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Neutral Citation Number: [2019] EWHC 3436 (Ch) Case No: BL- 2018 - 000302 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL Date: 12/12/ Before : MR JUSTICE MORGAN
**Between:
DERBY TEACHING HOSPITALS NHS FOUNDATION TRUST AND 16 OTHERS Claimants
- and - DERBY CITY COUNCIL AND 44 OTHERS
- and- CHARITY COMMISSION FOR ENGLAND AND WALES Intervener Defendants**
Christopher Tidmarsh QC and Francesca Quint and Luke Wilcox (instructed by Addleshaw Goddard LLP ) for the Claimants Amanda Tipples QC and Matthew Smith (instructed by Sharpe Pritchard LLP ) for the Defendants Christopher McCall QC and Naomi Hart ( instructed by Charity Commission for England and Wales ) for the Intervener Hearing dates: 4 – 8 November 2019
MR JUSTICE MORGAN:
Introduction
- There are 17 Claimants in these proceedings. The Claimants are all NHS foundation trusts which are duly authorised under Chapter 5 of Part 2 of the National Health Service Act 2006. The Claimants accept that they occupy properties (mostly hospitals) on which they are liable to pay non-domestic rates to their local rating authorities.
- Section 43( 5 ) of the Local Government Finance Act 1988 (hereafter “the 1988 Act”) provides that where section 43(6) of the 1988 Act applies, the ratepayer is entitled to a reduction in the amount payable by way of non-domestic rates, so that the ratepayer is only liable for 1/5 of the sum otherwise due. Section 43(6) applies where: (1) the ratepayer is a charity; and (2) the relevant property is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).
- Each of the Claimants asserts that: (1) it is a charity; and (2) the relevant property is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).
- There are 45 Defendants. They are the rating authorities in whose areas the 17 Claimants occupy relevant properties. In relation to a Claimant in the area of a particular Defendant, that Defendant denies that: (1) the relevant Claimant is a charity; and (2) the relevant property is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities).
- On 26 July 2018, Chief Master Marsh gave directions which led to the exchange of pleadings in the claim brought by the first-named Claimant, Derby Teaching Hospitals NHS Foundation Trust, against Derby City Council. On 12 November 2018, Master Clark referred to Derby Teaching Hospitals NHS Foundation Trust as the “Lead Claimant” and directed the trial of a preliminary issue in the following terms: “Whether the Lead Claimant is a charity for the purposes of section 43(6) of the Local Government Finance Act 1988?”
- This preliminary issue is directed only to the first issue which arises under section 43(6) of the 1988 Act and does not refer to the second issue as to whether, at a relevant time or times, the relevant property is wholly or mainly used for charitable purposes.
- The preliminary issue raises a point of considerable importance to NHS foundation trusts and to rating authorities. The foundation trusts say that if they succeed in establishing that they can rely on section 43(6) of the 1988 Act, then not only will the issue be cleared up for the future and they will only pay 1/5 of the rates which are otherwise due but they also claim to recover from the rating authorities rates which they have paid in the past (without the 4/5 discount). In the case of Derby Teaching Hospitals NHS Foundation Trust alone, it claims to recover in excess of £17 million in respect of the period of 6 years prior to its claim. Plainly, if a foundation trust can rely on section 43(6) of the 1988 Act and if every foundation trust in the country were to claim repayment of the rates it had paid in the last six years, the sums involved would be very significant.
- The Derby FT was represented by Mr Tidmarsh QC, Ms Quint and Mr Wilcox. Derby City Council was represented by Ms Tipples QC and Mr Smith. The Charity Commission was represented by Mr McCall QC and Ms Hart. I am grateful to counsel for their excellent submissions which were of great assistance to me. The 1988 Act
- I have already referred to the effect of sub-sections (5) and (6) of the 1988 Act. Section 67(10) contains a definition of “a charity” in these terms: “A charity is an institution or other organisation established for charitable purposes only or any person administering a trust established for charitable purposes only.” The organisation of the NHS
- The principal Act of Parliament which currently governs the organisation of the NHS in England is the National Health Service Act 2006 (“the 2006 Act”). The 2006 Act has been materially amended by the Health and Social Care Act 2012 (“the 2012 Act”). The 2006 Act is a lengthy statute. I will attempt to summarise those parts of it which might have a bearing on the preliminary issue. In that summary, I will not quote the various sections which provide for the matter being summarised. I will refer in more detail to the purposes or objects and the powers of a foundation trust. The Secretary of State
- The Secretary of State must continue the promotion in England of a comprehensive health service designed to secure improvement in the physical and mental health of the people of England, and in the prevention, diagnosis and treatment of physical and mental illness. For that purpose, the Secretary of State must exercise the functions conferred by the 2006 Act so as to secure that services are provided in accordance with that Act. The Secretary of State retains ministerial responsibility to Parliament for the provision of the health service in England. The services provided as part of the health service in England must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed. NHS Bodies
- Part 2 of the 2006 Act contains the sections which provide for a number of entities which are referred to as “NHS Bodies”. These bodies include the National Health Service Commissioning Board, Clinical Commissioning Groups, NHS trusts (dealt with in Chapter 3 of Part 2), Special Health Authorities, NHS foundation trusts (dealt with in Chapter 5 of Part 2) and Trust Special Administrators. NHS Trusts
- Although this case is not concerned with NHS trusts, but only with NHS foundation trusts, I will provide a brief summary of the position in relation to NHS trusts before I consider the position of NHS foundation trusts in more detail, if only to explain that the two bodies are different and operate in different ways. NHS trusts were established by order of the Secretary of State to provide goods and services for the purposes of the
health service. An NHS trust must not be regarded as the servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown; and an NHS trust's property must not be regarded as property of, or property held on behalf of, the Crown. Each NHS trust is a body corporate. Each NHS trust has a board of directors consisting of a chairman appointed by the Secretary of State, and executive and non-executive directors.
- The functions of an NHS trust are specified in the order establishing the NHS trust. The functions which may be specified in an NHS trust order include a duty to provide goods or services so specified at or from a hospital or other establishment or facility so specified. An NHS trust must exercise its functions effectively, efficiently and economically. The Secretary of State may give directions to an NHS trust about its exercise of any functions.
- An NHS trust may do anything which appears to it to be necessary or expedient for the purposes of or in connection with its functions. In particular it may acquire and dispose of property, enter into contracts, and accept gifts of property (including property to be held on trust, either for the general or any specific purposes of the NHS trust or for any purposes relating to the health service). An NHS trust may enter into arrangements for the carrying out, on such terms as the NHS trust considers appropriate, of any of its functions jointly with any special health authority, local health board or other NHS trust, or any other body or individual.
- The 2012 Act provided for the abolition of NHS trusts with the expectation that all NHS trusts would achieve foundation trust status. This process has proved more difficult and slower than expected and there are still a number of NHS trusts in existence. Consequently, the abolition of NHS trusts has been delayed until an unspecified future date. Existing NHS trusts are overseen by the NHS Trust Development Authority, which forms part of NHS Improvement. NHS foundation trusts
- NHS foundation trusts were introduced by Part 1 of the Health and Social Care (Community Health and Standards) Act 2003 and are now governed by the relevant provisions of the 2006 Act, as amended by the 2012 Act.
- An NHS trust may make an application to the regulator (currently, Monitor) for authorisation to become an NHS foundation trust, if the application is supported by the Secretary of State. The application must be accompanied by a copy of the proposed constitution of the NHS foundation trust, and must give any further information which the regulator requires the applicant to give.
- On an authorisation being given to a body corporate which is an NHS trust, it ceases to be an NHS trust and becomes an NHS foundation trust, the proposed constitution has effect, and any order establishing the NHS trust is revoked. The authorisation is conclusive evidence that the body in question is an NHS foundation trust.
- An NHS foundation trust is a public benefit corporation. A public benefit corporation must have a constitution. I will refer later in this judgment to the provisions relating to the constitution of an NHS foundation trust. An NHS foundation trust must not be regarded as the servant or agent of the Crown or as enjoying any status, immunity or
(b) the income it expects to receive from doing so. (3C) Where a document which is being prepared under paragraph 27 of Schedule 7 contains a proposal that an NHS foundation trust carry on an activity of a kind mentioned in subsection (3B)(a), the council of governors of the trust must— (a) determine whether it is satisfied that the carrying on of the activity will not to any significant extent interfere with the fulfilment by the trust of its principal purpose or the performance of its other functions, and (b) notify the directors of the trust of its determination. (3D) An NHS foundation trust which proposes to increase by 5% or more the proportion of its total income in any financial year attributable to activities other than the provision of goods and services for the purposes of the health service in England may implement the proposal only if more than half of the members of the council of governors of the trust voting approve its implementation.”
- Section 44 of the 2006 Act provides: “ 44 Power to charge for accommodation etc. ... (6) According to the nature of its functions, an NHS foundation trust may, in the case of patients being provided with goods and services for the purposes of the health service, make accommodation or further services available for patients who give undertakings (or for whom undertakings are given) to pay any charges imposed by the NHS foundation trust in respect of the accommodation or services. (7) An NHS foundation trust may exercise the power conferred by subsection (6) only to the extent that its exercise does not to any significant extent interfere with the performance by the NHS foundation trust of its functions.”
- Section 46 of the 2006 Act provides: “ 46 Financial powers (1) An NHS foundation trust may borrow money for the purposes of or in connection with its functions. ...
(4) An NHS foundation trust may invest money (other than money held by it as trustee) for the purposes of or in connection with its functions. (5) The investment may include investment by– (a) forming, or participating in forming, bodies corporate, (b) otherwise acquiring membership of bodies corporate. (6) An NHS foundation trust may give financial assistance (whether by way of loan, guarantee or otherwise) to any person for the purposes of or in connection with its functions.”
- Section 47 of the 2006 Act provides: “ 47 General powers (1) An NHS foundation trust may do anything which appears to it to be necessary or expedient for the purpose of or in connection with its functions. (2) In particular it may– (a) acquire and dispose of property, (b) enter into contracts, (c) accept gifts of property (including property to be held on trust for the purposes of the NHS foundation trust or for any purposes relating to the health service), (d) employ staff. (3) Any power of the NHS foundation trust to pay remuneration and allowances to any person includes power to make arrangements for providing, or securing the provision of, pensions or gratuities (including those payable by way of compensation for loss of employment or loss or reduction of pay). (4) “The purposes of the NHS foundation trust” means the general or any specific purposes of the trust (including the purposes of any specific hospital at or from which services are provided by the trust).”
- Section 63 of the 2006 Act provides that an NHS foundation trust must exercise its functions effectively, efficiently and economically. The constitution of a foundation trust
xii) Paragraph 3.8 is the same as section 46(6); xiii) Paragraph 3.9 is similar to section 43(2); and xiv) Paragraph 3.10 is similar to section 43(3). Other provisions as to foundation trusts
- Section 275(1) provides that in the 2006 Act, “goods” include accommodation. Section 65(2) of the 2006 Act provides that for the purposes of Chapter 5 of Part 2, references to “goods and services” include, in particular, facilities, education and training.
- Section 51 of the 2006 Act states that the Secretary of State may provide for the appointment of trustees for an NHS foundation trust to hold property on trust for the purposes of an NHS foundation trust or for any purposes relating to the health service. In this section, “the purposes of the NHS foundation trust” means “the general or any specific purposes of the trust (including the purposes of any specific hospital at or from which services are provided by the trust)”. Section 1 of the NHS (Charitable Trusts etc) Act 2016 provides for section 51 of the 2006 Act to be replaced by regulations but section 1 of the 2016 Act has not yet been brought into force. There is a charitable trust in existence, the Derby Hospitals Charitable Trust, where Derby FT is the corporate trustee. This charitable trust is a registered charity and exists to support the work of the Derby FT. However, the functions and the assets of the Derby FT are not subsumed into this particular charitable trust.
- Section 57A of the 2006 Act permits a foundation trust to apply to the regulator for dissolution. The regulator must grant the application if it is satisfied that the foundation trust has no liabilities. Where an application for dissolution is granted, the regulator must make an order providing for the transfer of the property of the foundation trust to the Secretary of State. There is no restriction on the purposes for which the Secretary of State may use such property following a transfer to him.
- Chapter 5A of Part 2 provides for the appointment of a special administrator of a foundation trust. The regulator may appoint such a special administrator to exercise the functions of the governors, chairman and directors of a foundation trust in specified circumstances, including where the foundation trust is unable to pay its debts or is guilty of certain serious failures to provide services. In some circumstances, the Secretary of State may decide to dissolve a foundation trust which is the subject of special administration. In that event, the regulator may make an order dissolving the foundation trust and providing for the transfer of the property and liabilities of the foundation trust to an NHS body or to the Secretary of State. There is no restriction on the purposes for which the Secretary of State may use such property following a transfer to him.
- There are other statutory provisions which are relevant to foundation trusts but which apply more generally. Section 81 of the 2012 Act requires any person who provides a health care service to hold a licence under Chapter 3 of Part 3 of the 2012 Act. That Chapter contains section 94 (dealing with standard conditions) and section 95 (dealing with special conditions). Chapter 4 of Part 3 of the 2012 Act deals with the prices payable by commissioners for NHS services. Monitor
- Before the 2012 Act, foundation trusts were the subject of regulation by a body corporate known as the Independent Regulator of NHS Foundation Trusts. Pursuant to section 61 of the 2012 Act, that body corporate continues to exist but was thereafter known as Monitor. By section 62 of the 2012 Act, the main duty of Monitor in exercising its function is to protect and promote the interests of people who use health care services by promoting the provision of health care services which are economic, efficient and effective and maintain or improve the quality of the services. Monitor is required to exercise its functions with a view to preventing anti-competitive behaviour. Caselaw on foundation trusts
- In relation to the purposes and the powers of a foundation trust, I was referred to the description of the position given by Cranston J in R (Unison) v Monitor [2009] EWHC 3221 (Admin), [2010] PTSR 1827. That case concerned the role of the Independent Regulator of NHS Foundation Trusts which used the name of Monitor even before the 2012 Act. The case also concerned the provisions then in force (before the 2012 Act) which were designed to control the amount of income which a foundation trust could earn from private patients as compared with its income from the NHS. The judge referred to government proposals in relation to the NHS and, specifically in relation to foundation trusts. He said at [5] – [ 6 ]: “5. NHS foundation trusts were introduced as part of the Government's ten-year programme of reform known as “the NHS plan” in 2000. Under the NHS plan the Government have a commitment to increase the scope and range of private sector activity with NHS services by creating independent public interest corporations with foundation status. Under the Government's proposals foundation status organisations would have NHS assets transferred to their ownership and control; be granted a licence to operate by an independent regulator; be freed from certain NHS controls; be run on a not-for-profit basis; and be accountable not to the Secretary of State for Health but to a board comprising employers, staff and local residents, some of whom would be locally elected. Foundation status would mean greater freedom to generate income. While they would not be allowed to sell their core assets, they would be allowed to raise finance for new facilities from the capital markets, subject to the Government's overall borrowing limits, and to set up joint ventures with the private sector. According to the Department of Health's guide to NHS foundation trusts, published in December 2002, the top performing NHS hospital trusts would be allowed to apply for foundation status.
- NHS foundation trusts were introduced by Part 1 of the Health and Social Care (Community Health and Standards) Act 2003 and are now governed by Chapter 5 of Part 2 of the National Health Service Act 2006, a consolidating Act. In accordance with the NHS plan the statute gives them broader freedoms than NHS trusts: under the legislation they have greater financial freedoms, they are not subject to direction by the Secretary of State and they can retain any operating surpluses they generate.
(1) For the purposes of the law of England and Wales, a charitable purpose is a purpose which— (a) falls within section 3(1), and (b) is for the public benefit (see section 4). (2) Any reference in any enactment or document (in whatever terms)— (a) to charitable purposes, or (b) to institutions having purposes that are charitable under the law relating to charities in England and Wales, is to be read in accordance with subsection (1). (3) Subsection (2) does not apply where the context otherwise requires. (4) This section is subject to section 11 (which makes special provision for Chapter 2 of this Part onwards).”
- It is agreed that the reference in section 67(10) of the 1988 Act to “charitable purposes” is a reference in an enactment within section 2(2) of the 2011 Act so that that reference is to be read in accordance with section 2(1) of the 2011 Act (assuming that the definition in section 67(10) of the 1988 Act is the relevant definition).
- Section 3 of the 2011 Act relevantly provides: “ 3 Descriptions of purposes (1) A purpose falls within this subsection if it falls within any of the following descriptions of purposes— … (d) the advancement of health or the saving of lives; … (j) the relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage; … (m) any other purposes— (i) that are not within paragraphs (a) to (l) but are recognised as charitable purposes by virtue of section 5 (recreational and similar trusts, etc.) or under the old law,
(ii) that may reasonably be regarded as analogous to, or within the spirit of, any purposes falling within any of paragraphs (a) to (l) or sub-paragraph (i), or (iii) that may reasonably be regarded as analogous to, or within the spirit of, any purposes which have been recognised, under the law relating to charities in England and Wales, as falling within sub-paragraph (ii) or this sub-paragraph. (2) In subsection (1)— … (b) in paragraph (d), “the advancement of health” includes the prevention or relief of sickness, disease or human suffering, … (e) paragraph (j) includes relief given by the provision of accommodation or care to the persons mentioned in that paragraph, and .. (3) Where any of the terms used in any of paragraphs (a) to (l) of subsection (1), or in subsection (2), has a particular meaning under the law relating to charities in England and Wales, the term is to be taken as having the same meaning where it appears in that provision. (4) In subsection (1)(m)(i), “the old law” means the law relating to charities in England and Wales as in force immediately before 1 April 2008.”
- Section 4 of the 2011 Act provides: “ 4 The public benefit requirement (1) In this Act “the public benefit requirement” means the requirement in section 2(1)(b) that a purpose falling within section 3(1) must be for the public benefit if it is to be a charitable purpose. (2) In determining whether the public benefit requirement is satisfied in relation to any purpose falling within section 3(1), it is not to be presumed that a purpose of a particular description is for the public benefit. (3) In this Chapter any reference to the public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales.
memorandum of association which were described as “powers” extended the purposes of the company and produced the result that the company was not established for charitable purposes only.
- In other cases, where it has been held that the institution is authorised to carry on activities or confer benefits which are not themselves charitable it may be held that these activities or benefits are merely subsidiary or incidental to the charitable objects or purposes of the institution. In this context, distinctions between ends, means and consequences have been suggested to be helpful: see Picarda on the Law and Practice Relating to Charities, 4th ed., at page 333. These distinctions were described by Lord Millett in the Privy Council in Latimer v CIR [2004] 1 WLR 1466 at [36], where he said: “The distinction is between ends, means and consequences. The ends must be exclusively charitable. But if the non-charitable benefits are merely the means or the incidental consequences of carrying out the charitable purposes and are not ends in themselves, charitable status is not lost.”
- With this guidance, and subject to the need to examine some of the examples more closely, I will begin with a provisional classification of the various functions and activities of a foundation trust as either “purposes” or “powers” in the following way. In this classification, references to statutory provisions are to the provisions of the 2006 Act.
- My provisional view is that the purposes for which a foundation trust is established include: i) The provision of goods and services for the purposes of the health service in England i.e. the NHS (see section 275(1)): section 43(1); this is described as “the principal purpose”; this is plainly a purpose of a foundation trust; ii) The provision of goods and services for any purposes related to the provision of services provided to individuals for or in connection with the prevention, diagnosis or treatment of illness: section 43(2)(a); although section 43(2)(a) states that a foundation trust “may” carry out these activities, the sub-section does not provide that the foundation trust may carry out these activities for the purpose of achieving its principal purpose so it cannot be said that these activities are subservient to achieving its principal purpose or a means to that end; thus, section 43(2)(a) identifies a further purpose; iii) The provision of goods and services for any purposes related to the promotion and protection of public health: section 43(2)(b); the above comments as to section 43(2)(a) apply here also; iv) “goods” include accommodation (see section 275(1)) and “goods and services” include, in particular, facilities, education and training (see section 65(2)).
- Section 44(6) needs separate consideration. Section 44(6) permits a foundation trust to make accommodation or further services available for patients who give undertakings to pay for the accommodation or further services. Section 44(6) limits this permission
to the case of patients being provided with goods and services for the purposes of the health service. A foundation trust could rely on section 44(6) to provide hotel accommodation and hotel services to day-patients who are travelling to the hospital and who wish to stay in such an hotel either the night before or the night after their treatment. Section 44(7) provides that a foundation trust may only exercise the power in section 44(6) to the extent that its exercise does not to any significant extent interfere with the performance by it of its functions. However, these sub-sections do not say that the power may only be exercised where the provision of accommodation and further services is for the purpose of the foundation trust providing healthcare. It may be, to use the above example, that the foundation trust may wish to provide hotel accommodation in a way which is not for the purpose of providing healthcare but nonetheless does not interfere (and even more so, does not interfere to a significant extent) with the performance of its functions. Thus, section 44(6) is not merely a power to provide accommodation and other services in a way which is subservient to achieving some other purpose or a means to that end and so should be considered as a separate purpose for which a foundation trust is established. These sub-sections do not restrict the provision of accommodation or further services to cases where the provision of accommodation or further services is for the advancement of health or the relief of a need attributable to ill-health.
- The following are activities which are expressed as powers given to a foundation trust to enable it to pursue its purposes so I will provisionally treat them as powers rather than purposes: i) The carrying on of activities for the purpose of making additional income available in order to carry on its principal purpose: section 43(3); as explained above, the principal purpose of a foundation trust is the provision of goods and services for the purposes of the health service in England; this is plainly a power which is to be used in order to help a foundation trust achieve its principal purpose; ii) Borrowing money for the purposes of or in connection with its functions: section 46(1); if this had been limited to borrowing “for the purposes of its functions” then it would plainly be a power which is to be used for the purpose of the various functions of a foundation trust; however, it is to be noted that the borrowing may be “in connection with” its functions; iii) Investing money for the purposes of or in connection with its functions: section 46(4); again, the provision extends to investing money “in connection with” its functions; iv) Giving financial assistance to any person for the purposes of or in connection with its functions: section 46(6); again, the provision extends to providing financial assistance “in connection with” its functions; v) Doing anything which appears to it to be necessary or expedient for the purpose of or in connection with its functions; again, the reference is to “in connection with” its functions.
- Before proceeding further, it is useful to consider whether the purposes of a foundation trust identified in sections 43(1), 43(2)(a), 43(2)(b) and 46 are charitable purposes.
- The purpose of the words “related to” in section 43(2) is to permit the foundation trust to pursue additional purposes (the phrase used is “any purposes”) provided they are “related to” the purposes specified in paragraphs (a) and (b) of section 43(2). The words “related to” do not carry the meaning that the additional purposes must be subservient to the specified purposes in the sense that they are being pursued in order to achieve the specified purposes. This means that the additional purposes may be pursued even if they are not intended to assist with the achievement of the specified purposes. Further, the words used do not carry the meaning that the additional purposes must be incidental to the specified purposes or a means of achieving the specified purposes.
- The result of the above reasoning is that section 43(2) allows a foundation trust to pursue “any purposes” provided that they have a connection to, or a relationship with, the specified purposes. I consider that it is not possible to say that the additional purposes, even though they have a relationship with the specified purposes, will be for the advancement of health within section 3(1)(d), or within any of the other purposes referred to or described in section 3, of the 2011 Act.
- I will next consider the words “in connection with” in section 43(2)(a). These words appear in the phrase “for or in connection with” and are followed by the words “the prevention, diagnosis or treatment of illness”. The words “in connection with” are wider words than the word “for”. In this context, “for” means “for the purpose of” and the words “in connection with” can refer to the provision of services otherwise than for the purpose of the prevention, diagnosis or treatment of illness.
- I was referred to a number of cases concerning charities or alleged charities which considered the words “in connection with” or similar wording.
- In re Bain [1930] 1 Ch 224 concerned a bequest in a will in favour of the vicar of a named church “for such objects connected with the church as he shall think fit”. That case did not turn on the fact that the vicar had a discretion as to the choice of the objects because all such objects had to satisfy the objective criterion that they were objects “connected with the church”. The way in which the case was argued in the Court of Appeal appeared to involve a distinction between objects connected with the church as distinguished from the parish. If the permitted objects were confined to being connected with the church as a place of religious worship then the objects were charitable. Conversely, if the permitted objects included objects connected with the parish of the church or the welfare of parishioners, then those objects would not be exclusively charitable. The majority in the Court of Appeal held that it was possible to give the words the narrower of the two meanings and, so read, the gift was charitable.
- In re Davies (1932) 49 TLR 5 is reported shortly in the Times Law Reports. That case concerned a bequest to the Archbishop of Cardiff “for work connected with the Roman Catholic Church in the Archdiocese of Cardiff”. The Court of Appeal rejected an argument that the words simply meant “for the work of the Roman Catholic Church” in the Archdiocese and that the words “work connected with” enlarged the scope of the words so as to cover objects which were not charitable. The report does not indicate if the Court of Appeal considered the earlier case of In re Bain.
- Both In re Bain and In re Davies were considered by Jenkins J in In re Eastes [1948] Ch 257. That case concerned a bequest to the vicar and churchwardens of a named church to be used by them “for any purposes in connexion with the said church which
they may select it being my wish that they shall especially bear in mind the requirements of the children in the said parish of” the named church. The court held that the words “any purposes in connexion with the said church” were to be construed in the same way as the similar words in In re Bain. The court further held that that result was not affected by the expression of wishes contained in the words of the bequest.
- Oxford Group v IRC involved the construction of a company’s memorandum of association. The memorandum stated that its objects were set out in clauses 3(A) and (B). The object in clause 3(A) was a charitable object. It was held by all members of the Court of Appeal that the object in clause 3(B) was not charitable. One member of the court, Cohen LJ, considered further arguments as to the effect of clauses 3(C)(9) and (10). Clause 3(C) referred to “the exercise of the following powers” but that did not prevent Cohen LJ holding that some of the paragraphs of clause 3(C) identified further objects and not just powers. Clause 3(C)(9) allowed the company to establish or support charitable or benevolent associations or institutions and to subscribe money for charitable or benevolent purposes in any way “connected with” the purposes of the company or calculated to further its objects. Cohen LJ held that clause 3(C)(9) allowed the company to spend monies on benevolent objects which were not charitable. He rejected an argument that this power was ancillary only to furthering the company’s charitable purposes. He said at 544H: “I think an institution could be connected with the advancement of religion without being itself an institution for the advancement of religion.”
- I consider that the decisions in In re Bain and In re Eastes are not so helpful to me as the sentence quoted above from Cohen LJ in Oxford Group. The decisions in the two earlier cases were influenced by the consideration that a wide construction of the relevant words would cause the gift to fail whereas a narrow construction of those words would produce a valid charitable gift. That consideration does not apply to the construction of section 43 of the 2006 Act as the statute does not disclose any general intention to confine the purposes of a foundation trust to exclusively charitable purposes.
- I consider that the sentence I have quoted from Oxford Group is plainly right and accords with my own reaction expressed above that if the phrase being construed is “for or in connection with”, the word “for” means for the purposes of and the words “in connection with” can refer to activities which go beyond activities for the purposes of (in the case of section 43(2)(a)) the prevention, diagnosis or treatment of illness. So construed, section 43(2)(a) allows a foundation trust to carry on activities in connection with the prevention, diagnosis or treatment of illness which are not themselves for the purpose of the prevention, diagnosis or treatment of illness. The concept of “connection” in section 43(2)(a) is not confined to activities which are subservient to or ancillary to or incidental to the purpose of the prevention, diagnosis or treatment of illness nor confined to being a means to that end. Accordingly, the words “in connection with” in section 43(2)(a) allow a foundation trust to pursue a purpose which is not within section 3(1)(d), or any other purpose within section 3, of the 2011 Act. Further, the difficulty for the assertion that a foundation trust is established for charitable purposes is compounded when one combines my two findings, as to the meaning of “related to” and “in connection with”, as to the scope of section 43(2)(a).
