Company which ran art events fails in appeal over £500k liability orders obtained by councils for business rates

A company that ran art events at a variety of properties for two or three days at a time has lost a legal challenge over liability orders worth nearly £500,000 obtained by two councils for payment of business rates and whether it should have been entitled to charitable relief.

The objects of the claimant in Preservation and Promotion of the Arts Ltd, R (On the Application Of) v Manchester Magistrates' Court [2020] EWHC 2435 were stated to be to promote the appreciation of the arts (in any form) amongst people in the United Kingdom and elsewhere, to promote education in the arts, to develop and enhance appreciation and understanding of art in any form, to introduce persons to the arts, and to provide a platform for unknown or developing artists.

Before Mrs Justice Jefford, Preservation and Promotion of the Arts (PAPOA) sought in a case involving Bolton Council judicial review of the decision of District Judge Hadfield, sitting in the Greater Manchester Magistrates' Court, not to state a case and/or judicial review of his substantive decision made on 26 April 2018.

In a second case involving Birmingham City Council, the claimant appealed, by way of case stated, against the decision of the District Judge sitting in the Birmingham Magistrates' Court.

Both cases arose out of the decisions of the relevant local authorities to seek liability orders against PAPOA for payment of business rates pursuant to Part III of the Non-Domestic Rating (Collection and Enforcement) (Local List) Regulations 1989.

Under Regulation 12 of the 1989 Regulations, applications for a liability or charging order are made to the Magistrates' Court and that court shall make the relevant order if it is satisfied that the sum is due and has not been paid.

PAPOA’s position in both cases was that it was entitled to relief from business rates under section 43(6) or 45A of the Local Government Finance Act 1988.

On this basis, PAPOA had opposed the local authorities' applications. In both matters it was unsuccessful.

The outcome was that, in the Bolton case, PAPOA was liable to pay £123,130.99 and, in the Birmingham case, PAPOA was liable to pay £371,019.99.

Mrs Justice Jefford said the issue that arose in the cases (whether it was properly to be regarded as one of fact or law) was whether on days that events were held at the properties they were used wholly or mainly for charitable purpose and whether it appeared that, when next in use, the properties would be wholly or mainly used for charitable purposes.

That involved issues as to the benefit to the public of events PAPOA had run at the properties and the extent of use, she said.

In relation to the Bolton case PAPOA's argument was essentially that, where matters of an artistic nature were concerned, it was no part of the court's function, in determining whether the public benefit test was met, to take it upon itself to decide that the quality of the art (as in this case) or music or literature (as in others) was not sufficient to be for the public benefit.

Such a decision was open to the court if the issue was raised, it argued. If the council raised that issue, then it was for the council to adduce evidence of the lack of quality. For PAPOA's case, if the issue was not raised, it was not incumbent on it to adduce evidence of quality.

Bolton's position was the opposite. On Bolton's case, there was no presumption of public benefit and section 4(2) of the Charities Act said as much.

The council said, as the District Judge had summarised it, where it was obvious that there was a public benefit, the court could take judicial notice but where it was not obvious there was a need for evidence. Bolton submitted that this was wholly a question of fact; that the legal and evidential burden fell on PAPOA; and that there was insufficient evidence to satisfy the court that the public benefit test was met.

In this case, District Judge Hadfield was not satisfied that the actual or intended use was for the public benefit. At [26] he said this:

"Even taking all the evidence, including that of Mr Wilcock, at its highest I could not be satisfied that those items which were exhibited (or intended to be exhibited) were such as to enable judicial notice of their quality to be taken. In the absence of such judicial notice being taken the court would require evidence as to their quality to make such an assessment. In this case there was insufficient evidence to enable me to be satisfied the public benefit test was satisfied."

Mrs Justice Jefford said the position, in her view, remained that if the burden of proof was on PAPOA to show that the properties were being or were to be used wholly or mainly for charitable purposes, it was inherent in that that it was for PAPOA to prove that the activities undertaken were or would be for the public benefit.

The High Court judge continued: “The District Judge was faced with evidence from the council of some rather half-hearted attempts to put on display some pictures or projections for short periods of time. He was right in my judgment to say that he could not, without evidence, decide whether those exhibitions were for the public benefit or whether future exhibitions would be and, since the burden of proof was on PAPOA, he was then right to make the liability orders.”

She added: “In my judgment, there was no error that could be the subject of judicial review and the judge did not take into account factors that he ought not to have done.”

The Birmingham case arose out of a similar factual scenario to the Bolton case.  The hereditaments were in buildings that were large, comprising in total 18 floors. PAPOA was tenant of 25 units, as tenant at will.

District Judge Jellema said that in considering the entirety of the evidence presented to him, he had identified eight matters, including:

  • The buildings were large block buildings, with PAPOA holding 5 hereditaments: "No explanation has been presented to me as to why the respondent company should need such an extensive portfolio of property nor has any explanation been put before me as to precisely what charitable use the company is making of those hereditaments.”
  • The tenancies were all tenancies at will on the same terms and with rents of £1. All the tenancies were granted by three companies with the same directors.
  • The published accounts showed that the company's balance sheet had shown assets of £500 for two years and that it was "as though the company is totally inactive". He noted that there were no payments for rent or utilities, for the expenses of volunteers, or for the acquisition of art.
  • There was no persuasive evidence of any charitable activity actually taking place across the three buildings in question. The District Judge referred to the events which a representative of PAPOA claimed had taken place and said: "There is no evidence of further or additional use of the hereditaments by [PAPOA] at all, nor even any claim of such additional use. The inescapable conclusion is that the hereditaments stood empty and unused for almost all of the time involved, even on [PAPOA's] own account of matters".

Counsel for Birmingham’s position was there was not enough evidence for the District Judge to be satisfied that PAPOA had met the statutory test. She submitted that Birmingham's evidence squarely put in issue (i) whether the particular events relied on by PAPOA had, in fact, occurred or were for the public benefit; (ii) whether any use of the premises had been wholly or mainly for charitable purposes; and (iii) whether any future use was likely to be for charitable purposes. PAPOA had failed to adduce any satisfactory evidence on these issues and the evidence of its director did not meet these points.

Counsel for Birmingham accepted that the eight matters might include some matters that were not relevant to the test to be applied but she submitted that they could properly be regarded as observations and they did not undermine the overall assessment that the evidence was inadequate - an assessment that she submitted was entirely accurate.

PAPOA argued that the District Judge had made only cursory reference to the case law; made no attempt to apply the principles in the case law to the facts; and failed to make any clear findings of fact. PAPOA then argued that where the District Judge did attempt to state the legal test he was applying, he adopted a number of "erroneous formulations".

These submissions lay at the heart of PAPOA's case that there was an error of law, and not of fact, which ought to lead to an answer to the first question – whether the District Judge had been right to conclude that [PAPOA] did not qualify for charitable relief in respect of the hereditaments in question – in its favour.

However, Mrs Justice Jefford said PAPOA’s dissection of the District Judge's reasoning involved, to a large extent, taking statements or observations out of context and ignoring the overall conclusion of the District Judge on the evidence or lack of evidence which he addressed in detail.

“That evidence went not only to the extent of use of the premises but also to the issue of whether there was any public benefit or benefit to a sufficient sector of the public. Where the District Judge has referred to something as significant which ought to have been immaterial, it is clear that that had no impact on the overall conclusion which was based on the evidence," she added.

The High Court judge found that there was no error of law in District Judge Jellema's reasoning and he was entitled to reach the conclusion that he did, namely that PAPOA did not qualify for charitable relief in respect of the hereditaments in question.

The District Judge had been entitled to reach that conclusion both on the issue of failure to meet the public benefit requirement and on the issue of extent of use, Mrs Justice Jefford said.

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