• In the case of Derby Teaching hospitals NHS foundation trust v Derby CC 2020 Ch 586, it was held that NHS foundations were not charities for the purposes of s.43(6) Local Government Finance Act 1988 and were therefore not entitled to a reduction in non-domestic rates in respect of the properties they occupied.

Facts of the Case

  • The court had to determine as a preliminary issue whether NHS foundation trusts were charities for the purposes of the of s.43(6) Local Government Finance Act 1988 and therefore entitled to a reduction in non-domestic rates in respect of the properties they occupied.
  • Under s.43(5) a ratepayer which was a charity was entitled to a four-fifths reduction in its non-domestic rates. Determination of the preliminary issue entailed asking whether foundation trusts (i) were “established for charitable purposes only” for the purposes of s.67(10)  of the 1988 Act and the Charities Act 2011 s.1(1)(a) (2) had to be subject to the control of the High Court in order to be able to rely on s.43(5)  and s.43(6) of the 1988 Act.

Issues in Derby Teaching Hospitals NHS foundation trust v Derby CC 2020 Ch 586

  • Could the NHS trusts be held as a charity under the 1988 Act.

Held by Chancery Division

  • Preliminary issued determined in favour of defendants

Morgan J

  • Held an institution which was established for other purposes besides charitable ones was not a charity even if, in practice, it pursued only its charitable purposes. 
  • The definition of “charity” in s.1(1) of the 2011 Act included a requirement that the institution had to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities. The foundation trusts sought to argue that s.1(1) of the 2011 Act had the effect of disapplying the s.1(1) definition in favour of that set out in s.67(10) of the 1988 Act, namely that of an institution established “for charitable purposes only”. If a foundation trust satisfied all other tests for a charity, then the statutory provisions which established it did not substantially oust the powers of the High Court to control it.
  • “If section 47(1) had merely provided that a foundation trust could do what it thought was necessary or expedient for the purposes of its functions and all of those functions were charitable, then it could be said that section 47(1) conferred a power and did not describe any further object or purpose of the foundation trust. On that basis, the fact that section 47(1) conferred on the foundation trust a power to do what it thought was necessary or expedient for its charitable purposes could be regarded as permissibly leaving to the foundation trust a power to decide how best to advance its charitable purposes. However, that reasoning is not applicable here for two separate reasons. First, not all of the other functions of a foundation trust are charitable. Secondly, the foundation trust is given a power to decide upon other matters which it thinks are necessary or expedient in connection with the other functions of the trust and that allows activities which are not strictly for the purposes of those other functions. The foundation trust’s case that it is a charity which faces the difficulty that, under section 47(1), it can carry on activities which are not for the purposes of its other functions, but only in connection with them, is made yet more difficult by the fact that what is necessary or expedient in connection with its other functions is not restricted by objective considerations but is left to the foundation trust itself to decide.” [81]

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