Non-domestic rates – Occupation for charitable purposes – Local Government Finance Act 1988 – Appellant charity occupying two sets of premises – Respondent council obtaining liability orders for rates in respect of those premises – Whether appellant entitled to mandatory charitable relief from rates under section 43(6) of 1988 Act on ground that premises wholly or mainly used for charitable purposes – Whether extent of use of premises relevant for that purpose – Appeal allowed – Permission for judicial review refused
The appellant, a registered charity, occupied two adjoining units pursuant to leases under which it was responsible for payment of rates. The respondents made demands for non-domestic rates in respect of those two units for the period of September 2010 to March 2012 and applied to the magistrates’ court for liability orders against the appellant in the sums of £863,756.19 and £750,810.52 respectively. The appellant contended that the sums demanded were not due since the units attracted 80% mandatory charitable relief, pursuant to section 43(6) of the Local Government Finance Act 1988, on the ground that they were wholly or mainly used for charitable purposes.
The district judge rejected the appellant’s contentions and granted liability orders. He held that he should look at all the evidence to decide, on a broad basis, whether the properties were wholly or mainly used for charitable purposes and that the expression “wholly or mainly used” should be given full effect in relation to the use of the building as a whole. In concluding that the two units were not wholly or mainly used for charitable purposes, he found that: (i) there was an absence of substantial use of the premises and that, if the furniture stored in the premises were less spaced out, it would take up no more than half of one of the units and no more than one-third of the other; (ii) the appellant did not need to occupy both units since one would have satisfied their needs; and (iii) the landlord in fact provided the money for the appellant to pay the rates; and (iv) one of the uses of the two units was to produce revenue for the appellant by arrangement with the landlord.
On an appeal by case stated, the issue for the court was whether the district judge had taken the correct approach in determining whether the premises were wholly or mainly in charitable occupation. The appellant contended that the words “wholly or mainly” referred only to the purpose of the use rather than to the extent of the use made of the premises.
The appellant also sought permission for a judicial review on identical grounds; its sole purpose in doing so was to allow for the possibility of an appeal to the Court of Appeal, since, by virtue of sections 18 and 28A of the Senior Courts Act 1981, there was no right of appeal to the Court of Appeal from a decision of the High Court on an appeal by way of case stated from the magistrates’ court.
Held: The appeal was allowed; permission for judicial review was refused.
(1) The litigation arose in the context of the change in rating law effected by the Rating (Empty Properties) Act 2007, whereby rates had become payable on unoccupied warehouse-type hereditaments at the same level as the full occupied rate. Subject to an exemption for the first six months of non-occupation, the owner of an empty warehouse therefore became liable for 100% unoccupied property rates where previously its liability had been zero. If the owner allowed a charity to occupy the warehouse, then the charity became the ratepayer and, subject to meeting certain conditions, was entitled to 80% relief from occupied rates. It therefore made financial sense for a property owner not only to encourage a charity to occupy its premises rent-free, but also to pay that charity to occupy those premises. The owner would still benefit financially if it paid to the charity the 20% liability that the charity incurred by its occupation, together with an additional donation, so long as the total amount paid was less than the 100% rates that the owner would otherwise incur. From the charity’s point of view, the arrangement represented a fundraising opportunity arising from the landlord’s donation in return for the resulting reduction in the landlord’s rates liabilities. However, the function of the court was to interpret the legislation and the success or otherwise of such tax planning measure was not of direct concern to it.
When determining whether premises were use wholly or mainly for charitable purposes, the use of the premises was to be addressed from the viewpoint of the charity in occupation, by asking whether the use that the charity made of the premises was directly to facilitate the carrying out of its main charitable purposes: Oxfam v City of Birmingham District Council [1976] 1 AC 126; [1976] 1 EGLR 112; (1975) 237 EG 107 applied. General fundraising did not come into that category. The judge had been entitled to look at the evidence before him and consider, on a broad basis, whether the premises were being used wholly or mainly for charitable purposes. The extent of user was a relevant consideration in applying section 43(6). There was no reason to confine the phrase “wholly or mainly” to the purpose of the use. The natural reading and meaning of the words used were apt to cover not only consideration of the purpose of the use, but also the extent or amount of the actual use. The district judge had correctly taken account of, and placed weight on, the extent to which the premises were used: English Speaking Union Scottish Branches Educational Fund v City of Edinburgh Council [2009] CSOH 139; [2010] RA 227 considered.
However, the judge had erred in taking into account the inefficiency of the furniture storage use and the necessity for the appellant to occupy both units. Necessity was not a material consideration: Glasgow Corporation v Johnstone [1965] AC 609 applied. In the present context, considerations of efficiency were closely related to questions of necessity and were likewise irrelevant. It was not a legitimate exercise for the judge to calculate that the furniture in each unit would take up less than half of the available space if it were stored more efficiently.
The judge had also erred in the way he took account of the mutual advantages to the charity and the landlord as a consideration pointing against entitlement to mandatory charitable relief. His reasoning on the matter was unclear. If he meant that the parties were indulging in tax avoidance, then that was not a matter to which weight should have been attached. If he was referring to his finding that one of the uses of the units was to produce revenue for the appellant, then, if such an arrangement did amount to a use of the premises, the mere fact that it was taking place could not, of itself, mean that furniture storage was not the whole or main use; some additional assessment of the position needed to be made. Accordingly, while the district judge had been entitled to take account of the extent to which the premises were used, he had also taken into account other factors that were not relevant or that he had not analysed sufficiently. His decision could not stand.
(2) Permission for the appellant’s alternative judicial review claim should be refused. The appropriate procedure for challenging decisions relating to liability orders was by way of a case stated appeal: R (on the application of Brighton and Hove Council) v Brighton and Hove Justices [2004] EWHC 1800 (Admin); [2004] PLSCS 252 applied. To permit parallel judicial review proceedings would fall foul of the fact that case stated is a suitable alternative remedy and would go behind the clear provisions of sections 18 and 28A of the Senior Courts Act 1981, which clearly intended that a decision of the High Court in relation to a case stated appeal should be final so that the Court of Appeal had no jurisdiction to hear an appeal against such a decision.
Daniel Kolinsky (instructed by Wellers Law Group LLP, of Bromley) appeared for the appellant; Jenny Wigley (instructed by the legal department of Sheffield City Council) appeared for the respondents.
Sally Dobson, barrister
