Charity law case before the Law Lords

The Supreme Court is the highest appeal court in the United Kingdom, hearing only cases of the greatest public or constitutional importance. There are 12 Law Lords of the Supreme Court sitting in the Middlesex Guildhall in Westminster.

It recently heard an appeal[1] by Nuffield Health, a registered charity that was refused a municipal rate concession by the local council.

Nuffield Health owns and operates 31 hospitals, 112 fitness and wellbeing centres, and 5 medical centres. It also operates over 200 gyms and health assessment facilities in workplaces across the United Kingdom.

Nuffield operated a fitness and wellbeing centre as a members-only gym known as Merton Abbey. It offered limited free and discounted services to the public; the standard fee for membership was £80 per month, or £71 per month if one committed to a longer period of membership.

The council assessed rates on the basis that the Merton Abbey gym (on its own) failed to qualify as being used for charitable purposes because the fees being charged to its members were set at a level that 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.

The Law Lords noted that Nuffield Health’s purposes were charitable, being for the promotion of health, but Nuffield also needed to be for the public benefit. Was a gym with membership fees that the poor might not be able to afford of benefit to the public?

To satisfy the public benefit test, a charity must provide benefits to a sufficient section of the public, so that the provision of that benefit is for a public, rather than private, purpose.

The Court found that the rating legislation was concerned with the overall activities of the organisation, not just the use of the particular property. The gym needed to be viewed as a part of the whole enterprise of the charity.  When Nuffield was viewed as a whole, it was charitable and entitled to a rates concession.

It was also argued before the Court that where a charity served both rich and poor, the service to the rich was merely incidental or ancillary to the fulfilment of its charitable purpose, which was to satisfy the essential public benefit requirement of serving the poor.

The Court declared this was an incorrect view, giving the example of church congregations. They typically contain a cross-section of rich and poor.  It has never been suggested that the advancement of the faith of only the poor members is charitable, while the advancement of the faith of the rest is purely incidental to the charitable purpose of the church.  The same logic also applies to non-profit schools.

The Law Lords remarked that this “may perhaps not accord with the perception of every modern-thinking person untrained in charity law, [that] this is true both as a matter of logic and authority”.

The case does not establish any new point in charity law being a relatively orthodox statement.

However, it does point the way for those that wish to alter this situation in relation to private schools, private hospitals, and other ‘high fee barrier charities’ that legislation will be required to change the common law of charity.

[1] London Borough of Merton Council v Nuffield Health [2023] UKSC 18

Article by:

Myles McGregor-Lowndes
Consultant
Email Myles