High Court holds HSE payments do not defray nursing home expenses for Valuation Act exemption purposes.

NEUTRAL CITATION: [2012] IEHC 254

THE HIGH COURT

[2011 No. 1783 SS]

IN THE MATTER OF THE VALUATION ACT, 2001 AND IN THE MATTER OF THE VALUATION OF PREMISES

BETWEEN:

GLENDALE NURSING HOME

APPELLANT

AND

THE COMMISSIONER OF VALUATION

RESPONDENT

JUDGMENT of Mr. Justice Birmingham delivered the 15th day of June 2012

1. The Valuation Tribunal has stated a case for the opinion of the High Court arising from its determination of the 4th January 2011.

2. The issues on which the opinion of the High Court is sought are whether:

(1) The HSE in making payments to nursing homes under the Nursing Homes Support Scheme Act 2009, is, within the

ordinary meaning of the word, defraying expenses of the nursing home in its purpose of caring for the elderly;

(2) The HSE for all intents and purposes is 'the State' as defined for the purposes of the Valuation Act 2001, as was held

by MacMenamin J. in Health Service Executive v. Commissioner for Valuation [2008] IEHC 178 and by natural extension is

therefore acting on behalf of the Exchequer when it makes payment;

(3) The relevant property falls within the ambit of paragraph 14(b) of the fourth schedule to the Valuation Act 2001;

(4) Glendale Nursing Home is a body the expenses incurred by which in carrying on an activity as a nursing home caring

for the elderly are defrayed by the Exchequer;

(5) In the event that the answers to the above questions are yes, did the Tribunal err in law in holding that expenses

incurred by Glendale were not wholly or mainly defrayed out of monies provided by the Exchequer when the uncontested

evidence before the Tribunal was that between the 10th January 2010, and the 10th June 2010, the proportion of

Glendale's income that came from the HSE ranged from 60.51% to 51.92%?

3. By way of background it should be explained that Glendale is a nursing home located at Tullowphelim, Tullow Rural, Carlow. The

proprietors of the nursing home contend that it should be exempt from rateability. During the course of an oral hearing, held before

the Valuation Tribunal on the 21st September 2010, and the 10th November 2010, at which it may be noted the appellant was not

legally represented, it was agreed that the appellant's claim to be entitled to an exemption from rateability fell to be determined by

reference to para 14(b) of Schedule 4 of the Va1uation Act 2001. That schedule so far as material provides: "Relevant Property

Not Rateable"

"14. Any land, building or part of a building occupied for the purpose of caring for elderly, handicapped or disabled persons

by a body, being either​

(a) a body which is not established and the affairs of which are not conducted for the purpose of making a private

profit from an activity as aforesaid, or

(b) a body the expenses incurred by which in carrying on an activity as aforesaid are defrayed wholly or mainly out

of moneys provided by the Exchequer."

4. It is agreed that the promoters of the nursing home have sought to make a profit so that the home is not one to which para 14(a)

applies. In effect the real question at issue, which will decide whether the nursing home is rateable or is exempt from rates, is

whether it is the case that its expenses are defrayed wholly or mainly out of monies provided by the Exchequer. In that regard it is no

longer in dispute between the parties that payments by the Health Service Executive are the equivalent to payments by the State.

Accordingly the question posed at (b) in the cases stated was not argued and it does not appear either appropriate or necessary to

answer this question.

The Valuation Tribunal

5. At the hearing before the Valuation Tribunal it was submitted on behalf of the nursing home that in excess of fifty percent of its

income was derived from the Nursing Home Subvention Scheme and the Nursing Home Support Scheme paid by the HSE in compliance

with the Health (Nursing Homes) (Amendment) Act 2007, and the Nursing Homes Support Scheme Act, 2009. On that basis, it was

argued that the appellant met the criteria under para 14(b) of Schedule 4 to the 2001 Act and accordingly was entitled to an

exemption from rateability.

6. On behalf of the Commissioner it was submitted that in order to avail of the exemption from rates, in accordance with the

provisions of para 14(b), it was necessary for the appellant to establish that expenses incurred were wholly or mainly defrayed by the

Exchequer. It was further submitted that State support or subvention is a payment applied for by a person in order to assist that

person procure services of their choice from the market place and that the HSE does not involve itself in defraying expenses incurred

by Glendale Nursing Home or indeed by any other private nursing home and that the HSE does not have the statutory objective or

purpose of defraying the expenses of Glendale Nursing Home.

7. Before the Valuation Tribunal it was agreed by the parties that the Tribunal should determine the issues arising from the

submissions that had been made to it in advance as a preliminary legal issue. In doing so, the Tribunal first referred to the definition of

the word 'defray' that appears in the Oxford English Dictionary, 2nd Edition, Volume IV which is as follows:-

"1. To pay out, expend, spend, disburse (money). 2. To discharge the (expense or cost of anything) by payment; to pay,

meet, settle. 3. To meet the expenses of; to bear the charge of; pay for. 4. To pay the charges or expenses of (a

person); to reimburse, to entertain free of charge."

The Tribunal then continued:-

"The HSE, in making payments to nursing homes under the Nursing Homes Support Scheme Act 2009, is, within the

ordinary meaning of the word, defraying expenses of the nursing home in its purpose of caring for the elderly. The HSE for

all intents and purposes is 'the State' as defined for the purposes of the Valuation Act 2001, as was held by MacMenamin

J. in Health Service Executive v. Commissioner for Valuation [2008] IEHC 178 and by natural extension is therefore acting

on behalf of the Exchequer when it makes a payment.

The Tribunal finds that the relevant property falls within the ambit of Paragraph 14(b) above, and further, that Glendale

Nursing Home is a body the expenses incurred by which in carrying on an activity as a nursing home in caring for the

elderly are defrayed by the Exchequer.

However, the Tribunal was not provided with sufficient evidence to establish that the aforementioned expenses are

defrayed wholly or mainly out of monies provided by the Exchequer.

Accordingly, the Tribunal finds that in the absence of evidence, the subject property does not qualify for relief under

Schedule 4, Paragraph 14(b)."

The role of the High Court

8. The role of the High Court when dealing with cases of this nature was recently the subject of comment by MacMenamin J. in Health

Service Executive v. Commissioner for Valuation [2010] 4 I.R. 23, where he commented as follows:​

"[5] By virtue of s.39 (5) of the Act of 2001, the High Court shall determine any question or questions of law arising on

the case and shall reverse, affirm or amend the determination in respect of which the case has been stated, or shall remit

the matter to the Valuation Tribunal with the opinion of the Court, or make such other order as the Court shall think fit.

[6] Thus, the remit of this Court is not now confined to a narrow consideration of affirmation or denial of the Valuation

Tribunal's conclusion."

The relationship between the Valuation Tribunal and the High Court

9. There is no doubt but that the Valuation Tribunal is an administrative tribunal, the members of which are individuals with expertise

and experience in relation to the issues likely to come before a Valuation Tribunal. So much is clear from the decision of the Supreme

Court in Bulmers Limited v. Commissioner of Valuation [2009] 1 I.R. 503 and the earlier decision Premier Periclase Limited v.

Commissioner of Valuation (Unreported, High Court, Kelly J. 24th June 1999). On this basis there is no doubt that ordinarily the Court

would be slow to intervene with a decision of such a body and would be minded to do so only on the basis of an identifiable error of

law or unsustainable finding of fact. However, the matter before the Court is an exercise in pure statutory interpretation. In those

circumstances it does not seem to me that the doctrine of curial deference is of any real significance.

10. The question that then arises is how the Court should approach its task of interpreting this statute. The approach that a court

should take was addressed by MacMenamin J. in Nangles Nurseries v. Commissioners of Valuation [2008] I.E.H.C. 73, where he

commented as follows:-

"I would therefore summarise the principles which are applicable in an interpretation of this statute in the light of the

authorities as follows:

(1) while the Act of 2001 is not to be seen in precisely the same light as a penal or taxation statute, the same

principles are applicable;

(2) the Act is to be strictly interpreted;

(3) impositions are to be construed strictly in favour of the rate payer;

(4) exemptions or relieving provisions are to be interpreted strictly against the rate payer;

(5) ambiguities, if they are to be found in an exemption are to be interpreted against the rate payer;

(6) if however there is a new imposition of liability looseness or ambiguity is to be interpreted strictly to prevent the

imposition of liability from being created unfairly by the use of oblique or slack language;

(7) in the case of ambiguity the Court must have resort to the strict and literal interpretation of the Act, to the

statutory pattern of the Act, and by reference to other provisions of the statute or other statutes expressed to be

considered with it."

11. Insofar as the provision in the schedule under consideration is one that provides an exemption or is a relieving provision, it is

paras. 4 and 5 which are of particular relevance. Accordingly, it is a provision that falls to be interpreted strictly against the

ratepayer and ambiguities, if found, are to be interpreted against the ratepayer.

12. The approach of interpreting exemption provisions against a ratepayer or tax payer is a long-standing one. The rationale was

addressed by Kennedy C.J. in Revenue Commissioners v. Doorly [1933] I.R. 750, where the Chief Justice, dealing with provisions that

exempt from liability, commented:-

"I have been discussing taxing legislation from the point of view of the imposition of tax. Now the exemption from tax,

with which we are immediately concerned, is governed by the same considerations. If it is clear that a tax is imposed by

the Act under consideration, then exemption from that tax must be given expressly and in clear and unambiguous terms,

within the letter of the statute as interpreted with the assistance of the ordinary canons for the interpretation of

statutes, ... The Court is not, by greater indulgence in delimiting the area of exemptions, to enlarge their operation

beyond what the statute, clearly and without doubt and in express terms, excepts for some good reason from the burden

of a tax thereby imposed generally on that description of subject-matter. As the imposition of, so the exemption from, the

tax must be brought within the letter of the Taxing Act as interpreted by the established canons of construction so far as

applicable."

The role of the HSE

13. The HSE interacts in two ways with the private nursing home sector of which Glendale forms a part. The first in time was the

Subvention Scheme which has been in existence since 1993. From October 2009 the Subvention Scheme has been replaced by the

Nursing Homes Support Scheme, provision for which had been made by the Nursing Homes Support Scheme Act 2009, better known as

the Fair Deal Act. Since then no new entrants are admitted to the Subvention Scheme but those who are already on that scheme

may elect to stay on there or may transfer over to the new Nursing Homes Support Scheme.

14. Under the Nursing Homes Support Scheme a person in need of care makes a contribution towards the cost of their care and the

State pays the balance. This applies whether the nursing home is public, private or voluntary.

15. For those seeking entry to the Nursing Homes Support Scheme there are potentially three steps to the application process. Step

one is an application for a care needs assessment. The care needs assessment identifies whether or not an applicant is in need of

long-term nursing home care. Step two is an application for State support. This involves a financial assessment which will determine

the contribution to be made by the applicant to their own care and then the corresponding level of financial assistance from the

State by way of State support. Then, in some circumstances there will be an optional third step which arises if the applicant is

seeking a nursing home loan under the Ancillary State Support provisions of the 2009 Act.

16. As might be expected, there are elaborate provisions setting out the manner in which the contribution to be made by an applicant

is to be calculated which involves a detailed financial assessment. The HSE informs the individual of the contribution they will be

required to make to their own care and whether they are eligible for State support. It will then provide the applicant with a list of

nursing homes to choose from which will include public nursing homes, voluntary nursing homes and approved private nursing homes.

The individual is then free to choose any home on the list. If the individual selects a public nursing home then they pay their

contribution to the HSE. If they choose a voluntary nursing home, they pay their contribution to the voluntary home each week and

the HSE pays the balance. Approved private nursing homes are homes which have agreed the price that will be charged for care with

the National Treatment Purchase Fund and have been approved for the purpose of the scheme. Again, if the individual selects a

private nursing home, the individual entering into care pays a contribution to the nursing home provider each week and the HSE pays

the balance.

17. To complete this overview of the operation of the Nursing Homes Support Scheme it is appropriate to refer to the Nursing Home

Loan element of the scheme. This can arise in these circumstances. In assessing the contribution to be made by an individual, one

has regard to the income and the assets of the applicant for care. An individual will contribute eighty percent of their assessable

income and five percent of the value of any assets per annum. Assets below a particular threshold are excluded from consideration.

Significantly, there is a provision whereby when the applicant's assets include land and property in the State, the five percent

contribution based on such assets may be deferred and collected at a later stage from the applicant's estate. The nursing home loan

element of the scheme is referred to as "Ancillary State Support". In effect this means that in the case of certain individuals the

HSE/the State can expect to recoup some of the monies it has expended on their behalf.

18. Under the previous subvention regime there was provision for people who entered registered private nursing homes to receive a

subvention from the Health Service Executive if they were in need of full-time care and attention and if they passed a means test

which took account of income and assets. The subvention was designed to assist individuals meeting the cost of nursing homes. It

was not designed to meet the full costs. In general there was a maximum weekly subvention rate of €300.

The Court's Assessment

19. By way of general observation, I think it can fairly be said that the focus of both State support and subvention was on the

individual in need of care rather than on the care provider. One indication of the emphasis on the individual is that under both

schemes an individual could choose a nursing home in Northern Ireland if it is registered by a Health and Social Services Board there.

It seems to me that it is beyond argument that under both schemes what the State, through the HSE, has sought to do is to offer

support and assistance to those requiring care rather than setting out with the objective of assisting private or voluntary care

providers. That is not necessarily the end of the matter but it is a matter of some significance.

20. Turning more directly to the basis on which the claim for exemption is advanced there are two aspects of para 14(b) of Schedule

4 which require consideration. There is, first of all, the question of whether the expenses incurred by Glendale in carrying out the task

of caring for its elderly residents are defrayed by the Exchequer. Then, if it is concluded that the expenses are in fact defrayed by

the Exchequer/HSE, whether the extent to which that happened is such that it can properly be said that the expenses are "wholly or

mainly" defrayed.

21. In determining the preliminary legal issue before it, the Valuation Tribunal (correctly in the submission of Glendale), gave the word

'defray' what it saw as its ordinary meaning which, according to the Shorter Oxford English Dictionary, was inter alia to "discharge"

(the expense or cost of anything by payment).

22. On the other hand, the Commissioner of Valuation analyses the nature of the payments made by the HSE and says that what is

involved is the making up of a shortfall in the price charged by the nursing home to the consumer. In that regard attention is drawn to

the long title of the Nursing Homes Support Scheme Act 2009, which provides:

"An Act to provide for the establishment of a scheme to be known as the Nursing Home Support Scheme under which

financial support may be made available to persons in respect of long term residential care services out of resources

allocated to the Health Service Executive for the purposes of the scheme ..." [Emphasis provided by the Commissioner of

Valuation].

The Commissioner contends that the State support defrays the costs of the care of the elderly person in need of care. This scheme is

designed to assist in covering the cost of care to the individual who is in need of care.

23. It seems to me that it is important not to focus just on the word "defrayed" but on the context in which it appears. What is in

issue is whether the expenses of Glendale incurred by it in caring for the elderly are defrayed by the HSE.

24. In that regard it is worth noting that para 14(b) is couched in the passive tense. That being so, the question is not whether the

State/HSE intended to support Glendale by defraying its expenses or still less whether that was the primary motivation of the

State/HSE, but whether that is what in fact happened, i.e., whether it can legitimately be said that the expenses of Glendale are

being defrayed by the HSE.

25. I am of the view that such would be a wholly strained, contrived and artificial use of language.

26. Over and above what the HSE intends to do, what it is actually doing is contributing to the cost of care for the individual elderly

person, alleviating the burden on the elderly person in obtaining care. It might be said that the State/HSE defrays the expenses of

the individual elderly person in need of care but it cannot be said that they are defraying the costs of Glendale.

27. If a delicatessen draws its clientele to a significant extent from amongst the ranks of public servants, could it seriously be said

that the State, as pay master of the public servants, was defraying the expenses of the delicatessen? If an adjoining cafe is

frequented by employees of a large company that provides its employees with luncheon vouchers redeemable at various locations

across the city, could it be said that the employer in providing the vouchers which were used in the cafe was defraying the costs and

expenses of that cafe? If a public house draws its clientele from the students of a third level college who are in receipt of grant

cheques from the Department of Education could it be said that the expenses of the public house are being defrayed by the

Department?

28. I am not at all convinced that it could ever be said that the State, by agreeing to offer financial support or subvention to

individual elderly people in need of care, could be said to be defraying the expenses of Glendale. I have already pointed out that

individuals are entitled to opt for a nursing home in Northern Ireland. On that basis can it be said that the expenses of Northern

Ireland nursing homes are being defrayed by the HSE?

"Wholly or mainly"

29. Notwithstanding my views that it cannot be said that the expenses of Glendale are defrayed by the HSE, it is necessary to focus

on the question whether, if that could be said, it would be the situation that the expenses were being defrayed "wholly or mainly" out

of money provided by the HSE. In order for a body to come within the ambit of para 14(b), that body's expenses must be defrayed

wholly or mainly out of monies provided by the Exchequer. In this case it is not contended by the appellant that its expenses are

defrayed wholly from the public purse. It is argued, however, that as more that fifty percent of the income of Glendale came from the

Health Service Executive over a particular period, its expenses are defrayed mainly out of the monies provided by the Exchequer.

30. At the outset it may be noted that while the section in the schedule speaks of defraying expenses, the evidence produced on

behalf of Glendale was directed to establishing that over a particular period, more than fifty percent of its income came from the HSE.

Information about the source of income tells us nothing about how expenses are met. In particular circumstances the income of the

body may allow it meet its expenses in full and provide for a handsome surplus. In other cases the entire income of a body may not be

sufficient to allow it meet its expenses and a body may find itself insolvent. However, providing information about the amount of the

income of a body or the source of that income does not, of itself and without more, tell us anything about the capacity of the body

to meet its expenses. In a situation where the evidence before the Tribunal was that the proportion of Glendale's income that came

from the HSE ranged between 60.51% and 51.92%, there has been much discussion as to what is meant by the word "mainly".

However, even if it was established that 99% of its income came from the HSE, I do not believe that would provide a basis for

concluding that the expenses of Glendale were mainly met by the HSE. We would still be completely in the dark about the extent to

which the entire income of Glendale enabled it to meet its expenses or its costs of operation.

31. Glendale contends that the word 'mainly,' if given its ordinary meaning, means "for the most part," "in the main," "chiefly" or

"principally" and refers in that regard to the definition contained in the Shorter Oxford English Dictionary. The Commissioner disputes

the contention by Glendale that 'mainly' is anything more than 50%. In that regard it relies on the case of R. v. Radio Authority [1997]

3WLR 1094 where, at pg 1103, Lord Woolf observed:-

"Wholly or mainly is a phrase the meaning of which is not free from ambiguity. Clearly it requires a proportion which is more than half.

But how much more? 51 per cent. or 99 per cent. and anything in between are candidates...

Here it has to be construed as a part of a provision which restricts the ability of AIBS [Amnesty International] to promote itself on the

media by advertising. This constitutes a restriction on freedom or communication... In view of this the restriction the ambiguous

words "wholly or mainly" should be construed restrictively. By that I mean they should be construed in a way in which limits the

application of the restriction to bodies whose objects are substantially or primarily political. This corresponds with the Shorter Oxford

English Dictionary's meaning of "mainly" as being "for the most part, chiefly or principally." Certainly a body to fall within the provision

must be at least midway between the two percentages I have identified, i.e. more that 75 per cent."

32. By reference to this case the Commissioner contends that the word 'mainly' was intended by the Oireachtas to mean more than

75%.

33. Lord Woolf was dealing with a situation where a highly respected body such as Amnesty International was being denied access to

the broadcasting media and in that context he concluded that the phrase "wholly or mainly" should be construed restrictively so as to

apply only to bodies whose objects are substantially or primarily political. For my part, while fully understanding the desirability of

interpreting the phrase in a restrictive manner so as to minimise the restriction of freedom of speech, I find the decision to set a

minimum threshold of 75% surprising. Even if one concluded that the fifty percent threshold had to be comfortably and clearly

exceeded, would 66.66% or 70% not achieve this?

34. In any event where what is under consideration is measuring how costs or expenses are defrayed it seems to me that the task

lends itself to a more mathematical approach than was regarded as appropriate in R. v. Radio Authority. There is a difference between

considering whether it can be said of a human rights' organisation that its objects were "mainly of a political nature" and whether

expenses are mainly defrayed from a particular source. It seems to me that if there is evidence to establish that more than fifty

percent of the expenses of a body are defrayed by a particular individual or from a particular source, it is proper to say that those

expenses were mainly so defrayed. However, that is not the situation here. On the contrary, even if one took the view that expenses

were being defrayed by the HSE there was no evidence about the extent to which that was happening and it would be impossible to

say that the expenses of Glendale were being wholly or mainly defrayed by the HSE.

35. In the circumstances I will answer the questions posed as follows:-

(1) The HSE is not defraying the expenses of the nursing home.

(2) This question no longer arises.

(3) The relevant property does not fall within the ambit of para 14(b).

(4) Having regard to the answers to earlier questions, the question does not require an answer