A recent decision of the Court of Appeal has again brought a focus to the charity sector and the courts have again wrestled with the vexed question of what truly constitutes a charity (for the purposes of the law) and, more particularly, at what point along the continuum the Charities Registration Board can de-register an organisation from the Charities Register on the basis that its main role in life is to be politically active.
Historical context
Charities law is founded in what is commonly referred to as the 1601 Statute of Elizabeth, and given judicial recognition in various landmark cases since. In New Zealand the purposes with which an organisation must comply in order to qualify as a charity are described in section 5 of the Charities Act 2005. Simply, a charity can only exist for one or more of the following purposes or “heads”:
- The relief of poverty;
- The advancement of education;
- The advancement of religion; or
- Any other purpose beneficial to the community.
It will likely come as no surprise to learn that compliance with the fourth head is the most problematic and the most open to interpretation.
There are considerable attractions to being able to register as a charity, principally the fact that a registered charity is exempt from the requirement to pay income tax (but the exemption does not apply to GST, in case you were wondering!). In order to qualify for such a state of affairs the threshold for registration is high and, more and more, is being rigorously administered. Charities Services staff are taking longer to consider applications to register as a charity – a consideration period of around six months appears to be the new normal – and are becoming increasingly vigilant in periodic reviews of charities that are registered. One such review resulted in the removal from the Charities Register of an organisation called Family First.
Family First
Family First was settled under the Charitable Trusts Act 1957 in 2006 and was registered as a charity on the Charities Register in 2007. It was removed from the Register in 2013 following an investigation in which the Charities Registration Board took the view that it considered the main purpose of Family First was:
… to promote the view that the “natural family” (defined by the Trust as the union of a man and a woman through marriage) is the fundamental social unit, and should be supported as such to the exclusion of other family forms (described by the Trust as “incomplete or fabrications of the state”).
This purpose was, in the Board’s view, political and therefore not charitable. The Board removed Family First from the Charities Register. Family First could still continue to operate, of course, but from that date it would have to account for income tax on all income it received. Suffice to say that Family First was not happy with the Board’s view and initiated what has become a long and tortuous path of litigation. The most recent decision is from the Court of Appeal on 27 August 20201 which we discuss below.
Application of Greenpeace precedent
The Family First decision followed closely after Greenpeace won its fight to be registered as a charity – which was accepted on the basis that its political advocacy benefitted the public.
In Family First, the Court, at [87], said that “charitable status depends principally on purposes, not activities” and accepted Family First’s argument that one of its primary roles was to educate the public on the benefits of the “natural family” and that the High Court had failed to analyse those of its objects that supported this position. The High Court, according to the Court of Appeal, “gave too much weight to the perceived activities of Family First”. The Court of Appeal went on to consider how Family First might comply with the charitable head of its work being beneficial to the community. It sought to apply the Greenpeace2precedent from the Supreme Court that:
… an entity that provides no or limited tangible public benefit and is primarily engaged in cause advocacy may qualify under the fourth head of charity, depending on the circumstances. Whether such purposes are for the public benefit in the sense the law regards as charitable will depend on the end sought to be achieved and the means and the manner of its promotion,
a decision which, incidentally, supported the view of Kiefel J of the Australian High Court3 that charitable and political purposes are not mutually exclusive.
The Court of Appeal stated at [172] that, as regards the fourth head of charity, the Greenpeace approach recognised the courts’ role in contemporary society as being one of recognising goals and objectives of general public benefit. Having already concluded that Family First complied with the second head of charity (the advancement of education), the Court determined at [175] that as Family First’s educational and advocacy charitable purposes had generally been constant over time, its advocacy on specific issues could properly be seen as ancillary to those purposes.
The Court of Appeal required the reinstatement of Family First to the Charities Register and declared that it was a charity that qualified for registration under the Charities Act 2005.
The counter view
It is possible that the decision in Greenpeace is not good law – some commentators have criticised the legal analysis and have pointed to the fact that it was a 3:2 majority decision. It should be pointed out that the Court of Appeal decision in Family First is also a majority decision (2:1) and the decision of Gilbert J, as the minority judge, makes interesting reading. He notes that this decision is the fifth in seven years dealing with the issue, and is the first to have been decided in favour of Family First.
Gilbert J took the view that Family First’s advocacy role was not merely ancillary but was, in fact, its primary activity. As such, the judge was of the view that it could never qualify under the fourth head.
What can we learn?
First and foremost, any analysis of whether or not an organisation is fit for registration as a charity will depend on its purposes – its reason for being. Such purpose (or purposes) must comply with one or more of the heads of charity, and such compliance must continue on an ongoing basis.
A charity must be accessible by the public, and it must benefit the community. Above all, it will be judged not on results but by its ability to act in accordance with its purposes.
From a cynical point of view, Greenpeace and now Family First seemingly stand for the proposition that, if you ask enough times, you will get the answer you are looking for. A more cautionary view might be that neither was a unanimous decision and Family First, at least, may still be appealed.
And if you are a registered charity? You need to be aware that Charities Services may investigate you at any time to check that you are acting in accordance with your purposes. As charitable purposes are able to be changed, please check with us if you think a review of your purposes, or your trust deed/rules, might be helpful.
If anything in this article raises questions or concerns, please do not hesitate to get in touch.
[1] Re Family First New Zealand [2020] NZCA 366
[2] Re Greenpeace of New Zealand Inc [2014] NZSC 105, [2015] 1 NZLR 169
[3] Aid/Watch Inc v Commissioner of Taxation [2010] HCA 42, (2010) 241 CLR
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