Factual and Procedural Background
This Supreme Court judgment (delivered by Judge Murray) concerns two related appeals about whether certain designated residential care properties are exempt from local rates under Schedule 4, paragraph 14(b) of the Valuation Act 2001.
Company A operated a designated centre for adults with intellectual disabilities and/or acquired brain injuries from a six-bedroom premises in The City, The County. Following a valuation revision request by a Local Authority, a final valuation certificate issued on 23 August 2018 valued the property at €56; Company A appealed to the Valuation Tribunal.
Company B operated a designated centre providing 24-hour care to four children (aged 12–18) with significant support needs from a five-bedroom property in The City, The County (referred to in the opinion as “Millview”), leased by a wholly owned subsidiary. A final valuation certificate issued on 8 October 2018 recorded a valuation of €41 per sqm; Company B appealed to the Valuation Tribunal.
The Valuation Tribunal decided (27 October 2021 for Company A and 6 May 2022 for Company B) that both properties were exempt and reduced their valuations to €0. On appeal by case stated, the High Court (per Judge Bradley) upheld the Tribunal ([2025] IEHC 197). The Supreme Court granted Agency C leave to appeal directly from the High Court ([2025] IESCDET 90 and [2025] IESCDET 89) on the question of general importance concerning the proper interpretation of paragraph 14(b).
Legal Issues Presented
- Whether paragraph 14(b) of Schedule 4 to the Valuation Act 2001 applies where a state healthcare body pays a service provider under service arrangements (including service level agreements and costing proposals), such that the provider’s expenses are “defrayed wholly or mainly out of moneys provided by the Exchequer”.
- Whether “defrayal” in this context requires a formal process of submission, vouching, and reimbursement of specific expenses by the state body, or can be satisfied where expenses are paid out of contract payments funded by the Exchequer.
- How the phrase “wholly or mainly” should be understood in paragraph 14(b) for determining the required degree of Exchequer-funded defrayal.
Arguments of the Parties
Company A and Company B’s Arguments
- Their facilities fall within paragraph 14(b) because the expenses of operating the relevant care activities are discharged out of monies paid to them by Agency D (and, for Company B, also Agency E), and those monies ultimately come from the Exchequer.
- The payments were made to them as service providers (not as payments focused on individual service users), and the properties should therefore be exempt from rates under section 15(2) of the 2001 Act.
Agency C’s Arguments
- Payments under service arrangements do not “defray” the providers’ expenses within paragraph 14(b); “defrayal” in this statutory context allegedly requires assessment/vouching of expenses and reimbursement or direct payment of those vouched expenses.
- Schedule 4 should be read as reflecting a policy to limit exemptions to public/charitable/community uses not operated for private profit, and the High Court was said to have over-focused on the phrase “out of moneys provided”.
- The term “Exchequer” was argued to mean the Central Fund; the Exchequer allocates funds to Agency D, and does not directly pay the providers’ operating expenses.
- Reliance was placed on Glendale and on strict construction principles for exemptions (including reliance on Nangles Nurseries).
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Glendale Nursing Home v. Commissioner of Valuation [2012] IEHC 254 |
Meaning of “defray”; prior judicial treatment of paragraph 14(b) (pre-2015 amendment) in the nursing home “Fair Deal” context. |
Distinguished on statutory-regime grounds; Supreme Court held the later amendment referencing the 2009 Act confirmed a broader understanding of “defrayal” than Agency C contended and made disputes about Glendale’s correctness largely academic for present purposes. |
| Nangles Nurseries v. Commissioners for Valuation [2008] IEHC 73 |
Exemptions must be established clearly; strict construction point discussed (including citation of Inspector of Taxes v. Kiernan). |
Used to address (and limit) the role of strict construction: it applies only if ambiguity remains after applying ordinary interpretive tools (context and purpose included). |
| Inspector of Taxes v. Kiernan [1981] IR 117 |
Words must be construed in immediate context and to effectuate statutory scheme and purpose. |
Relied on to reject an approach that treats any arguable alternative reading as creating ambiguity requiring automatic strict construction against the claimant of an exemption. |
| The People (DPP) v. TN [2020] IESC 26 |
Strict construction applies only where ambiguity persists after other interpretive methods. |
Cited by analogy to explain how the strict construction principle operates (though that case concerned criminal legislation). |
| Bookfinders Ltd. v. Revenue Commissioners [2020] IESC 60 |
In tax contexts, strict construction against doubtful penalisation applies only if genuine doubt remains after interpretation; purpose may be considered. |
Applied to hold that Agency C’s suggested “vouching” limitation did not create the kind of ambiguity that would trigger strict construction against the ratepayer. |
| R v. Radio Authority, ex parte Bull and anor. [1997] 3 WLR 1094 |
Example of construing “wholly or mainly” as requiring >75% in a rights-sensitive broadcasting prohibition context. |
Discussed in relation to Glendale’s treatment of “wholly or mainly”; Supreme Court rejected a purely mathematical threshold and adopted an “all or effectively all” approach tied to the rationale of the exemption. |
| Londonderry Union (Guardians) v. Londonderry Bridge Commissioners (1868) IR 2 CL 577 |
Historical reference point for rating exemptions under the Poor Relief (Ireland) Act 1838. |
Used to explain the legislative background and evolution of exemptions prior to the 2001 Act. |
| Mersey Docks and Harbour Board Trustees v. Cameron (1865) 11 H.L. Cas. 443 |
English approach to “public purposes” exemption (limited to government occupation). |
Contrasted with Irish law’s historic divergence on public purpose exemptions. |
| University College Cork v. Commissioner of Valuation [1912] 2 IR 328 |
Illustration of Irish “public purposes” exemption application to an educational institution. |
Part of the historical analysis of how exemptions were drawn pre-2001 Act. |
| Trinity College v. Commissioner of Valuation [1919] 2 IR 493 |
Illustration of limits of the “public purposes” exemption. |
Used as comparative historical example alongside other educational-institution cases. |
| Maynooth College v. Commissioner of Valuation [1958] IR 189 |
Illustration of limits of the “public purposes” exemption; cited with an observation by Davitt P. |
Used as comparative historical example in discussing pre-2001 exemption doctrine. |
| Port of Cork Company v. Commissioner of Valuation [2004] 1 ILRM 151 |
Description of public purpose as involving public interest/enjoyment; cited to explain pre-2001 approach. |
Used to frame the background policy context for later legislative changes. |
| Barrington's Hospital v. Commissioner of Valuation [1957] IR 299 |
Charitable purpose could subsist despite some paying private patients; focus on surplus and obligation to apply any profit to charitable purposes. |
Used in historical discussion to contrast older charitable exemption concepts with the 2001 Act’s redesigned exemption architecture. |
| HSE v. Commissioner of Valuation [2008] IEHC 178; [2010] 4 IR 23 |
Interpretation of “the State” under section 15(3) (as enacted) and interaction with Schedule 4 exemptions. |
Used to explain legislative responses (2014 reforms) and the policy setting in which paragraphs 8 and 14 operate. |
Court's Reasoning and Analysis
The Supreme Court focused on the proper interpretation of paragraph 14(b), which exempts property occupied for caring for elderly, handicapped, or disabled persons where the operator’s relevant expenses are “defrayed wholly or mainly out of moneys provided by the Exchequer” (subject to an exclusion connected to the Nursing Homes Support Scheme Act 2009).
1) Application of the text to the established facts. The Court held that, read literally, both properties met the use requirement (caring for disabled persons) and the evidence showed that the monies used to discharge the operating expenses came wholly or almost wholly from Agency D (and, for Company B, also Agency E), with those funds sourced from the Exchequer. On that basis, the expenses were reasonably described as being defrayed “out of” Exchequer-provided monies.
2) Rejection of “vouching/reimbursement” as a necessary feature of “defrayal”. The Court rejected Agency C’s proposed construction that “defray” requires submission, vouching, and reimbursement of specific expenses. It emphasized that paragraph 14(b) is framed in passive terms and is directed to the source of the monies used to pay expenses, not to a formal approval process by the funder. The Court found no contextual or purposive reason to read in the additional limitations suggested by Agency C.
3) Schedule 4 does not confine exemptions to non-profit bodies. The Court held it was incorrect to treat Schedule 4 as limited to non-profit or charitable operators: paragraphs 8(b) and 14(b) are structurally aimed at circumstances where services are delivered by bodies that may be profit-making but whose costs are met by Exchequer funding.
4) Legislative history and the “outsourcing” rationale. The Court analysed the evolution from the 1838 exemption framework to the 2001 Act, concluding that paragraphs 8(b) and 14(b) logically support a policy that where the State would not pay rates if it directly provided the service from its own premises, it should not end up paying rates indirectly through the contract price when it lawfully outsources the same service to private operators.
5) Significance of the post-Glendale amendment. The Court treated the insertion of the exclusion relating to the 2009 Act (made after Glendale) as confirming that “defrayal” in paragraph 14(b) is not confined to a narrow, formal reimbursement model; otherwise, the statutory reference to the 2009 Act would be unnecessary. The amendment also rendered debate about Glendale’s correctness largely academic for present purposes.
6) Strict construction of exemptions. While acknowledging the principle invoked by Agency C, the Court held strict construction operates only if ambiguity remains after ordinary interpretation considering text, context, and purpose. The Court found no such ambiguity: the respondents’ reading was the literal one and supported by rationale, whereas Agency C’s reading depended on unmotivated interpolation.
7) Meaning of “wholly or mainly”. The Court disagreed with Glendale to the extent it treated “mainly” as a >50% test. Instead, guided by the rationale of functional equivalence to state-operated services, the Court held “wholly or mainly” means “all, or effectively all,” allowing only limited tolerance for minor non-Exchequer contributions (e.g., occasional private fees or donations). On the Tribunal’s findings, that standard was met in both appeals.
Holding and Implications
Holding: APPEALS DISMISSED. The Supreme Court held that, on the Tribunal’s findings, the respondents’ properties were not rateable by reason of paragraph 14(b) of Schedule 4 to the Valuation Act 2001, and the questions in each case stated were to be answered as proposed by the High Court.
Implications: The direct effect is that the two care properties remain exempt from rates and their valuations remain reduced to €0. The judgment clarifies that paragraph 14(b) can apply to profit-making service providers where the relevant expenses are paid out of Exchequer-funded contract payments, and it interprets “wholly or mainly” as “all or effectively all,” rather than a fixed mathematical threshold; the Court also limited the circumstances in which strict construction principles affect interpretation where no genuine ambiguity remains.