100 years on the Statute Book but only one contested case…until now….

Hope Community Church (Wymondham) v Phelan [2020] UKHC 1240 (Ch)

Mrs Justice Falk; judgment 22 May 2020

Case commentary by Philip Rainey QC

Philip Rainey QC of Tanfield Chambers appeared for the successful Claimant

Introduction

The Places of Worship (Enfranchisement) Act 1920: As the Judge herself put it (at [12]):

“It is fair to say that the 1920 Act is a little encountered piece of legislation, with just one known contested High Court case, Stradling v Higgins [1932] Ch 143.”

It is perhaps fitting that the second contested case is decided as the 1920 Act celebrates its centenary.

The facts and the issues

There was no dispute about the facts. The Claimant church is a charitable company limited by guarantee, which took a 30 year lease of a former industrial unit from the Defendants and converted it into a Church and community centre. That was the permitted use under the lease.

The issue arose from the wording of s.1(1) of the 1920 Act, which provides:

“Where premises held under a lease to which this Act applies are held upon trust to be used for the purposes of a place of worship [or, in connexion with a place of worship, for the purpose of a minister’s house][1], whether in conjunction with other purposes or not, and the premises are being used in accordance with the terms of the trust, the trustees, notwithstanding any agreement to the contrary (not being an agreement against the enlargement of the leasehold interest into a freehold contained in a lease granted or made before the passing of this Act), shall have the right as incident to their leasehold interest to enlarge that interest into a fee simple, and for that purpose to acquire the freehold and all intermediate reversions…”

“Place of worship” must be public worship (section 5). Section 5 also includes a definition of “trustee” for the purposes of the 1920 Act:

“The expression “trustees” means the persons in whom the leasehold premises are for the time being vested for the purposes of a place of worship or minister’s house under any trust whether express or implied and includes their predecessors in title.”

The underlined parts of the text are of particular relevance to the issue which the Judge had to decide.

The Defendants contended that the Claimant did not hold the lease on trust, because a charitable company is the charity (and thus holds its assets beneficially) as opposed to being a trustee who holds on trust for a charity. The Claimants contended that a charitable company was to be regarded as a trustee in a broad sense and that the meaning of a “trust to be used for the purposes of a place of worship” in s.1 of the 1920 Act was to be construed in that broad sense and hence that the Claimant satisfied the statutory test.

The Defendants also contended that the even if the Claimant was to be regarded as a trustee for the purposes of the 1920 Act, its charitable objects and the terms of the lease did not require the premises to be used for the purposes of a place of a worship.

The decision

Following a trial by video link, Falk J found in the favour of the Claimant church. She gave a long, thorough and carefully reasoned judgment, of which the following is a bare summary.

The Judge took the background and “mischief” that the 1920 Act was intended to remedy from the Select Committee report on “Town Holdings” dating from 1889 (the “Town Holdings Report”). The relevant recommendation in the report reads as follows:

“There has been a considerable amount of evidence given from some parts of the country of the difficulty experienced by Nonconformist bodies in obtaining a secure tenure of their places of worship, and schools connected with them, and of this being frequently felt to be a great hardship. The Committee think that it is most desirable on public grounds that all religious bodies should be enabled to obtain a secure tenure of such places of worship and schools, and they consider that the freeholder who has granted land for such purpose has no good reason to object to its being held in perpetuity, on his receiving the value of his interest. They therefore recommend that all religious bodies to whom land has been granted on lease by the freeholder for the erection of their places of worship and schools, should be empowered to purchase the fee, subject to the payment of fair compensation.”

Falk J also considered the extensive case law concerning the status of charitable companies and how they hold their assets, including Liverpool and District Hospital for Diseases of the Heart v Attorney-General [1981] Ch 193. The cases indicate that “trust” in the sense of a charity (and a trust for the purposes of public worship will always be charitable) can be used in a broad sense, which would include a charitable company.

The Judge then applied the principles of statutory construction of enfranchisement statutes found in (among other cases) Cadogan v McGirk [1996] 4 All ER 643; Pollen Estate v HMRC [2013] 1 WLR 3785 and LM Homes Ltd v Queen Court Freehold Co Ltd [2020] EWCA Civ 371.

The objects of the 1920 Act did not include discriminating between charitable trustees holding a place of worship on a trust deed and an incorporated charity. To exclude the Claimant, and all incorporated charities like it, from the ambit of the 1920 Act would run contrary to the intention of Parliament:

“[65]…There is no indication that a policy choice was made to exclude religious bodies simply because they had adopted an incorporated form, with their charitable purposes set out in a constitution rather than in a trust deed. Such an approach would not appear to allow the mischief identified by the Town Holdings Report to be properly addressed, because it would deny enfranchisement in all cases where leases had been granted to incorporated charities (including prior to the enactment of the legislation) without some form of strict trust.”

As to the text of s.1 of the 1920 Act, Falk J held:

“[68]… The words used are capable of a construction which extends not only to trusts in the strict sense, but the broad sense considered in Liverpool Hospital, that is where the terms of an incorporated charity’s constitution place binding restrictions upon it, requiring it to apply its assets exclusively for charitable purposes….”

The Claimant’s objects included the holding of the Premises for the purposes of public worship. Falk J rejected the argument that the objects and/or the lease had to provide that premises must be used for such purposes or that these must be the only purposes for which the Premises might be used (see para.[86[). Neither is required by the 1920 Act, and in the only previous contested case as to qualification under the Act, Stradling v Higgins, it was held that public worship did not have to be the sole purpose. What the 1920 Act does require is that the premises must actually be used for public worship in accordance with the trusts, and there was no dispute that the Hope Community Church was in such active use.

The Claimant was therefore entitled to a declaration that it is entitled to acquire the freehold pursuant to s.1 of the 1920 Act.

A copy of the judgement can be found here.