England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2A 2LL
		7th October 2010

MR JUSTICE SALES:

Introduction

1. This is the hearing of an oral application by the claimant ("the ISC") for permission to bring judicial review proceedings to challenge the lawfulness of guidance issued by the Charity Commission ("the Commission") regarding the operation of the public benefit test in the law of charity, as it has application in relation to independent schools. The ISC has a membership comprising large numbers of independent schools which it represents.
2. The judicial review claim was issued by the ISC on 24 February 2010, some considerable time after the relevant guidance was issued by the Commission. The claim sets out extended grounds upon which the ISC seeks to challenge the guidance.
3. The Commission put in extended grounds of resistance to the claim, both on the merits and raising a point on delay. In response to the grounds of resistance, the ISC put in a short submission to draw attention to what it said were the critical issues which had crystallised between the parties and to formulate shortly why permission should be granted. As I read that short submission, it did not purport to limit the ambit of the challenge set out in the ISC's main grounds of claim, but rather sought to distill for any judge considering the application for permission on the papers a clear and strong basis why it should be the concluded that the claim set out a good, arguable claim so that permission should be granted on the whole of the claim.
4. The application for permission came before Charles J on the papers in July 2010. He directed that the application should be adjourned to be listed for an oral hearing in court. He observed that the ISC's grounds of claim raised arguable points on the law relating to charities and how it is expressed and reflected in the guidance, but did not grant permission and instead directed an oral hearing so that the Commission's arguments on delay could be considered. That oral hearing was listed for 7 October 2010 and in due course came on before me. At the hearing, the Commission expressly accepted that in some respects the judicial review claim raises arguable points of law and did not otherwise seriously seek to call in question the arguability of the claim set out in the ISC's grounds of claim.
5. Meanwhile, however, the Attorney General considered the papers filed in the judicial review proceedings and decided that it would be in the public interest to make a reference to what is now the unified Tribunal (which incorporates what was previously the Charities Tribunal), pursuant to paragraph 2(1)(a) of Schedule 1D to the Charities Act 1993, for the Tribunal to consider certain questions formulated by the Attorney General regarding the operation of the public benefit test contained in section 3 of the Charities Act 2006 in the context of independent fee-paying schools, established for the charitable objective of the advancement of education (see section 2(2)(b) of the 2006 Act). The Attorney General entered into correspondence with the ISC and the Commission as to the form of the questions to be included in the reference, but agreement was not reached about the form of the questions. In the event, on 28 September 2010 the Attorney General issued a reference in the Tribunal incorporating questions that he had formulated, taking account of some, but by no means all, of the comments made by the Commission and the ISC.
6. Notwithstanding that the Attorney General did not adopt all of the suggestions made to him by the parties, it is clear that there will be a very substantial overlap of the issues which would arise in relation to the judicial review proceedings if permission is granted and the issues which will arise on the reference. Mr Pearce QC on behalf of the Commission submits that the overlap is so great that there is no utility in the judicial review claim being allowed to proceed, and that therefore the issue of the Attorney General's reference affords a further reason, in addition to the issue of delay, why permission should be refused for the ISC's judicial review claim. In the alternative to his submission that the court should refuse permission for the judicial review on the ground of delay and/or on the ground that the claim is now otiose in the light of the Attorney General's reference, Mr Pearce submits that the judicial review claim should be transferred by the court to the Upper Tribunal in the exercise of this court's power to transfer judicial review applications to the Upper Tribunal contained in section 31A of the Senior Courts Act 1981, leaving it to the Upper Tribunal to consider whether permission should be granted for the claim.
7. Mr Giffin QC for the ISC, on the other hand, submits that this court should grant permission for the judicial review claim to be brought. The Attorney General adopts a neutral stance on the question of permission.
8. If this court does decide to grant permission for the judicial review claim to be brought, the Attorney General, the Commission and the ISC all contend that the court should, having granted permission, issue a direction under section 31A of the Senior Courts Act 1981 to transfer the judicial review claim to the Upper Tribunal. That is because although the Attorney General's reference has had to be issued before the First-Tier Tribunal, there is power for the First-Tier Tribunal to pass the reference to be considered by the Upper Tribunal. In view of the importance of the issues on the reference, it is intended that the First-Tier Tribunal should be invited to pass the reference to the Upper Tribunal, and it seems likely that that will happen. Upon the reference, the Attorney General and the Commission will both be entitled to be parties. The ISC will be entitled to participate with the permission of the Tribunal (see paragraph 2(3)(b)(iii) of Schedule 1D to the Charities act 1993, as inserted by the Charities Act 2006). In view of the issues to be debated on the reference and the reasons given by the Attorney General for making it, it is very likely that the ISC will be joined as a party to the reference. If the judicial review claim is transferred to the Upper Tribunal pursuant to section 31A of the 1981 Act, therefore, there is every prospect that it would be heard by the Upper Tribunal together with the Attorney General's reference. If it is appropriate to grant permission for the judicial review claim, that would be a highly desirable outcome, so that one judicial body can consider at one time all the arguments about the law of charities relevant to determining these overlapping proceedings.

The factual background

9. The Charities Act 2006 introduced certain amendments to the law of charities and set out new functions of the Commission. According to section 2(1), in order to qualify as a charitable purpose a purpose has to fall within a list set out in section 2 (2) (which includes "the advancement of education") and has to be for the public benefit. The public benefit test is amplified to a certain extent in section 3. Section 4 provides that the Commission must issue guidance to promote awareness and understanding of the public benefit test. The Commission is required to consult as appropriate before issuing such as guidance. Section 4(6) provides that:

"The charity trustees of a charity must have regard to any such guidance when exercising any powers or duties to which the guidance is relevant."

10. Guidance issued by the Commission about the operation of the public benefit test is therefore of considerable practical importance for charities and trustees who act in relation to them.
11. The Commission's guidance in relation to the operation of the public benefit test as regards independent schools has been promulgated in stages. The ISC has been a consultee at each stage while the guidance was in draft and made extensive representations. The first relevant set of guidance was promulgated by the Commission in January 2008. The next set of guidance, addressing independent schools directly, was promulgated in December 2008. It is clear that the ISC had very serious concerns at both stages about the views of the Commission regarding the law of charities and the operation of the public benefit test in relation to independent schools which appear to be reflected in the two sets of guidance. In particular, the ISC's concerns related to the possibility that the Commission might in due course require independent schools to make bursaries available to people who could not pay their fees, as a condition of retaining their charitable status.
12. Nonetheless, although protesting that this would not be a proper application of the governing law, the ISC did not issue legal proceedings at the stage when these two sets of guidance were issued. The evidence of Matthew Burgess for the ISC was that it was unclear at that stage what exactly might be the practical consequences of the application of the Commission's guidance. The ISC and its members decided to wait to see how the Commission approached the detailed application of the public benefit test in relation to assessment reports it issued on 14 July 2009 in relation to five schools, which in practice provided a series of test cases for the implementation of the Commission's guidance.
13. The concerns of the ISC and its members were greatly increased by the contents of those reports and what they showed about the approach of the Commission to the application of its guidance. The ISC continued to try to engage in debate with the Commission about the application of its guidance in the latter part of 2009 and also engaged with its members to secure funding for legal proceedings if they proved to be necessary.
14. The parties could not reach agreement, so on 16 November 2009 the ISC sent the Commission a detailed pre-action protocol letter setting out the claims. The Commission responded by a substantive letter of 29 January 2010. The ISC were not satisfied with the response, and judicial review proceedings were issued on 24 February 2010. Charles J gave directions on 7 July 2010 for an oral permission hearing.
15. By letter dated 13 July 2010, the Attorney General gave notice of his intention to make a reference to the Tribunal and of the questions he proposed to ask on that reference. There followed correspondence with both the Commission and the ISC about the form of the questions. Neither the Commission nor the ISC were entirely satisfied with the proposed questions. The ISC considered that the judicial review proceedings should remain on foot because they would potentially cover issues which needed to be determined between it and the Commission which might not be resolved by the Tribunal answering the Attorney General's proposed questions.
16. The Commission, by letter to the Attorney General dated 23 July 2010, indicated concerns about the terms and form of his proposed questions. It proposed that the Attorney General refer wider and more broadly formulated questions of principle to the Tribunal. In the event, the Attorney General was unpersuaded by this.
17. The questions ultimately set out in the reference included the following, numbered A1 and A2:

"Does charity law operate in any and if so which of the following ways?

A1 So as to cause a charitable educational institution which performs its objects solely by providing certain services for which it charges fees which cannot be afforded by a significant proportion of the population of England and Wales necessarily to be operating otherwise than for the public benefit within the meaning of "charity law" (as defined by paragraph 7(1) of Schedule 1D to the Charities Act 1993).

A2 So as to cause an institution established for the sole purpose of the advancement of the education of children whose families can afford to pay fees representing the cost of the provision of their education not to be established for a charitable purpose."

18. Then, in sections B, C and D of the reference, an extensive series of further questions were set out, based on detailed hypothetical factual scenarios rather than formulated by reference to general principles of charities law or by reference to the Commission's guidance.
19. I turn to consider the issues which arise on the application for permission which is before me.

Issue (1): Should permission be refused because the judicial review claim is otiose in light of the Attorney General's Reference?

20. Mr Pearce for the Commission submits that permission for the judicial review claim should be refused because such a claim is unnecessary, since it is practically inevitable that on the Attorney General's reference the Tribunal will resolve all the issues which divide the Commission and the ISC. Mr Giffin submits that the Tribunal may do so, but it is not certain that the Tribunal's determination on the reference will have that effect. He says that there will be little additional cost and effort involved in allowing the judicial review claim to proceed together with the reference, and it may prove to be beneficial for that to happen. Moreover, he submits that the Tribunal's determination on the reference will not in itself have the effect of quashing the guidance, as it should be quashed if it is defective in law. For these reasons, he submits that this court should not refuse permission for the judicial review claim by reason of the existence of the Attorney General's reference.
21. I am persuaded by Mr Giffin's submissions on this point. In my judgment, the fact that the Attorney General's reference has been issued does not deprive the judicial review claim of potential utility. It is possible that the Upper Tribunal in answering the questions on the reference may resolve all the legal issues which divide the ISC and the Commission; but at this stage in the proceedings I am not confident that that will necessarily be the case. Questions A1 and A2 in the reference (set out above) are not framed in a way which covers all the ground brought in issue in the judicial review claim: I refer in particular to the word, "necessarily", in question A1 (which significantly narrows the ambit and effect of that question) and the fact that question A2 addresses a hypothetical scenario which the ISC and the Commission agree does not in fact reflect the circumstances of any actual institution (in relation to which the views of the Upper Tribunal may or may not prove to be illuminating for the resolution of what is in issue between the ISC and the Commission). Elsewhere in the reference, the questions set out in sections B, C and D are based on the methodology preferred by the Attorney General to focus debate on actual specified facts - a methodology proceeding from the bottom up, as it were. It is possible that in answering these questions the Tribunal will answer the questions of general principle, pitched at a more abstract level, which both the ISC and the Commission are anxious should be answered; but it is also possible that the Tribunal may not.
22. In a case of this kind arguments may develop and different aspects of the legal issues may assume greater or lesser significance under the pressure of preparation for hearing and of argument at the hearing. In my view, there is force in the submission of Mr Giffin that allowing the judicial review claim to proceed alongside the reference will be the best way to ensure that the argument ultimately presented to the Tribunal and the determination ultimately given by the Tribunal will not be unduly constrained by the "bottom up" focus of the Attorney General's questions; may instead be directed, if more appropriate, to a more general examination of relevant principles of law bearing upon the Commission's guidance; and offers the best opportunity of ensuring that all the issues in contention between the ISC and the Commission will indeed be addressed and resolved. It is an approach which will minimise the scope for sterile argument before the Tribunal about what arguments are or are not relevant in respect of the questions in the Attorney General's reference and which will minimise any risk that at the end of the day important issues between the parties will not have been resolved.
23. Further, it is generally the case that where parties to a dispute wish to raise a claim in the courts it is best that they be permitted to formulate their case and the relief they seek for themselves. That is an approach that offers the best prospect for achieving resolution of what truly divides them. In this case, that is a factor again which points in favour of allowing the judicial review claim to proceed rather than leaving matters to be argued on the Attorney General's reference on the basis of questions drafted by the Attorney General - not the parties to the underlying dispute - and in respect of which both ISC and the Commission have reservations about the Attorney General's approach in relation to his formulation of the issues.
24. I also consider that the judicial review claim, seeking relief aimed at quashing the terms of the guidance issued by the Commission, offers to the Tribunal the potential for focusing upon a concrete form of relief which may crystallise the debate on the law in a manner different from the focus offered by the Attorney General's questions, in a way which the Tribunal may find helpful. Indeed, it may be that the Tribunal will find that an appropriate way of elucidating the issues and focusing debate is to approach the issues by a combination of the "bottom up" approach suggested by the Attorney General's questions and a more "top down" approach, starting from general principles of charities law, suggested by the judicial review claim. Neither approach is clearly wrong and both may be illuminating.
25. In addition, I consider that there is force in Mr Giffin's submission that if the Commission's guidance is unlawful it should be quashed. That is the proper function of the courts and judicial bodies such as the Upper Tribunal. It is relief which can only be granted in this case if the judicial review claim proceeds. It may be that if the Attorney General's reference proceeded on its own and the Commission lost on the relevant arguments, it would take steps to rectify its guidance, including on an interim basis, as Mr Pearce suggested. But a great deal might depend upon what exactly the Upper Tribunal said and how the Commission interpreted what was said. The best way to ensure that there will be a degree of certainty about the status of the guidance at the end of any hearing, it seems to me, is to allow the ISC to proceed with its claim that the guidance or parts of it should be quashed, and for the Upper Tribunal to rule upon that claim, "yes" or "no".
26. Against these advantages of allowing the judicial review claim to proceed, I consider that there are few disadvantages to be weighed on the other side. On any view there will be very substantial overlap in the arguments to be presented on both the reference and the judicial review, so if both are heard together it is very unlikely that major additional time or expense will be involved in dealing with the arguments which are common to them both. If other parties are to be joined or heard as interested parties in relation to the reference, they can equally be joined or heard as interested parties in relation to the judicial review. On the other hand if it emerges, as preparations for the hearing proceed, that there is some significant additional legal territory which falls to be covered for the judicial review claim which does not arise in the reference, that would itself support the conclusion that the judicial review claim should be allowed to proceed in order to ensure that all issues in dispute between the ISC and the Commission are resolved by the Upper Tribunal at one hearing.
27. For these reasons, I would not decline to grant permission for the judicial review claim by reason of the fact that the Attorney General's reference has been issued in the Tribunal.

Issue (2): delay

28. In my judgment, it is appropriate to grant permission for the judicial review claim to proceed notwithstanding the time that has elapsed since the Commission issued its guidance. The reasons already given above in relation to issue (1) point strongly to this conclusion. The Attorney General's reference is now going to be before the Tribunal in any event, and in all probability will be heard by the Upper Tribunal. The judicial review claim will potentially add value to the hearing before the Upper Tribunal and offers the best chance, if heard with the reference, of ensuring the Upper Tribunal will deal effectively with all relevant issues. The importance of those issues for independent schools generally and for individual charities and trustees cannot be doubted. It is essential that charities and trustees know where they stand, and in particular know the status of any guidance issued by the Commission in view of the effect of such guidance on how they should conduct themselves: see section 4(6) of the 2006 Act. There is therefore a strong public interest in allowing the judicial review claim to proceed at this stage.
29. In addition, I consider that this is a classic case in which the approach set out in R v Warwickshire County Council, ex parte Collymore [1995] ELR 217, at 228 to 229 (and in the authorities cited there) should be followed. The Commission's guidance has major continuing effects upon the ISC's membership and for individual trustees (see section 4(6) of the 2006 Act). If the guidance is unlawful, prima facie it should be quashed and discontinued. Independent schools and their trustees need to know where they stand now and for the future.
30. I would add that I consider that the ISC behaved in a responsible manner in waiting to see what the practical effect of the Commission's guidance might be, as worked through in the five school assessment reports, and then in seeking to engage the Commission in dialogue about such practical effect before taking the momentous and expensive step of launching legal proceedings. There is nothing in the conduct of the ISC which causes me to give any lesser weight to the two factors pointing strongly in favour of allowing the judicial review claim to proceed, to which I have already referred.

The way forward

31. Since I have concluded with the benefit of full argument that this is a judicial review claim for which permission should be given, I can see no advantage in now transferring the claim to the Upper Tribunal with the question of permission unresolved, as Mr Pearce submitted in the alternative I should do, for the Upper Tribunal to consider the question of permission de novo by hearing the same arguments as have been addressed to me. The appropriate course, rather, is for this court to grant permission for the judicial review claim and then to give a direction under section 31A of the Senior Courts Act for the claim to be transferred to the Upper Tribunal so that it can be heard together with the Attorney General's reference.
32. Accordingly, I grant permission for the ISC to bring its judicial review claim. In doing so, I make it clear that I consider the whole of the ISC's claim to be arguable, and accordingly permission is granted in respect of the whole of its claim and is not limited to the issues set out in the ISC's short submission dated 22 April 2010 in response to the Commission's summary grounds of resistance. I also give the relevant direction for transfer of the ISC's claim to the Upper Tribunal.
MR GIFFIN: My Lord, I am grateful. I don't think that so far as the directions are concerned anything more is required other than what my Lord has indicated. Under the rules when it is transferred the Upper Tribunal has to give directions without being invited to do so. I would invite your Lordship to say that the costs of the application for permission be costs reserved in these slightly unusual circumstances. I think that may not be controversial. I don't think there is anything else I would ask for.
MR JUSTICE SALES: Yes. Mr Pearce?
MR PEARCE: My Lord, I have no additional directions to propose, and I would agree that the appropriate order on costs would be costs reserved.
MR JUSTICE SALES: Very well. Mr Henderson?
MR HENDERSON: Nothing to add, my Lord.
MR JUSTICE SALES: Very well. I give the direction that the case be transferred to the Upper Tribunal pursuant to section 31A of the Senior Courts Act, and that the costs -- is it the costs of this hearing be reserved? Which costs are you asking me to reserve, all costs?
MR GIFFIN: Let me see. I think the costs of this hearing, because the Tribunal will be -- with the other costs in any event.
MR JUSTICE SALES: The rules say that everything done in this court, once it is transferred, is treated as having been done in the Tribunal, so that sounds right to me. Mr Pearce, any observations?
MR PEARCE: I agree, my Lord.
MR JUSTICE SALES: Very well, the order as to costs will be the costs of this hearing to be reserved.
MR GIFFIN: Perhaps one should say to the Tribunal specifically.
MR JUSTICE SALES: To the Tribunal, and should it be the costs of and in relation to this hearing?
MR GIFFIN: My Lord, I think it should be.
MR JUSTICE SALES: To cover skeleton arguments and all that sort of thing. Very well. If the parties are content with that, could I invite you and Mr Pearce -- and if you could check with Mr Henderson -- to draw up a minute and pass it to the associate. Anything else that arises?
MR GIFFIN: No, thank you.