The High Court in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin) considered the meaning of ‘used’ in respect to mandatory charitable relief under section 43(6)(a) and section 45A(2)(b) of the Local Government Finance Act 1988 in respect to a poster board exhibition.
Where a corporate charity is liable for national non-domestic rates (‘NNDR’ or ‘Business Rates’), whether as rateable occupier under section 43 Local Government Finance Act 1988 (the ‘1988 Act’), or as ‘owner’ under section 65 and section 45 of the 1988 Act, the level of Business Rates due from the charity to the billing authority will depend on various factors, including whether the charity qualifies for charitable relief under two key sections of the 1988 Act.
Take for instance, the typical scenario where a corporate charity is granted a tenancy of a property (which is also the hereditament) with an immediate right of possession, the lease term commencing immediately[1] and: (i) leaves the property rateably unoccupied for some periods; and (ii) rateably occupies the property for other periods. The charity, holding a tenancy with an immediate right to possession (as a matter of property law[2]), will be the ‘person entitled to possession of it’ for the purposes of section 65 of the Act 1988, and so be ‘owner’. Consequently, for the periods the property is unoccupied, the charity will be the (legal) person liable for the Business Rates. Depending on the circumstances, the charity may claim, in respect to those rateably unoccupied periods, that it was entitled to (100%) mandatory charitable relief from the Business Rates otherwise due, under section 45A(2) of the 1988 Act. Similarly, for the (other) periods of time - when the charity rateably occupied the property - the charity may claim mandatory charitable relief from Business Rates otherwise due, under section 43(6) of the 1988 Act – that is, an 80% reduction in the sum due (as compared to the full charge).
This was the scenario that arose in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin) (‘My Community’).
Mandatory Charitable Relief
Taking these charitable relief provisions in turn, section 43(6)(a) of the 1988 Act reads:
‘(6) This subsection applies where on the day concerned:
(a) 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 preceding provision, section 43(5) reads:
(5) Where subsection (6) … applies the chargeable amount for a chargeable day shall be calculated in accordance with the formula—‘
The section 43(5) formula is not written out here, but the effect of the formula is that the chargeable amount is reduced to 20% of the full charge (note the billing authority holds a discretion to reduce this further, to zero should it so choose[3]).
Section 45A(2), with section 45A(1), reads:
‘(1) Where section 45 applies in relation to a hereditament, the chargeable amount for a chargeable day is zero in the following cases.
(2) The first case is where–
(a) the ratepayer is a charity or trustees for a charity, and
(b) it appears that when next in use the hereditament will be wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).’
Section 45A(2)(a) and (b) are cumulative; both need to be satisfied for the zero liability provision to apply.
Establishing that a charity is eligible for either, or both (for different days), of these two mandatory charitable reliefs, requires the charity to demonstrate that, on a particular day, the hereditament property was used, or on that day, it appeared that when next in use, it would be used, in a qualifying way.
As part of his judgment, Walker J in My Community, on a case stated appeal to the High Court, considered the nature and requirements of ‘use’ under these sections. His judgment throws light on this complex and nuanced area of the law.
The Facts in My Community
My Community Space (‘MCS’) was a corporate registered charity[4]and was the tenant of certain properties (the ‘Properties’) forming part of St Clare House, Ipswich. The Properties consisted of 8 hereditaments[5]. MCS had taken leases of the Properties for 3 years from 23.3.16[6].
MCS’s original charitable objects were registered as (so far as is salient):
“To provide suitable buildings for the public benefit primarily in the United Kingdom for the provision of…The promotion of efficiency and effectiveness of charities and the effective use of charitable resources in particular, but not limited to, the provision of premises and work space for charitable use subject to such changes as the directors in their absolute discretion shall determine…”
An additional object was added to MCS by special resolution on 29.10.16[7]:
‘“To promote any charitable purpose (charitable under English law) for the benefit of the public as the trustees see fit in particular but not exclusively by the following means… providing opportunities for individuals to volunteer, in particular but not limited to, communications, exhibitions and promotion events in general helping charities convey the opportunities community contribution and benefits of volunteering.”’
Ipswich Borough Council (the ‘Billing Authority’) identified MCS as liable for the Business Rates on the Properties, and demand notices were served. In response, MCS claimed entitlement to charitable relief, however, the Billing Authority, relying on evidence from various visits to the Properties[8], refused to recognize that MCS activities at the Properties, came within section 43(6)(a) or section 45A(2),
Magistrates Court Hearing
The Billing Authority issued proceedings against MCS and the matter came DJ Dawson, where MCS made two principal contentions, that:
MCS Occupation Period Contention
(1) MCS had put on exhibitions at the Properties, and while doing so MCS had been in ratable occupation of the Properties. The exhibitions had been from 21.6.16 to 9.8.16 inclusive (‘Exhibition 1’) and 30.11.16 to 25.1.17 inclusive (‘Exhibition 2’)(together, the ‘Occupation Periods”). During these periods, by reason of the exhibitions, the Properties had been wholly or mainly used for charitable purposes – that the properties were used for exhibitions in pursuance of MCS's charitable objects (the ‘MCS Occupation Period Contention’). These exhibitions had been advertised in the local press and publicized elsewhere[9]; and that there had been ‘open days’[10]both during (a) Exhibition 1, on 8.8.16 and 9.8.16; and (b) Exhibition 2, on 24.1.17 and 25.1.17.
Consequently, the chargeable amount during the Occupation Periods was governed by section 43(5), and so the chargeable amount was 20% of what it might otherwise be.
The DJ rejected the MCS Occupation Period Contention. Though the DJ found that ‘…the dates when MCS were in actual occupation of the premises were 21/6/16 to 9/8/16 and 30/11/16 to 25/1/17’[11], the DJ concluded that MCS had not satisfied her that the use of the Properties was, during the Occupation Periods, wholly or mainly for charitable purposes.
As to the ‘actual set up of the exhibitions’[12]put on by the charity, the DJ said, at paragraph 81 (quoted by Walker J at paragraph 37):
‘The photos show a series of easels with pictures on, displayed in a random fashion across the floors of the property. It is accepted by MCS that some were duplicates, although this was rectified later. They appear to have been arranged for quantity rather in a meaningful or inviting way. This format, reproduced over all 8 floors is repetitive and it is hard to see how it can have been designed to be stimulating or informative.
The DJ continued:
The fact that there was no signage to get visitors around the building, and that the property was locked and could only be accessed by appointment, even on the four 3 hour “open” days,…
Led the DJ, crucially:
‘…to find that this did not have the appearance, purpose or intent of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute in charitable volunteering.’[13]
This finding that, the exhibitions lacked ‘…the appearance, purpose or intent of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute in charitable volunteering’ later proved a pivotal finding.
The DJ dismissed any importance being attributed to the fact that a few external organizations had engaged with the exhibitions. At paragraph 81 (Walker J, paragraph 39), the DJ said:
‘In my judgment it was purely fortuitous that two organisations dropped some leaflets off, two provided some artwork and text and one mother and son and a passing contractor expressed an interest and actually looked at the posters.’
At paragraph 85, the DJ said (Walker J, paragraph 41):
‘To summarise my assessment of the evidence: the majority of the posters were non-specific. I cannot find that they met the original charitable objects which were in place at the time of the first exhibition. Nor do I find that when amended in time for the second exhibition they met the additional charitable object to promote volunteering, see paras 10 and 12…. The posters and leaflets were held in locked rooms which could only be accessed by appointment. The “open days” totaled 12 hours over the whole period and prior notice was required to attend. For all the reasons set out above, taken together as a whole picture, the evidence does not satisfy me on the balance of probabilities that MCS was making active and extensive use of the property for charitable purposes.’
Then, at paragraph 86 (Walker J, paragraph 43), the DJ concluded:
‘… MCS has not satisfied me to the required civil standard that the use of the property, when it was occupied by the posters, was wholly or mainly for charitable purposes …’
Later, in the case stated appeal, the DJ explained the reasoning that led her to the conclusion that the exhibitions lacked the requisite ‘appearance, purpose or intent’, at paragraphs 35-37 (Walker J, paragraph 40):
‘Four local charities and a library were involved in providing or displaying materials for the exhibition. St Elizabeth's hospice provided art work on the 13th and 14/7/2016. Tools with a Mission supplied leaflets on 28/11/2016. Community Action Suffolk supplied images and quotes for a poster on 12/1/17. The Ipswich branch of the Children's Society sent a poster and leaflets on 24th January 2017. Gainsborough library offered to display promotional material for the exhibition on 16th January 2017. These dates were after the exhibitions were underway and the material could not have been included when Mr Powney set up exhibitions.
I found that MCS had been reactive, not proactive in its actions in promoting the exhibition and producing the materials, in changing its charitable objects and in notifying the council of its periods of occupation.
The exhibition consisted of a series of easels with pictures on, displayed in a random fashion. The majority of the posters were non-specific. Some were duplicated. They were arranged for quantity rather than in a meaningful or inviting way. The format, reproduced over all 8 floors was repetitive and uninformative. There was no signage to get visitors around the building. The property was locked and could only be accessed by appointment, even on the four “open” days which totalled 12 hours over the whole period of the two exhibitions.’ [14]
MCS Empty Periods Contention
(2) on each day during the 3 non-Occupation Periods (the 3 ‘Empty Periods’[15]), it appeared that when next in use the Properties would be wholly or mainly used for charitable purposes (the ‘MCS Empty Periods Contention’), and so the applicable chargeable amount, under section 45A(1), was zero,
The DJ rejected the MCS Empty Periods Contention. The judge concluded that MCS had not satisfied her that, for any Empty Periods day, it had appeared that when next in use, the Properties would be wholly or mainly used for charitable purposes. As Walker J stated, at paragraph 4:
‘This conclusion inevitably followed from the judge's rejection of the MCS occupation periods contention.’
Logically, what appears on any particular Empty Period day to be the use the Properties will next be put, is inextricably linked to the use the Properties are in fact put during the Occupation Periods. Given this link between the two respective contentions (the MCS Occupation Period Contention and the MCS Empty Periods Contention), the outcome of the case stated appeal turned on:
‘…whether the [DJ] was entitled to reach the conclusion that MCS had not satisfied her that the use of the properties during the occupation periods was wholly or mainly for charitable purposes.’
Questions Posed in Case Stated Appeal
In MCS’ appeal by way of case stated, amongst others[16], the DJ posed the following questions (and sub questions) to the High Court:
‘Q3. In determining that the [Properties were] not used wholly or mainly for charitable purposes when occupied by the poster board exhibitions did I err in law by taking into account and placing weight on the following factors, when examining the evidence as a whole, on a broad basis?
[Q3.1] The number nature and size of the advertisements for the exhibitions.
[Q3.2] How the [Properties] were arranged for presentational purposes during the exhibitions.
[Q3.3] That the exhibitions were not stimulating or informative.
[Q3.4] That MCS [was] reactive not proactive.
[Q3.5] That the exhibitions were only open to the public by appointment.
[Q3.6] There was no signage to direct visitors round the building.
Q4. In determining that the [Properties] were not used wholly or mainly for charitable purposes when occupied by the poster board exhibitions did I err in law by applying a more stringent test than is required, namely by considering that the charity should “actively make extensive use of the [Properties] for charitable purposes’[17]
Q4 can be deal with briefly immediately, as Walker J answered Q4: yes, the DJ had erred by using 'actively' rather than 'actually', but that error was immaterial as it had ‘no impact on the outcome of the appeal’[18]Consequently, this article will focus on Q3, and the permissibility of taking into account and placing weight on the 6 specified factors (the ‘6 factors’).
The Grounds of Appeal
The Grounds of Appeal linked to Q3 contended[19]:
GA6. The District Judge erred in law by considering the efficacy of the poster board exhibitions and applying a test of whether or not those exhibitions met the charitable objects of [MCS] instead of determining what the purposes of the use of the [properties] by [MCS] were and whether those purposes were in pursuance of any or all of [MCS]'s charitable objects which included:
GA6(a) “helping charities convey the opportunities, community contribution and benefits of volunteering”;
GA6(b) “providing opportunities for individuals to volunteer”; and
GA6(c) “provision of premises and workspace for charities”.’
The Legal Framework
Before turning to the importance of a finding that the exhibitions, the use relied upon, lacked the purported ‘appearance, purpose or intent of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute in charitable volunteering’, Walker J considered the various authorities and applicable legal principles.
A Qualifying Use
Both section 43(6)(a) and section 45A(2)(b) involve the concept of ‘use’ of the hereditament. What the 1988 Act requires by ‘use’ for the purposes of these sections was labeled by Walker J as 'a qualifying use'[20]. Walker J then defined what the ‘a qualifying use’ means, at paragraph 49:
‘As regards occupation periods, under section 43(6) the qualifying use concerns the current use on a particular day. As regards empty periods, under section 45A(2) the qualifying use concerns what appears to be the position when the hereditament will next be in use. Materially identical words are used as to what that qualifying use requires: the charity must show that the current use or what appears to be the next future use, as the case may be, involves the hereditament being “wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”.’
Distinction between Uses
Walker J noted that the meaning of the relevant words ‘…wholly or mainly used for charitable purposes…’ were considered in a leading House of Lords case, Oxfam v Birmingham City Council [1976] AC 126 (‘Oxfam’), when they appeared in a preceding statute, General Rate Act 1967[21]. In Oxfam, Lord Cross (with whom Lord Simon, Lord Edmund-Davies and Lord Fraser agreed) said, at 135, that they were:
‘…somewhat curiously worded. No body or trust can be a charity unless its objects are exclusively charitable and if it is using premises of which it is in occupation for purposes for which it is entitled to use them and not in breach of trust it must be using them for some purpose or purposes of the charity. Yet this subsection clearly contemplates that a charity may be properly using premises which it occupies for purposes which are not 'charitable' purposes of the charity. A line has therefore to be drawn somehow or other between the user of premises for purposes which are charitable purposes of a charity within the meaning of the subsection on the one hand and their user for purposes which though purposes of the charity are not charitable purposes of the charity on the other.’
The distinction to be drawn therefore, is between:
(1) ‘the user of premises for purposes which are charitable purposes of a charity within the meaning of the subsection’ and
(2) ‘their user for purposes which though purposes of the charity are not charitable purposes of the charity’[22]
Further, Walker J noted, at paragraph 51, Lord Cross's conclusion at 146, that a line should be drawn:
‘… so as to exclude from relief use for the purpose of getting in, raising or earning money for the charity, as opposed to user for purposes directly related to the achievement of the objects of the charity …’
This distinction had proved decisive to the facts in Oxfam, where Oxfam’s claim for relief for its ‘Charity Shops’ failed. Oxfam’s claim failed, because Oxfam’s claim fell on the wrong side of the line, because the shops were used mainly for the sale of clothing given to the charity in order to raise money for use in the charity's work. Conversely, had those shops been used mainly for the sale of “village handicraft” articles made in the developing world, in order to encourage village industries and provide employment in poor countries, then the shops would have been entitled to relief.
Walker J observed that while Lord Morris agreed with the result in Oxfam, Lord Morris in Oxfam described the distinction in types of ‘use’ in this way, at 148 to 149:
‘While care must always be taken to adhere to the statutory words and not to supplement them or to supplant them, I consider that user 'for charitable purposes' denotes user in the actual carrying out of the charitable purposes: that may include doing something which is a necessary or essential or incidental part of, or which directly facilitates, or which is ancillary to, what is being done in the actual carrying out of the charitable purpose. There may, on the other hand, be things done by a charity, or a use made of premises by a charity, which greatly help the charity, and which must in one sense be connected with the charitable purposes of the charity and which are properly within the powers of the charity, but yet which cannot be described as being the carrying out, or part of the carrying out, of the charitable purposes themselves. The nature of the user may not be sufficiently close to the execution of the charitable purpose of the charity. A charity may be entitled to occupy premises and to use them other than for its charitable purposes: only if to occupation by a charity there is added user 'for charitable purposes' will the benefit given by the section accrue.’
For Lord Morris therefore, the distinction to be drawn was between:
(1) use actually carrying out the charitable purposes, including necessary, essential or incidental parts thereof, or which directly facilitates, or is ancillary to, what is being done; and
(2) use done by the charity, or use made of premises, which greatly helps the charity, and is connected with the charitable purposes and is properly within the powers of the charity, but yet cannot be described as at least part of the carrying out, of the charitable purposes themselves. For instance, a charity may be entitled to occupy premises and to use them other than for its charitable purposes.
Consequently, only if the use (the activity) can be categorized as falling within the first type of ‘use’, will that use qualify as ‘use’ for the purposes of satisfying the mandatory charitable relief sections.
[Note, while the fundamental principles from Oxfam continue to apply - Parliament subsequently decided to intervene in relation to the law on Charity Shops, with section 64(10) of the 1988 Act - to expressly make the typical use of a Charity Shop, within 'charitable purposes'. Section 64(10) reads:
'A hereditament shall be treated as wholly or mainly used for charitable purposes at any time if at the time it is wholly or mainly used for the sale of goods donated to a charity and the proceeds of sale of the goods (after any deduction of expenses) are applied for the purposes of a charity.']
Entitlement to Organize One’s Affairs to Minimize Incurring Tax
The authorities establish that there is a general principle that a ratepayer, or potential ratepayer, is entitled to marshal his affairs, so as to avoid liability for Business Rates. That is, a person is entitled to organize his affairs, so that he will later qualify for a lower tax exposure, than might otherwise be applicable to him. To put it another way, there is no legal imperative on a person to act in a way that places that person under an increased liability to pay tax..
On this, Walker J considered relevant, the decision of HHJ Jarman QC in R (Makro Properties Limited) v. Nuneaton and Bedworth BC [2012] EWHC 2250 (Admin)(‘Makro’), where the judge said, at paragraph 56:
‘It has been recognised for a considerable amount of time that ratepayers or potential ratepayers can and do organise their affairs as to avoid paying rates. In Gage (1903) 67 JP 32, Alverstone CJ dealt with this question and stated that if the ratepayer thought that she would not be within the charging act by going out of possession, she was quite entitled to do so. In my judgment the same applies to going in and then out of occupation. It has often been emphasised that the court is not a court of morals, but of law. If the outcome of this case is seen as unacceptable then it is for the legislature to determine whether further reform is needed.’
In South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, (‘Digital Pipeline’), Elias LJ in the Divisional Court (Elias LJ and Nicol J), confirmed[23]this proposition, when considering pre-planned charitable tenant tax avoidance schemes, when he said, at paragraph 17:
‘…it is widely appreciated that the rules on charitable exemption can be manipulated to the advantage of both the owner of business premises and the charity leasing the premises. The landlord of unoccupied business premises will have to pay rates. However, if he lets it to a charity which carries on charitable activities, the landlord is no longer the ratepayer within the statutory definition in section 65. But the charity is able to take advantage of the charitable exemption. If, as is typically the case and is the position here, it simply has to pay a peppercorn rent and especially where the landlord pays a premium to the charity, both the charity and the landlord benefit. If the premium at least exceeds the 20% rate which remains payable for the appeal days, the charity is in profit, but so is the landlord who has avoided altogether the duty to pay rates. However, when determining whether the exemption applies or not, it is immaterial that the purpose of the arrangement between landlord and the charitable tenant is to reduce or avoid the payment of business rates: see the Kenya Aid case…, para 38. There is nothing unlawful in parties seeking to arrange their affairs so as to avoid paying taxes which they would otherwise have to pay, if they can lawfully do so.’[24]
And at paragraph 29 to Digital Pipeline, Elias LJ said:
‘Whether or not a party is arranging its affairs in a particular way so as to avoid tax is not a relevant matter and cannot be accorded any weight by the Judge in determining whether the charitable relief provisions apply … . Nor can it be accorded any weight in considering whether an exemption from unoccupied rates … should apply. …’
Extent of Use – Spatial and Temporal
In Kenya Aid, the Divisional Court held that an ‘extent of use’ interpretation, as well as ‘purpose of use’ interpretation[25], should be adopted for words ‘…wholly or mainly used for charitable purposes…’, and Sales J in Public Safety held that this was correct. Further, at paragraph 34, Sales J in Public Safety said:
‘In the context of this legislation and having regard to the language used, it is reasonable to infer that Parliament intended that the substantial mandatory exemption from rates for a charity in occupation of a building should depend upon the charity actually making extensive use of the premises for charitable purposes (i.e. use of the building which is substantially and in real terms for the public benefit, so as to justify exemption from ordinary tax in the form of non-domestic rates), rather than leaving them mainly unused.’
Walker J noted Sales J explanation for why an approach including the ‘extent of use’ interpretation, was to be preferred, over just a ‘purpose of use’ interpretation. Dealing with the strongest argument in favour of excluding ‘extent of use’ interpretation completely, and for adopting only the ‘purpose of use’ interpretation, Sales J said, at paragraphs 36 and 37:
‘To my mind, the strongest of the arguments put forward by [counsel for the charity] against this construction of [section 43(6)] was that the extent of use interpretation would strip the word “wholly” of all sensible meaning in the context of that provision. He submitted that on the extent of use interpretation the issue would always resolve into a question of whether the hereditament is “mainly used” for charitable purposes, since buildings would typically be left unused at night, or areas within them would not be in actual use all the time. If that were right, and the word “wholly” were rendered meaningless upon this interpretation, it could be a strong textual indicator in favour of the alternative, purpose of use interpretation.
However, I do not think that the argument can be sustained. A building may fairly and properly be described as being wholly used for a particular purpose even though not every square metre of floor space is in constant use all the time. For instance, the whole of a room used as an office can be described as being wholly used as an office, even though it is spacious and not crammed with people working. I also think it can fairly be described as being wholly used as an office, albeit it is closed and left vacant during the night. Even if that is not right, it is possible to imagine buildings which indeed are in constant use the whole time for charitable purposes (e.g. a permanent soup kitchen to feed the destitute or an office staffed 24 hours a day by the Samaritans to be available to give advice to people who feel suicidal). So it cannot be concluded that the word “wholly” in the phrase “wholly or mainly used for charitable purposes” has no meaning or proper function if the extent of use interpretation of section 43(6) is adopted.’
This proposition was confirmed[26]by Elias LJ in Digital Pipeline, when he said, at paragraph 13:
‘…the test is not whether the activity being conducted on the premises is wholly or mainly charitable. Instead, the test is whether the premises are being used wholly or mainly for charitable activity.’
Evaluating the extent of use is not simply a mechanical spatial and temporal calculation; use is not just about whether physical objects occupied a certain space over time. It is more nuanced than that.
In Digital Pipeline, the Magistrates Court had rejected a billing authority’s application for a liability orders in relation to premises leased by the charity. On occasional and infrequent days, the charity held ‘appeal’ days to collect unwanted IT equipment from donors, face to face, for processing and onward transportation to Africa, for use in Africa by schools without computer equipment. On these ‘appeal days’, the charity used approximately 42%[27]of the available space in the premises. There were unused parts of the premises, consisting of 3 different rooms, and part of the hall sales floor that not actually used by the charity or the customers who were attracted into the hall[28]. Elias LJ said, at paragraphs 25 to 27 of his judgment:
‘I do not accept the [billing authority’s] submission that once the floor space in use was only 42%, it was perverse for the judge to make a finding that the premises were wholly or mainly used for the charitable purpose. Nor, in my view, was there a presumption to that effect which could only be rebutted by compelling evidence. In some cases the amount of floor space in use may be minimal, depending on the nature of the charitable activity.
A charity may, for example, store books to be sent to Africa in the bookshelves around a room it leases. For much of the time the room will be empty. Even when the room is in use to shelve or remove the books, there is likely to be a portion of the middle of the floor which is virtually never in use. That would not prevent the inference that the room was used wholly for a charitable purpose, as Sales J, as he was, observed in the Public Safety Charitable Trust case…: see para 19 above.[29]
Moreover, if the [billing authority’s] approach were correct, it would sometimes have arbitrary results. In this case the area notionally deemed to be not in use was a space behind the boards which the charity had erected, where the public did not go or need to go. I would accept that if the boards are placed in a way which is clearly designed to hive off a particular part of a much wider space, that would justify treating the excluded space as an area not being used for charitable purposes. But if the boards are placed away from the wall for presentation purposes, so that it can reasonably be inferred that the whole space is being used as a discrete area, albeit that not all of the space is actually in use, it is not in my view legitimate to exclude the area not actually in use. The “wholly or mainly” question should not turn on the arbitrary decision how the premises are arranged for presentational purposes provided it can fairly be said that there is a clearly demarcated area in which the services are being provided, even if they are not all actually in use. … The courts have emphasised that a broad-brush approach is required - the antithesis of the approach suggested by the [billing authority].
However, I accept the [billing authority’s] second argument, namely that the judge erred in placing as much weight as he did on the fact that there was no other activity taking place on the premises. I accept that had there been another activity sharing the same premises, this would have been material to the “wholly or mainly” question. If, for example, some public body had set up an official at a desk in the same hall as the respondent charity, giving advice to members of the public, that sharing of the premises would plainly be a factor to take into account when asking whether the premises were wholly or mainly used by the charity, since it would dilute the use by the charity. But I do not think that the converse is true. If, having regard to the nature and extent of the use, the conclusion was that the premises could not properly be said to be wholly or mainly used by the charity, this conclusion could not change simply because the rest of the premises were empty. It seems to me that the judge was assuming that this could be the case and that the fact that the premises were otherwise unused was a positive factor in the charity's favour….’[30]
Extent of Use – Does not Include Necessity/ Efficiency of Use
Next, Walker J referred, at paragraph 56, to Sheffield City Council v Kenya Aid Programme [2014] QB 62 (‘Kenya Aid’), a Divisional Court decision (Treacy LJ and King J), wherein the Divisional Court, at paragraph 61, had rejected as irrelevant[31], considerations as to ‘…the efficiency or otherwise of the furniture storage use at the premises, and whether it had been necessary for the charity to occupy both premises.’
Walker J noted, at paragraph 63, that Elias LJ in the Divisional Court in Digital Pipeline, confirmed this proposition[32], when he said in Digital Pipeline, at paragraph 16:
‘…if as a matter of fact the premises are being used wholly or mainly for charitable purposes, it matters not that they could have been run more efficiently or that strictly only part of the premises need have been used: see the observations of the Treacy LJ in the Kenya Aid case [at] para 36. The test has to be applied to the facts as they are, not as they might have been.’
Success in Achieving the Charitable Objectives
Walker J then rejected a possible interpretation of a passage[33]from Digital Pipeline, that it is relevant to the extent of use, whether the charity was successful or not in bringing in potential donors. At paragraph 86, Walker J stated that:
‘…Elias LJ in that passage is simply pointing out that if the use meets the test laid down by Lord Morris Oxfam then success in achieving the charitable objects does not matter.’
Relevance of Factors Depends on Categorization of Circumstances
Up until this point, it might be said that Walker J was simply recounting the established legal principles to be found in the authorities. However, as to the next point, it might be said that Walker J discerned, or at least illuminated, a difference of approach in the law, depending on the circumstances. While the above authorities and statements of the law seem to have general application, Walker J held that they highlighted that (only) in certain circumstances were certain identified factors irrelevant to the ‘extent of use’ evaluation. Walker J held that factors[34]such as:
1. a ratepayer, or potential ratepayers lawfully organizing their affairs so as to avoid paying rates; and
2. whether it was necessary for the charity to occupy all, spatially, the premises that it did in fact occupy, and whether it could have been more efficient with space, than it in fact was;
could be ‘highly relevant’[35]to the ‘extent of use’ issue where the use of the property, made by the charity and relied upon to found the mandatory charitable relief claim, lacked ‘…the appearance, purpose or intent of…’ the activity was purported by the charity to have. In My Community, as stated above, the charitable activity was suppose to be ‘…a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering…’(paragraph 87)
In reaching the conclusion that the law prescribed different levels of relevance to such factors, depending on whether or not the activity met the ‘appearance, purpose or intent’ criteria, Walker J relied upon the qualifications set down in previous authorities. In this regard, Walker J said that the following 5 qualifications in the authorities, were, ‘particularly important’, at paragraph 83:
‘1. Lord Cross in Oxfam described the user which would give rise to charitable relief in this way…:
…user for purposes directly related to the achievement of the objects of the charity…
2. Lord Morris in Oxfam said that in order to qualify for relief there must be:
…user in the actual carrying out of the actual charitable purposes…
3. By contrast, Lord Morris said that charitable relief would not be available as regards:
…things done by a charity, or a use made of premises by a charity, which greatly help the charity, and which in one sense must be connected with the charitable purposes of the charity and which are probably within the powers of the charity, but yet which cannot be described as being the carrying out, or part of the carrying out, of the charitable purposes themselves. The nature of the user may not be sufficiently close to the execution of the charitable purpose of the charity. …
4. In Public Safety Charitable Trust Sales J said in paragraph 34:
‘… in the context of this legislation and having regard to the language used, it is reasonable to infer that parliament intended that the substantial mandatory exemption from rates for a charity in occupation of a building should depend upon the charity actually making extensive use of the premises for charitable purposes (i.e. use of the building which is substantially and in real terms for the public benefit, so as to justify exemption from ordinary tax in the form of non-domestic rates) …
5. In Digital Pipeline, before commenting that it mattered not whether the premises could have been run more efficiently or that strictly only part of the premises need have been used, Elias LJ at paragraph 16 began with a qualification:
‘… if as a matter of fact the premises are being used wholly or mainly for charitable purposes…’
Question of Fact whether Activity lacks Requisite Appearance, Purpose or Intent
When undertaking the preceding determination as whether or not the activity relied upon (an exhibition, for instance) lacks the necessary ‘appearance, purpose or intent’, the Court is determining a question of fact. Walker J said, at paragraph 90:
‘Whether the “exhibitions” had the appearance of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering is a question of fact. As MCS itself accepted, the judge's role did not involve the exercise of a discretion. Similarly, the judge's conclusion as to the relevant purpose and relevant intent involves a question of fact.’[36]
Where Purported Activity lacks Requisite Appearance, Purpose or Intent
Where the judgment of Walker J is somewhat unclear, is as to the consequences of a finding that the activity, the use relied upon, lacks the appearance, purpose or intent of the purported charitable activity. On the facts of My Community, Walker J noted that the DJ had made the finding of lack of ‘appearance, purpose or intent’, and had gone on to consider whether she was satisfied that MCS had made …‘active and extensive use of the property for charitable purposes,’. Walker J, at paragraphs 92 and 94 respectively, said:
‘For the reasons given above, it does not seem to me that the judge needed to do this. Her finding of lack of appearance, purpose or intent necessarily had the consequence that MCS's use fell on the wrong side of the line.
‘Once the judge had made her finding of lack of appearance, purpose or intent, the inevitable result was that MCS's use of the properties fell on the wrong side of the line.’
The important words here are ‘necessarily’ and ‘inevitable’, and the question is whether Walker J was here setting down guidance of universal application, or whether his statements here were, and are, limited to just the facts as they arose in My Community. It may be that the weight of findings made by the DJ in MCS, and leading to the finding of ‘appearance, purpose or intent’ meant that there really could be no doubt that the charity’s claim that a qualifying use was made of the Properties during the Occupation Periods, was bound to fail (and so the claim for the Empty Periods would also fail). There was, in practice, no need for an evaluation of the spatial use the Properties were put. Conversely, it may have been that Walker J was setting down guidance of wider significance. That were a finding is made that the activity relied upon as founding the claim for mandatory charitable relief, lacked the appearance, purpose or intent it was said to have, then inevitably the property was not ‘wholly or mainly used for charitable purposes’– the use was not of the right/qualifying variety to be 'a qualifying use'. However actual[37]and/or extensive such use may be been, if it is ineligible for consideration as ‘a qualifying use’, then there is little point quantifying quite how extensive that use was, since none of it can be used to fulfil the criteria for mandatory charitable relief. On balance, it would seems that wider guidance was being given, but this remains to be confirmed by future authorities.
The Key Passage
In considering the impact of Walker J’s decision in My Community, it pays to read the whole of Walker J’s key passage in full. This key passage is at paragraph 87:
‘If, as the judge held, this was a case where the use of the properties by MCS did not have the appearance, purpose or intent of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering, then it seems to me that the qualifications I have cited above all have the result that MCS was not using the properties in pursuance of the carrying out of charitable purposes. MCS criticised the judge for failing to find what it was that she considered to bes (sic) the purposes of the exhibitions. Here, as it seems to me, MCS enters inadmissible territory. For the reasons given above, I have held that the judge's finding as to lack of appearance, purpose or intent puts MCS on the wrong side of the line: it has the consequence that the qualifications I have cited above are engaged, and the prohibition on taking account of efficiency or necessity does not apply. Thus the Q3 factors, which in the ordinary case would not be relevant, become factors which are highly relevant. It necessarily follows that the answer to Q3 is that the judge did not err in law.’[38]
Conclusion
The broad approach in My Community to mandatory charitable relief claims appears to be as follows. That in evaluating a charity’s claim that it satisfies the criteria for mandatory charitable relief under section 43(6) or section 45A for a particular day, the Court will need to determine whether or not use the property was put on that day (or appeared next would be put) was a qualifying use. In making this determination, the Court will typically need to evaluate the ‘extent of use’ the property was put by the charity, excluding from the range of factors considered, those that are prohibited from consideration as being irrelevant (necessity of use/ efficiency of use etc.). However a qualification exists in the authorities: where the activity relied upon by the charity as founding its entitlement to mandatory charitable relief (exhibiting, collecting items, Bluetooth broadcasting, or whatever activity it was said to be), is found by the Court to lack the appearance, purpose or intent of the use it was suppose to be (according to the charity), then the factors which are relevant changes – factors that were prohibited from consideration, as irrelevant[39], can become ‘highly relevant’[40].
On the facts in My Community, the DJ had undertaken an evaluation of whether the purported activity, the ‘…public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering’, did indeed have that appearance, purpose or intent. Given the undisturbed[41]finding that ‘…the use of the properties by MCS did not have the appearance, purpose or intent of a public exhibition for charities to obtain volunteers and for the public to seek opportunities to participate and contribute to charitable volunteering…’, the case fell within the qualifications and so the varied range of relevant factors applied – in essence, the prohibition on taking account of efficiency or necessity etc., did not apply. The Q3, 6 factors, (those being the number, nature and size of the advertisements for the exhibitions [Q3.1]; how the Properties were arranged for presentational purposes during the exhibitions [Q3.2]; the exhibitions not being stimulating or informative [Q3.3]; MCS being reactive not proactive [Q3.4]; the exhibitions being only open to the public by appointment [Q3.5]; there being no signage to direct visitors round the building. [Q3.6]), all fell within the varied range of relevant factors the Court could take into account, and so the DJ had not erred in taking them into consideration. Indeed, such factors could be highly relevant to the evaluation.
Walker J concluded that ‘…the qualifications … all have the result that MCS was not using the properties in pursuance of the carrying out of charitable purposes.’ Simply put, the finding on ‘appearance, purpose or intent' put MCS ‘…on the wrong side of the line.’ (Walker J, paragraph 87).
On the facts in My Community, once the finding had been made that there was an absence of the requisite ‘appearance, purpose or intent’, the DJ need not have gone on to evaluate whether an active (ought to have been 'actual' [42]) and extensive use had been made of the property on any relevant day. Walker J said, at paragraph 92, that, ‘Once the judge had made her finding of lack of appearance, purpose or intent, the inevitable result was that MCS's use of the properties fell on the wrong side of the line.' On balance, this is a statement of wide guidance applicable to other, similar cases.
Other aspects to the case stated appeal had no impact on the outcome for the charity[43]. The outcome for the charity was that it was not entitled to any mandatory charitable relief.
Lexis Nexis
An shortened version of this article was published by Lexis Nexis, available here (subscription required).
SIMON HILL © 2019
BARRISTER
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.
[1] The term of the tenancy commences immediately, thereby granting the tenant a right to possession immediately. The term of the tenancy is not one that commences at some future date.
[2] This hypothetical scenario assumes that the charity does not grant a subtenancy with the term of the subtenancy commencing immediately.
[3] This discretionary charitable relief provision is contained in section 47 of the Local Government Finance Act 1988. Section 47 is the main provision in a series of sections consisting of section 47, section 48 and section 48A. Section 47 reads, so far as directly necessary:
‘(1) Where the condition mentioned in subsection (3) below is fulfilled for a day which is a chargeable day within the meaning of section 43 or 45 above (as the case may be)—
(a) the chargeable amount for the day shall be such as is determined by, or found in accordance with rules determined by, the billing authority concerned, and
(b) sections 43(4) to (6B) and 44 above, sections 45(4) to (4B) and 46 above, regulations under section 57A or 58 below or any provision of or made under Schedule 7A below (as the case may be) shall not apply as regards the day.
…
(3) The condition is that, during a period which consists of or includes the chargeable day, a decision of the billing authority concerned operates to the effect that this section applies as regards the hereditament concerned.
(4) A determination under subsection (1)(a) above—
(a) must be such that the chargeable amount for the day is less than the amount it would be apart from this section;
(b) may be such that the chargeable amount for the day is 0;
(c) may be varied by a further determination of the authority under subsection (1)(a) above.’
[4] Company House has the company as a ‘Private Limited Company by guarantee without share capital use of 'Limited' exemption’
[7] A peripheral issue involved MCS’s amendment to its charitable objects. By resolution dated 29.10.16, MCS added to its objects, an Article 3(e) ‘promoting, encouraging and supporting volunteering…’. This only took effect, it seems, from 6.12.16, so about 4 months before the end of the relevant liability period (see Walker J paragraph 12)
[8] The Billing Authority’s employees/agents inspector/Ms Mann undertook visits to the Properties on 6.7.16, 8.8.16, 9.1.17 and 24.1.17; see paragraphs 23-25 of Walker J’s judgment. In particular, at paragraph of 59 of the DJ’s judgment (Walker J, paragraph 34), The DJ said:
‘On the basis of the photographic evidence and the evidence of Ms Theresa Mann I am satisfied that the posters were set up and present when representatives of the applicant attended on 6/7/16, the 8/816 and the 9/1/17 and the 24/1/17.‘
[9] See paragraphs 18 and 26. Also, see paragraph 13 of Walker J’s judgment in My Community, in which part of the DJ’s judgment is recorded. In the DJ’s judgement, at paragraph 18, within a section containing the relevant agreed facts, the DJ recorded:
‘An advertisement appeared in the local evening paper on 6 occasions in total, in the “What's On” classified section. It was headed “Thinking of volunteering?” and gave details of a “Charities in the Community Exhibition” from 22nd of June 2016 to 9th August 2016 / 1st December 2016 to 23rd January 2017. It also advertised two open days on 8thand 9th of August 2016 / 24th and 25th January 2017’
[10] Paragraph 13 of Walker J’s judgment in My Community contains part of the DJ’s judgment. In the DJ’s judgement, at paragraph 18, within a section containing the relevant agreed facts, the DJ noted:
‘Each open “day” lasted for 3 hours, from 1-4pm on the first day and from 9am to 12 noon on the second. The advert invited people to phone a number to book viewings by appointment. The first advert appeared a few days after the first exhibition opened, the last appeared after the last exhibition had closed.’
[11] In paragraph 34 of Walker J’s judgment in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), he quotes paragraphs 58 to 60 of the DJ’s judgment. In paragraph 60, the DJ stated:
‘I …find …that the dates when MCS were in actual occupation of the premises were 21/6/16 to 9/8/16 and 30/11/16 to 25/1/17’
[12] Walker J quoted this part of the DJ’s judgment, in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), at paragraph 38.
[13] Walker J quoted this passage from the DJ's judgment, in paragraph 38 of his judgment in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin).
[14] Mr Powney worked for MCS since November 2016 and described himself as a “logistics manager” (see paragraph 27 of Walker J judgment).
Note at paragraph 82 (Walker J, paragraph 41), the DJ said:
‘I find that MCS has been reactive not proactive in its dealings. This applies to the promotion of the exhibition and production of materials…’
[15] The 3 Empty Periods were: 23.3.16 to 20.6.16 (‘Empty Period 1’), 10.8.16 to 29.11.16 (‘Empty Period 2’) and 26.1.17 to 31.3.17 (‘Empty Period 3’)
[16] The DJ in the case stated appeal posed some very case specific evidential questions. The outcome of these appeal points are very unlikely to be of interest beyond the parties to My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), and so won’t be considered further in this article. However, for completeness, the evidential questions were Q1 and Q2 (including sub questions):
‘Q1. Was there an evidential basis on which I was entitled to come to the following factual findings?
[Q1.1] That the charitable objects were changed after and in response to Mrs Mann's letter dated 26/10/16.
[Q1.2] That the adverts appeared in the local press on 6 occasions.
Q2. Was I entitled to come to the factual findings in 1 above without considering or giving reasons for rejecting or accepting the following documentary evidence?
[Q2.1] Copies of an email exchange between Mr Cook and Mrs Westhead of the Charity Commissioners commencing 6/9/16.
[Q2.2] Paragraph 33 of Mr Cook's witness statement and copies of 11 adverts in the press.
[Q2.3] Paragraphs 22 and 25 of the witness statement of Theresa Mann and copies of letters from the council to MCS dated 11/8/8/2016 and 25/8/2016.’
[17] For completeness, the Ground of Appeal linked to Q4 of the case stated appeal, was (Walker J, paragraph 45):
‘GA4. In determining that the [Properties] were not “used wholly or mainly for charitable purposes” when occupied by poster board exhibitions, the District Judge erred in law by applying a more stringent test than is required by law, namely by considering that what is required is that “the charity actively makes extensive use of the [properties] for charitable purposes”.’
[18] At paragraph 105 of My Community, Walker J said:
‘For the reasons given above, I answer the questions in the case stated:
…
Q4: yes, but this has no impact on the outcome of the appeal.’
[19] The full Grounds of Appeal in respect to the non-evidential questions, non-Q4, aspects, were:
‘GA5. The District Judge was not entitled to find that the first exhibition did not meet the charitable objectives of [MCS] in place at the time without determining whether she accepted the evidence before her (being the witness evidence of George Cook) and without determining and/or giving reasons for:
GA5(a) whether the promotion of the availability of space for charitable use fell within the terms of the charitable objects of [MCS] in place at the time of the first exhibition;
GA5(b) Whether the promotion of volunteering opportunities in charities fell within the terms of the charitable objects of [MCS] in place at the time of the first exhibition.
GA6. The District Judge erred in law by considering the efficacy of the poster board exhibitions and applying a test of whether or not those exhibitions met the charitable objects of [MCS] instead of determining what the purposes of the use of the [Properties] by [MCS] were and whether those purposes were in pursuance of any or all of [MCS]'s charitable objects which included:
GA6(a) “helping charities convey the opportunities, community contribution and
benefits of volunteering”;
GA6(b) “providing opportunities for individuals to volunteer”; and
GA6(c) “provision of premises and workspace for charities”.’
[20] After referring to section 46(6)(a) and 45A(2) of the Local Government Finance Act 1988 Act, Walker J in My Community stated, at paragraph 49:
‘I will refer to what the statute requires in these two cases as “a qualifying use”. As regards occupation periods, under section 43(6) the qualifying use concerns the current use on a particular day. As regards empty periods, under section 45A(2) the qualifying use concerns what appears to be the position when the hereditament will next be in use. Materially identical words are used as to what that qualifying use requires: the charity must show that the current use or what appears to be the next future use, as the case may be, involves the hereditament being “wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)”.’
[21] Charitable relief from Business Rates first appeared in the Rating and Valuation (Miscellaneous Provisions) Act 1955. The history of charitable relief, from inception to General Rate Act 1967, was set out by Lord Cross in Oxfam v Birmingham City Council [1976] AC 126, at 135:
‘Prior to the passing of the Rating and Valuation (Miscellaneous Provisions) Act 1955 there was no statutory provision which gave a charity relief from rates in respect of premises which it occupied; but in practice in the days before the passing of the Local Government Act 1948, which transferred the task of valuation and assessment from them to the Inland Revenue Commissioners, many local authorities used as a matter of grace to make 'sympathetic' assessments of premises occupied by charities. The statutory provisions contained in the Act of 1955 were replaced a few years later by section 11 of the Rating and Valuation Act 1961, the provisions of which were re-enacted in section 40 of the General Rate Act 1967.’
Turning to section 40 of the General Rate Act 1967 (now obsolete), that provision read (so for as material for present purposes):
‘(1) If notice in writing is given to the rating authority that—
(a) any hereditament occupied by, or by trustees for, a charity and wholly or mainly used for charitable purposes (whether of that charity or of that and other charities); or
(b) …,
is one falling within this subsection, then, subject to the provisions of this section, the amount of any rates chargeable in respect of the hereditament for any period during which the hereditament is one falling within ... paragraph (a) ...of this subsection, being a period beginning not earlier than the rate period in which the notice is given, shall not exceed one-half of the amount which would be chargeable apart from the provisions of this subsection…’
Note:
(i) previously charitable relief applied only if and from when the ratepayer served a 'notice of writing' on the relevant billing authority;
(ii) now under section 43(6) of the LGFA 1988, the position is different; rateably occupied mandatory charitable relief applies if the criteria in section 43(6) is met. There is no pre-condition that a ratepayer must have served a 'notice of writing' on the relevant billing authority and that relief is only available from the date of notice, forward.
[22] Interestingly, though not referred to by Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), the Divisional Court in Kenya Aid Programme v Sheffield City Council [2014] Q.B. 62, fashioned the differentiating question necessary to drawn out the distinction in Oxfam v Birmingham City Council [1976] AC 126, as follows:
‘The question to be asked is whether the use which the charity makes of the premises is directly to facilitate the carrying out of its main charitable purposes: see the Oxfam case [1976] 1 AC 126, 139.’
[23] Elias LJ in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971 said, at paragraph 12, that ‘It is common ground that they establish the following propositions.’ meaning, common ground between the parties. He said this, without himself disputing the accuacy of these propostions.
[24] Though not referred to by Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), Elias LJ also said in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, at paragraph 29:
‘It seems to me that there may have been some suggestion, at least implicit, that this was a collusive plan designed to avoid paying the rates, and that other premises would have been more suitable. I suspect that the judge is simply recounting the charity's response to that. As I have said, it would not affect the proper legal analysis even if there had been such a plan…’
[25] Though not referred to expressly by Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), Treacy LJ in the Divisional Court in Kenya Aid Programme v Sheffield City Council [2014] Q.B. 62 said, at paragraph 35:
‘In my judgment there is force in the difference of emphasis which [Billing Authority’s counsel] highlights between “occupation” in section 43(1) and “use” in section 43(6), and also in her submission that the qualifying adverbs “wholly” and “mainly” are important in looking at the context of the use. I would hold that there is no reason for limiting the ambit of the phrase in the way contended for by the charity. As was pointed out in the English Speaking Union case and again in argument before us, the charity's construction would substitute the word “solely” for the word “wholly”. I see no reason why the statute should be thus narrowly confined. The natural reading and meaning of the words used are, in my judgment, apt to cover not only consideration of the purpose of the use but also the extent or amount of the actual use. It follows therefore that I would hold that the judge was right to take account of and place weight upon the extent to which the premises were used.’ [bold added]
[26] Elias LJ in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971 said, at paragraph 12, that ‘It is common ground that they establish the following propositions.’ meaning, common ground between the parties. He said this, without himself disputing the accuacy of these propostions.
[27] A finding made in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, at paragraph 8 of the case stated document. The spatial figure of 42% emanated from the billing authority’s revenue recovery officer’s evidence.
[28] Elias LJ said, at paragraph 8:
‘…[the officer] visited the site on three occasions and gave evidence that the unused parts of the premises consisted in effect of four different elements: the mezzanine floor referred to by the judge; a similarly sized downstairs storage area which matched it; a reception/kitchen area; and that part of the sales floor which he considered was not actually used by the charity or the customers who were attracted into the hall. The first three areas could be seen to be distinct and separate from the sales hall itself, and no activities were going on in those areas. The fourth element, which I shall call the “notional unused area” was not marked out in any way but was the witness's own assessment of that part of the hall which was not in fact used by anyone in connection with the charitable activities.’
[29] Footnote added: What Elias LJ quotes, at paragraph 19 of his judgment in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, is:
‘In the Public Safety Charitable Trust case [2013] 2 EGLR 133 , para 34, Sales J said that the exemption: “should depend upon the charity actually making extensive use of the premises for charitable purposes … rather than leaving them mainly unused.”
[30] For completeness, Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), also relied upon the subsequent paragraph, paragraph 28, which reads:
‘If the judge's conclusion had been clear cut, I would not have considered this error to be material. But it is not self-evident on the facts whether a judge would find that the premises were used wholly or mainly for a charitable purpose or not. I would not go so far as the appellant in describing this factor as “decisive” but it plainly was seen by the judge as a matter of some weight. In those circumstances I cannot be sure that the decision would necessarily have been the same even if this factor had been ignored. Accordingly I would on this ground quash the decision and remit the matter to the judge.’
Elias LJ in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, confirmed that the fact that the premises were not being used for any other purpose, was not relevant to ‘extent of use’, at paragraph 30 of his judgment:
‘…the district judge was not entitled to take into account as a factor, when assessing whether the premises were wholly or mainly used for a charitable purpose, the fact that the premises were not being used for any other purpose. To that extent, his decision was flawed.’
[31] Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), summarized at paragraph 56, the Divisional Court in Sheffield City Council v Kenya Aid Programme [2014] QB 62 as having:
‘…accepted a submission that the district judge had been entitled to look at the whole of the evidence before him and decide on a broad basis whether the premises were being used wholly or mainly for charitable purposes. In that regard the district judge had been correct to take into account of the extent to which the premises were used. However the district judge had also taken into account the efficiency or otherwise of the furniture storage use at the premises, and whether it had been necessary for the charity to occupy both premises. At paragraph 61 of his judgment Treacy LJ held that both these considerations (efficiency or otherwise of the storage, and necessity of using both premises) were irrelevant. In those circumstances the appeal was allowed and remitted to the district judge for further consideration.’
[32] Elias LJ in South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971 said, at paragraph 12, that ‘It is common ground that they establish the following propositions.’ meaning, common ground between the parties. He said this, without himself disputing the accuacy of these propostions.
[33] In South Kesteven DC v. Digital Pipeline Ltd [2016] EWHC 101 (Admin) [2016] 1 WLR 2971, Elias LJ, in paragraph 29 said:
‘I doubt, however, whether the extent of the public's involvement was strictly relevant once it was conceded, as it apparently was, that the charity was bona fide. Whether the charity was successful or not in bringing in potential donors does not seem to me to be relevant to the extent of use. But even if that factor were relevant…’
Though not referred to by Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), Elias LJ also considered the relevance of two other factors to the ‘extent of use’ evaluation arising from the statutory test of ‘use’. Elias LJ said, at paragraph 29:
‘The amount of equipment provided is some indication of the extent of use.’
And;
‘I would accept that the fifth factor, namely that the charity had conceded that the premises were not ideal and had taken them because “beggars cannot be choosers”, could not conceivably be material to the extent of use question. I cannot believe that the judge thought that it was.’
[34] Walker J in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), at paragraphs 82 to 83, accepted:
‘1. It has long been established that ratepayers or potential ratepayers can lawfully organize their affairs so as to avoid paying rates: Makro Properties at paragraph 56, Kenya Aid at paragraph 38, Digital Pipelines at paragraph 17.
2. In paragraph 61 of his judgment in Kenya Aid Tracey LJ held that it was irrelevant whether it had been necessary for the charity to occupy both premises, and it had also been irrelevant to take into account the efficiency or otherwise of the furniture storage use at the premises.’
This point 2 was noted from Elias LJ in Digital Pipeline, who at paragraph 16, recorded, without demur, that it was common ground between the parties that the authorities established the proposition that:
‘…if as a matter of fact the premises are being used wholly or mainly for charitable purposes, it matters not that they could have been run more efficiently or that strictly only part of the premises need have been used: see the observations of the Tracey LJ in the Kenya Aid case [at] para 36. The test has to be applied to the facts as they are, not as they might have been.’
[35] See paragraph 87 of My Community Space v Ipswich BC [2018] EWHC 3313 (Admin).
[36] Incidentally, this passage from Walker J also emphasizes that the 3 components, appearance, purpose and intent, are separate and distinct concepts, each requiring separate evaluation and finding.
[37]It was a successful appeal ground that the test is not ‘active’ but ‘actual’; the DJ had mis-spoken the test when she had used the word ‘active’ in her decision.
[38] On the ‘inadmissible territory’ aspect to Walker J’s reasoning in paragraph 87, MCS had limited the scope of its case stated appeal to only 6 specific factors the DJ ought not to have taken into account in her decision. It was outwith the scope of the appeal, for MCS to complain that the DJ had not made a particular finding as to what, in her judgment, was the actual purpose of the exhibitions. Walker J said, at paragraph 88:
‘This leaves no room for a complaint that the judge should have made a finding as to what the actual purpose of the exhibitions was. In Q3 MCS has confined its challenge to the relevance of the six specified Q3 factors. It does not raise any issue as to whether the law requires the judge to make an express finding of what the actual purposes were.’
[39] The factors are necessity and efficiency of use, and, it seems, the organizing of affairs for the purpose of tax avoidance.
[40] The relevant paragraph in My Community Space v Ipswich BC [2018] EWHC 3313 (Admin), is paragraph 87, where Walker J said:
‘…the qualifications …cited…are engaged, and the prohibition on taking account of efficiency or necessity does not apply Thus the Q3 factors, which in the ordinary case would not be relevant, become factors which are highly relevant.’
[41] Since these were findings which had not been challenged by MCS under rule 76(2) of the Magistrates Court Rules 1981, these findings could not be challenged before Walker J. Walker J said, at paragraph 90:
‘Under rule 76(2) of the Magistrate's Court Rules 1981, if there were to be an assertion that there was no evidence on which the Magistrate's Court could come to its decision, then the particular finding of fact which it is claimed cannot be supported by the evidence must be specified when applying for a case stated. In the absence of any challenge in the case stated to the judge's finding of lack of appearance, purpose or intent that finding cannot be challenged.’
[42] Q4 asked whether the DJ had erred, by posing a test to herself which included the word ‘actively’. It was said that this applied too stringent a test, than the law set down (In Public Safety Charitable Trust [2013] 2 EGLR 133, para 34, Sales J said that the exemption: 'should depend upon the charity actually making extensive use of the premises for charitable purposes … rather than leaving them mainly unused.'). The question she had posed for herself, was whether ‘…the charity should actively make extensive use of the properties for charitable purposes.’. However, Walker J said, at paragraph 94:
‘…that Q4 does not arise. Once the judge had made her finding of lack of appearance, purpose or intent, the inevitable result was that MCS's use of the properties fell on the wrong side of the line.’
The scope of the appeal became an issue in itself. The case stated appeal delineating the appeal points, but there was also a list of issues and sub-issues arising from the appeal produced by the parties (paragraph 46), labeled by Walker J as ‘the listed issues and sub-issues’. Some of these strayed from the case stated, document and Walker J briefly considered a number of the sub-issues, at paragraphs 96 to 99. Walker J held that:
(1) there was no dispute between the parties that the DJ did fall into error by using the word ‘actively’ when describing the legal test;
(2) there was no material difference between the test of ‘actively’ and the test of ‘actually’ in the circumstances of the present case;
(3) any argument as to the meaning of ‘extensive use’ in earlier authorities, and whether it imposed a more stringent test, than that ‘…the property must be mainly in use and not ‘mainly unused’…’did not form part of the case stated and was not a matter the Court had jurisdiction to determine;
(4) the scope of the case stated did not include the question ‘…whether a charity, in order to be entitled to charitable relief, has “to actively meet or achieve its charitable purposes” or whether it would be sufficient for the use “to be in pursuance of charitable purposes.’
Walker J stated that, had the issue arisen for determination, Walker J would have found that ‘actively’ was the wrong test, but, in light of there being no material difference between ‘actively’ and ‘actually’, there was no successful ground of appeal there in any event (paragraph 99).
[43] For completeness, Walker J, at paragraph 105, answered all the case stated questions, as follows:
‘Q1(a) no. Q1(b) yes.
Q2: as to the change of charitable objects, this question does not arise. As to the number of advertisements, the judgment below gave sufficient reasons for rejecting MCS's evidence.
Q3: no.
Q4: yes, but this has no impact on the outcome of the appeal.’