Scottish Court of Session Decisions

Petitioners: Haddow, Q.C.; Shepherd & Wedderburn

Respondents: Clarke, Q.C.; G Lindsay

27 October 2009

[1] The English Speaking Union have premises at St Margaret's House, 151 London Road, Edinburgh. It is a large eight-storey building. Between 16 April 2007 and 31 July 2008 they were tenants of the whole building, but used the ground floor only. The remaining floors were left dormant.

[2] In September 2007 they applied to the City of Edinburgh Council for charitable rating relief in respect of the whole building. Their application was made in terms of Section 4(2)(a) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962. That provides for 80% rating relief for "lands and heritages ... occupied by... a charity and ... wholly or mainly used for charitable purposes".

[3] The petitioners' argument could not be simpler. They are a charity; they occupied the whole building; since the only use made of the building was that of the ground floor for charitable purposes, the building was "wholly ... used for charitable purposes". In contrast the respondents pray common sense in aid and submit that the building was only partially used, albeit for charitable purposes; as a result Section 4(2)(a) does not apply.

[4] If the petitioners are correct, then the potential benefit for landlords during any period of commercial inactivity are obvious. A building which might otherwise lie vacant may be let, as St Margaret's House was, for a peppercorn rent to a charity, a small part of the building then used for charitable purposes while the rest lies vacant, with the resultant benefit that only 20% of the normal rates for the building require to be paid. Were the building to be totally empty and unused, the rates payable after a three month rating holiday would be 50% of the normal business rate for office premises. It would thus be possible for any landlord faced with difficulty in letting his premises to come to a mutually beneficial arrangement with a charity. The decision sought in this petition could, therefore, have wide ranging implications.

[5] Beyond commenting on the wording of the above statutory provision and on certain authorities bearing upon the interpretation thereof, counsel for the respondents did not elaborate the submission I have summarised above. On the other hand, counsel for the petitioners made reference to a number of propositions of general application, and to statutory provisions of a not dissimilar nature and cases applying them, with a view to shedding further light on the appropriate interpretation of Section 4(2)(a). Ultimately the submission of counsel for the petitioners was that the respondents had asked themselves the wrong question. The professional advice which they received from their officials was that Section 4(2)(a) set out a two part test, comprising occupation and use. While the petitioners satisfied the first part on the basis that a party who occupies only part of subjects is considered to be in rateable occupation of the whole, they failed on the second part of the test because it could not be said that the building was "wholly or mainly used for charitable purposes". Counsel for the petitioners submitted that that approach was misguided. The respondents' entire concentration should have been upon the issue of use. If they had asked themselves what use or uses were made of the subjects, they would have concluded that there was only one, that that was charitable, and that the test in Section 4(2)(a) was satisfied.

[6] Some little assistance in interpreting Section 4(2)(a) may be obtained from the authorities cited by counsel for the petitioners. Reference was made to the Rating (Disabled Persons) Act 1978, and in particular to the amendments introduced in 1984 by the Rating and Valuation (Amendment) (Scotland) Act 1984, Section 5(1), which provided a manageable scheme for rebating rates where a proportion of the premises is used for purposes which, under the law as interpreted in a number of cases in the 1970s and early 80s, disqualified the premises from rebate even in respect of a substantial part used for charitable purposes. The issues are discussed, and relevant authorities referred to, in The Royal Blind Asylum and School v Lothian Regional Council 1982 S.L.T. (Sheriff Court) 89. Prior to the 1984 amendments, entitlement to rebate required that the "lands and heritages" in question were used "(a) wholly for one or more of the purposes specified ...; or (b) partly for one or more of those purposes and partly for purposes ancillary thereto." If the property was, to a material extent, used partly for a purpose which did not fall within one or more of the specified categories, or a purpose ancillary to one or more of them, it could not qualify for any benefit under the statute. The solution was an amendment to Section 5 of the Rating (Disabled Persons) Act 1978, providing entitlement to rebate

"if half or more of the floor area of so much of any building or, where there are more than one, those buildings as is comprehended in the lands and heritage is used exclusively for one or more of the purposes specified ... or purposes ancillary thereto, or is available so to be used".

Counsel founded particularly on the expression "or is available so to be used" as indicative of "use" encompassing areas where nothing was actually being undertaken but could be. I do not find myself assisted by this reference which, if anything, points in the opposite direction. The very fact that the expression "or is available so to be used" appears in the sub-section suggests that that is something different from being "used".

[7] Counsel then sought to find support for his submission in the statutory provisions and jurisprudence relating to country parks. Certain parks controlled by local authorities fall to be excluded from the valuation roll in terms of Section 19(1) of the Local Government (Financial Provisions) (Scotland) 1963. That sub-section has a proviso relating to buildings in these terms: "Provided that this sub-section shall not apply to any building comprised in any such part unless it is used for purposes ancillary to those of the park". In Assessor for Lothian Regional Council v Edinburgh District Council 1989 S.C. 267, in particular the Opinion of Lord Clyde at 270-271, the question whether such a building was used for purposes ancillary to those of the park was held to be one of degree and circumstances and essentially one of fact not necessarily to be determined by the main or substantial use made of the building. That case related to the stand at Meadowbank Stadium, under which was a concourse that was used for various independent functions such as a running training track, flower shows and exhibitions. There were also enclosed areas constructed for shooting, archery, table tennis and other purposes. The Court was satisfied that the valuation appeal committee were entitled to reach the conclusion that the stand was nevertheless "used for purposes ancillary to those of the park". While this decision shows that a building with a number of uses which are not ancillary to the purposes of the park may nevertheless be said to be used for such purposes, no question arose of whether it was "wholly" used for such purposes and no question arose of large parts of the building being mothballed. Indeed the nature of the stand at a sports ground is such that it is difficult to make any direct comparison with the circumstances of the office premises in this case.

[8] The principal guidance I take from that case is that the "use" of any subjects is a question of fact for the committee to determine. Where the determination made by the committee is one that the Court considers that they were entitled to make on the facts held established, then the Court will not interfere.

[9] The same approach can be found in Hamilton District Council v Assessor for Strathclyde 1986 SLT 370 which deals with the same legislation, again in relation to a building which had a number of different uses. However, counsel sought to draw from the opinions in that case support for the proposition that, where there is only one use made of subjects and that is actively confined to a modest part of the subjects, those subjects are nevertheless wholly used in that way. He submitted that the opinion of Lord Ross at page 378C-D, distinguishing between subjects with a single use and those with divided or mixed use, was open to the interpretation that subjects, which were 75% vacant but otherwise used for the purposes of the park, might qualify for exemption on the basis that they were used for purposes ancillary to those of the park since they were mainly or substantially used only for such purposes. I do not accept that submission. There is no basis in his opinion for concluding that Lord Ross had such circumstances in mind when he made his comments on buildings with a single use.

[10] Two cases in which Section 4(2)(a) was the subject of interpretation were cited to me. However neither directly addresses the issue in the present case. In Belhaven-Westbourne Church Congregational Board v Glasgow Corporation 1965 S.C. (H.L.) 1 the question of "use" was very much subsidiary to that of the identity of the "occupier" of the subjects. In Coalburn Miners' Welfare and Charitable Society v Strathclyde Regional Council 1995 S.L.T. 950 the point in issue was the "main" use of the premises. Lord Sutherland dealt with that issue in exactly the same way as it was dealt with in the country park cases. The Society's premises were a licensed social club where charitable activities were undertaken. Lord Sutherland set out his view of how the "main" use of the premises should be determined at page 952J to K as follows:

"The question then becomes whether the respondents' decision was wholly unreasonable. It was accepted that what constitutes the main use of the premises is a question of fact. It was further accepted that there was no single criterion on which this matter could be judged. A financial criterion would not be conclusive because, from the very nature of the petitioners' activities, their main income must come from the profits on the sale of alcohol. The proportion of ground area used for the purpose of provision of alcohol cannot be a sole criterion as a great deal of drinking could take place in a fairly limited area. Equally a large area may be available for the purpose of having a drink, but at the same time the other purposes of the society could greatly outweigh the use of the premises as a social club. In my view, what the committee had to do was to look at the whole evidence before them and decide on a broad basis what was the main purpose for which the premises were used."

He proceeded to refuse the petition because he found that it was open to the committee acting in a reasonable fashion to decide as they did.

[11] It seems to me that that sums up the appropriate approach to determining not only whether a use was properly determined to be the "main" use, but also whether premises were "wholly" used for a purpose. The question for the Court will generally be whether the authority or committee which made the decision was entitled to reach the conclusion it did on the strength of the material before it. Even in extreme cases that will generally be the question. In the present case, counsel for the petitioner invited me instead to approach the matter as a stark question of law and statutory interpretation on the basis that the facts are clear cut. However, counsel's submission, that his approach of concentrating exclusively on the question of "use" leads to the conclusion that, in all cases where a building is used for a single purpose, that sole use, however limited in extent within the building, is that for which the building is "wholly used", is unpersuasive. "Wholly" in section 4(2)(a) is not synonymous with "solely". The notion that an office building which is unused for any purpose throughout seven of its eight floors is "wholly used" for the purpose for which the one floor is actually in use does not accord with common sense.

[12] In my opinion, in applying section 4(2)(a) a committee or authority is obliged to give content to the full expression "wholly used" in relation to the use actually made of the building as a whole. I consider that the respondents made a decision which is consistent with the ordinary meaning of the language of section 4(2)(a). I find no fault with the approach taken by the respondents and with their interpretation of the sub-section. They decided that, where a self-contained area comprising roughly one-eighth of the subjects was devoted to charitable purposes and the remaining separable seven-eighths of the subjects were kept vacant and out of active use, the subjects were not "wholly used" for charitable purposes. In my opinion that is a conclusion that the respondents were entitled to reach. Indeed, on the particular circumstances presented to them, any other conclusion would have been unreasonable. However, that does not for a moment mean that subjects must be in active use all the time or for most of the time to satisfy that test. It is possible to envisage circumstances in which a local authority might justifiably decide that subjects were wholly used for charitable purposes where a large part of them lay vacant for substantial periods of time. That would be a decision for the local authority to make on the particular facts facing them. I revert to what Lord Clyde said in Assessor for Lothian v Edinburgh District Council at page 271, viz:

"The question whether the building taken as a whole is used for purposes ancillary to those of the park must be one of degree and circumstance and essentially one of fact. An impression and appraisal of the essential character and nature of the building may be as relevant as any more detailed study of the activities performed in its various parts."

While these views were expressed in relation to different legislation and in a different context, in my opinion they are equally applicable to the task of an authority in applying the terms of Section 4(2)(a) of the Local Government (Financial Provisions Etc) (Scotland) Act 1962. For example, the petitioners might find that the demand for studying English as a foreign language varies from term to term. Or another charity might find that at certain times of the year far more working space is required than at others. In these and other similar examples the charity's circumstances might be such that the only way in which the necessary space for storage or administrative work or teaching or counselling sessions would for sure be available when required would be if it had appropriate premises available throughout the year. An examination of the circumstances in such instances might well lead the authority to the conclusion that the test under Section 4(2)(a) was met. However, to put the majority of a building to no active use at all, and effectively to mothball it, is something quite different.

[13] A particularly good example of a building which might well be "wholly used" for a particular purpose, albeit it lies largely unused or unoccupied for most of the time, is the stand at a sports stadium. It is not uncommon for only part of a stand to be in use for many sporting events because only small crowds are expected. On the occasion of big events, the whole of the stand might then be brought into use. These are circumstances in which a building might be said to be wholly used for a particular purpose, ie. spectating, which is ancillary to the use of the arena in front of it for sporting events. Indeed the building might even be wholly unused on several days of each week. Other circumstances in which a similar finding might be made could arise in situations such as those of the Belhaven-Westbourne Church Constitutional Board case above. While the physical occupier of the house in question was the church officer, the "occupier" for the purposes of the statute was the Church. Since the church officer was required to live there for the more efficient performance of his duties, it was held that the house was mainly used for charitable purposes. Such a finding is conceivable in relation to a tied house of that nature where, because of the size of the family of the church officer, some rooms were left vacant. It would be a matter of fact for the authority to decide whether the use of the building as a whole was mainly for charitable purposes.

[14] For these various reasons I shall refuse the petition.