Derby Teaching Hospitals NHS Foundation Trust & Ors v Derby City Council & Ors

An NHS foundation trust is not a charity where its statutory purposes extend beyond purposes that are exclusively charitable. The statutory expressions related to and in connection with permit purposes and activities which need not be charitable, subsidiary, incidental or merely a means of achieving charitable ends. The requirement that an institution be established for charitable purposes only is therefore not satisfied. A broad statutory power to do anything necessary or expedient in connection with the trust’s functions may reinforce that conclusion. The court also held, on the assumed basis that all other requirements were satisfied, that regulation of a foundation trust and an internal arbitration clause would not substantially oust the High Court’s supervisory jurisdiction. Other issues, including governmental purposes, dissolution assets and public benefit, were left undecided.

Seventeen NHS foundation trusts sought mandatory relief from non-domestic rates under sections 43(5) and 43(6) of the Local Government Finance Act 1988. The preliminary issue concerned whether the lead claimant, Derby Teaching Hospitals NHS Foundation Trust, was a charity for those purposes. The parties agreed six questions concerning charitable status, the statutory purposes and powers of a foundation trust, public benefit, High Court control, and the destination of assets on dissolution.

The central issue was whether the statutory scheme governing NHS foundation trusts established them for charitable purposes only, having regard to their principal purpose, related purposes, charging powers and general powers.

1. Preliminary issue. Derby Teaching Hospitals NHS Foundation Trust was not a charity for the purposes of section 43(6) of the Local Government Finance Act 1988.
2. The purposes for which an institution is established are identified principally from its constitutive instrument. For a foundation trust, that instrument comprises the statutory provisions and its constitution. The word only is essential: an institution established for charitable and non-charitable purposes is not a charity, even if it in practice pursues only charitable purposes.
3. The principal purpose in section 43(1) of the National Health Service Act 2006, namely providing goods and services for the NHS, was charitable as the advancement of health. But sections 43(2)(a) and (b) permitted the pursuit of any purposes related to specified health purposes and public-health purposes. “Related to” required a connection, but did not confine the additional purposes to purposes that were charitable, subservient, incidental or means to an end.
4. The words “in connection with” in section 43(2)(a) were wider than “for”. They permitted activities connected with prevention, diagnosis or treatment of illness which were not themselves undertaken for those purposes. Section 44(6) likewise permitted accommodation and further services which were not necessarily directed to advancing health. Those provisions therefore described additional purposes, not merely powers ancillary to charitable objects.
5. The income comparison in section 43(2A) did not alter that conclusion. Nor did section 47(1), which permitted a foundation trust to do anything appearing necessary or expedient for the purpose of, or in connection with, its functions. Its breadth allowed activities which were not subservient, ancillary or incidental to charitable purposes, and the decision whether something was necessary or expedient was left substantially to the trust.
6. On the assumed basis that all other requirements for charity status were met, the statutory regulation of a foundation trust did not substantially oust the High Court’s supervisory jurisdiction. An internal arbitration clause concerning disputes under the constitution did not have that effect.
7. The court declined to decide whether NHS foundation trusts could be excluded as governmental rather than charitable bodies. It also declined to decide whether the possible transfer of assets to the Secretary of State on dissolution prevented charitable status. The public-benefit issue did not require determination.