Family First Charity wins right of review against the Charities Board
On 30 June 2015 Collins J released his decision in the long awaited Charities case of Re Family First New Zealand HC Wellington  NZHC 1493. If you don’t want to read to the end of this interesting tale, we can advise you that the Charities Board was directed to reconsider its intention to remove Family First from the Charities Register taking into account the Greenpeace decision and the comments made by the Supreme Court in that case. Justice Collins’ decision was that Family First’s advocacy (and it’s so called “controversial” role) and political purpose did not preclude it from being a charity carrying out purposes that are beneficial to the community.
This isn’t the end for Family First, but hopefully a beginning of the end, as it all started in February 2008. And that’s a lot of time, effort and legal expenses for anyone to handle.
What’s a “charity”?
For those of you not familiar with the complex world of Charity registrations in New Zealand, in brief, to qualify for registration as a “charity” in New Zealand law an entity must be registered under the Charities Act 2005 and have as its Object (purpose) one or more of the following:
It’s a bit more complex than that, because an entity can achieve one of these Objects but be disqualified for other reasons, like being a front for a terrorist organisation, having other Objects which are not charitable, or (according to the Charities Board) having a political purpose. And it was for this last reason that Family First struck trouble.
The benefit of being charitable
Regardless of an entity’s Objects, intentions and actions; without charitable registration, that entity will not qualify as a “charity” for income tax purposes. So far, not so good. However, the implications are wider than not having a tax exempt status. This is because many private companies, tax exempt Funding Organisations and other Charities, as well as Local and Central Government agencies will not make grants, donations, distributions or apply dispensations or local tax relief to organisations that are not registered charities. Also, many non-registered charities, denied the right to call themselves “tax exempt charities” may also lose their “donee status”, which means individuals and companies that donate funds to them will not receive a tax credit or deduction.
Back to Family First
They were registered as a charity on 18 May 2007, shortly before the Charities Act 2005 came into force. In early 2008 they were questioned by the then Charities Commission, who formally investigated whether they were an advocacy entity with political purposes, and therefore could not be a charity. Two years later in March 2010 the Charities Commission cleared Family First to remain registered as a charity. Another two years later (following administrative changes to the Charities Act) the Commission was restructured into the Charities Board and came under the Department of Internal Affairs. Only a few months later the Department recommended to the new Charities Board that Family First be deregistered as, in its view, Family First’s purposes involved advocating and promoting a political view point (including law changes), and this was not a charitable purpose. Fast forward: April 2013 the Board resolved to remove the charitable registration; May 2013 Family First lodges an appeal to the High Court; June 2013 the High Court gives an interim order allowing Family First to remain registered pending a decision on that appeal. All parties then agreed to await the Greenpeace decision (eventually delivered on 6 August 2014, Re Greenpeace New Zealand Inc (2014) 26 NZTC 21-088 (SC)).
Family First High Court Decision
Substantive legitimate expectation
The Charities Commission, and later the Charities Board did not give any certainty over Family First’s charitable registration over a long period of time, but we question whether they should have. Is it fair to any charity to be subjected to a review and be advised they passed only to be later informed that another review had determined that they failed (when nothing appeared to have changed)? Perhaps the Charities Commission did not give a “clear and unequivocal representation” that Family First’s charitable status would remain unquestioned in the future, but it surely came close to doing so in its letter of 16 March 2010 when it advised that Family First continued to be qualified for registration as a charitable entity.
Justice Collins refers to the doctrine of “substantive legitimate expectation”. This is where the words, actions or inactions of a public authority are such as to give a party (e.g. Family First) an expectation that their position will not be challenged by that authority if they remain as they were. Family First may not have fallen within such a doctrine, if such a doctrine applied in New Zealand, but Collins J does discuss the principles in this case. Whether it is or will become an argument in administrative law is yet to find firm ground. But Collins J has developed five factors that, where found, may amount to a claim against a public authority (almost an estoppel argument).
“ …The five factors I identified are where:
(1) a public authority has given a clear and unambiguous undertaking;
(2) the undertaking was reasonably understood to mean what the applicant claims;
(3) the decision maker knew of the representation and chose to act contrary to it;
(4) the applicant has suffered some detriment by relying on the representation; and
(5) the decision-maker’s conduct cannot be objectively justified as being in the public interest and a proportionate response to the circumstances of the case.”
Take away thoughts
This is not the first time that the Charities Board (and before that the Charities Commission and before that the Inland Revenue) have confused an express and clear Object within a charity’s legal documentation and framework with some other type of activity.
The Charities Board has lost a number of high profile cases in recent years. On their website they comment on the Greenpeace case, and in particular announce they are not going to review any earlier decisions that would now be considered wrong after the Greenpeace decision of August 2014. However, they invite entities that were previously declined to reapply. Based on the comments of Collins J, it would appear that the Family First case should never have proceeded if the Board had reconsidered its resolution in light of the Greenpeace decision. While we welcome these court decisions, someone must ask the Charities Board at what point will they back down, and stop digging?
Perhaps it is time that the doctrine of “substantive legitimate expectation” is given firmer authority in New Zealand to provide that all important check against the power of the State. And perhaps the five principles should be extended to where there is an implied undertaking by a public authority or even a duty to give an undertaking to provide certainty to the public.
If you wish to know more about what qualifies as a charity, registering for charitable status and the tax issues surrounding charitable registration or donee status please contact us at firstname.lastname@example.org
Anne Edgar, Principal Advisor, Shellock Consulting Ltd. July 2015
The comments in this paper are the personal opinion of the writer and are of a general nature only. If you wish to read the Family First decision in full this can be found at https://charities.govt.nz/assets/Uploads/Family-First-New-Zealand.pdf
Posted: Thursday 30 July 2015