Charities Act 2011 (“the 2011 Act”).
The law on charities developed from consideration of, in particular, the preamble to the Charitable Uses Act 1601 which set out a long list of purposes which were taken to be charitable. These included the “releife of aged impotent and poore people”, the “maintenance of sicke and maymed Souldiers and Marriners” and to provide “schooles of learninge”. Public benefit, namely benefit to the community or a relevant section of the community, was regarded as inherent in the concept of charity. Over time, this came to be regarded as a separately identified requirement which had to be satisfied before a purpose could qualify as charitable in the eyes of the law. What was meant by public benefit for these purposes was explored and articulated in case-law. The history is traced in detail in the judgment of the Upper Tribunal (Warren J and Judges Alison McKenna and Elizabeth Ovey) in R (Independent Schools Council) v Charity Commission for England and Wales [2011] UKUT 421 (TCC), [2012] Ch 214 (“ ISC”), paras 42–53, and does not need to be rehearsed here.
As has been noted in several cases, charity is a legal term of art the definition of which, including the public benefit requirement, does not always accord with the general public understanding of what is and what is not charitable: see, eg, Inland Revenue Comrs v McMullen [1981] AC 1, 15 per Lord Hailsham of St Marylebone LC.
There have been a number of Acts of Parliament dealing with charities. The law relating to charities was comprehensively revised and restated in the Charities Act 2006, which was the legislation under review in the ISC case. That has now been replaced by the 2011 Act, which was and is the legislation in force at all material times in this case.
Lord Sumption explained the background of the rating legislation in Woolway (Valuation Officer) v Mazars LLP [2015] UKSC 53, [2015] AC 1862, para 1, as follows:
“Local authority rates are the oldest tax in continuous existence in England, having originally been introduced in the reign of Queen Elizabeth I by the Poor Relief Act 1601 (43 Eliz 1, c 2). Historically, they were payable in respect of the rateable occupation of hereditaments, and that continues to shape the law in this area even though non-domestic rates are today imposed on unoccupied hereditaments also. The core concepts underlying the assessment of rates are that they are a tax on property and not on persons or businesses, and that the ‘hereditament’ is the unit of assessment. Each hereditament is separately identified in the rating list and separately assessed, notwithstanding that the same occupier may have more than one. …”
Lord Briggs and Lord Leggatt also examined the historical background in their judgment in Rossendale Borough Council v Hurstwood properties (A) Ltd [2021] UKSC 16, [2022] AC 690 (“ Rossendale”), paras 20–24. The LGFA 1988, as...
To continue reading
Request your trial
-
Dukes Bailiffs Ltd v Breckland Council
...by the Supreme Court in R(PRCBC), paras 29–31, summarised recently by the Supreme Court at para.35 of Merton LBC v Nuffield Health [2023] UKSC 18 at p.35 as: ‘focusing on the words used in that provision in the context in which they were enacted, and taking account of the purpose for which......