Nuffield Health v London Borough of Merton

By a majority, the Court of Appeal held that mandatory non-domestic rates relief depends on whether a hereditament is wholly or mainly used for the charitable purposes of the charity occupying it. A registered charity’s public-benefit status is not separately reassessed at each individual site. The use must nevertheless be functional charitable use, rather than investment or fundraising use. The court also observed, in the alternative, that charging fees is not inherently inconsistent with public benefit, but provision for people of modest means must exceed a token level. On the facts, the gym’s non-member services were token and affordability evidence was inadequate. The appeal was dismissed because the majority rejected the site-specific public-benefit test.

Nuffield Health, a registered charity, occupied a gym and wellbeing centre at Merton Abbey. The London Borough of Merton withdrew mandatory rates relief under section 43(6)(a) of the Local Government Finance Act 1988. The High Court declared that Nuffield Health was entitled to relief and ordered repayment of rates, with interest. On appeal, Merton argued that Nuffield Health had to establish public benefit at the individual premises, that the fees and services failed that requirement, and that the premises were mainly used for fundraising. The central issue was whether public benefit had to be assessed separately at the hereditament or followed from the charity’s status and use of the premises for its charitable purposes.

By a majority, Lord Justice Jackson and Lord Justice Nugee dismissed the appeal. Lord Justice David Richards dissented and would have allowed it on Grounds 1 and 3.

1. Construction of the statutory test. The majority held that section 43(6)(a) of the Local Government Finance Act 1988 requires the particular hereditament to be wholly or mainly used for the charitable purposes of the occupying charity. However, it does not require a separate public-benefit assessment for every site. A registered charity is conclusively presumed to be a charity, and its charitable purposes include the public-benefit requirement. The relevant question is whether the premises are being used for those charitable purposes.
2. Functional and fundraising use. The assessment remains hereditament-specific for the purpose of deciding what use is made of the property and whether that use is wholly or mainly charitable. Use directly furthering the charity’s objects is capable of qualifying. Premises used merely to raise or earn money, or held as an investment, do not qualify.
3. Grounds 2 and 3. The court rejected a hard-edged rule that health, recreational or general-public-utility charities must serve the public at large or every person needing their facilities. In the alternative, all members of the court agreed that, if public benefit had to be assessed at the premises, charging fees would not by itself disqualify the use. The poor, understood as people of modest means, could not be excluded and provision for them had to be more than token. On the facts, Nuffield Health had not established that its fees were affordable to people of modest means, and its non-member services were limited and promotional. Ground 3 would therefore have succeeded on the site-specific approach.
4. Fundraising. The generation of a surplus did not itself establish that the premises were mainly used for fundraising. Merton had not produced evidence of the income, surplus and use of surplus necessary to prove that proposition.

The High Court’s declaration and consequential repayment order therefore stood.

• Court of Appeal (Civil Division) — The appeal was dismissed by a majority. Lord Justice Richards dissented.
• High Court of Justice, Business and Property Courts — The Deputy Judge declared that Nuffield Health was entitled to mandatory rates relief under section 43(6)(a) of the Local Government Finance Act 1988, and ordered repayment of rates with interest: [2020] EWHC 259 (Ch).