Beyond Charity: Outlines of a Jurisprudence for Civil Society
By
Matthew Dwight Turnour
Bachelor of Economics, University of Queensland
Bachelor of Laws, University of Queensland
Master of Arts (Research), Queensland University of Technology
Solicitor of the Supreme Court of Queensland
Solicitor of the High Court of Australia
The Australian Centre for Philanthropy and Nonprofit Studies Faculty of Business Queensland University of Technology Submitted in full requirement for the award of Doctorate of Philosophy on 23 September 2009 ii
I venture to think that there is no subject the study of which benefits more than does law from the liberalising influence of contact with other spheres of life and knowledge.
Lord Macmillan 1937 Law and Other Things 39.
iii iv KEYWORDS
altruism – association – benefit – charitable purpose – charities – civil society – civil society organisation – coercion – deductibility – intermediaries – jurisprudence – nonprofit – not- for-profit – NGO – nongovernment organisation – preamble – public benefit – social economy – Statute of Elizabeth – tax exemption – third sector – voluntarism
The thesis relies upon case law and statute up to 31 December 2008.
v vi ABSTRACT There is not a single, coherent, jurisprudence for civil society organisations. Pressure for a clearly enuciated body of law applying to the whole of this sector of society continues to increase. The rise of third sector scholarship, the retreat of the welfare state, the rediscovery of the concept of civil society and pressures to strengthen social capital have all contributed to an ongoing stream of inquiry into the laws that regulate and favour civil society organisations. There have been almost thirty inquiries over the last sixty years into the doctrine of charitable purpose in common law countries. Those inquiries have established that problems with the law applying to civil society organisations are rooted in the common law adopting a ‘technical’ definition of charitable purpose and the failure of this body of law to develop in response to societal changes. Even though it is now well recognised that problems with law reform stem from problems inherent in the doctrine of charitable purpose, statutory reforms have merely ‘bolted on’ additions to the flawed ‘technical’ definition. In this way the scope of operation of the law has been incrementally expanded to include a larger number of civil society organisations. This piecemeal approach continues the exclusion of most civil society organisations from the law of charities discourse, and fails to address the underlying jurisprudential problems. Comprehensive reform requires revisiting the foundational problems embedded in the doctrine of charitable purpose, being informed by recent scholarship, and a paradigm shift that extends the doctrine to include all civil society organisations.
Scholarly inquiry into civil society organisations, particularly from within the discipline of neoclassical economics, has elucidated insights that can inform legal theory development. This theory development requires decoupling the two distinct functions performed by the doctrine of charitable purpose which are: setting the scope of regulation, and determining entitlement to favours, such as tax exemption. If the two different functions of the doctrine are considered separately in the light of theoretical insights from other disciplines, the architecture for a jurisprudence emerges that facilitates regulation, but does not necessarily favour all civil society organisations.
Informed by that broader discourse it is argued that when determining the scope of regulation , civil society organisations are identified by reference to charitable purposes that are not technically defined. These charitable purposes are in essence purposes which are: Altruistic, for public Benefit, pursued without Coercion. These charitable puposes differentiate civil society organisations from organisations in the three other sectors namely; Business, which is manifest in lack of altruism; Government, which is characterised by coercion; and Family, which is characterised by benefits being private not public. When determining entitlement to favour , it is theorised that it is the extent or nature of the public benefit evident in the pursuit of a charitable purpose that justifies entitlement to favour. Entitlement to favour based on the extent of public benefit is the theoretically simpler – the greater the public benefit the greater the justification for favour. To be entitled to favour based on the nature of a purpose being charitable the purpose must fall within one of three categories developed from the first three heads of Pemsel’s case (the landmark categorisation case on taxation favour). The three categories proposed are: Dealing with Disadvantage, Encouraging Edification; and Facilitating Freedom.
In this alternative paradigm a recast doctrine of charitable purpose underpins a jurisprudence for civil society in a way similar to the way contract underpins the jurisprudence for the business sector, the way that freedom from arbitrary coercion underpins the jurisprudence of the government sector and the way that equity within families underpins succession and family law jurisprudence for the family sector. This alternative architecture for the common law, developed from the doctrine of charitable purpose but inclusive of all civil society purposes, is argued to cover the field of the law applying to civil society organisations and warrants its own third space as a body of law between public law and private law in jurisprudence.
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viii CONTENTS PAGE
PART ONE – CHARITIES...... 1
I Beyond Charities ...... 3
A. Preamble ...... 3 B. Introduction...... 3 C. Context...... 5 1. The Law of Charities in Context...... 5 2. Academic Discussion of the Law of Charities and Civil Society ...... 12 3. Charitable Purpose in the Context of Civil Society ...... 17 4. Charitable Purpose in its Legal Context ...... 21 D. An Analogy...... 25 E. How to Move Beyond Charities? Introducing the Research Question ...... 30 F. Beyond Charities to Civil Society: Introducing the Hypothesis ...... 31 G. How the Jurisprudence will be Developed: Explaining Methodology ...... 32 H. The Scope and Limitations of Beyond Charities ...... 45 I. Definitions Needed to Develop a Jurisprudence for Civil Society ...... 50 J. Moving Towards a Jurisprudence for Civil Society: An Overview of the Thesis .....57 K. Postscript...... 59 II Why Go Beyond Charities?...... 61
A. Preamble ...... 61 B. Introduction...... 61 C. Addressing the Threshold Problems of Foundation, Genus and Form ...... 64 1. Charities are without an Essential, Theoretical Foundation...... 64 2. The Essence of Charitable Purpose and its Other...... 71 3. Problems of Form ...... 73 D. Problems Arising from the Four Principal Divisions of Charitable Purpose...... 75 1. Introduction...... 75 2. The Broad and Unsophisticated Scope of Relief of Poverty ...... 75 3. Education as a Class is Too Broad...... 79 4. Problems with Advancement of Religion...... 81 (a) Distinguishing Between Regulating and Favouring ...... 82 (b) Excluding Others and Political Purposes...... 86 (c) Uneven Contributions ...... 89 5. Problems with Other Purposes Beneficial to the Public ...... 91 (a) Public Benefit is Central to Charities but what is it in Essence? ...... 92
ix (b) The Delimiter Does Not Work...... 93 (c) The Levels of Public Benefit...... 96 E. Problems that go Beyond the Doctrine of Charitable Purpose...... 98 1. Family and Social Breakdown, Private Purposes and Civic Participation...... 98 2. Problems with Civic Engagement and Third Party Government ...... 102 3. Problems Distinguishing Business from Charities...... 105 F. Conclusion...... 111 G. Postscript...... 112 III How to go Beyond Charities ...... 115
A. Preamble...... 115 B. Introduction...... 115 C. Three ‘Principle’ Problems ...... 116 1. Principle 1: The Preamble was not Intended to Define Anything...... 118 2. Principle 2: The Overlooked but Underlying Jurisprudence of Pemsel’s Case ...... 120 3. Principal 3: There is not a Definition...... 126 D. How the Definitional Problems Arose ...... 128 E. Wider Taxonomy Problems: Distinguishing Charitable Purpose from Related Purposes ...... 133 F. Problems with Measuring Charitable Purpose and some Alternative Approaches.. 135 G. Going beyond Charities: the Foundation of the Problems in Philosophic Contests. 139 H. Conclusion...... 145 I. Postscript...... 146 PART TWO – CIVIL SOCIETY...... 147
IV Benefit ...... 149
A. Preamble...... 149 B. Introduction...... 149 1. Overview ...... 149 2. Introduction to Economic Theories in their Historic and Social Context ...... 151 C. When the Government is the Other...... 154 1. Burton Weisbrod ...... 154 2. Estelle James and the Public/Private Continuum...... 159 3. Lester Salamon’s Voluntary Sector Failure Theory...... 162 D. When Business is the Other...... 164 1. Henry Hansmann, Market Failure and Trustworthiness Theory...... 164 2. John Colombo and Mark Hall’s Donative Theory ...... 172 3. Myles McGregor-Lowndes ...... 174
x 4. Interim Summary ...... 175 E. When Family is the Other...... 175 1. Introduction...... 175 2. Conceptions of Family and Problems of Definition ...... 176 (a) The Nuclear Family is not Necessarily the Norm...... 176 (b) Extended Family and Kin Support can Extend beyond Nation States...... 177 (c) Distinguishing between Family and Religion can be Problematic ...... 178 3. Theoretical and Philosophical Ambiguity and Problems of Definition...... 178 F. Conclusion ...... 180 G. Postscript...... 183 V Altruism ...... 185
A. Preamble ...... 185 B. Introduction...... 185 C. Altruism as a Concept...... 188 1. A Definition of Altruism...... 189 2. Altruism is: An Overview of Research...... 190 3. What Drives Altruistic Behaviour?...... 192 4. No Universal Measure or Ranking of Altruism but a Continuum ...... 193 5. Interim Summary ...... 194 D. Theorising Altruism for Jurisprudential Development ...... 195 1. Introduction...... 195 2. Theorising Altruism: Two Alternatives ...... 195 3. Nothing, Except Vanity ...... 197 4. A Kind of Human Demigod...... 199 5. Interim Summary ...... 201 E. Altruistic Associations...... 202 1. Introduction...... 202 2. Robert Atkinson and a Weak Form of Altruism...... 203 3. Rose-Ackerman ...... 207 4. Avner Ben-Ner...... 211 5. Richard Steinberg...... 213 6. Interim Summary regarding Altruistic Associations ...... 215 F. Conclusion ...... 216 G. Postscript...... 219 VI Coercion...... 221
A. Preamble ...... 221
xi B. Introduction...... 221 C. Coercion and Community ...... 223 1. Saint Augustine ...... 223 2. Thomas Aquinas...... 226 3. From Thomas More to Shawn Kimmel...... 227 4. Interim Summary...... 230 D. Coercion and Contract...... 230 1. Nicolo Machiavelli...... 230 2. Thomas Hobbes...... 231 3. Adam Smith, Adam Ferguson and David Hume...... 232 4. Jean Jacques Rousseau...... 233 5. Fredric Bastiat ...... 236 6. Karl Marx...... 238 7. John Stuart Mill...... 239 8. Interim Summary...... 240 E. Conceptualizing Coercion, Communities and the Social Contract ...... 241 1. Ferdinand Tönnies...... 242 2. Evelyn Brody, Arthur Jacobson and Sovereignty Theory...... 246 3. Will Kymlicka...... 249 4. Helmut Anheier and the Civil Society Diamond...... 252 F. Conclusion...... 256 G. Postscript...... 258 PART THREE – JURISPRUDENCE ...... 261
VII Association law ...... 263
A. Preamble...... 263 B. Introduction...... 263 C. Locating Jurisprudence in Civil Society Theory and Civil Society in Jurisprudence265 D. Space to Associate is Protected by the Common Law ...... 269 E. Space to Associate and International Conventions ...... 277 F. The Scope of Application of Association Law...... 283 G. Regulate All Civil Society Organisations by Reference to Purposes...... 291 1. Introduction...... 291 2. Form is an Accident of History...... 292 3. Including the Excluded Others...... 294 4. Focus on Purpose not Activities...... 296 H. Principles of Regulation of Associations ...... 297
xii I. Conclusion ...... 302 J. Postscript...... 303 VIII Benefit law ...... 305
A. Preamble ...... 305 B. Introduction...... 305 C. Pemsel’s Case ...... 308 1. The Facts...... 308 2. The Ratio Decidendi of the Decision and the Orthodox Reading of the Case...... 310 D. Two Charitable Purposes: Defining Jurisdiction and Justifying Favour ...... 315 E. Reintroducing Altruism in Going Beyond ‘Spirit and Intendment’...... 317 F. Reintroducing Coercion in Going Beyond ‘Spirit and Intendment’ ...... 323 G. Reintroducing Public Benefit as a Justification for Favour ...... 326 1. A Continuum of Public Benefit ...... 326 2. Categories of Public Benefit...... 328 3. Beyond Relief of Poverty to Dealing with Disadvantage ...... 330 4. Beyond Advancement of Education to Encouraging Edification ...... 333 5. Beyond Advancement of Religion to Facilitating Freedom ...... 335 6. Reasons for Adopting Liberty, Equality and Fraternity...... 341 H. From Charities to Eleemosynary Corporations to Civil Society Organisations...... 344 I. Conclusion ...... 345 J. Postscript...... 346 IX A Jurisprudence for Civil Society ...... 349
A. Preamble ...... 349 B. Introduction...... 349 C. One Dimension: Rediscovering the heart of charitable purpose...... 352 D. Two Dimensions: Rediscovering differentia ...... 354 1. Introducing the Components of the Theory...... 354 2. Altruism ...... 355 3. Benefit...... 357 4. Coercion...... 358 E. Civil Society Space...... 360 F. Introducing Dynamic Boundaries...... 363 G. Three Dimensions: Adding Depth by Favour...... 365 1. Introducing the Elements of Favour...... 365 2. Dealing with Disadvantage...... 366 3. Encouraging Edification ...... 367
xiii 4. Facilitating Freedom ...... 367 5. Summary of Third Dimension of Favour...... 368 H. Moving Beyond ‘Nominal’ Measurement of Charitable Purpose...... 371 I. A More Powerful Analytical Framework is Available for Legal Theorising...... 373 J. Applying a Jurisprudence for Civil Society to Go Beyond Charities...... 375 1. Introduction...... 375 2. Resolving Foundational Puzzles and Identifying Genus and Form ...... 377 3. Practical Guidance for Determining Public Benefit...... 385 4. Applying A Jurisprudence for Civil Society to Income-Tax Issues...... 388 5. Applying the Principles in Foundational Philosophical Contests ...... 392 K. An Analytical Framework that may be Difficult to Implement ...... 393 L. Location in Current Jurisprudential Theory ...... 396 M. Paths for Further Reseach ...... 398 N. Conclusion...... 400 O. A Final Postscript...... 402 Bibliography ...... 403
TABLE OF FIGURES Figure 1 Jurisprudence without Civil Society...... 23 Figure 2 Jurisprudence without Civil Society Law...... 25 Figure 3 Schematic of Steinberg’s Complete Theory...... 213 Figure 4 Illustration of the Civil Society Diamond...... 254 Figure 5 Altruism Continuum...... 356 Figure 6 Benefit Continuum ...... 358 Figure 7 Coercion Continuum ...... 359 Figure 8 Charity Continua ...... 361 Figure 9 Charity Continua and Civil Society Space ...... 362 Figure 10 Defining Boundaries and Expanded Civil Society...... 362 Figure 11 Defining Boundaries and Constrained Civil Society...... 363 Figure 12 Dynamic Boundaries for Civil Society Space ...... 365 Figure 13 Extent of Benefit Guide to Essential Characteristics...... 369 Figure 14 Civil Society Space and the Favour Dimension Pyramid...... 371 Figure 15 Variables on a Continuum Quantitatively Measured...... 372 Figure 16 Type of Charitable Goods and Public Benefit Guide ...... 387 Figure 17 Tax Exemptions and Charitable Purpose Continuum...... 390 Figure 18 Jurisprudence with a ‘third’ Space for Civil Society...... 398
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STATEMENT OF ORIGINAL AUTHORSHIP
The work contained in this Doctorate of Philosophy has not been previously submitted for a degree or diploma at any other higher education institution. To the best of my knowledge and belief, the thesis contains no material previously published or written by another person except where due reference is made.
The thesis relies upon case law and statute up to 31 December 2008.
Signed: ______
Matthew Dwight Turnour
Date: Monday, 28 September 2009
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ACKNOWLEDGEMENTS
The magnitude of a project such as this is daunting and undertaking it part time increases the challenge. It has though been a great pleasure for me and one of the main reasons for that has been the phenomenal support I have received. Myles McGregor-Lowndes has consistently been supportive and has pushed me to deliver better quality work than I would have been inclined to without his challenges. I have always looked forward to our supervisory meetings and come away with more than that for which I could have hoped. My wife, Wendy has been constant in her encouragement and support, as have my four children.
My partners in the practice of law, Shayne Neumann, Steve Potts, Simon Fisher and Mark
Fowler have encouraged and helped resource my efforts.
The following people also made helpful comments on summaries of ideas and drafts of the manuscript: Helmut Anheier, Richard Copp, Simon Fisher, Mark Fowler, Reid Mortenson,
Elizabeth Turnour and Wendy Turnour.
Kristina Ngweso, Amy Ruben, Nathan Rieck, Anne Overell, Joan Turnour, Meryl Young and Sarah Wright all played important roles at different stages in the development of the thesis by helping variously with typing, proof reading, filing, and keeping organised the
2,000 odd documents that inform the development of this thesis.
To each of these people I am very thankful.
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xviii
PART ONE – CHARITIES
Charities are the subject of this first part. Chapter I is devoted to contextualising challenges facing common law countries as they endeavour to move beyond the strictures of the common law doctrine of charitable purpose to a jurisprudence for civil society. Methods that will be utilised to progress theory development are introduced and an overview of the argument to be advanced is offered. Chapter II explores problems driving development of this body of the law. Foundational challenges are considered first. Difficulities inherent in the doctrine of charitable purpose per se are at the centre of the discussion. Social concerns that the doctrine is supposed to address are then considered. Chapter III explores methodological problems that make development of the doctrine of charitable purpose so difficult in legal theory. The chapter begins with three principles that usually are integral to common law development. The three principles are: that a preamble is not a definition; that the ratio decidendi of a case is an expression of jurisprudential reasoning giving effect to public policy; and a useful definition defines something. The way these principles were disregarded in the historic development of the doctrine of charitable purpose is discussed. Deeper taxonomy problems are also identified. Inadequate methods of measurement and contested a priori assumptions to be addressed in developing the doctrine of charitable purpose are considered. The part closes noting that the contested a priori assumptions elucidated through Chapters II and III relate to three subject areas: public benefit, altruism and the coercive role of government.
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2
I BEYOND CHARITIES
A. Preamble
As an innocent, uneducated, young seamstress approached the guillotine she was fearful but accepting. She accepted that the decision of the government to execute her was for the public good. She did not understand the detail but it was fledgling democracy in action: liberty, equality, fraternity or death. Behind her in the queue was a middle-aged, male lawyer. He offered her support. He too was innocent, but his decision to die was of his making. He had decided to give his life that his client might live. As the seamstress and the lawyer were beheaded, a banker, at great risk to his own person, and going well beyond the expections of his business retainer, ferried the client, and his family, to safety. With these images, Charles Dickens closed A Tale of Two Cities .1 In choosing this medium – of city comparisons – he wrote in the spirit of Augustine who took two cities – the City of God and the City of Man – as typologies to explore similar ideas: altruism, public benefit and the coercive role of government. This thesis revisits these great themes but in a very specific context.
B. Introduction
The very specific context in which the great themes of altruism, public benefit and coercion are explored is in the common law doctrine of charitable purpose. It is a doctrine rich in history, steeped in controversy and full of possibilities. Lord Macnaghten, in the landmark case of The Commissioners for Special Purposes of the Income Tax v Pemsel observed that
‘[t]he Court of Chancery has always regarded with peculiar favour those trusts of a public nature which, according to the doctrine of the Court derived from the piety of early times, are considered to be charitable.’ 2 This favouritism, based in ‘piety’ and ‘public benefit’ is still a
1 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 388-389. 2 The Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531, 583 (Lord Macnaghten). In the remainder of this thesis this case is referred to as Pemsel’s case. For the status of charitable purpose as a doctrine see also: National Anti- Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 52 (Lord Porter).
3
part of the common law applied in almost all common law countries. It is a source of controversy because that which was favoured in former centuries is not necessarily the same as that which twenty-first century, common law countries now wish to favour. The doctrine has not developed with the times. It has ossified. Some jurists have all but given up hope that this doctrine is capable of developing in response to social needs in the way that a common law doctrine usually develops. 3 To ameliorate the problems many common law countries have added to the categories of charitable purposes by statute. 4 Those additions do not develop the common law doctrine. They are an acknowledgement of the failure of this body of law to develop. There are, though, possibilities for development of this common law doctrine. It is these possibilities that this thesis explores.
The last thirty years have seen significant changes in the roles and expectations of organisations that enjoy ‘peculiar favours’.5 Charitable contributions of a ‘public nature’, rooted in the altruism that may once have been called ‘piety’, continue in the twenty-first century but the concept of ‘charities’ no longer adequately defines the organisational expression. The context in which these organisations serve is now often described as civil society. The organisations that are expressions of civil society transcend the traditional concept of charities. These civil society organisations compete for entitlement to the
‘peculiar favours’ that were once the exclusive domain of charities. Twenty-first century
3 Blake Bromley, 'Contemporary Philanthrophy - Is the Legal Concept of "Charity" Any Longer Adequate?' in Donovan Waters (ed), Equity, Fiduciaries and Trusts (1993) 59; Gino Dal Pont, 'Why Define 'Charity'? Is the Search for Meaning Worth the Effort?' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 5; Arthur Drache, 'Hostage to History: The Canadian Struggle to Modernise the Meaning of Charity' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 30; George Keeton, 'The Charity Muddle' in Current Legal Problems 1949 (1949); Hubert Picarda QC, 'The Preamble to the Statute of Charitable Uses 1601: Peter Pan or Alice in Wonderland?' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 229; See also Reverend Richard Harries, 'Is there a Role for Charity in a Modern State?' (Speech delivered at the First Annual Lecture on Philanthropy: Association of Charitable Foundations and the Allen Lane Foundation, London, 10 November 1993). 4 Extension of Charitable Purpose Act 2004 (Cth); Charities Act 1979 (Barbados) Volume VIII, Title XVIII, Chapter 243; Charities Act 2006 (Eng.&W) c 50; Charities and Trustees Investment Act 2005 (Scotland), and Charities Act 2008 (NI). 5 Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 70-71 (Gontier J), 200- 201(Iacobucci J); Con Alexander and Jos Moule, Charity Governance (2007) 1; Kerry O'Halloran, Myles McGregor-Lowndes and Karla Simon, Charity Law & Social Policy: National and International Perspectives on the Functions of the Law Relating to Charities (2008) 73-79; Ian Leigh, 'The Legal Framework for Community Involvement' in Alison Dunn (ed), The Voluntary Sector, the State and the Law (2000) 9, 11.
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common law countries require a relevant and responsive common law jurisprudence underpinning these developments but such a jurisprudence is not to be found.
This thesis takes up the challenge of sketching the outlines of such a jurisprudence. Far from abandoning the doctrine of charitable purpose, this thesis is a plea for its release from the technical, legal definition that imprisons it. It is argued that a jurisprudence for civil society is outlined in the law of charities and, more distinctly, when contextualised in those branches of law that regulate and favour altruism and voluntary contributions of public benefit. Set free from the technical meaning and informed by scholarship from disciplines other than law, it is theorised that the doctrine of charitable purpose can underpin a jurisprudence for all civil society organisations. Beyond Charity: Outlines of a Jurisprudence for Civil Society provides a framework for reconciling into a cohesive jurisprudential architecture, all of the laws applying to civil society organisations, not just charities.
In this chapter, first the argument is contextualised in legal discourse and civil society literature. An analogy is then offered, which leads into a statement of the research question and then the hypothesis. The exploration of the research question leads to a discussion of the methodologies adopted, including a discussion of weaknesses in those methodologies.
Discussion of those weaknesses flows logically to the challenges related to the scope of the thesis and its limitations. In an endeavour to overcome some of the language problems embedded in cross-disciplinary inquiry, a statute-like definition section is provided, beginning at page 50. The chapter closes with an overview of the thesis.
C. Context
1. The Law of Charities in Context
The law of charities is centred on a technical legal definition of charitable purpose – not the common or ordinary meaning. The requirement that, at law, charitable purpose must take a
5
6 ‘technical definition’ is traced to the 1891 House of Lords decision known as Pemsel’s case .
In that case a majority agreed with the opinion of Lord Macnaghten who stated that the concept of ‘charitable purpose’, applied by the Courts of Chancery to determine that Courts jurisdiction over trusts for charitable purposes also applied for the purpose of determining entitlement to the peculiar favour of income tax exemption.7 The consequence is that this definition of charitable purpose – used for determining the jurisdiction of the old English
Courts of Chancery – set by reference to the preamble 8 of an English Act of 1601 which has become known as the Statute of Elizabeth, is still also applied to determine entitlement to
9 favour throughout common law countries in the twenty-first century.
As the common law stands at present a purpose is charitable if it is within the spirit and intendment of the Preamble and for public benefit. 10 As the spirit and intendment of the
Preamble is central to determining the meaning of ‘charitable purpose’ it is convenient to set out here the critical phrase of the Preamble . It is, rendered into modern English, as follows :
The relief of the aged, impotent and poor people; the maintenance of sick and maimed soldiers
and mariners, schools of learning, free schools and scholars in universities; the repair of bridges,
ports, havens, causeways, churches, sea-banks and highways; the education and preferment of
orphans; the relief, stock or maintenance of houses of correction; the marriage of poor maids, the
supportation, aid and help of young tradesmen, handicraftsmen and persons decayed; the relief or
redemption of prisoners or captives; and the aid or ease of any poor inhabitants concerning
payment of fifteens, setting out of soldiers and other taxes. 11
6 Pemsel’s case [1891] AC 531. 7 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten). 8 A reference to the Preamble throughout this thesis is a reference to the preamble to the Statute of Charitable Uses 1601 , 43 Eliz c 4 ( Statute of Elizabeth). See definitions from 50. 9 Guild v Inland Revenue Commissioners [1992] 2 AC 310; Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1, 15-37 (Kirby J); AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42; and Auckland City Mission v Brown [2002] 2 NZLR 650. 10 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 4. 11 Statute of Charitable Uses 1601 , 43 Eliz c 4. Modern English expression utilised in Vancouver Regional FreeNet Association v Minister of National Revenue [1996] FC 880 at note 1 adopted.
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This approach, to defining both the scope of operation of the law and entitlement to favour by reference to the spirit and intendment of the Preamble, has proved problematic. 12 It is now almost universally agreed that ‘the definition of charity is a continuing and topical problem’, 13 that ‘the law’s concept of “charitable” is haphazard and confused’ 14 and that the present legal framework is inadequate. 15 The apology with which a leading Australian, legal academic, Gino Dal Pont, prefaces his text on the law of charities exemplifies the situation.
He begins:
Whilst every effort has been made to use a readable and easily understandable style, it must be
emphasised that even after some 400 years of development (or perhaps because of it) there are
certain aspects of Charity law that remain unclear, and others that simply defy logical
explanation. 16
Dal Pont’s comments join a chorus of dissatisfaction and frustration with the present law expressed by judges. Take as an example of judicial frustration the observations of Viscount
Simonds who held in Gilmour v Coats 17 in relation to the law of charities that:
[A] great body of law has thus grown up. Later it may appear illogical and even capricious. It
could hardly be otherwise when its guiding principle is so vaguely stated and is liable to be so
differently interpreted in different ages. 18
12 Peter Luxton, The Law of Charities (2001) 16; Christine R. Barker, 'The Reform of Charity Law in Scotland' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 33, 44. 13 Hubert Picarda, The Law and Practice Relating to Charities (2 nd ed, 1995) xi. 14 Michael Chesterman, Charities, Trusts and Social Welfare (1979) 7; Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001), 29. 15 Blake Bromley, 'Contemporary Philanthrophy - Is the Legal Concept of "Charity" Any Longer Adequate?' in Donovan Waters (ed), Equity, Fiduciaries and Trusts (1993) 59. 16 Gino Dal Pont, Charity Law in Australia and New Zealand (2000) xvii. 17 [1949] AC 426. 18 Gilmour v Coats [1949] AC 426, 442.
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Indeed ‘it is difficult to dispute that the law of charity has been plagued by a lack of coherent principles on which consistent judgment may be founded’. 19
The source of the problem is in language. 20 As one Law Lord put it ‘the legal meaning and the popular meaning of the word “charitable” are so far apart that it is necessary almost to dismiss the popular meaning from the mind as misleading before setting out to determine whether a gift is charitable within the legal meaning’. 21
This dissatisfaction and frustration have been of such a magnitude that common law countries have had almost 30 inquiries into the law and regulation of charities over the last
60 years. 22 Australia, 23 Barbados, 24 England and Wales, 25 Northern Ireland 26 and Scotland, 27
19 Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 202 (Iacobucci J). 20 That this has been the source of the problem from the outset was opined by Lord Macnaghten himself who held: Is it true, as a matter of fact, that we always find in these taxing Acts that the words used are words of ordinary meaning, understood by everybody in the three kingdoms in the same sense, and not technical legal terms in use in one part of the United Kingdom? I could wish it were so. But we are not living in Utopia, where a perfect or ideal lawgiver may be had very readily. Pemsel’s case [1891] AC 531, 576. 21 Verge v Sommerville [1924] AC 496, 502 (Lord Wrenbury). This comment is not an isolated exception. Jenkins LJ also observed: ‘This exception cannot be accounted for by reference to any principle’. Harman LJ commented that some ‘cases stick out like a sore thumb from the general rule’ in The Inland Revenue Commissioners v Educational Grants Association Ltd [1967] 2 All ER 893, 898; See also Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation 125 CLR 659, 667 (Barwick CJ). 22 See: Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53); Chief Justice's Law Reform Committee, Report on Charitable Trusts (1965); Queensland Law Reform Commission, A Report of the Law Reform Commission on the Law Relating to Trusts, Trustees, Settled Land and Charities (1971); National Council of Social Service, ' Report of an Independent Committee of Inquiry to Examine the Effect of Charity Law and Practice on Voluntary Organisations ( Goodman Report )' (1976); United States Department of the Treasury, Regulation, Research Papers Volume V (1977); New Zealand Property Law and Equity Reform Committee, 'Report on the Charitable Trusts Act' (Department of Justice, 1979); Victorian State Government Interdepartmental Working Party, 'Administration of Charities (First Report)' (Victorian Government, 1980); Victorian State Government Interdepartmental Working Party, 'Administration of Charities (Second Report)' (Victorian Government, 1982); Law Reform Commission of Tasmania, Report on Variations of Charitable Trusts Report No 38 (1984); Victorian Department of Health, Regulation of Health Care Agencies and Charities: Discussion Paper No.8 (1987); P Woodfield et al, 'Efficiency Scrutiny of the Supervision of the Law of Charities: Report to the Home Secretary and the Economic Secretary to the Treasury' (1987); Great Britain National Audit Office, 'Monitoring and Control of Charities in England and Wales' (HMSO, 1987); New Zealand Government, 'Report to the Minister of Finance and the Minister of Social Welfare by the Working Party on Charities and Sporting Bodies' (New Zealand Government Printer, 1989); United Kingdom Secretary of State for the Home Department, Charities: A Framework for the Future (1989); Great Britain Parliamentary Panel on Charity Law, Charity Supervision in the 1990s: A Response to the White Paper (HMSO, 1990); Scottish Council for Voluntary Organisations, Head and Heart. The Report of the Commission on the Future of the Voluntary Sector in Scotland (1997); Katz Commission Report, Ninth Interim Report of the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa (1997); Voluntary Sector Round Table Panel on Accountability and Governance in the Voluntary Sector,
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have passed legislation defining and or extending the common law definition of charitable purpose. None of the 22 African, Caribbean Island, and Pacific Island states that are members of the Cotonou Agreement have a statutory definition of ‘charity’ although there is reference to ‘charity’ in legislation of those states, and statutory extensions to the common law ‘definition’ are common across those jurisdictions. 28 Perhaps surprisingly, then, in each jurisdiction the statutory extended definitions remain dependent on the precedent developed through the common law cases, and the method of proceeding by way of analogy continues. 29 In Barbados, where what appears to be an exhaustive list has been passed into statute, the common law continues to inform legal development. 30 A similar approach has been taken in the United States of America where the Supreme Court has relied upon the common law doctrine to deny access to deductibility on at least one occasion to a civil
Building on Strength: Improving Governance and Accountability in Canada's Voluntary Sector (1999) ( Broadbent Report ); Charity Scotland, Report of the Scottish Charity Law Review Commission (2001) ( McFadden Report ); Canada Revenue Agency, Final Consultations and Validation of Charities Directorate Action Plan (2002); The New Zealand Treasury, Second Report by Working Party on Registration, Reporting and Monitoring of Charities (2002); Council of Europe, Fundamental Principles on the Status of Non-Governmental Organisations in Europe: Open Meeting of Contacting Parties to the European Convention on the Recognition of the Legal Personality of International Non-Governmental Organisations (ETS No 124) (2002); Arthur Cox & Centre for Voluntary Action Studies, 'Charity Law Review: Report to the Department of Community, Rural and Gaeltacht Affairs Ireland Sector Study' (13, Department of Community, Rural and Gaeltacht Affairs, 2002); Rural and Gaeltacht Affairs Department of Community, 'Establishing a Modern Statutory Framework for Charities' (Department of Community, Rural and Gaeltacht Affairs, 2003); Irish Law Reform Commission Consultation on Charitable Trust Law General Proposals (2005); Joint Committee on Taxation, 'Historical Development and Present Law of the Federal Tax Exemption for Charities and other Tax-Exempt Organisations, Scheduled for a Public Hearing Before the House Committee on Ways and Means on April 20, 2005.' (JXZ-29-05, 2005); Office of the Scottish Charity Regulator, 'Monitoring Scottish Charities' (2005); Panel on the Nonprofit Sector, Strengthening Transparency Governance Accountability: A Final Report to Congress and the Nonprofit Sector (2005); Canada Revenue Agency, 'Consultation on Guidelines for Sport and Charitable Registration under the Income Tax Act' (Canada Revenue Agency, 2008); Canada Revenue Agency, 'Consultation on Proposed Policy on Fundraising by Registered Charities' (Canada Revenue Agency, 2008); Canada Revenue Agency, 'Consultation on Proposed Guidelines for Research as a Charitable Activity' (Canada Revenue Agency, 2008); and Parliament of Australia Senate, 'Inquiry into the Disclosure Regimes for Charities and Not- For-Profit Organisations' (2008). 23 Extension of Charitable Purpose Act 2004 (Cth). 24 Charities Act 1979 Volume VIII, Title XVIII, Chapter 243. 25 Charities Act 2006 (Eng.&W) c 50. 26 Charities Act 2008 (NI) c 12. 27 Charities and Trustees Investment Act 2005 (Scotland) 10, s 7. 28 Chaitanya Lakshman, 'The Contonou Agreement, Civil Societies and Charities in Pacific Member States of the ACP' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 173, 184-187. 29 Peter Luxton, The Law of Charities (2001) 111. See also in Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 199-200, 207 where the Canadian Supreme Court by majority encouraged parliament to amend the law and set out a model put forward by one of the parties in the appeal. 30 Corporate Affairs and Intellectual Property Office, The Charities Act, Cap.243 (2001) Corporate Affairs and Intellectual Property Office,
9
society organisation even though there is no express reference to charitable purpose in the omnibus list of civil society organisations entitled to favours under section 501(c)(3) of the
Internal Revenue Code .31
From these reports, statutes and the surrounding literature, what is known can be stated quite simply: there are multitudinous difficulties due in part to the way the casuist methodology of the common law (sometimes known as precedent or case-based method) has been applied to the development of the doctrine of charitable purpose. Reform proposals have accepted that the problems are rooted in the Preamble and the way the cases have developed following the
Pemsel’s case categorisation into ‘four principal divisions’. Proceeding by way of a list and analogy from already accepted charitable purposes remains, though, the accepted method – even after legislative intervention purporting to remedy defects in the common law.32
It follows that legislative patches to the common law are a fix that is becoming more frequently used to overcome the problems but this does not address the underlying lack of a genus. Jurists required to differentiate these listed and analogous charitable purposes from other purposes remain without explicit rationale for differentiation. Ostensibly recognising these problems, New Zealand, 33 Scotland, 34 England and Wales35 have empowered regulators of charities to assist in defining the boundaries for a definition. A similar approach has been followed in Northern Ireland. 36 Revenue Canada discharges this role in Canada. In South
Africa, the South African Revenue Service discharges this role, but in that jurisdiction
31 Bob Jones University v United States , 461 US 574, 591 (1983) discussed in Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 426. The US Internal Revenue Service on its web page states: ‘Organisations described in section 501(c)(3) are commonly referred to as charitable organisations .’ See The US Internal Revenue Service, http://www.irs.gov/ last accessed at 25 September 2007. 32 See Arthur Drache, 'Hostage to History: The Canadian Struggle to Modernize the Meaning of Charity' (Paper presented at the Charity Law in the Pacific Rim Conference, Ottawa, Ontario, 4-6 October 2001); Blake Bromley, 'Contemporary Philanthrophy - Is the Legal Concept of "Charity" Any Longer Adequate?' in Donovan Waters (ed), Equity, Fiduciaries and Trusts (1993) 59. 33 Charities Act 2005 No 39 (NZ) s 8. 34 Charities and Trustees Investment Act 2005 (Scotland) s 1(1). 35 Charities Act 2006 (Eng.&W) c 50, s 6. 36 Charities Act 2008 (NI) Part 2 particularly s 6(1).
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charitable purposes is defined narrowly, ‘to mean direct poverty relief.’ 37 The issues are addressed, in part, in an Australian context by the Australian Taxation Office endeavouring to discharge an interpretive function through public and private rulings.
The underlying problems confronting jurists across the common law world are, then, fundamentally the same and so are the unsatisfactory answers. The first and central puzzle is how to define the relevant organisations to be regulated. The class of organisation called charities must form part of a larger class from which common law judges and legislators have drawn to add further purposes to the class called charities. But what is it? How is this class to be defined and what is its relationship with charitable purposes? Without a definition of this broader class of organisation that is capable of jurisprudential application there does not seem to be a way forward. Without a definition of this broader class of organisation, that takes cognizance of the centuries of development of the doctrine of charitable purpose, the prospect of common law development is even more remote.
This central puzzle compounds to a second layer of difficulty when judges, legislators and regulators must determine which organisations will be granted entitlement to favours based on the doctrine of charitable purpose. As the law is presently understood there is not a clearly defined justification for entitlement to favour founded in reason; the law is simply that organisations pursuing purposes within the four principal divisions set out by Lord
Mcnaghten in Pemsel’s case, perhaps with reference to statutory extensions, are entitled to
‘peculiar favours’. An overlay, intended to remedy some of the apparent injustice with this approach, now applied in the United Kingdom is for charities to be required to prove public benefit. Currently in Scotland and Ireland judges and regulators are required to assess this
‘public benefit’ having regard to certain factors. There is little of substance to assist the
37 Karen Nelson, 'Tax and the Non-profit Sector - The South African Experience' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and Their Activities (2004) 193-194.
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judges or regulators in deciding how this duty is to be discharged when considering these factors. 38 The probem is not, though, simply one of challenges with interpreting ‘public benefit’. This is a problem that goes to the heart of favours given to particular classes of civil society organisations under taxation laws across the common law world in the twenty- first century. The fundamental problem is how to understand the doctrine of charitable purpose in a way that enlights rather than obsfucates entitlement to taxation and other favour in twenty-first century common law countries. The response of legislative patches is unsatisfactory. It compounds rather than addresses the source of dissatisfaction and frustration.
2. Academic Discussion of the Law of Charities and Civil Society
Academics have suggested alternatives. From beginnings traceable to the initially more tentative suggestions of Michael Chesterman in his Doctoral Dissertation of the late 1970s, 39 there has been a steady stream of contributions flowing towards the emergence of what Mark
Freeland called a ‘coherent basis for the law for civil society in general’. 40 These contributions anticipate ‘a tailored legal regime’ addressing the ‘confusion over what law to apply to the private enforcement of charitable gifts’ because ‘the existing legal classifications are not working’. 41 They do not, however, provide an alternative.
38 Charites Act 2008 (NI) s. 3; Charities and Trustees Investment Act 2005 (Scotland) 10, s 8; See also Explanatory Memorandum to Charities Act 2008 (NI) at http://www.opsi.gov.uk/legislation/northernireland/acts/acts2008/en/niaen_20080012_en_1.htm and Expanatory Memorandum Charities and Trustees Investment Act 2005 (Scotland) at http://www.opsi.gov.uk/legislation/scotland/acts2005/en/aspen_20050010_en_1 both last accessed 22 December 2008. In England and Wales that task has fallen to the Charities Commision under Charities Act 2006 (Eng.&W) s.4. The Charities Commission released further guidelines in December 2008. See The Charity Commission for England and Wales, Charities and Public Benefit: The Charity Commission's General Guidance on Public Benefit (2008). 39 Michael Chesterman, Charities, Trusts and Social Welfare (1979). 40 Mark Freedland, 'Charity Law and the Public/Private Distinction' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 111, 123. 41 Evelyn Brody, 'From the Dead Hand to the Living Dead: The Conundrum of Charitable-Donor Standing' (2007) 41(4) Georgia Law Review 1183, 1274.
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During the Blair government in the United Kingdom, the Home Office became a conduit for the gathering and dissemination of many of these ideas. 42 At a broader international level, are the publications of the International Center for Non-Profit Law. 43 To this contribution must be added the work of its former director, Leon Irish: the World Bank Handbook on
Good Practices for Laws Relating to Non-governmental Organisations 44 and other publications with Karla Simon. 45 Karla Simon herself proposed a set of principles to guide
‘nonprofit’ law reform. 46 From a quite different, but also international, perspective is the contribution of Kerry O’Halloran which focused on social inclusion as a central theme to be explored. 47 The former Charities Commissioner for England and Wales, Richard Fries, has offered a more radical alternative framework. 48 The Australian, Myles McGregor-Lowndes, building on work of Henry Hansman, has offered a gift transfer model. 49 Following in that genre of building from economic concepts, is the recent contribution of Evelyn Brody from
42 The Home Office Research and Statistics Directorate and Tony Marshall, Local Voluntary Activity Surveys (LOVAS) Research Manual LOVAS PAPER 1 (1997); The Home Office, Charity Registration: When Should it be Voluntary? A Consultation Document from the Charity Commission and the Home Office (2000); Home Office, 'Charities and Not-for-Profits: A Modern Legal Framework - The Government's response to 'Private Action, Public Benefit'' (Home Office, 2003); The Home Office, Charities Bill Will Back Voluntary and Community Sector's Work to Change Lives (2004). 43 International Center for Not-for-Profit Law, 'Integrity, Good Governance, and Transparency' (International Center for Not-for- Profit Law, 1998); International Center for Not-for-Profit Law, 'Regulating Not-for-Profit Organisations' (International Center for Not-for-Profit Law, 1998); International Center for Not-for-Profit Law, 'The Tax Treatment of Nongovernmental Organisations - A Survey of Best Practices from Around the World' (International Center for Not-for-Profit Law, 1998). 44 International Center for Not-for-Profit Law, 'Handbook on Good Practices for Laws Relating to Non-governmental Organisations (Discussion Draft)' (The World Bank, 1997). 45 Leon E Irish, 'The Role and Purpose of the Not-for-Profit Sector' (Paper presented at the Working Conference: "Regulating Not- for-Profit Organisations in New Democracies", The Interchurch Center, New York City, 1995). 46 Karla W Simon, 'Principles of Regulation for the Not-for-Profit Sector' (International Centre for Not-for-Profit Law, 1998); Karla W Simon and Leon E Irish, 'Legal Mechanisms to Encourage Development Partnerships' (1998) 1(1) The International Center for Not-for-Profit Law 10; see also Leon E Irish, Robert Kushen and Karla W Simon, 'Guidelines of Laws Affecting Civil Society Organisations' (Open Society Institute, 2004) and Karla W Simon, The Role of Law in Encouraging Civil Society (2001) International Center for Not-for-Profit Law
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the United States of America. 50 Her fellow American, Rob Atkinson, also building from
Hansmann’s economics roots, elucidated the centrality of altruism to legal theory development and more broadly, has offered reform proposals which go beyond charities and take cognisance of the sector as a whole. 51 The Australian, Gino Dal Pont, perhaps drawing on the examples from the United States, has encouraged Parliament to abandon ‘charitable’ as a concept, stating that the time has come to ‘encourage parliament to carefully define the scope of statutory privileges and to make the regulation of collections independent of a charitable moniker’. 52 These various authors do not offer, though, an alternative jurisprudence for civil society developed from the common law. None offers an overarching framework that seeks to develop the common law doctrine of charitable purpose to a jurisprudence for civil society in a manner consistent with common law’s casuist method (so that it could be applied by common law judges) yet explores the deeper philosophic issues underpinning the definitional problems.
50 See Evelyn Brody, 'Are Nonprofit Organisations Different?' in Helmut Anheier and Avner Ben-Ner (eds), The Study of Nonprofit Enterprise - Theories and Approaches (2003) 239 and her work as a reporter for the American Law Institute’s project on the ‘Principles of the Law of Nonprofit Organisations’ from 2004 (co-reporter from 2001-2004). 51 Rob Atkinson, 'Third Parties' Tax-Exempt Status can be Challenged According to New Decisions' (1985) 63 Journal of Taxation 166; Rob Atkinson, 'Impact of the 1986 Tax Reform Act on Exempt Organisations' (1987) 66 Journal of Taxation 344; Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501; Rob Atkinson, 'Neutral Partisan Lawyering and International Human Rights Violators' (1994) 17 Fordham International Law Journal 531; Rob Atkinson, 'Reforming Cy Pres Reform' (1993) 44 Hastings Law Journal 1111; Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395; Rob Atkinson, 'Unsettled Standing: Who (Else) should Enforce the Duties of Charitable Fiduciaries?' (1998) 32 Journal of Corporation Law 655; Rob Atkinson, 'Problems with Presbyterians: Prolegomena to a Theory of Voluntary Associations and the Liberal State' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 125; Rob Atkinson, 'The Reformed Welfare State as the Radical Humanist Republic: An Enthusiastic (if Qualified) Endorsement of Matthew Adler's Beyond Efficiency and Procedure' (2000) 28 Florida State University Law Review 339; Rob Atkinson, 'Reviving the Roman Republic: Remembering the Good Old Cause' (2003) 71 Fordham Law Review 1187; Rob Atkinson, 'Connecting Business Ethics and Legal Ethics for the Common Good: Come Let Us Reason Together' (2004) 29 Journal of Corporation Law 469; Rob Atkinson, 'Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis and Synthesis' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 253; Rob Atkinson, 'The Low Road to Cy Pres Reform: Principled Practice to Remove Dead Hand Control of Charitable Assets' (2008) Unpublished 58; Rob Atkinson, 'Rediscovering the Duty of Obedience: Toward a Trinitarian Theory of Fiduciary Duty' (2008) Unpublished 58. 52 Gino Dal Pont, 'Why Define 'Charity'? Is the Search for Meaning Worth the Effort?' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 5, 30.
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The English academic, Jonathan Garton has laid the platform for extension of the doctrine of charitable purpose to the bounds of civil society regulation in his thesis The Regulation of
Charities and Civil Society .53 Garton undertook a ‘comprehensive analysis of the legal boundaries of the English charitable sector’ and concluded ‘that there are no theoretical grounds on which to differentiate between the [charitable] sector and wider organised civil society for regulatory purposes’. 54 Garton argued cogently ‘that regulation of the charitable sector in isolation is untenable because (i) no meaningful distinction between this and the wider organised civil society can be drawn on the basis of either organisational structure or social function and (ii) the reasons traditionally given by successive governments for treating charities as a special case are inadequate’. 55 In consequence, he declared at the outset that
‘charities form a subset of wider civil society’. 56 Locating charities as central to civil society, he quoted authors who described charities as the ‘heart and soul’ and ‘centre of gravity’ of civil society. 57 Garton also pointed to one purpose at the centre of civil society declaring that, in theory at least, ‘all the players in the sector have “the same ultimate goal” and should not need to compete with each other’. 58
What Garton did not do, is declare what that goal was. Until that goal is declared the common features, essential to a jurisrudentially adequate definition of the organisations that make up the sector, remain illusive. Instead, having declared that there are no theoretical grounds for a boundary between charities and civil society, having concluded that charities are the ‘heart and soul’ and ‘centre of gravity’ of civil society, and having identified that
53 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005). 54 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 28,152. 55 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 152-153 and Chapter 5. 56 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14. 57 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14, 42, citing Graham Dawes and R Tolley, Charity, Accountability and Compliance (1998-99) 1.2; and Lester Salamon and Helmut Anheier, Defining the Nonprofit Sector: A Cross-National Analysis (1997) 16. 58 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 124.
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there is a body of literature arguing that civil society organisations in theory pursue the same goal, he concluded that there is no single overarching purpose of organised civil society.
This he could do because he is only setting out normative, regulatory principles developed in a tradition traceable through Henry Hansmann into the discipline of neoclassical economics.59 The challenge of identifying the unique characteristics of civil society organisations must be comprehensively addressed, though, if jurisprudence is to progress beyond charities to encompass all civil society organisations. It remains for the apparently elusive genus of civil society organisations to be articulated. It is the absence of this genus which is, arguably ‘a’, if not ‘the’, source of the puzzle. It is the failure to resolve this critical question that has led to the frustrations and dissatisfactions.
Further, and perhaps because Garton has confined his thesis to regulatory theory, the significant issues embedded in justifications for favour are not elucidated. Acting as a gateway to entitlement to favour is, though, equally as significant a function of doctrine of charitable purpose as its role in setting out a jurisdiction It remains for that distinction between these two roles to be explored in the context of a more comprehensive alternative jurisprudence.
Finally, Garton does not explicitly give voice to the deeper philosophic contests that are embedded in both the existing law and any attempts to change it. Rather than setting out a framework in which philosophic ideas may contest, Garton offers normative possibilities.
Law reform might embrace these normative suggestions, but there remains a need for the philosophic contests that lie beneath any law reform – including common law development – to find voice in the architecture of an alternative jurisprudence.
59 See discussion at pages 165 to 171.
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There remains a need for an overaching jurisprudence, developed from the common law that identifies the unique characteristics of the organisations that are the expressions of civil society and facilitates contests over both the regulation of these organisations and their entitlement to favour.
What is needed is a fresh approach. Justice Kirby of the High Court of Australia has invited an alternative jurisprudence and his fellow judges have observed that without an alternative being argued before the court, the court is obliged to remain within the current orthodoxy. 60
This thesis proposes an alternative. It does so by beginning with conceptions of society and civil society as a subset of that. It does not take the concept of charitable purpose as it is defined technically at common law as the starting point. Introducing that alternative begins with considering charitable purpose in the context of civil society.
3. Charitable Purpose in the Context of Civil Society
‘Voluntary and charitable organisations, almost everyone is agreed, lie at the very heart of a vibrant and dynamic civil society.’ 61 The heart though, is not the whole. In fact charities are but a small, albeit exemplar, part of a large sector and must be located in that sector. 62 That sector is called civil society in this thesis. Civil society in turn must be located in society as
60 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1, 15-37 (Kirby J). The Australian High Court stands alone in this request. The Canadian Supreme Court has eschewed responsibility for this development declaring that, ‘wholesale reform [as distinct from] incremental change… is best left to Parliament. … [and] substantial change in the definition of charity must come from the legislature rather than the courts.’ See AYSA., Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [44] (Rothstein J delivering the judgment of McLachlin C.J., Bastarache, Binnie, LeBel, Deschamps, Fish, Charron and Rothstein JJ). 61 Nick Seddon, Who Cares? How State Funding and Political Activism Change Charity (2007) 1. See also Vancouver Regional FreeNet Association v Minister of National Revenue [1996] FC 880, 901-902. 62 Kristin A Gronbjerg and L Paarlberg, 'Extent and Nature of Overlap between Lisitngs of IRS Tax-Exempt Registration and Nonprofit Incorporation: The Case of Indiana' (2002) 31 Nonprofit and Voluntary Sector Quarterly 565 ; Michael Hall, Larry McKeown and Karen Roberts, 'Caring Canadians, Involved Canadians ' (2005) 2000 National Survey of Giving, Volunteering and Participating, Statistics Canada ; Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001); Kathleen Day and Rose Anne Devlin, 'Backgrounder: The Canadian Nonprofit Sector' (Canadian Policy Research Networks, 1997); Marion R Fremont-Smith, Governing Nonprofit Organisations – Federal and State Law and Regulation (2004).
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a whole, if its context is to be appreciated. This fresh approach begins by contextualizing charitable purposes and more broadly the law for civil society within a conception of society.
Society is complex and so, for analytical purposes, the literature often divides society into four sectors: 63
1. Business (the first sector);
2. Government (the second sector);
3. Not-for-profit, non-government, voluntary, intermediary, (the third sector); and,
4. Family (the fourth sector).
In this broader literature, organisations with charitable purposes are discussed as a part of the third sector which is here caught up in the concept of civil society. 64 It is important to note at the outset, though, that the third sector or civil society is much more expansive than charities. 65 More broadly, and to use the language of the United Kingdom Prime Minister’s
Strategy Unit, it is the sector ‘dedicated to community benefit or social purposes’. 66 It is identified as the sector of voluntary participation and its inhabitants colourfully described as
‘a congeries of tribes who acknowledged fealty to neither Caesar nor the Invisible Hand, who were accountable in neither the arena of politics nor the marketplace of economics’. 67
These ‘tribes’, which are increasingly becoming known as civil society organisations, are the object of the operation of law and are the subject of this thesis. Conceptually, because law
63 Analysis of society in terms of sectors, particularly when discussing civil society organisations, came to prominence through the United States Filer Commission, although it was initially suggested by Amitai Etzioni. See: Helmut Anheier and Regina List, A Dictionary of Civil Society, Philanthropy and the Non-Profit Sector (2005) 264. The black market arguably amounts to a fifth sector to be considered. See: Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 44A. That there should be any division at all is contested. See Simone Chambers and Will Kymlicka, Alternative Conceptions of Civil Society, The Ethikon Series in Comparative Ethics (2002). Margaret Thatcher’s famous quote: ‘There’s no such thing as society’ evidences that even the concept of society is contested. See Brian Deer, Epitaph for the Eighties? 'There is no such thing as society' (2006)
18
cannot act upon ‘sectors’ only ‘juridic persons’, the focus on organisations, both as gatherings of individuals and as entities in their own right, cannot be avoided.
So, whilst the law focuses on a particular form of organisations (those with charitable purposes), the broader literature does not. 68 The broader literature is significantly informed by the sectoral analysis of society with a focus on civil society organisations as the organisational expression of the third sector – not just charities. This broader literature informs my focus on civil society organisations rather than charities, and my object of sketching outlines of an architecture for a jurisprudence for civil society. This broader approach is necessary because, as will become evident from this section, there is a gap in legal theory relative to the organisations that make up civil society. The scope of this alternative jurisprudence is determined, then, by the scope of the definition of civil society.
Defining civil society is difficult. 69 Civil society is a contested concept 70 used to label a significant space. 71 A very succinct summary of the scope of the literature as at 2005, introduced the Journal of Civil Society in the following terms:
There is little agreement on its precise meaning, though much overlap exists among core
conceptual components. Some scholars adopt an abstract, systemic view and see civil society as a
macro-sociological attribute; others take on individualistic views and emphasize the notions of
agency and social capital; while others yet see civil society as a set of institutions and
organisations located in the public sphere, complementing what some refer to as ‘political
68 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14, 30. 69 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004). See also Brian O'Connell, 'Civil Society: Tufts University' (2000) 29 Nonprofit and Voluntary Sector Quarterly 471, 474 whose model I do not adopt, in part because it labours under (what I consider to be) the definitional difficulties that beset legal analysis, in that he excludes some charities and some other civil society organisations from civil society. 70 Whilst foundations of the contest are traceable into the roots of occidental philosophy the foundational work setting out the two dominant alternative contested views lies in the work of one of the founders of sociology. See John Ehrenberg, Civil Society - The Critical History of an Idea (1999); Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed). 71 Jon Van Til, Growing Civil Society - From Nonprofit Sector to Third Space (2000).
19
society.’ Yet in its very essence, the combination of being both contested and strategically located
makes civil society a very fruitful and intellectually lively concept. 72
A challenge, when considering civil society, then, is to avoid being taken captive by one perspective or swamped by the diversity. It is possible, though, to seek and find explanatory theory for the laws that operate upon the organisations in this space. Helmut Anheier’s definition of civil society is taken as the working definition of civil society for the purposes of this thesis. It is as follows: ‘Civil society is the sphere of institutions, organisations and individuals located between family, the state and the market in which people associate voluntarily to advance common interests. ’73
It follows from the discussion so far, that it is the organisations, as distinct from individuals or institutions, that are the focus of this thesis. There are two reasons for this. First, it is the purposes pursued through organisations that are critical to the identification of charitable purposes (and non-charitable purposes). Thus it is at this level of identifying the purposes for which an organisation exists that the legal theory discussion is framed. Second, and at a more general level, it is the gathering of people to pursue common purposes through organisations that are the dominant expression of civil society. With this brief introduction of civil society and its organisations, and foreshadowing further exploration, I turn now to introduce the way in which law has come to be analysed.
72 Helmut Anheier, 'Introducing the Journal of Civil Society: An Editorial Statement' (2005) 1 Journal of Civil Society 1. 73 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 22. This definition has been chosen as it underpins the structural-operational model that was used for much early research and it now underpins the civil society diamond concept which is used in more recent research. The structural-operational model has been utilised in a number of different systems of accounts including, the Global Non Profit Information System Project, the European System of National Accounts, and various national accounting methods including for example, the Australian Non Profit Data Project and the Australian Bureau of Statistics. The Global Non Profit Information System Project was a joint project of the United Nations Statistical Division and Johns Hopkins Centre for Civil Society Studies. The System of National Accounts is a definitional system, which was developed jointly by various bodies including the United Nations. The civil society diamond was utilised for further research in 50 countries between 2003 and 2005 and research using the framework is ongoing. In my quest to avoid normative paradigms it is the best definition I have found. It is never entirely possible to avoid normative implications as all analysis has implicit philosophic assumptions. For example the South African users of the civil society diamond have criticised the definition of civil society at its foundation as the ‘free market assumptions’ were not accepted by many South Africans. See: Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 128. It is, then, arguably the most widely used, internationally accepted, definition of civil society and the most useful available for cross disciplinary theory development.
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4. Charitable Purpose in its Legal Context
Law is complex and so, for analytical purposes, it, too, is often divided according to sectors.
A common, initial division of law, now well established in the literature of jurisprudence, is between public law and private law. 74 The division between public law, which relates to government (second sector), and private law, which relates to business and family (first and fourth sectors), can be traced back into Roman law.75 It is still widely adopted in common law jurisdictions. 76 In the United States, where the division is ‘not uncommon’, 77 although not as popular 78 it was described by Justice Jackson in 1953 as a ‘handy classification
[which] is doubtless valid for some purposes’. 79 The division significantly informs European law. 80
I conceptualize public law, for the purposes of this thesis, as principally concerned with delimiting and regulating the use of coercive powers by government. 81 Private law is concerned with legal relations between citizens as citizens. 82 A major subset of private law within its own jurisprudential framework is commercial law, which is founded in contract law and its focus is the facilitation and regulation of an informed market to ensure that
74 John Farrar, Introduction to Legal Method (1977) 15; Carol Harlow, ''Public' and 'Private' Law: Definition Without Distinction' (1980) 43 The Modern Law Review 241, 242. 75 Paul Girard, A Short History of Roman Law (2000). 76 John Farrar, Introduction to Legal Method (1977); Carol Harlow, ''Public' and 'Private' Law: Definition Without Distinction' (1980) 43 The Modern Law Review 241 and Anne Deegan, 'The Public/Private Dichotomy and its Relationship with the Policy/Operational Factors Distinction in Tort Law' (2001) 18 QUT Law & Justice Journal 24. 77 E Allan Farnsworth, An Introduction to the Legal System of the United States (3 rd ed, 1996) 96. 78 In the United States this jurisprudential division can be traced into the work of Henry Terry in the 1880s whom Herget describes as ‘the first American author of a significant text on jurisprudence’. James E Herget, American Jurisprudence, 1870-1970 (1990) 357. 79 Garner v Teamsters Union 346 US 485, 494 (1953). 80 Geoffery Samuel, 'Government Liability in Tort and the Public Private Division' (1988) 8 Legal Studies 277, 278. 81 Sue Arrowsmith, 'The Impact of Public Law on the Private Law of Contract' in Roger Halson (ed), Exploring the Boundaries of Contract (1996) 3, 3. 82 Sue Arrowsmith, 'The Impact of Public Law on the Private Law of Contract' in Roger Halson (ed), Exploring the Boundaries of Contract (1996) 3, 3.
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profits are acquired justly. 83 Laws enabling and regulating association for non-commercial purposes, are often analysed as a part of commercial law. 84 The further division of private law does not follow neat categorisation but for present purposes, it is sufficient to note that within private law there is a further separation of commercial law from that which regulates families as families. Families have family law and estate law 85 to ensure persons within families are treated equitably. 86 Equity is a subsection of private law that applies to both business and families. 87 As Lord Mcnaghten pointed out: ‘Charitable uses or trusts form a distinct head of equity.’ 88 The division between public and private is foundational to the law of charities. 89
Returning to the sector analysis of society mentioned earlier, it is important to highlight that the third sector is absent in this subsegmentation of law, but that analysis of law has loosely followed the sectoral divisions for the other sectors, into which analysis of society has been divided. 90 In legal analysis it is possible to identify segmentation into:
83 See for example the Trade Practices Act 1974 (Cth) where the intent is expressed in Section 2 as ‘…to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.’ 84 A reason for this is possibly that the association may be understood as a contract between members; but in situations where the purpose of the association is not the pursuit of self interest but provision of charitable goods the division is by no means tidy. As Ford & Lee note ‘In so far as a body corporate is formed to advance some purpose or the interests of a class of persons the body corporate may be thought to be like a trustee.’ See H A J Ford and W A Lee, Principles of the Law of Trusts (1996) [1560]. 85 Succession law, whilst technically different from estate law, is for present purposes, incorporated as within estate law. 86 See for example the Family Law Act 1974 (Cth) which regulates family disputes that cannot be resolved privately and the Succession Act 1981 (Qld) which provides for the passing of property justly, following death. 87 For the purpose of this thesis, the distinction between law and equity is not important. In this thesis the practice now adopted by legislators like the Queensland Government of not distinguishing between equitable or legal forms chosen for pursuit of charitable purpose, is adopted. For example in the Trusts Act 1973 (Qld) s106(5), the following definition appears: ‘…“charity” means any institution, whether or not incorporated, which is established for charitable purposes.’ The proliferation of incorporated associations and companies limited by guarantee (see eg, Corporations Act 2001 (Cth) s150) as vehicles through which charitable purposes are pursued (in lieu of charitable trusts) has the effect of making the distinction, at least for the purposes of this inquiry irrelevant. The interrelation of the law of charities and company law raises, though, very significant issues in the context of charitable purposes. See also the Charities Act 2006 (Eng & W.). And note that the distinction between the institution and the trust it conducts can be critical see Re Christian Brothers of Ireland in Canada 37 O.R (3d) 367; 1998 (Blair J); Michael Chesterman, Charities, Trusts and Social Welfare (1979) 394-396. 88 Pemsel’s case [1891] AC 531, 580 (Lord Macnaghten). 89 The Charity Commission for England and Wales, Charities and Public Benefit: The Charity Commission's General Guidance on Public Benefit (2008) 13; J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 9-10. 90 For discussion of why the common law seems fixed around private law see Colin Howard, 'Public and Common Law' in D J Galligan (ed), Essays in Legal Theory (1984) .
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Public law for government; Private law for citizens as citizens with further subdivision into: Commercial law for business; and Estate and family law for families; but a jurisprudence for the third sector 91 here called civil society has not developed. 92 The figure below illustrates this point.
Figure 1 Jurisprudence without Civil Society
Law
Public Law Private Law
Commercial Equity Estate Family Law Law Law
Association Law of Law Charities
91 The concept of third sector is virtually absent from the legal landscape. For example a search of all databases of Australian Legal Information Institute (http:\\www.austlii.edu.au) conducted to 31 December 2008 for the phrase ‘third sector’ elucidated only six cases. None referred to that sector of society under discussion in a legal sense but for one reference to a conference paper using the term in this way. One, RRT Reference: N02/43616 [2003] RRTA 290 was a reference to the Refugee Review Tribunal and the reference to third sector there was a reference to subject matter of a conference. ‘Third sector’ referenced the definition of ‘trades’ in M202 Mis 106/86 MD Print G2415 (7th April, 1986) which was a decision of the Australian Industrial Relations Commission. In 624/1989 (25th August, 1989) a decision of the Australian Industrial Relations Commission, the following sentence appears: ‘One of the assistant superintendents and a foreman is in charge of 22 employees who maintain the large parks, another such pair are in charge of 18 who work on the smaller parks and reserves, street trees, etc. The third sector groups together 12 mechanics, carpenters, streetscaping, the nursery, the major park, and city hall gardens.’ In Joyce v Ku-Ring-Gai Council [2002] NSWLEC 46 which was a decion of Land and Environment Court of New South Wales ‘third sector’ was a reference to a section of land. In Woodward - Brown v Qantas Airways Limited - [2007] AIRC 360 the reference was to the leg of a flight path. In 0802534 [2008] RRTA 369 the reference was to the title to an academic paper. 92 The phrase ‘civil society’ has begun to appear more in Australian judicial decisions. Six recent High Court of Australia cases where the term is used (at 31 December 2008) illustrate its application to freedom of association, freedom of communication and (reward for) voluntary contribution. There is suggestion that its scope should be defined having regard to the values of the relevant society at that time. The first five cases are: MZWKN v Minister for Immigration and Citizenship & Anor [2008] HCASL 359; Harriton v Stephens [2006] HCA 15; CSR Limited v Eddy (2005) 226 CLR 1; APLA Limited v Legal Services Commissioner (NSW) [2005] HCA 44; Applicant S v Minister for Immigration and Multicultural Affairs [2004] HCA 25. In the sixth case Justice Kirby held, in the context of a case involving the internet that: ‘…courts throughout the world are urged to address the immediate need to piece together gradually a coherent transnational law appropriate to the "digital millennium". The alternative, in practice, could be an institutional failure to provide effective laws in harmony, as the internet itself is, with contemporary civil society - national and international.’ Dow Jones and Company Inc v Gutnick [2002] HCA 56; 210 CLR 575, 194.
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The law of charities, (which sometimes arises for consideration in the context of estate law) remains a subset of equity and consequently is a subset of private law. 93 There is ‘no single structure in English law specifically designed for charities’ and ‘charities have had to make do with a legal structure fashioned largely (in the case of trust) for family property holding, or (in the case of the company) for commercial endeavour’. 94
So, whilst it may be said that jurisprudential divisions follow divisions of the first, second and fourth sectors and distinct heads of law for those sectors are readily identifiable, the same cannot be said for the laws applying to the civil society. At the beginning of the third millennium, there is not a clearly identifiable jurisprudence for the third sector. Analysis of its law seems to have lagged in development in a way similar to the way analysis of the third sector has lagged. 95 The division of society into the four sectors discussed above (business, government, civil society and family) which is common in a range of social science discourses, including economics, sociology and politics, has not, to date, flowed into jurisprudence. 96 It is suggested in this thesis, that the time has come for this division to
93 Although Luxton avers that: ‘We are witnessing the encroachment of trusts law by stealth.’ Peter Luxton, The Law of Charities (2001) 17. 94 Peter Luxton, The Law of Charities (2001) 17. 95 See Rob Atkinson, 'Problems with Presbyterians: Prolegomena to a Theory of Voluntary Associations and the Liberal State' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 125. 96 Jon Van Til, Growing Civil Society - From Nonprofit Sector to Third Space (2000); Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000); Helmut Anheier, 'Dimensions of the Third Sector: Comparative Perspectives on Structure and Change' (Paper presented at Centre for Civil Society, London School of Economics, August 2000); Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001); Lester Salamon and Stefan Toepler, 'The Influence of the Legal Environment on the Development of the Nonprofit Sector' (Center for Civil Society Studies, Institute for Policy Studies, The Johns Hopkins University, Baltimore, 2000); Ian Leigh, 'The Legal Framework for Community Involvement' in Alison Dunn (ed), The Voluntary Sector, the State and the Law (2000) 11; Susan Moody, 'Policing the Voluntary Sector: Legal Issues and Volunteer Vetting' in Ann Lyon (ed), The Voluntary Sector, The State and the Law (2000) 39; Evelyn Brody, 'The Legal Framework for Nonprofit Organisations' in Powell and Steinberg (eds), For The Nonprofit Sector: A Research Handbook (2002) 243; Mark Lyons, 'The Legal and Regulatory Environment of the Third Sector' (2003) 25 Asian Journal of Public Administration 87; Arthur Drache, 'Hostage to History: The Canadian Struggle to Modernise the Meaning of Charity' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 30; Jeremy Kendall, The Voluntary Sector (2003); Helmut Anheier, 'The Third Sector in Europe: Five Theses' (LSE, 2002); Susannah Morris 'Defining the Non-Profit Sector: Some Lessons From History' (Working Paper No 3, London School of Economics, 2000); Jeremy Kendall, 'The third sector and the development of European public policy: A framework for analysis' (LSE, 2001); Roselyn Melville, 'The State and Third Sector Organisations: Renegotiating the Relationship in the 1990s' (1998) ; Helmut Anheier and Lester Salamon, 'In search of the non-profit sector II: The problem of classification' (1992) 3 Voluntas: International Journal of Voluntary and Nonprofit Organisations 267; Helmut Anheier and Lester Salamon, 'In search of the non-profit sector - I: the question of
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inform legal theory development in relation to civil society organisations. To illustrate: the
‘?’ in the sector divisions below must be replaced with a body of law:
Figure 2 Jurisprudence without Civil Society Law
Sector No. 1 2 3 4
Sector Name Business Government Civil Society Family
Constitutional and Family law and Commercial Sector Law administrative estates based on law based in ? law based on justice within contract limitation of families power
An analogy may help to introduce the argument.
D. An Analogy
The present description and legal analysis of civil society organisations within the common law framework of the law of charities (plus some heads added by statute in some jurisdictions) with assistance from commercial, association and corporation law, is like explaining the solar system in pre-Copernican terms. It is possible, but is becoming progressively more difficult. A simpler theory that more completely explains this ‘legal universe’ is required. 97 So, just as Copernicus urged upon his readers the acceptance of ‘that which is easiest to grasp’ 98 and pointed out that his ideas were not that radical for they could
definitions' (1992) 3 Voluntas: International Journal of Voluntary and Nonprofit Organisations 125; Estelle James, The Nonprofit Sector in International Perspective (1989); Alberto Bacchiega and Carlo Borzaga, 'The Economics of the Third Sector - Toward a more Comprehensive Approach' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 27. 97 A qualification about this metaphor is central to the thesis, and that is that a PhD in the natural sciences involves the discovery of immutable patterns but the discovery of similar patterns in law, which is an artificial construct, is an incidental exercise in (re)organisation and definitions. Were that not so then this thesis would not be possible for it postulates not that the law is different but that by adopting an alternative way of viewing the object – law – a better understanding of it evolves. Tolstoy applied the Copernican analogy to the march of history see Leo N Tolstoy, War and Peace, Great Books (Louise and Aylmer Maude trans, first published 1889, 1992 ed), 696; Evelyn Brody problematised civil society law in the context of a ‘universe’: The American Law Institute, 'Principles of the Law of Nonprofit Organisations, Discussion Draft Submitted by the Council to the Members of The American Law Institute for Discussion at the Eighty-Third Annual Meeting on May 15, 16 and 17, 2006' (The American Law Institute, 2006); as did Peter Dobkin Hall, 'Law, Politics, and Charities in the Post-Liberal Era' (2000) 27 New Directions for Philanthropic Fundraising 5, 8. 98 Nicolaus Copernicus, On the Revolutions of the Heavenly Spheres (2 nd ed, 1542) 508.
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be found in a pedigree leading back to the early Greeks, 99 so in this thesis I argue that a simpler theoretical framework is discernible in the common law. I suggest that this simpler framework is identifiable in the ancient roots of the law of charities but has been lost in the present convolution. I begin by asking questions such as: if the presently recognised charitable purposes are planets, to what particular universe do they belong? What else belongs in that universe? What distinguishes these planets from planets that belong to other universes? What is the gravitational force that holds these planets together? The great puzzle for lawmakers has been the difficulty in recognising what purposes truly belong to this legal universe. 100
Under the doctrine of charitable purpose, as it has evolved in common law jurisdictions, only advancement of religion, poverty relief and advancement of education have had a secure place. 101 Beginning with Barbados in 1979, 102 where a complete statutory definition of charitable purpose was provided, it has become progressively more fashionable for common law countries to add by legislative fiat to the common law heads of charities. 103 The legislation for England and Wales includes as charitable purposes, a broad range of purposes that edify society, and promote the basic freedoms essential to the foundational enjoyment of citizenship. 104 In Australia, certain childcare, self-help groups and closed and contemplative
99 Nicolaus Copernicus, On the Revolutions of the Heavenly Spheres (2 nd ed, 1542) 508. 100 Levin suggests that ‘all [l]aw is a puzzle at least to the ordinary individual, uninitiated in the mysteries and ritual of the legal process’: Joel Levin, How Judges Reason: The Logic of Adjudication (1992) 13. 101 See Pemsel’s case [1891] AC 531. 102 Charities Act 1979, (Barbados) Volume VIII, Title XVIII, Chapter 243. 103 Charities Act 1979 (Barbados) Volume VIII, Title XVIII, Chapter 243; Extension of Charitable Purpose Act 2004 (Cth) ; Charities and Trustees Investment Act 2005 (Scotland) s. 10; Charities Act 2006 (Eng. & W) c 50; and Charities Act 2008) (NI). The Supreme Court of Canada considered and rejected the idea of adding a head on the grounds that it would ‘do little to enhance the fairness or flexibility of the law’ See Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] 1 SCR 10, 206 (Iacobucci J). 104 The relevant section of the Charities Act 2006 (Eng.&W) , is 2(2) and is in the following terms: 2 Meaning of “charitable purpose” (2) A purpose falls within this subsection if it falls within any of the following descriptions of purposes— (a) the prevention or relief of poverty; (b) the advancement of education; (c) the advancement of religion; (d) the advancement of health or the saving of lives;
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religious orders enjoy that status also by legislative fiat. 105 The Barbados list included such things as the provision of facilities for family planning and the relief of distress caused by natural disaster and catastrophe. 106 These statutory extensions amounted to securing a place in this legal universe for those purposes so added. What, though, is the underlying rationale for these inclusions? What has led these Governments to ‘bolt on’ these particular, yet different, purposes and not others to the law of charities? It is not enough, theoretically, to add to or take away from a list. The additions must all share some common characteristics.
Whether purposes belong to this particular area of law or not should be determined by reference to characteristics – real definable essence and distinguishing features.
I theorise that the characteristics may be labelled ‘charitable purpose’. In labeling this characteristic ‘charitable purpose’ I recognise the risk of confusion. The title is kept because the doctrine of charitable purpose is to be developed beyond the current ‘technical’ conception – not abandoned. In taking this approach I am returning to the juncture in the development of the doctrine where one overruled superior court held:
‘Charitable’ must …be understood in its ‘popular’ sense. That does not admit of any rigid or
undeviating connotation. It is flexible to an immeasurable degree, as can be seen by reference to
(e) the advancement of citizenship or community development; (f) the advancement of the arts, culture, heritage or science; (g) the advancement of amateur sport; (h) the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity; (i) the advancement of environmental protection or improvement; (j) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage; (k) the advancement of animal welfare; (l) the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services. 105 Extension of Charitable Purpose Act 2004 (Cth) ss 4-5. 106 Trevor A. Q.C. Carmichael, 'Charity Law Development in the Commonwealth Caribbean' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 5961.
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the judgments of such eminent masters of law and language as the Judges who sat in Pemsel's
Case .107
The many reports mentioned so far ennumerate the problems with the ‘technical’ legal approach. 108 I suggest, ‘charitable purpose’ is a very broad concept which at its very weakest, evidences the moral sentiment Adam Smith pointed to; as the glue that holds society together. 109 At its weakest, this moral sentiment evinces some concern for others which is voluntarily and results in the pursuit of purposes for their benefit. It can be deeply infused, even dominated by self interest. At the other extreme, is the pursuit of purposes that are entirely other regarding and self-sacrificing. I propose that charitable purpose is the gravitational force holding all civil society organisations together. I suggest that this charitable purpose, like gravity, is evident at different strengths, in different contexts. 110 At the weakest level, it is the fellowship and friendliness that sustains voluntary association. 111
Those purposes that are sufficiently charitable are considered to be included within this legal universe. It will be evident from the discussion so far, that I suggest that legal theory could
107 Chesterman v Federal Commissioner of Taxation [1923] HCA 24 (6 June 1923); (1923) 32 CLR 362, 384 (Isaacs J). This was also the position taken in overruled decisions in lower courts in Pemsel’s case as Lord Watson observed: ‘The learned judges of the Court of Session refused to attach to "charitable purposes" the comprehensive meaning which the words admittedly bear in English law, being of opinion that they have no technical significance in the law language of Scotland.’ Pemsel’s case [1891] AC 531, 556 (Watson). 108 See footnote 22. 109 Adam Smith, The Theory of Moral Sentiments (first published 1789, 1971 ed) Ch I. 110 Charity is often viewed from two (allegedly) antithetical perspectives: one, that charity is voluntary gift, the other, that it is the fulfilment of a positive duty. Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 87. It is not the function of this thesis to arbitrate between the two perspectives but rather to lay out a platform for a debate that may encompass both. This debate (about why people behave charitably) is of significance to this thesis though, for altruism is a justification for favouring and therefore is of importance later, when setting out an alternative basis for favouring from the Preamble . The view that the perspectives are necessarily the reverse is also not well founded. There is a pedigree of ideas leading back to at least the thirteenth century which positions charitable acts on a continuum between self interest and self-sacrifice. For the eight degrees of charity drawn from ancient Jewish roots see Rabbi Maimonides, The Laws of the Hebrews, Relating to the Poor and the Stranger (1840). 111 At its very basest it is rudimentary pro-social behaviour. For a brief introduction to the scientific study of pro-social behaviour see J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27; Jen-Chieh Ting and Jane Allyn Piliavin, 'Altruism in Comparative International Perspective' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 51 and L.A. Penner, J.F. Dovidio, J.A. Piliavin, D.A. Schroeder, 'Prosocial Behavior: Multilevel Perspectives: Abstract' (2005) 56 Annual Review of Psychology 365 for the literature to 1990, to 2001 and to 2005 respectively.
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divide the legal cosmos into four universes and that the third be a universe held together by the gravitational force called in common parlance ‘charitable purpose’.
The issue is complicated though, because acceptance into that legal universe currently brings with it access to favourable treatment. There is not under the common law doctrine of charitable purpose, as it is presently understood, a differentiator between those organisations that evidence weak charitable purpose and those that evidence charitable purpose strongly.
Once recognised as belonging to the universe of ‘charitable purpose’ at common law favourable treatment follows. I argue that it is necessary to distinguish within the class, between civil society organisations that show only weak evidence of charitable purpose, and those where charitable purpose is incontrovertibly and overwhelmingly evident. I suggest that the weaker the evidence of charitable purpose the weaker the claim to favour. The stronger the evidence of charitable purpose the stronger the claim to favour. For the purpose of assessing strength of charitable purpose for the purpose of accessing favour I suggest the extent or nature of public benefit is the appropriate measure.
I theorise that ‘charitable purpose’ understood in the way discussed in this thesis, is the gravitational force that holds all of the laws of this legal universe together. Closer to the centre of the universe, ‘charitable purpose’ (as here defined) is more evident. 112 In this context, the purposes recognised as ‘charitable purposes’ at law are but the characteristics of some planets in this legal universe. Scanning this legal universe in search of ‘charitable purposes’ has not brought, and cannot bring, clarity and certainty. Discerning a legal framework for civil society appropriate for, and adapted to, the needs of common law countries among the myriad relevant laws requires a different approach. A vantage point is needed to view this legal universe which is not obscured, blurred, dominated and distorted
112 The idea that charity may be analysed in this gradutated way is both ancient and current. For the ancient roots see Rabbi Maimonides, The Laws of the Hebrews, Relating to the Poor and the Stranger (1840); see also Jen-Chieh Ting and Jane Allyn Piliavin, 'Altruism in Comparative International Perspective' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 51.
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by the technical-meaning-of-charitable-purpose lens. To address these challenges the applicable laws need to be viewed as a whole in their political, social and economic context in twenty-first century, common law countries.
A reseach question that presupposes such a vantage point is essential.
E. How to Move Beyond Charities? Introducing the Research Question
A theoretical framework bringing together the laws applicable to this third sector of society called, in this thesis, civil society is needed. There is a gap in legal theory. The law of charities has not been located in a wider jurisprudence linked to the sectoral analysis discernible in the jurisprudential analysis of other categories of law. 113 Further, people associate and transfer goods voluntarily in common law countries in the twenty-first century in a variety of ways. Many of these ways were not foreseen prior to the twentieth century when the framework of law of charities was moulded. Information technology transfer is an obvious example but the assistance provided to indigenous people groups and the emergence of the Human Rights agendas are other examples. Charities comprise only a small percentage of the total number of these civil society organisations. 114 Common law and equitable doctrines facilitating these associations and transfers remain ossified around ancient conceptions of charitable purposes. Accommodating these changes has required statutory assistance in some jurisdictions and so by legislation the definition of charitable purpose has been extended. Given the increasing importance of civil society organisations for both enabling association and as vehicles for the provision of charitable goods 115 the research question shaping the thesis is: ‘How can the common law be developed beyond the orthodox understanding of the law of charities to a jurisprudence for civil society?’
113 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 30. 114 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14, Myles McGregor-Lowndes and Matthew Turnour 'From Charity to Civil Society' (Paper presented at the ARNOVA Conference, Atlanta, 15 - 17 November 2007) 3. 115 Alan Ware, Between Profit and State (1989) Chapters 1 and 5 in particular.
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F. Beyond Charities to Civil Society: Introducing the Hypothesis
The hypothesis to be tested is that the common law doctrine of charitable purpose can be developed into a jurisprudence for civil society. This principal hypothesis anticipates sub- hypotheses:
1. There are at least some aspects of the law of charities that warrant development
and are capable of development.
2. The law of charities is capable of development using the common law method
and there are enough foundational principles in common law to facilitate that
development. Put differently, it is possible to abandon the ‘technical’ one
dimensional concept of charitable purpose by which:
a. charities are defined and by which, the jurisdiction of the law of charities is
determined; and
b. entitlement to favour is determined,
in favour of a jurisdiction derived from common law principles yet determined
by reference to civil society organisations.
3. The law applying to civil society organisations has two dimensions which
correspond to the two functions performed by the law of charities and they are
first, determining jurisdiction for the application of laws and second,
determining entitlement to favour. Civil society organisations are identified by
reference to charitable purposes that are not technically defined and entitlement
to favour is also not technically defined.
4. The charitable purposes by which civil society organisations are defined are in
essence purposes which are:
a. altruistic;
b. for public benefit;
c. performed without coercion.
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These charitable puposes differentiate civil society organisations from the three
other organisational forms and purposes, namely:
a. business, which is manifested by the pursuit of self-interest; that is lack of
altruism;
b. government, which is characterised by coercion, lack of voluntariness or
freedom; and
c. family, which is characterised by being private not public.
5. The charitable purposes by which entitlement to favour is determined are those
purposes pursued through a civil society organisation by which charitable goods
are supplied for public benefit. Charitable goods supplied for public benefit are
usually supplied through a civil society organisation and are:
a. private goods supplied to a person for the purposes of Dealing with
Disadvantage; thereby advancing equality;
b. quasi-public or public goods supplied to people for the purposes of
Encouraging E dification; thereby advancing fraternity ; or
c. ligaments binding the polis together which Facilitate F reedom to advance
liberty .
6. These developments amount to the outline of an alternative jurisprudence which
warrants its own space in legal theory.
I now discuss the method by which this hypothesis is argued.
G. How the Jurisprudence will be Developed: Explaining Methodology
‘Jurisprudence … has no method of its own.’ 116 ‘Philosophy concerns itself with conceptual clarification, and with providing structures for further analysis.’ 117 As this jurisprudence for civil society is to provide structures for use within the common law, common law method is
116 Joel Levin, How Judges Reason: The Logic of Adjudication (1992) 9. 117 Joel Levin, How Judges Reason: The Logic of Adjudication (1992) 10.
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utilised. A central problem confronting the law of charities is one of definition of charities and more broadly civil society organisations. Clarification of the subject is, then, the objective. It follows that within that methodology, the principal sub-methodology applied is definitional and the classical method of definition is chosen. 118 That method is used to elucidate propinquity and alternatively, remoteness or difference between subjects that are not necessarily seen as related or, as the case may be, different.
Classical definition theory is chosen as this sub-methodology because it traverses legal and non-legal disciplines and thus offers a bridge for concepts from wider civil society discourse to crossover and inform legal theory development. These issues of definition have been addressed in disciplines other than law and Helmut Anheier’s mapping of civil society and the concept of a civil society diamond 119 is utilised within the classical definitional sub- methodology to locate this jurisprudence in wider civil society discourse. 120
Once propinquity is patent, and boundary definition is established, it is possible to allow for differences in relation to where these boundaries are drawn from one common law country to another. Once differences of degree become significant, measurement theory becomes relevant. I adopt Stanley S. Stevens’ widely used and well known categorisation of measurement 121 to argue how the present nominal approach to measurement of charitable purpose (charitable purpose or not) can be extended at least to ordinal and possibly to
118 The value this method has to wider social science inquiry has more recently come to be appreciated. See, eg, Thomas H. Murray, 'Moral Reasoning in Social Context' (1993) 49 Journal of Social Issues 185 but for a contrary view see Michael Chesterman, Charities, Trusts and Social Welfare (1979) 404. Exploration of definitions by elucidation of the genus and the differentia is referable originally to Aristotle see David Charles, Aristotle on Meaning and Essence (2002). 119 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004). 120 In adopting this wider cross-disciplinary approach a beginning is made which takes cognisance of ‘the role of charity in the welfare state’, that is, a perspective that starts with the needs of societies rather than law. Such an approach might avoid the criticism that ‘lawyers have little to offer to the current debate on charity law reform’ because they take a ‘lawyer’s lay view of charity’ which reduces to a ‘counsel of despair’ that should not be allowed to circumscribe the future role of the law of charity. J C Brady, 'The Law of Charity and Judicial Responsiveness to Changing Social Need' (1976) 27 Northern Ireland Legal Quarterly 198, 214-15. 121 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 678.
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interval and even ratio forms of measurement. In this section, I introduce these methods, outline my reasons why they are adopted, and highlight some of the inherent weaknesses.
The common law method is a process of casuist reasoning whereby courts take into consideration reasons given in former similar cases. There is a heirachy of courts and an inferior court must follow the reasons given by a higher court in the judicial heirachy. As a body of precedent cases develops the reasons for judgment distil into a body of rules or principles and what become known as doctrines emerge. 122 The common law method is adopted because the law of charities has developed within that tradition to this point and, in my view, the doctrine of charitable purpose is capable of further development from within this method. 123 This method is extremely flexible and is capable of taking cognisance of theory development in other disciplines. 124 I acknowledge the view that ‘any adjustment to the legal framework regulating philanthropy … is the business of legislatures’. 125 However,
‘this is an area of law where legislators seldom venture’ 126 and if the common law is capable of development, as I suggest it is, there is a case for exploration of this possibilty. So, the approach I take is to argue from the leading precedent, Pemsel’s case , the law which preceded it, and the way it has been applied. I argue that there are foundational principles evident in the precedents from which a more satisfactory jurisprudence can be developed.
This method is explained by Justice Gummow of the High Court of Australia extra curia in the following way :
122 Alastair Macadam and John Pyke, Judicial Reasoning and the Doctrine of Precedent (1998) 13-14. 123 The contribution of the following authors to understanding the common law method inform my approach: P L Waller, D P Derham and F K H Maher, An Introduction to Law (2000); John Wade, ‘Writing Theses and Reports - An Acronym for Structure in the Wilderness: TCAGONARM’ (1999) 11(1) Bond Law Review 1; A Brockbank and I McGill, 'Reflection and Reflective Practice' in Facilitating Reflective Learning in Higher Education (1998) 70; E Clark, 'Comparative Research in Corporate Law' (1996) 3(1) Canberra Law Review 62; S Corcoran, 'Comparative Corporate Law Research Methodology' (1996) 3(1) Canberra Law Review 54; and Baron Charles de Montesquieu, The Spirit of the Laws, Great Books of the Western World (Thomas Nugent trans, first published 1748, 1992 ed). 124 Terry Hutchinson, Researching and Writing in Law (1 st ed, 2001) 89-90. 125 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 3. 126 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 3.
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The most difficult questions that come before appellate courts in the end and more often than not
are to be answered by recourse to basic principle. If there is one characteristic which, for the
whole of life, has distinguished the approach taken in the High Court of Australia it is the
grounding of new developments in basic principle. 127
The thesis is an attempt, to use Justice Gummow’s phrase, to find a way out of the present legal cunundrum by ‘recourse to basic principle.’ Applying this method, I suggest, adopting the famous words of Lord Atkin in Donoghue v Stevenson , that ‘there must be, and is, some general conception of relations …of which the particular cases found in the books are but instances’. 128
This casuist method is a method not dissimilar from the methodology which philosopher and jurist John Rawls’ explicated, to carry forward his arguments, and is now commonly known as reflective equilibrium. 129 The acceptability or otherwise of the overall argument is, in
Rawls’ terms, best described as ‘a matter of the mutual support of many considerations, of everything fitting together into one coherent view’. 130 It is an approach which is at least as old as Aristotle who, in Nicomachean Ethics, states, ‘with a true view all of the data harmonize’. 131
I adopt the common law method not only because it is the method by which this body of law developed, but also because it avoids the need to accept a particular modernist meta- narrative. More than twenty years working as a practising lawyer, with this common law methodology and consideration of the attacks upon modernity by postmodern thinking, have
127 William Gummow, 'Equity: Too Successful?' (Paper presented at the The 2002 WA Lee Equity Lecture, Supreme Court of Queensland, 31 October 2002). 128 Donoghue v Stevenson [1932] AC 562, 580. 129 John Rawls, A Theory of Justice (1972) 20. For a similar approach to elucidate the Spirit of the Laws from the eighteenth century see Baron Charles de Montesquieu, The Spirit of the Laws, Great Books of the Western World (Thomas Nugent trans, first published 1748, 1992 ed). 130 John Rawls, A Theory of Justice (1972) 21. 131 Aristotle, Nicomachean Ethics Book 1 (1991) 344.
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developed in me both a renewed appreciation of the strengths of the common law’s casuist approach and a deep insecurity about modernist meta-narratives. I am acutely aware that I write at a time of great, philosophic uncertainty and ambiguity. 132 This impact of postmodern thinking, whilst limited, finds expression in three significant ways in the development of this jurisprudence for civil society. First, it has reinforced my commitment to utilising the casuist method of legal analysis by which case law usually develops and which eschews reference to meta-narratives discussed above. This fits well with developing a jurisprudence that seeks only to express ‘a general public sentiment’; 133 that sets out to describe the ‘legal connections’ that make sense of a body of law: a jurisprudence that seeks to map certain inter-related ideas into a paradigm for analytical purposes. 134 Second, I adopt a classical, rather than a modern approach to analyse and to define both charitable purpose and civil society organisation. That distinction is discussed in the next part of this section.
Third, and perhaps most significantly, for this theory development, I find useful Foucault’s suggestion of a concept of a table on which ideas can be laid out and rearranged. 135 This approach may, then, also make the jurisprudence more acceptable to postmodern thinkers such as Richard Rorty who might not accept a metanarrative, but may embrace the pragmatic solutions embedded in the paradigm. 136
132 It will be interesting to watch the way jurisprudence develops in the context of the challenges of postmodernism. For a discussion of the way in which Richard Posner has abandoned the modernist grounding of his economic theory of law and how its underpinnings may be reworked into a postmodern jurisprudence see: Daniel T Ostas, 'Postmodern Economic Analysis of Law: Extending the Pragmatic Visions of Richard A. Posner' (1998) 36 American Business Law Journal 193. For an example of the possibility that there is a move away from postmodernism even in France see the June 2006 edition of the Philosopher’s Forum in particular the introduction of Lackey where he states that the authors there published ‘set the stage for the revival of a contemporary French rationalism’: Douglas Lackey, 'Introduction: French Philosophy and Science' [2006] Philosophical Forum 11, 2. 133 Donoghue v Stevenson [1932] AC 562, 580. 134 R W M Dias, Jurisprudence (5 th ed, 1985) 3. 135 Michel Foucault, 'Preface' in The Order of Things - An Archaeology of the Human Sciences (2002) xvi. 136 Richard Rorty, 'Solidarity or Objectivity?' in Lawrence Cahoone (ed), From Modernism to Postmodernism - An Anthology (1 st ed, 1996) 573. Some postmodern thinkers will not accept this. There will be those, who like Quirrell, have beeen shown by Lord Voldemort: ‘There is no good and evil, there is only power, and those too weak to seek it.’ J.K. Rowling, Harry Potter and the Philosopher's Stone (1997) 211. Concepts of common good and public benefit central to this thesis require acceptance of ‘good.’
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There are significant weaknesses with this methodological approach upon which I comment next. Weaknesses that go beyond methodology are not raised until the following section.
The weaknesses of the common law’s casuist method are substantial both theoretically and practically. Vandevelde summarises the basic problems with legal method in the following way:
First, although the legal reasoning process in form is structured as if it were based on mechanical
logic, in reality legal reasoning is impossible without reference to policies underlying the law.
Second, these policies are in conflict, and thus legal reasoning requires a lawyer to make
judgments about which policies are to prevail in particular circumstances. 137
At the level of theory, then, common law method is inherently contestable and underpinned by value judgments. The rules of interpretation are esoteric and can be applied differently with different emphasis, at different times, leading to different results. Every decision reached by majority over dissenting judgments bears witness to this point. There is a general principle underpinning the development of the common law, that precedents are to be followed but that, too, can lead to fine distinctions which even lawyers find difficult to understand - as some of the earlier cited judicial observations noted. A second criticism is that at a practical level the common law method is not suited to voluminous disparate data.
The development of the doctrine of charitable purpose requires (recalling the earlier comments of Viscount Simon) a strategy to address volume. 138 There is a ‘great body of law’, and a way of dealing with what appears ‘illogical and even capricious’ 139 is needed to manage the substantial inconsistency.
A defense to the first criticism is that the value judgments are based on the precedents and those precedents rest on public reasons justifying the choices made. My response to the
137 Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3. 138 [1949] AC 426. 139 Gilmour v Coats [1949] AC 426, 442.
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second of these weaknesses is to remember that this thesis is a disquisition about law – that is the development of jurisprudence – and not an exposition of the law. 140 There are two consequences that flow from this. First, I do not seek to explain or exposit how ‘the thousands of cases’ 141 on charitable purpose came to be corralled within the four heads of
Pemsel’s case . Second, whilst I comment on a range of cases and legislation from across the common law world, I discharge my disquisitive object by focusing on limited examples of what I suggest are foundational principles.
The classical method of defining is adopted because the strictures of the classical method bring a discipline that requires confrontation of the issues creating the problems which the modernist, nominative method does not. The modernist, sometimes called ‘nominal’ approach to definitions is, to use the judicially accepted words of Humpty Dumpty, ‘a word means just what I choose it to mean – neither more nor less’ 142 for it is my ‘inviolable … liberty’ (as a modernist) to make a word mean what I say it means. 143 By contrast, the classical method of definition development begins by taking hold of the characteristics that evidence uniqueness and differentiates from that which it is not. As Socrates explained to
Theaetetus, when people ‘lay hold only of the common and not of the characteristic notion’ 144 confusion arises but if ‘you get at the difference and distinguishing characteristics of each thing then, as many people affirm, you will get at the definition or explanation of it.’ 145 I adopted the classical approach so I am compelled to seek to elucidate the ‘real’ definition.
140 R W M Dias, Jurisprudence (5 th ed, 1985) 4. 141 Peter Luxton, The Law of Charities (2001)17. 142 Lewis Carroll, Through the Looking Glass and what Alice Found There (1899) 123 cited in Liversidge v Anderson [1942] AC 206, 244-5 (Lord Atkin). For a discussion of the threats to political integrity embedded in the modernist approach see George Orwell, Politics and the English Language (1946); for a more polemic Australian critique see David Flint, 'The 'Shock Jocks' are in Tune with the Silent Majority', The Australian (Sydney) 15 December 2005,
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In the classical sense, a ‘real’ definition signifies a thing’s essence 146 and locates it in the context of its other. In searching out its other, the development of such a definition requires the draftsperson to explore the differentia. 147 It is in the search for essence and differentia, that the philosophic battles problematising the language of the doctrine of charitable purpose are uncovered. 148
The adoption of a nominal approach to definition of civil society would enable papering over of the difficulties for, as Blaise Pascal poignantly observed in relation to the nominal approach, ‘…there is great freedom of definition and definitions are never subject to contradiction, for nothing is more permissible than to give whatever name we please to a thing we have clearly pointed out.’ 149 By returning to the approach of the classics the confusion must be confronted. At the outset, though, it must be acknowledged that the weakness of the common law, in that it involves policy choices over what is selected and what is not, applies also to the selection of the essence and differentia using the classical method of defintion. 150
I return to the strictures of the classical method of definition development not only in my investigation of the problems with the meaning of ‘charitable purpose’ but also in the way the concept of civil society is expressed. This avoids the criticisms of a modernist approach to definitions but I prefer it also for another reason.
146 See Aristotle, Nicomachean Ethics Book 1 (1991) see Topics Book I Chapter 5, 144. 147 Exploration of definitions by elucidation of the genus and the differentia is referable originally to Aristotle: see David Charles, Aristotle on Meaning and Essence (2002). 148 Anup Malani and Eric A. Posner, 'The Case for For-Profit Charities' (Working Paper No 304, The Law School, The University of Chicago, 2006). 149 See Blaise Pascal, Scientific Treatises (1952); Plato, Sophist (1991 ed, 1952) 431. 150 One of the more colourful, if disingenuous, comments on the weakness of the method comes from William James who expressed it as follows: The only a priori advice that can be given to a man embarking on life with a certain purpose is the somewhat barren counsel: Be sure that in the circumstances that meet you, you attend to the right ones for your purpose. To pick out the right ones is the measure of the man. ‘Millions’, says Hartmann, ‘stare at the phenomenon before a Genialer Kompf pounces on the concept’. The genius is simply he to whom, when he opens his eyes upon the world, the 'right' characters are the prominent ones. The fool is he who, with the same purposes as the genius, infallibly gets his attention tangled amid the accidents. See William James, The Principles of Psychology (first published 1890, 1991 ed) footnote 3 at 670.
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Elucidating the solution to the definitional puzzle involves drawing upon the insights of disciplines other than law. As the classical method of definition is at least acceptable and frequently utilised across all of the disciplines informing the architecture developed here, it is possible to draw upon definitional insights from those other disciplines then apply those insights in the development of a definition for jurisprudential purposes using this method.
By utilising a well accepted, but more rigorous, way of defining key concepts in different disciplines, it is possible to set out relationships that are not immediately apparent across disciplines.
Dynamic boundaries emerge from such an approach to definitions. This is because there will be contests over where the boundaries are. If these contests are to be embraced rather than supressed, a framework capable of accommodating divergence is needed. This leads to incorporation of dynamic boundaries into the definitions. Dynamic boundaries are built into this jurisprudence through a combination of Helmut Anheier’s civil society diamond, 151 and
S. S. Stevens’ segmentations of forms of measurement. 152 S. S. Stevens’ categorisation of measures is adopted because it is adequate and widely understood. The insight to actually redraw the boundaries comes from Foucault. A concept similar to Foucault’s table 153 is employed to explore this region in which the boundaries between civil society organisations on the one hand and each of businesses, government organisations, and families on the other are in contest. It is a definition arrived at by developing the notion of civil society organisations in the context of their relations with their others. 154
151 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004). 152 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677. 153 Michel Foucault, The Order of Things (1994) xvii. 154 Thus within a classical framework the notion of relational signs rooted in the linguistics of de Saussure is allowed to speak and inform but it is not given untamed freedom. The overarching structure remains fundamentally classical. See Ferdinand de Saussure, Course in General Linguistics (1966) for the foundations of this approach.
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Underpinning this framework development is my Christian faith, which provides, in modernist terms, a meta-narrative which gives meaning to all facets of my life, yet I am willing to live with the inexplicable mysteries as if a pre-modern or postmodern, for my faith is essentially about relationships not propositional truths. 155 This combination of influences causes me to question, and then to challenge, the present dominant frameworks from within, as a practising charities lawyer, whilst seeking to offer a constructive alternative. The approach taken is designed to undermine the present, dominant, orthodox, legal framework centred in a conception of ‘four principal divisions’ of charitable purpose. What drives me to write this thesis is a passion to deconstruct a framework that results in injustice because there is little or no way for some voices within it to be heard. 156 Whilst I have views on the matters in debate it is the absence of a satisfactory framework for philosophic battle – the absence of a paradigm in which the divergent voices may debate – that troubles me most. So for me, deconstruction of the orthodox understanding of the law of charities is not an end. It is a part of a rebuilding process.
My central object is to offer an alternative architecture – one that explicitly seeks to facilitate debate over regulation of voluntary association and favouring of altruistic contribution for public benefit from diverse worldviews. I set this out because the choice of casuist method, the adoption of a classical method for definition, and the quest for a middle region below the meta-narratives are all tainted with subjective prejudices. 157 In elucidating the essence or differentia of charitable purpose or civil society, the selection of the relevant ‘essence’, it
155 Central to this understanding is the great commandment recorded in Mark 12:28-31 in The Holy Bible New International Version (1984). 156 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 100. 157 This broad attempt at maintaining philosophic independence means that to the extent that this approach could be described as consistent with the Rawlsian method of reflective equilibrium it is so in only a very limited way as I adopt the Rawlsian method but resist adoption of Rawlsian liberalism. This is because in taking this approach I consistently seek to anchor it back into the classical method proposed by Aristotle and which is central to the common law method and away from the fundamentally modernist premises in which Rawls’ framework is set. The substantive weaknesses flowing from this are discussed under limitations below.
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must be conceded to William James, is ‘a teleological instrument’. 158 All aspects of charitable purpose and civil society organisations are not explored. What is elucidated is ‘a partial aspect’, that which for ‘our purpose we regard as its essential aspect’, and ‘the essence, the ground of conception, varies with the end we have in view.’ 159 Adopting these methods, helps to overcome the weaknesses emerging in modernist approaches, but it replaces them with the problems inherent in the casuist method, 160 classical definitions and
Foucault’s middle region. By not adopting Rawls’ modernist, liberal premises I also must concede that I cannot explicate logically a general theory from very limited premises as he does in A Theory of Justice. 161
Could other methods of research be better suited to the project undertaken? The work arguably lends itself to various methodologies including analysis within economic theories of law, a critical approach, grounded theory or even historical method.
The extent to which insights from the discipline of economics informs theory development suggests that perhaps the thesis could have been written from within an economic analysis of law or even a comparative law and economics model. 162 Economics, even applied in a comparative law context, and even though it can take cognisance of broader scholarship;
158 William James, The Principles of Psychology (first published 1890, 1991 ed) 670. 159 T Honderich, The Oxford Companion to Philosophy (1995) 181-182. 160 The definition is for jurisprudential purposes so it will uniquely and distinctly shape the essence identified; for as William James observed: A substance like oil has as many different essences as it has uses to different individuals. One man conceives it as a combustible, another as a lubricator, another as a food; the chemist thinks of it as a hydrocarbon; the furniture-maker as a darkener of wood; the speculator as a commodity whose market-price today is this and tomorrow that. The soap-boiler, the physicist, the clothes-scourer severally ascribe to it other essences in relation to their needs. Ueberweg's doctrine that the essential quality of a thing is the quality of most worth is strictly true; but Ueberweg has failed to note that the worth is wholly relative to the temporary interests of the conceiver. And, even, when his interest is distinctly defined in his own mind, the discrimination of the quality in the object which has the closest connection with it is a thing which no rules can teach. William James, The Principles of Psychology (first published 1890, 1991 ed) 670-671. 161 See John Rawls, A Theory of Justice (1972). 162 See Nicholas Georgakopoulos, Principles and Methods of Law and Economics (2005); R Hunter, R Ingleby and R Johnstone, 'Law and Economics' in Thinking About Law (1995) 62; and for a postmodern twist see Daniel T Ostas, 'Postmodern Economic Analysis of Law: Extending the Pragmatic Visions of Richard A. Posner' (1998) 36 American Business Law Journal 193.
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could not accommodate, in my view, the breadth of material considered in this work.
Further, neo-classical economic analysis requires presumptions to be made regarding contested a priori assumptions and my object is to accommodate these contests, rather than decide those contests within neo-classical economic premises. 163
A cursory review of the layout of the thesis, considered in the context of comments made so far, suggests influence from critical legal theories. 164 A critical approach was not taken, because common law method, in my view, gave greater freedom to deal with the difficulties of ‘nebulous and conflicting’ streams of thought. 165
In returning to the cases, and in the elucidation of principles from those cases, my approach might suggest grounded theory method. Aspects of my approach resonate with the process of grounded theory in looking for ‘ codes then concepts and finally categories’. 166 I begin with preconceived ideas, though, and it is evident from the work as a whole that I proceed in a more traditional way, proposing and testing an hypothesis.
If ‘history is nothing more than the raw material of law’ 167 and ‘the rational study of law is still to a large extent the study of history’ 168 then arguably the thesis could have been written
163 Contrary to the now more frequent practice of utilising economic method in social science analysis it is the fruit of the economic analysis – the content – that informs this thesis not the method. The method adopted here eschews the strictures that attend adopting (exclusively) neoclassical economics’ rational actor homo economicus as the underpinning anthropology. The jurisprudential paradigm developed is designed to permit other denizens of the discourse (such as homo sociologicus ) to contest for supremacy as the paradigm seeks to serve a philosophically diverse society. For discussion of these terms see Bruce Chapman, 'Rational Voluntarism and the Charitable Sector' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 127, 127-28. In this thesis, for utilisation of economics insights see Chapter IV and V; for discussion of method see method section above and for the final outcome of accommodating anthropological dissonance within the thesis see Chapter IX. 164 See Oliver Brand, 'Conceptual Comparisons: Towards a Coherent Methodology of Comparative Legal Studies' (2007) 32 Brooklyn Journal of International Law 405. 165 Terry Hutchinson, Researching and Writing in Law (1 st ed, 2001) 53. 166 George Allan, 'A Critique Of Using Grounded Theory as a Research Method' (2003) 2(1) Electronic Journal of Business Research Methods 1, 1. 167 D J Boorstin, 'Tradition and Method in Legal History' (1941) 54(3) Harvard Law Review 424, 424. 168 O W Holmes, 'The Path of the Law' (1897) 10 Harvard Law Review 457, 469.
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from within an historical precedent approach. 169 History is, though, too limiting in and of itself, for this project. Oliver Wendell Holmes observed over one hundred years ago: ‘For the rational study of the law the blackletter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.’ 170 The need to accommodate insights from economics and other disciplines in the development of this thesis obliged me to work beyond historical methods alone. So I adopt the common law’s casuist, sometimes called case-based, approach as my method.
Legal reasoning is ‘a distinctive mixture of logic and judgment’. 171 So, I must concede at the outset, that ultimately the method is subjective. Using logic and judgment I set out an argument in a fashion utilised by lawyers for centuries - but that is all. My values therefore cannot but permeate every aspect of the thesis. 172 This is a major weakness that runs through the whole thesis. It cannot be avoided, however, as it is central to legal method.
It is my judgment that the cross disciplinary literature and the legal literature have developed to a point where it is logical to look at the cases on the doctrine of charitable purpose differently and to organise information in relation to those cases in a different way. The argument in the thesis, like any common law opinion, reduces ultimately to a judgment of whether the reader is satisfied that this alternative whole fits together. 173
It should also be stated in this context that prejudice does not just apply to the writer but is relevant to the reader. There are a number of possible responses to the analysis undertaken.
Those responses will be shaped by the reader’s perspective on two issues. The first of these is the problems with the present law of charities. The second is the extent to which the
169 Robert Spector, 'Legal Historian on the United States Supreme Court: Justice Horace Gray, Jr, and the Historical Method' (1968) 12(3) The American Journal of Legal History 181. 170 O W Holmes, 'The Path of the Law' (1897) 10 Harvard Law Review 457, 469. 171 Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3. 172 Karl R. Popper, Conjectures and Refutations: the Growth of Scientific Knowledge (1989). 173 See William James, The Principles of Psychology (first published 1890, 1991 ed) footnote 3 at 670.
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concept of civil society, particularly as mapped in this thesis, is, for the reader, a satisfying idea. To pick the two extremes: if the reader is an academic researcher who finds the concept of civil society very satisfying, and finds the present law of charities an impenetrable fog, then the reader is far more likely to readily embrace the architecture developed in this thesis. On the other hand, if the reader is a professional lawyer, practising in the area of charity law, who finds the present form of the law of charities entirely satisfying and considers the emerging concept of civil society an irrelevant fad of the social sciences, then embracing the idea of a jurisprudence for civil society will be much more difficult. We are all prejudiced. 174 These prejudices ought to be acknowledged at the outset. It must also be stated that any and every method that could be adopted will labour under limitations but the advantage of adopting the common law’s casuist approach is that those limitations are recognised, accepted and integral to the process of legal theory development.
H. The Scope and Limitations of Beyond Charities
The thesis is centred on the doctrine of charitable purpose and its scope is as broad as is practicably possible. Taking such a broad approach requires prioritising. The analogy of a magnifying glass illustrates the approach taken to this challenge of prioritzing and setting the scope for discussion. Under a magnifying glass the central subjects are enlarged and dominate the observations. Also, though, where the subject ends is fuzzy and difficult to make out. Thus, discussion of the central subjects of the doctrine of charitable purpose – the
Preamble and Pemsel’s case – dominates the legal analysis. Other less central cases on the doctrine, and even developments in the law in Europe that may influence the development of the common law, occupy the fuzzy edges. The scope is set always, though, with reference to the common law doctrine of charitable purpose – as it is presently formulated and how it might be developed. There are significant limitations with this approach and these are now considered.
174 The former professional now academic Michael Powell opined: ‘Professions tend to be conservative whereas the best research is not.’ Michael Power, The Audit Society: Rituals of Verification (1999) xiii.
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First, there are limitations in relation to method. These were discussed in the earlier methodology section and are not repeated here.
Second, there are limitations due to the international scope of the work. As the law of charities applies throughout most of the common law countries, 175 cases decided in one jurisdiction tend to significantly inform developments in others, so the scope of the analysis is not limited to one jurisdiction. Furthermore, the challenges which the common law countries face are also quite similar and so the role of the common law principles in addressing social challenges is also similar. The economic research and broader civil society scholarship into the voluntary supply of public and quasi-public goods, which is the subject of the law of charities, also tends to be of international application. This all affirms an international scope for the work but adopting an international perspective creates a significant drawback. The relevant law is not only case based. It is constructed in diverse constitutional contexts and the common law principles frequently find different statutory overlays. Without reference to this body of constitutional and statute law which is jurisdiction specific, jurisprudential theorising is at best incomplete and at worst disingenuous. I address these challenges in two ways. First, in relation to constitutional contexts, I argue that the constitutional frameworks of common law countries rest upon common law foundations and I advance the discussion within that broad premise. That argument occupies the early part of Chapter VII. In relation to specific laws, I have to make choices. I endeavour to illustrate points with statutes from a variety of jurisdictions but the default jurisdiction is the jurisdiction of Queensland, Australia where this thesis is submitted for examination. Having said that, the law of that jurisdiction is taken principally to illustrate more general principles and the thesis is seasoned with cases relied upon across the
175 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 3.
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common law jurisdictions. As to time, the thesis takes cognisance of the law as at 31
December 2008.
The usefulness of the thesis will also vary from jurisdiction to jurisdiction as the way in which the concept of charitable purpose is applied varies. For example, the discussion regarding favours based on charitable purpose, will be much more relevant in Australia, the
United Kingdom and Canada where the term is a gateway to income tax exemption than in the United States where the concept is not as central to that regime. Income Tax legislation in India references charitable purpose 176 but the Indian courts have made it clear that in their view ‘[t]he Indian legislature has evolved a definition of the expression 'charitable purpose' which departs in its material clause from the definition judicially supplied in Pemsel's case and decisions of English courts, which proceed upon the interpretation of language different from the Indian statute, have little value.’ 177 Consequently, much of that discussion might be of little relevance to Indian jurists. In setting out the discussion I have, then, to acknowledge that the argument remains very abstract and at a broad conceptual level with the law of particular jurisdictions used to illustrate points rather than for detailed analysis. This commitment to broad philosophical reasoning, which is a strength in providing an underlying theoretical rationale for policy decisions, is also a major weakness. This is because in the twenty-first century, common law principles – particularly the doctrine of charitable purpose
– are embedded in statutory contexts that are beyond the scope of this thesis to explore in any depth. The statutory context is, though, critical to appreciating the way the law in each of these jurisdictions has developed.
Third, in this thesis the discussion is limited to the law applying to charities and other organisational expressions of civil society. The law applying to individuals as individuals is
176 Income Tax Act 1967 (In), s 11(1). 177 CIT v Andhra Chamber of Commerce [1965] 55 ITR 722, 734; CIT v FICC AIR 1981 SC 1408, 1414-1415 (Venkataramiah J). See also Municipal Corporation of Delhi v Children’s Book Trust AIR 1992 SC 1456.
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excluded from discussion. Similarly institutions, such as the rule of law, which are central to legal theory development in Chapter VII are discussed only to the extent necessary to develop the argument. This approach follows the common law which focuses on charities as organisations and is necessary to contain the scope of the thesis. It is, though, arguably a significant limitation. The law applying to civil society applies to individuals as individuals and not just to their involvement in organisations. Similarly these broader institutions upon which the common law rests are important and worthy of more explicit exploration. Two points can be made in support of this limitation to only the organisational form. First, by focusing on the organisational form I build logically from the present law. Second, in focusing on the organisational form I focus on the principal area of the law’s operation and consequently even if the theory developed here does not encapsulate all of the laws applying to civil society it encapsulates most.
Fourth, there are problems for theory development inherent in applying ancient, legal concepts to contemporary conceptions of civil society organisations. The legal foundations of charities, and more broadly the freedoms upon which charities depend at common law, developed in times when there was not government, business or family as they are now known. Current conceptions of civil society organisations, as discussed here, did not exist. I endeavour to do justice to the development of the concepts in their religious, feudal context but that involves extrapolation, as ‘modern institutions did not exist in the Middle Ages’. 178
This is a limitation and a weakness that must also be acknowledged from the outset.
Fifth, I theorize that there is a division between laws that facilitate association (Association law) and laws that facilitate favours to certain civil society organisations (Benefit law). The doctrine of charitable purpose does not explicitly segment the regulatory dimension from the favouring. I develop an argument that the division of the doctrine of charitable purpose
178 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 169.
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known as advancement of religion is predicated on freedom of religion. Further I theorise more generally that the broader freedom to associate underpins the freedom to pursue other charitable purposes. The common law protections were, though, fundamentally for religious organisations not broadly for civil society organisations and some conceptual stretching is required to bridge the chasm. These are my contentions, but they are latent not patent. My theory is consequently open to the criticism that the presupposition is erroneous and the value of the theory is quite limited if that conceptual step is not taken.
A sixth major limitation, implicit in the earlier five limitations, is the generality with which I address the law. Frequently, it is necessary to set out in deft, general strokes principles which summarize the law but which do not do justice to the context or background. In
Chapters II and III where I set out problems with the law in common law countries at present
I make judgments to include or exclude some arguments. Others could well have made a different judgment on what to include and what to exclude. In Chapter VI, I select only a limited number of philosophers and give even more limited attention to some of their ideas.
Similarly in Chapter VII my attention to constitutional context is only passing although it is fundamental to legal theory and practice. In Chapter VIII the only theoretical analysis is of
Pemsel’s case . These are but four examples of decisions to limit discussion to generalities where the subject matter warrants attention to particulars. In like vein is my frequent appeal to, and discussion of, the law in Australia, New Zealand, Canada, the United States,
Scotland, Ireland, England and Wales, for example. A thesis such as this, which is an outline of a completely different architecture, arguably cannot but labour under such limitations.
Seventh and finally, I labour under the same limitation as Garton in that like his theory of civil society so my theory also is untested and no empirical evidence, either qualitative or
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quantitative, was gathered in order to test its central propositions. Like he, I also rely upon theories that are themselves untested. 179
I. Definitions Needed to Develop a Jurisprudence for Civil Society
It will be evident from the discussion in the methodology section that in offering definitions, the object is to state the shared common meaning for clarity, not to make a word mean ‘just what I choose it to mean – neither more nor less.’ 180 As Dias observed, there is usually a shared common meaning to most words even if the margins are contested 181 and, true to the classical method, these definitions operate as explanations of shared meanings and clarify, where there are contested margins, at just what point a meaning line is drawn. So, in this thesis, unless otherwise stated below, words have the meaning set out in the Oxford English
Dictionary . It is helpful to set out as clearly as possible what is meant by a word or phrase and consequently I adopt the style of a practising lawyer rather than an academnic to state that in this thesis the following words have the following more precise definitions:
‘Association law ’ is one of the two divisions of a jurisprudence for civil society; the other is
Benefit law. Association law is the area of law concerned with the freedom of persons to associate and the freedom of organisations by which those associations occur. For example people associate through churches, clubs, trade unions and professional organisations.
Sometimes these associations are incorporated. Sometimes they are not. Association law is the body of law that applies to all of these asssociations as associations. An example of a common law association case is Grace Bible Church v Reedman .182 Examples of association law statutes include the recent legislation passed by Vermont in the United States to enable
179 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 33. 180 Lewis Carroll, Through the Looking Glass and what Alice Found There (1899) 123. 181 R W M Dias, Jurisprudence (5 th ed, 1985) 3. 182 (1984) 54 ALR 571, 585, discussed in Chapter VII.
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and regulate for-profit charities called L3Cs 183 and the Scottish Charitable Incorporated
Organisations Act .184
‘Benefit law ’ is one of the two divisions of a jurisprudence for civil society; the other is
Association law. Benefit law is the area of law concerned with favourable treatment accorded to persons who, and organisations by which, charitable goods are provided.
‘Charitable goods’ are private goods supplied to deal with disadvantage, and public goods and quasi-public goods supplied to edify society and facilitate the freedom upon which society rests. To be charitable the goods must be supplied altruistically, voluntarily and result in public benefit. The definition can include services and range from the provision of religious services broadly understood through to the delivery of food to those in need and choral performances.
‘Charitable purpose’ means when used in the context of the law of charities ‘[a]n object listed in the Preamble to the Statute of Charitable Uses Act 1601 , or within the “spirit and intendment” of that statute’ 185 but which is argued to be capable of a broader reading to include all purposes that manifest altruism, public benefit and which are pursued voluntarily.
‘Charities ’ are civil society organisations ‘established for charitable purposes only.’ 186
Charitable trusts are included in the class, as the concept of organisation is given the widest possible meaning. Some of the more well known charities include the St Vincent de Paul
Society that provides assistance to persons in financial need, Red Cross International which
183 Low-Profit Limited Liability Companies VT STAT ANN (2008). 184 Charities and Trustees Investment Act 2005 (Scotland) s. 49. 185 Peter E Nygh and Peter Butt (eds), Butterworths Concise Australian Legal Dictionary (2 nd ed, 1998) 67. 186 Charities Act (Eng.&W) s 1(1)(a). The section continues importantly to limit the definition to the relevant jurisdiction. J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 1.
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provides medical related services, and Harvard University which provides educational services.
‘Civil society’ is the sphere of institutions, organisations and individuals located between family, the state and the market, in which people associate voluntarily to advance common interests. 187 The expression ‘civil society’ takes on a technical meaning. Importantly, the concept of civil society has developed significantly beyond the original idea of an alternative to rude or uncivilised society. 188
‘Civil society organisation’ means an entity which is more public and usually larger than a family, by which people voluntarily associate to pursue common altruistic objects which are not commercial. 189 These organisations can include car enthusiast clubs, child care centres conducted on a not-for-profit basis and orders of contempative nuns.
‘Coercion’ is the opposite of freedom. Coercion does not have to be direct and could be through subtle means. 190 It is most patent in taxation where money is taken by force of law from some citizens and given to others. At a subtler level, it is evident in the degree of difficulty and the costs levied on the formation and conduct of an association.
‘Common law’ for the purposes of this thesis includes the equity case law. I adopt
Simpson’s observation that ‘equity is just another form of common law’.191
187 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 22. 188 For the history of the original idea see Adam Ferguson’s essay An Essay on the History of Civil Society (1767); for the development of the idea in recent times see John Ehrenberg, Civil Society - The Critical History of an Idea (1999) and Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004). 189 The term is replacing NGO in international discourse. Anna-Karin Lindblom, Non-Governmental Organisations in International Law (2005) and is becoming accepted in legal discourse Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 519. 190 See R v Big M Drug Mart Ltd [1985] 69 SCC 95 (Dickson J). 191 William Twining (ed), Legal Theory and Common Law (1986) 8.
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‘Common law countries’ broadly means countries that still apply the common law principles derived from England. Principally, in this thesis, the definition focuses on those countries which also share the cultural, philosophic heritage of England. This is because it is necessary to draw from that broader cultural (particularly religious), philosophic context to develop the argument set out in that thesis. That means the following jurisdictions take centre stage: Australia, Canada, New Zealand, the United States of America and the United
Kingdom.
‘Donor favoured’ means deductible gift recipient or tax credited. Examples of such favours are contained within the Income Tax Assesment Act 1997 (Cth), Division 30; the Internal
Revenue Code (US) s 501(c)(3) and section 170; Income Tax Act 2004 (NZ) s BD 2, DV 8 and DV 9; Income Tax Act 2007 (UK) c 3, s 521-523; Income Tax Act (Can) (1985) c 1 (5 th
Supp) s 110.1(1)( a)(ii), 118.1(1)( b) and s 118.1(3), and 149(1)( l)).
‘Equality’ is a value. I acknowledge diversity of meanings. For example, in classical
Greek theory, three kinds of equality are recognised: isonomia (equality before the law); isotimia (equal respect for all); and isegoria (equal freedom of speech and political action).
In post-enlightenment theory, the three kinds tend to be covered by one of a trilogy of principles (liberty, fraternity, and equality). 192 My limited purpose is to label an ideal. A particular jurisprudential worldview or common law country may give shape and expression to the value in a particular context.
‘Exemption’ means exemption from income tax. Examples of such favours are contained within the Income Tax Assesment Act 1997 (Aus), Division 50; the Internal Revenue Code
(US) s 501(c)(3); Income Tax Act 2004 , (NZ) s CW36; Income Tax Act 2007 c.3 (UK);
Income Tax Act (Can) (1985, c 1 (5 th Supp)).
192 Peter E Nygh and Peter Butt (eds), Butterworths Concise Australian Legal Dictionary (2 nd ed, 1998) 152.
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‘Family’ is the word used to describe the informal sector outside of civil society. I avoid the title ‘informal’ as it does not capture the essentially private, usually small, nature of the gatherings that are not civil society. Private gatherings, such as gatherings of friends, extended kin relations and informal networks which lack the necessary public dimension to be considered civil society organisations, are within the definition of family in this thesis.
The term goes beyond the usual definitions of family for policy analysis. 193 The term can be confused also with civil society organisations. 194 I avoid this by defining family as essentially private and civil society organisations as essentially public.
‘Favour’ is the blanket descriptor of ‘peculiar favours’ 195 afforded to organisations because they are charities or, more generally, because they belong to civil society or a sub-class of it.
The more well known are exemption and donor favoured status.
‘Fraternity’ is also a value and I eschew the contest over its expression as I do with equality and liberty.
‘Freedom’ means ‘liberty’, and includes expression in the four freedoms recognized at law: freedom of association, freedom of assembly, freedom of speach and freedom of religion. 196
‘Grantee’ means a recipient of a government grant.
‘Law of charities’ means the currently orthodox, overarching framework or jurisprudence that operates to include or exclude from the class of charitable purposes according to the
‘technical’ meaning of ‘charity’ drawn from a particular reading of the judgment of Lord
193 K H Tillman and C Nam, 'Family Structure Outcomes of Alternative Family Definitions' (2008) 27 Population Research and Policy Review 367. 194 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14, 40B. 195 Pemsel’s case [1891] AC 531, 583. 196 S E Klingelhofer and David Robinson, 'The Rule of Law, Custom and Civil Society in the South Pacific: An Overview' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 211, 211.
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Macnaghten in Pemsel’s case .197 That reading focuses exclusively upon the four heads set out in Lord Macnaghten’s judgment to the exclusion of reference to an underlying jurisprudence. Whilst the body of law is principally case based, to the extent that statutes rely upon and incorporate this case law, the law of charities includes that statute-based law.
That means, for the purposes of determining jurisdiction, it is the body of law which the
Court of Chancery and its successor, the High Court of Justice, evolved from a consideration of the Statute of Elizabeth, in particular the Preamble. 198 Importantly for jurisdiction development, this body of law involves looking primarily to the Statute of Elizabeth, and not behind it, for the definition of charitable purpose.
‘Liberty’ , like equality and fraternity, is a value and labels ‘freedom from arbitrary or undue external restraint, especially by a government’. 199
‘Non-distribution constraint ’ is a clause or collection of clauses in the constituent documents of an organisation which prevent the organisation distributing income or capital to members of the organisation. Such a constraint is the most common evidence that an organisation does not operate for the purposes of benefiting its members. 200 To be effective, a non-distribution constraint must be married with a fair compensation constraint that prevents excessive compensation for goods or services to stakeholders such as executives.
The expression ‘non-distribution constraint’ in this thesis includes both forms of restraint.
197 Pemsel’s case [1891] AC 531, 583-584 (Lord Macnaghten). 198 The definition is taken from Gilmour v Coats [1949] AC 426 (Lord Simon). Although Lord Simon refers to this body of law as ‘the law of charity’ using the singular not ‘the law of charities’ which is plural, I have adopted the plural, as Picarda does, see H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) Chapter 1. I have done this to avoid confusion with the verb charity and because it focuses attention on the organisations which are usually described as charities and which are the object of the law’s attention. 199 Bryan A Garner (ed), Black's Law Dictionary (7 th ed, 1999) 930-31. 200 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 501. Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 118.
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‘Organisations ’ include trusts and any other entities by which charitable purposes and more broadly, association in civil society are pursued.
‘Pemsel’s case’ means: The Commissioners for Special Purposes of the Income Tax v
Pemsel [1891] AC 531.
‘Pemselian partitioning ’ means the division of charitable purposes into the four heads set out by Lord Macnaghten in Pemsel’s case .
‘Pemselian purpose ’ means only ‘the four principal divisions’ of charitable purpose stated by Lord Macnaghten in Pemsel’s case , namely ‘trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads’ 201 but applies to organisations other than charitable trusts.
‘Preamble’ means the Preamble to the Statute of Elizabeth.
‘Public’ means the community as an aggregate, but not as an organized whole. It is often confined to mean such members of the public as require the particular goods or services concerned, or a significant section of the public, and not the public at large. 202
‘Statute of Elizabeth ’ means Statute of Charitable Uses 1601, 43 Eliz.c.4.
‘Voluntary’ means the opposite of coerced.
201 See Pemsel’s case [1891] AC 531, 583. 202 Peter E Nygh and Peter Butt (eds), Butterworths Concise Australian Legal Dictionary (2 nd ed, 1998) 351.
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J. Moving Towards a Jurisprudence for Civil Society: An Overview of the Thesis
The thesis is an interpretation and synthesis of cases and published research to suggest an alternative architecture – a new way forward – for jurisprudence developed from the doctrine of charitable purpose as it is presently understood but which expands to include all civil society organisations. It involves setting out and building from diverse disciplines, theories and insights. The thesis is divided into three parts.
Part One is devoted to identifying the law of charities, the reasons why it needs to be developed, and obstacles to that development. It foreshadows how these obstacles might be addressed. In this chapter only literature locating the discussion has been mentioned.
Chapter II is a discussion of foundational, definitional and conceptual inadequacies with the law as it is presently understood. It includes a discussion of difficulties in applying the common law to contemporary social challenges. The inability of the common law to develop is due to the failure to address problems of method. I argue that there are three common law principles which have not been followed. The abandonment of these principles makes sense in their historical context. Chapter III begins with these three principles and discusses them in their historical context. It goes deeper, though, and identifies taxonomy problems, inadequate methods of measurement and contested a priori assumptions to be addressed in developing the doctrine of charitable purpose.
The contested a priori assumptions elucidated through Chapters II and III relate to three subject areas: public benefit, altruism and the coercive role of government. These three subject areas are explored in the second part which is titled, Civil Society. Civil society is the broader framework within which charities are located. I theorise that it is in rediscovering the doctrine of charitable purpose as central to civil society that its capacity for development lies. That rediscovery requires exploration of the three subject areas: public benefit, altruism and the coercive role in the context of broader theorising regarding civil society. One Chapter is devoted to each. Benefit as a public and private concept is explored
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in Chapter IV. Altruism is considered in Chapter V. The place of charities in particular and civil society organisations in general cannot be understood without taking cognisance of worldviews in relation to the coercive role of government. Those worldviews cannot be separated from the philosophy that underpins theoretical understandings of civil society.
Insights from political philosophy on the coercive role of government therefore dominates
Chapter VI and closes Part Two.
Part Three is dedicated to jurisprudential development. In Chapter VII the foundations for enabling and regulating charities, and more generally civil society organisations, to pursue their purposes are considered under the heading of Association law. In Chapter VIII the
Preamble and the decision in Pemsel’s case (from which the present difficulties are derived) is revisited with a view to finding an alternative reading beyond the orthodox. An alternative architecture for the common law, developed from the doctrine of charitable purpose but inclusive of all civil society purposes is outlined in Chapter IX.
In summary, the thesis argued is that the doctrine of charitable purpose, freed from the
Pemselian partitioning , can continue to perform useful service in the development of the law applying to civil society organisations. In sketching the outlines of a jurisprudence for civil society, I develop a framework consistent with such a reading of Pemsel’s case. I set out an argument as to how this reading can be rediscovered. One caveat is required at the outset. A central argument is that the doctrine of charitable purpose can evolve to include all civil society organisations. It is necessary, therefore, to discuss the idea of charity in both its present form, which is riddled with definitional difficulties, and the evolved form, which extends to include all civil society organisations. These conceptual challenges are managed by foreshadowing the objective in mind and extensive reliance on the nuanced definitions set out in the section above. These challenges cannot be completely avoided, however, and it may be necessary for the reader to refer frequently to these definitions and read the thesis, particularly chapter II and III with the end in view.
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K. Postscript
As in Dickens’ Tale , the confusion flowing from court hearings and the ostensible injustices arise, not because of the fine distinctions made in those hearings, but because of the way they unfold in the broader social and political context. It is the inadequate way that jurists have developed the doctrine of charitable purpose to respond to the changed social and political context that has generated the challenges now facing common law jurists considering civil society. The starting place for this discussion is not, then, the doctrine of charitable purpose but the broader social and political context in which the doctrine of charitable purpose is located. By reflecting upon the challenges facing common law countries, it becomes apparent why it is important to go beyond charities to a jurisprudence for civil society and what that jurisprudence should address. It is to those social challenges that the next chapter first turns.
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II WHY GO BEYOND CHARITIES ?
A. Preamble
In A Tale of Two Cities , Charles Dickens paints a tragic picture of a physician, Dr Alexandré
Manette, who was imprisoned for so long that when his daughter and banker came to get him, they found him voluntarily locked in a room and cobbling shoes. His interminable confinement caused Dr Manette to completely forget his original vocation and he could not take advantage of his changed circumstances. Like Dr Manette, the doctrine of charitable purpose seems disconnected from related disciplines, imprisoned within its Pemselian partitioning , unable to respond to changed circumstances and unable to fulfill its proper role in society. Just as Dr Manette could not recognise the banker who cared for him and came to help, so the doctrine of charitable purpose seems to be incapable of connecting with the economic discourse that can lead it out of its isolation. Just as his daughter – who was his closest but unknown relative – was unrecognisable to Dr Manette, so the doctrine of charitable purpose cannot recognise the proximity of the civil society discourse that can relocate it in the wider family of purposes voluntarily pursued, often for the benefit of others.
Just as there was a deep commitment on the part of the banker and daughter to see Dr
Manette through the challenges he faced and reformed in his role in society, so there is a deep commitment on the part of societies throughout the common law world to address the challenges facing the doctrine of charitable purpose and see it reformed in its role in society.
B. Introduction
From Chapter I it will be recalled that there is extensive academic literature expressing dissatisfaction with the law of charities. Beginning with that literature, identifying problems, puzzles, gaps and inadequacies and then building, from that, towards a solution or alternative would be usual in a thesis such as this. The problem with that approach is that it is insufficient. Whilst there is a recognised need to build from the law of charities to a jurisprudence for civil society that legal literature, as Garton has observed, focuses ‘almost
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exclusively on the charitable sector as opposed to wider organised civil society’. 203 Garton was writing in a regulatory context and the objective of this work is to progress beyond both
Garton’s regulatory proposals and the more general confines of the doctrine of charitable purpose. It is to provide a framework that is useful to address the broader challenges facing civil society as a whole, not just theoretical problems embedded in the doctrine of charitable purpose. As Lord Porter noted:
... the difficulty does not lie in the origin of the doctrine alone. It is, I think, inherent in the subject
matter under consideration. ... It is not the law but the diversity of subjects which creates the
difficulty. 204
So, whilst academic insights in relation to the law of charities inform and substantially frame sections of the chapter, the difficulties with the doctrine and the diversity of subjects are marshalled principally by having regard to the classical definition theory methodology mentioned in Chapter I with a view to defining, not just charitable purpose, but civil society organisations. The problems, puzzles, gaps and inadequacies identified are woven through the discussion rather than determining the point of embarkation.
The threshold problems of definition, and the way regulation is carried out, cannot be addressed adequately without returning to the usually overlooked foundation of all civil society organisations, not just charities, which is the freedom to associate. 205 Discussion of foundations, genus and form therefore introduces the problems explored in this chapter. A second usually overlooked threshold problem is that the law regulating charities in particular,
203 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 27. In his footnote 109 Garton explained that these limitations were due in part to the scope of the briefs given to the respective Inquiries. 204 See: National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 52 where Lord Peorter held: But the difficulty does not lie in the origin of the doctrine alone. It is, I think, inherent in the subject matter under consideration. Whether any two persons would agree in all cases as to what ‘charity’ should include is at least doubtful. It is not the law but the diversity of subjects which creates the difficulty. 205 Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53) 1-2; Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 27.
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but more generally civil society organisations, varies according to the form taken. Even though certain trusts, companies limited by guarantee, incorporated associations and unincorporated associations could all be charities pursuing identical purposes they are subject to different regulatory regimes. This also frequently overlooked problem compounds the problems set out later in the chapter so it is also introduced in the first section. The substantive problems, related to the doctrine of charitable purpose that explicitly concern the inadequacy of the Pemselian purposes , are considered in the second substantive part. In the second section, the impact of the law on social concerns, rather than the more esoteric legal agendas, informs the issues chosen for exploration and the way they are considered. Beyond the narrow agenda of the doctrine of charitable purpose, is a plethora of other problems, eluded to in the introduction, that are central to civil society, and these are discussed in the third substantive section. Problems with entitlement to income taxation favours, which are also integrally linked to charitable purpose across the common law world, are considered in this last section as part of the problems distinguishing businesses from charities.
This chapter and the next chapter are paired. This chapter discusses the presenting problems
– that is problems with the content – that point to the need to go beyond charities to a jurisprudence for civil society. Chapter III focuses on elucidating the underlying problems of methodology rooted in philosophic a priori assumptions that make analysis of these problems within common law jurisprudence so difficult. Many of the problems discussed in this chapter apply broadly to civil society organisations, not just charities, but in this chapter the problems discussed are contextualised in a discussion of charities. This is because the problems embedded in the doctrine of charitable purpose lie at the heart of the challenges addressed in this thesis. Later it will be theorised that many of these problems are resolved by abandoning the ‘technical’ definition of charitable purpose in favour of a definition of charitable purpose that extends to include all civil society organisations. Charities and civil society organisations would then be one and the same. It will also be theorised that linking entitlement to favours to the ‘technical’ definintion of charitable purpose only further
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complicates the discourse. Those developments take shape in Part Three. The task at hand is to address the threshold problems. The foundations is where this begins.
C. Addressing the Threshold Problems of Foundation, Genus and Form
In the first part of this section, the essence and foundational freedom to pursue charitable purposes and regulation of that freedom begin the discussion. In the second part, the always difficult problem of finding the boundary between charities and non-charities is discussed.
1. Charities are without an Essential, Theoretical Foundation
Identifying the essence of charitable purpose is a first step to a classical definition. A definition is the first step to clarifying which organisations should be regulated and which should not. Beneath that question is the larger question: what freedom is there to pursue civil society purposes in general and charitable purposes in particular? Following from the answer, if there is any such freedom, is the question: why does this freedom exist? This is an entry point to the crux of many of the problems.
Freedom of association and charities are integrally linked because, at the heart of almost all charitable purpose, can be found voluntary association for public benefit. Freedom to associate and give is the heart, not just of charities, but of the whole of civil society.
Defourny and Develtere go so far as to state that ‘it is fair to say that the genesis of the social economy [their descriptor of civil society] parallels to a large extent the gradual emergence over the centuries of freedom of association.’ 206 Writing in 2005, Garton observed that this oversight led to a giant theoretical leap. Summarising the common themes running through the reform agendas of the many common law jurisdictions addressing the doctrine of charitable purpose, he noted that:
206 Jacques Defourney and Patrick Develtere, 'The Social Economy: The Worldwide Making of a Third Sector ' in Jacques Defourney, Patrick Develtere and Bénédicte Fonteneau (eds), L'economie Sociale au Nord et au Sud (1999) 4.
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all focus almost exclusively on the charitable sector as opposed to wider organised civil society;
all are concerned with ensuring that the definition of charity reflects contemporary social needs;
and all except England are concerned with establishing new sector specific regulatory agencies.
However, what is most striking is the fact that all the reform proposals have been made on the
assumption that regulation of organised civil society – and more specifically, regulation of the
charitable sector – is justified. None of the reform bodies take a step back to consider whether
this is indeed the case, and ask whether flourishing civil society might achieve, and whether
regulation would enable this. Instead, they simply consider the form that regulation should
take. 207
This analysis of the framework for addressing problems begins by taking that step back and considering the justification for all and any regulation.
The invitation to take that step back and begin analysis of charities in the context of freedom of association in civil society, has been flagged for further exploration since at least 1952.
The Introduction to the Nathan Report quoted Lord Beveridge from page 10 of Voluntary
Action: A Report on Methods of Social Advance as pointing to this. It noted that Lord
Beveridge’s first recommendation, to ‘enable the voluntary movement, was a review of charities and the law within which they operate’. 208
Taking that step back is the first step forward. Lord Beveridge’s recommendation presupposes a particular view of society. A view of society where ‘voluntary movement’ is to be encouraged. The substance of freedoms, though, ‘depends on what the community or society demands and this in turn is often a function of what it is prepared to trust and types of risk to which it feels vulnerable’. 209 The prevalence of that worldview, in an age of
207 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 27. In his footnote 109 Garton explained that these limitations were due in part to the scope of the briefs given to the respective Inquiries. 208 Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53)1-2. 209 Michael Power, The Audit Society: Rituals of Verification (1999) 3.
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terrorism, might be different. 210 If a society is consumed by what Michael Power called ‘the pathologicality of excessive checking’, is there any space left, at common law, for free association and giving? Is there a place where government cannot intrude without trespassing on common law freedoms? 211 As an Australian Senate Committee asked in
December 2008:
Should regulatory reform apply to the whole not-for-profit sector, or only to segments of the
sector? For example, to charities; to bodies receiving public funds, whether through grants or tax
concessions; to bodies with a financial turnover about a specified threshold etc? 212
The way a society answers these questions determines more than the definition of ‘charitable purpose’ and consequently the scope of operation of the doctrine of charitable purpose, it informs the common law jurisprudence for the whole of civil society.
Charities in common law countries have felt the pinch of these limitations nowhere more acutely than in legislation that has resulted from the War Against Terror. 213 The United
Nations Security Council has called upon member states to take action to monitor, control and seize funds collected for terrorist acts. 214 The scope of the resolutions require, or at least encourage, member states to bring what has formerly been a private matter – giving – within
210 Mark Sidel, 'Fallout from the War on Terror' in Yale Global Online
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the purview of government scrutiny. 215 Governments are to decide whether or not any particular gift is within the definition of a terrorist act, as defined by that state, in the light of the resolutions. In an endeavour to guide charities the Charities Commission of England and
Wales had issued a policy on charities and their alleged links to terrorism. This policy does not make any reference, though, to the deeper theoretical principles. 216 That Commission’s
Simplification Plan, stated that it is presently ‘developing a risk and proportionality framework’. 217 The Commission seeks to regulate charities in ways that are ‘proportionate, accountable, consistent, transparent and targeted’. 218 Having stated this, the Commission does not ground these principles in fundamental human rights. 219 As a consequence the framework for resolving clashes between freedom to associate and give in the context of charities remains without a theoretical framework. This is not simply a problem for theorists. Baker has stated, as an illustration of the use of ‘terrorism’ powers, that ‘counsel for the US government went so far as to argue the executive had authority to detain a little old lady in Switzerland who sent cheques to what she believed was a charity for Afghans in
Afghanistan but which was in fact a front for Al Queda.’ 220 The arrest of the little old lady in
Switzerland might sound an extreme example; it is not. Recently, in Haneef’s case, 221 the
Full Federal Court in Australia has had cause to restate the fundamental common law freedoms in just such a situation. Dr Haneef was imprisoned in Queensland under the
Australian government’s anti-terrorism laws on the basis of his association and his gifts. The charges, which were subsequently dropped, were based on an alleged association with ‘a terrorist organisation consisting of two persons including his two second cousins.’ 222 The
215 John Mowbray, Lewin on Trusts (18 th ed, 2008) 1327. 216 The Charity Commission for England and Wales, Counter-Terrorism Strategy (2008). 217 The Charity Commission for England and Wales, Charity Commission Simplification Plan 2008 (2008) 4. 218 The Charity Commission for England and Wales, Charity Commission Simplification Plan 2008 (2008) 6. 219 The Charity Commission for England and Wales, Charity Commission Simplification Plan 2008 (2008). 220 Ian Barker, 'Human Rights in an Age of Counter Terrorism' (2005) 26 Australian Bar Review 1, 12 citing Hamdi v Rumsfeld , 542 US 507 (2004) 6 and Rasul v Bush , 542 US 466 (2004); Al Odah v United States , 542 US 466 (2004). 221 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007). 222 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [2].
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arrest ostensibly resulted because Dr Haneef made a gift. He was alleged to have
‘intentionally provided resources’ to a terrorist organisation by giving to his second cousin ‘a
“subscriber information module” (SIM) card’ for a mobile telephone. 223
The link between charitable association and giving on the one hand and its foundations in freedom to associate and freedom to give on the other, remains largely unexplored. As
Garton observed:
there are no existing theories of civil society regulation on which the laws would be placed.
English charity law, for example, is based on a statute which predates sector-based analysis of
society altogether, and its development has been influenced by factors which attempt to
undermine civil society. For example, the law of mortmain, which dates back to the Magna Carta
in 1215, prohibited certain testamentary gifts of land to charities, partly so as not to deprive the
crown of revenue and partly out of “hatred ... and contempt” for charities and their benefactors. 224
With the exception of the three old United States cases (pointing to freedom of religion as underpinning not just the advancement of religion but society in general), jurists both on and off the bench have tended to pass over this fundamental nexus. 225 That is not to say that the common law foundations of freedom have not been revisited more recently. In Haneef’s case , on appeal, the Full Court of the Federal Court of Australia held that ‘[f]reedom is not merely what is left over when the law is exhausted’226 but that ‘the common law, ... has its own set of constitutional rights, even if these are not formally entrenched against legislative
223 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [2]. 224 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 44B (citations removed). 225 Holland v Peck (1842) 37 NC 255, 258; Gass v Wilhite (1834) 32 Ky 170, 180; People ex rel Seminary of our Lady of Angels v Barber (1886) 3 NY St Rep 367 affirmed in (1887) 13 NE 936. 226 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [113].
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repeal.’ 227 Nor is the judical reaffirmation of common law freedoms unique to Australia in the twenty-first century. Ahdar and Leigh writing in 2005 and referring to freedom of religion summarise the position internationally as: ‘in the past two decades, courts across the common law world have purported to find that certain fundamental rights existed – either as limitations on legislative capacity (Australia) or in the form of a strong presumption against legislative encroachment (New Zealand and the United Kingdom).’ 228 What has not been theorised is the link between these freedoms and charitable giving.
Exploration of the nexus is not driven only by terrorism laws. Revenue concerns in particular, and more generally regulation of fundraising are also driving inquiry into the division between charitable giving and freedom. In 2007, the head of the United States
Senate Finance Committee, Senator Grassley, sent a letter to Kenneth and Gloria Copeland the leaders of a Christian religious ministry. 229 The letter, which is one of six sent to ‘media- based ministries’ 230 asked for ‘a detailed explanation of the personal use of assets’. 231
Senator Grassley stated that his object was fiscal integrity. He wanted the American people to be ‘assured that all donations are being used for the tax-exempt purpose of the organisation.’ 232 The letter from Senator Grassely to the Copelands has implications for basic freedoms discussed earlier in this chapter. When should a religious charity be free to conduct its ministry as it sees fit? There is a long tradition under the common law, linked to the concept of the call to religious ministry, that integrates a religious practioner’s public and
227 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [113] citing TRS Allan. 228 Rex Ahdar and Ian Leigh, Religious Freedom in the Liberal State (2005) 102 (citing Australian Capital Television Pty Ltd v Commonwealth (No 2) (1992) 177 CLR 106 as authority for the situation in Australia; R v Lord Chancellor, Ex parte Witham [1998] QB 575; R v Secretary of State for the Home Department, ex parte Simms [2000] AC 115; and R (on the application of Daly v Secretary of State for the Home Department [2001] 2 WLR 1622 as authority for the situation in the United Kingdom, Fraser v State Services Commission [1984] 1 NZLR 116, 121 and Taylor v New Zealand Poultry Board [1984] 1 NZLR 394, 398 as authority for the position in New Zealand). 229 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm. 230 Senator Chuck Grassley, 'Ministries' response to the Nov. 5 Inquiry' (Press Release, 6 December 2007). 231 Joe Maxwell and Rob Moll, 'Senate Crackdown', Christianity Today 2008, 15. 232 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm.
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private life. How is a common law country to respond to the challenge of wanting to encourage people to give their lives in the service of God and others in a charitable way on the one hand, and on the other restraining the use of religion as a vehicle for self indulgence?
Put in United States’ constitutional language; the ‘danger here is that [Grassley’s letter requesting information] can become a fishing expedition ... into areas where the First
Amendment protects ministries – for example, their beliefs and views of the gospel.’ 233
Senator Grassley’s expressed concern was that: ‘Jesus comes into the city on a simple mule, and you got people today expanding his gospel in corporate jets’. 234 How is a common law society to distinguish the religious practitioner that rides into town on a mule from the one that enters in a private jet? Should it? How can the doctrine of charitable purpose, as presently understood, provide architecture for this discussion? As presently understood it cannot. The calls for greater regulation in such a context may be very understandable, but without a theoretical framework to assist, legislators, regulators and judges are in a quandary.
These concerns, regarding the scope of legislative inquiry into giving in the United States, are likely to cross the Atlantic sooner than might be expected. The European Court of
Justice has ruled that member states, which include the countries of the United Kingdom, should allow the same tax advantages for cross-border donations as for donations to domestic organisations. This is likely to trigger significant reflection on the theoretical foundations for freedom when giving as the Bristish Treasury considers how to protect its revenue base. For example, upon what common law principles (of sovereignty or otherwise) could a British court decide whether a charitable gift by a British citizen to a Portuguese
Nursing Home entitled that citizen to claim a tax deduction for the gift in Great Britain? 235
So, whilst at this point, it may not seem critical to anchor principles of regulation in common
233 Joe Maxwell and Rob Moll, 'Senate Crackdown', Christianity Today 2008, 15. 234 Laurie Goodstein, Senator Questioning Ministries on Spending (2007) The New York Times at 16 May 2008 235 See: Hein Persche v Finanzamt Lüdenscheid [2008] ECJ C318/07.
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law history and development because the issues are not usually considered in common law countries, in the context of issues regarding freedom and sovereignty there are international developments driving change.
Explicating the link between giving charitably and the freedom upon which it is predicated, has become a priority. Senators, regulators, practitioners and citizens who send cheques to aid workers in Afganistan, need foundations to guide them on the appropriate limits to regulation of charities in the context of fundamental freedoms. At the source these questions cannot be answered without defining the essence and foundations of the doctrine of charitable purpose.
2. The Essence of Charitable Purpose and its Other
This section of this chapter began with a subsection identifying a foundational problem.
That problem was difficulty identifying the common law foundation of freedom to associate to pursue charitable purposes and give. Equally important is differentiating charities, and more broadly civil society organisations, from other organisations. Differentiation is particularly critical for lawmakers and enforcers in common law countries struggling with how to justly regulate a plethora of organisations. As presently theorised, the doctrine of charitable purpose segregates from other organisations those organisations that are pursuing
Pemselian purposes . There is not a satisfactory theoretical basis for distinguishing the organisations presently defined as charities from those presently not defined as charities.
The problem arises from the way charitable purpose is ‘defined’. To be pursuing a charitable purpose an organisation:
1. must be pursuing purposes that are within the ‘spirit and intendment’ of the
Preamble ;
2. must pursue only those purposes; although incidental other purposes will not
necessarily vitiate the charitable purpose; and
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3. the entity must exist for the benefit of the public. 236
These criteria are inadequate as a tool for differentiating between organisations. It will be recalled from Chapter I, that the Preamble sets out a long list of items and it seems that for a very long time it was ‘the practice of the Court to refer to [the Preamble ] as a sort of index or chart.’ 237 The list did not prove particularly helpful so, following Lord Macnaghten’s decision in Pemsel’s case , the ‘spirit and intendment’ of the Preamble has come to mean falling within one of four Pemselian purposes , namely relief of poverty, the advancement of education, the advancement of religion and other purposes beneficial to the community. 238
The net effect of taking the Preamble as a definition, and the categorisation in Pemsel’s case as the framing jurisprudence, is this: the method a twenty-first century citizen of a common law country must adopt to ascertain if a purpose is a charitable purpose today involves understanding how a court, in exercising this jurisdiction, would interpret a list in the
Preamble of an English seventeenth century statute, having regard to a classification in a nineteenth century English case. The existing cases from all over the common law world may act as a guide as to whether a purpose is within the ‘spirit and intendment’ of that list, but there is not, as one Chief Justice of the High Court of Australia observed, a relevant genus. 239
Without a relevant genus it is impossible to adequately define the subject to be regulated, and that presents problems for legislators. In the section on foundation and essence that preceded this discussion, limits on inquiry into giving and sovereignty were discussed.
These challenges of defining what organisations are within and what are outside the scope of regulation apply also to the more general issue of fundraising. The Irish Parliament has
236 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 2. 237 Pemsel’s case [1891] AC 531, 581 (Lord Macnaghten). 238 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten). 239 Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR 659, 667 (Barwick CJ).
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added a full two chapters of fundraising regulation in its Charities Act 2008 240 but its scope is limited to charities as defined at common law and exended by the Act. 241 The Australian
Senate Committee on Economics has conducted an inquiry into the Disclosure Regimes for
Charities which focused on fundraising and has recommended a whole-of-sector approach, but it cannot define the organisations that will fall within the sector. 242 It found that the sector had to be considered in a legal context as a ‘third sector’, but concluded that ‘an accurate descriptive analysis of the Sector was impossible to achieve’. 243 Having come to this conclusion its first recommendation was, nevertheless, for a uniform nomenclature across all Australian Governments. 244 A beginning must be made, then, towards defining the organisations that make up this sector. If legislation is to apply to all of the organisations that make up the sector it must go beyond adding to the Pemselian heads, as Ireland and other British jurisdictions have done. A definition of these organisations is needed.
Defining generally the organisations that make up the sector will not resolve all of the problems because whilst the lack of definition is fundamental to the challenges it is not exhaustive of them. Integral to the problems are the diverse organisational forms that charitable institutions and other forms of voluntary participation take. Problems of form are considered next.
3. Problems of Form
Common law countries have provided a plethora of means for citizens to voluntarily associate and give. The institutions and guilds which were early vehicles for philanthropy in medieval England gave way to the trust, so dominant from the sixteenth to the close of the
240 Charities Act 2008 (NI) Part 13 Fund of Charitable Institutions. 241 Charities Act 2008 (NI) s 1-5, 16-25. 242 The Senate Standing Committee on Economics, 'Disclosure Regimes for Charities and Non-Profit Organisations' (Parliament of the Commonwealth of Australia, 2008). 243 The Senate Standing Committee on Economics, 'Disclosure Regimes for Charities and Non-Profit Organisations' (Parliament of the Commonwealth of Australia, 2008) 11. 244 The Senate Standing Committee on Economics, 'Disclosure Regimes for Charities and Non-Profit Organisations' (Parliament of the Commonwealth of Australia, 2008) 154 (Recommendation 1).
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nineteenth century. Charitable trusts continue as a vehicle for philanthropy but the twentieth century witnessed the emergence of a variety of other legal forms which carry across into the twenty-first century. The ancient forms of association through institutions and guilds re- emerged in the form of companies, associations (both incorporated and unincorporated),
Royal Charters, Letters Patent, incorporated bodies and statutory forms of association.
These bodies, whether charities or not, all share one characteristic with the charitable trust which is critical but rarely stated. All of these organisations, be they incorporated or unincorporated, are a vehicle for holding assets to be applied to purposes which are not commercial, family or government. The concept of purpose has been central to the development of the law of charitable trust. Charitable trusts, as a vehicle for social contribution, are on the wane even in the United Kingdom. 245 Remaining fixated on the trust form, and locating this discussion of purposes within the law of trusts, is hindering common law development. It is the pursuit of charitable purposes , not the packaging of the purposes in the form of a trust, that is central to jurisprudence in this emerging area of law.
The problem arises because the common law has, for the last four hundred years or so, been focused on trusts for purposes , whilst legislation has been enabling and regulating the
245 For a summary of the decline of the trust form and the emergence of other forms internationally see: Myles McGregor-Lowndes and Matthew Turnour 'From Charity to Civil Society' (Paper presented at the ARNOVA Conference, Atlanta, 15 - 17 November 2007) 2-4; See also Kathleen Day and Rose Anne Devlin, 'Backgrounder: The Canadian Nonprofit Sector' (Canadian Policy Research Networks, 1997); David Smith, 'Grassroots Associations Are Important: Some Theory And A Review Of The Impact Literature' (1997a) 26 Nonprofit and Voluntary Sector Quarterly 269 ; David Smith, 'The Rest Of The Nonprofit Sector: Grassroots Associations As The Dark Matter Ignored In Prevailing “Falt Earth” Maps Of The Sector' (1997b) 26 Nonprofit and Voluntary Sector Quarterly 114 ; Australian Bureau of Statistics, Standard Economic Sector Classifications of Australia (SESCA) , Cat. No 1218.0 (1998); Kristin A Gronbjerg and L Paarlberg, 'Extent and Nature of Overlap between Lisitngs of IRS Tax-Exempt Registration and Nonprofit Incorporation: The Case of Indiana' (2002) 31 Nonprofit and Voluntary Sector Quarterly 565 ; Marion R Fremont-Smith, Governing Nonprofit Organisations – Federal and State Law and Regulation (2004); Marion R Freemont- Smith, 'The Search for Greater Accountability of Nonprofit Organisations: Recent Legal Developments and Proposals for Change' (Working Paper No 33.8, The Hauser Center for Nonprofit Organisations, Harvard University, 2007); Marion Fremont-Smith, 'Comments on US Senate Committee on Finance Staff Discussion Draft of June 21, 2004' (2004) Urban Institute 7 at 5 September 2008; Michael Hall, Larry McKeown and Karen Roberts, 'Caring Canadians, Involved Canadians ' (2005) 2000 National Survey of Giving, Volunteering and Participating, Statistics Canada ; UK Government, 'Private Action, Public Benefit' (Strategy Unit, Cabinet Office, UK Government, 2002); Givewell, Important Statistics on the State of Australian Philanthropy (2006)
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formation of associations under different regimes based on form , not the purposes pursued.
Addressing problems of form requires resolving the question of whether purpose or form should be the principal indicium determining regulation. If purpose is to be the dominant criterion, then methods more sophisticated than the current methods of identifying charitable purpose and, more generally civil society purposes would be helpful. The diverse forms of charities and more generally civil society organisations compound the problems of identifying charitable purpose in particular and civil society purposes generally.
D. Problems Arising from the Four Principal Divisions of Charitable Purpose
1. Introduction
The first and second heads illustrate fundamentally antithetical problems. In the case of poverty relief, what is needed is greater subsegmentation to separate those at a significant disadvantage from those that simply have some financial necessity. In the case of advancement of education, the problem is the opposite – the class has been stretched, and stretched again, in the hope of finding an appropriate outer limit, when what is needed is reclassification beyond education. The broad and unsophisticated scope of relief of poverty is discussed first. The issues embedded in advancement of education follow. Issues set out in the section above will be revisited under the third head, advancement of religion, as that discussion logically follows the discussion of the last section in relation to fundamental freedoms. The section closes with consideration of three fundamental problems with the fourth general head of other purposes beneficial to the community.
2. The Broad and Unsophisticated Scope of Relief of Poverty The word ‘poverty’ is a word of ‘wide and somewhat indefinite import; and it may not unfairly be paraphrased as meaning persons who have to ‘go short’ in the ordinary acceptation of that term, due regard being had to their status in life.’ 246 Going short can be a
246 Re Coulthurst [1951] Ch 661, 666.
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long way from poverty but those comments by an English judge have been adopted by
Justice Walsh of the High Court of Australia. These observations illustrate the quite generous interpretation of what amounts to poverty. Justice Walsh summarised the law in
1971 in the following terms and it remains an adequate summary for present purposes:
A person may be in need without being destitute. The word ‘poverty’ and similar expressions, as
used in the law in relation to charities, refer to persons who, although they may not be in abject
poverty, are subject to some degree of financial necessity. That view accords with the view stated
by Kitto J in Ballarat Trustees Executors and Agency Co Ltd v Federal Commissioner of
Taxation … and also with that stated by Vaisey J and by the Court of Appeal in Re Coulthurst,
deceased; Coutts and Co v Coulthurst … In the latter case there was a discussion of the degree of
need in which persons must be, in order that a gift for the purpose of assisting them financially
may be held to be a gift for the relief of poverty.247
This generous approach obscures rather than resolves problems which centre around the
‘degree of need [required for a gift to be] for the relief of poverty.’ 248 That is a problem.
There is a vast continuum between persons in abject poverty who are without the necessities of life and who will die if not given food or medical attention on the one hand; and those whose poverty amounts to ‘some degree of financial necessity.’ Some criterion is needed, beyond the notion of relief of poverty as a head of charitable purpose, to sort cases into more discriminating categories for different levels of need.
One size does not fit all. This has led in Australia to the creation, for taxation purposes, of two other classes which arguably could be treated as charitable; but the way the doctrine of charitable purpose has developed this has not been possible. The two examples are the classes called Public Benevolent Institutions and Necessitous Cirumstances Funds. 249 Public
247 Downing v Commissioner of Taxation (1971) 125 CLR 185, [7] (Walsh J). 248 D v Bryant Trust Board v Hamilton City Council [1997] 3 NZLR 342, 350 (Hammond J). See also Re Scarisbrick; Cockshott v Public Trustee and Others [1951] Ch 622 (Evershed MR) 249 Income Tax Assesment Act 1997 (Cth) Division 30, particularly items 4.1.1 and 4.1.3 of section 30-45.
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Benevolent Institutions are ostensibly charities that provide direct relief to those in need.
Necessitous Circumstances Funds provide funds to those at a disadvantage. For example, as the law presently stands in Australia, 'the current disadvantaged position in Australia of
Aboriginals is such that any valid trust for their benefit must also be for public benevolent purposes...' 250 and a trust to establish [only] Australian Aboriginals in the profession of barrister may, in appropriate cases, amount to a category entitling gifts to that trust to tax deductibility on the basis that such a gift is for the relief of necessitous circumstances. 251
The doctrine of charitable purpose knows of no such broad category as the public benevolent institution or the necessitous circumstances fund, and they are not incorporated into the extant jurisprudence, yet both stand so close to charitable purpose and are clearly a development of a poverty-relieving jurisprudence. The need for such categories as Public
Benevolent Institution and Necessitous Circumstances Fund legislatively is because the categorisation of charitable purpose is inadequate.
The same issues arise with respect to the relief of the ‘aged’ and the ‘impotent’. The common law requires that they be treated as separate concepts but there is no clarity as to why ‘aged’ is relevant if the aged is a very rich person capable of acquiring by purchase all their needs. There are clearly sometimes disadvantages with being ‘aged’; and with being
‘impotent’; but, if it is the disadvantage not the age or impotence that is important, then should not that be the classifier?
The mirror of aged is infancy and the challenges associated with granting favour to infants is even more problematic. Picarda doubts that ‘any of the decided cases justify the assertion that gifts or trusts for the care, upbringing and establishment in life of children and young people generally is charitable. 252 He notes, though, that if the child or children are
250 Maclean Shire Council v Nungera Co-operative Society Ltd 84 LGERA 144 (Handley JA, Priestley and Sheller JJA agreeing). 251 See Trustees of the Indigenous Barristers' Trust – The Mum Shirl Fund v Federal Commissioner of Taxation [2002] FCA 1474. 252 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 155.
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‘defenceless, under privileged or otherwise necessitous’, 253 that a gift or trust to assist those children would be charitable.’ 254 The question which a citizen might reasonably ask is, why old age generally should be a gateway to charitable purpose and not young age. Second, if it is the disadvantage that attaches to the age, why is not dealing with this disadvantage the gateway to charitable purpose instead of age?
At the source of much of the confusion, is the problem that much of what previously was a charitable purpose is not a charitable purpose any more. Since 1601, when the Preamble was passed into law and indeed since 1891, when Pemsel’s case was decided, the division of responsibility for poverty relief has changed. Whereas poverty relief was principally the responsibility of family and those pursuing charitable purposes, through the twentieth and into the twenty-first century the government has taken over much responsibility for poverty relief and care for the aged poor. Pensions, some low cost accommodation and also the provision of some low or no cost health services, are commonly provided by government in many common law countries. Whilst many hospitals, to pick the clearest example, remain controlled by charities, they are now substantively funded by government with the next largest contribution to funding being fees paid by patients. Charitable donations provide a very small part of revenue. In such a market, it is not surprising that hospitals run by civil society organisations compete directly with businesses which also run hospitals but do not enjoy the favours that attend being within the scope of operation of the doctrine of charitable purpose. In such a market, justifying the favours that hospitals run by charities enjoy is problematic. This problem applies generally to other industries where government funding has enabled businesses to enter the market and conduct activities profitably.
What this means is that whilst the concept of charitable purpose may remain meaningful in common parlance, as a legal concept imprisoned within the Pemselian partitioning of the
253 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 155. 254 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 155.
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four Pemselian purposes , it is relatively meaningless. It now describes purposes that are pursued by organisations that are charitable in simple language and instead of the categories when they do apply being useful, they are too broad or too narrow. In relation to the problems of breadth, take the following problems with the second Pemselian purpose.
3. Education as a Class is Too Broad In contrast with the need to narrow relief of poverty, age and impotence, there is an apparent need to expand the class of education. To date, the practice has been to extend the concept of education – perhaps to ludicrous extents. The common law has expanded the concept of education beyond mental education to include physical education. 255 It has expanded beyond physical education to include prizes for sport in a school. 256 It has expanded beyond prizes for sport at school to the the point where, as Justice Fawell opined with reference to the education of young persons,
‘A ride on an elephant may be educational. At any rate it brings the reality of the elephant and its
uses to the child’s mind, in lieu of leaving him to mere book learning. It widens his mind, and in
that sense is educational.’ 257
Expanding advancement of education, or finding other community benefiting purposes as analogous to the purposes set out in the Preamble , have stretched the Pemselian purposes arguably beyond rational limits. There is a need to theorise how purposes such as advancement of human rights (as has been added by statute in the United Kingdom) 258 fit within classes of cases that make up the law of charites. What also of the other purposes that edify society and are presently, if at all, caught up in the fourth head? What is to be made of purposes such as:
255 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 4. 256 Peter Luxton, The Law of Charities (2001) 120 citing Re Mariette [1915] 2 Ch 284. 257 In Re Lopes Bence-Jones v Zoological Society of London [1931] 2 Ch 130, 136. 258 Charities Act 2006 (Eng.&W) c 50, s 2(2)(g).
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1. Culture;
2. Environmental protection;
3. Recreational purposes;
4. Sport; and
5. Technology development? 259
Those problems cannot be addressed by remaining within the category of advancement of education, and overloading the catch-all fourth head. Foreshadowing conclusions, it might be addressed by acknowledging that education is but one dimension of social edification. 260
The deeper issue behind this is that preoccupation with the categories of ‘relief of poverty’ and ‘advancement of education’ suppresses common law development of other classifications that more appropriately segment charitable purposes from the purposes of government, business and family. It also surpresses the development of categories within charitable purpose that are more theoretically useful. This is fundamentally a problem of differentiation.
If it is neither education, as the second head of charitable purpose, nor the relief of poverty, aged or impotence, as the first head, that mark out the boundary of the doctrine of charitable purpose (as these services are provided by government, business and families), what is it that uniquely characterises such civil society organisations? Until this problem is adequately addressed, development of the doctrine of charitable purpose will remain difficult.
259 The Australian Charities Definition Inquiry recommended expanding the list of heads of charitable purpose to include similar purposes but this recommendation was not taken up by the Australian government. The United Kingdom parliament added such purposes to the list of charitable purposes of the common law. See Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001); and the Charities Act 2006 (Eng.&W) c 50. 260 Note this approach was rejected by Iacobucci J in Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 166-179 but is arguably consistent with the dissenting judgment of Gontier J. who considered the current law capable of very broad application see particularly 90-92.
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4. Problems with Advancement of Religion
Religion is private and yet has very public outworkings. It is credited with providing the social infrastructure of society by some judges 261 but can be a source of war and offensive to international covenants. 262 In an increasingly pluralist society the role of religion must be scrutinized and there are significant problems with the way the common law theorises the role of advancement of religion in the doctrine of charitable purpose. Theorising advancement of religion is, then, both deeply problematic and increasingly contested. In this section the challenges are considered from within three fundamental categorisation problems. Each problem builds from, and is related to, the others. The three problems considered are:
1. The doctrine of charitable purpose is incapable of distinguishing between
regulation and favouring and in the context of the distinction between freedom
of religion and favouring religion that is particularly problematic.
2. Why is advancement of religion favoured but not advancement of political
purposes?
3. If positive social contribution justifies favouring religion, why should other
sources of social contribution not be favoured also? Alternatively, if a religion
is not making a positive social contribution, should it not be excluded from the
category of charitable purposes?
In this section these three problems are explored.
261 Holland v Peck (1842) 37 NC 255, 258; Gass v Wilhite (1834) 32 Ky 170, 180; People ex rel Seminary of our Lady of Angels v Barber (1886) 3 NY St Rep 367 affirmed in (1887) 13 NE 936. 262 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 179-180; Peter Luxton, The Law of Charities (2001) 45 and 125-128. See also: The International Covenant on Civil and Political Rights (ICCPR), opened for signature 16 December 1966, GA Res 2200A (XXI) (entered into force 23 March 1976); and Declaration in the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief , GA Res 36/55, 36 UN GAOR Supp (No 51), 171, UN Doc A/36/684 (1981).
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(a) Distinguishing Between Regulating and Favouring
There is a fundamental distinction that can be drawn in logic, but not within the doctrine of charitable purpose, between regulating and favouring. This distinction is embedded in an argument advanced by Jonathan Garton. When he considered justifications for regulation of civil society he declared that it is necessary to divide the relevant law into two classes.
First, we can distinguish between regulation that is designed to prevent or rectify specific
problems that may occur in the course of the sector’s operation and [second] regulation that is
designed to encourage the already successful sector to flourish further .263
This distinction is critical. A common law country might wish to enable, but not necessarily favour a charitable purpose but the common law does not separate the two functions in the context of charitable purpose. This lack of distinction is particularly problematic in the context of advancement of religion as a head of charitable purpose. Furthermore, religion is given an expansive reading in the context of the doctrine of charitable purpose. Concern for religious liberty is given as the justification for this very broad reading. 264 Adopting a quote from Dal Pont, the Australian Charities Definition Inquiry noted:
The principal reason for the breadth of the definition of ‘religion’ is that it promotes religious
liberty which is enshrined in the Australian Constitution…and it is moreover consistent with the
law’s concern with protecting minorities. The law’s protection in this context is not directed to
safe-guarding the tenets of each religion — it is accorded to preserve the dignity and freedom of
persons to adhere to the religion of their choice .265
263 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 115. 264 Cf the attitude of the courts to the Roman Catholic Religion discussed in R. Ombres, 'Charitable Trusts: The Catholic Church in English Law' (1995) 126/127 Law & Justice 72. 265 See Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 148, adopted by the Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 175.
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Religions and religious denominations often spring from unpopular minorities 266 and whilst the lawmaker might wish to protect the freedom of association and speech, which is the hallmark of a healthy democracy, it might not wish to extend the favourable treatment associated with charitable purpose to the transfer to, and holding of, assets by the organisational expression of the religion. As Max Wallace noted in The Purple Economy :
Churches would pay their electricity, gas and other related expenses. But when they put their
garbage out to be collected, when a church catches fire, or should there vandalism, they expect
garbage collection, fire trucks and police without paying for them. Similarly, they expect
footpaths, roads and other infrastructure to be paid for by other rates and taxpayers while making
little or no contribution themselves. There is room for reform here which would save the states
considerable amounts in revenue foregone. 267
Why should this favour be extended to religious organisations in preference to other organisations? A society might wish not to do so. Alas the doctrine of charitable purpose does not permit this distinction between freedom of association and giving on the one hand, and exemption from taxation and sometimes donor favoured charitable gifts on the other.
It does not matter how irrational and fringe a religion may be, once it is found to be pursuing the purpose of advancement of religion, its organisational form is entitled to all of the
266 Church of the New Faith v Commissioner of Pay-Roll Tax (1983) 154 CLR 120, 159 (Murphy J). See also: Rocco Buttiglione, 'The Moral Mandate for Freedom: Reflections on Centesimus Annus' (Action Institute for the Study of Religion and Liberty, 2001); W T Cavanaugh, 'Does Religion Cause Violence?' (2006) Spring Zadok Papers 1; Silvio Ferrari, 'Individual Religious Freedom and National Security in Europe After September 11' (2004) 2 Brigham Young University Law Review 357; Paul Horwitz, 'The Sources and Limits of Freedom of Religion in a Liberal Democracy: Section 2(a) and Beyond' (1996) 54(1) University of Toronto Faculty of Law Review 1; David Little, 'Religion and Human Rights: A Personal Testament' (2002-2003) 18 Journal of Law and Religion 57; H. Picarda, 'New Religions as Charities' (1981) 131 New Law Journal 436; Steve T Woodfield, 'Doing God's Work: Is Religion Always Charitable?' (1996-1999) 8 Auckland University Law Review 25; T S Carter and A M Langan, 'Advancing Religion as a Head of Charity: What are the Boundaries?' (Paper presented at the Canadian Bar Association/ Ontario Bar Association: 3 rd National Symposium on Charity Law, Toronto, May 6 2005); Ian Ellis-Jones, Beyond the Scientology case: Towards a Better Definition of What Constitutes a Religion for Legal Purposes in Australia Having Regard to the Salient Judicial Authorities from the United States of America as well as Important Non-Judicial Authorities (PhD Thesis, Sydney University of Technology 2007); Craig Furneaux, Russia's Religious Revival: Exploring the New Paradigm of the Sociology of Religion (MA Thesis, Griffith University, 2002) 267 Max Wallace, The Purple Economy: Supernatural Charities, Tax and the State (2007) 114.
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favours that accompany pursuit of a charitable purpose. 268 Thus, a trust for the promulgation of the writings of a woman such as Joanna Southcote (who thought that she was going to give birth to another Messiah, and claimed she was with child by the Holy Ghost), would be entitled to all of the favours that attend the advancement of a charitable purpose. 269 By contrast, the promulgation of secular, ethical writings is not a charitable purpose entitled to those favours unless falling within the fourth Pemselian purpose .270 It does not matter how integral to the foundations of Occidental society the ethical writings might be, if they do not satisfy the criteria for advancement of religion, the promulgation of the writings will not enjoy the favours enjoyed by writings that advance religion at common law. 271
The anomaly may be taken a step further. O’Halloran and Luxton both observed that the law in this area tends to discriminate in favour of theistic religions – notwithstanding a broad reading of the meaning of religion at common law. Both suggest that this discrimination is offensive to international covenants prohibiting discrimination. 272 Ellis-Jones has mapped in detail the inherent illogicality of the current approach. 273 In secular, pluralist, common law
268 I acknowledge that since the decision in Gilmour v Coats [1949] AC 426 there is an unsettled debate over the extent to which, at common law, public benefit is deemed and the extent to which it must be established in the context of religious organisations pursuing advancement of religion. It is also noteworthy that legislatures have taken different approaches to the issue. My purpose is only to flag the problem generally. For a discussion of the issues see H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 84-93 and compare Charities Act 2006 (Eng.&W) and Extension of Charitable Purpose Act 2004 (Cth). See also Rocco Buttiglione, 'The Moral Mandate for Freedom: Reflections on Centesimus Annus' (Action Institute for the Study of Religion and Liberty, 2001); H. Picarda, 'New Religions as Charities' (1981) 131 New Law Journal 436; Steve T Woodfield, 'Doing God's Work: Is Religion Always Charitable?' (1996-1999) 8 Auckland University Law Review 25; Ian Ellis-Jones, Beyond the Scientology case: Towards a Better Definition of What Constitutes a Religion for Legal Purposes in Australia Having Regard to the Salient Judicial Authorities from the United States of America as well as Important Non-Judicial Authorities (PhD Thesis, Sydney University of Technology 2007). 269 Thornton v Howe (1862) 31 Beav. 14. See also Ashfield Municipal Council v Joyce and Others (1975) 34 LGRA 253 (exclusive Brethren allowed rates exemption). 270 See Bowman v Secular Society Ltd [1917] AC 406; National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31. 271 See Bowman v Secular Society Ltd [1917] AC 406; National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31. 272 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 179-80; Peter Luxton, The Law of Charities (2001) 45 and 125-128. See also The International Covenant on Civil and Political Rights (ICCPR) and the Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief. 273 Ian Ellis-Jones, Beyond the Scientology case: Towards a Better Definition of What Constitutes a Religion for Legal Purposes in Australia Having Regard to the Salient Judicial Authorities from the United States of America as well as Important Non-Judicial Authorities University of Technology 2007).
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countries, if this head of the doctrine of charitable purpose is discriminatory, and offensive to
International Covenants, to which the common law country is a signatory, then, ostensibly there is need for reform of this area of the law. 274 As the many inquiries referenced earlier demonstrate, this is easier said than done.
The issues are further complicated by the extent to which governments sometimes favour religion. The United Kingdom government now requires every student every day to ‘take part in an act of collective worship’ subject to limited exceptions.275 For many years,
Australians have been allowed tax deductibility for gifts to organisations for the teaching of religion in schools. 276 To that tax favour the Australian Government has now added $165 million to fund school chaplaincy as part of the National School Chaplaincy Program. 277 If there are to be increased favours extended to organisations for advancement of religion because of the contribution, how is this to be theorised?
Dal Pont raises one other issue relevant in this context and that is whether it is appropriate to adopt different definitions of religion according to the issue under consideration. He points to the possibility of having a narrower definition of religion apply for the right to access the favours but perhaps a broader definition when considering the right to associate. 278
274 Ironically perhaps the intention not to discriminate lies at the heart of the common law favouring of all religions. See Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 149. 275 School Standards and Framework Act 1998 (Eng.&W) c 31, s 70. 276 Income Tax Assessment Act 1997 (Cth) Division 30B s 30-25(1) Items 2.1.8 and 2.1.9. 277 Australian Government, Department of Education, Employment and Workplace Relations, Chaplaincy Program Overview (2008) Commonwealth of Australia
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Separating regulating from favouring gives due place to the question of what space is enabled for participation in civil society including religious liberty and yet provides the possiblility of different criterion for access to favourable treatment under the common law.
Until this distinction is adequately addressed these problems evident in advancement of religion as a charitable purpose are likely to persist.
(b) Excluding Others and Political Purposes
If the advancement of religion is charitable and a broad construction of religion is appropriately based on the foundational role of freedom of religion in society, 279 then why are other purposes that contribute to the foundations of society not also favoured at common law in a way similar to charities? Political parties, lobby groups and other institutions whose purposes are committed to the expression of fundamental freedoms and even the promulgation and maintenance of these fundamental freedoms are, at common law, expressly excluded from the class of organisations pursuing charitable purposes. 280 The door into charitable purpose is bolted shut against them. This is so irrespective of the contribution
279 Holland v Peck (1842) 37 NC 255, 258; Gass v Wilhite (1834) 32 Ky 170, 180; People ex rel Seminary of our Lady of Angels v Barber (1886) 3 NY St Rep 367 affirmed in (1887) 13 NE 936. 280 National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31. For an example of statutory amendments see the Charities Act 2006 (Eng.&W) c 50. For discussion of the relevant theory see: Perri 6 and Anita Randon, Liberty, Charity and Politics: Non-Profit Law and Freedom of Speech (1995); B Oonagh Breen, 'EU Regulation of Charitable Organisations: The Politics of Legally Enabling Civil Society' (2008) 10(3) International Journal of Not-for-Profit Law ; Abraham Drassinower, 'The Doctrine of Political Purposes in the Law of Charities: A Conceptual Analysis' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 288; Alison Dunn, 'Charity Law as a Political Option for the Poor' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 57; Alison Dunn, 'Shoots among the Grassroots: Political Activity and the Independence of the Voluntary Sector' in Alison Dunn (ed), The Voluntary Sector, The State and the Law (2000) 143; Alison Dunn, 'To Foster or to Temper? Regulating the Political Activities of the Voluntary and Community Sector' (2006) 26(4) Legal Studies 500; James Fishman, 'The Political Use of Private Benevolence: The Statute of Charitable Uses' (2008) Pace Law Faculty Publications
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to public good they make. The common law, perhaps surprisingly, justifies this exclusion on a similar basis to the embracing of advancement of all religion. Just as the courts do not wish to arbitrate between religions, and consequently place a broad reading upon ‘religion’ and thus accord charitable purpose status to all; so, when it comes to choosing between political purposes, courts do not wish to be seen to be favouring any political activity (or perhaps cannot make an informed choice) and therefore, deny all political purposes charitable status. 281 The problem is, though, that ‘it is still not clear whether jurisprudential rationales are able to explain the fact that only common law countries constrain charitable campaigning.’ 282
This reasoning compounds the problem and weaves the puzzle into a Gordian knot.
Religion, at least in its organisational expression, when it acquires the power that attends having many adherents, is fundamentally political. As Tocqueville observed:
Every religion has some political opinion linked to it by affinity. The spirit of man, left to follow
its bent, will regulate political society and the City of God in uniform fashion, it will, if I dare put
it so, seek to harmonize earth with heaven .283
The Ontario Law Reform Commission also declared that at ‘certain times in Anglo-Canadian legal history, the dominant regulatory concern has been the fear that charitable organisations would grow to the point where they would begin to usurp the functions of the state or the commercial economy’ and that ‘[h]istorically, this concern applied almost wholly to religious institutions.’ 284 Anglicare Australia, which is the welfare arm of the Anglican
Church, one of the largest religious denominations in Australia submitted to the Australian
281 Stephen Swann, 'Justifying the Ban on Politics in Charity' in Alison Dunn (ed), The Voluntary Sector, The State and the Law (2000) 161, 161-75. 282 Perri 6 and Anita Randon, Liberty, Charity and Politics: Non-Profit Law and Freedom of Speech (1995) 105. 283 Alexis De Tocqueville, Democracy in America, Great Books of the Western World (George Lawrence trans, first published in 1835, 1992 ed) 150. 284 Ontario Law Reform Commission, Report on the Law of Charities (1996) 16.
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Charities Definition Inquiry that advocacy was integral to its functioning. 285 It is less than completely honest for this power of religion not to be acknowledged.
Religion has persuasive power that can rival, and indeed trump, the coercive powers of the state. It should not be forgotten that at one time in common law history ‘the majority of its activities were funded by taxation.’ 286 Richardson, drawing lessons from the Reformation for the present day, concluded:
that non-economic cultural beliefs can influence the structure of economic institutions and
efficiency of the economy by changing the structure and equilibrium of the collective action
game. In addition, the realization that Reformation represented a large scale transformation of
European society from a collectivist to an individualistic framework suggests that exogenous
changes in beliefs, such as beliefs about the afterlife, that alter the relative costs and benefits of
individualistic and collectivistic organisations, can alter the trajectory of societal organisation. 287
The place of religion in the ‘velvet revolution’ in Czechoslovakia, that brought down communism and brought to power Vaclav Havel, is a potent recent reminder of this powe r. 288
Further, engagement by citizens in the development of law is almost always likely to be good for that society and generally healthy for democracy. In the rare situations when it is not, it is probably a criminal offence, such as treason, and can be addressed in that context.
Accepting political purposes as charitable purposes is not hard. Garton put the situation simply as follows:
285 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 214. 286 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 15. 287 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 177. 288 See John Ehrenberg, Civil Society - The Critical History of an Idea (1999) 186-196.
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In fact, if the courts were of a mind to tolerate greater political action by charities, it is submitted
that it would be a simple matter to find that there is significant public benefit inherent in pursuing
a charitable purpose (or some other social good, for that matter) through political means. 289
From Garton’s perspective this is the only logical development, for in his view ‘it is clear … the politically active [civil society organisations] are structurally synonymous with charitable
[civil society organisations].’ 290 In his view ‘there are no theoretical grounds on which to differentiate between the charitable sector and organised civil society when justifying and designing a regulatory strategy.’ 291
If it ‘is still not clear whether jurisprudential rationales are able to explain the fact that only charity law countries constrain charitable campaigning’ 292 and if as Garton contended – and his arguments are compelling – there is no reason justifying exclusion of organisations pursuing political purposes from the sector which includes charities, a way must be found to bring these organisations within the one theoretical framework. As presently framed, there is not a way of developing this within the Pemselian purposes .
(c) Uneven Contributions Social contribution can be uneven and contributions can be unevenly valued. Once the purpose is declared as charitable, though, the access to favours is constant. Evaluating the contribution is difficult but the favours enjoyed are constant. There is a view that ‘religion is a private matter, with private not public benefits and that therefore ít should not be subsidized by citizens who have no interest in it.’293 On the other hand, it is sometimes suggested that religion is favoured on the basis that it is a wellspring of good. 294 But religion
289 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 198. 290 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 201. 291 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 201. 292 Perri 6 and Anita Randon, Liberty, Charity and Politics: Non-Profit Law and Freedom of Speech (1995) 105. 293 Australian National Secular Association, Submission to The Senate Economics Committee, Parliament of Australia (2008). 294 Ian Williams, 'The Development of Purpose and Strategy Within British Charitable Organisations: Historical Impressions' (1999) 4(2) International Journal of Nonprofit and Voluntary Sector Marketing 135 , 137.
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is not always a wellspring of good. Nor is that a basis for excluding other wellsprings of good. Religion can be a source of social cohesion.295 It can also be a foundation of war and a source of unacceptable discrimination. The Preamble to the Declaration on the
Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief , observed many wars have flowed from religion.296 The common law position is that attendance at worship improves a person and, as a consequence, the favour is founded on the
‘benefit [that] accrues to the public from the attendance at places of worship of persons who live in this world and mix with their fellow citizens’ 297 The famous dictum of Lord Cross summarised the law: ‘As between the religions the law stands neutral, but it assumes that any religion is at least likely to be better than none.’ 298 This is foundationally an approach grounded in religious toleration 299 but the common law will not accept religion as charitable if it is ‘adverse to the very foundations of all religion, and subversive of all morality.’ 300 In a twenty-first century context where religious Jihad is a source of terror, 301 it is only those religions that are adverse to the very foundations of all religion, and subversive of all
295 See Terrance Carter, Anne-Marie Langan and Nancy Claridge, 'Supreme Court Gives Strong Endorsement to Freedom of Religion' (2006) 17 Carters Church Law Bulletin 1; Patrick M Garry, 'Religious Freedom Deserves more than Neutrality: The Constitutional Argument for Non-Preferential Favouritism of Religion' (2005) 57(1) Florida Law Review 1; Kevin J Hasson, 'Religious Liberty and Human Dignity: A Tale of Two Declarations' (2003) 27 Harvard Journal of Law and Public Policy 81; Mark Janis (ed), The Influence of Religion on the Development of International Law (1991); Nancy Theresa Kinney, 'When Religion Speaks for the Poor: Religious Groups and the Formulation of Public Welfare Policy' (University of Colorado at Denver, 2001); David Little, 'Religion and Human Rights: A Personal Testament' (2002-2003) 18 Journal of Law and Religion 57; Lord Macmillan, 'Law and Religion' in Law and Other Things (1937) 55; James A Nafziger, 'The Functions of Religion in the International Legal System' in Mark W Janis (ed), The Influences of Religion on the Development of International Law (1991) 147; Greg Smith, 'Religion, and the rise of social capitalism: the faith communities in community development and urban regeneration in England' (2002) 37(2) Community Development Journal 167; James E Wood, 'Religious Human Rights and a Democratic State' (2004) 46(4) Journal of Church and State 739; Craig Furneaux, Russia's Religious Revival: Exploring the New Paradigm of the Sociology of Religion (MA Thesis, Griffith University, 2002); Amy M. Godfrey, Divine Benevolence to the Poor: Charity, Religion and Nationalism in Early National New York City, 1784-1820. (PhD Thesis, Northern Illinois University, 2007); Reid Mortensen, The Secular Commonwealth: Constitutional Government, Law and Religion (D Phil Thesis, University of Queensland, 1995); HR Sorensen and A K Thompson, 'The Advancement of Religion is Still a Valid Charitable Object' (Paper presented at the Charitable Law in the Pacific Rim Conference, QUT, October 2001). 296 Declaration in the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief, GA Res 36/55, 36 UN GAOR Supp (No 51), 171, UN Doc A/36/684 (1981). 297 Neville Estates v Madden [1962] 1 Ch 832, 853 (Cross J). More generally see R.H Tawney, Religion and the Rise of Capitalism (1948) 274-275. 298 Neville Estates Ltd v Madden [1962] 1 Ch 832, 853. 299 Peter Luxton, The Law of Charities (2001) 125. 300 Peter Luxton, The Law of Charities (2001) 129. 301 Mahmood Mamdani, 'Whither Political Islam? Understanding the Modern Jihad' (2005) 84 Foreign Affairs 148, 148.
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morality that are excluded from charitable purpose. This is theoretically problematic.
Under the doctrine of charitable purpose, the extent to which the religion has provided and continues to contribute to the social infrastructure of a common law country is irrelevant. It does not matter the extent to which the pursuit of a religion is for the common good. All religion is (theoretically) treated alike. The self-sacrificing religious expression that leads to the charitable service and underpins community is not different under the doctrine of charitable purpose from the the religious self-sacrifice that leads a person to suicidally ‘kill in the name of God’ 302 – until a threshold of subversion of democracy, morality and arguably religion 303 is crossed. The common law seems to need ways of distinguishing between religions, at least with respect to access to favours, if religion is to be favoured on the basis that it is a wellspring of good.
The root of the definition of ‘religion’ in ‘ligament’ suggests a way of conceptualising the role of religion as that which binds a body together, 304 but that is not the way the common law has developed. These problems that attend advancement of religion under the common law will continue to plague theory development until a way is found of distinguishing between religions that lead to the charitable conduct that binds people to one another in society, and those that divide.
5. Problems with Other Purposes Beneficial to the Public
Public benefit lies at the heart of the concept of charity in common parlance and and it is central to the ‘technical definition’ employed by the common law, yet it is unsatisfactorily theorised for jurisprudential reasoning. 305 These problems with public benefit can be divided
302 Silvio Ferrari, 'Individual Religious Freedom and National Security in Europe After September 11' (2004) 2 Brigham Young University Law Review 357, 358. 303 Cock v Manners (1871) L.R. 12 Eq. 574, 585. 304 Oxford English Dictionary Online, Definition of Ligament (2008)
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into broad classes. Its essential character is not known. Where it ceases cannot be marked. It is not subsectionalised in a way useful for theoretical development. These challenges are explored in this subsection.
(a) Public Benefit is Central to Charities but what is it in Essence? It is a well-established principle that public benefit is central to the doctrine of charitable purpose 306 but what public benefit is, is quite confusing. The following passage from the opinion of Lord Simmonds for the majority in Oppenheim’s case summarises the law and illustrates the difficulties:
It is a clearly established principle of the law of charity that a trust is not charitable unless it is
directed to the public benefit. This is sometimes stated in the proposition that it must benefit the
community or a section of the community. Negatively it is said that a trust is not charitable if it
confers only private benefits. In the recent case of Gilmour v. Coats [1949] A.C. 426, this
principle was reasserted. It is easy to state and has been stated in, a variety of ways, the earliest
statement that I find being in Jones v. Williams (1767), Ambler 651, in which Lord Chancellor
Hardwicke is briefly reported as follows: "Definition of charity: a gift to a general public use,
which extends to the poor as well as to the rich…." With a single exception, to which I shall refer,
this applies to all charities. We are apt now to classify them by reference to Lord Macnaghten's
division in Pemsel's case and, as I have elsewhere pointed out, it was at one time suggested that
the element of public benefit was not essential except for charities falling within the fourth class,
"other purposes beneficial to the community". This is certainly wrong except in the anomalous
case of trusts for the relief of poverty with which I must specifically deal. In the case of trusts for
educational purposes the condition of public benefit must be satisfied. The difficulty lies in
determining what is sufficient to satisfy the test, and there is little to help your Lordships to solve
it. 307
Plowright, 'Public Benefit in Charitable Trusts' (1975) 39 The Conveyancer 183; Wino Van Veen, 'Public Benefit from a Comparative Perspective' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activites (2004) 239; UK Charity Commission, Consultation on Draft Public Benefit Guidance (2007). 306 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 19-20; J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 7. 307 Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297, 305.
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This problem of lack of essential character troubled the Ontario Law Reform Commission which reviewed the concept and concluded that the concept is vague and that it is applied variously to purposes, effects and people. 308 The Goodman Report pointed out ‘a highly successful commercial venture’ can be ‘of immense benefit to the community.’ 309 John
Colombo, discussing the problem in the context of United States revenue law interpretation has observed that ‘practically any transaction undertaken by an exempt charity will result in benefit to some private party outside of the charitable class’. 310 What then is public benefit within the doctrine of charitable purpose? Perhaps little can be said beyond the conclusion that it is a central but poorly theorised concept in the common law. In the body of law known as negligence, there are tests of remoteness and forseeability used to theorise a continuum of possibilities. The doctrine of charitable purpose offers no such conceptual tool and as a consequence, at least in the United States, ‘no one even knows what to balance’ and
‘charites [are] completely at sea’. 311 If public benefit is central but seemingly anything can be for public benefit, then jurists really do not know what public benefit is in essence and how it is to be distinguished from private benefit. That is a problem.
(b) The Delimiter Does Not Work Building on the last problem is the problem that the delimiter of public benefit does not work. Take as an example the division between organisations for private benefit on the one hand, and charities on the other. An organisation is not charitable if it is for private benefit. 312 The reason is that a charitable purpose must be for public benefit. 313 There are
308 See Ontario Law Reform Commission, Report on the Law of Charities (1996). 309 National Council of Social Service, ' Report of an Independent Committee of Inquiry to Examine the Effect of Charity Law and Practice on Voluntary Organisations ( Goodman Report )' (1976) 2; See also Metropolitan Borough of Battersea v British Iron and Steel Research Association [1949] 1 KB 434 (Jenkins L J). 310 John Colombo, 'In Search of Private Benefit' (2006) 58(5) Florida Law Review 1063, 1065. 311 John Colombo, 'In Search of Private Benefit' (2006) 58(5) Florida Law Review 1063, 1065. 312 William Taylor v Mathew Taylor (1910) 10 CLR 218, 237 (Isaacs J). John Colombo, 'In Search of Private Benefit' (2006) 58(5) Florida Law Review 1063, 1065. 313 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 172; J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 6.
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two tests, one focused on the purpose and the other focused on those who may benefit. 314
The first question is whether the purpose is a public purpose recognised by law. The second is whether the class that will benefit is properly considered to be the public or a ‘sufficient segment of the community.’ 315 A charity will be for private benefit if it is:
1. referable to a particular individual or entity; or
2. referable to a numerically small number of persons.316
The first problem which has been discussed above is that almost all charitable purpose is reducible to private benefit. 317 As Chief Justice Herning pointed out in Re Godfree
(deceased) ,318 ‘[t]he ‘real’ beneficiaries of charitable trusts are the persons who derive the benefits from them.’ 319 So the issue becomes not the identity of the beneficiary but the basis upon which it is received. Thus a trust to benefit John and Joan Doe is not a charitable trust but if the gift benefits them as a part of a class, even if they are identifiable as the only likely beneficiaries, that does not destroy the charitable nature of the trust. 320
On its face this makes sense but that ‘rule’ is not an absolute rule. Gifts to private individuals may be for a charitable purpose provided the individuals are ‘poor relations’ or
‘poor employees.’ This ‘rule’ is not, then, a rule at all. One exception could be treated as an exception or otherwise explained. It seems, though, that the ‘rule’ does not apply to gifts for very small groups of religious practitioners either. In the High Court of Hong Kong decision of Cheung Man Yu v Lau Yuen Ching , that court held that a trust for the charitable purpose of advancement of religion did not lose that charitable purpose merely because the participants
314 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 7. 315 Lloyd v Federal Commissioner of Taxation (1955) 93 CLR 645, 662 (McTiernnan J), 667 (Fullagar J), 670 (Kitto J). 316 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 21. 317 National Council of Social Service, Report of an Independent Committee of Inquiry to Examine the Effect of Charity Law and Practice on Voluntary Organisations ( Goodman Report ) (1976) 13, 22, 123. 318 [1952] VLR 353. 319 [1952] VLR 353, 366. 320 Re Compton [1945] 1 Ch 123, 129 (Lord Greene MR). Lord Justice Harman remarked in Inland Revenue Commissioners v Educational Grants Association Ltd [1967] 2 All ER 893, 899 that the size of a class is not relevant, it is the ‘connecting link between members of a class that matters.’ See also Denis Ong, Trusts Law in Australia (3 rd ed, 2007) 334-338.
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in the religion were numerically very small and they were also linked by family connections and private friendships, as long as they remained in the community and were not a cloistered religious order. 321 The breaking of the rule has progressed even further. In New Zealand,
Justice Heron, after considering the cases on public and private benefit, decided that it was possible for ‘private benefits to members [to be] for charitable purposes’ in the context of a fund to support retired Ministers of Religion. He held this was a situation ‘where the charitable altruistic purposes and the private benefits of the members as distinguised in the cases referred to coincide’. 322 The simplistic way in which public and private benefit is analysed within the doctrine of charitable purpose at present cannot cope with this. The addition of contemplative prayer to the list of charitable purposes by the Australian
Extension of Charitable Purpose Act 2004 may also complicate the public benefit test for the doctrine of charitable purpose as presently understood. Thus, it seems that the ‘publicness’ test for charitable purpose is undermined not only for poor individuals who are employees or relatives but also for religious practitioners, both in terms of not benefiting private individuals, and also in terms of not benefiting too few individuals. Perhaps not surprisingly
Garton reviewed the discussion of public benefit as a tool for ‘delineating between the private sector and organised civil society’ and noted that ‘the test is under-inclusive.’ 323
The converse problem also arises. Charities to benefit poor relations or employees may well be for a small number of people. But the same problem can arise with a very large workforce. 324 Dal Pont observed in relation to the numeric requirement, ‘[a]t the outset it must be noted, however, that the first such requirement is unlikely of itself 325 to be a disqualifying factor. 326
321 Cheung Man Yu v Lau Yuen Ching (2007) CACV 213/2006; 265/2006. 322 Presbyterian Church of New Zealand Beneficiary Fund v Commissioner of Inland Revenue [1994] 3 NZLR 636, [28]. Cf Douglas and Others v Commissioner of Taxation (1997) 77 FCR 112, 124. 323 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 202. 324 Oppenheim v Tobacco Securities Trust Co [1951] AC 297, 317-18 (Lord MacDermott dissenting). 325 Emphasis in original. 326 Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 16.
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The two distinguishing criteria to establish that the benefit is not private, namely not for individuals, and not a ‘numerically negligible class’ are both problematic. Viscount
Simonds in Inland Revenue Commissioners v Baddeley and Others 327 sought to explain this difficulty in the context of the sea-walls mentioned in the Preamble and discussed by Lord
Watson in Pemsel’s case .328 He opined that the critical point was not that only a small number benefit but that the good or service was available to all. Having offered this explanation, he concluded that he ‘doubt[ed] whether this sort of rationalisation helps to explain [this] branch of the law’ which implicitly was incapable of rational explanation. 329
So there are significant theoretical problems for jurists endeavouring to rationalise the centrality of public benefit as a concept when it seems that its application to two of the four
Pemselian purposes (relief of poverty and advancment of religion) is hard to distinguish from private benefit. This problem is compounded when the different tests discussed next are considered.
(c) The Levels of Public Benefit. Public benefit is subject to different tests for the different Pemselian purposes . The
Pemselian partitioning has resulted in different concepts of public benefit and ostensibly different notions of public benefit applicable to each of the four heads. Even if the law could manage four different conceptions of ‘public benefit’ applicable to each of the four heads, the trend which is emerging in common law countries of adding to the heads by statute but maintaining a ‘closed system’ of listed charitable purposes rather than an ‘open system’ based on broad concepts, 330 arguably has taken the idea of charitable purpose in a common law context beyond that which is reasonable. As Peter Smith observed in commentary on the position in England and Wales: ‘now we are faced with thirteen heads rather than four, it
327 [1955] AC 572, 590. 328 Pemsel’s case [1891] AC 531, 559 (Lord Watson). 329 Internal Revenue Commissioners v Baddeley [1955] AC 572, 590. 330 Wino Van Veen, 'Public Benefit from a Comparative Perspective' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activites (2004) 239, 248.
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may be difficult to correlate a particular test of public benefit with one of the new heads.’ 331
Smith also noted that the problem does not end there. If it is intended to apply one conception of public benefit across all of the new heads for England and Wales he observed as follows:
... this would, I suggest, cause grave problems and inequities in its application and could create a
fundamental distortion and reappraisal of what might or might not be charitable in the future.
Gifts for religious purposes, I would suggest, may be particularly susceptible to any such
realignment of the public benefit criterion. 332
Smith’s reference to religion and public benefit is an important one. The religious liberty foundation of the advancement of religion head (which I will explore in some detail in
Chapters VII and VIII), becomes very vulnerable to extinguishment if the presumption formerly afforded advancement of religion must be proved. As Ong has observed: ‘How can it ever be possible to prove that any religious (supernatural) purpose is capable of conferring earthly (natural) benefits’. 333 This challenge might be more acute for common law countries that are signatories to international conventions obliging maintenance of this fundamental right. 334
In addition to the problems considered above, the power of the categorisation of all that remains of charitable purpose as ‘other purposes beneficial to the public benefit’ suppresses all other voices.
The extent of the problems is magnified when they are considered in the more natural way that they come packaged. The problems are but microcosms of broader challenges facing
331 Peter Smith, 'Religious Charities and the Charities Act 2006' (2007) 9(3) The Charity Law & Practice Review 57, 70. 332 Peter Smith, 'Religious Charities and the Charities Act 2006' (2007) 9(3) The Charity Law & Practice Review 57, 70. 333 Denis Ong, Trusts Law in Australia (3 rd ed, 2007) 349. 334 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 172.
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common law societies. It is to the location of these challenges in the ebb and flow of life together in common law communities, that the next section turns.
E. Problems that go Beyond the Doctrine of Charitable Purpose
It will be recalled, from the beginning of the thesis and the comments of Lord Porter at the beginning of this chapter, that, central to my argument is the propostition that charitable purpose cannot be considered as an organising idea separate from the broader, social agendas. In this section, the even broader challenges arising from social developments are discussed as they touch upon the definition of charitable purpose and the role of charities in contemporary common law countries. The subject areas discussed are organised according to the differentiators. In the first subsection, the differentiator is families, as defined in this thesis, 335 and the challenges associated with the need to encourage civic participation are considered. The orthodox way that charitable purpose distinguishes (or does not distinguish) public from private benefit is simply not a useful tool. This section is, then, a logical development of the last section where public benefit was discussed. In the subsection that follows, problems exacerbated by the retreat by government from service delivery and the emergence of what has become known as third party government, are considered. In the third and final subsection, problems in distinguishing civil society organisations from businesses are discussed.
1. Family and Social Breakdown, Private Purposes and Civic Participation
The private, informal social supports that have been an integral part of common law societies since at least medieval times are in decline and this decline has been accompanied by ‘a rise in the more calculating, selfish norms.’ 336 This ‘rise in the more calculating, selfish norms’ has had social consequences. 337 As Anthony Gittens bluntly observed:
335 See definition at page 54. 336 Ilana Krausman Ben-Amos, The Culture of Giving: Informal Support and Gift-Exchange in Early Modern England` (2008) 2. 337 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 123.
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Civic decline is real and visible and in many sectors of contemporary societies, not just an
invention of conservative politicians. It is seen in the weakening sense of solidarity in some local
communities and urban neighbourhoods, high levels of crime, and in the break-up of marriages
and families. 338
In practical terms, this means that if people do not participate in charities and other civil society organisations in a voluntary capacity, such as occurs in churches, trade unions, and service clubs, they do not have the informal social support networks that former generations could rely upon. 339 This is because ‘volunteering itself is considered a strong indicator of social capital’. 340 The value of these informal supports and the impact of their erosion is illustrated by the story from which the title to Robert Putnam’s book, Bowling Alone , 341 is taken. A 33-year-old, African-American accountant gave his kidney to a 64 year-old, retired, white, hospital worker because they got to know each as ‘they bowled together’. 342
Putnam’s thesis is that if people do not participate in civil society activites (like bowling) they do not form the extended networks they need to help them when a crisis (like the need for a kidney) arises. 343
As Giddens noted, the problems associated with lack of social networks are compounded by weakened family supports. In the twenty-first century, family breakdown is also occurring at an unprecedented rate,if divorce statistics are taken as an idicator.344 The decline in
338 Anthony Giddens, The Third Way (1998) 78. 339 Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001) 221. 340 Australian Bureau of Statistics, Australian Social Trends – Voluntary Work , Cat. No 4102.0 (2008) 5. 341 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001). See also Bob Edwards and Michael Foley, 'Civil Society and Social Capital Beyond Putnam' (1998) 42(1) The American Behavioral Scientist 124. 342 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001) 100. 343 See also Anthony Giddens 'Arnold Goodman Charity Lecture' (Speech delivered at the 16 th Arnold Goodman Lecture, London, 15 th June 1999). 344 The Family Law Council in Australia summarised the situation as follows: ‘The divorce rate increased dramatically following implementation of the Family Law Act . The [number of decrees absolute granted during the calendar year per 1,000 estimated resident population for the year] increased from 1.8 in 1975 to 4.6 in 1976, but has fluctuated between 2.4 and 2.9 over the past 20 years. The rate was between 2.7 and 2.9 during 1980–84 and between 2.4 and 2.5 during 1985–89. By 1996, the rate had
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participation in civil society organisations and increase in family breakdown in common law countries at the beginning of the twenty-first century, places increased pressure on governments and charities to provide the necessary social supports. However, the late twentieth century witnessed the retreat by government from welfare services provision. 345
This has increased the pressure on charities.
Ironically perhaps, in this period when government is in retreat and when participation in civil society organisations that are rich in social engagement is in decline there has been an increase in the total number of civil society organisations. A proliferation of civil society organisation letterheads does not equate with ‘a boom in grass roots participation.’ 346
Writing in a United States context, Putnam observed that ‘over this quarter of a century [to
2001] the number of voluntary associations roughly tripled, but the average membership seems to be roughly one-tenth as large – more groups, but most of them much smaller.’ 347
At one extreme, for example, is what Putnam called ‘mailing list organisations’ where
‘membership … means moving a pen not making a meeting.’ 348 If members’ participation in an association is limited to payment of money, and members never or rarely meet, it is self evident that the contribution to social capital, and consequently the public benefit of that association, is significantly less than that of a group where the level of voluntary participation is high and members regularly meet and support one another.
The challenge for common law societies is how to respond to this increasing social need in the context of a decline in the institutions by which those needs have traditionally been met.
gradually increased to 2.9, and since that year has been between 2.6 and 2.8. The crude divorce rate was 2.6 in 2000, 2.8 in 2001 and 2.7 in both 2002 and 2003’. See Commonwealth Attorney-General's Department, Statistical Snapshot of Family Law 2002-03 (2005) 7. See also United Nations Statistics Division, Demographic Yearbook 2005 (2005) for the most recent divorce statistics from the United Nations. 345 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35; Lester M. Salamon, Partners in Public Service: Government-Nonprofit Relations in the Modern Welfare State (1995). 346 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001) 49. 347 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001) 49. 348 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001) 49, 51.
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The problem is one of how to identify, and possibly to encourage, the organisations that contribute to the building of social capital without extending all the favours to be enjoyed by these organisations to mere ‘mailing list organisations’.
Perhaps as a response to the decline in organisational participation, the definition of charitable purpose in Australia has been extended to include certain self-help groups. This was on the recommendation of the Charities Definition Inquiry which as its eighth recommendaiton suggested ‘that self-help groups which have open and non-discriminatory membership be regarded as having met the public benefit test’. 349 Are not self-help groups, though, essentially for private benefit? 350 Is not private benefit anathema to the concept of charitable purpose?
How is this extension of what seems to be private benefit into a public one to be theorised within the orthodox common law understanding of charitable purpose? Is there a balancing and weighing of private and public benefit to be undertaken? If, as Putnam has noted,
‘[s]ocial capital can … be simultaneously a “private good” and a “public good”’ 351 is it possible to form an aggregated assessment of the extent of public benefit? In the alternative is the justification of favour found in the nature of the public benefit? For example, when considering self help groups could the justification for the entitlement to favour be that by encouraging self help groups society as a whole is strengthened by being bound together more tightly, or could it be that self help groups help people who are at a disadvantage to address that disadvantage? In either of these possibilities it is the nature of the public benefit
(strengthening society or dealing with disadvantage) that justifies one person or a small
349 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 14 350 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 111. 351 Robert D Putnam, Bowling Alone - The Collapse and Revival of American Community (1 st ed, 2001) 20.
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group of people enjoying the favours that extend to charities. As presently conceptualised charitable purpose offers no explanation.
Voluntary participation is a critical indicator of social capital forming organisations. But while the concept of charitable purpose at common law remains locked behind the Pemselian partitioning , it remains impossible for voluntary participation to inform conceptions of charitable purpose. This combination of social challenges obliges a re-think of the doctrine of charitable purpose and a clearer statement of why charitable purpose is a gateway to favour and why self help groups should be included within the definition of charities. 352
2. Problems with Civic Engagement and Third Party Government
The welfare state is now in retreat. 353 Through the first seventy or so years of the twentieth century, governments took over more and more of the functions performed by charities. The tide turned toward the end of the 1970s and governments, beginning with Margaret
Thatcher’s conservative government in Britain, began to look to other sectors of society, particularly charities, to take an ‘enhanced role’ 354 in discharging these responsibilities. 355 At the same time governments increased funding for the supply of charitable goods by non- government organisations including businesses. 356 Historically, funding had been by way of grants, but as funding increased so did the controls exercised by goverment. 357 The rise of regulated grants, payment for performance of contracts or grants to acomplish specified
352 Extension of Charitable Purpose Act 2004 (Cth) ss 4-5. 353 Federal Commissioner of Taxation v Word Investments Ltd [2007] FCAFC 171 (Unreported, Stone, Allsop and Jessup JJ, 14 November 2007) [81]. See also Alan Ware, Between Profit and State (1989) 108-109, 143. 354 Auckland City Mission v Brown [2002] 2 NZLR 650 (Richardson P, Gault and Anderson JJ) [40]. 355 Peter Luxton, The Law of Charities (2001) 10-11. 356 E.g. Director-General of Social Welfare v De Morgan [1996] 3 NZLR 677. See also Nicholas Seddon, Government Contracts: Federal, State and Local (3 rd ed, 2004); Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35; Lester M. Salamon, Partners in Public Service: Government-Nonprofit Relations in the Modern Welfare State (1995). 357 Myles McGregor-Lowndes and Matthew Turnour, 'Recent Developments in Government Community Service Relations: Are You Really My Partner?' (2003) 9(1) The Journal of Contemporary Issues in Business and Government 25.
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outcomes, 358 led to what has become known as the ‘contract culture’. 359 Contracts, predominantly with civil society organisations, particularly charities (although sometimes with businesses), have been used increasingly to provide social services by governments of common law countries. The extent of this method of funding has significantly changed the relationship between charities and other civil society organisations on the one hand, and governments on the other. 360 The extent of the changes led the Australian Charities
Definition Inquiry to conclude:
The overall relationship between government and the non-government sector regarding the
provision of services can be characterised as a ‘purchaser-provider’ relationship, with government
as the purchaser exercising a high degree of authority over the way in which the non-government
provider organisation makes use of the funds provided. 361
The benefits to governments of having civil society organisations delivering services (and also in shifting risks and responsibilities) is such that sometimes goverments have acted to establish civil society organisations. 362 The more common practice remains, however, to fund projects and encourage civil society organisations to apply for the funding and carry out the projects. 363
Whilst contracting with civil society organisations such as charities is a logical way for governments to ensure that the society continues to enjoy public benefits, the effect of these contracts is to seriously undermine the uniqueness of these charities in two regards. First,
358 E.g. Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 175. 359 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 15. 360 Helmut Anheier, Stefan Toepler and S Sokolowski, 'The Implications of Government Funding for Non-profit Organisations: Three Propositions' (1997) 10 International Journal of Public Sector Management 190; Industry Commission, Charitable Organisations in Australia , Report No 45 (1995). 361 See Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 59. 362 Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001) 114. 363 Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001) 183-190 for models of funding.
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the ‘altruistic character’ that is the ‘mark or test of what is truly charitiable’ 364 is lost to the extent that the service is provided for payment. 365 Second, voluntariness is lost to the extent that government takes control of the purposes pursued by the charities through the terms of the contract or outcome-based funding.
The loss of altruism is more than a sentimental sadness. In legal terms, to the extent that a civil society organisation’s overall purpose amounted to discharging contracts it seems to be a business. The the extent that the purpose amounted to discharging government purposes throught contracts, the contracting charities were, arguably, agents of the government. If that is so, then should such organisations, in that context at least, be seen as agents of government or not? That is – to which sector does such an organisation really belong: business, government or civil society? This is a problem for legal theory. In the Central Bayside case , the total revenue of the organisation in a relevant period was $1,048,973, and of this
$1,006,997 came from Australia (not Victorian) government grants 366 and so the argument of the Victorian Commissioner of State Revenue was in a nutshell that:
because about 93 percent of its income came from Commonwealth funding, with about half of
those funds being outcomes based funding grants received pursuant to its outcomes based funding
Agreement, there was control and influence by government to such an extent that the appellant
was carrying out, not its own purposes, but the purposes of … a government department, [it] could
not have charitable purposes. 367
364 Educational Fees Protection Society Inc v Commissioner of Inland Revenue [1992] 2 NZLR 115 [33] (Gallen J.). 365 National Council of Social Service, ' Report of an Independent Committee of Inquiry to Examine the Effect of Charity Law and Practice on Voluntary Organisations ( Goodman Report )' (1976) 2. 366 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 175. 367 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 181.
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This argument was ultimately unsuccessful before the High Court of Australia but the case illustrates how the boundaries between civil society, business and government can become so blurred it is almost impossible to discern which is which in some contexts. 368
This confusion for legal theory evolves into the second broader challenge for common law societies – the loss of autonomy. In the United Kingdom:
…one organisation which received funding from a government department had to send an
advance copy of its newsletter as a condition of the grant. A message was received in response to
one such newsletter that, if it went out, there would be no more funding, as it contained criticism
of a government bill before parliament. 369
It is for society as a whole to determine the role of government on the one hand and civil society organisations on the other in delivery of goods and services of public benefit. The common law architecture does not, though, enable this discussion in the context of the common law. It forces the debate into the structures of the Pemselian partitioning . In that context, the coercive character of government and control are poorly theorised. These challenges, inherent in the move to third party government, oblige a rethink of the doctrine of charitable purpose to clarify just what is and what is not a government organisation. How far can jurists theorise government control of an organisation to delineate it from charitable purpose?
3. Problems Distinguishing Business from Charities
Not only is the boundary between civil society organisations and government blurred, 370 so too is the boundary between civil society organisations and businesses. 371 If services are to
368 See Myles McGregor-Lowndes and Ted Flack, 'The Border Between Government and Charity: A Case Study of Queensland Hospital Foundations' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 99. 369 Nick Seddon, Who Cares? How State Funding and Political Activism Change Charity (2007) x. 370 Kevin Davis, 'The Regulation of Social Enterprise' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 485; Bronwyn Dalton and John Casey, 'Money for Mission or Moral
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be supplied under a contract it is the price and quality, not whether the organisation is a business or civil society organisation, that is important. Consequently, there has been increased involvement by business in the supply of charitable good for reward. 372 If, as could be the case, all of the purposes of a civil society organisation are actually pursued by the discharge of government contracts then the means of differentiating that organisation, from a business pursuing profits through the same means, are quite limited.
To confuse matters further, charities and other civil society organisations have increasingly relied upon business activities not only to pursue their missions 373 but to resource their missional purposes. 374 As Justice Sundberg of the Federal Court observed in the
Commissioner of Taxation v Word Investments Limited 375 (‘the Word Investment Case’) :
With the decline of the welfare state, charitable organisations are expected to do more with the
same resources. Reliance on donations alone will, in many cases, be insufficient. Hence many
charitable organisations have established business ventures to generate the income necessary to
support their activities. 376
So whereas charities were once clearly distinguished from businesses by volunteers and donations, many charities increasingly look like businesses. In some charities, most people
Minefield? The Opportunities and Risks of Not-for-profit Business Venturing' in Jo Barraket (ed), Strategic Issues for the Not-for- profit Sector (2008) 163, 167-171. 371 Alan Ware, Between Profit and State (1989) 58-59; Liz Fisher, 'The Charity Business - Playing Politics' (2004) 134(1336) Accountancy 36; Liz Fisher, 'The Charity Business - Turning Professional' (2004) 134(1336) Accountancy 31. 372 See C W Massarsky and S L Beinhacker, Enterprising Nonprofits: Revenue Generation in the Nonprofit Sector (2002) Yale School of Management
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involved are paid as employees and most of the income comes from sales at market rates of private goods. 377 This is not an abstract legal nicety. In Australia as Bronwen Dalton and
John Casey observed ‘there is fierce competition between the two breakfast cereal makers:
Kelloggs Pty Ltd and the Seventh Day Adventist Church-owned Sanitarium Health Food
Company’. 378 The level of involvement by civil society organisations, including charities, in business, and the dependence upon government funding had reached a point by 1995 where revenues from fees and charges of not-for-profits in Australia accounted for 62.5 percent of income; in the United States of America 57 percent and in the United Kingdom 44 percent. 379 In addition to this, funding from Government is also substantial. In the United
Kingdom it was the dominant source of funding comprising 47 percent of total income and in the United States it comprised 30 percent. 380 So, far from being funded by donations, the bulk of funding of civil society organisations has been increasingly business enterprises and grants. 381 To complicate analysis further there are mutual benefiting organisations that ‘seem to straddle the boundary between the for-profit sector and [civil society]’. 382
There is a need to clarify the distinctives because the charitable contributions of volunteers and donors do not sum in the assessment of Pemselian partitioned charitable purpose. The differentiation of one form of organisation from the other is therefore problematic. How, if at all, should civil societies be regulated differently from businesses? Why, if at all, should
377 Anup Malani and Eric A Posner, 'The Case for For-Profit Charities' (Working Paper No 304, The Law School, The University of Chicago, 2006). 378 Bronwyn Dalton and John Casey, 'Money for Mission or Moral Minefield? The Opportunities and Risks of Not-for-profit Business Venturing' in Jo Barraket (ed), Strategic Issues for the Not-for-profit Sector (2008) 163, 171. 379 Bronwyn Dalton and John Casey, 'Money for Mission or Moral Minefield? The Opportunities and Risks of Not-for-profit Business Venturing' in Jo Barraket (ed), Strategic Issues for the Not-for-profit Sector (2008) 163, 169-170. 380 Bronwyn Dalton and John Casey, 'Money for Mission or Moral Minefield? The Opportunities and Risks of Not-for-profit Business Venturing' in Jo Barraket (ed), Strategic Issues for the Not-for-profit Sector (2008) 163, 169-170. 381 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 50; Alan Ware, Between Profit and State (1989) 88-92; Bronwyn Dalton and John Casey, 'Money for Mission or Moral Minefield? The Opportunities and Risks of Not-for-profit Business Venturing' in Jo Barraket (ed), Strategic Issues for the Not-for-profit Sector (2008) 163, 169-170. 382 Alan Ware, Between Profit and State (1989) 58-59.
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civil society organisations be favoured? To which sector do mutual benefiting organisations belong and why?
If, in common law countries, the two organisational forms, businesses and civil society organisations, are increasingly finding themselves in competition for the supply of charitable goods paid for by government, or the supply of private goods at market rates, why should the civil society organisation enjoy tax favour and business, not? Are the tax favours granted to civil society organisations simply ‘cushions’ protecting inefficient organisations against market forces? 383 If charities are ‘businesses’ then on what basis is the favour they enjoy justified? In England and Wales and also in the United States and Canada the tax laws distinguish unrelated business activities from the core charitable purpose but that is not the law in Australia where the contrary position holds.384 Given these different approaches in different jurisdictions, should the organisation engaged in what is arguably an unrelated business activity through a separate company be classified as one of the nation’s charities (as has been confirmed as the law in Australia by the High Court in the Word Investment
Case 385 ) or as a business? What are the consequences for favours in this context? 386 These are issues of practical concern with revenue implications for businesses, charities and tax collectors. 387 They are issues that cannnot be discussed within the common law doctrine of charitable purpose.
The introduction of the corporate social responsibility discourse into the mix of issues further highlights the inadequacy of the current law. The decline in participation in civil society
383 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 127. 384 Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204. 385 See Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204, 240 where the appeal was dismissed and at 218 where the court concluded Word’s purposes were charitable. 386 Kevin Davis, 'The Regulation of Social Enterprise' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 485. 387 See for example Living Faith, Inc. v Commissioner, 950 F.2d 365, 371 (7 th Cir. 1991) where the court (Wood Jr. Flaum and Ripple) found that two restaurants conducted in accordance with the Seventh Day Adventist faith were commercial operations and not entitled to exemption under s.501(c) of the Internal Revenue Code (US).
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organisations, the increase in family breakdown and the retreat by governments from service delivery has left a lacuna which socially responsible businesses have sometimes sought to fill. When a business makes voluntarily altruistic contributions to public good, perhaps following a lead and encouragement from the Government, 388 what distinguishes it from a civil society organisation? Is it in fact more charitable than one of the legally recognised charities that simply provide a service for a fee? The debate over the entitlement of charities to exemption is well aired but the flip side of business entitlement to favours for comparable contributions to public benefit is not. When, if ever, should business be entitled to the same favours as civil society organisations? Business already enjoys favours in the form of a tax deduction for research and development (ostensibly because of the public benefit of that research and development) in some jurisdictions. 389 Various grants are made to businesses to assist the pursuit of activities such as exporting, on the basis that they too are considered to be for public benefit. 390 If there is to be a denial of favours to civil society organisations, to the extent that their activities are commercial, then conversely is it not appropriate to consider favouring businesses to the extent that their activities are for public benefit, particularly where altruism is evident? 391 How is a common law society to explain these differences or perhaps integrate the favours theoretically? The case law so far has rejected exploration of this notion. 392
388 Prime Minister's Community Business Partnership, Taxation Initiatives to Encourage Philanthropy (2005)
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Taxation favours are linked to the pursuit of charitable purposes but there is not a uniform benefit associated with the pursuit of charitable purposes. 393 There is also not any uniformity
393 See Michael Kobetsky et al, Income tax: text, materials & essential cases (2005). See also Rob Atkinson, 'Third Parties' Tax- Exempt Status can be Challenged According to New Decisions' (1985) 63 Journal of Taxation 166; Christine R. Barker, 'The Reform of Charity Law in Scotland' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 33; Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activites (2004); Chauncey Belknap, 'Appendix - The Federal Income Tax Exemption of Charitable Organisations: Its History and Underlying Policy' (1989) 2025; Marcelo Bergman, 'Who Pays for Social Policy? A Study on Taxes and Trust' (2002) 31(2) Journal of Social Policy 289; Boris Bittker and George Rahdert, 'The Exemption of Nonprofit Organisations from Federal Income Taxation' (1976) 85(3) The Yale Law Journal 301; David Brennen, 'The Charitable Tax Exemption is About More Than Efficency' (2007) The Nonprofit Quarterly 67; Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585; Neil Brooks, 'The Tax Credit for Charitable Contributions: Giving Credit where None is Due' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 457; Andrew Chamberlain and Mark Sussman, 'Charities and Public Goods: The Case for Reforming the Federal Income Tax Deduction for Charitable Gifts' (2005) (137) Special Report - Tax Foundation 8; Charles T Clotfelter, Federal Tax Policy and Charitable Giving (1985); John Colombo and Mark Hall, The Charitable Tax Exemption (1995); Committee on Ways and Means, 'Hearing on Tax Exempt Charitable Organisations: Before the Subcommittee on Oversight of the Committee on Ways and Means, U.S House of Representatives, One Hundred Tenth Congress, First Session.' (2007); Ian Dawson, 'Taxation of Trades in the Charities Sector' in Alison Dunn (ed), The Voluntary Sector, The State and the Law (2000) 177; James Douglas and Peter Wright, 'English Charities - Legal Definition, Taxation and Regulation' (Nonprofit Organisation Working Paper No 15, Yale University, no date); David G Duff, 'Charitable Contributions and the Personal Income Tax: Evaluating the Canadian Credit' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 407; Graham Elliott and Nick Vaughton, 'Charity Tax Consulting Fatigue - Can We Go the Last Mile?' (1999) 123(1270) Accountancy 70; Michael Flynn, ‘The Tax Consequences of Testamentary Gifts to Tax Exempt Bodies’ (Speech delivered to STEP Queensland, Brisbane Club, 19 August 2008); Timothy Goodspeed and Daphne Kenyon, 'The Nonprofit Sector's Capital Contraint: Does it Provide a Rationale for the Tax Exemption Granted to Nonprofit Firms?' (1993) 21(4) Public Finance Quarterly 415; Henry Hansmann, 'Unfair Competition and the Unrelated Business Income Tax' (1989) 75(3) Virginia Law Review 605; Henry Hansmann, 'Unfair Competition and the Unrelated Business Income Tax' (Yale Law School, Yale University, 1988); Bruce Hopkins, The Tax Law of Charitable Giving (2000); International Center for Not-for-Profit Law, 'The Tax Treatment of Nongovernmental Organisations - A Survey of Best Practices from Around the World' (International Center for Not-for-Profit Law, 1998); Olof Johansson, 'Optimal Pigovian Taxes under Altruism' (1997) 73(3) Land Economics 297; Joint Committee on Taxation, 'Historical Development and Present Law of the Federal Tax Exemption for Charities and other Tax-Exempt Organisations, Scheduled for a Public Hearing Before the House Committee on Ways and Means on April 20, 2005' (JXZ-29-05, 2005); Louis Kaplow, 'Tax Policy and Gifts' (1998) The American Economic Review 283; Ineke Koele, International Taxation of Philanthropy (2007); James R. Malone Jr., 'Taxation and Constitutional Law - The Internal Revenue Service has the Power to Revoke the Tax-exempt Status of Private Schools which Practice Racial Discrimination Due to Religious Belief, Since These Schools are not Charitable, and Revocation does not Violate the Free Exercise or the Establishment Clauses of the First Amendment.' (1984) 29 Villanova Law Review 253; Myles McGregor-Lowndes and Sandra Carr, 'A Select and Annotated Bibliography of Nonprofit Taxation' (Working Paper No 35, Queensland University of Technology, 1993); Karen Nelson, 'Tax and the Non-profit Sector - The South African Experience' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and Their Activities (2004) 193; Barry Rickert, 'The Differing Tax Treatment of Investment Advisory Fees and Brokerage Fees; a General Analysis and an Analysis in the Context of Charitable Investments' (2006) 4(2) International Journal of Civil-Society Law 68; Lucinda Schmidt, 'Tax Perk for 'Benevolent' Workers' (2005) (24-30 March) Business Review Weekly 52; Ethan G Stone, 'Adhering to the Old Line: Uncovering the History and Political Function of the Unrelated Business Income Tax' (2005) 54 Emory Law Journal 1475; Max Wallace, The Purple Economy : Supernatural Charities, Tax and the State (2007); Harrison Wellford, 'Unfair Competition? The Challenge to Charitable Tax Exemption' (1988); Basil Wunsh, 'The Taxation of Charitable Institutions and Trusts' (1995); Michael Gousmett, The Definition of Charity and Its Nexus with Tax Preference Issues (PhD Thesis, Queensland University of Technology, 2002).
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in explanatory theory setting out why favours are granted. Across the common law world, the concept of charitable purpose is integral to favourable treatment under a variety of income-tax regimes but the application of the principles is such that:
1. Charities can be taxed like businesses;
2. Charities can be partially exempt from income tax;
3. Charities can enjoy full exemption from income tax without being donor
favoured;
4. Charities can enjoy the full exemption from income tax and be donor favoured;
5. Charities can also enjoy full exemption from income tax, be donor favoured and
be in receipt of government grants.
There is a need for some uniformity or at least a rationale for difference but the case law is
‘illogical and even capricious’. 394 Charitable purpose is criticised because it is the language used to decide the relevant classes. Sorting out the language will help but the root problem will remain. The underlying problem needs to be stated clearly. It is that common law countries lack a way of classifying organisations to which particular favours are to be extended. The language of charitable purpose is used but it is inadequate and contributes to the confusion.
F. Conclusion From the analysis so far, it is possible to point toward the underlying problems that will be explored further in the next chapter. All of these content problems are related to, or derived from, an unwillingness or inability of the doctrine of charitable purpose to satisfactorily address three contests.
The first contest, is the inevitable contest between the state and voluntary association. At its foundation, the doctrine of charitable purpose buried this and it remains buried in the
394 Gilmour v Coats [1949] AC 426, 442.
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oppression of political objects. The problems manifest in the expansive definition of religion based on the concern for freedom of religion, but this has not, and perhaps cannot, be adequately addressed without addressing the concerns about unjustified favour for organisations with charitable purposes and genuine freedom of association (not just freedom of religion).
The second contest is over the struggle to make sense of charity as altruistic and distinct from a self-interested act. That clash is inherent in having the common meaning giving way to the technical meaning of charitable purpose. It finds expression in the problematic nature of charitable but discriminatory action and in the dificulty in distinguishing between public and private benefit.
The third contest is over the distinction between public and private benefit. This manifests itself most poignantly in the context of poverty relief but it is embedded in all dimensions of the doctrine of charitable purpose. The judicial approach is to look to a decision on similar facts and to revert to ‘spirit and intendment’ when what is needed is a theory to explain identifiable factors shaping public benefit, to which the courts may revert.
Addressing the challenges identified in this chapter requires a whole-of-sector approach which enables the philosophic contests to be ventilated adequately and the excluded voices to be heard. The doctrine of charitable purpose is inadequate because, behind the content problems raised in this chapter, are problems of method, measurement and a priori assumptions that cannot find voice. These issues of method, measurement and a priori assumptions are considered in the next chapter.
G. Postscript When Dr Manette found himself giving evidence against his own son-in-law, he was shocked and disturbed by the way his past came back to condemn. The inherent injustice in
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a system that granted favours to those who should not have enjoyed them and deprived of freedom those who should have enjoyed it, unleashed awful, uncontrollable, remedial forces.
Dickens’s point in the Tale is that if there is a need to enable freedom and reallocate favours, it is prudent to do so before there is revolution. The challenge when confronted with 400 years of precedent is how to do this. Progress requires understanding how the common law could be developed. That is the topic of the next chapter.
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III HOW TO GO BEYOND CHARITIES
A. Preamble
In A Tale of Two Cities, Dickens paints the stark choice between maintaining unjust privilege and the difficulty in relinquishing it through the two Marquis Evremonde. The two marquis personify two quite different responses to changes. The Senior Marquis Evremonde, the uncle, lamented the limitations on his ancestral right over the life and death of citizens complaining, ‘[w]e have lost many privileges; a new philosophy has become the mode; and the assertion of our station, in these days, might … cause us real inconvenience.’ In contrast, his nephew, Charles Darnay, fled France for England rather than participate in the privileges he enjoyed as a marquis in France. Darnay described his position as ‘bound to a system that is frightful to me, responsible for it, but powerless in it; seeking … to have mercy and to redress; and tortured by seeking assistance and power in vain.’ 395 Evremonde Senior lost everything and Evremonde Junior (Darnay) almost lost his life when change swept through
France in 1789.
B. Introduction
It will be recalled that Chapter II and this chapter are paired. In Chapter II the presenting problems which related to content were explored. In this chapter the focus is on elucidating the underlying problems of methodology rooted in philosophic a priori assumptions that make analysis of the problems discussed in Chapter II so difficult. The commitment to overcome these difficulites is evident in the number of inquiries that have been held over the last 60 years and the proliferation of legislative patches in this century. 396 The critical issue is not whether there will be change, but the method by which change is facilitated. Change has been inhibited at common law by problems of method. Problems of method are often deeply rooted in philosophic a priori assumptions. Copernicus’s model may have been
395 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 129. 396 See pages 6 to 9.
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simpler and easier to understand but it was not going to be accepted until distorted a priori assumptions regarding the universe were squarely confronted. In a similar way, there cannot be developments in the doctrine of charitable purpose until the methodological inhibitors of development of the common law, at the deepest level of a priori assumptions, are addressed.
In this chapter, layer by layer, the methodological assumptions and their causes are peeled back until the root a priori assumptions are exposed.
There are three well-founded principles underpinning common law development which have been ignored or misapplied in the development of the present, orthodox doctrine of charitable purpose. These three principles, and the context and consequence of their abandonment, are explored first. In the second and third sections, how the concept of charitable purpose lost its genus and differentia are discussed as these expose the definitional problems. This leads to a discussion of wider taxonomical problems in the fourth section.
Developing a more sophisticated theory requires ways of measuring charitable purpose that go beyond the mere charitable-or-not, nominative approach of the current regime and so the fifth section discusses methods of measurement. In the sixth and final section is a discussion of three, contested, philosophic a priori assumptions, that underpin differences in the discourse. It is intended then, by the end of this chapter to have elucidated and explored the methodological problems that inhibit development of the common law doctrine of charitable purpose down to the level of contested a priori assumptions.
C. Three ‘Principle’ Problems
The puzzle to be resolved is how the common law painted itself into this corner. If the casuist method of the common law generated similar problems in other areas of law then it might reasonably be considered that the method is the cause of the problem. But the casuist method has served well, though, in other branches of law. 397 Why, then, have these
397 For discussion of casuist method see pages 34 to 38.
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problems arisen in the context of the doctrine of charitable purpose? The answer is that three basic, well-known principles, used in the development of the common law, have been ignored or misapplied in the development of the doctrine. Had these three principles, usually applied in casuist method, not been ignored or misapplied, the problems discussed in the last chapter would not have arisen. The three legal principles not followed were:
Principle 1: The preamble to an act of parliament sets out (only) background and
context. This means it is not essential to the validity of the Act. 398 Unless
the operative part of the Act otherwise declares, the preamble does not
contain the definition (of anything). 399
Principle 2: In the reading of a case, there is a presumption that there is jurisprudence
giving effect to a public policy in the ratio decidendi of the case. 400 Sound
jurisprudential reasoning may dissent from that reasoning and it may be
overruled, but it does not overlook it. 401
Principle 3: A definition defines something. 402 The definition should always be
consistent with the matter defined. A good definition, at least in the
398 D C Pearce and R S Geddes, Statutory Interpretation in Australia (5 th ed, 2001) 15. 399 Attorney-General v Prince Ernest August of Hanover [1957] AC 436, 463 (Viscount Simonds); Wacando v Commonwealth (1981) 37 ALR 317, 333 (Mason J). AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [16]. This recognition of the contextual role played by the preamble can be compared to the more conservative approach, from which the ‘no recourse rule’ stems, whereby the preamble should only be consulted if an ambiguity arises. See Anne Winckel, 'The Contextual Role of a Preamble in Statutory Interpretation' (1999) 23 Melbourne University Law Review 184, 185-6; D C Pearce and R S Geddes, Statutory Interpretation in Australia (5 th ed, 2001) 191-2. 400 Julius Stone, 'The Ratio of the Ratio Decidendi' (1959) 22(6) Modern Law Review 597 ; Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3, 20-21. 401 Distinguishing obiter remarks from the ratio decidendi of a case is not without controversy. For an introduction to the debate and its more recent developments see: J L Montrose, 'Ratio Decidendi and the House of Lords' (1957) 20 The Modern Law Review 124; A.L Goodhart, 'The Ratio Decidendi of a Case' (1959) 22(2) The Modern Law Review 117; H K Lucke, 'Ratio Decidendi: Adjudicative Rational and Source of Law' (1989) 1(1) Bond Law Review 36 and Robert Scofield, 'Goodhart's Concession: Defending Ratio Decidendi From Logical Positivism and Legal Realism in the First Half of the Twentieth Century' (2005) 16 The King's College Law Journal 311. 402 Lucy Melville, The Draftsman's Handbook (1979) 10 referring to the second of Sir Henry Thring’s two points about the drafting of definitions.
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classical sense, sets out the genus and differentia ensuring that all
subcategories are mutually exclusive and collectively exhaustive. 403
These three principles are now considered in the context of the doctrine of charitable purpose.
1. Principle 1: The Preamble was not Intended to Define Anything
In Pemsel’s case Lord Macnaghten stated that the object of the Statute of Elizabeth ‘was merely to provide new machinery for the reformation of abuses in regard to charities’. 404 In this section, I return to that purpose and plunge back into the history of the Preamble pointing out that it was ‘merely’ a part of a machinery Act and was not intended to define anything. 405
The problem with the Preamble is not with the Preamble itself , but with what has become the orthodox reading of it. 406 It is elementary legal method to look not to a preamble, but to the Act as a whole, and in particular, to the operative part of an Act to determine the law. 407
That is if, in fact, the function of the Act is to declare the law in a particular area. Not all
Acts declare the law. Some Acts principally function as machinery provisions to enable
403 See No. 20 Cannon Street Ltd v Singer & Friedlander Ltd [1974] Ch 229, 240 (Megarry J). 404 Pemsel’s case [1891] AC 531, 581 (Lord Macnaghten). 405 For discusison of purpose and context generally see Gareth Jones, History of the Law of Charity 1532-1827 (1969) 27,107; H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 8-11; James Fishman, 'The Political Use of Private Benevolence: The Statute of Charitable Uses' (2008) Pace Law Faculty Publications
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some administrative tasks to be performed. 408 The Preamble was the preamble to an Act creating machinery for commissioners to investigate abuses of charitable trusts. 409 A dimension of the reasons for the problems with the Preamble , is that a preamble to a machinery Act has, contrary to tenets of statutory interpretation, come to be read almost as a codification of substantive law.
The process by which the Preamble becomes a definition is as follows: In 1605, a Mr
Romilly (later Sir Samuel Romilly) for the purposes of arguing a case that depended upon a narrow definition of charitable purpose, 410 categorised the list in the Preamble into four broad groupings. 411 These suggested categories were not taken up in the judgment but were subsequently adopted in a leading text on the law of charities. 412 Lord Macnaghten substantially adopted these four categories in his reasons for judgment in Pemsel’s case. 413
From that categorisation into these four heads, the law of charities has developed to a point where the orthodox understanding of the doctrine is that for a purpose to be charitable, it must fall within one of the four heads of charitable purpose listed by Lord Macnaghten in
Pemsel’s case and be for public benefit. 414
The use of the categories in both Morice v Bishop of Durham and Pemsel’s case contexts is eminently reasonable. The categories alone were not, though, the reasons for judgment in either case. In Morice v Bishop of Durham , they were not adopted into the reasons for
408 See Charities Act 2006 (NZ) s 8. 409 Pemsel’s case [1891] AC 531, 581 (Lord Macnaghten). See also Gareth Jones, History of the Law of Charity 1532-1827 (1969) 27, 107; and H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 8-11. 410 Morice v Bishop of Durham [1805] 10 Ves 522. 411 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 13; H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 12. 412 L S Bristowe and W I Cook, The Law of Charities and Mortmain (Tudor's Charitable Trusts) (3 rd ed, 1889) 2. 413 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 13. 414 Peter Luxton, The Law of Charities (2001) 112; Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 111-112, 123, 127; 132-146; 147-169; 172-197. Denis Ong, Trusts Law in Australia (3 rd ed, 2007) 330; Philip H Pettit, Equity and the Law of Trusts (10 th ed, 2006) 251; H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 12-13; Kerry O'Halloran, Myles McGregor-Lowndes and Karla Simon, Charity Law & Social Policy: National and International Perspectives on the Functions of the Law Relating to Charities (2008) 29-31.
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judgment. 415 In Pemsel’s case , Lord Macnaghten described his musing over the classification into ‘four principal divisions’ as ‘academical.’ 416
With the classification having now taken on the significance that it has, the divisions are more than ‘academical’. The list itself, which, according to Fishman, recited the ‘proper objects of charitable interest’ solely unintentionally, 417 has become the rationale. This is the first underlying methodological problem.
2. Principle 2: The Overlooked but Underlying Jurisprudence of Pemsel’s Case
Just as the problems with the Preamble flow from its unintentional application, 418 so the problems with Pemsel’s case are not with the case; the problems arise from what has become the orthodox reading of it. At the latest, by 1947, the orthodox reading of Pemsel’s case had become that ‘all claims to embrace an object under the head of a charity must assert that it comes within one of the four classes’. 419
This is an unexpected outcome because the judicial officer in Pemsel’s case , Lord
Macnaghten, himself, described the classification as a ‘rather academical discussion’ that would probably ‘amuse’ a layman. 420 Equally as important, Lord Macnaghten stated that ‘no one who takes the trouble to investigate’ can doubt that the concept of charitable purpose,
415 Morice v Bishop of Durham [1805] 10 Ves 522. 416 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten). 417 James Fishman, 'The Political Use of Private Benevolence: The Statute of Charitable Uses' (2008) Pace Law Faculty Publications
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and the jurisdiction of the courts that treat those purposes with ‘particular favour’, was established well before the Statute of Elizabeth and was not dependent upon it. 421
The overlooking of the underlying jurisprudence is even more unusual when considered from first principles. Typically in the reading of a case, there is a presumption that there is a jurisprudence giving effect to a public policy in the ratio decidendi of the case. 422 Sound jurisprudential reasoning may dissent from that reasoning and it may be overruled but it does not overlook it. Had the underlying jurisprudence not been overlooked, the current problems with the doctrine of charitable purpose might not have arisen.
If Lord Macnaghten is so clear that his classification is ‘academical’ and that the jurisprudence of charitable purpose rests on foundations independent of the Statute of
Elizabeth , how can his opinion have been read as one of classification and without reference to the underlying jurisprudence? The answer may lie in the problem of defining charitable purpose. Lord Macnaghten set out these observations as part of his reasons as to why the popular notion of charity could not be utilised in legal theory. He held that it led to the
‘hopeless task’ of each individual case being decided on its own facts. 423 Subsequent cases have substantially followed his example of classifying charitable purpose into classes but whereas Lord Macnaghton developed the classes with reference to the underlying jurisprudence the subsequent decision do not. The is now at apoint where the classification has become the jurisprudence.
421 Pemsel’s case [1891] AC 531, 580, 581 (Lord Macnaghten). 422 Julius Stone, 'The Ratio of the Ratio Decidendi' (1959) 22(6) Modern Law Review 597; Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3, 20-21. 423 Pemsel’s case [1891] AC 531, 587 (Lord Macnaghten).
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At a critical juncture, a case that held that the popular concept of charitable was capable of legal theory development, was overruled. 424 Justice Issacs, in Chesterman’s case, attempted to give jurisprudential form to the popular notion of charitable purpose. He pointed out that:
But in the application of these rules minds easily differ. For instance, in Pemsel's Case Lord
Halsbury and Lord Bramwell dissented. And one of the three eminent jurists who composed the
majority, Lord Herschell, in the very next year indeed – within eight months afterwards – was led
to a non-technical interpretation of the words "charitable purpose" in another Act. 425
The other Judges in the majority of the High Court of Australia agreed but the High Court was overruled by the Privy Council. 426 The consequence has been that the ‘hopeless task’ of each individual case being decided on its own facts, because of the apparent inability to give meaning to the popular concept of charity, has been avoided and replaced by the ‘hopeless task’ of each individual case being decided on its own facts because the courts are without an underlying jurisprudence to frame decision making.
What then was that overlooked jurisprudence? The opinions in Pemsel’s case point to an underlying jurisprudence informed by (supply side) motives of piety and (demand side) requirements for public goods. Lord Macnaghten, along with the other Law Lords in the majority, identified charitable purposes not with reference to the categories per se , but with
‘those trusts of a public nature which, according to the doctrine of the Court derived from the piety of earlier times.’ 427
The centrality of trusts of a public nature to the doctrine of charitable purpose is well accepted. The equally important, but more readily overlooked, dimension of the
424 Chesterman v Federal Commissioner of Taxation [1923] HCA 24 (6 June 1923); (1923) 32 CLR 362. 425 Chesterman v Federal Commissioner of Taxation [1923] HCA 24 (6 June 1923); (1923) 32 CLR 362, 381-382 (Isaacs J) referring to Commissioners of Inland Revenue v Scott 15 (1892) 2 QB, 152. 426 Chesterman v Federal Commissioner of Taxation [1923] HCA 24 (6 June 1923); (1923) 32 CLR 362. 427 Pemsel’s case [1891] AC 531, 580 (Lord Macnaghten).
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jurisprudence is that informed by the ‘piety of earlier times’. There is a concept of pious uses 428 that lies beneath the concept of charitable purpose traceable to well before the Statute of Elizabeth .429 The centrality of this concept to early forms of voluntary association cannot be overstated. Richardson summarised several scholars declaring not only that ‘[a]ll craft guilds pursued pious goals’ but also ‘that craft guilds began as religious and fraternal associations’ which ‘all’ retained a religious orientation until the Reformation. 430 Evidently, it was the combination of ‘piety and profit’ that ‘helped overcome the free-rider problems and achieve common goals’. 431
The legislation of the English Parliament of 1601, and its antecedent in 1557, 432 did not set out a definition of charitable purpose drawn from the concept of pious use or reference the broad concept of public trust within a definition as might be done today. 433 The reasons why can only be speculation. It is interesting, though, that the drafters of the Statute of Elizabeth , and its 1597 predecessor, 434 appear to have drawn, instead, upon the poem The Vision
Concerning Piers Plowman 435 to formulate the list of charitable purposes set out in the
Preamble .436 Had the legislation been declaratory then it may have been necessary to
428 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 3, 4. The word pious has at law (or at least had at the time of Pemsel’s case ) a broader meaning than in common parlance. Lord Watson reviewed the law in relation to pious uses in Pemsel’s case and found ‘[s]o far as I am able to discover, godly and pious as applied to trusts or uses, had, in early times much the same significance in Scotland as in England. Their meaning was not limited to objects of a religious or eleemosynary character, but embraced all objects which a well-disposed person might promote from motives of philanthropy.’ See Pemsel’s case [1891] AC 531, 558 (Lord Watson). 429 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 3. 430 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 140. 431 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 141, 167, 169, 175-178. 432 An Act to Reform Deceits and Breaches of Trust Touching Lands Given to Charitable Uses 1597, 39 Eliz c 6. 433 R H Helmholz, Roman Canon Law in Reformation England (1990). 434 An Act to Reform Deceits and Breaches of Trust Touching Lands Given to Charitable Uses 1597 , 39 Eliz c 6 discussed in James Fishman, 'The Political Use of Private Benevolence: The Statute of Charitable Uses' (2008) Pace Law Faculty Publications
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address the issue of what the extant law was, squarely, but being a machinery Act, the issue could be avoided. It seems it was.
The context was post-Reformation England where the law by which the charities had formerly been administered was Roman Catholic Canon law and the poem adopted railed against Roman Catholic abuses. In selecting wording from The Vision of Piers Plowman for the Preamble ,437 the Protestant reformers may have been offering political comment on their willingness to address the abuses which Langland, the poet, had criticised. The adoption of the words of such a poem, to make the point that the full force of state power, at a national level, will now be applied to remedy the abuses of which the people have complained, is very understandable and methodologically sound for a preamble. If that is so, then the use of the poem in the Preamble was a method for the legislators to carry a message that was politically poignant. Furthermore, in post-Reformation England, the unwillingness of a
Tudor Parliament to affirm, or in any way to give expression to, Roman Catholic Canon law is understandable.
The factors informing the drafting of the Preamble by a Tudor Parliament are not relevant in twenty-first century common law countries but the consequences are. For citizens in the twenty-first century in common law countries, the most profound consequence of the primacy of the Preamble may not be what it says, but what it ignores. By entombing the extant common law behind the Preamble , and instead requiring the Preamble to be used to decide charitable purpose, the underlying jurisprudential rationale (the essence) that may have given some sense to the formation of the (incomplete) list, which is the Preamble , was lost. That may not have mattered at the time because the underlying rationale that organised
State's Agenda for Charity' (2002) 8 Third Sector Review: Charity Law in the Pacific Rim 67, 71. Both views may be correct if the earlier statutes had adopted the wording of the poem and the drafters of the Statute of Elizabeth followed this. 437 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 9.
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the list was, then, not important. The community in question knew the objects within the purview of the legislation and that was all that was required at that time.
Exploration of the impact of this oversight must wait until Chapter VIII. At this point, it is sufficient to note that the loss of the underlying jurisprudence does not flow from a reading of Pemsel’s case as a whole, though, but only from a narrow focus on the categorising words in the judgment of Lord Macnaghten. 438 The underlying jurisprudence has been overlooked.
The common law is such that a jurisprudence that has been overlooked can be rediscovered.
The paradoxical nature of the common law is that it is not ‘a set of fixed rules but a process’ whereby courts return to earlier cases and decide what principles from ‘prior cases’ inform the development of the law in the case before it. The underlying jurisprudence in Pemsel’s case awaits rediscovery.
In the context of an overlooked jurisprudence, it is also worth noting in passing at this point, that the form of the expression of both piety and public benefit – trust or corporation – was not historically significant. The law in relation to these organisations for piety has a history preceding the Norman Conquest of England. In those days, they were called eleeymosynary corporations. They are traceable back to about the sixth century with charities, such as the
King’s School, Canterbury, having history traceable to 597. 439 These organisations can now be located in civil society but they were not conceived of as civil society organisations until recently. Conceptually, there was not a distinction between these charitable corporations and charitable trusts. The form was not important.
The concept of the trust has become central to the current formulation of the doctrine of charitable purpose but this need not be so. Not only is there a basis for a corporate form of expression in eleemosynary corporations but the antecedents to the charitable trust might
438 Pemsel’s case [1891] AC 531, 583-584 (Lord Macnaghten). 439 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 58.
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trace not only to church law, but the Islamic concept of the waqf brought back from the
Crusades. 440 The formal recognition of trusts in general, and charitable trusts in particular, evolved through feudal times and the present conception of trust as a legal concept emerged following the passing of the Statute of Uses in 1535. 441
The doctrine of charitable purpose may be presently locked within the concept of trusts but historically its foundations lie equally, if not foundationally, in corporate and unincorporated forms.
3. Principal 3: There is not a Definition.
There is not, now, a definition of charitable purpose. The popular meaning of charitable purpose as concern for others was sacrificed for certainty. Charitable purpose, in lay terms, has a subjective element that relates to motive. 442 At law, by the adoption of the technical definition, the reference to motive is removed and charities are institutions that satisfy certain
‘objective’ criteria. 443 Lord Macnaghten held, in adopting the technical meaning, that:
The majority of the Court of Appeal tell [the Special Commissioners vested with the task of
deciding what is a charitable institution for tax exemption purposes under the English Income Tax
Act (1842)] they must be guided by the popular meaning of 'charity', and that ‘each individual case
must be decided on its own facts.’ There is certainly no indication in the Act that such a hopeless
task as that was laid on the Special Commissioners.444
The law has consistently returned to the Preamble to overcome this difficulty but as the doctrine of charitable purpose has become focused on the institution (not the altruistic characteristic) it bears little, if any, link to common parlance. If the legal class of charities
440 Monica Gaudiosi, 'The Influence of the Islamic Law of Waqf on the Development of the Trust in England: The Case of Merton College' (1987-1988) 136 University of Pennsylvania Law Journal 1231. 441 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 59. 442 Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 8-9. 443 Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 8-13; Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten). 444 Pemsel’s case [1891] AC 531, 587.
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does not represent social expectations of charitable purpose, what do citizens of common law countries expect to reside at the heart of this body of law? This problem was foreseen by none less than Lord Chancellor Halsbury who, in Pemsel’s case , argued in his dissenting judgment to resist the separation of the common from the technical meaning. 445 The problem that arises from the schism is that the notions embedded in the words ‘charitable purpose’, which might have stood as the unifying or relating concept that brings all of these heads of charitable purpose into relationship (the essence) has been lost. The now dominant jurisprudential theory is that referrable to the list in the Preamble ; and if the inquiries have shown anything, it is that this list is clearly inadequate.
A specific problem with identifying the genus in the Preamble is that it is a list. 446 A definition defines with reference to key characteristics – that is, the essence is not elucidated. 447 A list only lists. If there is a commonality of characteristics in a list, it is the responsibility of the definer to state what that commonality is: that is, to provide this as the essence of the definition. If it is helpful, the definer may state in the definition ‘this definition includes....’ The only time when a list may be a definition is where the list is an exhaustive list. With the Preamble formulating the foundation for the modern legal understanding of charitable purpose, there is the worst of both. 448 There is not an exhaustive list and there is not a statement of the essential characteristics. Addressing this problem requires an exhaustive list, a clear definition or a definition including a list. 449
445 Pemsel’s case [1891] AC 531, 542. 446 Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53) 29, 31-36. 447 R W M Dias, Jurisprudence (5 th ed, 1985) 3. 448 That is not to say that it was the worst of both in 1601. The Preamble served its purpose then. It is the purpose to which it is presently put that creates the problems. 449 United Kingdom Secretary of State for the Home Department, Charities: A Framework for the Future (1989).
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A second specific problem with the present approach when considering the missing essence, is that spirit and intendment are ephemeral, opaque and uncertain concepts, 450 unsuited to legal analysis. 451 A spirit may have character, but that character is not manifest nor subject to legal obligation until incarnate in a legally recognised body. Then, the body is subject to the law, not the spirit. In the context of charities, these bodies take organisational form.
Put at its simplest, there is a need for the law applying to these organisations to identify clearly the essence of these organisations that are said to manifest charitable purposes. It is not enough, though, to identify essence. That which differentiates these organisations from others must also be delineated if the organisations are to be defined adequately.
Differentiation is possible. The sector to which charities belong is but one sector, in fact, but one part of a sector of society. Categorised as a part of the third sector, charities and other civil society organisations stand alongside, but different from, the response to social needs of businesses (the first sector), the government (the second sector) and family (the fourth sector). 452 At this point it is enough to note that there is not a definition . In the next section reasons why the present situation exists are considered.
D. How the Definitional Problems Arose
The Statute of Elizabeth was passed in conjunction with, the Statute of Poor Relief .453
Together they were part of the first national attempt to provide a regulatory framework for voluntary attention to community needs, but most particularly, poverty. 454 For reasons to be discussed below, real wages at the dawn of the seventeen century were ‘only about half of
450 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 7. 451 Gilmour v Coats [1949] AC 426, 443 (Lord Simonds). 452 Submission by Australian and New Zealand Third Sector Research to the Inquiry into the Definition of Charities and Related Organisations, Commonwealth Government, (2000). Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 3. Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000). Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001). 453 43 Eliz c 2 (Eng.&W). For a discussion of the inter-relation of the two Acts see Blake Bromley, '1601 Preamble: The State's Agenda for Charity' (2002) 8 Third Sector Review: Charity Law in the Pacific Rim 67. 454 Peter Luxton, 'The Shaping of Charity Law' in Judith Hill (ed), The Law of Charities (2001) 3, 6.
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what they had been’ at the dawn of the sixteenth. 455 The extent of the poverty was such as to cause the sovereign concerns as to the maintenance of social order. 456
In the sixteenth century, poverty relief, and indeed the voluntary supply of resources in general, was a combined effort of family and business, 457 often, if not usually, organised through the church. 458 The Statute of Elizabeth brought the state into poverty-relief regulation and regulation of voluntary supply of resources. 459 It entrenched the coercive role of the state in administration of voluntary supply of goods and services. The Nathan Report
(1952) refers to this as the beginning of a partnership ‘in which the state fills gaps left by charity rather than charity filling gaps left by the state.’ 460 The boundaries between the voluntary giving and government-coerced contributions to poor relief were ‘fluid’, 461 as had been the boundary between commercial relations expressed through guilds in the lead up to the Reformation. 462
What had changed through the sixteenth century was the church and its role. At the beginning of the sixteenth century, it was the Roman Catholic institution. By the end of that century, that institution had become a pariah, its institutions sacked and its property base sequestrated to the English crown. 463 With that transition from Roman Catholicism came a
455 Marjorie K. McIntosh, 'Poverty, Charity, and Coercion in Elizabethan England' (2005) 35 Journal of Interdisciplinary History 457, 460. W Jordan, 'The English Background of Modern Philanthropy' (1961) 66 American Historical Review 401, 403. 456 Peter Luxton, 'The Shaping of Charity Law' in Judith Hill (ed), The Law of Charities (2001) 3, 6. Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 204. 457 W Jordan, 'The English Background of Modern Philanthropy' (1961) 66 American Historical Review 401, 404. McIntosh provides a detailed overview of the way in which the ‘disparate elements’ came together to ameliorate poverty ‘at the town Hadleigh’ during the Elizabethean period: Marjorie K. McIntosh, 'Poverty, Charity, and Coercion in Elizabethan England' (2005) 35 Journal of Interdisciplinary History 457, 468-79. See also Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 140-141 on the role of guilds in mediating religious giving. 458 Peter Luxton, The Law of Charities (2001) 6. 459 Geoffrey Gibson, 'Fusion or Fission?' (2000) 20(1) Australian Bar Review 70,79. 460 Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53) 8. 461 Ilana Krausman Ben-Amos, The Culture of Giving: Informal Support and Gift-Exchange in Early Modern England` (2008) 10. 462 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 145. 463 Blake Bromley, '1601 Preamble: The State's Agenda for Charity' (2002) 8 Third Sector Review: Charity Law in the Pacific Rim 67, 78.
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removal of many of the forms of assistance that had previously been available to address poverty. 464 The Roman Catholic Church had required of its adherents that they, in their wills, leave a portion to pious uses. 465 Its law also administered the transfer of estates on death so some of these gifts made their way to relief of poverty and other charitable ends through the application of that law, the terms of the will and the nature of the gift. 466 With the sacking of the monasteries and the disenfranchising of the Roman Catholic religion, poverty relief particularly, but the supply of charitable good in general, came to be organised voluntarily and principally at a local level, without the institutional support of the law or the
Roman Catholic Church. As might be expected, this community response met with mixed levels of effectiveness and success according to the capacity of the relevant community. 467
By the time of the famines of the 1590s, it seemed evident that a national response was required. The Statute of Poor Relief was the regulatory framework by which the state responded to aspects of that need and the Statute of Charitable Uses was the way by which the voluntary dimensions expressed through charitable uses (trusts) would be enforced. 468
It was the English merchant classes, keen to shape the emerging nation according to their aspirations, who applied to their public purposes the concepts of the charitable trust. Free of the shackles of the Roman Catholic religion’s laws and involvement, they were able to appoint trustees who might accomplish their social purposes in perpetuity, rather than the local bishop or cleric, so they poured enormous sums into non-religious charitable purposes 469 with the knowledge that it would be state, not church courts that would oversee
464 Peter Luxton, The Law of Charities (2001) 6. 465 The phrase was ad pios causa that is for a ‘pious cause’ or as described through this thesis a ‘pious use’. 466 Gareth Jones, History of the Law of Charity 1532-1827 (1969). 467 Marjorie K. McIntosh, 'Poverty, Charity, and Coercion in Elizabethan England' (2005) 35 Journal of Interdisciplinary History 457, 468. 468 Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53) 8. See also James Fishman, 'The Political Use of Private Benevolence: The Statute of Charitable Uses' (2008) Pace Law Faculty Publications
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their performance. The private supply of charitable good flourished in that environment and through that, a charitable sector developed outside of the context of organised religion.
Not all generations take the same view of charitable purpose – some ages are more generous than others and the period 1680 to 1760 is sometimes described as ‘the dark age of English philanthropy.’ 470 In such a context, it may reasonably be expected that there would be a backlash against the growth of charities and that this would find judicial expression in limiting the definition of ‘charitable purposes’. It might be expected, then, that this would result in the narrowing of the classes of charitable purposes. But that was not to be. The scope of charities was curtailed, but not by narrowing the definition of charitable purpose .
The Preamble was evidently too deeply entrenched. 471 The response was legislative – the
English Mortmain Act 1736. 472 That Act had the effect of hampering devises of land for charitable purposes 473 by declaring void dispositions by will to charities that were made within the 12-month period prior to the death of the devisor. 474 In this context, litigation over whether or not a purpose was charitable was to ascertain if the Mortmain Act declared the gift of no effect and, as a consequence, the gift passed to the next of kin or otherwise in accordance with the will. So, perversely perhaps, the effect of the Mortmain Act was that it
‘preserved from serious questioning the inherited, generous conception of legal charity.’ 475
From the generous, secular spirit of sixteenth century to the eighteenth century’s Mortmain legislation, the scope of charitable purpose, as defined by the Preamble , expanded but for antithetical reasons. 476
470 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 105. 471 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 107. 472 Geo II c 36. 473 J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7 th ed, 2006), 139. 474 Geo II c 36. Peter Luxton, The Law of Charities (2001) 7; Gareth Jones, History of the Law of Charity 1532-1827 (1969). 475 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 107. 476 Peter Luxton, The Law of Charities (2001) 6-9.
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From these beginnings, traceable to the Preamble , the law of charities as a body of law has been, and must be viewed, as a part of society’s response to its members’ needs for charitable good. 477 Civil society organisations, like the church, may press to expand both their scope of operation and their entitlement to favour. Business and government might encourage this against family interests, which may push back with legislative curtailment as occurred with the Mortmain Act. 478 In such a context, civil society organisations must be seen not as passive intermediaries, but as ‘players’ in their own right contesting for both space and favour. Charities are, then, part of a social space and charity’s boundary with other aspects of society sectors, and its entitlement to favours, may expand or contract.
Common law countries in the twenty-first century often do not have either Mortmain legislation or its equivalent. The same contests over boundaries are, though, evident. They find expression in a variety of ways of which the following are examples:
1. The disquiet over tax benefits to ‘businesses’ run by religious organisations not
being available to commercial operators 479 and, more generally, over the
government’s utilisation of the voluntary sector to deliver welfare services;
2. The exclusion of all political activity from the benefits available to charities at
common law and the extent to which political parties ought to be favoured and
accountable; 480
3. The emergence of the welfare state 481 and the acceptance by government of
primary responsibility for care of the poor, education and health care provision;
that is three of the four ‘heads of charity’; 482
477 Gareth Jones, History of the Law of Charity 1532-1827 (1969) 105. 478 Geo II c 36. 479 Adele Ferguson, 'Not-for-Profit Organisations are a Big Part of the Economy, Yet they are Virtually Unaccountable' (2005) (March 24-30) Business Review Weekly 45, 45-46. 480 Gary Johns, 'Political Parties: From Private to Public' (1999) 37 Commonwealth and Comparative Politics 89; Gary Johns, 'Desirability of Regulating Political Parties' (2001) 8 Agenda 291. 481 Peter Luxton, The Law of Charities (2001) 10-11; J W Nevile (1998) provides the following definition of a welfare state: A welfare state can be defined as one in which the economy is basically a capitalist economy, but the government intervenes extensively in order to ensure that the economic welfare of all citizens is at least at a minimum standard, and, if possible, to increase the economic welfare of all.
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4. Family provision claims where gifts to charities are, or are not, as the case may
be, set aside in favour of family members. 483
In summary, then, the problems arose because there were social challenges that needed addressing and the law evolved in the way it did in response to those needs. 484 To step out of the corner into which the law has painted itself, it is necessary to rediscover the essence of the doctrine of charitable purpose and clarify what distinguishes charitable organisations from other organisations. These are issues of boundary definition. As the Charities
Definition Inquiry reported: ‘It is clear from submissions to the Inquiry that much of the confusion in the sector is related to …what the boundaries are between different types of entities.’ 485 By remaining with the simple alternatives of only charitable or not charitable, the possibility of a more sophisticated analysis is excluded. This points to wider taxonomical problems.
E. Wider Taxonomy Problems: Distinguishing Charitable Purpose from Related Purposes
Going beyond charities required rebuilding the links between charitable purposes and other civil society purposes. The fourth head of Pemsel’s case , ‘other purposes beneficial to the community’, in many ways sets the outer limits of charitable purpose. What, though, lies beyond those limits? Discussing the ‘current reforms’ in the United Kingdom, Garton concluded that
a modernised charitable sector is primed to dominate two social functions – the provision of
public goods and intangible private services – but that there are still significant areas that fall
In the Australian version the cornerstone of the welfare state was that in every family income unit at least one person had the right to full time employment at a wage which was at least big enough to enable the breadwinner and his family to live in frugal comfort. J W Nevile, 'Human Rights Issues in the Welfare State' (1998) 4(2) Australian Journal of Human Rights 95, 96. 482 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 55. 483 Eg. Succession Act 1981 (Qld) Part V and Auckland City Mission v Brown [2002] 2 NZLR 650. 484 J M Kelly, A Short History of Western Legal Theory (1992) xv. 485 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 34.
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outside of the charitable sector, and hence, in some cases, outside the ambit of regulation, despite
the fact that they are functionally similar to those activities which fall within the charitable sector.
These are: (i) the advancement of non-traditional religion; (ii) the facilitation of political self-
determination and the political pursuit of charitable purposes; (iii) the facilitation of professional
association; (iv) social enterprise and the pursuit of otherwise charitable purposes for private
benefit; (v) the advancement of non-welfare based recreation; (vi) the provision of social housing
by means of purposes which had not been considered charitable by virtue of lack of public benefit;
and (viii) the facilitation of mutual support. 486
This is an unsatisfactory situation from a regulatory perspective and it points to a clue to solving the puzzle. It is immediately apparent that charities form part of a vast sector of organisations: 487 a sector that touches the lives of almost every citizen 488 and is a ‘significant contributor to the economy and society’. 489 Expanding the class, and then subsectionalising within that class more effectively, is a more useful conceptual development. In the twenty- first century, charitable purpose could be the rallying point around which so much legal analysis is organised if the relationship between charitable purpose and these ostensibly similar and yet different ‘other’ purposes could be revealed.
Mapping this class becomes even more important as the common law doctrine of charitable purpose is extended by legislation into more and more diverse areas of law. The fiscal favours attaching to charitable purposes are well known. What is less widely appreciated is that statutes have extended the concept of charitable purpose into such diverse areas as company law, with charitable purpose being a criterion for omitting ‘Limited’ from the name
486 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 194. 487 See Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001). 488 Mark Lyons, Third Sector - The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001) xi suggests that at least 65% of Australians belong to at least one third sector organisation. 489 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 31; see also Lester Salamon and Wojciech Sokolowski, 'Volunteering in Cross-National Perspective: Evidence From 24 Countries' (Working Paper No 40, The Johns Hopkins Center for Civil Society Studies, 2001).
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of a company, 490 to volunteer protection, 491 and into copyright law. 492 The challenge for jurists, which this thesis explores, is to identify the underlying commonality that gives meaning to the class so that the common law can continue to develop.
F. Problems with Measuring Charitable Purpose and some Alternative Approaches
It will be recalled that the reason why the common law has remained constrained within the spirit and intendment of the Preamble when defining charities and consequently the scope of operation of the law, is because the courts have been reluctant to expose the law to the vagaries of subjective concepts. This presents a problem, identified by Garton, of how to define civil society organisations. This is because it is ‘difficult to draw a bright line around the [civil society organisations] falling within the scope of the regime.’493 Garton proposed three possible ways of defining the scope. They were ‘(i) controlling entry to the sector; (ii) drawing up a complete list of regulated organisations; and (iii) defining the sector by reference to conceptually clear criteria.’ 494 Concluding that the first two proposals were unsatisfactory in some regard or another, he preferred ‘conceptually clear criteria’. 495 The problem with conceptually clear criteria is that the structural and functional definitions that he proposed (drawing upon the work of Salamon and Anheier, mentioned in the next chapter, which preceded the civil society diamond introduced in Chapter VI) were ‘not able to reflect the sector, as defined ...with complete accuracy.’ 496 The problem with this approach is that it is likely to be over inclusive or under inclusive. Garton’s solution was pragmatic. He suggested that these problems ‘could be mitigated in practice if we provide
490 Corporations Act 2001 (Cth) s 150. 491 Civil Liabilities Act 2003 (Qld) Ch 2 pt 3 div 2. 492 Copyright Act 1968 (Cth) s 106(b). 493 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 217. 494 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 217. 495 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 217. 496 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 217-218.
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for the periodic review and, where necessary, revision of the boundaries of our regulatory regime.’ 497
Thus he proposed ‘the development, through trial and error, of a robust working boundary that brings the inevitable problems of over – or under – inclusion to an acceptable level, whilst in the long-term topographical changes to the boundaries could also be taken into account.’ 498
This pragmatic suggestion has merit, but in my view, it is possible to theorise further. If, as I will suggest in the next three chapters, the factors that inform conceptions of charitable purpose can be quantified, then jurisprudence can move beyond this ‘periodic review’ and
‘revision’ process, and also the simple nominal form of measurement of charitable purpose, or not. Legal doctrines like the doctrine of charitable purpose, are ‘usually not based on a single policy but represent compromises among a set of opposing policies’. 499 Some of those policies will prevail at one time and others at another time. 500 If the policy contest is to find expression in legal theory, it is necessary to establish subjects over which those disputes are held and, if possible, the variables that are weighed in making decisions for or against. Put simply, there may be dynamic boundaries which accommodate movement along a continuum of contested a priori policy assumptions. If the policy contests that underpin the doctrine of charitable purpose can be elucidated and set out on a continuum, then it may be possible to rank and even measure the variables that inform these policy choices. That possibility is fulfilled in Chapter IX.
It will also be recalled from the last chapter, that not only must the purposes of an organisation be charitable, they must be only charitable for an organisation to belong to the
497 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 219. 498 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 219. 499 Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3. 500 Kenneth Vandevelde, Thinking Like a Lawyer (1996) 3.
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legal category of charities. Thus one purpose not being charitable, even if among others, could destroy the charitable nature of an organisation even where the intention to be charitable seems clear. 501 To highlight this limitation it is necessary to introduce measurement theory at a rudimentary level.
Measurement is not a simple concept. 502 Its application to concepts like charitable purpose
(and three other concepts I will introduce over the next three chapters – altruism, public benefit and coercion) is problematic. 503 One group debated the concept of measurement for six years 504 and at the conclusion of that debate it was said that ‘the 19 members of the committee came out by the routes they entered.’ 505 Following this debate, S S Stevens of
Harvard University published a paper clarifying measurement into four classes. 506 These four categories, now labelled Representational Theory, stand alongside and differ from
Operational Theory and Classical Theory approaches to measurement. 507 The language of
Stevens’s Representational Theory is deeply embedded in the discourses of Occidental thought and the categories are adequate for the purposes of discussion in this thesis so they are adopted even though they are not without difficulties. 508 The four classes or scales of measurement Stevens postulated were: nominal, ordinal, interval and ratio.
501 Morice v The Bishop of Durham [1805] 9 Ves 399 but compare Congregational Union of NSW v Thistlethwaite (1952) 87 CLR 375. 502 Warren Sarle, Measurement Theory: Frequently Asked Questions (1997) SAS Institute Inc.
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The Nominal Scale is a labelling device. 509 In the context of this discussion it is the question: charitable purpose or not a charitable purpose, upon which Lord Macnaghten cast an opinion in Pemsel’s case. 510 It is generally considered uninformative. 511 It remains, though, the only method used by jurists when discussing the doctrine of charitable purpose.
The Ordinal Scale of measurement is a method of measurement where ranking or ordering takes place. ‘This scale has the structure of what may be called the isotonic or order- preserving-group.’ 512 It is most suited where rank ordering can be discerned but not precise values. If, as I will suggest later, some purposes are more charitable than others, it would be possible to rank these. This is not to say that there will not be debate over rankings on the ordinal scale. The importance for this thesis, in introducing ordinal measurement, is that if charitable purposes can be ranked then it is possible to move beyond simply labelling purposes as charitable or not. The step to an ordinal approach is not a large one. It is evident in other disciplines when discussing public benefit and altruism. 513
The Interval Scale is the third form of measurement. It is the first clearly quantitative approach; there is not a true zero point but rather, where zero is is a matter of convention. 514
There are objectively verifiable quantitative differences between values such as one interval being double another. Stevens notes that ‘[m]ost psychological measurement aspires to create interval scales, and it sometimes succeeds.’515
509 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 678. 510 Pemsel’s case [1891] AC 531, 587 (Lord Macnaghten). 511 Hiroshi Watanabe, 'Coarse-Grained Information in Formal Theory of Measurement' (2005) 38 Measurement 295, 301. 512 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 679. 513 C S Lewis segmented charity into four classes and Atkinson segmented civil society organisations into ten categories. There are two examples. See C S Lewis, The Four Loves (1960) and Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 519-65. 514 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 679. 515 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 679.
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The Ratio Scale is the fourth form of measurement. It can be applied when ‘all four relations: equality, rank order, equality of intervals, and equality of ratios’ are present. 516
The amount of money received by a charitable organisation by way of donations is an example of application of the ratio scale to a measure of charitable giving. Calculating the amount of money received by way of donations, as a percentage of the total income for an organisation, is an example of the application of the ratio scale where the measurement is reduced to a scale of between zero and 100 hundred inclusive. 517
Disciplines other than law apply much more sophisticated methods of measurement to concepts such as charitable purpose and civil society theory has developed models for addressing these difficulties. Garton has identified the problem and proposed three possible solutions.
This suggests that legal theory could be enhanced by taking cognisance of these developments in other disciplines. This does not seem possible as the doctrine of charitable purpose is presently understood, but if a more dynamic concept of charitable purpose emerged, it might be possible for these alternative methods of measurement to inform jurisprudence. At this stage, though, it is enough for me to point out that the doctrine of charitable purpose cannot, at present, progress beyond nominal measurement, and that is a fundamental methodological problem inhibiting legal theory development. In so doing, I point to a way that the doctrine of charitable purpose might develop beyond charities to a jurisprudence for civil society.
G. Going beyond Charities: the Foundation of the Problems in Philosophic Contests
Resolving the challenges embedded in defining charities, deciding whether regulation should be based on form or purpose and deciding the way that charitable purpose should be
516 Stanley Smith Stevens, 'On the Theory of Scales of Measurement' (1946) 103 Science 677, 679. 517 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 217.
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measured, cannot be determined without reference to broader, non-legal a priori assumptions. That is because the definition of charitable purpose is ultimately to decide the scope of regulation and access to favourable treatment. Those questions are socio-political, not legal. There is not a better illustration of this than the background to Pemsel’s case itself.
The background to Pemsel’s case begins in England in 1863 with Gladstone, who was then
Chancellor of the Exchequer, advancing the argument that if government funds charities it has a right to control charities. He expressed this view in the following way:
… if we have the right to give public money, we have no right to give it in the dark. We are
bound to give it with discrimination; bound to give it with supervision; bound as a constitutional
Parliament, if the Hospitals are to receive a grant, to bring them within our control. 518
The Bill that he put before the British Parliament to give effect to this position significantly curtailed the scope of the exemption from income tax for charities, reducing it to ‘the buildings occupied by hospitals, colleges and almshouses.’ Evidently, Gladstone was aware of ‘a number of charities that were very wealthy, enjoyed taxation exemption and yet catered only for the very wealthy.’ 519 The contrary argument was put by Disraeli. His contention was that the exemption of charities ‘is not a privilege – it is a right’; Disraeli’s position succeeded. The Bill was withdrawn. Gladstone lost the next election. That was not, however, the end of Gladstone’s attempts to limit the scope of exemption for charities. It was under Gladstone’s subsequent leadership of the Inland Revenue Office that the reassessment of the Moravian’s trust, of which Pemsel was the Treasurer, was issued. It was the final appeal from that decision that we now know as Pemsel’s case . Discussion of the
518 Myles McGregor-Lowndes, 'Public/Private Accountability and the Tax Exempt Status of a Charitable Organisation' (Seminar Paper, Social Policy Research Centre, University of New South Wales, 2003) citing W E Gladstone in 3 Hansard 170, 200 reported in The Financial Statements of 1853 (1860-63) 458. 519 Myles McGregor-Lowndes, 'Public/Private Accountability and the Tax Exempt Status of a Charitable Organisation' (Seminar Paper, Social Policy Research Centre, University of New South Wales, 2003).
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decision must wait until Chapter VII, but it is important in peeling back the layers to underlying assumptions, to recognise that the decision in Pemsel’s case arose out of a concern that charities were being unjustly favoured. Litigation does not arise unless at least one of the parties is dissatisfied with the state of things.
Socio-political questions, such as whether or not charities or other civil society organisations are unjustly favoured, do not change their nature by moving from the parliament to the courts. The questions that underpin those debates are ultimately decided according to philosophic a priori assumptions. Gladstone had a view that government should control the sector more and limit entitlement to favours. Disraeli had a different view. Judges are mindful of the policy outcome of decisions. Nowhere is this more significant than in
Pemsel’s case itself where Lord Bramwell, who was in the minority, expressed his concern at what he saw as taxpayer funded evangelism. 520 The majority did not share this view.
Lord Macnaghten reached his conclusion by the application of principle and precedent but concluded his opinion ‘glad to find that the claim of the crown is based on what seems…to be a very superficial view…[and consequently]…that the appeal should be dismissed with costs.’ 521 The issues have not changed with the passing of centuries. In 2008 Justice Kirby held that as the functions performed by religious organisations can be offensive to ‘the beliefs, values and consciences of other taxpayers’ the favours extended to these organisations must be limited. 522 In similar vein Justice Rothstein held that such issues are
‘best left to Parliament’. 523
My point is that these socio-political questions cannot be separated in the context of a discussion of the law of charities from the broader question of the role of these organisations in common law countries. In Pemsel’s case , the question focused on a trust for religious
520 Pemsel’s case [1891] AC 531, 568 (Lord Bramwell). 521 Pemsel’s case [1891] AC 531, 592 (Lord Macnaghten). 522 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1, 47 (Kirby J). 523 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [44] (Per Rothstein J).
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purposes. The issue remains though fundamentally the same today but it is sometimes framed in terms of social capital. If, as Steinberg has pointed out, ‘[r]eligious and other nonprofits complement ... relational contributors to social capital by nurturing moral codes and behaviours’, 524 does that justify favour? If a society wishes to encourage the development of social capital, should religious and other civil society organisations be favoured? That is ultimately a debate, not only about freedom, but also about the funding of religion in common law countries. The freedom and funding of religion are socio-political questions, as commentators on the law of charities have observed. 525 Garton is illustrative.
He pointed out:
English charity law can be viewed as utilitarian in nature. The list of purposes in the Preamble ,
which demonstrates the kind of charity the State wish to encourage, reflects legal charity’s origin
in the activities of the protestant Church of England, which played a “fundamental” role in
maintaining the structure and social fabric of British society in the 17 th century. 526
At a broader philosophic level, Michel Foucault observed that the really ‘demonic’ nature of the ‘modern state’ is derived from the combination of the ancient Greek ‘city-citizen game and the shepherd-flock game’; that is, the political and the religious agendas. 527 The doctrine of charitable purpose purports to proceed by analogy (only) from the ‘spirit and intendment’ of the Preamble . The socio-political factors do not find explicit voice. If, as Foucault suggests, religion and the state are in fact integrated in Occidental society, then it is disingenuous to continue the charade that it is ‘spirit and intendment’, not other socio-
524 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 123. 525 Blake Bromley, '1601 Preamble: The State's Agenda for Charity' (2002) 8 Third Sector Review: Charity Law in the Pacific Rim 67, 84; Neville Estates Ltd v Madden [1962] 1 Ch 832, 853; Ontario Law Reform Commission, Report on the Law of Charities (1996) 16. Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 214. 526 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 86b citing Gareth Jones, History of the Law of Charity 1532-1827 (1969) 27. 527 For a detailed discussion of the way Foucault deals with these issues across a number of his lectures see Nancy Holland, 'Truth as Force: Michel Foucault on Religion, State Power, and the Law' (2002-2003) 18 Journal of Law and Religion 79.
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political factors, that shape the doctrine of charitable purpose. The mere fact that Pemsel’s case was brought and defended, and that there were majority and minority opinions, evidence that there are worldviews in contest, and victory for one is usually a loss for another. Pemsel’s case is ultimately proof that Gladstone lost and Disraeli won not only in parliament but before the courts. There is, I contend, a need to be explicit about this. It is an early step to progressing towards development of the doctrine of charitable purpose to include all civil society organisations, although this may seem counter-intuitive. It may seem counter intuitive because acknowledging that the current formulation of the doctine of charitable purpose is fundamentally the result of contests between worldviews, seems to only complicate an already complicated area of law. So a jurist’s journey into these deeper contests is likely to be a little like the trip Merry and Pippin made into Fangorn Forest. 528
Having entered it may seem there is not a way out. That is not necessarily so, though, for my object is not to resolve these disputes but to set them out in a jurisprudential framework where they can compete, and common ground can be found. It is not that the diverse worldviews agree on what the outcome should be. They can however agree on what is in dispute. At this level is common ground. Again, to quote Foucault, who asks generally – and this thesis asks with particularity in relation to doctrine of charitable purpose ‘what historical a priori provided the starting-point from which it was possible to define the great checkerboard of distinct identities established against the confused, undefined, faceless, and, as it were, indifferent background of differences?’529
In the context of the doctrine of charitable purpose there are three contested a priori assumptions:
1. The first contested a priori assumption is over the division between the
individual in family and kin on the one hand and the wider community on the
other. It is the fundamental question underpinning the determination of when
528 J R R Tolkien, The Lord of The Rings, The Two Towers (1965) 74-109. 529 Michel Foucault, The Order of Things (1994) xxiv.
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benefit is public and when it is private which is so central to the doctrine of
charitable purpose at common law. It is central in the quest to define civil
society organisations, in particular those with charitable purposes, as distinct
from other organisations which exist for private benefit. At its base, so far as is
relevant to this thesis, is the question of when community begins to exist distinct
from individuals in family groupings. These issues of public and private benefit,
and the way in which the ideas have been theorised with reference to the
development of this jurisprudence, are explored in Chapter IV titled Benefit. The
answers to these questions are shaped by, and shape the answers to, the
contested a priori assumptions mentioned below.
2. The second contested a priori assumption is the nature of humans. The doctrine
of charitable purpose springs from ‘the piety of earlier times’. 530 The existence
of this piety is taken as given. That assumption is not without controversy. At
its simplest, this controversy is a dispute over the existence and nature of
altruism. 531 If there is no altruism, just rational self-interested actors operating in
nonprofit markets, then charities in particular, and civil society organisations in
general, will be regulated and favoured on different bases than if altruism is the
continental divide which segments the sector from all others – in particular
business. 532 At its base, so far as is relevant to this thesis, is a fundamental
tension between anthropologies which affirm that all human action is capable of
explanation according to some framework which is founded in pursuit of self-
interest (alone) on the one hand, and on the other, anthropologies affirming a
capacity for self abnegation, charity and altruism in humanity. Whilst the
foundations of the anthropologies are complex, diverse and incapable of
reconciliation, in their practical application they are reducible to the extent to
530 Pemsel’s case [1891] AC 531, 580 (Lord Macnaghten). 531 See Chapter V. 532 See Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501.
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which the activity in question is motivated by, or has the effect of, helping
others. The issues in relation to those contests over the value and extent of
altruism, so far as they are relevant to the development of this jurisprudence, are
explored in Chapter V.
3. The third contested a priori assumption relates to the nature of human society.
At its simplest, this is a dispute over the extent and nature of freedom in society
and expressed, alternatively, as the nature and role of government and the
limitations on government by those governed. This issue underpins the division
of civil society organisations, particularly those with charitable purposes, from
government organisations and the broader question of what are the proper limits
of government regulation of civil society organisations such as religious
organisations. At the base of this contest, so far as is relevant to this thesis, is
the fundamental tension (built from outcomes of the contest over the nature of
humans) between voluntary submissions to one another for the sake of
community on the one hand, and on the other the compulsory submission to one
another under pain of force. The issues of relevance to the development of this
jurisprudence in relation to the distinction between government and civil society
organisations are explored in Chapter VI. The discussion of these issues
provides a platform for the discussion of Associations law in Chapter VII.
H. Conclusion Across this and the two preceeding chapters, the need to go beyond charities has been explored. In Chapter I, the state of the literature was sketched in outline and the gaps, puzzles and problems were elucidated. In Chapter II, some of the challenges facing common law countries, that are driving the need for reform of the common law, were considered from the social and also the legal perspective. In this chapter, the foundations of these problems were identified with a view to establishing how to go beyond charities to a jurisprudence for civil society. The next three chapters build on this foundation work.
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Rudyard Kipling pointed out, ‘they know not England who only England know.’ 533
Similarly, jurists who try to resolve the challenges in the doctrine of charitable purpose solely with reference to the doctrine of charitable purpose cannot expect to find the answer, for the answers must lie outside of the law. Research into and theorising about altruism, public benefit and voluntary associations have, in non-legal disciplines, advanced considerably over the last 30 years. Drawing upon that research, it will be argued over the next three chapters, first that the concept of public benefit is capable of being more completely understood, second that a concept of altruism suitable for jurisprudential application can be drawn from that research and theorising and finally, that the theory of association can be mapped separate from government. The fundamental issues in contest are not resolved. All that is attempted is to set out the issues in each case in relationships that enable jurists to work with the concepts to develop the law as they might see fit.
I. Postscript
Just as the Woodman and the Farmer in A Tale of Two Cities ‘work unceasingly, work silently and no one heard them as they went about with muffled tread’ 534 bringing into position the apparatus to be used in the revolution, so I suggest the resources needed for development of the common law have likewise been steadily moved into position for development of a framework suited for jurisprudential development. So, across the next three chapters, the resources will be marshalled under the headings of benefit, altruism and coercion respectively.
533 Rudyard Kipling, Barrack-Room Ballads and Other Verses (45 th ed, 1891). For the application of this idea to civil society analysis see the introductory comments of Helmut Anheier in Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) ix. 534 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 6.
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PART TWO – CIVIL SOCIETY
Civil society is the subject of this Part. It will be recalled from Chapter I that ‘Civil society is the sphere of institutions, organisations and individuals located between family, the state and the market in which people associate voluntarily to advance common interests. ’535 Civil society is differentiated from the family, the state and the market by means of the three contested a priori assumptions elucidated through Chapters II and III - public benefit, altruism and coercion. Chapter IV is devoted to exploring, conceptually, the distinction between public and private benefit. Altruism is explored in Chapter V with a view to development of a concept capable of application in legal theory. Insights from various disciplines inform theory development but economic insights dominate. At the end of
Chapter V both the altruism (that is integral to supply of civil society organisations and the provision of charitable goods), and the public benefit (that characterises demand for those organisations and goods) are integrated into one framework. The nature of freedom in society is discussed in Chapter VI. This discussion is critical, first to distinguish civil society organisations from government, and second to inform the broader question of what are the proper limits of government regulation of civil society organisations. Chapter VI closes with a model for theory development that is applied in Part Three to bring civil society theory to jurisprudence and jurisprudence to civil society theory.
535 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 22.
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IV BENEFIT
A. Preamble
Mr Lorry was a banker and steward who protested that all that concerned him was the technical discharging of his duty but who, at every point, went beyond that which was technically required and yet always remained within the strictures of his brief. He was
Dickens’s main link between the two cities. 536 He is a wonderful Dickensian typology of the neo-classical economist who, from within the strictures of that discipline’s rational, self- interested, opportunity-maximiser, seeks to facilitate understanding of the journey between self-interest and common good. It is principally to the assistance of that discipline – economics – that this chapter now turns.
B. Introduction
1. Overview
By the close of the last chapter the problems with development of the doctrine of charitable purpose had been peeled back to three contested a priori assumptions . The first contested a priori assumption identified was over the division between the individual in family and kin on the one hand, and the wider community on the other. This distinction is central to the quest to define civil society organisations, in particular those with charitable purposes, as distinct from other organisations that exist for private benefit. 537 If the purposes of an organisation are for public benefit, those purposes satisfy one of the two criteria of charitable purpose at common law. This chapter explores the distinction betweeen public and private benefit. I argue that if a large number of people, who would otherwise be strangers, voluntarily associate in a civil society context the association is public. If a small number of
536 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 21, 23, 36-40, 244, 356. 537 Peter Luxton, The Law of Charities (2001) 112; Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 111-112, 123, 127, 132-146, 147-169, 172-197; Denis Ong, Trusts Law in Australia (3 rd ed, 2007) 330 ; David Hayton, Paul Matthews and Charles Mitchell, Law Relating to Trusts and Trustees (7 th ed, 2007) 977; Philip H Pettit, Equity and the Law of Trusts (10 th ed, 2006) 251; Gino Dal Pont, Equity and Trusts in Australia and New Zealand (2 nd ed, 2004); H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 20.
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people associate for private purposes (such as a family gathering to celebrate Christmas) the association is private. Charities, and more broadly civil society organisations, are, I theorise public organisations. Put differently, I suggest that both the remoteness of the people involved and the number of people involved inform whether or not an organisation is pursuing public purposes.
It will also be recalled from Chapter II, that measuring the amount of public benefit, necessary to satisfy charitable purpose at common law, was difficult. Different measures applied to different heads of charitable purpose. 538 If the purpose is the relief of poverty, under the first head, then the ostensibly private purpose of benefiting one’s relatives can still be a charitable purpose. If the purpose is to qualify under the fourth, general head of charitable purpose, public benefit must be considerably more evident. In this chapter, I also argue that the way public benefit has been theorised in economics as on a continuum, provides a guide to how public benefit might also be theorised in the context of the doctrine of charitable purpose. 539 The ultimate goal, of which this chapter is a first step, is a way of measuring or at least ranking benefit so that a clearer distinction can be drawn between public and private benefit for theory development. That is the first step to a more sophisticated concept of charitable purpose.
In this chapter, the major demand side economic theories of relevance to the development of this jurisprudence are introduced. The theories are considered in historic and social context before three substantive sections explore the way that economists have analysed charities and more broadly civil soicety organisations. 540 A central challenge for jurisprudence is to define
538 Peter Smith, 'Religious Charities and the Charities Act 2006' (2007) 9(3) The Charity Law & Practice Review 57, 70. 539 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 117. 540 Basic texts define the scope of economics differently and there is no universal agreement as Miller and Shade note. See R J Miller and E D Shade, Foundations of Economics (2 nd ed, 1988) 2. For the purposes of this thesis the following will suffice; ‘Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.’ J Jackson et al, Economics (5 th ed, 1998) 2-5. Steinberg simplifes this to ‘Economics is the study of choices under scarcity’.
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the organisations. Differentiating these organisations from their ‘other’ is integral to resolving the defintion problem. Accordingly, theories predominantly concerned with the distinction between civil society organisations and government begin the substantive discussion. This is followed by a discussion of theories predominantly concerned with the distinction between civil society organisation and business A final, more general, discussion regarding the disctinction between civil society organisations and family concludes the chapter. In this third section, the discussion is predominantly concerned with the essential nature of civil society organisations and the challenges of distinguishing them from private gatherings of which the nuclear family is the exemplar. The supply side of the economic equation is not considered until Chapter V.
2. Introduction to Economic Theories in their Historic and Social Context
Charities have existed and have enjoyed favourable treatment since time immemorial.
Luxton pointed to Julius Caesar’s gift of the gardens beyond the river to the people of Rome as evidence of charitable giving existing in ancient Rome. 541 Elaine Abery has observed that the favouring of charities is at least as old as Ezra’s return of the exiled Jews. 542 Colombo and Hall pointed to evidence of tax favour for charities in ancient Greece, ancient Rome and in ancient Egypt. 543 They began their work with the words: ‘Exempting charities from various forms of taxation is a practice that appears as old as western civilization itself’. 544
The exemption has applied in the United Kingdom since William Pitt introduced income taxation. 545 The challenge arising with this is that when legislatures such as the United
States Congress, pass into law this favoured status, they are ‘generally silent about the
Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 117. 541 Peter Luxton, The Law of Charities (2001) 4. 542 Elaine Abery, 'Charities: A Target for Ralph' (2000) 29 Australian Tax Review 224, 224 referencing The Holy Bible New International Version (1984) Ezra 7:24 . 543 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 1, 14. 544 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 3. 545 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 305.
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dispositive reasons.’ 546 The beginning challenge for the formation of a common law jurisprudence, then, is that charities exist and are favoured but we do not know why. There are various contested views. 547 At a more foundational level underpinning charities, is a body of law which enables these gifts to take place. 548 Why do charities and other civil society organisations exist and why are they granted favours?
Since the late 1970s, a rich and diverse debate has raged within economics in an endeavour to explain what, why and how public goods are provided by civil society organisations. 549
As public goods are goods supplied to the public at large, as distinct from private buyers, the concept of markets, and the rules of supply and demand applying to them, are deeply problematised. 550 Legislative agendas, not common law development, precipitated this development. The ‘emergence of non-profit studies was bound to the expansion of the non- profit sector in the United States and attempts to regulate it.’ 551 Integral to this inquiry in that country were two factors: first, changes to the funding of health care by government, making it more attractive to businesses; and second, changes to the taxation regime that were not necessarily advantageous to charities. 552 Peter Dobkin-Hall has observed:
Although a few scholars studied philanthropy, voluntarism, and non-profit organisations simply
because they found them interesting, most members of the research community were attracted to
546 Penina Kessler Lieber, 'United States Tax Treatment of Nonprofit Organisations' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 173, 180. 547 Penina Kessler Lieber, 'United States Tax Treatment of Nonprofit Organisations' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 173, 180-181. 548 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 1. 549 Charles T Coltfelter, The Economics of Giving (1997); Robert Scott Gassler, 'Nonprofit and Voluntary Sector Economics: A Critical Survey' (1990) 19 Nonprofit and Voluntary Sector Quarterly 137. 550 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117; Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy' in Benedetto Gui (ed), Annals of Public and Cooperative Economics (1991) 519. 551 Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000) 96. 552 Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000) 96-97.
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the field by the incentives provided by non-profit leaders as they sought to defend the charitable
tax-exempt universe against legislative attack. 553
These factors, which shaped the emergence of the study of the sector in the United States, are significant in the debate in the United Kingdom, 554 Australia, 555 Canada, 556 South Africa, 557 the Caribbean 558 and New Zealand 559 today. 560
In contrast with the economic agendas, which were driven by social agendas and the need for appropriate regulatory responses, common law development throughout the same period continued to be considered within the strictures of the Preamble ostensibly without reference to these debates that shaped the legislative agenda. 561 The Preamble upon which the doctrine of charitable purpose is founded is, essentially, a list of public goods. The exemplars of
553 Peter Dobkin Hall, 'Theories and Institutions' (1995) 24 Nonprofit and Voluntary Sector Quarterly 5, 9. 554 Christine R. Barker, 'The Reform of Charity Law in Scotland' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 33; Great Britain Parliamentary Panel on Charity Law, Charity Supervision in the 1990s: A Response to the White Paper (HMSO, 1990); Great Britain National Audit Office, 'Monitoring and Control of Charities in England and Wales' (HMSO, 1987). 555 Prime Minister John Howard (Speech delivered at the Prime Minister's Awards for Excellence in Community Business Partnerships, Melbourne Museum, 20 October 2005); Senator Andrew Murray and Mary O'Donovan, Parliament of Australia, One Regulator One System One Law: The Case for Introducing a New Regulatory System for the Not for Profit Sector (2006). 556 David G Duff, 'Charitable Contributions and the Personal Income Tax: Evaluating the Canadian Credit' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 407; Wolfe Goodman, 'Reflections on Tax-Assisted Giving in Canada' (2005) 53(3) Canadian Tax Journal 747. 557 Karen Nelson, 'Tax and the Non-profit Sector - The South African Experience' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and Their Activities (2004) 193. 558 Trevor A Carmichael Q.C., 'Charity Law Development in the Commonwealth Caribbean' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 59. 559 Michael Gousmett, 'The Charitable Sector in New Zealand' (2002) The New Zealand Law Journal 278. 560 Professor Karla Simon and Professor Lee Irish, 'Tax Preferences for Non-governmental Organisations' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 303; Rob Atkinson, 'Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis and Synthesis' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 253. 561 Guild v Inland Revenue Commissioners [1992] 2 AC 310; Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1, 15-37 (Kirby J); and AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 and Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204, 240 where Kirby J (dissenting) held: ‘My own attempt to drag this body of law into the twenty-first century, in conformity with modernity and applicable general principles, came to nothing’. See also Senator Andrew Murray and Mary O'Donovan, Parliament of Australia, One Regulator One System One Law: The Case for Introducing a New Regulatory System for the Not for Profit Sector (2006).
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these public goods in the Preamble are the ‘Repaire of Bridges Portes Havens Causwaies …
Seabanks and Highewaies’. 562 The Preamble also lists such things as the relief of poverty, which, in economic terms, usually involves the supply of private goods, such as food, to particular individuals. 563 There is, then, in the cases on charitable purpose, a division.
Atkinson, in his usual colourful way, puts it thus: ‘[I]n summary, charities provide primary public benefits in two ways: especially good goods to ordinary people, and ordinary goods to the especially deserving.’ 564 With this brief background, this chapter is directed to endeavouring to provide a framework for the divide between public and private to be contested within the common law.
C. When the Government is the Other
1. Burton Weisbrod
Burton Weisbrod is credited with initiating the current stream of economic discourse regarding the unique characteristics of charities, and other civil society organisations, and their role in society. 565 The publication in 1975 of various chapters by him, initially in
Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy 566 and then
562 Preamble. 563 It might be asked where the advancement of religion fits. The repair of churches was listed in the Preamble but that has been expanded to advancement of religion as the law is presently understood. I will argue that advancement of religion, broadly understood and recast, will be theorised as fundamentally a public good. 564 Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 402. 565 There were others who preceded Weisbrod, notably Ginzberg, Heinstad Arrow and Rebens, but because they did not offer a theoretical framework their contributions are not considered foundation. Robert Scott Gassler, 'Nonprofit and Voluntary Sector Economics: A Critical Survey' (1990) 19 Nonprofit and Voluntary Sector Quarterly 137, 139. Weisbrod’s work is, as Kingma points out a ‘natural extension of the theory of club goods, Coase Theorem and the theory of collective action. In each theory the classic public goods or externality problem is resolved by the collective action of the individuals affected.’ Bruce Kingma, 'Public Good Theories of the Nonprofit Sector' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 53, 54. 566 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51.
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his 1977 work, The Voluntary Nonprofit Sector ,567 laid the foundation for subsequent economic theory, to which he again contributed in 1988 with The Nonprofit Economy. 568
Perhaps the most easily overlooked contribution of Weisbrod’s work is the simple, but profound, observation that analysis of an economy as only made up of two sectors: business and government, is ‘seriously’ incomplete. 569
In Weisbrod’s analysis of the sector, he identifies ‘three general categories of non-profits – one private and two public’, 570 called, in order, ‘proprietary, collective, and trust non- profits.’ 571 The private (proprietary) are typically clubs, trade unions and trade associations, which, whilst they adopt the non-profit form, ‘do little but seek the betterment of their own members.’ 572 The two public forms are collective non-profits and trust non-profits. The first of these public forms, whose activities are virtually indistinguishable from government agencies, 573 do such things as finance research on causes and cures for diseases and aid the poor and the handicapped. 574 The second provides ‘trust goods’ such as ‘nursing homes, day care centres and blood banks’. 575 These organisations provide a combination of ‘private goods and consumer protection.’ 576 From the theoretical outset of the discourse, regarding the organisations that make up civil society, then, can be discerned the public versus private
567 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51. 568 Burton A Weisbrod, The Nonprofit Economy (Paperback ed, 1991). 569 Burton A Weisbrod, 'Not-for-Profit Organisation as Providers of Collective Goods' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 1, 1. 570 Burton A Weisbrod, The Nonprofit Economy (Paperback ed, 1991) 59. 571 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60. 572 Burton A Weisbrod, The Nonprofit Economy (Paperback ed, 1991) 59. 573 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60. 574 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60. 575 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60. 576 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60.
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distinction. This is a blurred but evident boundary between government agency and private action. There is also a concern that non-profits may sometimes do little more than ‘seek the benefit of their own.’ These concerns are located in the context of a wider attempt by
Weisbrod to prise from the jurisdiction of business and government, a space that he calls the voluntary, non-profit sector. It is my threshold contention that the time has come for jurisprudence to follow economics and acknowledge this space. I contend that this should be done irrespective of any entitlement to favours associated with charities.
Weisbrod also considered the issue of favours (so central to the doctrine of charitable purpose) and offered a justification for favoured treatment based on contribution to public good. 577 He did not follow the vague, nominal approach of the doctrine of charitable purpose to identify public benefit. He postulated an ordinal scale for ranking civil society organisations according to the extent of their contribution to public good. Public good was to be measured by a concept Weisbrod called the ‘collectiveness index’. This collectiveness index weighed the extent to which a civil society organisation was public as against the extent to which it was private. He wrote:
The collectiveness index reflects the causal relationship between the way an organisation obtains
revenues and the nature of its outputs. A private for-profit firm sells outputs that benefit only the
buyer; in return it receives revenues from sales. It is typically a provider of ‘purely private’ goods
or services and an accurate measure of ‘collectiveness’ would be an extreme score – say, zero.
Similarly, an organisation that, even if it is called a ‘nonprofit,’ provides only private goods or
services for its members or constituents and not for others should also be characterized by a zero.
Such a nonprofit would generally obtain all its revenue either from sales of goods and services or
from membership dues.
577 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 75.
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By contrast, and at the opposite extreme, any private organisation that provided purely collective
goods – virtually all of the benefits from which accrued to persons who did not pay for them –
should receive the highest measure of collectiveness, say 100. 578
How, then, is the collectiveness rating to be calculated? Weisbrod suggested that the way to measure collectiveness is by ‘the percentage of the organisation’s revenue that is in the form of contributions, gifts or grants.’ 579 Weisbrod acknowledged that the index as postulated by him would be flawed, or at least not flawless, 580 but an accurate collectiveness index would
‘reflect the degree to which an organisation provides external benefits’. 581 Weisbrod argued that the higher the collectiveness index the more public subsidy can be justified. 582 In short, he postulated a means of ranking non-profits according to the extent of their contribution to public good. 583
Weisbrod considered the issue of legal form. For Weisbrod, the voluntary non-profit category is not necessarily limited to those organisations with the non-distribution constraint.
Weisbrod leaves open the possibility that ‘self-help groups’ and organisations that ‘have no legal structure’ and possibly ‘mutual’ organisations and ‘cooperatives’ would be within the class called civil society organisations within this thesis. 584 For Weisbrod, the sector may comprise all of the organisations of whatever form that do not fit government or business.
He thus approached definition, not by reference to a list like the Preamble , but by
578 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 73. 579 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 75. 580 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 77. 581 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 75. 582 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 75. 583 Public good in this context does not have the exact economic meaning linked to public goods but rather the broader meaning attributable to policy debate and political economy. In that context, it is more like common good in the philosophic sense or public benefit in the legal sense. 584 Burton A Weisbrod, The Nonprofit Economy (Paperback ed, 1991) 62.
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differentiating these organisations from their other. The other, for Weisbrod, was business or government.
Weisbrod offered an explanation for why these organisations emerge. He theorised that civil society organisations, such as charities, emerge in a society because the state has failed to provide a collective good. Working through the form of the voluntary organisation, is a society’s ‘second best’ solution. 585 For Weisbrod, socio-economic ends should principally be achieved through business in the first instance, and then, if possible, through the state, and if by neither, then through civil society organisations. Muukkonen conveniently summarises
Weisbrod’s ‘state failure’ theory as follows:
Weisbrod argued that the government is willing to provide public goods only to meet the needs of
the majority. When the need is homogenous the median voter prefers government supply because
the state can eliminate the free-rider problem with taxation. There are, however, special needs that
governmental services do not fulfil as in the case of ethnic and linguistic minorities. This creates
the need for many specialised services because the government does not supply them. Sometimes
this is because the government is not able to supply enough public goods and sometimes it is seen
that it is not the duty of government to provide certain public goods. 586
In summary, for Weisbrod there is a third sector of society where organisations that pursue purposes different from business and government, provide a good or service when businesses and government cannot be enticed to do so. A society, and for jurisprudential purposes lawmakers, may subsectionalize the participants in this sector according to whether they are public (trust and collective) or private. They may also justifiably favour those contributing to public benefit where public benefit is evidenced by scoring highly on Weisbrod’s
585 ‘Second best’ in this context does not have the precise economic meaning developed in economic theory flowing from the work of E H Mishan. See E H Mishan, 'Second Thoughts on Second Best' (1962) 14 Oxford Economic Papers 205. 586 Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000) 102-103. For historical significance and the former role played by guilds see also Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139 and for more on free-rider problems generally see John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 100.
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collectiveness index. This approach subsegments and ranks such organisations according to an ordinal, not a nominal form, where the measuring indicium is the income source. Legal form, and in particular the existence in constituent documents of a non-distribution profit constraint, is not critical.
2. Estelle James and the Public/Private Continuum
Estelle James built upon the government failure theory of Weisbrod. 587 She argued that there were two demand side factors propelling the private supply of public and quasi-public good by non-profits (as she called civil society organisations). They are excess demand and differentiated demand. 588
Where there is excess demand, both government provided schooling and civil society supplied schooling may both grow until sufficient education is supplied to meet the need.
This phenomenon is particularly evident in (poorer) third world countries where the government does not, or is not able to, supply adequate educational services for all student needs. 589
In addition to, or in lieu of, the excess demand, as a theory of civil society organisation growth, is the existence of differentiated demand. According to James, people will choose civil society organisations for education in lieu of government supplied education because their worldview is different from the dominant hegemony expressed through government- provided services. 590 Whereas Burton Weisbrod’s theory of civil society organisations was
587 Estelle James, The Nonprofit Sector in International Perspective (1989); Estelle James, 'The Nonprofit Sector in Comparative Perspective' in Walter W Powell (ed), The Nonprofit Sector: A Research Handbook (1987) 397. 588 Estelle James, 'The Nonprofit Sector in Comparative Perspective' in Walter W Powell (ed), The Nonprofit Sector: A Research Handbook (1987) 397. She acknowledges these were first ‘mentioned’ in Burton A Weisbrod, 'Not-for-Profit Organisation as Providers of Collective Goods' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 1, 5. 589 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 1-4. 590 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 5.
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that they emerged because government’s obligation to satisfy the needs of (only) the median voter left minorities without a product they needed, Estelle James pointed out that even if the government provided adequate product, consumers may still choose to have the good or service supplied in a differentiated form by a civil society organisation. Noting that some elite schools may be chosen because of a superior quality product, she observes that this does not explain all, or even most, choices of civil society organisation provided schooling.
James pointed to the difference of the educational service provided as the reason. 591 The difference is due to the demand for education taught in accordance with a particular worldview. The importance of civil society organisations as vehicles for the propagation and maintenance of worldviews – particularly religion – is foundational to Estelle James’s heterogeneity theory. 592
James segmented the sector into two types of organisations. Type (i) are those organisations such as schools, where the good is a quasi-public good often supplied in the pursuit of a charitable purpose, but which, also, is capable of being supplied on a user-pays basis. Type
(ii) are those where the beneficiaries do not pay or pay little for the services they receive. 593
Seeking payment for services is a characteristic of business, and seeking and obtaining donations is an indicia of commitment to supply of public or quasi-public goods. When considering the supply of civil society organisations, James noted that in some countries, notably Japan and Columbia, these organisations are perceived as ‘disguised’ vehicles for private benefits, particulary in the supply of education. She noted, ‘the founder may become the headmaster and be paid a salary beyond market wage, [and receive benefits] in
591 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 4-5. 592 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 6. 593 Estelle James, 'The Nonprofit Sector in Developing Countries: The Case of Sri Lanka' in Estelle James (ed), The Nonprofit Sector in International Perspective - Studies in Comparative Culture and Policy (1989) 289, 292.
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nontaxable form – expense accounts, free houses and cars.’ 594 Discerning the underlying purpose – in particular whether it is for public or private benefit, may be a significant differentiator and advance theory in discerning a business from a civil society organisation pursuing the purpose of advancement of education.
Distinguishing civil society organisations from government, can also be a challenge. Civil society organisations stand alongside, and in contest with, government. Government is, within James’s analysis, a significant influencer of the expression of the sector in a society.
She pointed to the example of the Bihar government in India, ‘nationalising’ most of the private schools, as an extreme example of influence. 595 Less extreme examples include use of funding to coerce the way purposes are pursued. James observes that initially government may offer subsidies; then, once the civil society organisation is dependent upon the subsidies, James observed it is easier for government to influence it. 596 This interplay of government with civil society organisations in the pursuit of purposes such as education, can make distinguishing one from the other difficult. She notes, for example, that in Ireland the government funds Catholic schooling and the schools are managed by the Catholic Church.
She suggests that in Italy, the Catholic Church’s influence is sufficiently great for the demand for worldview-compatible education to be provided by public schooling. 597 She points out that what this means is:
594 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 6. 595 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 10. 596 Martti Muukkonen, The Familiar Unknown - Introduction to Third Sector Theories (Licentiate Thesis, University of Joensuu, 2000) referring to Estelle James, 'The Nonprofit Sector in Comparative Perspective' in Walter W Powell (ed), The Nonprofit Sector: A Research Handbook (1987) 397, 409. 597 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 7.
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the definition of “public” versus “private” is by no means an unambigious concept. We really
have a continuum of public versus private funding and control, with different countries
representing different points on a continuum. 598
James also comments on the supply of civil society organisations. ‘The availability of religious (nonprofit) entrepreneurship, plays an important supply side role…’. 599 Religious organisations have important motivations which are not profit-related and have advantages over both businesses and government. These advantages spring from the availability of volunteers, and usually religious, parent organisations being willing to sponsor or subsidise. 600
One final observation to be noted from this discussion of Weisbrod and James’s works, is that civil society organisations are not government but can provide goods similar to government in that the goods are often public goods and for public benefit. They are also like government in that these organisations can comprise significant minorities and thus can have quite large memberships. 601
3. Lester Salamon’s Voluntary Sector Failure Theory
Lester Salamon’s voluntary sector failure theory is not neoclassical economic theory per se , but in this multi-disciplinary discourse, it stands juxtaposed against the government failure theory of Weisbrod and the soon to be discussed, market failure theory of Henry Hansmann.
It is most conveniently considered in this context. His work also provides an introduction to supply side factors which will be discussed in the next chapter.
598 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 7. For statutory application of this principle see Charities and Trustees Investment Act 2005 (Scotland) s 8. 599 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I, 1. 600 Estelle James, 'The Public/Private Division of Responsibility for Education: An International Comparison' (1987) 6 Economics of Education Review I. 601 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 123.
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Salamon argued that the transaction costs of mobilising a government, as against mobilising a ‘handful of volunteers’, means that ‘the private, nonprofit sector will typically provide the first line of response to perceived “market failures”, and the government will be called upon only as the voluntary response proves insufficient.’ 602 Salamon integrated this idea with his criticism of theories of the welfare state, noting that when the sector is viewed in this way, ‘it becomes clear that government involvement is less a substitute for, than a supplement to private non-profit action.’ 603 There are, according to Salamon, four failures of the voluntary sector that lead to government involvement. They are:
1. ‘Philanthropic insufficiency’, by which Salamon means the sector’s inability to
generate resources ‘on a scale that is both adequate enough and reliable enough
to cope with the human-service problems of an advanced industrial society.’ 604
2. ‘Philanthropic particularism’, by which he means the predisposition of (some)
charities to be selective and also favour those of their own class, race, religion or
other basis for social segmentation. 605
3. ‘Philanthropic paternalism’, is the phrase used by Salamon to declare that it is
those who have control of the most resources who control resource allocation.
The consequence is not only that there may be a flow of funds to charities
‘enjoyed also by the rich such as fine arts and opera but also a sense of
dependence can be cultivated among the poor.’ 606
602 Lester Salamon, 'Voluntary Failure Theory Correctly Viewed' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 183, 185 quoting Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 39. 603 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 39. 604 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 39. 605 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 40. 606 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 41.
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4. ‘Philanthropic amateurism’, flows frequently from voluntary participation in the
sector. Salamon points out that many of the social problems addressed by the
sector require a professional response. 607 This may call for government
involvement.
As, in Salamon’s view, these four weaknesses of the voluntary sector, ‘correspond well with government’s strengths’, and vice versa, a framework at both a theoretical and practical level exists for ‘government-non-profit cooperation’ 608 and should be preserved and strengthened.
This model harks back to the concept of the charities working in partnership with the government, mentioned in chapter III. It identifies specific areas of weakness, though, of which a jurist may take cognisance when developing a regulatory regime. Importantly, though, he anchors these civil society organisations in a worldview where civil society itself responds to communal needs. Only when the voluntary response ‘fails’, is government to step in. The inherent freedom therefore in civil society organisations to respond to social agendas, as theorised by Salamon, cannot be overemphasised. Arguably, if Salamon’s model is to be given legal expression, it is the function of law to facilitate voluntary response to social concerns. This agenda will be taken up in Chapter VII.
D. When Business is the Other
1. Henry Hansmann, Market Failure and Trustworthiness Theory
Burton Weisbrod’s public goods theory, as developed by Estelle James, took as its focus civil society organisations as an alternative to government supply. Following Weisbrod in time, though not in significance, came a theory of supply of public goods by organisations adopting the civil society form rather than businesses. That is, it was a market failure theory.
Henry Hansmann is universally recognised as the ‘chief architect’ of the market failure
607 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 42. 608 Lester Salamon, 'Of Market Failure, Voluntary Failure, and Third Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State' (1987) 16 Journal of Voluntary Action Research 35, 43.
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theory. 609 Writing in a context where, in the United States, California and New York had just passed legislation and the law regulating ‘nonprofit’ corporations was under theoretical review by the American Bar Association, 610 Hansmann proposed an economic theory for the existence of civil society organisations and then drew upon that theory to assess the policy framework in which ‘nonprofit’ legislation was located. In his 1981 work, Reforming
Nonprofit Corporation Law ,611 Hansmann considered directly the legal framework regulating civil society organisations, and his insights profoundly informed the development of regulations for the sector in the United States. In this section, first, the way Hansmann defined the sector is considered, then why civil society organisations emerge, and finally, attention is turned to Hansmann’s discussion of which organisations should be entitled to favours and why.
Hansmann defined civil society organisations with reference to the non-distribution constraint. ‘ The defining characteristic of a non-profit organisation is that it is barred from distributing profits, or net earnings, to individuals who exercise control over it, such as directors, officers, or members.’ 612 The fact that Hansmann begins with such a legal constraint, presupposes some sort of formal organisational structure rather than an informal network, association or social movement. Hansmann acknowledged the existence of other forms, including trusts, but focused on the incorporated form for two stated reasons: first, because the incorporated form is the most economically significant, and second, the law regulating these bodies is most in need of reform. 613 It is important for jurisprudential development to note that Hansmann recognised other forms of civil society organisation such as unincorporated associations and trusts. This is because a jurisprudence for civil society must not to become shackled to the non-distribution constraint as the indicia of a
609 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 512; 610 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500. 611 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500. 612 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 501. Emphasis added. 613 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 502.
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civil society organisation. The non-distribution constraint is an indica of altruistic intent and an indicia of pursuing a public not a private purpose. It is indicative not determinative.
Having defined the organisations’ defining characteristic – the non-distribution constraint –
Hansmann subcategorised the organisations with this characteristic according to their sources of income and the way they were controlled.614 According to Hansmann, there were only two sources of income: donations or sales. As for control, again there were two subcategories – either the patrons control the entity or they do not. From this matrix of characteristics (only) four categories of organisations with non-distribution constraints emerged from Hansmann’s analysis:
1. donative mutuals, where the givers to the organisation control the organisation;
2. donative entrepreneurials, where persons other than the givers control the
organisation;
3. commercial mutuals, where the consumers of goods or services supplied by the
organisation control it; and
4. commercial entrepreneurials, where the consumers of the goods or services
supplied by the organisation do not control it. 615
Hansmann readily acknowledged that no type is pure and, whilst ‘the distinction ... between commercial and donative non-profits is simply one of degree, rather than a difference of kind’, that ‘difference in degree is substantial.’ 616 These four classes of nonprofit serve in three typical situations where the non-distribution constraint typically arises. They are:
1. third party payment of which charitable intermediaries (Hansmann uses
Oxfam as an example) are the classic case where the recipient for whom the
good is ‘purchased’ is often a long way away and, unknown to the contributor
614 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 502. 615 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 503. 616 Henry Hansmann, 'The Role of Trust in Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 115, 117.
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and as a consequence, the purchaser/contributor has little or no way of knowing
whether the intended recipient receives the goods purchased. In this ‘radical
case of asymmetric information’, 617 how can a contributor to ‘CARE’
(Hansmann’s example) ‘discover whether as a result of her contribution, 100
children in Africa actually received a bowl of nourishing porridge for a
week?’ 618
2. purchases of public goods of which subscriber public radio is a typical example.
In such cases, the relatively small cost of subscription and the large and usually
dispersed patronage, make an organisation with a non-distribution constraint,
more attractive than private ownership – at least in some cases. 619 It is
noteworthy that Hansmann explicitly avoided the underlying motive. He wrote
‘for whatever reason, many individuals are willing to ignore the incentive to free
ride, choosing, instead, to make a contribution toward the purchase of a good
that will serve a large public.’ 620 Donations to performing arts are exemplars of
this category as their contributors, in effect, subsidise the attendance of those
who only pay the ticket price. 621
3. purchases of complex private services of which the most topical examples are
hospitals and other health services. 622 In these ‘commercial’ operations, where
the asymmetric information challenges, observed earlier, also arise, the non-
distribution constraint operates as ‘a very crude consumer protection device.’ 623
Hansmann emphasised that the purpose of his categorisation was for ease of description and reference and not because legal significance should attach to the categories. He wrote,
617 Henry Hansmann, The Ownership of Enterprise (1996) 230. 618 Henry Hansmann, The Ownership of Enterprise (1996) 230. 619 Henry Hansmann, The Ownership of Enterprise (1996) 230-231. 620 Henry Hansmann, The Ownership of Enterprise (1996) 230. 621 Henry Hansmann, The Ownership of Enterprise (1996) 231-232. 622 Henry Hansmann, The Ownership of Enterprise (1996) 233-235. 623 Henry Hansmann, The Ownership of Enterprise (1996) 235.
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‘nonprofit corporation law should be unitary, applying essentially the same rules and standards to all non-profit corporations regardless of classification.’ 624 His reasoning for taking this stand was stated to be because the legal form of organisation – nonprofit or for- profit – is determined by weighing, on the one hand, the cost of private ownership and on the other, the cost of contracting in the market. If this is so, the choice of an organisation subject to a non-distribution constraint rather than a for-profit entity, is directly shaped by regulatory choices affecting costs. In The Ownership of Enterprise, 625 Hansmann pointed out that all of the different legal forms of association, from propriety limited companies to nonprofit associations, are merely vehicles of association for purposes. It followed that ‘[t]here is no fundamental reason to have business corporation statutes at all; they are just specialized versions of the theoretically more general cooperative corporation statutes.’ 626 The purpose of incorporation is ‘to permit the creation of a juridical person – a single legal entity – that can serve as a signatory to contracts.’ 627 The parties most motivated to enter into the
‘ownership’ contracts, will be those for whom the cost of market imperfections are such that to achieve their purpose, other than by taking ownership, will be more costly.
Logically then, according to this theory, the emergence of the ‘nonprofit’ and mutual enterprise arises where contracting costs and ownership costs are high. In such a case:
the solution is to create a firm without owners – or, more accurately, to create a firm whose
managers hold it in trust for its customers. In essence, the ‘nonprofit’ form abandons any benefits
of full ownership in favour of stricter fiduciary constraints on management. 628
624 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 504. 625 Henry Hansmann, The Ownership of Enterprise (1996). 626 Henry Hansmann, The Ownership of Enterprise (1996) 17. 627 Henry Hansmann, The Ownership of Enterprise (1996) 19. 628 Henry Hansmann, The Ownership of Enterprise (1996) 228.
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As a consequence, there is not a satisfactory justification for complex varied forms of civil society organisation, according to Hansmann, but only the existence of the non-distribution constraint.
Hansmann also pointed out that ‘many of today’s commercial nonprofits had their origins as donative nonprofits that depended crucially on philanthropic support.’ 629 He also observed that, as the industries in which these commercial activities were conducted through civil society organisations with a non-distribution constraint matured, there were changes that led to for-profit firms being able to compete more readily. The standardisation of services, the development of reputations and the promulgation of more effective regulatory regimes, all reduced the need for the stricter fiduciary constraints which attend civil society organisations with non-distribution constraints. For, as the cost of contracting declines, so does the need for the non-distribution constraint. 630 There is, though, a clear distinction between the business corporation and the civil society organisation. The business exists to serve its shareholders. The civil society organisation exists for its patrons. 631
Hansmann concluded that a society needs only three forms of corporation:
1. the business corporation which is used where the patrons can police through
individual contracts, the producer’s price and performance;
2. the cooperative corporation which is necessary for situations where it is not
possible to police the producer’s price and performance through individual
contracts (such as arises in the case of monopolies); and
629 Henry Hansmann, 'The Role of Trust in Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 115, 118. 630 Henry Hansmann, The Ownership of Enterprise (1996) 237. 631 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 507.
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3. the nonprofit corporation (here called the civil society organisation with a non-
distribution constraint) which is needed where there is contract failure such that
contracts and direct patron control are inadequate.632
With the distinction between ‘non-profit corporations’ and other corporations clearly in mind, Hansmann analysed reasons why there should be excessive regulation of civil society organisations with non-distribution constraints. He concluded that there is no basis for restricting the purposes for which a civil society organisation may incorporate which could not be ‘better served by other means.’ 633 By this he meant that once the non-distribution constraint is in place, the civil society organisation should be subject to the general law. 634
This is an important point, which will be taken up in Chapter VII, for any jurisprudence must come to terms with why it would be more restrictive to the vehicle for the voluntary provision of public goods than that applying more generally. If there is not a sound basis, then it seems appropriate for the general law to apply.
It will be recalled from chapter II, that there is a plethora of forms of incorporation and that civil society organisations tend to be regulated according to the form they take. If
Hansmann’s insights are accepted, there is simply no basis for this. One simple form of corporation for all civil society organisations will do.
If one form of corporation will do, and the general law should apply to it, is there, then, any basis for tax favour for any organisation under Hansmann’s theory of market failure?
Clearly, if the role of nonprofits is to satisfy a market failure, that, in and of itself, does not warrant ‘peculiar favours’ such as preferential tax treatment. Hansmann approached the matter from the other direction. Accepting the situation, that many charities and other civil
632 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 597. 633 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 526. 634 Hansmann used the phrase ‘criminal law’ but in context it seems to be broader than this. See Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 526.
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society organisations already have tax favour, he justified the exemption they receive on the basis that – as they are subject to the non-distribution constraint – they are denied equity fundraising opportunities available to for-profits.635 It is just, then, to allow a tax exemption as a crude equaliser enabling capitalisation so that a means of efficient distribution of resources in these particular markets occur. 636 This is, though, linked to the need for civil society organisations with non-distribution constraints to be available to meet the needs arising from asymmetric information. If, as is the case in the hospital sector where the government is a major supplier of funding, and the level of regulation is onerous, there is not a substantive problem with asymmetric information, then the favour may not be warranted.
As Hansmann pointed out in 2003, when responding to criticism by Ortmann and
Schlesinger, 637 he ‘expressed serious doubt [as long ago as 1981] that the problem by asymmetric information in product markets could explain the market share of most commercial non-profits.’ 638 Consequently, at least with respect to the hospital industry in the
US at that time, ‘there was a strong case for eliminating federal and state tax exemption for non-profit hospitals’. 639
Hansmann has also expressed the view that the case for exempting unrelated business income is weak and that ‘[s]ubsidies for non-profits should be structured to encourage them to expand their related, not their unrelated, activities.’ 640
635 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 507-8. 636 For a discussion of the weaknesses of this approach see Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 418. Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117. 637 Henry Hansmann, 'The Role of Trust in Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 115, 116-17 responding to criticisims in Andreas Ortmann and Mark Schlesinger, 'Trust, Repute, and the Role of Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of The Nonprofit Enterprise - Theories and Approaches (2003) 77. 638 Henry Hansmann, 'The Role of Trust in Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 115, 117. 639 Henry Hansmann, 'The Role of Trust in Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 115, 121 Note 2. 640 Henry Hansmann, 'Unfair Competition and the Unrelated Business Income Tax' (1989) 75(3) Virginia Law Review 605, 621.
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Hansmann did not take up the existence and extent of donations as a source of justification for favour put forward by Weisbrod. Nor did Hansmann consider charity, altruism, public benefit, or any of the other traditional notions considered central to legal discourse. True to the liberal, individualist philosophy and neo-classical economics in which the analysis was rooted, the adoption of the form – of a civil society organisation – is to facilitate the supply of goods; to address ‘contract failure’. Favour was justified on the basis of economic efficiency. Without the tax exemption as a rough leveller of the playing field, a market need would not be satisfied.
2. John Colombo and Mark Hall’s Donative Theory
Like Hansmann, John Colombo and Mark Hall developed their theory from entirely within an economic paradigm – avoiding the notion of charitable purpose central to law. Their project was the development of a theory of tax exemption of charities. 641 The problem of defining ‘charities’, was relevant to them only for the purpose of identifying entitlement to tax favour. 642 Consequently, they had little to contribute to the definition of charities or more broadly civil society organisations beyond what should be in, or out, of tax exemption. Put differently, their concern was only with the class of organisations entitled to tax favours.
The significant contribution to the discourse made by Colombo and Hall, relevant here, was the development of a more rigorous theory of entitlement to exemption based only on donations. They observed that if civil society organisations provide public goods, there will always be ‘free riders’ taking advantage of that provision. It follows that there will always be a shortfall between the level of the supply and the level of demand of charitable good.
This gap is the strong normative case for a shadow subsidy by the rest of the community through the tax system. 643 At a threshold level, they argued that the mere formation or
641 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) Preface xi. 642 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) Preface xi. 643 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 100.
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existence of a civil society organisation with a non-distribution constraint, is not an altruistic act deserving tax exemption. It is the donations to the civil society organisation that raise it to a status where exemptions may be justified. They theorised that justification for exemption rested on the level of donative support from the public. 644 Acknowledging this idea is not new; 645 they argued that donations constitute a signal by the donors that some good or service is undersupplied by both the private market and direct government funding.
Moreover, because of the free-rider incentive, donors alone will never provide the level of production actually required to meet demand. Thus, donative organisations need additional financial support, and this support is provided by the indirect subsidy of tax exemption (as well as through the donation of charitable deduction). 646 This taxation support is justified because it is the function of government to provide public goods – it being the sector equipped to deal with the free-rider problem through its coercive powers. 647
Colombo and Hall also considered the complex problem of sorting out what is a donation.
They too, like Hansmann, avoided any reference to motive. They relied upon the literature to the date of their work to conclude that ‘in most instances, selfish and adulterated motives for giving do not undermine the basis for the donative theory, with the exception of donations that are not true gifts but instead constitute implicit purchases.’ 648 With this concession to mixed motive, 649 they concluded that these challenges are sorted out (they use the word ‘rehabilitated’) in the market for the supply of charitable goods. 650 This
‘rehabilitation’ operates by directing the gifts to those objects that society perceives more
644 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 113. 645 See, for example Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 73. 646 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 112. 647 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 101. 648 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 119. 649 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 138. 650 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 139.
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deserving. 651 They suggest civil society organisations receive, by way of gift income, not less than one tenth and up to one third of total revenues to be entitled to the tax exemption. 652
3. Myles McGregor-Lowndes
Building on the work of Hansmann, Atkinson and Colombo and Hall, a gratuitous, transfer intermediary is introduced by Myles McGregor-Lowndes as an organising idea to articulate the role played by civil society organisations which act as an intermediary between donor and donee. 653 This entity facilitates the fundamental purpose of the sector which, according to McGregor-Lowndes, is the gratuitous transfer of property. 654 This is a much broader concept than ‘charities’. Charities ostensibly perform this function but are defined with reference to the purposes listed in Pemsel’s case only. A logical step for common law development would be to expand the way charities are defined to include all such organisations that are vehicles for the gratituous transfer of property. That does not mean that all such organisations should be entitled to the favours attaching to charitable purpose.
That is a separate issue and needs to be separately addressed.
Reviewing the law in Australia in relation to the facilitation of gratuitous transfers through the use of gratuitous transfer intermediaries, McGregor-Lowndes concluded that whilst these intermediaries are likely to be more efficient than government and their for-profit counterparts, the law fails to adequately provide the regulatory infrastructure to facilitate such gratuitous transfers efficiently. He stops short, however, of offering a proposal for reform. 655 When cognisance is taken of both Colombo and Hall’s and McGregor-Lowndes’s contribution in the context of a wider discussion of market failure set by Hansmann, the centrality of gratuitous transfers to the sector and the need for legal infrastructure to enable
651 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 139. 652 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 217. 653 Myles McGregor-Lowndes, The Regulation of Charitable Organisations (PhD Thesis, Griffith University, 1994) 123. 654 Myles McGregor-Lowndes, The Regulation of Charitable Organisations (PhD Thesis, Griffith University, 1994) 161. 655 Myles McGregor-Lowndes, The Regulation of Charitable Organisations (PhD Thesis, Griffith University, 1994) 377.
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such transfer, the need for a more comprehensive framework – as distinct from a conception of charitable pupose – emerges as critical for development of the common law.
4. Interim Summary
In reforming the common law, as distinct from simply adding heads by statute to the four heads enumerated in Pemsel’s case , jurists could take cognisance of the need for an overarching framework that facilitates ‘gratuitous transfers’. They could take cognisance of the irrelevance of form provided there is a non-distribution constraint. They could take cognisance of the percentage of income received as donations. All of these factors seem more relevant than the four heads of Pemsel’s case because they are explicit indicia of actual pursuit of a charitable purpose. They manifest direct evidence of altruistic intent and public benefit.
The focus so far in this chapter has been on the way theorists from within the discipline of economics have analysed charities and other civil society organisations that are vehicles for contributions of public benefit. The review has therefore focused on what is sometimes called the demand side analysis of civil society organisations. In the second half of the next chapter, the supply side will be considered and the works of Atkinson, Rose-Ackerman, Ben-
Ner, and Steinberg will be considered. Both the supply and demand sides will be brought together at the end of that chapter.
E. When Family is the Other
1. Introduction
The focus of this chapter is the division between public and private benefit within economic theories regarding civil society organisations. This focus on organisations, presupposes a private sphere. That private sphere has not been explored. Completing the chapter requires some attention to the more general foundations of that public-private divide, having regard to the private as distinct from the public dimension.
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In this section, I briefly canvass conceptions of family as the ultimate typology of private.
This is undertaken with a view to distinguishing these gatherings from civil society organisations. 656 This distinction is important because at law, it will be recalled, a charitable purpose is distinguished by being for public benefit not for private benefit. Identifying the boundary between family and its other is increasingly problematic. Family has been a dynamic concept historically and philosophically. A consequence of that is that what is private is not easily segmented from what is public in twenty-first century theory. Returning to first principles there are, though, indicia that assist in differentiating civil society from family, and with that, public from private, which can be elucidated. These are distilled from the ideas canvassed in this and earlier sections of this chapter.
2. Conceptions of Family and Problems of Definition
(a) The Nuclear Family is not Necessarily the Norm Through the later part of the twentieth century, a concept of a family as nuclear – comprising a monogamous, married, father and mother, one or more children, without grandparents, grandchildren or other extended family – dominated thinking when defining family in common law countries. This concept of family has continued into the twenty-first century.
At the most basic level, the private sphere was that which was contained within the family.
With such a definition of family, the boundary between family on the one hand and civil society organisations, including those engaged in charitable purposes on the other, is easy to define. This is because even if civil society organisations are difficult to define, the boundary line of family is clear.
The concept of family is not necessarily nuclear, however, nor is the boundary line necessarily clear in common law countries at the beginning of the twenty-first century. The social changes mentioned in Chapter II, affecting the form and composition of families, is
656 Note the broad definition of family set out in the definitions section commencing at page 50.
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affecting the way that people gather to support one another. The nuclear family still may be the exemplar of private social community but, as Tillman pointed out, the way people form families is changing. 657 Households often now have only one parent who may not be married to another adult in the home. The nature of the relationships may be characterised as not permenant. The ‘associations’ may be more explicitly for mutual (contractual) benefit.
Where, and when, in such a concept does the private sphere end?
(b) Extended Family and Kin Support can Extend beyond Nation States Compounding this division between public and private is the scope and extent of giving and support in common law countries. For example in New Zealand, six percent of the population is a diaspora of Pacific Islanders and one of the ‘features of this Pacific diaspora is the transfer of money, goods, and human resources from expatriate kin to their islands of origin’. 658 Should those transfers be treated as in pursuit of private purposes or are they in the pursuit of public charitable purposes? Does it make a difference if the giving is through religious or other charitable organisations? Does it make a difference if the resources, so transferred, are applied to persons who are impecunious – whether or not they are relatives?
If so, why, or why not?
There is a demarcation between private social units, of which the nuclear family is the exemplar; and arrangements which, at their most basic, are public institutions. This may not be an easy boundary to draw, but there is a difference, and consequently, there must be a division between the private purposes of family at one extreme and the most public charitable purposes of civil society organisations, such as a large membership international aid organisation, at the other.
657 K H Tillman and C Nam, 'Family Structure Outcomes of Alternative Family Definitions' (2008) 27 Population Research and Policy Review 367, 378. 658 E T Cowley, J Paterson, et al., ‘Traditional Gift Giving Among Pacific Families in New Zealand’ (2004) 25(3) Journal of Family and Economic Issues 431, 432.
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(c) Distinguishing between Family and Religion can be Problematic The changing face of religion illustrates that there is a contest that finds contemporary expression in the boundary between what is a family and what is a religious charitable purpose. The letter from Senator Grassley to Kenneth and Gloria Copeland discussed in
Chapter II, 659 illustrated that there is a contested boundary in the context of definition of family between what is public and what is private. The traditional understanding of a religious calling, as the whole of one’s life being set aside for the service of God and others, creates theory challenges in a tax context where the lifestyle enjoyed by the religion’s practitioner is not the traditional, frugal one commonly expected.
There is a boundary between public and private at the deepest levels but how is it to be theorised in the doctrine of charitable purpose?
3. Theoretical and Philosophical Ambiguity and Problems of Definition
The way families are considered theoretically is changing. The increasing analysis of family in terms of contracts in a neoclassical sense, traceable to the Nobel Prize winning work of
Gary S Becker, may theorise the developments mentioned at the beginning of this section but it also compounds the conundrum for legal theory. This is because it leads to a definition of families that is close to the definition of (other) associations. Associations are understood legally as essentially a contract between members. 660 If families are similarly seen, then both are fundamentally the same: both are associations of individuals for mutually beneficial transfers. 661 How then is family different from a civil society organisation? If families are no longer defined by reference to nuclear family concepts, but are fluid communites formed and dissolved to facilitate the supply and demand of needs, then how are these families more or less than self-help groups?
659 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm. 660 See any association law text. 661 Maria Sophia Aguirre (2006) 'Marriage and the Family in Economic Theory and Policy' (2006) 4 Ave Maria Law Review 435.
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For some periods of history, the idea of family has extended to include all within the household. This expansive sense of family to include even employees (to use a contemporary descriptor) was mentioned in relation to the law when discussing charitable purpose trusts and their extension to include trusts for poor employees as well as poor relations. The inclusion of employees as within the household flows from the idea of business integrally linked to the idea of family. The word economics comes from the Greek word oikonomea , which literally means management of a household of family life.
Household was a broad and expansive term. Within it may be included not just the narrow concept of mother, father and their infant children, but extended family and even servants and slaves. 662 Elsewhere, I have argued that the idea of household is a rich one with dynamic boundaries useful for understanding obligations with respect to resource distribution. 663 For the purposes of this discussion, it is sufficient to note that at a practical level, the idea of family was historically understood very broadly to extend well beyond the nuclear family and the idea of the family as an economic cooperative is not novel.
The idea of family associations being formed and dissolved for social convenience is not a novel proposition either. Plato gave philosophic expression to the idea. In the Republic ,664
Plato set out Socrates’s discussion with Glucon regarding the sharing of wives and children as an idea for achieving unity in community. Aristotle rejected this notion, 665 but it was to re-emerge in the writings of Marx in the nineteenth century.666
662 For an extensive discussion of the concept see J H P Reumann, The Use of OIKONOMIA and Related Terms in Greek Sources to about 100 A.D., As a Background for Patristic Applications (PhD Thesis, University of Pennsylvania, 1957) and D McDairmid, Stewardship and Tithing in the Episcopal Church (PhD Thesis, The University of Queensland, 1994). 663 Matthew Turnour, 'The Stewardship Paradigm' (School of Humanities, Queensland University of Technology, 1999). 664 Plato, 'The Republic Book 1 (360 BC)' in W H D Rouse (ed), Great Dialogues of Plato (1956) . 665 Aristotle, Nicomachean Ethics Book 1 (1991) Chapter 12, 414 [15]. 666 Karl Marx and Friedrich Engels, The Communist Manifesto (1888) see Chapter II.
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The point is not to argue for or against spouse-sharing. It is to highlight that not only are there practical, social challenges with which theorists must contend, but also philosophically the concept of family has a long, and contested history that problematises the theoretical divide between public and private.
Jurists may assume that the idea of a boundary between family and civil society organisations is not fixed but, for regulatory purposes, lines will need to be drawn. This problem of identifying the boundary between public and private extends beyond issues of family. Whenever a gathering of people arises, be it a bikie gang, a gentlemen’s club or an ethnic association, the question of whether it is a public or private association may inform the extent to which it is enabled, regulated and favoured by law. The practical challenges associated with drawing those lines are rooted in philosophic disputes and those disputes are deeply embedded in Occidental thought. The disputes do not need to be resolved in this thesis. It is enough, for the purposes of this thesis, to identify the contests and the factors that inform those contests. What is important to establish is that there are gatherings that are private. They can extend beyond the nuclear family but they ultimately involve intimate relationships of people who know each other well. These relationships may involve groups larger than nuclear families but they are generally smaller rather than larger.
F. Conclusion
From the discussion in this chapter a number of conclusions can be drawn.
First, drawing from the easily overlooked but profound observation of Weisbrod that was underscored by Hansmann and Salamon – there is a third sector. The common law has a doctrine centred on only one relatively small subsector of that sector – charities – not the sector as a whole. The common law will remain ‘seriously incomplete’ to quote Weisbrod, 667 until it expands the scope of operation of the doctrine to include all of civil society.
667 Burton A Weisbrod, The Nonprofit Economy (Paperback ed, 1991).
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Second, the form an organisation takes may be treated as irrelevant. Weisbrod’s analysis was not dependent upon the form taken. Hansmann assumed a non-distribution constraint characterised the organisations he analysed. Beyond that indicia, he considered only one form of organisation to be necessary. There is nothing in the analysis of James, Salomon,
Colombo and Hall or McGregor-Lowndes which pressed for a particular form for civil society organisations with the exception, perhaps, of the non-distribution constraint. The analysis of the concept of family by Gary Becker in mutual benefiting (contractual) terms parallels legal analysis of associations and further presses for a framework which is not dependent upon form for analysis of civil society organisations. According to Hansmann, the form is chosen only because it is the most suitable vehicle to carry out a particular purpose.
Third, it is the purpose pursued, and in particular whether that purpose is for the public benefit, that is the critical feature of civil society organisations. James segmented civil society organisations into two types: those for which consumers pay and those where part of the whole or the good is given. Weisbrod focused on the purpose pursued. He subsectionalised civil society organisations into public and private and subsectionalised public organisations into trust and collective. He also ranked them on a 'collectiveness’ index. For Salamon, it was the voluntary provision of public goods that distinguished the sector. Hansmann similarly pointed to the constituency served as ‘other’ as the distinctive characteristic of civil society organisations. James pointed out that the purpose was distinctively to provide a good from within a worldview different from the dominant hegemony expressed through government. For McGregor-Lowndes, similarly, it is the
‘gratuitous’ transfer (to others) that is distinctive; as was the case with Colombo and Hall.
Fourth, persons are not family unless they are related by blood, marriage or closely associated through some other extended form of intimate association such as belonging to the same household. Strangers are not family. If strangers are not family then I theorise that
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where persons are associating in what may be a civil society context, a variable is the degree of remoteness. In the context of an association, remoteness is evident by the people involved being strangers, but for their mutual pursuit of a common purpose through a civil society association. In the context of gratuitous transfers, it is the remoteness of the transferee beneficiaries from the transferor donors. For convenience I label this variable ‘X’
(‘xenos’). 668
Fifth, remoteness is not, however, the only variable informing whether a benefit is public.
From the discussion in the earlier chapters, and from the review of all of the authors mentioned above, the number of people involved in the association, or as beneficiaries of transfers, is an express or implied factor in distinguishing public from private. Civil society organisations are often the expression of significant minorities and can be quite large. For convenience I label this variable ‘Z’.
Sixth, it should be noted that some authors, notably Hansmann and Colombo and Hall, sought to expressly exclude why persons associated or gave. Motive was expressly excluded from the analysis. The concept of motive is, however, present conceptually in the idea of the non-distribution constraint and in the concept of ‘gratuitous transfers’. I suggest that it is analytically confusing to impregnate the concept of public benefit with motive. In my view, public benefit should be treated as a demand side concept. Motive should be analysed separately as a supply side concept. As I will come to altruistic motives in the next chapter, and as it is the variable attached to ‘why’; for convenience I now label this variable of motive ‘Y’ (‘why’).
I conclude, Seventh, that whether a benefit is public or private can be assessed as a function of X and Z. If a large number of people, who would otherwise be strangers, voluntarily
668 The classical Greek word for stranger.
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associate then the purpose is a public purpose. If a small number of people associate for private purposes (such as a family or work colleagues gathering to celebrate a birthday) the association is private.
Eighth, both remoteness and the numbers involved are variables that could be ranked or measured. If these variables could be ranked or measured, then I theorise that the variables above could be used to inform a dynamic concept of public benefit. What is public and what is private can be arranged on a continuum. Weisbrod suggested a collectiveness index.
Colombo and Hall proposed a scale based on donated income for entitlement to shadow tax- subsidy.
The fundamental contest over a priori assumptions, regarding what is public and what is private has not been resolved. Factors that inform the division between what is public and what is private have been elucidated. I theorise that a civil society organisation is public.
When a civil society organisation undertakes transfers the transfers are for public benefit.
Demand is but one side of an economic analysis. Supply is the other. It took some time for this distinction to be elucidated in economics. It is a helpful theoretical division. Given the struggle with the Preamble , the separation of the demand factors from the supply in economic theory is a distinction that can usefully inform jurisprudential developments.
Altruism has been theorised as distinctly linked to the supply of civil society organisations in economic theory and exploration of the supply side factors occupies the next chapter.
G. Postscript
In an interesting exchange between the lawyer, Sydney Carton, and his client, Charles
Darnay, in the presence of Lorry the banker, Carton says to Darnay: "If you knew what a conflict goes on in the business mind, when the business mind is divided between good- natured impulse and business appearances, you would be amused, Mr. Darnay." Lorry
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acknowledged the comment was directed at him and affirmed that in the discharge of ostensibly private business he must have regard to others. “We men of business, … are not our own master” he replied. Mr Lorry was averring to his more public duties as a citizen charged with looking after other citizens’ private business. It is easy at the beginning of the twenty-first century, when neo-classical economic theory has been so dominant for so long, to forget that not all people of business do pursue only their own good. 669 Mr Lorry’s professionalism is an example of the complex weave where public and private distinctions are difficult and are interwoven with the complexities of altruism and self interest. Having considered the interface of public and private benefit in this chapter, in the next, altruism and self interest are considered.
669 D Maister, True Professionalism: The Courage to Care about Your People, Your Clients, and Your Career (1997).
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V ALTRUISM
A. Preamble
When, at the close of A Tale of Two Cities, Dickens narrated the thoughts of a man who had just sacrificed his life that another might live, 670 he juxtaposed altruistic and self-interested motivations. The initial thoughts are of the wellbeing of others: ‘the lives for which I lay down my life, peaceful, useful, prosperous and happy.’ 671 The thoughts immediately turn, though, to self-centred visions. He sees a woman with ‘a child upon her bosom, who bears
[his] name’, 672 people who hold ‘a sanctuary in their hearts, and in the hearts of their descendants, generations hence…weeping for [him] on the anniversary of this day.’ 673
When all will die, and perhaps imminently, is it self-interested prudence to choose the time, day and a manner most likely to ensure ‘that my name is made illustrious’, 674 or is such self- sacrifice, which results in the saving of the life of another, always altruistic?
B. Introduction
Chapter III closed noting that development of the doctrine of charitable purpose required addressing three contested a priori assumptions . The second of those contested a priori assumptions, it will be recalled, was over the nature of humans. At its simplest, it was stated that this is a dispute over the existence and nature of altruism. Those contests over the nature of altruism are the subject of this chapter.
One of the great challenges facing reform of the doctrine of charitable purpose is how it is possible to move beyond the ‘spirit and intendment’ of the Preamble. In this chapter, I argue that it is possible to move beyond the ‘spirit and intendment’ of the Preamble by replacing it
670 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 389. 671 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 389. 672 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 389. 673 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 390. 674 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 390.
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with altruism. I argue that altruism stands alongside public benefit as the second essential characteristic of charitable purpose. 675 This is not a novel proposition. The Australian
Charities Definition Inquiry reported that the Preamble ‘has now outlived its usefulness’ 676 and recommended that: ‘to be regarded as charitable, an entity must have a dominant purpose which is altruistic and for the public benefit’ .677
There is a long line of cases from diverse jurisdictions setting out the principle that altruism is central to charitable purpose. 678 I argue that it is a ‘mark or test of what is truly
675 See Toronto Volgograd Committee v Minister of National Revenue [1988] 3 FC 251, 258-259 where Marceau J held: There is one difficulty however with Lord Macnaghten's judgment, a difficulty which, in my opinion, is too often overlooked: it was a judgment strictly concerned with charitable trusts and was elaborated with a view to reaching all possible objects capable of giving validity to institutions set up in an altruistic spirit for the furtherance of some beneficial objective. 676 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 6. 677 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 111. 678 Whilst altruism as a word was only introduced into the English language in 1853 (see discussion in next section) the concept was established before T V Grant MR famously held in 1805 that the word charity ‘in its widest sense denotes all the good affections, men ought to bear towards each other; in its most restricted and common sense, relief of the poor’ but that in ‘neither of these senses is it employed in this Court. Here its signification is derived chiefly from the Statute of Elizabeth ’: Morice v Bishop of Durham [1804] 9 VES 399; 32 ER 656. Wickens, VC in Cocks v Manners (1871) LR 12 Eq 574, 585 held that benefiting others was central to charity ‘whether the word “charitable” is used in its popular sense or in its legal sense’. Other-regarding motive was held to be an element of charitable purpose in Pemsel’s case itself by the majority comprising Lords Watson, Herschell and Macnaghten with Lord Morris; see discussion in Chapter VIII. In Re Delany, Conoley v Quick [1902] 2 Ch 642, 648-9 Farwell J held that ‘Charity is necessarily altruistic and involves the idea of aid or benefit to others; but, given the latter, the motive impelling it is immaterial.’ By the early twentieth century the importance of altruism to charitable purpose was often stated. For examples in Australia see William Taylor and Another v Mathew Taylor and Others [1910] CLR 218, 225, 227 (Griffith, Barton and Isaccs JJ); Barby and Others v Perpetual Trustee Company (Limited) and Another (1937) 58 CLR 316, 324 where it was held that to be charitable the ‘gift must proceed from altruistic motives or from benevolent or philanthropic motives’ (Dixon J). In Canada see Re Morton, Yorkshire & Canadian Trust Ltd v Atherton et al [1941] 4 DLR 763, [779] (Fisher J) citing Re Delany, Conoley v Quick [1902] 2 Ch 642, 648-9 (Farwell J); Toronto Volgograd Committee v Minister of National Revenue [1988] 3 FC 251 particularly 259 (Marceau J), and 275 (Stone J); Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] 1 SCR 10, 40 [14] and AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 (Rostein J for the Court). In England see Re Coats’ Trusts; Coats and Another v Gilmour and Others [1948] Ch 340 (Evershed LJ). Lord MacDermot summarised the law in 1958 stating ‘there can be no doubt that unselfishness and benevolence are still of the essence of legal charity. That is not to say, … that the unselfish element must be absolute in the sense that what would otherwise be charitable will fail to be so if its founders or promoters incidentally take some degree of benefit. The principle, as I understand it, is that a valid charity must be substantially altruistic and benevolent in its purposes’: see Trustees of the National Deposit Friendly Society v Skegness Urban District Council [1959] AC 29. This quote was promptly cited with approval in Independent Order of Odd Fellows Manchester Unity Friendly Society v Manchester Corporation [1958] 3 All ER 378 (Lord Evershed M R). See also for contra statement Skegness Urban District Council v Derbyshire Miners’ Welfare Committee [1959] AC 807, 824 (Viscount Simmonds). In Dingle v Turner and Others [1972] AC 601, 614 it was held that a trust must be ‘sufficiently altruistic in nature’ to qualify as being for a charitable purpose (Lord Macdermott); and Waterson and Others v Hendon Borough Council [1959] 2 All ER 760 (Salmon J); London Library v Cane and Westminster City Council [1958] 4 RPC 239, 51 R&IT 571, 29 DRA 484, 248- 249; 3 All ER 378 (Sir William Fitzgerald P); In Ireland see Baptist Union of Ireland (Northern) Corporation Ltd v
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charitable’. 679 The difficulty is not with the idea. The puzzle is how to theorise it. Altruism has not been theorised as an alternative to the Preamble in a way that is suitable for jurisprudential development of the common law. This chapter develops a foundation for that theory. I argue that when strangers associate to pursue purposes which transcend private benefit, altruism is present. There are, then, two factors that inform altruism: remoteness and motive. The more disparate the origins of the persons (remoteness) and the more the reasons are to benefit others (why) then the greater the altruism. A civil society organisation is altruistic. When goods are transferred in or through a civil society organisation, some altruism is evident.
The recommendations of the Australian Charities Definition Inquiry regarding altruism did not find their way into legislation. 680 The cases underscore the importance of altruism but they do not develop it conceptually. 681 It is necessary, then, to look beyond the cases to theorise altruism. It is to the scholarship of disciplines other than law, therefore, that this chapter turns. By exploring altruism in other non-legal disciplines, a concept of altruism suitable for jurisprudential application is developed through the chapter. Theories explaining altruism span economics, sociology, political science, administrative science, management theory, 682 theology and linguistics. 683 One author has suggested that it has become a
‘[r]orschach blot onto which different people project their expectations, hopes or fears.’ 684 I
Commissioners of Inland Revenue 26 Tax Cas 335 [1945] NI 99, 357 (MacDermott J); Expert Witness Institute v Commissioners of Customs and Excise [2002] 1WLR 1674 (CA) [2001] 1 WLR 1658 (Lloyd J); In New Zealand see Educational Fees Protection Society Inc v Commissioner of Inland Revenue [1992] 2 NZLR 115 [33], [35]-[36], Presbyterian Church of New Zealand Beneficiary Fund v Commissioner of Inland Revenue [1994] 3 NZLR 363 [28], [30], [32], [38], [40]. 679 Baptist Union of Ireland (Northern) Corporation Ltd v Commissioners of Inland Revenue 26 Tax Cas 335 [1945] NI 99, 357 (MacDermott J). 680 Charities Bill (2003) (Cth). 681 Cited at footnote 678. 682 Ludwig Theuvsen, 'Doing Better While Doing Good: Motivational Aspects of Pay-for-Performance Effectiveness in Nonprofit Organisations' (2004) 15 Voluntas: International Journal of Voluntary and Nonprofit Organisations 117, 118. 683 See C S Lewis, The Four Loves (first published 1960, 2002 ed). 684 Lester Salamon and Wojciech Sokolowski, 'Volunteering in Cross-National Perspective: Evidence From 24 Countries' (Working Paper No 40, The Johns Hopkins Center for Civil Society Studies, 2001) 1.
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must confess at the outset to this possibility. In the forest of research, I think I see a path down which a jurist could journey and I set out to describe it.
The Chapter is divided into four substantive sections. The first section explores the definition of altruism and research into it. The a priori assumptions of jurists will determine how the research is theorised and so, in the second substantive section, a framework is offered for managing contested a priori assumptions. Third, and building on the discussion of the previous chapter, the idea of altruism as integral to the supply side of civil society organisations is canvassed under the title of Altruistic Organisations . This leads to the final discussion in the chapter, which proposes how a concept of altruism could be theorised in such a way as to replace the Preamble in legal theory. In closing this introduction it is important to also note that altruism joins ultimately with voluntarism to replace the
Preamble. It does not stand alone. This chapter and the next together inform the theory developed across Chapters VIII and IX.
C. Altruism as a Concept
It will be recalled from Chapter I, that the ‘peculiar favours’ enjoyed by charities at common law are enjoyed, not only because of their contributions of a ‘public nature’, but also because those contributions are based in the ‘piety of earlier times’. 685 Piety is a word that, whilst popular in ‘earlier times’, has yielded popularity to the word ‘altruism’. I adopt the word altruism as it is more commonly used and it carries meanings more precisely in the twenty- first century. My object in changing from piety to altruism is not to break rank from the historical development of the law, but rather to find new ways of expressing an aspect of an old doctrine.
685 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten): The Court of Chancery [and its counterparts throughout the common law world] has always regarded with peculiar favour those trusts of a public nature which, according to the doctrine of the Court derived from the piety of early times, are considered to be charitable.
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This section has five subsections. First, altruism is defined. Second, an overview of reseach into altruism is offered to establish that it is now widely accepted that there is such a thing as altruism. 686 Third, consideration is given to the puzzle of motive – what drives altruistic behaviour? Fourth, this problem that there is not a universal measure or ranking of altruism is discussed. Fifth, an interim summary closes the section with the point that altruism is not a vague notion but there are challenges to be addressed if the ‘hopeless task’, of each individual case being decided on its own facts, is to be avoided. 687
1. A Definition of Altruism
George Lewes introduced the word ‘altruism’ into the English language in 1853 with his translation of Comte's Philosophy of the Sciences. 688 Comte evidently invented the word possibly drawing upon a French legal phrase Alteri huic .689 The Oxford English Dictionary defines altruism as: ‘[D]evotion to the welfare of others, regard for others, as a principle of action; opposed to egoism or selfishness.’ 690
When using the term, Comte intended ‘to establish the opposite reference point to the self- gratifying, utility-maximizing “economic man” of economic theory.’ 691 In theoretical analysis, it is part of a broader class called ‘prosocial behaviour.’ 692
The three aspects of the definition are all important to this jurisprudential theorising. First, the concept is the foundation of action. It is not (just) a feeling or sentiment but the pursuit
686 Later in this chapter I will come to the philosophic and theological arguments that affirm, deny and explain the phenomenon labelled ‘altruism’. 687 Pemsel’s case [1891] AC 531, 587 (Lord Macnaghten). 688 George Lewes, Comte's Philosophy of the Sciences (George Lewes trans, 1890 ed); see also J A Simpson and E S C Weiner, The Oxford English Dictionary (2 nd ed, 1989). 689 Helmut Anheier and Regina List, A Dictionary of Civil Society, Philanthropy and the Non-Profit Sector (2005) 6; see also J A Simpson and E S C Weiner, The Oxford English Dictionary (2 nd ed, 1989). Note also the similarity with italian word ‘altrui’ meaning ‘others.’ 690 J A Simpson and E S C Weiner, The Oxford English Dictionary (2 nd ed, 1989). 691 Helmut Anheier and Regina List, A Dictionary of Civil Society, Philanthropy and the Non-Profit Sector (2005) 6. 692 Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 324; David Shaffer, Social and Personality Development (2000) 306.
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of altruistic purpose can be assessed by reference to objects pursued. Second, it spans a range. It spans from the weaker form of ‘regard for others’ to the stronger ‘[d]evotion to the welfare of others.’ Third, it is defined with reference to, and as the opposite of, egoism or selfishness.
If altruism exists, as the next subsection seeks to establish; and if the strength of altruistic purpose can be theorised as on a continuum between two extremes – complete selfishness at one extreme and complete devotion to the welfare of others at the other – then altruism, as the ‘mark or test of what is truly charitable’ 693 is capable of quite sophisticated theoretical analysis. A definition is but the first step.
2. Altruism is: An Overview of Research
Altruism is now accepted as an international phenomenon of significant proportions.
Research by the Johns Hopkins Comparative Nonprofit Sector Project published in 2001, spanning 24 countries, found significant diversity in contributions made voluntarily but that in all of the nations investigated, people give of time and money in a way that is irrational when considered from a purely economic basis. 694 In further research published in 2003, the results of investigation across 35 countries established that 190 million people volunteer their services. 695 That amounted to about 221 volunteers per 1,000 adult population. 696 It is difficult to estimate the total amount of voluntary contributions but there is evidence to suggest that volunteer work contributed through civil society organisations is ‘equivalent to another 11 million full time employee equivalent jobs’. 697 To these contributions must be
693 Baptist Union of Ireland (Northern) Corporation Ltd v Commissioners of Inland Revenue 26 Tax Cas 335 [1945] NI 99, 357 (MacDermott J); 694 Lester Salamon and Wojciech Sokolowski, 'Volunteering in Cross-National Perspective: Evidence From 24 Countries' (Working Paper No 40, The Johns Hopkins Center for Civil Society Studies, 2001) 4. 695 Lester Salamon, S Sokolowski and Regina List, Global Civil Society: An Overview (2003) 14. 696 Lester Salamon, S Sokolowski and Regina List, Global Civil Society: An Overview (2003) 14. 697 Lester Salamon and Wojciech Sokolowski, 'Volunteering in Cross-National Perspective: Evidence From 24 Countries' (Working Paper No 40, The Johns Hopkins Center for Civil Society Studies, 2001) 3.
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added the gifts of money and other things which fund and enable the work of the employees in those organisations.
Altruism may be evident throughout the world but the form of contribution varies greatly from community to community. The international research is supplemented by other country-specific research on giving and volunteering. For example, research has found that
‘the best’ country for blood donation, France, is the ‘worst’ in willingness to give money for the support of the Third World. 698 The highest-ranked country for volunteering, Norway, is near the bottom in giving blood. 699 This leads Ting and Piliavin to the observation that ‘we cannot make any strong statements regarding comparative altruism.’ 700 The form altruistic contributions take also varies from nation to nation. For example, a comparison of attitudes to giving between the United States and the United Kingdom found that in the United
Kingdom conceptions of private, undisclosed generosity dominate whereas in the United
States of America, more public conceptions of altruism dominate thinking. 701
The conclusions to be drawn are that there is now a body of research showing that people do contribute in ways that may be described as altruistic, and the phenomenon is international.
If each nation expresses altruism differently, different factors might inform its presence or absence from jurisdiction to jurisdiction. Does this not simply plunge analysis back into the subjectivity concerns raised by Lord Macnaghten in Pemsel’s case ? 702 The answer is no.
The next section explains why.
698 Jen-Chieh Ting and Jane Allyn Piliavin, 'Altruism in Comparative International Perspective' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 51, 52. 699 Jen-Chieh Ting and Jane Allyn Piliavin, 'Altruism in Comparative International Perspective' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 51, 52. 700 Jen-Chieh Ting and Jane Allyn Piliavin, 'Altruism in Comparative International Perspective' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 51, 52. 701 Karen Wright, 'Generosity Versus Altruism: Philanthropy and Charity in the US and UK' (Civil Society Working Paper No 17, London School of Economics and Political Science, 2002) 23-25. 702 Pemsel’s case [1891] AC 531, 587 (Lord Macnaghten).
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3. What Drives Altruistic Behaviour?
If motive itself can be measured, analysis may be able to progress beyond simply valuing time. It may be possible to actually measure altruism. Altruism is a complex phenomenon.
There is a great variety of factors at play and methods of measuring those factors. At the most basic level, altruism can be measured by volunteering. The United Nations Handbook of National Accounting: Handbook on Non-Profit Institutions in the Systems of National
Accounts sets out a method for valuing volunteer labour input, having regard to the two presently dominant methods of opportunity cost and market or replacement cost. 703 It may be possible though to progress further. The factors informing altruism range from reasons that appear to be entirely self-sacrificing through to those that seem to be entirely self- interested. 704 Motives are ‘rarely if ever pure’ and ‘people have multiple motives in play for doing anything’. 705 They include the response of others 706 and whether those others act altruistically or at least pro-socially, 707 empathy, 708 being helpful, ‘to avoid feeling helpless,’ 709 a calculation of the cost, 710 sanctions, 711 and the competence to deal with the situation. 712 There appears to be a complex interaction of intrinsic and extrinsic motivations 713 and some research suggests altruistic behaviour is genetic. 714 As research into
703 United Nations Department of Economic and Social Affairs Statistics Division, Handbook on Non-Profit Institutions in the System of National Accounts (2003) 69. See also Matthias Benz, 'Not for the Profit, but for the Satisfaction? - Evidence on Worker Well- Being in Non-Profit Firms' (2005) 58 Kyklos 155. 704 See Roger Bennett and Anna Barkensjo, 'Internal Marketing, Negative Experiences, and Volunteers' Commitment to Providing High-Quality Services in a UK Helping and Caring Charitable Organisation' (2005) 16 Voluntas: International Journal of Voluntary and Nonprofit Organisations 251; Matthias Benz, 'Not for the Profit, but for the Satisfaction? - Evidence on Worker Well-Being in Non-Profit Firms' (2005) 58 Kyklos 155. 705 Mathew Liao-Troth, 'Are they here for the Long Haul? The Effects of Functional Motives and Personality Factors on the Psychological Contracts of Volunteers' (2005) 34 Nonprofit and Voluntary Sector Quarterly 510, 513-514. 706 Including the mass media and parent modelling. See Wayne Weiten, Themes & Variations (1998) 446. 707 Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 332. 708 Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 329-30. 709 Richard Sharf, Theories of Psychotherapy & Counselling (2000) 36. 710 Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 335-36. 711 See Ernst Fehr and Bettina Rockenbach, 'Detrimental Effects of Sanctions on Human Altruism' (2003) 422 Nature 137. 712 Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 340. 713 See Roland Benabou and Jean Tirole, 'Intrinsic and Extrinsic Motivation' (2003) 70 Review of Economic Studies 489; Carlo Borgaza and Ermanno Tortia, 'Worker Motivations, Job Satisfaction, and Loyalty in Public and Nonprofit Social Services' (2006) 35 Nonprofit and Voluntary Sector Quarterly 225 .
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altruism progresses the appropriateness and the limitations of research tools become clearer and with that there emerges a clearer picture of what altruism is and what are its manifestations. 715 With this clarification, it seems that there are myriad drivers but indicia of what is ‘altruistic’ are distilling certain characteristics. 716 These characteristics, once identified, can possibly be measured. If they can be measured, then there is the beginning of a basis for assessing altruism itself, not just indicia of it such as volunteering. Further, that measurement could be at least on an ordinal if not on an integral or ratio set scale. 717 At this point, all that can be stated, though, is that research into measurement of motives for altruism is progressing but there are not universally agreed indicia or measures.
4. No Universal Measure or Ranking of Altruism but a Continuum
The lack of uniformity in indicia or measurement has not prevented ranking of motives. The authors of Giving Australia, consistent with an approach becoming more common, 718 acknowledge the vastness of the literature and adopt a simple concept of a continuum of altruism reporting: ‘Giving can also be viewed as occurring along a continuum from altruism
714 Wayne Weiten, Themes & Variations (1998) 446; James Kalat, Biological Psychology (2001) 16; David Shaffer, Social and Personality Development (2000) 308-309; Graham Vaughan and Michael Hogg, Introduction to Social Psychology (1998) 325. Interestingly, altruism has now been found in an indirect form in fish: see Lee Dugatkin, 'Trust in Fish' (2006) 441 Nature 937 . 715 For a good example of use of presently accepted methods see Tom Smith, Altruism and Empathy in America: Trends and Correlates (2006). 716 See E Gil Clary, Mark Snyder and Arthur Stukas, 'Volunteer's Motivations: Findings from a National Survey' (1996) 25 Nonprofit and Voluntary Sector Quarterly 485; Roland Benabou and Jean Tirole, 'Intrinsic and Extrinsic Motivation' (2003) 70 Review of Economic Studies 489; Edward Deci and Ryan Richard, 'The "What" and "Why" of Goal Pursuit: Human Needs and the Self Determination of Behaviour' (2000) 11 Psychological Inquiry 227; Monica Hwang, Edward Grabb and James Curtis, 'Why Get Involved? Reasons for Voluntary-Association Activity Among Americans and Canadians' (2005) 34 Nonprofit and Voluntary Sector Quarterly 387; Ludwig Theuvsen, 'Doing Better While Doing Good: Motivational Aspects of Pay-for-Performance Effectiveness in Nonprofit Organisations' (2004) 15 Voluntas: International Journal of Voluntary and Nonprofit Organisations 117. 717 One model that explores motives divided them into six ‘dimensions’ and is called the Volunteer Function Inventory. See E Gil Clary, Mark Snyder and Arthur Stukas, 'Volunteer's Motivations: Findings from a National Survey' (1996) 25 Nonprofit and Voluntary Sector Quarterly 485 and also Mathew Liao-Troth, 'Are they here for the Long Haul? The Effects of Functional Motives and Personality Factors on the Psychological Contracts of Volunteers' (2005) 34 Nonprofit and Voluntary Sector Quarterly 510, 513 where the volunteer function inventory has been married with other theories to develop more complex methodologies for anticipating volunteer behaviour. 718 See the entry on ‘altruism’ in Helmut Anheier and Regina List, A Dictionary of Civil Society, Philanthropy and the Non-Profit Sector (2005).
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– with no expectation of return – through to giving that entails reciprocity of either implicit, explicit, more or less tangible returns to the giver’. 719
This approach, of ranking on a continuum, has the advantage of simplicity and enables the empirical data, as it emerges, to inform where on the continuum the level of altruism may be set without having to embrace a particular method or framework. The concept seems equally applicable to civil society organisations. In principle, there is not a reason why civil society organisations could not similarly be ranked on a continuum of altruism. Indeed, it may be simpler. The manifestations of motive may be more objective. In the context of civil society organisations, for example, purposes are almost invariably set out in the constituent documents. The ways those purposes are pursued in activities, can be taken as indicia if there is ambiguity. 720 At this point in this argument, though, all that is necessary is to note that there is nothing in the research inconsistent with a concept of a continuum of altruism
There is judicial support for the idea, and the Australian research is an example of the concept of a continuum becoming an acceptable conceptualisation.
5. Interim Summary
It will be recalled from the definition discussion that began this section that altruism finds expression in the pursuit of purposes that benefit others. The form of those other benefiting pursuits may be quite differently expressed in different nations, age groups and religious expressions. There is considerable research into indicia of altruism that has not reached a consensus on measurement. One way of managing the contests may be to take the diverse factors into account and simply create a continuum of altruism from strongest to weakest.
Altruism is not a vague notion. It is the subject of detailed investigation across the world
719 Centre for Australian Community Organisations and Management, Giving Australia: Research on Philanthropy in Australia: Australians Giving and Volunteering 2004 (2005) ix. 720 Congregational Union of NSW v Thistlethwaite (1952) 87 CLR 375; Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12.
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and its identification, classification and measurement is progressing at a rapid rate. How then is it to be theorised for jurisprudential application?
D. Theorising Altruism for Jurisprudential Development
1. Introduction
Given that altruism ‘is’, and that the common law has already accepted the concept into its understanding of the doctrine of charitable purpose (albeit not adequately theorised to provide part of an alternative conception) the next challenge is to theorise it in a way that is useful to jurists who wish to replace the Preamble . That is the challenge of this section. It is complicated by conflicting worldviews which must be acknowledged and accommodated.
The conclusion to which I will come, is that theories in relation to altruism are not capable of reconciliation at any level. At each level there is, however, a continuum between two extremes. In this section, I argue that there is a basis for a theoretical bridge between the two extremes upon which disputants may contest the form of altruism accepted into law. I do not conclude that there is a middle ground – for I do not consider that to be the present state of theorising.
2. Theorising Altruism: Two Alternatives
The law, at least in this area of civil society organisations such as charities, has, for a long time, been premised both on the assumption that humanity is characterised by limited altruism 721 and is essentially associative. 722 Beneath those assumptions, though, lie deep divides. This is because theorising altruism reduces to contests over human nature. The threshold challenge to be addressed in this section is, then, how to reduce the contests into a framework that jurists can manage. I adopt a classification proposed by the Scottish,
Enlightenment philosopher, David Hume. David Hume summarised the alternatives in the following way:
721 H L A Hart, The Concept of Law (1961) 191-192. 722 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 7.
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There are certain sects, which secretly form themselves in the learned world, as well as factions in
the political; and though sometimes they come not to an open rupture, they give a different turn to
the ways of thinking of those who have taken part on either side. The most remarkable of this kind
are the sects, founded on the different sentiments with regard to the dignity of human nature;
which is a point that seems to have divided philosophers and poets, as well as divines, from the
beginning of the world to this day. Some exalt our species to the skies, and represent man as a
kind of human demigod , who derives his origin from heaven, and retains evident marks of his
lineage and descent. Others insist upon the blind sides of human nature , and can discover nothing,
except vanity , in which man surpasses the other animals, whom he affects so much to despise. If
an author possess the talent of rhetoric and declamation, he commonly takes part with the former:
If his turn lie towards irony and ridicule, he naturally throws himself into the other extreme. 723
Contestable, antiquated and perhaps overly simplistic as this division into these two typologies is, these divergent assumptions are foundational to at least some legal theory. 724
On the one hand, religious belief systems of all kinds have for millennia exhorted altruistic behaviour725 and it has been taken as axiomatic by many that altruism is possible. Adopting
Hume’s phrase, I label this the ‘demigod’ school. There are those who belong to what Hume called the ‘vanity school’. For these people, altruism is not only an unacceptable concept but it is ‘intellectually unacceptable to raise the question of whether “true” altruism could exist.’ 726 So, I adopt the division between the two typologies as it provides a platform for much more sophisticated development between these extremes. In this section I summarise the basis upon which concessions are being made by the ‘vanity’ schools and note that the
‘demigod’ schools, too, acknowledge the complex interplay of self-interested prudence and
723 David Hume, 'Of the Dignity of Meanness of Human Nature' in Eugene F. Miller (ed), Essays, Moral, Political and Literary (first published 1742, 1985 ed) 80, 80. Italics added. 724 John Farrar, Introduction to Legal Method (1977) 3. 725 See Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87. 726 J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27, 28.
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other-centred benevolence. The level of divergence between the two schools cannot be overstated and these divergences are considered in the next two subsections.
3. Nothing, Except Vanity
The view that people only act out of self-interest is traceable to at least Hobbes, 727 some might say Machiavelli, 728 but arguably back to Augustine’s conception of the City of Man 729 and probably beyond. It builds from the premise that all action is for the pursuit of self- interest. If an action seems to be for the benefit of others, there are psychic benefits such as a ‘warm inner glow’ 730 for the ‘altruist’ which makes the action rational and in the pursuit of self-interest. 731 Once a view of human nature is taken that all ostensibly altruistic action is explicable as derived from self-interest alone, it cannot be disturbed for it is an a priori assumption. This view became so dominant that, until the mid to late 1970s, it did not matter ‘…whether one spoke to a biologist, a psychologist, a psychiatrist, a sociologist, an economist, or a political scientist the answer was the same: anything that appears to be motivated by a concern for someone else’s needs will, under closer scrutiny, prove to have ulterior selfish motives.’ 732
This extreme view is not now the only, nor even the dominant, view. The theoretical landscape of altruism has changed. By 1990, the research and theory on altruism could be summarised as ‘the data from sociology, economics, political science, and social psychology
727 Thomas Hobbes, Leviathan, Great Books of the Western World (first published 1651, 1992 ed). 728 Nicolo Machiavelli, The Prince, Great Books of the Western World (W K Marriott trans, first published 1515, 1992 ed). 729 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed). 730 J Andreoni, 'Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence' (1989) 97 The Journal of Political Economy 1447 ; Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 130. 731 Anne M McGuire, ''It was Nothing' - Extending Evolutionary Models of Altruism by Two Social Cognitive Biases in Judgments of the Costs and Benefits of Helping' (2003) 21 Social Cognition 363. 732 J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27, 28.
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are all at least compatible with the position that altruism is part of human nature.’733 The paradigm shift is argued to have occurred in the mid 1970s. 734 Hamilton’s early work 735 which led to the work by Robert Trivers in 1976, entitled The Evolution of Reciprocal
Altruism, 736 provided the genesis in evolutionary biology theory although it has since been suggested that altruism is compatible with, and possibly foreshadowed by, Charles
Darwin. 737 The foundations of the shift in economic theory are traceable to at least Kenneth
Arrow in 1963. 738 In 1988 Robert Frank, building on this early work, put forward a cogent argument as to why altruism is consistent with rational self-interest. 739 By the beginning of the twenty-first century, Ben-Ner and Putterman could argue that the discourse had reached a point where it could be said that ‘kin altruism across human cultures is an illustration of the fact that organic evolution can produce organisms that are not strictly self-interested.’ 740
This view of the progress in evolutionary biology theory led them to argue that ‘a scientific view of human nature’ 741 transcends the narrowness of neoclassical economic theory which, they say, will move to a point where pure self-interest is a special case. 742 So, theorising from this ‘vanity school,’ a priori assumptions are at a point where the limited altruism and associative nature of humanity, which is presumed in the doctrine of charitable purpose, is explicable from a scientific view of human nature. It is important to note, though, that whilst
733 J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27, 28. 734 J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27, 28. 735 W D Hamilton, 'The Genetical Evolution of Social Behaviour I' (1964) 7 Journal of Theoretical Biology 1; W D Hamilton, 'The Genetical Evolution of Social Behaviour II' (1964) 7 Journal of Theoretical Biology 17; W D Hamilton, 'Innate Social Aptitudes of Man: an Approach from Evolutionary Genetics' in R Fox (ed), Biosocial Anthropology (1975) 133. 736 Robert Trivers, 'The Evolution of Reciprocal Altruism' (1976) 46(1) Quarterly Review of Biology 35 . 737 Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91, 92. 738 See K Arrow, 'Uncertainty and the Welfare Economics of Medical Care' (1963) 53 American Economic Review 941. See also discussion in J A Piliavin and Hong-Wen Charng, 'Altruism: A Review of Recent Theory and Research' (1990) 16 Annual Review of Sociology 27, footnote 3. 739 See Robert H Frank, Passions with Reason - The Strategic Role of the Emotions (1988). 740 Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91, 97. 741 Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91, 97. 742 Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91, 97.
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there has been a shift toward embracing the concept of altruism, that shift has been based on extensions of evolutionary, biological theory and rational self-interest. It has not been based on acceptance of a priori assumptions of a demigod worldview. The a priori assumptions remain intact. There is a base, though, the span of a bridge reaching out toward the other side of an ideological chasm. There is not an acceptance of the alternative perspectives foundation.
4. A Kind of Human Demigod
In contrast with the ‘nothing except vanity’ schools of human nature, there are those who
‘exalt our species to the sky’. They are people who embrace altruism as inherent in human nature. Frequently, they draw upon a religious worldview but that is not necessarily so.
They may simply be persons who, to use Hume’s phrase: ‘possess the talent of rhetoric and declamation.’ As the secular and sacred foundations of both perspectives share a similar anthropology (people are capable of altruism) and possibly even a similar teleology (self- perfection) 743 in outworking, they may produce very similar behavioural outcomes.
Religious foundations provide both the command to behave altruistically and the theological justification for that behaviour. One of the ‘four virtues of Buddha’ is a pure self, which is distinguished from self in the pursuit of selfish desire. 744 The purpose of Zakaat is ‘to make
(non-Muslims) aware of how Islam teaches people to treat one another with love and altruism.’ Muslims are extolled to ‘establish regular prayer and to practice regular “Zakaat”
(charity)’. 745 The Jewish tradition, likewise, has similar exhortations to charitable giving, and a division of charity into eight degrees. 746 Theologically, if there is a benevolent, divine
743 See Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87. 744 Soka Gakkai International USA, Living Buddhism, Buddhist Concepts for Today's Living (1): The Four Virtues of the Buddha: Breaking Out of their Lesser Self (2002)
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Being, and people are created by that Being, then human nature being derived from that being, is also capable of benevolence toward others. On this basis, altruistic behaviour is a manifestation of the divine nature. 747
The expectation of altruism does not need a supra-human foundation. Such a perspective can derive principally from a feeling or moral sentiment. 749 A sentiment that identifies with people and sees all as connected. This perspective was succinctly summarised in the twentieth century by Germaine Greer in The Female Eunuch in the following way:
Half the point in reading novels and seeing plays and films is to exercise the faculty of sympathy
with our own kind, so often obliterated in the multifarious controls and compulsions of actual
social existence. For once we are not contemptuous of Camille or jealous of Juliet we might even
understand the regicide or the motherfucker. That is love. 750
There has been a renewed interest in rediscovering this secular foundation for the demigod school. Will Kymlicka illustrates a current articulation in wording consistent with the quote from Hume that opened this section:
If we are chronically distrustful and pessimistic, we are unlikely to find the will to form the sorts
of relationships and projects that make life worth living. We can call this general outlook one of
“charity”, since it involves taking a charitable view of other people and of their potential. I believe
that charity in this broad sense – thinking charitably about others – is indeed necessary for self-
perfection, even on a purely secular level. 751
747 An example of the New Testament teaching to this effect is: Through these he has given us his very great and precious promises, so that through them you may participate in the divine nature and escape the corruption in the world caused by evil desires. The Holy Bible New International Version (1984) 2 Peter 1:4. 748 Alan Ware, Between Profit and State (1989) 119. 749 Adam Smith, The Theory of Moral Sentiments (first published 1789, 1971 ed). 750 Germaine Greer, The Female Eunuch (1993) 163. 751 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 111-12.
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In an approach reminiscent of Plato 752 and some virtue ethicists, 753 he argued that by being charitable we pursue the good and in so doing, act in a way that is most to our own personal advantage.
His point is that ‘outside a theological context, supply side arguments are by definition prudential arguments: they tell us how to improve the quality of our lives.’ 754 These points by Kymlicka, evidence the compatibility of secular approaches to altruism with religious concern for others.
5. Interim Summary
In both the religious and the secular articulations discussed, are two dimensions. First, there is other benefiting action and second there is benefit for the altruist. Augustine labelled the two as benevolence and prudence. 755 The exhortation and aspiration to pure altruism may be present in both the religious and secular articulations of this approach but the reality is of a murky mixing of prudence and benevolence. In all cases there is observable benefit for others. In the context of motive, however, it is interpreted through the worldview of the theorist. The challenge for this thesis is to bring these two extremes of self-interested prudence and other centred benevolence into some sort of relationship suitable for jurisprudential analysis. The theoretical developments discussed provide a platform and economists have taken these insights and applied them in the context of civil society organisations. The next section considers developments from within that discipline.
752 Plato, The Dialogues of Plato, Great Books of the Western World (Benjamin Jowett trans, 1992 ed). 753 See Peter Geach, The Virtues (1977); Phillippa Foot, Virtues and Vices (1978); Thomas Hurka, Virtue, Vice and Value (2001). 754 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 112. 755 Saint Augustine, The Confessions, Great Books of the Western World (R S Pine-Coffin trans, first published 400, 1992 ed); Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed) 745.
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E. Altruistic Associations
1. Introduction
In the last chapter, various theories, focused on the demand side, were discussed and the centrality of the theme of providing benefit to others was explored. In this section of this chapter, the supply side of the equation is explored in a limited way. Rob Atkinson is a lawyer trained in economics who, as long ago as 1990, theorised altruism ‘to be the continental divide in the nonprofit sphere’. 756 He also subsegmented civil society organisations, into ten classes. 757 His insights open the section. That discussion is followed by a later review by Susan Rose-Ackermann 758 whose more general observations on altruism in civil society organisations locate these organisations in a unique space in society.
Together these two authors provide a way of envisaging altruism for subsegmenting civil society organisations, and also of distinguishing civil society organisations from other organisations. The groundbreaking work of Ben-Ner and Van Hoomissen, 759 bringing together the supply and demand sides of these organisations characterised by altruism, follow. Richard Steinberg’s most recent, and most comprehensive attempt at an overarching theory, closes the section. As with the preceding chapter on Benefit, the object is not to review every work on economics dealing with altruism, but rather to show ways in which altruism has beeen theorised in organisations such as charities, and draw from that clues as to how law might similarly theorise the concept.
For a market to exist, including a market for civil society organisations and the goods and services they supply, there must not only be a demand for such, but also supply to meet that demand. For charities and other civil society organisations to exist, someone has to be willing to make the altruistic contributions necessary to establish the organisations and keep
756 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 509. 757 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 565-66. 758 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701. 759 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519.
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them running. ‘Without founding entrepreneurs and those managers and board members willing to play a continuing role in the evolution of the organisation, the nonprofit share would obviously fall to zero.’ 760
‘Economists assume that each individual pursues his or her self-interest as they see it.’ 761
When the typology of the self-interested, utility-maximising individual is applied to civil society organisations, the outcome to be expected is less efficiency, less drive for excellence and less conscientious behaviour. This is because the material benefits of ownership that drive efficiency, are removed. 762 At the foundation of supply side analysis is, then, an ambiguity inherent in adopting a for-profit model of profit maximisation as the driver of supply into a voluntary or nonprofit environment. 763 How this tension has been theorised from an ‘often simplified’ 764 typology of human nature, whilst remaining within the framework of neoclassical economics, provides insights useful for jurists. Robert Atkinson provides an essential beginning.
2. Robert Atkinson and a Weak Form of Altruism
In Atkinson’s view, whilst market failure on the one hand (Hansmann) and government failure on the other (Weisbrod) ‘give plausible and coherent account of the Third Sector’, that account is ‘incomplete’. 765 The account is incomplete as a description of these
760 Richard Steinberg, 'Economic Theories of Nonprofit Organisations - An Evaluation' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 277, 282; See also Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 532. 761 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 117. 762 Dennis Young, 'Entrepreneurs, Managers, and the Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 161, 164. 763 Dennis Young, 'Entrepreneurs, Managers, and the Nonprofit Enterprise' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 161, 162. 764 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 117. 765 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 505, 509.
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organisations, because of its ‘reliance on the perspective of neo-classical economics [which] leads it to overlook altruism’. He observed:
The benefits provided by organisations on one side of the divide flow to their members in the
form of ordinary consumer goods and services purchased at fair market value; the organisations
on this side of the nonprofit range are mutual benefit nonprofits. I maintain that all other
organisations that are truly nonprofit exhibit altruism in one form or another. 766
Atkinson at the outset, therefore, postulated that civil society organisations may be divided into two mutually exclusive and collectively exhaustive groups:
1. mutual benefit nonprofits; and
2. altruistic nonprofits. 767
Atkinson’s definition of altruism is critical. He avoided the ‘subjective selflessness that is hard to identify in particular cases and thus of limited utility as a criterion for government policies toward nonprofits’. 768 He opted instead for a weak altruism which ‘is not at odds with contemporary economic analysis of altruism itself as a self regarding preference’. 769
Atkinson’s altruists ‘may be motivated wholly or in part by a desire for fame, a good name, divine favour (now or hereafter) or some other ‘selfish’ concern’. 770 ‘What is distinct about
[them] is not that they give without gain, but that any satisfaction they derive from giving is not in the form of a material quid pro quo for their donation.’ 771 He thus accommodated both the demigod school and the vanity school.
766 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 509-10. 767 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 510 particularly footnote 23. It should be noted that this perspective was not unique to Atkinson. Hansmann mentioned it and quoted an author of California’s twofold classification for religious nonprofits as dividing between charitable or public benefit corporations on the one hand and mutual benefits on the other. Hansmann appeared to be of the view that these two categories do not adequately encompass commercial entrepreneurial nonprofits. See Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 584-85. 768 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 520 footnote 64, 526. 769 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 526. 770 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 526. 771 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 526.
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On the basis of analysis rooted in this weak altruism, Atkinson considered ‘the locus of benefits in each of Hansmann’s four categories of nonprofits: donative entrepreneurials, donative mutuals, commercial entrepreneurials, and commercial mutuals. 772 This approach leads to ‘ten different species of nonprofits, which fall into two broad general categories.’ 773
Those categories are altruistic organisations and mutual benefit organisations. Of these ten categories of ‘nonprofits’, clearly it is the civil society organisations that have as their defining characteristic the sale of private goods to members (Atkinson’s Type 10) that are only a mutual benefit organisation and ‘as they arise and operate essentially for the benefit of their members… they lack an essential element of altruism in any of its various manifestations.’ 774 The other nine types all manifest the weak altruism of Atkinson in some way or another. 775 Whilst a little long, Atkinson’s own summary cannot be surpassed. He stated:
The role of altruism is clearest in donative organisations that benefit a class other than their
members, whether control is in the hands of donors themselves (Type 4), beneficiaries (Type 3),
or third parties (Type 1). Altruism can also be found in both entrepreneurial (Type 2) and mutual
(Type 5) donatives that benefit the donors themselves, but only under special circumstances.
Either the benefits must be in the form of public goods, as with listener-sponsored radio, or
individual donors’ receipt of benefits must be independent of their gifts, as in the case of needy
congregants who receive their churches’ relief without regard to their own contributions. Even
though, in the latter case, the benefits provided are private goods, the provision is ‘socialized.’
Altruism is not limited to donative nonprofits. Entrepreneurial commercials – commercials not
controlled by those who purchase their products – can confer uncompensated benefits either on
their own customers, in the form of lower prices or higher quality (Type 7), or on their parties, in
the form of cross-subsidization (Type 6). Genuinely non-profit hospitals are examples of the
772 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 520. 773 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 520. 774 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 562. 775 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 566.
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former; NYU’s operation of the Mueller Macaroni Company illustrates the latter. As we saw in
the case of Type 8 organisations, an entrepreneurial commercial can also use the proceeds of its
sales for the benefit of its controllers. But for such an organisation to be altruistic, the benefits
would have to be either public goods or socialized private goods. Finally, mutual commercial
organisations exhibit altruism if they use the proceeds from their sales to member-controllers to
benefit others, as arguably occurs on a small scale in church bazaars and a large scale in the
American Bar Endowment’s insurance program (Type 9). 776
From Atkinson’s perspective, what is critical about the organisations is that supply of civil society organisations arises from altruistic motivations in all but the mutual benefit organisations. Furthermore, the extent and type of altruism are capable of delineation or subsectionalisation so that, if the law is to grant favour based on altruism, there are ten categories identified by Atkinson into which civil society organisations may be subsectionalised for the purposes of assessing the nature, and possibly extent, of altruism as a basis for entitlement to favour. This is a much more sophisticated division of organisations than that presently applied at common law which involves classifying into ‘four principal divisions’ of charitable purpose. Further, it explicitly accommodates divergent worldviews by adopting a weak form of altruism to divide the classes.
Atkinson’s 1990 work, discussed above, then proceeded into normative territory arguing for tax exemptions for nonprofit civil society organisations in light of his ‘altruism analysis’. 777
He revisited the topic of tax exemptions in 1997 and there reviewed the significant theoretical developments that occurred between 1990 and 1997. He concluded that the mere existence of altruism in any form of nonprofit civil society organisation is enough to justify tax exemption. 778
776 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 565-66. 777 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 616. 778 Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 423.
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To find altruism in commercial, ‘nonprofit’ civil society organisations he pointed to the supply side noting that, at the very least, the founders sacrificed the set-up capital. Provided that capital, at the least, remains in the organisation, their initial altruism remains in the organisation, and so it remains an altruistic organisation. 779
Atkinson also made the point that merely manifesting altruism is not enough to justify tax exemption. An altruistic organisation may be engaging in socially destructive activities that would warrant denial of the exemption. He gives as an example, consistent with the doctrine of charitable purpose weighing of public benefit, 780 the racist practices of Bob Jones
University, being enough to extinguish an entitlement to exemption that it might otherwise have enjoyed as a charitable organisation. 781 It is noteworthy that this approach has found acceptance now in England and Wales since the passing of the Charities Act 2006 782 and
‘disbenefit’ is listed expressly as a factor to consider in Scotland; and ‘detriment’is listed as a factor in Northern Ireland.783
3. Rose-Ackerman
Rose-Ackerman undertook an extensive study in 1996 784 and found: ‘Altruism and nonprofit entrepreneurship cannot be understood within the standard economic frameworks.’ 785 In concluding that altruism is the central distinguishing feature of ‘nonprofit’ civil society organisations, she does not mention the work of Atkinson. She discussed various authors on altruism, but the aim of her work was to understand the role of ‘nonprofit’ firms. 786 The
779 Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 523. 780 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 7. 781 Bob Jones University v United States , 461 US 574, 591 (1983) discussed in Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 426. 782 See for instance the The Charity Commission for England and Wales, Commentary on the Descriptions of Charitable Purpose in the Charities Act 2006 (2007). 783 Charities and Trustees Investment Act 2005 (Scotland) s 8(2)(a)(ii). 784 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701. 785 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 701. 786 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 702.
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conclusion to which she came was that, whilst the distinction between business, government and nonprofit was ‘problematic’, 787 nevertheless ‘differences persist’ 788 and nonprofit civil society organisations can perform ‘three inter-related roles’. 789 Those three inter-related roles are not defined with respect to the Pemselian purposes of poverty relief, advancement of religion or other purposes beneficial to the community. She distils the purposes into three classes. They are:
1. to provide an organisational form that ‘may be trusted more’ 790 and thus have a
‘competitive advantage’ in a market where ‘customers have imperfect
information about service quality’;
2. to serve as ‘outlets for the generous impulses of individuals’, 791 and have an
advantage over government bodies because they can ‘better reflect the desire of
donors’ and; linked to the above,
3. to provide ‘a shell within which people can reify their ideological beliefs without
having to be accountable to profit-seeking investors.’ 792
The first class, based on trust, is often typified by hospitals, child care and aged care providers, which sometimes are charitable purposes under the first head of Pemsel’s case .
The second, broad class of social contributions would have included advancement of education (the second head of Pemsel’s case ) in former centuries and now embodies many other forms of public-benefiting purposes. The third class includes advancement of religion,
(the third head of Pemsel’s case ) but goes beyond that to include pursuit of political and other ideological purposes. There are, then, three very different classifications offered by
Rose-Ackerman that include, but go beyond, the Pemselian purposes .
787 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 702. 788 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 702. 789 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 723. 790 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 723. 791 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 723. 792 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 723.
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These three classes are something of a synthesis of the various views which preceded her work mentioned in this, and the former, chapter. She also noted, consistent with former authors, that the boundaries between these civil society organisations and other organisations are contested and dynamic:
1. Government regulation and professional training can reduce the advantage of the
‘nonprofit form’; 793 and
2. If government funding and regulation are both evident the form (‘nonprofit’ or
for-profit) may become ‘irrelevant’; 794 and
3. Consequently ‘nonprofits’ may, in such a context, have little claim to
preferential tax treatment.
Recognising the risk of favours granted to civil society organisations attracting for-profits in disguise, Rose-Ackerman recommended that the ‘treatment of nonprofits should not be so favourable as to open a large wedge between the sectors’. 795 She also pointed to the importance of the ‘signal sent by the nonprofit form’ and encouraged civil society organisations ‘run on genuinely charitable principles’ to oppose subsidy programs that may dilute that signal. 796 She noted a risk to the revenue base, stating: ‘Only if the tax and regulatory benefits of the nonprofit form become too large, will charlatans select it as a way to get rich’. 797
Her concluding comments related to the ‘proper mix’ of organisations in society; and the likely battlefields:
793 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 724. 794 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725. 795 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725. 796 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725. 797 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 723.
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Future debate over the proper mix of nonprofits, for-profits and government provision is likely to
be most heated in social services, child care, and education. The debate concerns both the role for
the state in direct provision versus financing, and the relative status of for-profits verses nonprofits
as suppliers of services.’ 798
In the context of religion, Rose-Ackerman concluded there is ‘little doubt that nonprofits will continue their dominance’ 799 but in the provision of health care, where government funding and regulation are powerful influencers, a special role for civil society is open to serious challenge. 800
In summary then, for Rose-Ackerman, altruism is the central distinguishing feature of a collection of organisations that fulfil three overarching purposes. Those purposes include, but are much broader than, the ‘four principal divisions’ of Pemsel’s case . Some purposes, such as the reification of ideological beliefs through, for example the advancement of religion, are likely to always be expressed through civil society organisations. Other purposes, such as the provision of health care, could be discharged by other organisational forms such as business or government. Law and, more broadly, regulation policy can powerfully influence the types of organisations that discharge a particular type of purpose.
Jurists seeking to unshackle the doctrine of charitable purpose informed by Rose-
Ackerman’s insights may take cognisance of four key points: first, the centrality of altruism; second, the classifying of civil society purposes into three broad classes, that include but go beyond the four Pemselian purposes; third, the fact that some purposes such as reifying ideology are always likely to adopt the civil society organisational form; and fourth, the way that contests over organisation form is shaped by government policy.
798 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725. 799 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725. 800 Susan Rose-Ackerman, 'Altruism, Nonprofits, and Economic Theory' (1996) 34 Journal of Economic Literature 701, 725.
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4. Avner Ben-Ner
In the development of economic theory regarding civil society organisations, the recognition of supply factors, and their interplay with the demand for charitable good, was not immediately apparent. In 1991, the year after Rob Atkinson published his work, Avner Ben–
Ner and Theresa Van Hoomissen explicated a theory of both supply and demand that explained the formation of charities and other civil society organisations in mixed economies, such as is typical of common law countries. 801 They pointed out that it is not enough simply to focus on the demand for charitable good. 802 It is necessary to also consider the factors that lead to the supply of charitable good through civil society organisations. 803
They theorised that the most important supply factor is the ability of demand side stakeholders (broadly defined to include consumers, sponsors, or donors) to ensure that the civil society organisations ‘of interest to them perform according to their wishes within economic feasibility constraints’. 804 These stakeholders, who are not necessarily or even primarily altruistic, will form civil society organisations if they ‘value the expected flow of net benefits from a self-run organisation more than the benefits they can derive from alternative sources’. 805 This means that civil society organisations are ‘an instance of vertical integration.’ 806 Ben-Ner and Van Hoomissen went so far as to state that:
Although the process of nonprofit formation can be facilitated by individuals other than
stakeholders, demand side stakeholders must play an active role informing and operating
801 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519. 802 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 521. 803 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 520. 804 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 520. 805 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 521, 532. 806 Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 540.
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nonprofit organisations, because demand will not materialize unless the organisation is
stakeholder controlled. 807
Ben-Ner, in conjunction with others, continued to explore the supply side characteristics 808 but it is not critical to explore those factors in this thesis beyond noting two things. First, that there is a place for civil society organisations in mixed economies such as those existing in common law countries. Second, whilst charities might evidence quite high levels of altruism, the non-distribution constraint, as a signal of the sector, can operate at very low levels of altruism and the existence of the non-distribution constraint can be compelled by economic need, rather than self-sacrifice.
In later work, Ben-Ner discussed altruism. Noting that study of altruism is an evolving science, and the accommodation of altruism in economic theories is a work in progress, he concluded that altruism, within economic theory, is not inconsistent with a more sophisticated understanding of human nature. 809
The common law doctrine of charitable purpose remains, like early economic analysis, fixated on the demand side of provision of public benefits. As has occurred in economic
807 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, Avner Ben-Ner and Theresa Van Hoomissen, 'Nonprofit Organisations in the Mixed Economy: A Demand and Supply Analysis' (1991) 62 Annals of Public and Cooperative Economics 519, 540. 808 Avner Ben-Ner, 'For-profit, State, and Nonprofit: How to Cut the Pie?' (Working Paper, Industrial Relations Center, University of Minnesota, 2004); Avner Ben-Ner, 'Religous Institutions and the Economics of Religion' (1997) 153 Journal of Institutional and Theoretical Economics 150; Avner Ben-Ner, 'The Shifting Boundaries of the Mixed Economy and the Future of the Nonprofit Sector' (2002) 73(1) Annals of Public and Cooperative Economics 5; Avner Ben-Ner, 'Who Benefits from the Nonprofit Sector? Reforming Law and Public Policy Towards Nonprofit Organisations' (1994) 104(3) Yale Law Journal 731; Avner Ben-Ner and Helmut Anheier, 'Shifting Boundaries: Long-term Changes in the Size of the For-profit, Nonprofit, Cooperative and Government Sectors.' (1997) 68(3) Annals of Public and Cooperative Economics 335; Avner Ben-Ner and Benedetto Gui, 'Introduction' in Avner Ben-ner and Benedetto Gui (eds), Annals of Public and Cooperative Economics (1991) 515; Avner Ben-Ner and Benedetto Gui, 'The Theory of Nonprofit Organisations Revisited' in Helmut Anheier and Avner Ben-Ner (eds), The Study of the Nonprofit Enterprise - Theories and Approaches (2003) 3; Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91; Avner Ben-Ner and Louis Putterman, 'Trusting and Trustworthiness' (2001) 81 Boston University Law Review 523. 809 Avner Ben-Ner and Louis Putterman, 'On some Implications of Evolutionary Psychology for the Study of Preferences and Institutions' (2000) 43 Journal of Economic Behavior and Organisation 91 particularly 97. See also Avner Ben-Ner and Louis Putterman, 'Trusting and Trustworthiness' (2001) 81 Boston University Law Review 523.
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analysis, jurisprudential development must move to a more holistic approach that takes cognisance of altruism as integral to the supply of those public benefits. Such a step does not require theorists to embrace the demigod worldview. Ben-Ner’s approach from within the discipline of economics provides a model.
5. Richard Steinberg
Ben-Ner integrated the supply and demand factors but the influence of government, mentioned variously throughout this and the last chapter, remained excluded until Richard Steinberg attempted a comprehensive theory in 2005. His work is by far the most complete attempt yet to bring all of the factors into one framework.810 Steinberg began with the premise of the three failure theories discussed in Chapter IV but noted that they ‘do not explain why nonprofits are there for [consumers] to use’. 811 He theorised an arrangement in the form set out in the figure below. The top, left-hand box identifies the factors that each potential ‘nonprofit’ entrepreneur considers when deciding issues in relation to whether to utilise a civil society organisation or not. The lower, left-hand box sets out the factors that determine whether the entrepreneur’s objectives can be accomplished through a civil society organisation and the right-hand box sets out the possible outcomes that may flow from the civil society entrepreneur’s decision-making. 812
Figure 3 Schematic of Steinberg’s Complete Theory
810 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117. 811 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 128. 812 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 130.
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Steinberg acknowledged at the outset that there are ‘many ways to fit these various pieces together’. 813 His way of putting the pieces together is informed by his purpose which is to provide, from within the discipline of economics, ‘a more comprehensive and integrated theory’ 814 of why ‘nonprofits are there for [consumers] to use’. 815
The purpose of this thesis is different. So, taking cognisance of the factors but fitting them together in a different way, it is noted that the factors listed in the first box can be divided into two classes, when considered in the light of this and the last chapter. There are goods that are demanded – Collective Goods and Private Benefits. There are motives for suppl y –
Changing Preferences, Being Trustworthy, Distribution and Access to Income and Perks. 816
The goods that are demanded – Collective Goods and Private Benefits can be considered according to who benefits. This is an important issue, not only for economic theory, but also for legal theory regarding the doctrine of charitable purpose. There is a need to identify public as distinct from private benefit.
The motives for supply – Changing Preferences, Being Trustworthy, Distribution and Access to Income and Perks – can be considered according to the extent of altruism evident.
Considering the factors listed in the second box, which identified factors those entrepreneurs consider, the jurist notices that all of the factors in the second box are influenced, if not determined, by law. The role of government has been evident throughout the discussion so
813 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 132. 814 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 117-118. 815 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 128. 816 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 130.
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far but it is Steinberg’s model that brings together not just Regulation and Enforcement but five other factors, all of which are shaped by laws. Even Resource Availability is shaped, if not determined, by law. 817
The first, and most obvious point for jurists to note, is that if completing an economic theory requires bringing the coercive role of government into the equation, a jurisprudence is also likely to require the coercive role of government to be explicitly addressed. In the next chapter, the theory behind the coercive role of government will be discussed. At this point, it is enough to note it as a significant factor. Second, and equally important, is the role that both the supply side factors and the demand side factors play. Third, and capping these broader remarks, is the fact that it seems that these three factors are sufficient to complete a theory.
6. Interim Summary regarding Altruistic Associations
In summary, at this point the following conclusions may be drawn regarding civil society organisations from the literature canvassed.
First, there are ‘many ways to fit these various pieces together’ but it seems fair to say that the analysis of economists, of which the figure by Steinberg above is a recent example, offers an example of the pieces and how they might be put together. Taking into account
Steinberg’s observations and the work of authors discussed over this and the preceding chapter, it is clear that public benefit, altruism and the coercive role of government are all essential factors shaping civil society. From Chapters II and III, it is clear that putting together the relevant common law into an alternative architecture of issues like this, is as needful to law as it is to economics. This project is yet to be undertaken by jurists, though,
817 The Australian exemptions to the copyright laws for charities being an apt example: Copyright Act 1968 (Cth) s 106(b).
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beyond the doctrine of charitable purpose, at least at anything like the same level as that undertaken by economists.
Second, certain factors have been identified as central to the discourse in other disciplines that are factors also important to law. Altruism is one of the factors. It ought to be an integral part of the definition of charities, as the Australian Charities Definition Inquiry 818 concluded, and, I now suggest, of the definition of the broader class of civil society organisations. Altruism is a factor that leads to the supply of civil society organisations in common law countries. The supply of goods that are non-rivalrous and non-exclusive (often called in other disciplines common goods or collective goods and in this thesis called
Charitable goods) is a central theme of the discourse and these goods are the object of the supply of charities that so interests jurists.
Third, the non-distribution constraint is a clear signal which is widely accepted as evidencing a civil society organisation. This signal is not only evidence of altruism which is an essential characteristic, it is also a signal that the organisation does not exist for private benefit which is an equally important differentiator marking out civil society organisations. There are many laws enabling and regulating organisations with non-distribution constraints and the law looks to the indicia as integral to charity. The relationship of the non-distribution constraint to altruism, and altruism to charities and charities to the wider body of organisations with non-distribution constraints, is capable of more complete theorising.
F. Conclusion
From the discussion in this chapter a number of conclusions can be drawn. First, theoretical agreement that altruism ‘is’ provides a foundation for legal theory development. The second contested a priori assumption in relation to the nature of humans has not been completely
818 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 14, Recommendation 7.
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resolved, but the dispute over the existence and nature of altruism has been resolved sufficiently in favour of there being something that can be labelled altruism. This concept of altruism is not a feeling or sentiment but a formulation for action that benefits others. It spans a range from weak to strong. Measurement of altruism is developing and there are indicia capable of ranking or being measured even if there is not a universal measure of altruism.
Second, divergences over how altruism is theorised are deep and the contests seemingly irreconcilable. These differences need not prevent the divergent insights informing development of the doctrine of charitable purpose, provided broad agreement over what is in contest can be reached. If the variables that inform those contests can be brought into a theoretical framework, then this altruism exists where a person acts from a motive which is other-centred.
Third, however it be theorised, ‘altruism’ is the ‘continental divide’ by which civil society organisations are distinguished from other organisations. Civil society organisations may take many forms. They may be categorised in many ways. Atkinson proposed ten categories. Rose-Ackerman pointed to these organisations existing for the pusuit of three classes of purposes. These are examples of the way in which economists have distilled key indicia for more useful and conclusive purposes: and these are examples of categories that jurists could use that are arguably superior to the four heads set out in Pemsel’s case .
Fourth, theory has developed in economics to a place where altruism has been theorised as distinctly linked to the supply of civil society organisations. Supply is but one side of an economic analysis. Demand is the other. It took some time for this distinction to be elucidated in economics. It is a helpful theoretical division. Given the continual reference to altruism in the case law, and the struggle with the Preamble , the separation of the supply
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factors from the demand for public benefit suggests that the insights from economics could usefully inform jurisprudential developments.
Fifth, the first and arguably most significant variable in the supply of civil society organisations is motive: a motive of benefiting others. As the essential feature of this variable is that it offers a reason ‘why’ a purpose is pursued, I have, for convenience, labelled it ‘Y’.
Sixth, motive is not, though, the only factor. People do things for others such as their family or immediate acquaintances and there the motive may be personal benefit. It is essential to altruism that others benefit – that is members of the wider public who are more remote from the donor. I theorise, therefore, that remoteness is then also a factor. It will be recalled from the last chapter that remoteness was labelled ‘X’.
I theorise that altruism as defined earlier 819 is manifested as a function of two variables, X and Y. When strangers associate to pursue purposes which benefit persons other than themselves, altruism is present. The more disparate the origins of the persons, and the more the purposes are for public benefit, the greater the altruism. A civil society organisation is altruistic.
It is possible, though, to go one step further. Once it is conceded that there may be gradients or ranks or a continuum of altruism between the two theoretically diverse a priori typologies, there is a basis for legal theory development. That theory development can be informed by measurement theory to the extent considered necessary or appropriate by judges, legislators and regulators. All that is needed is the framework within which the contestants may debate the indicia of altruism and to what extent it is established and might be necessary.
819 See Section C subsection 1 of this Chapter, page 688
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I have, then, by drawing on this economic analysis, begun marking out a basis different from the Pemsel’s case categorisations for recognising charities and civil society organisations.
Economists have advanced analysis of charities and altruism sustantially. They have done so by building on a concept of rational self-interest drawn from neoclassical economic theory.
The concept of the rational self-interested person is a modernist concept. It is contested and deeply problematic when viewed in a pre- and post-modern context. Indeed, there are many modernist perspectives, particularly in the social sciences, that also find it deeply problematic and progressively more contested. Importantly, in part this is because, embedded in it, are notions of the individual in relation to the community which are founded in contest not cooperation. 820 In the next chapter, civil society organisations are considered as organisations separate from the government.
G. Postscript
When Dickens had written of the altruistic act of the middle-aged lawyer (the giving of his life for his client) he lifted his sights with sympathy and understanding to the locus of that moment in the vast sweep of history. He wrote immediately, and prophetically of his vision that out of this period of tyrannical state oppression, would emerge ‘a beautiful city and a brilliant people rising from the abyss, and, their struggles to be truly free, in their triumphs and defeats through long, long, years to come’. 821 This chapter has focused on altruism but, following Dickens’s example, the argument in the next chapter lifts to understandings of the role of the state in the vast sweep of history. The nature of human society, freedom, and visions of how a ‘beautiful city’ is achieved, are explored. There is not just one conception of civil society or its component parts. The same a priori assumptions that founded the
820 For similar comments on the limits of economic analysis in explaining the essentials in family law see Brian H Bix, 'How to Plot Love on an Indifference Curve' (2001) 99 Michigan Law Review 1439, 1454. 821 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 389.
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problems canvassed so far, find their roots in an history that problematises development of conceptions of civil society and the state. The next chapter explores that diversity as a basis for development of a jurisprudence for civil society in chapters VII, VIII and IX.
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VI COERCION
A. Preamble
At the beginning of A Tale of Two Cities , Dickens paints an image of two ostensibly similar countries. He wrote:
There were a king with a large jaw and a queen with a plain face, on the throne of England; there
were a king with a large jaw and a queen with a fair face, on the throne of France. In both
countries it was clearer than crystal to the lords of the State preserves of loaves and fishes, that
things in general were settled forever. 822
With the benefit of hindsight, readers know that the commonality and the settledness were only surface-deep. A revolution was coming and the power to coerce would soon change hands from a king with a large jaw and a queen with a fair face in France but not in England.
Dickens wanted us to draw lessons from the comparison. The reader is to ask why one incarnation of sovereignty survived and the other did not. This chapter helps to frame that discussion in the context of views of sovereignty relevant to the development of a jurisprudence for civil society.
B. Introduction
The third contested a priori assumption elucidated in Chapter III, related to the nature of human society. At its simplest, this is a dispute over the extent and nature of freedom in society. The nature of freedom in society is discussed in this thesis for two reasons. First, there is the role of distinguishing civil society organisations from government. In this regard, coercion is considered in a way similar to altruism and benefit in the prior two chapters. A second, and equally important, reason is unique to the discussion of law. The second issue informs the broader question of what are the proper limits of government regulation of civil society organisations. In relation to the first issue, I suggest that if a group
822 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 5.
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of people carry out a purpose together but the reasons for association to carry out the purpose are coerced, then the fundamental character of voluntariness is missing and the association is an expression of government. As families and private groups can be coercive, it is not enough, though, to focus only on the reason for associating. A siginificant theoretical feature of government is that it is the will of ‘the people’ of a ‘ polis ’. The number of people involved is, then, also a relevant distinguishing feature. Government involves larger groups.
A civil society organisation is a large enough voluntary association. As with the last two chapters, I theorise that coercion is a dynamic concept that can be understood as on a continuum.
The second aspect of coercion explored in this chapter relates to attitudes to government coercion. In the last chapter, the motifs of ‘vanity’ and ‘demigod’ were adopted to elucidate two typologies of a priori assumptions regarding motive for pursuing purposes. In this chapter, a similar approach is adopted to categorise two divergent positions in relation to perceptions of the coercive role of government. The two positions are labelled for convenience as ‘communal’ and ‘contractual’. To explain the differences, I link the two worldviews to eras in history. The contractual is linked, as might be expected, with modernity. The communal concept is linked with the thinking of the period that preceded modernity. I acknowledge at the outset that there is overlap and inadequacy with both the descriptors and the linking of these descriptors to these periods in history. My object, though, is a very limited one. It is to mark out a continuum between extreme positions in relation to the level of coercion and voluntary involvement in society.
At one extreme, is the a priori assumption that people only engage in society because they need to do so and society is nothing more than a social contract. Performance of a contract can be voluntary but ultimately, a contract is dependent upon coercion to compel performance. People will breach such a contract if it is in their best interests unless there is a coercive force ready to restrain this breach. At one extreme, then, is a concept of society
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which is fundamentally reliant upon coercion. The coercive powers of the state sustain society by enforcing the social contract. This worldview is rooted in modernist philosophy and is explored second in this chapter. First, I explore the alternative concept of society that rests on a priori assumptions that people are social and have a propensity to care for one another. Within such a worldview, society is an extension of family ties because everyone is related. There is a place for coercion in such a society, but it is an adjunct or ancillary dimension – not the foundation. The foundation is voluntary association. Fundamentally, from this persective, people voluntarily meet the needs of one another. The third and final section, conceptualised these two approaches to coercion in a framework suitable for jurisprudential theory development. That theory development will occur across Chapters
VIII and IX in conjunction with notions of altruism and public benefit.
C. Coercion and Community
1. Saint Augustine
Amazing as it may seem, the roots of our present tensions over the nature and place of coercion in society must be traced at least as far back as Augustine for an adequate appreciation of the depth of the dilemma. In his City of God ,823 Augustine postulated two contrasting, though commingled, 824 conceptions of society which he typed as cities ( polis ). 825
The two cities are distinguishable at a foundational level by two different types of love. 826
The first city is the earthly. It is constructed on the self love of its citizens. The second city is the heavenly. It is constructed on citizens’ love of ‘God, and … neighbour’. 827 For
Augustine, then, the society which consists of people who love and serve one another, will only be found in the heavenly city. Society may, and indeed will, continue to exist in the
823 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed). 824 Saint Augustine, The City of God (Marcus Dodds trans, 1992 ed) 375, 598. 825 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed) Book 14 Chapter 1. 826 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed) Book 14 Chapter II8. 827 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed) 589 and more generally Book 14 Chapter 1.
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earthly manifestation of the city of God but at its foundations will be the pursuit of self- interest. This society, for the pursuit of self-interest, will be at peace but it is a peace achieved by force not by love. This is because those who would overthrow a government, seek to create a society of peace in a form acceptable to them. 828 Michael Banner summarised the position as follows:
Peace is achieved through the imposition of one’s own will by the exercise of force, and is at once
costly in its creation, unjust in its character, and unstable in its existence. This is not to say that
there is no difference between the Roman Empire and a band of brigands, to refer to Augustine’s
infamous jibe, but it is to say that the peace of all other societies is different in kind from the just
and certain peace of the true society found in the city of God, represented here on earth in the
church, which is the city of God ‘on pilgrimage. 829
Augustine applauded the just peace achieved in the earthly city as ‘good’ and ‘without doubt the gift of God’, but he exhorted his reader to pursue ‘the better things of the heavenly city’ for it is when people pursue the heavenly city, that ‘misery’ is avoided. 830 Augustine exhorted his reader to voluntarily give up the pursuit of their own will and be ‘converted from [their] own evil and selfish desires’ that they might experience ‘peace everlasting’. 831
This fundamental tension between a civil society founded on love and voluntary surrender of one’s will to the will of God so that peace everlasting may be known, on the one hand and a civil society founded on a just peace achived by force on the other, continues as the root dilemma for our civil society analysis today. It has been variously expressed, interpreted and restated over the 17 centuries since Augustine to the present day, but in seeking to theorise a common law doctrine, both perspectives must be borne in mind.
828 Saint Augustine, The City of God (Marcus Dodds trans, 1992 ed), 458. 829 Michael Banner, 'Christianity and Civil Society' in Simone Chambers and Will Kymlicka (eds), Alternative Conceptions of Civil Society (2002) 113, 116. 830 Saint Augustine, The City of God (Marcus Dodds trans, 1992 ed), 458. 831 Saint Augustine, The City of God (Marcus Dodds trans, 1992 ed), 460.
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A second equally important contested a priori assumption, relates to the legitimacy of government action. To Augustine is also often traced the path back to the philosophical foundation for the view that the legitimacy of the state rests upon government behaving in accordance with overarching principles of justice. Law is the expression of a higher law in such a context. The positive law depends for legitimacy upon its alignment with these overarching principles of justice. Augustine argued that where the state is unjust, it loses legitimacy. In the City of God he wrote:
Justice being taken away, then, what are kingdoms but great robberies? For what are robberies
themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of
a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed
on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds
places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly
the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal
of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which
was given to Alexander the Great by a pirate who had been seized. For when that king had asked
the man what he meant by keeping hostile possession of the sea, he answered with bold pride,
“What thou meanest by seizing the whole earth; but because I do it with a petty ship, I am called a
robber, whilst thou who dost it with a great fleet art styled emperor.” 832
Those who hold to this communal worldview, consequently, readily defy the government if it does not give expression to their common values. The readiness of those engaged in the civil rights movement in the United States in the 1960s to be imprisoned for disobedience to racist laws, is one of the more popular examples of this resistance. The power of this worldview is perhaps no more powerfully illustrated than by King Henry of Germany in
1077 standing in penance in the snow outside the Pope’s residence at Canossa, accepting that
832 Saint Augustine, On Christian Doctrine, Great Books of the Western World (J F Shaw trans, first published 427, 1992 ed) Book 4 Chapter 4.
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to disobey the Pope was to disobey God. 833 Coercive power in a community dominated by such a worldview is of limited effect for the citizens only submit to it in so far as the power enforces the accepted community values. The shared values, though, underpin conceptions of community which bind society together. These shared, usually religious, values are the society’s ligaments. The worldview is not, though, dependent upon, nor is it the exclusive domain of, religion. John Rawls set out a sophisticated secular argument developed from
Kantian premises to similar effect. 834
2. Thomas Aquinas
Augustine’s two cities were mutually exclusive and no basis existed for a bridge or step between them. Thomas Aquinas developed, and varied, the idea of Augustine’s City of God based on love, by extending it to include those who shared a common will for common good. 835 He thus laid the base for taking a concept of civil society beyond and outside of the church but maintained its relational base of service to others or common good. Participation came to have a significant and central role in the formation of society for it is through the quest for a common will that participation became important and that led to the development of representative democracy. Importantly, then, this view of the social nature of humans was not a uniquely Christian concept; critical to this thesis, though, is that whether solely within the church (as in Augustine) or outside it as well (as in Aquinas) the good or value of society was in its ‘sociality’. 836 People willingly chose to come together into society. In society they might voluntarily submit to one another, they may pursue a common good or they may pursue self interest.
833 He had formerly written to Pope Gregory, ‘King Henry not by usurpation, but by the pious ordination of God, to Hildebrand, not now Pope, but false monk.’ John Ehrenberg, Civil Society - The Critical History of an Idea (1999) 44. 834 John Rawls, A Theory of Justice (1972). 835 Michael Banner, 'Christianity and Civil Society' in Simone Chambers and Will Kymlicka (eds), Alternative Conceptions of Civil Society (2002) 113, 117-119. 836 Michael Banner, 'Christianity and Civil Society' in Simone Chambers and Will Kymlicka (eds), Alternative Conceptions of Civil Society (2002) 113, 119. This is not to suggest that Aquinas was offering a proposal for those outside of the Church but that the argument in its twenty-first century application is capable of that application.
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This idea of society is not uniquely Christian. Aristotle was of the same view. For Aristotle, humanity, at least in its ideal expression, is fundamentally social. 837 Thus the pillars of pre- modern civil society were founded on the fundamental sociality of humanity whether those foundations traced to Jerusalem or Athens.
Augustine’s teaching may have suggested ready and violent contest between government and those who hold to a view that justice is sourced in God (or some higher principle) but that conflict did not follow. It did not follow because the external reference point (God or the
Bible’s teaching) encouraged submission to governments. Voluntary associations may, then, choose to submit to quite oppressive unjust regimes. The Apostle Paul’s teaching recorded in Romans chapter 13, and evidently written from prison in Rome, is an oft cited justification for acceptance of oppressive regimes whilst affirming freedom of association generally. 838
The Roman Catholic catechism is instructive in setting out the obligation to submit and the freedom to resist .839 The catechism does not teach an entirely compliant reading of Romans
13. It refuses to allow the untrammeled exercise of power and authorises Roman Catholic citizens, in certain situations, to do what is necessary to reform society according to their vision of the common good. Importantly, this is a conception of society where people associate together to achieve common good – if necessary against their government.
Principally, though, the common good is to be pursued in submission to government and working within its structures.
3. From Thomas More to Shawn Kimmel
The conception of the pre-modern, ideal society reached its most theoretical zenith in
Thomas More’s Utopia. Written during the reign of Henry VIII, Utopia maps out the ideal
837 Aristotle, Nicomachean Ethics Book 1 (1991) particularly the early chapters. 838 The Holy Bible New International Version (1984) Romans 13:1-6. 839 Catholic Church, Catechism of the Catholic Church (2003) Vatican City http://www.vatican.va/archive/ENG0015/_INDEX.HTM at 21 February 2007.
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state. It is a state where everyone looks after one another. The utopia that More sought was perhaps too ideal. Far from seeing the emergence of such a state, he was beheaded for refusing to submit to that state when it changed religious allegiances. His hopes of such a society were, however, to find political expression in two quite different forms. In the protestant expression typified by the United States of America, the foundations were in personal piety. Each person’s conscience and their freedom to hear God as their personal
God, is a foundational premise of the protestant conception of civil society. A consequence of this was a foundational commitment to freedom of religion and freedom of conscience expressed in a separation of church and state. The Roman Catholic conception of civil society more evident in European countries rested, not on an atomised or individual expression of society as such, but rather on a society being expressed through shared community. The Protestants sought to create space within the secular sphere for private individuals to live the values of the heavenly city in personal piety. The Roman Catholics sought to make this an instituted social norm within the church. In both contexts the function of state power-police was to foster civic goodness not maintain control. This paradigm is being rediscovered in contemporary civil society. A recent example is the work of Shawn
Kimmel.
Shawn Kimmel returned to eighteenth century United States history to point out that police are now viewed as ‘a disciplined corps of policemen [sic] or a nation doing a good job of controlling crime’, 840 but that formerly ‘police referred to a mode of governance in which a community or polity assumed responsibility for regulating the basic conduct of its social and economic life in order to promote not only public security but also public well-being.’ 841 In titling his work Freedom’s Police , Kimmel’s first objective was to
840 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xii. 841 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xii.
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underline the degree to which the structure and conditions of freedom are only understood through
a careful study of the institutional and policy forms and frameworks (of police ) created by
different groups to determine the ways people constitute themselves and their rule over others –
especially through the means of organized association in civil society .842
Deeply imbedding restraint on freedom in consensual civil society, he observed that in that context police went beyond public security ‘to public well-being’. Police were, he wrote, quoting Donna Andrews, ‘the partial, consensual expression of a society’s social arrangements, mores, and beliefs’. 843
Seen through this ‘new lens’, 844 Kimmel invited his reader to consider whether restraint on freedom in both an historical and contemporary context ‘was constituted as an unequally applied discipline that created power for some on the basis of restraining the exercise of power, both visual and political, by others’. 845 It is not my project to comment on the normative dimensions of these assertions. What I flag is that premodern conceptions of civil society continue today and conceptions of freedom rest upon them. They were more than that, though. They were to ‘promote not only public security but also public well-being’ 846 and to reify ‘social arrangements, mores and beliefs.’ 847 Seen in this light, freedom is foundational to the expression of charity. Civil society organisations, including charities, are
842 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xv, xvi.. 843 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xiii. 844 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xv. 845 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xv. 846 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xii. 847 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xiii.
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not to be seen as ‘separate spheres’ but as ‘part of a strategic theatre of state power’ included or alienated according to the application of theories of freedom. 848
4. Interim Summary
For theory development, it is critical to note that the pursuit of comon good as the the foundation of civil society was an accepted central tenet of civil society from both Protestant and Roman Catholic perspectives as modernity dawned. There is a clear common will, in such a context, to care for one another as all belong to the one large family. That provision could, and perhaps ideally should, find expression through government. Government is a tool to assist in the order of society to carry out the common will. Restrictions on freedom are appropriate if they are just and advance the common good but if government is unjust and not for the common good it may be resisted. There were differences over how this ideal society was to be achieved – through Protestant individual piety or Roman Catholic community – but the centrality of caring for one another in community was taken as given.
Association for charitable purposes, and the provision of charitable goods, is not to be seen as an entirely separate sphere from government under this framework but rather as its cradle.
D. Coercion and Contract
1. Nicolo Machiavelli
Nicolo Machiavelli’s The Prince 849 marks the dawn of modernity. It provided philosophic justification for the entirely self-interested approach to social life and in so doing, the City of
Man received clear articulation in occidental philosophy.
Machiavelli conceptualised civil society and the government, as we now understand these ideas, in terms not of community but rather coercive power. ‘a prince, so long as he keeps
848 Shawn D Kimmel, Freedom's Police: The Constitution of the Liberal Police State in the Early Republic's Theater of Civil Society (PhD Thesis, University of Michigan, 2007) xv. 849 Nicolo Machiavelli, The Prince, Great Books of the Western World (W K Marriott trans, first published 1515, 1992 ed).
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his subjects united and loyal, ought not to remind the reproach of cruelty.’ 850 If power is diffuse then compromise is needed but ‘it has to be noted that men ought either be well treated or crushed’ 851 . The government can sometimes buy-off either the relevant contesting civil society organisations or a sufficiently large portion of them to maintain control. If people only pursue self interest, then the role of government is quite different. It is an approach that has, though, underpinned the development in modernity. Thomas Hobbes has been integral to this.
2. Thomas Hobbes
Thomas Hobbes built upon Machiavelli’s seminal work a conception of government where persons chose to submit to the sovereign because the life of man is not social but ‘solitary, poor, nasty, brutish, and short’.852 People come into society not because they are social but to avoid the ravages of life without government. The state of nature is, for Hobbes, not a loving community but a place of fear. Civil Society in the political sense (not as here defined) is achieved by each person being provided by the state with the peace and order necessary for pursuing their own self-interest. The role of government is (merely) to provide the superstructure to enable this to occur. Law is the coercive tool of the sovereign to separate the civil from the uncivilised. It is a positive law without reference to a higher law or morality. Citizens will voluntarily choose submission to the law that issues from the sovereign because it is better than living in the state of nature. Recognising the pursuit of self-interest as fundamental and ignoring any altruism, Hobbes devised a political structure whereby persons in this free association known as ‘civil society’, gave up freedom for the better life that flowed from being under the leviathan of government. In such a context ‘civil society’ was expressed through government. There was not a separate space for civil society as is conceptualised here.
850 Nicolo Machiavelli, The Prince, Great Books of the Western World (W K Marriott trans, first published 1515, 1992 ed) 23. 851 Nicolo Machiavelli, The Prince, Great Books of the Western World (W K Marriott trans, first published 1515, 1992 ed) 4. 852 Thomas Hobbes, Leviathan, Great Books of the Western World (first published 1651, 1992 ed) 65.
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3. Adam Smith, Adam Ferguson and David Hume
Adam Smith’s Wealth of Nations published in 1776, explained how self-interested individuals, pursuing their own self-interested ends, built a nation’s wealth. Smith theorised that the market operates like an invisible hand allocating resources. It is thus contracts in a market by which resources are allocated, not concern for others. The market, not sociability, founds social engagement.853
Civil society in this typology of a modernist worldview is constructed not upon mutual relations but upon the capacity to contract. Augustine’s City of Man had received formal, philosophic articulation in modernity. This does not mean that there was not a place for concern for others within Smith’s worldview. There was; it was based on moral sentiment.
Charitable acts were legitimate expressions of private piety and a society based on contract was tempered by public civility. As Adam Smith explained in A Theory of Moral Sentiment , people cared for one another out of a moral concern or sentiment. 854 That infrastructure was based on self-love. It was believed, then, that reason dictated moral behaviour. In such a context, the market was seen as but one sphere of societal interaction and religious sensitivities tempered commerce. In general, eloquence and law came to be seen [in the sixteen century] as the means whereby men moved from a natural brutish life to one of civility’ opines Brooks and in this context the emergence, protection and enforcement of the charitable trust can be seen as a tool for social progress and cohesion. 855
The humanising influence of morality and religion on market capitalism was not long to stand. Smith’s fellow Scot, David Hume, was soon to publish A Treatise of Human Nature .
The effect of that work was to establish beyond doubt that reason cannot justify morality.
There is an unbridgeable chasm between what “is” and what “ought” to be. Henceforth there
853 Adam Smith, The Wealth of Nations (first published 1776, 1977 ed) 119. 854 Adam Smith, The Theory of Moral Sentiments (first published 1789, 1971 ed). 855 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 206.
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was no theoretical basis for moral restraint of the market. There was, though, a formal contractual base for society. Although John Locke and Jean Jacques Rouseau are both central figures in the articulation of this alternative conception of society, for the purposes of this thesis, it is the concept of a social contract, that found its articulation in the work of Jean
Jacques Rousseau, that is most helpful.
4. Jean Jacques Rousseau
In his book, The Social Contract, Rousseau constructed the argument for a social contract by commencing with the concept of freedom and developing from this an idea of equality. To this he added notions of fraternity. Rousseau began with a premise that individuals in the state of nature are free. These free individuals agreed together to give up their freedom and form a society by entering into a social contract. Rousseau wrote that the social contract, stripped down to its essence, reduces itself to the following terms: ‘[E]ach of us puts his person and all his power in common under the supreme direction of the general will, and, in our corporate capacity, we receive each member as an indivisible part of the whole.’ 856 So, like Augustine, Rousseau invited his readers to surrender their will. The difference was that
Augustine invited surrender to God, whereas Rousseau invited surrender to one’s fellow citizens.
Rousseau also drew upon the concept of the ‘ polis ’ to describe this space where people voluntarily submitted their will to others .857 Sovereignty became in this context the expression of the common or general will. Since it was for freedom that citizens came to partake of the social contract, it is the function of the sovereign to facilitate that freedom – and to do so with as little intrusion as is absolutely necessary. This is because ‘each man alienates, ... by the social compact, only such part of his powers, goods and liberty as it is
856 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 392 (Italics in original). 857 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 536 (Italics in original).
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important for the community to control; but it must also be granted that the sovereign is sole judge of what is important’. 858 This means that it is general will, and consequently the function of the sovereign, to promote both liberty and equality.
If we ask in what precisely consists the greatest good of all, which should be the end of this
system of legislation, we shall find that it reduces itself to two main objects: liberty and
equality – liberty, because all particular dependence means so much force is taken from the
body of the State; and equality, because liberty cannot exist without it. 859
Having stated this, Rousseau immediately observed that equality is difficult to maintain and it ‘is precisely because the force of circumstances tends continually to destroy equality that the force of legislation should always tend to its maintenance’. 860 That does not mean, though, that the legislative response will always be the same. On the contrary, there is a need to tailor the legislative response ‘in every country in accordance with the local situation and the temper of the inhabitants’. 861
It might seem, from what has been written so far, that what holds a society together is the laws issuing as an expression of the general will. It is not. What holds a society together, according to Rousseau, is not the particular regulations, but the ‘manners and morals’ of the particular society. The regulations are but the ‘arc of the arch, while manners and morals, slower to arise, formed in the end its immovable keystone’. 862
858 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 397. 859 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 405. 860 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 405 861 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 405. 862 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 406.
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Rousseau does not flinch from integrating religion into the state, for ‘no state has ever been founded without a religious basis’. 863 The place of religion is, though, according to
Rousseau, completely subservient to the state. The function of this civic religion is, according to Rousseau, to strengthen the polis . As the Christian Gospel, Rousseau explained, in its true form encouraged other-worldliness, he knew of ‘nothing more contrary to the social spirit’ than this Christian Gospel. This was because, ‘so far from binding the hearts of citizens to the state, it has the effect of taking them away from all earthly things’. 864
This inherent tension between the Christian Gospel, which encourages other-worldliness, and the need for unity under one sovereign, requires the imposition of a ‘ purely civil confession of faith of which the Sovereign should fix the articles’ with power to put to death or ‘banish from the State whoever does not believe them’. 865
The basis for this banishment or even death, was lack of fraternity or, as Rousseau put it, for being ‘anti-social’ which was ‘the worst of all crimes’. 866 Central to this fraternity is tolerance and this ‘tolerance should be given to all religions that tolerate others, so long as their dogmas contain nothing contrary to the duties of citizenship. But whoever dares to say:
Outside the Church is no salvation , ought to be driven from the State, unless the State is the
Church and the Prince and Pontiff.’ 867
These values of liberty, equality, and fraternity have been taken up, over and again, as will be seen in the next chapter, as values foundational to democracy. They are values that are acceptable in an entirely secular modern state context and yet, as Rousseau observed, are
863 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 436-437. 864 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 437. 865 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 439 (footnotes removed). 866 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 439 (footnotes removed). 867 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 439.
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likely to be lived by true Christians voluntarily as they ‘recognize one another as brothers.’ 868
The values can be a tool for evil as well as good when grounded in the social contract alone.
This is because the social contract provided a philosophic platform for tyranny in a way that their voluntary pursuit has not. That this was so, did not take long to prove. Robespierre took up the phrase ‘liberty, equality, fraternity or death’ opportunistically and what followed in France was the Reign of Terror. 869 There is not, within Rousseau’s social contract, a theoretical justification for the innocent, young seamstress or the visiting, middle-aged lawyer to resist the general will. 870
Religion then, and the morality that it sustains, was then foundational to society; whether it be the compulsory morality, rooted in the secular religion of Rousseau, or the moral sentiment perhaps rooted in a voluntarily chosen religious expression as was contemplated by Adam Smith and Adam Ferguson.
5. Fredric Bastiat
The French Revolution brought into stark relief the contest between voluntary philanthropic attention to poverty within the social order and the overthrow of that order .871 The catch cry of the revolution – liberty, equality, fraternity or death – refined, in an extraordinary way, the distinction between coerced participation in the shaping of society and voluntary contribution to the common good. Pointing out that the fathers of the revolution were committed to shaping society by force of law into their own image of what common good was, Fredric Bastiat argued that this was to press the function of law too far .872 For Bastiat, law must be limited to ‘the collective organisation of the individual right to lawful defence’
868 Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed) 437. 869 T Honderich, The Oxford Companion to Philosophy (1995) 780. 870 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 388-389. 871 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 101. 872 Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 52-53.
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which is the expression of liberty .873 This liberty stands antithetically against fraternity.
Enforced fraternity, according to Bastiat, destroys liberty .874
In fact, it is impossible for me to separate the word fraternity from the word voluntary. I cannot
possibly understand how fraternity can be legally enforced without liberty being legally destroyed,
and thus justice being legally trampled underfoot. 875
For Bastiat, liberty provides the foundation of the social order. People, once they have a foundation of liberty may, and possibly will, care for one another, but any taking of property from one person to provide for another under coercion, such as occurs with taxation, is unjust plunder and ‘false philanthropy’. 876 Bastiat was at pains to point out that he was not opposed to many of the activities that socialists wanted performed by the state. He discussed charities, education and religion but argued that these must be provided or pursued voluntarily. 877
Bastiat’s conclusion obliges a separation by law between law which enables voluntary association, which Bastiat would affirm as an expression of liberty, and law by which favour is granted. The former are fundamental, the latter are unjust.
873 Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 2. 874 Bastiat’s definition of Liberty is instructive. He wrote: And what is this liberty, whose very name makes the heart beat faster and shakes the world? Is it not the union of all liberties – liberty of conscience, of education, of association, of the press, of travel, of labor, of trade? In short, is not liberty the freedom of every person to make full use of his faculties, so long as he does not harm other persons while doing so? Is not liberty the destruction of all despotism – including, of course, legal despotism? Finally, is not liberty the restricting of the law only to its rational sphere of organizing the right of the individual to lawful self-defense; of punishing injustice? See Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 51-52. 875 Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 21-22. 876 Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 4-5. 877 Frederic Bastiat, The Law - The Classic Blueprint for a Just Society (1998) 26-29.
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6. Karl Marx
In contrast with Bastiat’s view of individual liberty, and Adam Smith’s view of the centrality of markets, in 1848 Karl Marx published the first version of The Communist Manifesto. 878 In that work he postulated, as an alternative to both freedom and the ‘invisible hand’ of market economics, a view of history which led to a situation where goods were transferred ‘from each according to his ability to each according to his need’. 879 In proposing this, Marx did not develop More’s ideas expressed in Utopia .880 He did not revert to the anthropology of
Augustine for beneficence toward one another as a basis for this approach. For Marx, the key to his utopia was for the general will of civil society to be expressed through the uprising of the proletariat against the owners of capital (the bourgeois) and the breaking of the market. It would be the general will of civil society to be discovered and articulated initially through a revolutionary uprising of the proletariat. It would be followed by the collapse of capitalism through to a communist (civil) society. Government would carry into effect the community’s desires. These desires would be for the good of all, Marx taught, in the communist state. This political form would be achieved once the impact of the market was completely overthrown.
Thus for Marx, and for communism generally, ‘civil society’ was expressed in and through the government. Public benefit was expressed through the government. The anthropology of Marx’s society, at least until the communist state was achieved, was a place where self- interested individuals pursued self-interested objectives. His hope however (and his belief) was that, freed of market forces, people would voluntarily contribute to the public benefit through government.
878 Karl Marx and Friedrich Engels, The Communist Manifesto (1888). 879 Karl Marx, Critique of the Gotha Program (1875) EServer
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So, rooted in Hegel, and developed in Marx, communism also was founded upon self- interested economic actors. The fundamental selfishness of human beings was harnessed through the market in liberal capitalism; but in a socialist context, it found expression through the wishes of the people expressed through their government. A quite different perspective on the role of government was to be published nine years later in England.
7. John Stuart Mill
In 1859, John Stuart Mill published On Liberty in which, having regard to developments on the continent, 881 he asserted one very simple principle, namely
…that the sole end for which mankind are warranted, individually or collectively, in interfering
with the liberty of action of any of their number, is self protection. That the only purpose for
which power can be rightfully exercised over any member of a civilised community, against his
will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient
warrant. 882
Importantly, for arguments canvassed in this thesis, ‘…from this liberty of each individual follows the liberty, within the same limits, of combination among individuals; freedom to unite, for any purpose not involving harm to others: the persons combining being supposed to be of full age, and not forced or deceived.’ 883
One of the great challenges of developing a general theory of liberty, which Mills identified, was that even though there is general acceptance of liberty as a concept ‘the practical question, where to place the limit – how to make the fitting adjustment between individual independence and social control – is a subject on which nearly everything remains to be
881 John Stuart Mill, On Liberty (1892) 268 882 John Stuart Mill, On Liberty (1892) 271. 883 John Stuart Mill, On Liberty (1892) 273.
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done’. 884 But ‘no two ages, and scarcely any two countries, have decided [the limits of liberty] alike; and the decision of one age or country no more suspect any difficulty in it, than if it were a subject on which mankind had always been agreed’. 885 This challenge, Mill explained, is overcome in two ways:
The aim, therefore, of patriots was to set limits to the power which the ruler should be suffered to
exercise over the community; and this limitation was what they meant by liberty. It was
attempted in two ways. First, by obtaining a recognition of certain immunities, called political
liberties or rights, which it was to be regarded as a breach of duty in the ruler to infringe, and
which if he did infringe, specific resistance, or general rebellion, was held to be justifiable. A
second, and generally a later expedient, was the establishment of constitutional checks, by which
the consent of the community, or of a body of some sort, supposed to represent its interests, was
made a necessary condition to some of the more important acts of the governing power. 886
In setting out a role for ‘a body of some sort’ separate from government Mill arguably recognises a role for civil society organisations to participate in, and oppose the state. He follows Montesquieu ‘who first placed intermediate organisations at the centre of civil society as a check and balance to the states coercive power’. 887
8. Interim Summary
Civil society in modernity developed, and came to rest upon, a contractual view of society.
The foundation for that view was a view of human nature that was solitary as distinct from
‘social’; a society that was exchange based rather than communally based; and a conception of government based on liberty surrendered to sovereignty for security. There was always a basis for tension over the extent to which liberty could be constrained by the sovereign.
Equality and fraternity emerged as central themes but they, too, were contested. The
884 John Stuart Mill, On Liberty (1892) 269. 885 John Stuart Mill, On Liberty (1892) 269. 886 John Stuart Mill, On Liberty (1892) 268. 887 John Ehrenberg, Civil Society - The Critical History of an Idea (1999) 148 referring to Baron Charles de Montesquieu, The Spirit of the Laws, Great Books of the Western World (Thomas Nugent trans, first published 1748, 1992 ed) 71.
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contests were over the extent to which liberty could properly be constrained and the extent to which equality and fraternity could properly be compelled.
So dominant were these views of civil society as subsumed in the state and freedom to contract that by the late twentieth century that social commentary failed to foresee the collapse of the Berlin Wall. 888 All analysis tended, under both of these dominant paradigms, to focus on freedom to contract or government, as people were expected to accept injustice in such a context because it was better than not being subject to government.
It is easy to see from this perspective how civil society as a third space would be lost philosophically in the milieu of liberal and socialist philosophy, for in both cases, civil society is perceived as expressed through the government or the freedom to contract.
E. Conceptualizing Coercion, Communities and the Social Contract
In this section, the two contrasting worldviews discussed to this point in this chapter are brought into relationship by a review of ideas from Ferdinand Tönnies, Will Kymlicka,
Helmut Anheier, Evelyn Brody and Arthur Jacobsen. Ferdinand Tönnies is considered one of the three founders of sociology and his work grounds this thesis development in a long theoretical tradition. Will Kymlicka’s bridging of a secular and sacred divide is important in a way similar to the way theory, discussed in the last chapter, is bridging the gap between the
‘demigod’ and ‘vanity’ schools. Helmut Anheier’s civil society diamond is a tool designed to bring into relationship the disparate variables discussed here, and is adopted for reasons set out in Chapter I. Evelyn Brody and Arthur Jacobsen’s ideas on sovereignty flesh out the need for dynamic boundaries.
888 Helmut K Anheier, Eckhard Priller and Annette Zimmer 'Civil Society in Transition: The East German Third Sector Ten Years after Unification' (Working Paper No 15, Centre for Civil Society, 2000).
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1. Ferdinand Tönnies
Toward the end of the nineteenth century, sociology began to emerge as a distinct discipline.
One of the early pioneers in the field was Ferdinand Tönnies. In his analysis of society, he juxtaposed two different conceptions of community: one where people live with altruistic concern for one another ‘ Gemeinschaft’ and a second of a fundamentally self-interested view of society which he labelled, ‘ Gesellschaft’ . Intellectually, Tönnies was profoundly influenced by both Thomas Hobbes and Karl Marx. Whereas Marx was principally concerned with that which led to the breakdown of the (then) society, and Hobbes’s
Leviathan 889 was based on the violence from which people escaped by coming into civil society; Tönnies’s interest was that which bonded people together. 890 Integral to explaining his thesis of why people associate, was identifying the two theoretical bases for society. The foundations were embedded in the difference between two German words which he acknowledged ‘are conventionally used as synonyms.’891 It is important to note at the outset that for Tönnies, there is not a sharp distinction between the two but rather that there is a continuum between them. For Tönnies, ‘the crucial question in any ‘empirical’ setting was not whether a particular individual, institution, idea or action belonged to Gemeinschaft or
Gesellschaft , but where they were positioned on the continuum between the two.’ 892
Whilst Tönnies deals with Gemeinschaft first in his work, laying out its richly-textured, relational base before contrasting it with the more formal association labelled Gesellschaft , it is convenient in this thesis to deal first with Gesellschaft .
Tönnies’s concept of Gesellschaft, if not identical with, closely resembles the idea of civil society attributed to the liberal, individualist tradition traceable at least to Hobbes and set out earlier in this chapter. Tönnies wrote:
889 Thomas Hobbes, Leviathan, Great Books of the Western World (first published 1651, 1992 ed). 890 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) x. 891 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 17. 892 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) xxviii.
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Gesellschaft thus forms a single aggregate, and must be understood as a mass or multitude of
natural and artificial individuals. Their wills and spheres of interest interact with each other in
manifold different ways, yet they remain independent of one another and lacking in deep
intimacy. A general picture now emerges of what may be called “Civil Society” or Society based
on general commercial exchange. 893
It is pursuit of self-interest, and that alone, which holds Gesellschaft together. For in this form of civil society.
Nobody wants to do anything for anyone else, nobody wants to yield or give anything unless he
gets something in return that he regards as at least an equal trade-off.
The theory of Gesellschaft takes as its starting point a group of people who, as in Gemeinschaft,
live peacefully alongside one another, but in this case without being essentially united – indeed,
on the contrary, they are here essentially detached. In Gemeinschaft they stay together in spite of
everything that separates them; in Gesellschaft they remain separate in spite of everything that
unites them. As a result, there are no activities taking place which are derived from an a priori
and pre-determined unity and which therefore express the will and spirit of this unity through any
individual who performs them. Nothing happens in Gesellschaft that is more important for the
individual’s wider group than it is for himself. On the contrary, everyone is out for himself alone
and living in a state of tension against everyone else. The various spheres of power and activity
are sharply demarcated, so that everyone resists contact with others and excludes them from his
own spheres, regarding any such overtures as hostile. Such a negative attitude is the normal and
basic way in which these power-conscious people relate to one another, and it is characteristic of
Gesellschaft at any given moment in time. 894
Whilst Tönnies allocates considerable space to the discussion of formation and maintenance of this common space and the formation of the values placed upon goods transacted in this
893 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 63-64. 894 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 52.
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‘common ground’, 895 what is important in his argument, for the purposes of this discussion, is that the dependence that arises between persons is a ‘dependence’ on market society, 896 that is on the capacity to trade with others – nothing more. 897
Gemeinschaft provides a very different, but important alternative, foundation for civil society, one which is rooted in altruistic concern for others. The distinction between
Gesellschaft and Gemeinschaft is the difference between a society of persons held together by the mutual pursuit of self-interest ( Gesellschaft ) and a society founded on the relational base most evident in family and kin ( Gemeinschaft) . The foundation premise of Tönnies’s
Gemeinschaft is the interrelatedness of all persons due to common descent. This ‘direct mutual affirmation’, 898 is typified by the close personal bonds of family. Tönnies lists the mother/child, the man/woman as couple and the brother/sister relationship as examples. 899
Far from the rational pursuit of self-interest by individuals bound together only by their mutual dependence typified by Gesellschaft , in Gemeinschaft , people are bound together by
‘mutual understanding’ and ‘[c]ommonly life means…in common.’ 900 Integral to this binding together, is a common will or sentiment which Tönnies explains: ‘Reciprocal binding sentiment as the peculiar will of a community is what we shall call mutual understanding or consensus. This is the special social force and fellow feeling that holds people together as members of a whole.’ 901 It is the central, shared understanding from which its law is drawn: ‘We can say that anything which is in agreement with the inner
895 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 53. 896 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 57. Jean Jacques Rousseau, The Social Contract, Great Books of the Western World (G D H Cole trans, first published 1762, 1992 ed). 897 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 60. 898 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 22. 899 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 22. 900 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 34. 901 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 33.
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character of a community relationship constitutes its law , and will be respected as the true, essential ‘will’ of all those bound together in it.’ 902
If altruism is accepted, and a Gemeinschaft view of society adopted, this takes conceptions of civil society back into the richly textured but, for liberal individualism, deeply problematic territory of religion and morality. Tönnies draws his chapter on Gemeinschaft to a close with this powerful observation: ‘Accordingly, the entire economic existence of a fully developed city – whether as part of the Hellenic or the Germanic world – cannot be understood unless art and religion are taken to be the most important matters in the whole of civic life, for its government, its citizenry and its guilds’. 903
In Tönnies’s theory, then, we have the theoretical formulation of two conceptions of civil society which are extensions of the demigod and vanity schools discussed earlier. But in this discussion of society, the concept of civil society is to be understood as located on a continuum between these two extremes. One school of civil society theorists could conceive of it entirely as a Gemeinschaft, another as entirely Gesellschaft , but, according to Tönnies, most civil societies will be conceived as located in between the two extremes. 904
The nineteenth century closed and with it, significant discussion of civil society. Tönnies continued to be issued and reissued, and discussed in a sociological context. The rediscovery of community, and civil society in this context, however, appears recent. From the perspective of the jurist, though, what is important is that it is not necessary to accept either a Gemeinschaft or a Gesellschaft conception of civil society in the development of a jurisprudence. The differences can be accepted and located on a theoretical continuum.
Before coming to the way these ideas have been mapped in the twenty-first century by Will
902 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 33. 903 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) 50. 904 Ferdinand Tönnies, Community and Civil Society (Jose Harris trans, 2001 ed) xxviii.
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Kymlicka, it is helpful to touch briefly upon ideas of sovereignty and porous boundaries, as these ideas become important in a legal context in Chapter VII.
2. Evelyn Brody, Arthur Jacobson and Sovereignty Theory
The dynamic nature of the boundaries between civil society and government and the acknowledgment that this creates a platform for serious conflict, was revised in a theoretical context by both Evelyn Brody and Arthur Jacobson in the late twentieth century. At the foundation of Evelyn Brody’s theorising, is an appreciation that there are three sectors of society: government, business and nonprofit, 905 and that the boundaries between these sectors are ‘porous’. 906 By porous, she means that the same activity can be conducted in more than one sector. 907
Turning to entitlement to favour in the form of tax exemption, Brody argued that the theoretical foundation for exemption lay in a notion of sovereignty. 908 By sovereignty she did not mean that civil society organisations are outside of the coercive powers of government nor that civil society organisations have their own coercive abilities. 909 Rather, by sovereignty she meant that each keeps out of the other’s space and in effect each operates in its own domain. 910 Acknowledging the religious foundation of many charities,
905 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 588. 906 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 588. 907 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 588; Evelyn Brody, 'Institutional Dissonance in the Nonprofit Sector' (1996) 41 Villanova Law Review 433, 440. It seems this boundary has been ‘porous’ for at least 500 years. See Ilana Krausman Ben-Amos, The Culture of Giving: Informal Support and Gift-Exchange in Early Modern England (2008) 12. 908 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 586. 909 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 588. 910 The foundations of this debate in economics are usually traced to Bittker and Rahdert. See Boris Bittker and George Rahdert, 'The Exemption of Nonprofit Organisations from Federal Income Taxation' (1976) 85(3) The Yale Law Journal 301, 307. For a review of this position and a summary of the criticisms of this argument see Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 408.
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particularly in the United States context, she put her argument at its plainest as ‘charities go untaxed because Caesar should not tax God (or the modern secular equivalent)’. 911
Ultimately, she did not accept this theory concluding that, whilst there is clear evidence of power struggles between the churches, as the most powerful of charities on the one hand, and government on the other, 912 that is not an appropriate basis for favour or denial of favour.
Her conclusion was that ‘policy makers should resist the lures of this approach in order to reform the tax treatment of charity’. 913
Whether a jurist believes the churches stand outside the scope of government regulation or whether they should be taxed like other organisations is not a legal question but a theological or philosophical one. It finds expression, though, in the form laws take. Locating the contest in contests over the scope of legal coercion, is the work of Arthur Jacobson.
Jacobson laid a platform for a fresh perspective on the place not just of charities but of all associations in political economy, with his thesis that, by allowing any form of association, the state divests itself of sovereignty. Pointing to the ‘discomfort of legal and political thought with private associations of persons’ 914 and noting that both friends and enemies of sovereignty must make concessions, he theorised that there is a middle ground.
When these ideas, of the sovereignty of civil society organisations, are married with the developing interest in the idea that corporations generally are in effect a form of independent
911 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemp tion' (1998) (Summer) The Journal of Corporation Law 585, 586. 912 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 629. 913 Evelyn Brody, 'Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption' (1998) (Summer) The Journal of Corporation Law 585, 587. 914 Arthur Jacobson, 'The Private Use of Public Authority: Sovereignty and Associations in the Common Law' (1980) 29 Buffalo Law Review 600, 601.
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sovereign, 915 there is considerable scope for development of a jurisprudence that is informed by political theory. If Jacobson’s understanding is accepted, allowing the formation of any form of association is a threat to the sovereignty of the state. The larger the association and the stronger its claim to allegiance, the more it is a potential threat to the coercive power of government. The overt resistance of government by civil disobedience, such as was seen in the US civil rights movement or the demolition of the Berlin Wall, is an illustration of
Jacobsen’s point. One final observation integral to this conception of contested sovereignty, and consistent with the concept of Gemeinschaft , is the notion that fiduciary relations provide the fundamental substratum upon which all civil society organisations are built. 916
These late twentieth century themes of contested sovereignty resonate with the premodern conceptions of civil society and the willingness of persons to stand against the government.
The concept of different spheres of influence and boundaries between the spaces that are porous and contested, enliven issues of which cognisance must be taken in jurisprudential development. Civil society organisations can be seen as a real threat to the government.
Government is an active participant in defining the contested boundaries and can act to encourage or limit the organisations that make up civil society. The contest over the boundary’s location and any entitlement to favour, is shaped by political a priori assumptions. It is not simply they result of principle by precedent without reference to philosophy. A twenty-first century author, Will Kymlicka, has contributed significantly to elucidating these political a priori assumptions and his insights are considered next.
915 Stephen Bottomley, The Constitutional Corporation: Rethinking Corporate Governance (2007) 36-38. 916 Joel Fleishman, 'Public Trust in Not-for-Profit Organisations and the Need for Regulatory Reform' in Philanthropy and the Nonprofit Sector in a Changing America (1999) 172, 173.
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3. Will Kymlicka
Like Tönnies, but writing over a century later, Kymlicka 917 distilled the alternative paradigms to two. He based the differences on two different conceptions of what is just. He summarises the options into two choices:
Faced with this ‘instability’ in our everyday views of justice, we have two choices: To put it
crudely, we can move to the left, or we can move to the right. The left-wing option is to adopt a
stronger form of egalitarianism, which seeks to eliminate all forms of involuntary disadvantage,
including those that result from differences in natural talents. This is often called the left-liberal
or ‘liberal egalitarian’ view of justice. The right-wing option is to reject the initial premise that
involuntary disadvantages as such are unfair, even if they are the result of social class, race or
gender. This is the right-liberal or ‘libertarian’ view of justice. 918
If the law is the expression of the community’s values then political choices between left and right will shape the form law takes. Those choices express on the one hand, a Gemeinschaft conception of civil society or on the other, Gesellschaft . As Kymlicka observes, ‘which of the two options we will take will profoundly influence our view of charity’. 919 The point is that, if a society has a strong preference for a communal concept of civil society, then government intervention through law to redistribute is more likely. If society has a market- based conception of civil society, then freedom will be respected above redistributive conceptions of justice. Kymlicka explains the implications of this for the role of government in creating or reducing the space for, and favour of, charities. ‘[I]f we accept the left-liberal conception of justice, there seems to be little room for a distinctive virtue of charity.’ 920
917 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87. 918 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 91. 919 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 91. 920 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 100.
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By contrast, if the worldview of Gesellschaft and the conception of freedom and its attendant materials triumphs, then there is arguably, according to Kymlicka (with echos of Bastiat) a greater basis for freedom. 921
Like Rousseau and Tönnies, Kymlicka also pointed to the important role of religion in deciding between perspectives, noting that:
There are a few libertarians who trumpet the virtues of selfishness while disputing the value of
compassion…[h]owever,… [most] insist that is one of the strengths of their theory that it can
make room for genuine compassion for others, unlike the compelled contributions required by the
welfare state. 922
Charity plays a very different and more prominent role in the three major monotheistic religions –
Christianity, Islam and Judaism – than in modern secular theories of justice. 923
Within all three religious traditions we can find two distinct sorts of contributions – [(a)] an
obligatory (and sometimes legally enforced) system of mutual aid and support for the church and
(b) more voluntary forms of charity, particularly for the poor. 924
In spelling out this role, Kymlicka highlights the difference between the libertarian and liberal perspectives in supply and demand terms:
But this left-liberal attitude is ‘demand sided’ – it is focused on the needs or merits of the recipient
of the charity – whereas the religious attitude is supply sided, focused on the giver, and his or her
921 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 101. 922 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 102. 923 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 105. 924 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 105.
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need to develop his or her character and his or her relationship with God. And from a supply side
perspective, the need to give charity is just as strong for the poor as the rich. 925
It is only by radically curtailing obligations of justice that earlier religious traditions were able to
make significant space for charity. 926
In this respect, religious conceptions of charity share a major feature with libertarianism: they
both make space for charity by radically curtailing obligations of justice. 927
Turning to the economic framework of transactions by which supply and demand are met,
Kymlicka explained that:
This focus on recipients means that in left-liberal theories the requirements of justice leave little
room for charity. But by concentrating on the importance of charity for the giver, perhaps we can
give charity a more prominent and positive role. The religious arguments described above do not
depend on any particular conception of justice and could in principle be accepted by those on both
the left and the right. 928
Up to this point, it may seem reasonably clear that according to this analysis, left-leaning lawmakers will develop law in such a way that the state takes greater responsibility for the meeting of community need and right-leaning lawmakers will focus on the freedom of individuals. Right-leaning lawmakers might be expected to encourage voluntary contributions but would not compel these. Kymlicka, though, did not accept the simplicity of that conclusion. In relation to the role of government, Kymlicka observed that:
925 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 109. 926 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 115. 927 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 114. 928 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 110.
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There is good reason to think that states are inherently imperfect and that even the best-designed
public policies cannot remedy all of the forms of involuntary disadvantages that inevitably arise
out of modern societies 929
…coercive laws and impersonal bureaucratic regulations are often simply unable to identify and
rectify the real sources of disadvantage facing specific people in specific contexts. 930
In such a context, ‘charity would no longer be a regrettable second-best approach but might instead be the best and only way of dealing with certain important forms of disadvantage.’ 931
The extent to which space should be made for voluntary contributions and the extent to which it ought to be encouraged is not, then, a simple choice between ‘left’ and ‘right’.
Philosophy informs both the space for civil society organisations and entitlement to favours but in the outworkings of the theory, there is room for compromising to achieve the optimum outcome.
4. Helmut Anheier and the Civil Society Diamond
The acknowledged philosophical diversity problematising research into civil society, led to a quest for broad models for theoretical discussion. The civil society discourse has developed to a point where there are now internationally accepted models for this theoretical discussion.
One of those frameworks is the civil society diamond which Helmut Anheier developed to provide a framework where a priori assumptions could be contested. 932 For reasons set out earlier, I adopt it for jurisprudential development. To use his words, he sought to set out a
929 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 100. 930 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 100. 931 Will Kymlicka, 'Altruism in Philosophical and Ethical Traditions: Two Views' in Jim Phillips, Bruce Chapman and David Stevens (eds), Between State and Market: Essays on Charity Law and Policy in Canada (2001) 87, 100-101. 932 It is never entirely possible as all analysis has implicit philosophic assumptions. The South African users of the civil society diamond have criticised the definition of civil society at its foundation as the ‘free market assumptions’ were not accepted by many South Africans; see Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 128.
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‘common map’, ‘compass’, ‘a set of instruments that could frame and guide the conversation’. 933 The civil society diamond is explained in this subsection so that jurisprudential development can draw from, and be located within, this wider international inquiry in the next chapter. Four points of importance emerge for discussion.
First, and building on Weisbrod 934 and others, at the foundation of Anheier’s framework is a conception that civil society is a space or sphere of society different from business, government and family. The definition which Anheier supplied, and which was mentioned in Chapter I, bears restatement here. Anheier’s definition is ‘civil society is the sphere of institutions, organisations and individuals located between family, the state and the market in which people associate voluntary to advance common interests.’ 935
Second , Civil society is a multi-faceted concept. 936 He theorised that there are four major areas of discourse in relation to civil society:
1. Structural ; which he stated incorporates ‘…size, composition and sources of
support of the civil society unit under consideration’;
2. Legal and Political Space; which he defined as ‘…the regulatory environment
in which civil society operates’;
3. Impact-Related ; which he defined as ‘…the contributions of civil society,
generally, or in a particular field’; and
4. Value-Related ; which he defined as ‘…norms and cultural elements’. 937
Anheier brings these four quite different dimensions into one theoretical framework by projecting them into a common ‘property space’. He achieved this using common or almost
933 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 6. 934 Burton A Weisbrod, 'Not-for-Profit Organisation as Providers of Collective Goods' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 1, 1. 935 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 22. 936 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) Forward, Ch 1. 937 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 32.
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common units of measure, namely, numeric assessments of key components of civil society.
The stand-out common measure is percentage, or rating, on a scale of zero to 100. The result is a diamond set out in the figure below where each dimension is allotted one quadrant. 938
Figure 4 Illustration of the Civil Society Diamond
Importantly, in assessing ‘space’, the preferred focus is law.
Third, Anheier asserts that civil society must be viewed at three levels – institution, organisation and individual. Clarifying the level is integral to clarity in legal analysis, as charitable purposes attach to organisations. Charities are expressions of organisational purpose. 939
938 Reproduced from Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 45. 939 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 23-26; Peter Luxton, The Law of Charities (2001) 5.
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Fourth, Anheier suggests that the preferred indicators of space, measured through law, are indicators designed to measure the degree of enablement . The indicia Anheier points to are three: fiscal and other incentives, freedom of association and civil liberties. 940 As freedom of association is a subset of civil liberties, these two arguably can be addressed as one group under the more general head of association. Tax expenditures and other fiscal favours amount to favour over other organisations that do not enjoy the tax incentive.
Favour is quite different and distinct from regulating. It is possible to regulate but not to favour . It is not possible to favour, though, without having first enabled by some form of regulation. Anheier’s division informs the division between the next two chapters, where the concept of law regulating and enabling participation through civil society organisations is theorised under the title, ‘Association law’, and laws by which civil society organisations are favoured on the basis of their contribution to public benefit are discussed under the title of
‘Benefit law’. This division, between regulating association and favouring voluntary contributions of public benefit, is logical when approached in this way but it is not a division presently evident from within the doctrine of charitable purpose. 941 It is, though, a division that follows logically from the philosophical discussion in this chapter. Theorists in the tradition exemplified by Bastiat, may wish to enable voluntary association but not favour it.
This division between regulating and favouring is a threshold which must be crossed to go beyond charities to a jurisprudence for civil society. 942 The legal reasoning for Association law is set out in the next chapter but the justification for the division and a discussion of
Benefit law must await Chapter VIII.
940 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 41. 941 This distinction is implicit in Luxton who notes: ‘The result is that all charitable institutions are subject to two sets of laws: those that relate to status and those that relate to structure’: Peter Luxton, The Law of Charities (2001) 16. 942 That the law centres on the charitable trust is pointed to by Luxton as a reason for difficulty in development of the law: Peter Luxton, The Law of Charities (2001) 16.
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F. Conclusion
From the discussion in this chapter, a number of conclusions can be drawn.
First, the conceptions of society, and civil society, are diverse. The space for civil society organisations can be seen as separate from, and sometimes subsumed in, government but progressively the space is being seen as separate. There are different conceptual foundations for civil society. Civil society can be seen as an extension of notions of family and relatedness or it can be conceptualised as simply a forum for transactions.
Second, the duty of citizens in relation to government, which frames the response of citizens through civil society organisations, can range from complete submission to legitimate opposition. Civil society organisations as vehicles for association can be seen as subject entirely to the will of the sovereign in a Hobbesian sense or as a right and legitimate threat in a Jacobsonian sense.
Third, responding to these alternative worldviews, theorists such as Tönnies, since the late ninteteenth century, have conceptualised different societies as located between these alternative extreme worldviews. These boundaries can be conceived of as porous and dynamic. Particular political philosophies might, in a purist sense, oblige particular views of the space and the encouraging or discouraging of charitable purposes, but practical reality confounds tidy, theoretical outworkings and presses toward a need for blended responses.
The perceived role of government in shaping the sector and the acknowledgement that government is a player in shaping the sector further complicates theory development.
Fourth, theory has progressed to a point where the factors informing conceptions of civil society have been brought within the framework of a diamond. Within that framework, space is assessed according to laws.
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Fifth, laws can be considered as divided between regulating and favouring. It follows that legal theory can be informed by this division and can also inform broader civil society discourse by analysis within this framework. In this development of legal theory, the decisions of lawmakers regarding the form of law regulating both entitlement to associate
(Association law) and entitlement (if any) to favoured treatment (Benefit law) both of which are to be discussed over the next two chapters, are identified as the expressions of choices between philosophic alternatives informed by practical reality. Those choices can be simplistically reduced to a left verses right analysis, but they need not be. They can be located in a broader body of more sophisticated theory anchored in the concepts upon which these societies are built. These often irreconcilable perspectives – diverse as they are – distil to contests over the freedom of people to associate in civil society beyond the coercive power of government in groups larger than families. The extent of civil society’s freedom from government is in contest. What is not in contest is the fact that it is ‘freedom’ that is in dispute.
Sixth, there are clear differences in the extent to which societies enable communities to form, self-regulate and dissolve civil society organisations without government interference. The protection may extend beyond this as will be discussed in the next chapter. There is a continuum between the extremes of maximum freedom from government influence on the one hand and complete control so as to make an organisation in effect only an arm of government on the other.
Seventh, there are two factors that inform the extent of coercion. The first is the reason why people associate. It will be recalled that this variable was labelled ‘Y’ in the last chapter.
People may be coerced to associate in the context of family and so motive alone is not the only variable. The size of the organisation is the second factor relevant in this context. The polis , as the expression of the people in a jurisdiction is an exemplar. The most significant distinguishing feature, though, is the existence of coercion.
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It will be recalled from the end of Chapter III that the third fundamental contest over a priori assumptions related to the nature of humans in society. That issue has now been addressed.
The tensions between worldviews have not been resolved but both the influence of the alternative perspectives, and the variables that inform the extent of coercion, have been elucidated. A civil society organisation is a voluntary organisation. When goods are transferred to, or through, these organisations, the transfers are not taxes but freely made.
G. Postscript
There were awful injustices committed, accepted or ignored by the sovereigns of both
England and France in the eighteenth century. The responses of citizens to this were quite different. Different views of sovereignty may well have informed these different responses.
In France, environed by the awful injustices, ‘the Woodman and the Farmer worked unheeded’ 943 toward a revolution whilst in England, their counterparts did not. It is beyond the scope of this work to explain why. It was my project, though, to consider how views of sovereignty can inform the development of the doctrine of charitable purpose. Like the
Woodman and the Farmer, I have worked and the apparatus to frame that discourse is now in place. Across the next three chapters, a jurisprudence for civil society is developed. In chapter VII, a metaphor of confusion is introduced drawn from Dickens’s character Solomon
Pross presenting one persona in England and another in France. In Chapter VIII, the reverse metaphor of two different characters seeming to be the same is introduced through Dickens’s characters, Darnay and Carton, being mistaken for one another. This frames the confusion between the doctrine of charitable purpose defining the organisations to be subject to regulation and the role of the doctrine in determining entitlement to favour. They may look the same but they are not. This lays the platform for resurrecting the central character of
Dickens’s work who was ‘recalled to life’, Dr Manette. His being ‘recalled to life’, provides
943 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 7.
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the typology for releasing charitable purpose into a new life of service of the law in Chapter
IX.
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PART THREE – JURISPRUDENCE
Jurisprudence is the subject of this Part. In this Part the components developed in Part Two are assembled into a jurisprudence for civil society organisations. The foundational dimension of this jurisprudence is Association law. Association law is the theoretical framework for enabling and regulating charities, and more generally civil society organisations, in the pursuit of their purposes. Association law is discussed in Chapter VII.
In Chapter VIII the role of charitable purpose in determining the scope of operation of the common law and entitlement to favour is discussed. This second aspect, called in this thesis Benefit law, explores the basis for the laws granting favour to some civil society organisations. It is argued that the reason favour is extended to some civil society organisations is based on the extent or nature of public benefit provided. The focus of Chapter VIII is on Pemsel’s case and it is argued that the case can be read in a way that resolves, or at least ameliorates, the puzzles and problems identified in Part One.
In Chapter IX a way in which the doctrine of charitable purpose could be developed into a jurisprudence of civil society is outlined. Why this alternative jurisprudence is superior to the present orthodox approach is set out using examples drawn from problems identified in Part One. This alternative architecture for the common law, developed from the doctrine of charitable purpose but inclusive of all civil society purposes, is argued to cover the field of the law applying to civil society organisations and warrants its own space as a body of law between public law and private law in jurisprudence.
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VII ASSOCIATION LAW
A. Preamble
John Barsad was a thoroughly republican Parisian. He was described as, ‘about five feet nine of height; black hair; complexion dark; generally, rather handsome visage; eyes dark, face thin, long, and sallow; nose aquiline, but not straight, having a peculiar inclination towards the left cheek’. 944 Solomon Pross was an upright Londoner who was deeply loved by his sister whose appearance could be similarly described. As John Barsad rose from table at the ‘Good Republican Brutus of Antiquity Wineshop’ in Paris, his eyes met those of
Solomon Pross’s sister. She screamed and clapped her hands with joy at the sight of the brother she had not seen for so long. Solomon Pross was John Barsad. That the two men were in fact the same person (one being a spy’s persona) would have remained unknown but that someone came from London to Paris who knew him so well, and could not but declare so publicly. This is Miss Pross’s chapter. Associations hidden are declared. It is the chapter where relations are recognised.
B. Introduction
In this chapter, it is argued that the common law protects a freedom to associate and give.
Those freedoms underpin charitable association and charitable giving but apply whether or not the association and the giving enjoy the ‘peculiar favour’ afforded charities. 945 The freedoms extend beyond charities to protect association through all civil society organisations. As the space for association has been protected by the common law, it is appropriate to call this body of law ‘Association law’. Association law derives its legitimacy not only from the common law but also from constitutionally protected and internationally accepted freedoms. It follows that the regulation of these organisations must respect not only common law recognised freedoms, but also basic human rights. The entities that are to
944 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 184. 945 Pemsel’s case [1891] AC 531, 583. (Lord Macnaghten).
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be regulated having regard to these freedoms are those that are pursuing civil society purposes. Further, it is the purposes pursued and not the form that these organisations take that is the basis for regulation. Association law is, then, the body of law that enables and regulates association through civil society organisations generally – not just charitable associations. For the purposes of defining the organisations that fall within the scope of operation of Association law it is contended that civil society organisations are identified by reference to charitable purposes that are not technically defined. These charitable purposes are in essence purposes which are:
a. Altruistic; and
b. For public Benefit; and
c. Pursued without Coercion.
These charitable purposes differentiate civil society organisations from the three other organisational purposes: namely
a. Business, which is manifest in the pursuit of self-interest; that is, lack of
altruism;
b. Government, which is characterised by coercion, that is, lack of voluntariness or
freedom; and
c. Family, which is characterised by being private not public.
Association law is the foundation of a jurisprudence for civil society. It is a body of law that is founded on two reciprocal principles. First, that voluntary association is to be enabled, regulated and perhaps encouraged. Second, that regulation of civil society organisations must be the minimum necessary to meet the just requirements of morality, public order and the general welfare in a democratic society. This is, in summary, the argument advanced in this chapter.
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The argument is foundational to the next chapter because on this foundation is constructed an infrastructure justifying favour to civil society organisations including charities. The body of law, which is the outworking of entitlement to favour is called Benefit law.
This chapter focuses only on the enabling dimension integral to regulation called here
Association law. First, the relationship between civil society theory and legal theory is discussed. It is suggested that legal theory can draw from civil society theory and civil society theory can accommodate jurisprudential insights. This initial investigation is necessary to locate civil society jurisprudence in a broader body of civil society inquiry.
Second, the extent to which space to associate freely is protected by common law is discussed. This leads into a discussion of the protection of freedom of association under international conventions. Third, the scope of application of Association law is considered.
Fourth, it is suggested that purpose, not form, should be the basis for regulating all civil society organisations not just the organisations presently known as charities. The chapter closes by suggesting twinned principles that could act as a bridge between foundational but abstract human rights, such as freedom of association on the one hand; and the emerging civil society regulation theory on the other.
C. Locating Jurisprudence in Civil Society Theory and Civil Society in Jurisprudence
It will be recalled from the beginning of Chapter I that the widest frame was adopted to begin the discussion, and that widest frame was society. 946 It was stated that because society is complex, for analytical purposes, the literature often divides society into four sectors: business (the first sector), government (the second sector), civil society (the third sector) and family (the fourth sector). 947 Following that observation, it was also noted that law is
946 See page 18. 947 See Helmut Anheier, 'Dimensions of the Third Sector: Comparative Perspectives on Structure and Change' (Paper presented at Centre for Civil Society, London School of Economics, August 2000) 16; Kristin A Gronbjerg and L Paarlberg, 'Extent and Nature of Overlap between Lisitngs of IRS Tax-Exempt Registration and Nonprofit Incorporation: The Case of Indiana' (2002) 31 Nonprofit and Voluntary Sector Quarterly 565 ; Michael Hall, Larry McKeown and Karen Roberts, 'Caring Canadians, Involved Canadians ' (2005) 2000 National Survey of Giving, Volunteering and Participating, Statistics Canada ; Mark Lyons, Third Sector
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complex and so, for analytical purposes, it, too, is often divided according to sectors, and that in legal analysis, it is possible to identify segmentation into: public law for government, private law for citizens, as citizens, with further subdivision into commercial law for business, and estate and family law for families. It was immediately apparent that a jurisprudence for the third sector, 948 and more broadly civil society, had not developed.949 It followed that whilst it could be said that jurisprudential divisions follow divisions of the first, second and fourth sectors, and distinct heads of law for those sectors were readily identifiable, the same could not be said for the laws applying to the civil society.950 Analysis of the law applying to civil society organisations seems to have lagged in development, similar to the way analysis of the third sector has lagged. 951 This chapter takes up the challenge of going beyond the narrow class of charities to include the plethora of other forms of civil society organisation by which people associate for purposes that are not family, business or government.
Across Chapter II, it was noted that the law’s preoccupation with Pemselian partitioning of charitable purposes had fettered its capacity to respond to the needs of common law countries. 952 In Chapter III, the way that the esoteric methodology of the common law had alienated legal research from the wider community of scholarship was explored. The consequence of this has been that scholarship in disciplines other than law, and even developments within law, have not, to date, significantly informed the jurisprudence centred on charitable purposes. The time has come for that to change. It is important to locate this theory development not only in legal theory but also in cross-disciplinary scholarship. As
- The Contribution of Nonprofit and Cooperative Enterprises in Australia (2001); Kathleen Day and Rose Anne Devlin, 'Backgrounder: The Canadian Nonprofit Sector' (Canadian Policy Research Networks, 1997); Marion R Fremont-Smith, Governing Nonprofit Organisations – Federal and State Law and Regulation (2004). 948 See footnote 91 at page 23. 949 See footnote 92 at page 23. 950 See page 24. 951 See Rob Atkinson, 'Problems with Presbyterians: Prolegomena to a Theory of Voluntary Associations and the Liberal State' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 125. 952 See particularly pages 98 to 111.
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the civil society diamond is a, if not the leading, international tool for cross-disciplinary analysis of civil society, the jurisprudence developed in this thesis is located within this civil society diamond. 953 It will be recalled from Chapter VI that Anheier divided civil society into three levels for analytical purposes, and it was noted that charities belong to the level of organisations , not individuals or institutions. 954 The definitional problems with charitable purpose lead to a dissonance between, on the one hand, the definition of charities at law – which takes a technical meaning with reference to the purpose of an organisation – and on the other hand, the concept of charity and acts of charity at the institution and individual levels respectively - which takes a common meaning. The challenge for jurists is to bring these conceptions back into harmony. Logically, this is best achieved by abandoning the technical meaning applied at the organisational level and replacing it with a concept of charitable purpose consonant with the idea of charity at an individual and institutional level.
To date there has not been an alternative to the technical legal meaning of charitable purpose because of concerns regarding subjectivity. 955 If, though, the development of a jurisprudence for civil society does not rely upon subjective concepts of altruism, benefit or coercion to define civil society organisations, it is arguably possible to move beyond the technical definition. If it is possible to move beyond the technical definition, then the dissonance experienced in relation to the meaning of charity at the organisational level can be addressed.
It is beyond the scope of this work to explore charity at the institutional and individual level, and I leave open the question of whether the theory proposed here can be extended into these other dimensions. The point is that the underlying objective criteria can be applied to reunite
‘charity’ at the organisational level with its source jurisprudence in public benefit and the piety of earlier times. 956
953 See page 254 and discussion of significance at footnote 73. 954 For discussion of the importance and use of the civil society diamond see particularly page 20, footnote 73 and also pages 253 to 255. 955 Pemsel’s case [1891] AC 531, 587 (Lord Macnaghten). 956 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten).
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The next insight of Anheier useful in the development of jurisprudence is that which enables the methodology of civil society analysis to be applied in jurisprudence. It will be recalled from the last chapter that civil society was multi-faceted in nature. The civil society diamond was postulated as a tool for bringing different facets into the one plane for analysis by reducing the variables into numbers between zero and 100. Whilst Anheier stated that it is for the researchers to select the indicators 957 for each dimension that they consider most useful to their particular project, 958 it will be recalled that he suggested that for assessing
‘space’ the preferred focus is law. 959 Over the last three chapters, it has been argued that the space is defined with reference to altruism, benefit and coercion. Altruism, benefit and coercion are all capable of some level of objective measurement. It is also suggested that these factors are informed by, remoteness ‘X’, motive ‘Y’ and number of person involved
‘Z’. These variables are also capable of objective measurement. All inform the space for civil society and all can be measured on a scale of zero to 100. It follows that if jurisprudential development of the doctrine of ‘charitable’ purpose draws upon these same measurable indicia of charitable purposes, this body of law can be located in a wider body of civil society discourse.
Conversely stated this means that the wider body of civil society discourse may inform legal theory development. This has further implications. First, because in civil society discourse the space is distinguished from, but on par with , business (the first sector) government (the second sector) and family (the fourth sector) it invites recognition of the law applying to civil society as a separate jurisprudential division of third sector law on par with public
(government) law and private (business and family) law. Second, as civil society theory draws a distinction between enabling and regulating participation in the space and granting favour, it invites a division between law that regulates (Association law) and law that favours
957 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 137. 958 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 35. 959 See page 254.
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(Benefit law). 960 In the remainder of the Chapter, I focus only on that part of law that relates to associations in civil society, beginning with the fundamental freedom to associate at common law.
D. Space to Associate is Protected by the Common Law
The extent to which freedom to associate and contribute is dependent upon the goodwill of the government is contested. There are significant differences among, and within, common law countries. In this section, the belief that ‘western legal thought …assumes the universality of certain principles contained in the “four freedoms” … freedom of association, of assembly , of speech , and of religion ’961 is discussed. The purpose of the discussion is to set out a platform for the pursuit of charitable purposes anchored in a fundamental freedom to associate. The section should be read as twinned with the next section, which takes up the same issue but from the perspective of international law.
The foundation of the freedom to associate at common law is most clearly recognisable in freedom of religious association. Freedom to associate, particularly for religious purposes, separate from sovereign control, is founded in the common law that precedes the signing by
King John of the Magna Carta Libertatum 962 at Runnymede in 1215. In the tenth century,
King Edgar had declared that ‘the church must have its law’. 963 This freedom of the church to self regulate was adopted as part of the law of England by William the Conqueror following his accession to the throne of England in 1066. These fundamental freedoms were codified, initially in the The Charter of Liberties of Henry I. 964 Similar statements of
960 See page 255. 961 S E Klingelhofer and David Robinson, 'The Rule of Law, Custom and Civil Society in the South Pacific: An Overview' (2002) 8(1) Third Sector Review: Charity Law in the Pacific Rim 211, 211. 962 Magna Carta Libertatum , it should be remembered translates as ‘great charter of freedoms’ hereafter referred to only as Magna Carta. 963 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 219. 964 1100, Hen; H L Cannon, 'The Character and Antecedents of the Charter of Liberties of Henry I' (1909) 15(1) The American Historical Review 37 .
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freedom of religious association were made by succeeding English monarchs. 965 Most of the provisions of Magna Carta have been repealed, 966 but the first chapter, which guarantees the freedom of the English Church, remains in force – at least in England. 967 The conclusion to be drawn is that there is a fundamental freedom inherent in the common law to associate to pursue, at the least, religious charitable purposes. If a church is a self-regulating civil society organisation then at least one form of civil society organisation has the freedom to associate and self regulate independent of the state.
Freedom to associate is of limited value if the common law does not recognise associations other than those incorporated in a manner acceptable to the government. This is because the government may control association through regulation of incorporation. The position at common law on this point is anomalous. The common law does not, now, recognise unincorporated associations as separate judicial personae. Formerly it did. The common law did not have difficulty recognising associations that did not take an incorporated form until the late fourteenth or early fifteenth century. 968 Throughout the period in which custom was being rationalised into common law, ‘the judges did not distinguish between individuals and group interests’. 969 Fletcher pointed to kindred groups, village communities, trade guilds and monastic orders 970 as all enjoying recognition at common law until an awareness developed of the threat of associations to the feudal powers, and later, the state. 971 Garton has pointed out that ‘in England an unincorporated association, which has no legal personality, may
965 Magna Carta 1215 signed by King John; Magna Carta 1216, 1217, 1225 signed by King Henry III; Magna Carta 1297 signed by King Edward I; signed by each succeeding monarch until Henry V in 1416. 966 9 Geo IV c 31 s 1; Statute Law Revision Act 1873 (Eng.&W). 967 See Statute Law Revision Act 1872 (Eng.&W). Its enforceability in other jurisdictions will be dependent upon the rules governing the reception of English laws into those jurisdictions and subsequent enactments within those jurisdictions. See B H McPherson, The Reception of English Law Abroad (2007) 8, 205. 968 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 7. 969 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 10. 970 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 7-9. 971 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 3; Arthur Jacobson, 'The Private Use of Public Authority: Sovereignty and Associations in the Common Law' (1980) 29 Buffalo Law Review 600.
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[today] be registered as a charity’. 972 We have then today the anomalous situation in
England where unincorporated associations can be registered as charities but not be recognised as legal entites. The foundations for the anomaly are in the Tudor period.
The Tudor period was one in which the ‘state frequently presented itself as an absolute monarchy’. 973 Under Henry VIII, the law was a coercive arm of the sovereign to declare the religious beliefs of citizens, confiscate property and decide what form of religious association was permissible. The reading of the liberties granted by Magna Carta became subject to the sovereign’s discretion and this translated into prohibition of what we now call civil society organisations that were not created with royal consent. There had formerly been some limitations on association but by the Chantries Act of 1531 , Henry VIII extended the prohibition on associations without royal consent to a broad array of associations ‘made by common assent without any corporation.’ 974 To migrate these civil society organisations that had not been incorporated in a manner issuing from the sovereign, common law judges adopted ‘the fiction of a lost grant’ to enable their recognition by courts of law. 975
Freedom for religious association, and with it, to a limited extent, freedom of association for other charitable purposes did survive, however, beyond the Tudor period, within the common law. It was to receive clearer articulation and protection at common law under the
Stuart kings.
Three years after the Preamble was passed into law by Queen Elizabeth I, she was succeeded by King James VI of Scotland, who became King James I of England. Under this new monarch, English lawyers were keen to reassert that the common law was a fetter on the
972 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 62b. 973 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 201. 974 Chantries Act 1531 23 Hen VIII c 10; cited in Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 11; Fletcher notes that it was not repealed until 1960. 975 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 12.
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sovereign’s power. A body of writing emerged reaffirming the freedom protected by law. 976
Edward Coke, who was speaker of the English House of Commons in 1592 and 1593, and
Lord Chief Justice from 1613 to 1616, articulated the legal reasoning that shaped this jurisprudence; not only in England but subsequently in the United States of America. 977
Coke’s articulation of his theoretical foundation for these rights can be stated as three theses: first, the king, in an English political sense, never dies; second, that the political power of the king is derived from this law; so, third, it is ‘most dangerous’, particularly for a sovereign, to change the laws, for the law makes the king. 978
The consequence of acceptance of these thesis is that the sovereign, far from being an absolute monarch is, like every other citizen, subject to laws and dependant upon them for sovereignty. Furthermore, the sovereign should not change the law readily and should only do so with the consent of the people for it is the people’s common law, customs and statutes from which the sovereign derives ‘wit, power and dominion.’ 979 If the sovereign is dependent upon the laws for sovereignty, then the foundations for the rule of law and limitations on government power have been laid. If among those common laws are basic liberties such as the freedom that found expression in Chapter 1 of Magna Carta ,980 citizens have some basis for protection of those rights from sovereign control. 981
It was not long after Coke wrote of this foundation that the freedoms began to find expression again in Charters. The first example, after the Tudors, of the practice of preserving the common law freedoms by codification, is the Virginia Charter of 1606. From
976 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 225. 977 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 229. 978 Sir Edward Coke, The Selected Writings and Speeches of Sir Edward Coke , Steve Sheppard (ed) (Indianapolis: Liberty Fund, 2003) Vol 1
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that time, a practice began of stating in charters and other constituent documents of colonies that the liberties enjoyed by English citizens were also enjoyed by the citizens of the particular jurisdiction. 982 The language varied from jurisdiction to jurisdiction but there was significant similarity in content. McPherson observed:
The similarity of the language used in colonial charters and the liberties declared by Magna Carta
and celebrated by Coke and others inevitably attracted attention in the colonies. Colonial lawyers
and political leaders viewed the liberties clauses in colonial charters as confirming their pre-
existing fundamental right as English subjects and binding the crown to acknowledge those
rights. 983
So seemingly out of abundant caution, and upon secession from the English Crown, most
American states incorporated Magna Carta -style safeguards in their constitutions or organic laws. 984 This practice was followed in many other common law jurisdictions as they gained independence from British rule. 985
In England, the freedoms remained uncodified. By the time William Blackstone published his Commentaries on the Laws of England 986 in the 1760s, this view of an interplay between sovereign power and citizens’ liberties was so well established that Blackstone was able to set out a complete geneology back to the Magna Carta and beyond. He concluded:
But when such an hereditary right, as our laws have created and vested in the royal stock, is
closely interwoven with those liberties, which ... are equally the inheritance of the subject; this
982 B H McPherson, The Reception of English Law Abroad (2007) 208-209. 983 B H McPherson, The Reception of English Law Abroad (2007) 211-212. 984 B H McPherson, The Reception of English Law Abroad (2007) 215. 985 B H McPherson, The Reception of English Law Abroad (2007) 216. 986 Blackstone, Blackstone's Commentaries on the Laws of England , (The Avalon Project, Yale Law School, 2007)
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union will form a constitution, in theory the most beautiful of any, in practice the most approved,
and, I trust, in duration the most permanent. 987
Blackstone had also become ‘the leading legal authority’ 988 in the United States. These fundamental freedoms, that had been in Charters dating back to the early 1700s, and which
Blackstone eulogised as ‘liberties .. most beautiful’, found expression in the first written, common law country constitution. 989 It began with the famous phrase ‘We the people of the
United States…’ 990 The setting out of basic freedoms common in the colonies became common practice in common law nations. By 1996, the simple words ‘[e]veryone has the right to freedom of association’ were enough on this point for the people of South Africa. 991
If most common law countries codified protection of the freedoms, what, then, is the current position at common law? The position is not clear. Ahdar and Leigh, writing in 2005 and referring to freedom of religion, summarised the position as: ‘[i]n the past two decades, courts across the common law world have purported to find that certain fundamental rights existed – either as limitations on legislative capacity (Australia) or in the form of a strong presumption against legislative encroachment (New Zealand and the United Kingdom)’. 992
987 Blackstone, Blackstone's Commentaries on the Laws of England; Book the First - Chapter the Third: Of the King, and His Title , (The Avalon Project, Yale Law School, 2007)
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This may well be the situation more generally with respect to freedom of association. The common law foundation continues in the United Kingdom and it would seem beneath the constitutions in the United States and Canada. Ahdar and Leigh cite Watson v Jones 993 as
United States authority for common law confirmation of protection of the space. 994 In
Canada, the Supreme Court has recently affirmed the protection of religious freedom as based on the ‘philosophical and political values underpinning Canadian democracy’, but that protection was based on the Charter of Rights . 995
In Australia, where there is not a Bill of Rights or other equivalent charter, the dominant, orthodox view of the common law is that put by Justice Millhouse in Grace Bible Church v
Reedman : ‘... in the absence of a Bill of Rights . . . the citizens … do not have rights which may not be overridden by Act [of] Parliament.’ 996 Recently, in Haneef’s case , on appeal, the
Full Court of the Federal Court of Australia held, though, that ‘[f]reedom is not merely what is left over when the law is exhausted’ 997 but that ‘the common law, ... has its own set of constitutional rights, even if these are not formally entrenched against legislative repeal’. 998
It seems that at the time of the Australian Constitutional debates, at least some thought it was unnecessary to set out these freedoms, as they were believed to be preserved by the common law. 999 Following the reasoning of Justice Millhouse, if these freedoms are not incorporated
993 80 US (13 Wal) 679, 728-9 (1971). They also cite Bryce v Episcopal Church in Diocese of Colorado , 289 F 3d 648, 655 (10 th Cir 2002). 994 Ahdar and Leigh point out that the case was decided without reference to the First Amendment of the United States Constitution which protects religious liberty . They subsequently note that the US Supreme Court has ‘explicitly grounded the right of church autonomy in the First Amendment.’ Rex Ahdar and Ian Leigh, Religious Freedom in the Liberal State (2005) 329-330. 995 Rex Ahdar and Ian Leigh, Religious Freedom in the Liberal State (2005) 1 quoting Congregation des temoins de Jehovah de St Jerome-Lafontaine v Lafontaine (Village) (2004) 241 DLR (4 th ) 83, [64]. 996 (1984) 54 ALR 571, 585. That this is the dominant position in Australia at the time of writing this thesis see: Gerhardy v Brown (1985) 159 CLR 70, [20]. The minority view in Australia is that expressed by Justice Gaudron in Krugar and Bray 146 ALR 126. 997 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [113]. 998 Minister for Immigration and Citizenship v Haneef [2007] FCAFC 203 (Unreported, Black CJ, French and Weinberg JJ, 21 December 2007) [113] citing TRS Allan. 999 Tony Blackshield and George Williams, Australian Constitutional Law and Theory: Commentary and Materials (3 rd ed, 2002) Chs 2, 27.
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in Magna Carta -style safeguards, they may be abrogated at any time by legislation. 1000 In this context it is noteworthy, though, that in 1951, the Australian High Court struck down as unconstitutional the Communist Party Dissolution Act 1950 (Cth). 1001 That Act dissolved the
Australian Communist Party and forfeited its property 1002 on the grounds that it was ‘a revolutionary party using violence, fraud, sabotage, espionage and treasonable or subversive means for the purpose of bringing about the overthrow or dislocation of the established system of government of Australia’. 1003 That case is usually read as an example of limitation of the Australian Government’s interpretation and use of the constitutionally granted defence power but this may become relevant as the law in this area develops.
In summary, then, there is a long history in the common law of recognising freedoms. They exist. They may, though, be trumped by statute unless there is written constitutional protection. Whether they will always be trumped by legislation may be a moot point for reasons which will be discussed later. I turn now to the issue of association being dependent upon government consent.
There is not a reason, in principle, why the common law courts could not recognise associations even if unincorporated. That this possibility remains open is affirmed by
Fletcher, who identifies that ‘[n]o parliament has attempted to destroy the private autonomy of associations’. 1004 The European Court of Human Rights recognises associations irrespective of incorporation for the purposes of affirming free assembly in civil society. 1005
1000 Tony Blackshield and George Williams, Australian Constitutional Law and Theory: Commentary and Materials (3 rd ed, 2002) Chs 2, 27. 1001 Australian Communist Party v Commonwealth (1951) 83 CLR 1, [3]. 1002 Communist Party Dissolution Act 1950 (Cth) s 4. 1003 Communist Party Dissolution Act 1950 (Cth) Preamble. 1004 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 6, although Fletcher confined his analysis to the applicable law in the United Kingdom, Australia and New Zealand. 1005 See eg, The United Communist Party of Turkey v Turkey [1998] Eur Court HR 1, where the formal structure of the association was dissolved by the state even before it was able to commence activities.
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Some United States jurisdictions now recognise unincorporated associations by legislative fiat. 1006
If it is accepted that at common law there is at least freedom of religious association, to which a sovereign must assent, as inuring for the benefit of all citizens of that particular common law country, then, I theorise that a common law judge may hold that advancement of religion as a charitable purpose is a part of a broader class of freedom of religion accepted from time immemorial by the common law. If that is so, it is logical to suggest that all charitable purposes are part of a broader class of a general freedom of association accepted from time immemorial by the common law which, in more recent centuries, has found expression in constitutional restatements rather than common law development. If this argument is accepted, there is a theoretical foundation for the pursuit of charitable purposes, in particular, and civil society purposes in general, that is not dependent upon government sanction. It is rooted in a freedom protected by the common law.
I turn now to consider the freedom that preserves this space from the perspective of international covenants.
E. Space to Associate and International Conventions
For as long as recognition and protection of freedom of association involved only interpretation of domestic constitutions, the common law principles could remain otiose. In the late twentieth century and early twenty-first century, however, international treaty obligations have obliged common law jurists to revisit the common law in the context of those international covenants. In this next section, an argument is advanced that the common law has a foundation for taking cognisance of international treaties and applying the
1006 The following states have adopted Revised Uuniform Unincorporated Nonprofit Association Act (2008) or variations on this model legislation: Alabama, Kansas, Colorado, Delaware, The District of Colombia, Hawaii, Idaho, North Carolina,. Texas, West Virginia, Wisconsin, Wyoming. See also Council to the Members of The American Law Institute, 'Principles of the Law of Nonprofit Organisations: Discussion Draft' (American Law Institute, 2006) xxx.
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underlying principles of those treaties into the domestic common law. The conclusion to which I come is that, at the weakest, international covenants buttress the argument based in common law which was set out in the prior section. In some jurisdictions, they may provide an alternative foundation. Again I return to Blackstone for a statement of the common law at about the time that these common law freedoms were finding explicit expression in written constitutional form.
Blackstone averted that the common law imported into the laws of England internationally accepted principles - what he called ‘the law of nations’. 1007 First, he set out in summary the foundation principles of doing good, not harm and respecting sovereignty. 1008 He then summarised the way that ‘the law of nations’, which could now be described as
‘international conventions’, was imported into the law of England. He wrote, that it was imported as a way of declaring ‘fundamental conditions’ necessary to be a part of the
‘civilized world’. 1009
It follows, if Blackstone correctly stated the common law, that by the mid-to late 1800s, the common law recognised and protected certain freedoms on the basis that they were a part of the ‘law of nations’. If the freedoms that now find expression in international covenants draw from those fundamental freedoms, there is a basis for the common law to recognise international covenants that give expression to the law of nations. For the purposes of the argument advanced here, at the forefront of that recognition and protection is freedom for association, particularly religious association. If this is accepted, then it is immaterial whether that freedom is rooted in the common law tradition or international covenants. They
1007 For a history of the law of nations see J M Kelly, A Short History of Western Legal Theory (1992) 241-243. 1008 Blackstone, Blackstone's Commentaries on the Laws of England; Book the Fourth - Chapter the Fifth: Of Offences Against the Law of Nations , (The Avalon Project, Yale Law School, 2007)
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are the same. All civilised countries accepted these principles. England, and those countries that inherit her common law to the extent that they purport to be civilised and build on and from Blackstone’s articulation, accept this ‘law of nations’.
What then of sovereignty? Throughout legal history, the idea that sovereign states have absolute authority has waxed and waned. 1010 The position waxed at common law under
Henry VIII and waned under the Stuarts. The idea that a state is sovereign, and as a consequence, entitled to resist all internal dissidence and external interference, was reaching its zenith in the nineteenth century 1011 and dominated until the close of the Second World
War. The atrocities of the Second World War were so shocking that there was ‘a clear international consensus among the victor powers that the perpetrators of aggression should this time be treated differently by the international community’. 1012 The result was the
Nuremberg Charter 1013 and a war trial. 1014 The outcome of the trial process was the establishment of a foundation of new rules of international law and human rights. 1015 The trial was not the only, nor the most important, platform for the statement of these fundamental rights in an international context. The Universal Declaration of Human
Rights 1016 adopted on 10 December 1948, set out across 30 Articles a consensus of value statements. 1017
The consequence of the steady development of those value statements into international law has, in Vesselin Popovski’s view, led to a ‘re-conceptualization of sovereignty, which no
1010 Antony Anghie, Imperialism, Sovereignty and the Making of International Law (2004) 101. 1011 Antony Anghie, Imperialism, Sovereignty and the Making of International Law (2004) 100-110. 1012 Richard Overy, 'The Nuremberg Trials: International Law in the Making' in Philippe Sands (ed), From Nuremberg to The Hague (2003) 1, 28. 1013 Vesselin Popovski, 'Sovereignty as Duty to Protect Human Rights' (2004) UN Chronicle Online Edition 16
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longer antagonizes but incorporates human rights. A state cannot pretend to absolute sovereignty without demonstrating a duty to protect people’s rights.’ 1018 Further, the State
Department of the United States of America has affirmed that the United States will intervene to protect civil society organisations threatened by governments that do not respect the freedoms of their citizens. 1019 Popovski’s argument, in an international human rights law context, resonates with Coke’s defence of the common law basis for subjugation of the sovereign to the law. He contended that once it is accepted that sovereignty ‘means the sovereignty of the people, not of the leaders’, then if the leaders fail to protect the people (in
Hobbesian sense) or guard their rights (in a Lockean or Mill sense) or express their collective will (in a Rousseauian sense) then there is justification for intervention to restrain that sovereign to protect the freedoms of the people of that jurisdiction. 1020
Many nations have agreed voluntarily to accept that their states cannot pretend to absolute sovereignty without demonstrating a duty to protect people’s rights and have accepted that the fundamental freedoms expressed in the Universal Declaration of Human Rights apply to them. Provisions of the Universal Declaration of Human Rights have been adopted into other international covenants which have been ratified by common law countries. Such provisions include the International Covenant on Civil and Political Rights and the
European Convention on Human Rights and Fundamental Freedoms . Many nations, including common law countries such as Great Britain, have ratified the European
Convention on Human Rights and Fundamental Freedoms1021 by which they agree to submit
1018 Vesselin Popovski, 'Sovereignty as Duty to Protect Human Rights' (2004) UN Chronicle Online Edition 16
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to the European Court of Human Rights. This will undoubtedly affect the development of the doctrine of charitable purpose. 1022 Other common law countries like Canada, 1023 South
Africa 1024 and New Zealand 1025 have adopted concepts articulated in the Universal
Declaration of Human Rights into their constitutional rubric. Still others, like Australia, have ratified treaties and established administrative bodies to effect compliance with the treaty obligations. 1026 At the end of the twentieth and beginning of the twenty-first centuries, then, when the vast majority of common law countries have subscribed to the Declaration of
Human Rights and have accepted certain rights as ‘inalienable’, 1027 they have, arguably or expressly in so doing, circumscribed the scope of sovereignty to the extent necessary to preserve these fundamental rights. In the twenty-first century, sovereignty appears to be on the wane and freedoms, including freedom of association, are waxing. If common law countries have circumscribed the scope of sovereignty to the extent necessary to preserve these fundamental rights, I suggest that they have acted in a manner consistent with the
English common law. The common law arguably does not, or at least at various periods has not, respected sovereignty as absolute.
It follows from the discussion so far, that common law jurists can take cognisance of litigation in relation to these freedoms not only under the common law but also in an international context. This freedom to take cognisance of international conventions becomes an obligation if their country has agreed to bring its domestic law into conformity with
1022 Peter Luxton, The Law of Charities (2001) 36. 1023 Canadian Charter of Rights and Freedoms set out in The Constitution Act 1982 , being Schedule B to the Canada Act 1982 (Eng.&W) 1982 c 11. 1024 Constitution of the Republic of South Africa 1996 as adopted on 8 May 1996 and amended on 11 October 1996 by the Constitutional Assembly One Law for One Nation Act 108 of 1996 s 36(1). 1025 New Zealand Bill of Rights Act 1990 (NZ). 1026 In Australia the Human Rights and Equal Opportunity Commission, an independent statutory authority of the Commonwealth, was established by the Human Rights and Equal Opportunity Commission Act 1986 (Cth) and is responsible for ensuring that Australia discharges its responsibilities under (among other treaties): The International Covenant on Civil and Political Rights (ICCPR), opened for signature 16 December 1966, GA Res 2200A (XXI) (entered into force 23 March 1976) and the Declaration in the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief , GA Res 36/55, 36 UN GAOR Supp (No 51) at 171, UN Doc A/36/684 (1981). 1027 Preamble to The Universal Declaration of Human Rights (UDHR), GA Res 217A (III) (entered into force 10 December 1948).
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international covenants affirming these rights, as is the case with the United Kingdom. 1028
This issue is not merely theoretical. It affects the revenue base of common law countries that belong to the European Union. This is because the European Court of Justice has accepted the advice of Advocate General Mengozzi that the Court should allow the same tax advantages for cross-border donations as for donations to domestic organisations. 1029
Common law countries that belong to the European Union may, then, reasonably expect to receive tax advantages determined with reference to European case law that transcends the domestic, taxing statutes. These developments put even more pressure on development of the doctrine of charitable purpose in the context of sovereignty over revenue – and limitations on that sovereignty.
This argument, in relation to common law limitations of sovereignty, would be assisted if it were established that the ‘law of nations’ was relied upon by the drafters of the Universal
Declaration of Human Rights ,1030 as it is the foundation of later developments in international law. I have not been able to establish this. Wood has opined, referring not only to the Universal Declaration of Human Rights , but also the more explicit Declaration on the
Basis for the Elimination of All Forms of Intolerance and of Discrimination Based on Belief adopted in 1981, that ‘there is no universal consensus as to their intellectual or philosophic basis’. 1031 It seems that the drafters of that declaration were ‘less concerned with attempting to create a theory underlying human rights than they were with the urgent task of agreeing together to protect those rights in practice’. 1032
1028 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 6; Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 170-171. 1029 Hein Persche v Finanzamt Lüdenscheid [2008] ECJ C318/07. 1030 The Universal Declaration of Human Rights (UDHR), GA Res 217A (III) (entered into force 10 December 1948). 1031 James E Wood, 'Religious Human Rights and a Democratic State' (2004) 46(4) Journal of Church and State 739, 740. 1032 Hasson has endeavoured to anchor the foundation in theological and anthropological argument. If, as he suggests, the link to the common law can be established then these foundations can be traced back to the foundations of the common law mapped by Brooks. Kevin J Hasson, 'Religious Liberty and Human Dignity: A Tale of Two Declarations' (2003) 27 Harvard Journal of Law and Public Policy 81, 82. Marki Janis has traced the contribution of religion to international law and pointed out that ‘[a]s the [twentieth] century has worn on, as a statist basis for international relations has appeared more and more threadbare, and as encounters between state and society threaten the fabric of global order ... [r]eligion stands ready to help express both
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I suggest that this freedom could extend to underpin the freedom of civil society organisations to recognition independently of government imprimatur. For present purposes, the first step in the argument has been completed and that is to establish that the common law, arguably if not absolutely, recognises and protects a space for civil society separate from government.
What form, then, does this body of law that recognises the space for civil society separate from government, take? It will not be the same in all jurisdictions. What can be stated of a general nature is that there are two dimensions. The first, is that it will define civil society organsations and thus the scope of operation of the particular laws. Second, I contend that the body of law will focus on purpose, not form of incorporation, as the appropriate foundation on which to base enabling and regulatory regimes. These two issues are the subject areas of the next two sections.
F. The Scope of Application of Association Law
In this third substantive subsection of this chapter, the scope of Association law is sketched.
The discussion in Chapters IV, V and VI have set the foundations for these developments and in this section, beginning with the common law, steps are taken from the Pemselian partitioning to a broader concept. First, the regulating and favouring dimensions are separated. The argument for progressing beyond the ‘spirit and intendment’ is advanced before the step to regulation, not just of charities but of civil society organisations generally, is made.
civilization’s discontents and the law’s contents.’ Advancement of religion is, then, potentially fertile terrain for investigation but it is beyond the scope of this thesis. Mark Janis (ed), The Influence of Religion on the Development of International Law (1991) 145, 151. Add to this Ahdar and Leigh’s observation, referring to Locke that: ‘[s]ome theorists see a crucial link between religion and the fostering of important civic virtues, such as law-abidingness, honesty, thrift and self-restraint’ and there seem to be links between the role of religion in common law societies and the twenty-first century international law waiting for further exploration. Rex Ahdar and Ian Leigh, Religious Freedom in the Liberal State (2005) 56. For my part I am not persuaded that the links have yet been built.
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All organisations that are not businesses, government or family are within the scope of this body of Association law. To identify whether an organisation is a civil society organisation or another organisational form, it will be recalled from Chapters IV, V and VI, that regard may be had to a combination of three factors: altruism; public benefit; and an absence of coercion.
The elasticity of the concepts of altruism, public benefit and coercion meant that they could be set out, it will be recalled, on a continuum, and that concept of a continuum permitted subtle, and significant, differences from jurisdiction to jurisdiction. Civil society organisations take many and varied forms throughout common law countries. 1033 In a common law context, the test could be that proposed by Justice Gonthier in his dissenting judgment in Vancouver Society of Immigrant and Visible Minority Women where he held:
How then should the Court undertake the task of modernizing the existing categories of charitable
purposes? … [i]t would be a mistake to make a fetish of the purposes enumerated in the preamble.
Rather, the Court should adhere to the principles of altruism and public benefit, to which I
adverted above, in order to identify new charitable purposes and to ensure that existing ones
continue to serve the public good. The law should reflect the realization that although the
particular purposes seen as worthy of pursuit change over time, the principles of which they are
instantiations endure. 1034
Under this more flexible alternative framework, the extent to which organisations manifested altruism, public benefit and the absence of coercion could be assessed. If there were insufficient altruism or public benefit, or if the organisation was effectively under the coercive control of government, then that organisation would not be defined as a civil society organisation. It would be subject to the laws applying to business, government or families.
1033 Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 356. 1034 Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] 1 SCR 10 [50].
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If this broader approach is taken, all incorporated and unincorporated associations pursuing civil society purposes, would be included in the class. Arguably the category includes all organisations with a non-distribution constraint, in the reasoning of Hansmann 1035 and all of the organisations that satisfy Weisbrod’s public non-government criterion of ‘proprietary, collective, and trust non-profits’. 1036 They also include, of course, all the new forms of civil society organisation emerging in the United Kingdom such as the ‘charitable incorporated association’, the ‘community interest company’ 1037 and the Scottish charitable incorporated organisations. 1038 In the United States the category would include not just those organisations falling within the scope of sections 501(c)(3) and 5014(c) of the United States
Internal Revenue Code but other civil society organisations as well. In Australia, within this category would be not just charities as presently formulated, but all of the organisations described as ‘related’ by the Australian Charities Definition Inquiry. 1039 Why, then has the class been kept small?
Beginning with charities, the current legal theory is focused on the technical definition of charitable purpose, which gravitates towards definitions linked to Pemselian purposes . The difficulty with defining the class with reference to charitable purposes is that the class of
Pemselian purposes has been kept so small by the courts that most civil society organisations are defined as not having charitable purposes.
In a framework where entitlement to favour is linked historically to charitable purpose, it is understandable that the common law judges would consider themselves bound to keep the
1035 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 501. 1036 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 60. 1037 Companies (Audit, Investigations and Community Enterprise) Act 2004 (Eng.&W) Part 2. 1038 Charities and Trustees Investment Act 2005 (Scotland) s 10 Schedule 1; Office of the Scottish Charity Regulator, 'Monitoring Scottish Charities' (2005). 1039 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 43.
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class of entity recognised as having charitable purposes quite small. 1040 That confinement, to a small class of organisations is not a logical consequence of the definition of the class but a need to avoid a ‘slippery slope’ of expanding the class enjoying favour to include organisations that, in the opinion of the court, ought not to enjoy such favour. 1041 If regulating association is severed from favour, however, it follows that the class does not need to be limited so as to exclude those associations that ought not to be enjoying favour. If not so limited, then conceptually, the class could be expanded to include all of those organisations that comprise civil society organisations. As the Supreme Court of Canada observed in the AYSA Amateur Youth Soccer Association Case ,1042 it is the access to favour that obliges the court to keep the category limited. It is that same concern that motivated
Senator Grassley in his inquiry into the affairs of the Copelands. 1043 This is particularly so in
Canada and the United States where gifts to charitable organisations are tax credited or tax deductible. 1044
The first step, then, toward a comprehensive definition of civil society organisation based on a concept of charitable purpose is to recognise the different roles played by the concept of charitable purpose: one to define the scope of application of the law and the other to act as a gateway to favour. Freed of favour, it is a surprisingly easy step to move from the Pemselian purposes. In deciding whether or not a purpose is charitable at common law, regard is had to whether the purposes of the organisation are for public benefit and are within the spirit and intendment of the Preamble . These purposes can be extrapolated by a series of steps to include all civil society organisations. Public benefit is accepted as a concept central to charitable purpose. It is generally understood that organisations controlled by government
1040 See: AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42, [44] (Rothstein) . 1041 Internal Revenue Commissioners v Baddeley [1955] AC 572, 591 (Simmonds). 1042 2007 SCC 42. 1043 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm. 1044 Internal Revenue Code s 501(c)(3); Income Tax Act RSC 1985, c 1 (5th Supp) s 110 and s 118.
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are not charities so absence of coercion is an acceptable distinguishing concept also. 1045 So, to advance the thesis argued here a significant issue in contention is whether the ‘spirit and intendment’ of the Preamble equates with altruism and voluntarism. Can altruism be accepted as central to the concept of charitable purpose? A long list of cases has already been provided supporting this proposition. 1046 If altruism is accepted as integral to charitable purpose, I theorise that altruism and voluntarism can replace reference to the spirit and intendment of the Preamble . When read with public benefit together, they can replace the
Pemselian partitioning of charitable purpose for the purpose of defining space. I suggest that a charitable purpose could be defined non-technically as a purpose pursued voluntarily and altruistically for public benefit. It does not have to be defined as a purpose within the spirit and intendment of the Preamble pursued for public benefit. These arguments will be developed further in Chapter VIII and IX.
Turning now to civil society organisations, I have argued across the last three chapters that the factors that distinguish civil society organisations from other organisations are altruism, public benefit and the absence of coercion. The proximity of these factors to the definition of charities is apparent. Charities cannot be defined as civil society organisations, though, nor can civil society organisations be defined as charities at present because charities are defined technically by reference to the Preamble. But, and here is the logical step, if, for the purposes of defining space for free association, charitable purpose is defined with reference to altruism, public benefit and voluntarism, rather than according to the four heads in
Pemsel’s case, most if not all of the problems set out in Chapters II and III would be ameliorated if not removed.
The concept of charitable purpose yields the framework for the genus; just as it did the genesis for the concepts of altruism, public benefit and voluntarism developed through
1045 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168. 1046 See footnote 186.
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Chapters IV, V and VI. That genesis, it will be recalled, found expression in ‘public benefit’ and ‘the piety of earlier times’ (to use Lord Macnaghten’s words). 1047 I theorise that the essence of civil society organisations is charitable purposes, but not charitable purposes as defined technically into Pemselian partitioning . It follows from this reasoning, that when defining the jurisdiction, civil society organisations are identified by reference to charitable purposes that are not technically defined. These charitable purposes are in essence purposes which are:
a. Altruistic; and
b. For public Benefit; and
c. Pursued without Coercion.
These charitable puposes differentiate civil society organisations from the three other organisational purposes: namely
a. Business, which is manifest in the pursuit of self-interest; that is lack of
altruism;
b. Government, which is characterised by coercion; that is a lack of
voluntariness or freedom; and
c. Family, which is characterised by being private not public.
Further, dynamic boundaries are both possible and appropriate once a definition of civil society organisations is set out in this way because the limits on the right to freely associate are contested in twenty-first century common law countries and will vary from one jurisdiction to another.
Approaching the scope of application of the law in this way, brings a refining clarity to analysis of the laws of association generally, not just the particular class called charities.
1047 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten).
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Legal development based on this theory would remain, in essence, focused on charitable purposes but would extend the concept of charitable purpose to apply to all civil society organisations. This is because, by definition, all civil society organisations, not just charities, evidence in their essence some altruism and public benefit and are pursued without coercion.
Consider now the outworkings of this alternative jurisprudence. Advancement of religion is a head under the Pemselian partitioning of charitable purpose. It is, at its purest, a charitable purpose in common parlance. In its more impure forms, it is possible to form the view that some ‘religious organisations’ seem more like they are pursuing business, government or family purposes. For example, an ostensibly religious organisation could in fact be a front for advancement of personal interests and thus be really a family arrangement. Second, a religious organisation could be predominantly pursuing business purposes such as making profit in the most tax effective way. These first two issues are both dimensions of the concerns raised in Senator Grassley’s letter. 1048 An ostensibly religious association could be pursuing government purposes. In the late twentieth and early twentieth centuries it has become common for governments to deliver welfare to citizens by grants to, or contracts with, religious civil society organisations. In such a context it is possible for a religious civil society organisation, particularly a small parachurch organisation, to become simply a conduit for the delivery of government services. 1049 Taking each of these in turn, it is possible to identify the factors that operate to differentiate the family, the business, and the government organisation from the genuinely religious organisation.
It will be recalled from earlier chapters, that I contend that the genuinely religious organisation is differentiated from business by the evidence of altruistic purposes. ‘A’, if not
1048 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm. 1049 Peter Luxton, The Law of Charities (2001) 10-11.
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‘the’, principal indicator of this altruism is, I suggest, the non-distribution constraint. 1050 It is differentiated from government organisations by evidence of sufficient voluntariness to abrogate coercion and thus not be pursuing government purposes. It is differentiated from family by the purpose pursued being sufficiently public to not be private. Thus, when looking at Kenneth Copeland Ministries, 1051 using the theoretical framework proposed here, evidence of public benefiting purposes will be weighed against evidence of private benefiting purposes when assessing whether the ministry was a private family purpose or a public one. When looking at the ministry from the perspective of whether the ministry was a business or not, then the question will be in relation to altruistic purposes.
Each jurisdiction could require different evidence of altruism, public benefit and voluntarism and the factors informing those evidences could all be weighed differently. One jurisdiction might take the view that, provided the religious organisation’s constituent documents evidenced religious charitable purposes, very limited altruism, public benefit and freedom from government coercion were necessary. A religious organisation in such a jurisdiction might be able to be entirely funded by business pursuits; 1052 the government could effectively control the purposes it pursues, through contract; 1053 and it might have only one family as members and controllers of the board. 1054 Another jurisdiction could take a different view on one or more of these factors. That different view could lead to such an organisation being considered a business, a government organisation or a family as the case may be. Put theoretically – one or more of the dynamic boundaries would be more contracted in the second jurisdiction with the consequence that the organisation was no longer defined as falling within the scope of the definition of a civil society organisation.
1050 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 118. 1051 Letter from Charles Grassley to Kenneth and Gloria Copeland, 5 November 2007, available at http://finance.senate.gov/sitepages/grassley2007.htm. 1052 As is the position in Australia see: Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204. 1053 As is the position in Australia see: Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 175. 1054 As appears to be the case in Hong Kong. See: Cheung Man Yu v Lau Yuen Ching (2007) CACV 213/2006; 265/2006.
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This approach brings analytical clarity to defining the scope of the laws applying not just to religious organisations, of which the above are examples, and not just charities, but all civil society organisations. This brings me to my second point: purpose, not form, ideally governs theory development for civil society organisations.
G. Regulate All Civil Society Organisations by Reference to Purposes
1. Introduction
Charities are identified and favoured on the basis of purpose. 1055 If the principles discerned from the common law are to be applied to other civil society organisations, the criterion for such regulation must, in the light of the discussion of purpose in this chapter, be based, not on the form of incorporation, but on the purpose pursued. 1056 There is no compelling reason not to follow the common law. Form is an accident of history. Further there is not even a need to take an incorporated form. It is quite appropriate to regulate different civil society organisations differently. A society might even choose to regulate different charities differently based on the different charitable purposes pursued. Political parties, subversive organisations and those pursuing terrorism purposes, may be treated differently. It is the purposes they pursue, however, and not the form organisations take that justifies this different response. At a theoretical level, it is not the form of the association that is important, only that the association has a recognised form. 1057 My next step, then, is not one of dividing but of binding. In this section, I argue that the different forms of association – unincorporated association, trust, company limited by guarantee, Royal Charter or association incorporated under specific legislation – can be ignored for regulatory purposes.
It is purpose pursued that is relevant. As Stoljar pointed out, and as was mentioned in
1055 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [24] per Rothstein J. 1056 J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7 th ed, 2006) 141 -142. 1057 Peter Luxton, The Law of Charities (2001) 16. Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 526.
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Chapter III, it is purpose, not form, that animates an association and it is the existence of property applied to that purpose that is critical for regulation. 1058
2. Form is an Accident of History
The form civil society organisations take is an accident of history. As Luxton asserts, the general proposition remains that charities have had to ‘make shift with forms intended for other sectors’ and the fact that ‘the common law does not recognise incorporation in the absence of a royal charter or statute’ highlights further restraint on the pursuit of charitable purposes. 1059 This is a direct consequence of the common law, not recognising unincorporated associations.
Historically, as voluntary societies emerged following the Tudor period in England, and later in other common law countries, they took three forms: the joint stock company, the chapel and the public house. 1060 The first form led to the membership associations of which the company limited by guarantee is an exemplar. The second led to the utilisation of trusts predominantly for religious congregations and the third led to more informal clubs; some of which became recognised as institutions which were charitable, such as public libraries, and some not charitable, such as trade associations. 1061 These practices continued until the late twentieth century, when some common law jurisdictions began to pass legislation expressly intended to enable civil society participation through organisations. In the jurisdiction where this thesis is submitted for examination, the Associations Incorporations Act 1981 (Qld) and the Aboriginal Associations Act (Cth) are examples of enabling and regulating legislation. 1062
In the United Kingdom, the ‘charitable incorporated association’, the ‘community interest
1058 S J Stoljar, Groups and Entities: An Inquiry into Corporate Theory (1973) Chapter 2 and 175. 1059 Peter Luxton, The Law of Charities (2001) 19. 1060 Peter Luxton, The Law of Charities (2001) 8. 1061 Peter Luxton, The Law of Charities (2001) 8. 1062 The genesis of this form of legislation is the Associations Incorporation Act 1858 (SA): Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 346.
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company’ 1063 and the Scottish charitable incorporated organisations have been enabled. 1064
In the United States, recent legislation passed by Vermont to enable for-profit charities called
L3Cs is a recent, more sophisticated example of specialist legislation. 1065 Luxton has noted, with some irony, that the association legislation in jurisdictions such as Queensland was designed broadly for vehicles for civil society not specifically charitable purposes. 1066 There is a move on the continent toward a European nonprofit association. 1067 Foundations in
Europe discharge a function similar to that of charitable trusts and so the guidelines for their management are instructive. The model provides minimum requirements but expressly declares: ‘the coming into existence of a European Foundation does not depend on any acknowledgement or approval by a Court or other state supervisory body’ (Article 7). 1068
This more recent approach to legal reform; of passing legislation for incorporating associations, perpetuates dependence on government. The legislation has been justified by
Fletcher as necessary to ‘correct particular defects in the common law’ 1069 but, as the discussion in the section above illustrated, the ‘defects’ associated with lack of incorporation may be more imaginary than real. There was common law recognition before the Tudors of unincorporated associations; the European Court of Human Rights has not been constrained by lack of incorporated form in delivering justice;1070 and, if there is a problem, it can be
1063 Companies (Audit, Investigations and Community Enterprise) Act 2004 (Eng.&W) Part 2. 1064 Charities and Trustees Investment Act 2005 (Scotland) s 10 Schedule 1; Office of the Scottish Charity Regulator, 'Monitoring Scottish Charities' (2005). 1065 Low-Profit Limited Liability Companies VT STAT ANN (2008). 1066 Peter Luxton, The Law of Charities (2001) 20. 1067 Peter Luxton, The Law of Charities (2001) 21; Klaus J Hopt et al (eds), The European Foundation: A New Legal Approach (2006). 1068 Cited in Klaus J Hopt et al (eds), The European Foundation: A New Legal Approach (2006) 11. 1069 Robert Baxt, 'The Dillemma of the Unincorporated Association' (1973) 47 Australian Law Journal 305, 305; Keith L Fletcher, The Law Relating to Non-Profit Associations in Australia and New Zealand (1986) 5. 1070 See, eg, The United Communist Party of Turkey v Turkey [1998] Eur Court HR 1 where the formal structure of the association was dissolved by the state even before it was able to commence activities.
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resolved in the way that some United States jurisdictions have done, by passing legislation obliging courts and others to recognise unincorporated associations. 1071
The conclusion, to which I come, then, is that whatever the form of incorporation, and indeed even if unincorporated, the common law can look to purpose not form and apply regulation uniformly. The common law can recognise civil society organisations whether or not they are incorporated and can protect them without reference to form.
3. Including the Excluded Others
If pursuit of a civil society purpose, not form, is the basis for regulation, the class of civil society organisations expands, as it is necessary to include the formerly excluded. It will be recalled from Chapter II that advancement of religion was a charitable purpose but advancement of political purposes was not. If this reasoning is accepted, it overcomes the problem identified in Chapter II of allowing religion into the class of charitable purposes while excluding political purpose. In fact I contend that the political purpose cases should be read as standing alongside the advancement of religion cases, providing the underpinnings of civil society in common law countries. My reasoning is as follows. Advancement of religion and advancement of political purposes are related conceptually as they are both subcategories of a legal right to pursue freedoms – including freedom of association. 1072
Lindblom summarised: ‘the right to free political expression was understood as inclusive of the rights to freedom of thought, freedom of association and freedom of expression as specified in the International Covenant on Civil and Political Rights .’ 1073 These are freedoms upon which advancement of religion rests. The international covenants protect both. It follows in civil society purpose discourse that both political and religious liberties are intertwined. In drawing these parallels, I acknowledge that the spirituality that underpins
1071 For example Alabama, Kansas, Colorado, Delaware, The District of Colombia, Hawaii, Idaho, North Carolina, Texas, West Virginia, Wisconsin and Wyoming which have Revised Uniform Unincorporated Nonprofit Association Act (2008) or variations on this model legislation.
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religion, is fundamentally different from political purposes. My object is to bring political purposes into the class of civil society organisations by identifying parallels, not to argue that religion is political. It may or may not be, depending upon context.
What, though, of other purposes, particularly pursuit through civil society organisations of purposes that are not good? The common law excludes from organisations pursuing charitable purposes those organisations that are subversive of all morality. That has been the position at common law since it was held in Cock v Manners 1074 that ‘not all religious purposes are charitable. Religious purposes are charitable only if they tend directly or indirectly towards the instruction or the edification of the public’. 1075
It follows from this discussion, though, that once favour is severed from association, those associations which are subversive will remain within this broader class of civil society organisations provided the other criteria for membership of the category are satisfied. If the other criteria are not satisfied, these organisations must by definition be either businesses, government organisations or families. Subversion of morality, criminal conduct and for that matter even terrorism purposes, do not change the category which, by definition, will include all purposes that do not fall within the other categories of purposes that are either business, government or family. The consequences of pursuing purposes that are immoral, may well affect entitlement to favours. 1076 The pursuit of purposes that are criminal will invite prosecution and may lead to trial under other laws. The pursuit of terrorism purposes could
1072 In this context see the history of law reform being included and excluded from the class of charitable purposes summarised for the US in Perri 6 and Anita Randon, Liberty, Charity and Politics: Non-Profit Law and Freedom of Speech (1995) 95-98. 1073 Anna-Karin Lindblom, Non-Governmental Organisations in International Law (2005) 7-8. 1074 (1871) L.R. 12 Eq 574, 585. 1075 Chesterman v Federal Commissioner of Taxation [ 1925] 37 CLR 317. 1076 Peter Luxton, The Law of Charities (2001) 129.
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lead to incarceration without trial for those involved. 1077 What the pursuit of those purposes will not do is change the theoretical class to which these organisations belong.
I thus end with a very broad, ‘empty’ 1078 shell of a class of organisations stripped of moral content for the purposes of classification, but ready for ordering in ways that may involve taking into consideration any or all of these factors, particularly when it comes to considering entitlement to favours. Thus, for example, if the German government bans
‘religious organisations whose objectives or activities conflict with the criminal laws or that oppose the constitutional order or the concept of international understanding’, 1079 as Ferrari has noted, then this will be analysed as ordering of civil society organisations in a particular way – those with objects that are criminal and those with objects that are not. The organisations will not be excluded from the class of civil society organisations by pursuing criminal purposes. This distinction between the genus to which an organisation belongs and how organisations within a genus are classified is taken up in the context of entitlement to favour, in the next chapter.
4. Focus on Purpose not Activities
Before closing this section, one last observation should be made in relation to the temptation to be drawn to look at activities rather than purposes . As Justice Rothstein pointed out:
The common law focuses on “charitable purposes” rather than “charitable activities” [and] it is
really the purpose for which an activity is carried out, and not the character of the activity itself,
that determines whether or not it is “charitable” .1080
1077 Antony Anghie, Imperialism, Sovereignty and the Making of International Law (2004) 274-275; Silvio Ferrari, 'Individual Religious Freedom and National Security in Europe After September 11' (2004) 2 Brigham Young University Law Review 357, 368. 1078 Anna-Karin Lindblom, Non-Governmental Organisations in International Law (2005) 525. 1079 Silvio Ferrari, 'Individual Religious Freedom and National Security in Europe After September 11' (2004) 2 Brigham Young University Law Review 357, 368. 1080 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [24] (Justice Rothstein).
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Justice Iacobucci set out the reason for this in his judgment for the majority in Vancouver
Society of Immigrant and Visible Minority Women v MNR :
The difficulty is that the character of an activity is at best ambiguous; for example, writing a letter to
solicit donations for a dance school might well be considered charitable, but the very same activity
might lose its charitable character if the donations were to go to a group disseminating hate literature.
In other words, it is really the purpose in furtherance of which an activity is carried out, and not the
character of the activity itself, that determines whether or not it is of a charitable nature. 1081
To this point in this chapter, I have argued that there is a theoretical space recognised at common law for association through civil society organisations. I have identified the scope and operation of that body of law as the law applying to all civil society organisations. I have argued that the unifying feature of these organisations is their purposes. I have argued that these purposes are essentially charitable in the non-technical sense, and that this enables civil society organisations to be classified as differentiated from business, government and family. The next step is to state, clearly and succinctly, the unique organising principles underpinning the law applying to civil society organisations. What are its underlying principles? How do these principles find expression in civil society regulation theory?
These questions are addressed in the final substantive section that follows.
H. Principles of Regulation of Associations
Given the discussion so far, it will be obvious that underpinning civil society is a jurisprudential, organising framework that enables and even encourages freedom to associate voluntarily for purposes other than business, government and family. It follows that all laws that touch upon freedom of association through civil society organisations for purposes other
1081 [1999] 1 SCR 10 [152] and for similar views expressed in an Australian context see: Commissioner of Taxation v Word Investments Limited [2006] FCA 1414 (Sundberg J); affirmed [2007] FCAFC 171 (Unreported, Stone, Allsop and Jessup JJ, 14 November 2007) [81] and reaffirmed on appeal to the High Court of Australia: Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204.
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than business, government and family are within the scope of this jurisprudence. This is an easy and logical first classification and I make it. I call this body of law Association law.
Freedom to associate is not untrammelled. So the next step in the theory development, when focusing on Association law, is to set out a framework for enabling, and regulating, freedom of association. Portions of the Universal Declaration of Human Rights , which has been widely accepted in common law countries, articulate these broadly-held values, so I adopt the wording of that Declaration as foundational articulations.
The Universal Declaration of Human Rights sets out across 30 Articles a consensus of value statements, three of which are important for this discussion. They are:
Article 18, which provides:
Everyone has the right to freedom of thought, conscience and religion; this right includes freedom
to change his religion or belief, and freedom, either alone or in community with others and in
public or private, to manifest his religion or belief in teaching, practice, worship and observance.
Article 20(1), which provides:
Everyone has the right to freedom of peaceful assembly and association.
and Article 27(1), which provides:
Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts
and to share in scientific advancement and its benefits.
These freedoms are stated to be exercised subject to certain limitations. The limitations are set out in Article 29(2) as follows:
In the exercise of his rights and freedoms, everyone shall be subject only to such limitations as are
determined by law solely for the purpose of securing due recognition and respect for the rights and
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freedoms of others and of meeting the just requirements of morality, public order and the general
welfare in a democratic society.
Adopting these statements as summaries of the principles which countries such as Canada have done, 1082 a jurist wishing to determine the role of regulation to apply to a civil society organisation would ask two key questions:
1. How can free and voluntary association best be enabled, and perhaps
encouraged? (the ‘maximum freedom principle’) and
2. What are the minimum restraints necessary? (the ‘minimum restraint principle’).
These are very broad questions. Simply stated as broad reciprocal premises of maximum freedom and minimum restraint they are not particularly useful to judges, legislators or regulators. They are though, arguably, a critical bridge to civil society regulation theory, which is of immediate relevance to courts, legislators and regulators. The most recent work in this context is that of Jonathan Garton. Garton has undertaken an extensive ‘bottom-up’ review of justifications for regulation of civil society. His principles of regulation can be accommodated comfortably within this overarching jurisprudential framework. The two premises, developed from the foundations, link to his general framework for regulation which he expresses as his six principles. In summary, Garton built on earlier work such of
1082 ‘The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.’ See The Constitution Act 1982 , being Schedule B to the Canada Act 1982 (Eng.&W) c 11, s 1. The Constitution of the Republic of South Africa 1996 As adopted on 8 May 1996 and amended on 11 October 1996 by the Constitutional Assembly One law for One Nation Act 108 of 1996 – s.36(1) is in similar terms. It provides: 1) The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including: a) the nature of the right; b) the importance of the purpose of the limitation; c) the nature and extent of the limitation; d) the relation between the limitation and its purpose; and e) less restrictive means to achieve the purpose. It must be acknowledged, though, that there are other approaches open and those other approaches could be adopted in other jurisdictions. For a detailed discussion of the diverse approaches to limitation of freedom discussed in the context of religion see: Rex Ahdar and Ian Leigh, Religious Freedom in the Liberal State (2005) Chapter 6 (Limits to Religious Freedom).
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that of Karla Simon, who, as early as 1998 had stated that a central plank of regulation of civil society organisations is that it should be ‘no heavier, not cut more deeply, than is necessary.’ 1083 Garton concluded that all regulations of civil society should not be more in number, nor more in complexity, than is necessary, stating that: ‘It is clearly in the interest of proportionality and targeting that a particular regulatory goal is achieved through rules that are no more complex or greater in number, than is necessary.’ 1084 He identified only six overlapping grounds justifying regulation of civil society organisations. They were:
1. Preventing anti-competitive practices;
2. Controlling campaigning;
3. Ensuring trustworthiness;
4. Coordinating the sector;
5. Rectifying philanthropic favours; and
6. Preventing challenges to organisational quiddity. 1085
Adopting the two reciprocal premises and applying within this architecture Garton’s six justifications for regulation the function, and legitimate scope, of Association law might be stated in the following way:
Association law performs two functions. It is the body of law:
1. that enables voluntary association, and
2. that regulates voluntary association.
Limitations on voluntary association are justified if and only if the restraint is all that is necessary to secure due recognition and respect for the rights and freedoms of others and of meeting the just requirements of morality, public order and the general welfare in a
1083 Karla W Simon, 'Principles of Regulation for the Not-for-Profit Sector' (International Centre for Not-for-Profit Law, 1998) 246. 1084 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 150. 1085 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 37b, Chapter 4 generally and 151.
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democratic society. This restraint on regulation marks the legitimate scope of Association law.
For the purposes of assessing whether a limitation on voluntary association is justified the restraint will be justified if and only if it is all that is necessary
1. to prevent anti-competitive practices;
2. to control campaigning;
3. to ensure trustworthiness;
4. to coordinate the sector;
5. to rectify philanthropic favours; and
6. to prevent challenges to organisational quiddity.
The point in setting this out is not to manadate Garton’s normative ideals but to demonstrate how his regulatory grounds could be located within this broader architecture. It is beyond the scope of this work to progress to the content of regulation. My project is to propose only a framework, not the regulatory content itself. This project is now completed. It is also beyond the scope of this thesis to offer normative comment. It will be recalled from Chapter
I that there are many suggestions for regulatory reform. This framework seeks to provide a broader jurisprudence for assessment and comparison of these proposals. It provides an architecture for discussing, for example, the American Law Institute draft Principles of the
Law of Nonprofit Organisations or the Charities Commission’s Guidelines on Terrorism.1086
Finally, it should be noted that in building from the wording of the Universal Declaration of
Human Rights, there could be other formulations which might be preferred in a particular jurisdiction. I take the Universal Declaration of Human Rights only as one example of a
1086 Council to the Members of The American Law Institute, 'Principles of the Law of Nonprofit Organisations: Discussion Draft' (American Law Institute, 2006); The Charity Commission for England and Wales, Counter-terrorism strategy (2008).
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way in which common law freedoms can be stated in a shorthand way and distilled into principles that link to regulatory theory for civil society.
I. Conclusion
I observed in Chapter I, that jurisprudential divisions follow divisions of the first sector
(business), the second sector (government) and the fourth sector (family) and that distinct heads of law for those sectors are readily identifiable. I noted that at the beginning of the third millennium, there was not a clearly identifiable jurisprudence for the third sector.
Legal theory regarding the law applicable to civil society, I observed, had lagged similarly to the way analysis of the third sector lagged.
In this Chapter, I argued that space for civil society organisations is a matter for each common law country to determine but that there is a history in the common law of protecting space for association free of the coercive influence of government. That freedom is now supported by constitutional law and international covenants. Development of a concept of
Association law as a foundation for a jurisprudence for civil society goes beyond freedom to associate for religious purposes, although the religious underpinnings of the freedom are central, and have been at the forefront of the common law’s protection. This addresses the first problem of why associations in general, and more particularly those pursuing charitable purposes, should exist at all outside (the control) of government. The reason is that common law, constitutional law and international covenants affirm that the common law protects a freedom to associate and sets the appropriate limits on the scope of government control of that freedom.
As Association law, as here described, covers the field of all law applying to civil society, not just charitable purposes, and, as it is distinguished from the laws applying to business, government and family, it covers the field of relevant law. It describes the body of law unique to all civil society organisations. It has been contended that, whilst associations are
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presently regulated by laws formulated with reference to the forms of association – thus locking analysis of civil society association within the analysis of law applying to associations for purposes other than civil society – it is the purposes, not the form, of the association that is critical. The association dimension of a jurisprudence for civil society emerges by defining and then regulating associations in civil society by reference to purpose.
Finally, I set out two principles drawn from the Universal Declaration of Human Right s – the maximum freedom principle and the minimum limitations principle, and suggested that these provide a bridge between the abstract foundational freedoms and regulatory theory such as that developed by Garton. I thus suggested that these two principles might be applied as underpinning a jurisprudence for Association law.
J. Postscript
The preamble to this chapter began with the excitement of rediscovered relations. The relationship between charities and common law freedoms has been reasserted and these freedoms have been related to civil society regulatory theory. In France the regulation of fundamental freedoms led to a revolution. The catchcry of that revolution was ‘liberty, equality, fraternity or death’. Dickens wrote that the words: ‘liberty, equality, fraternity’ were everywhere. Voluntarily emblazoned on homes and sometimes as graffiti, they were
‘the standard inscription’ on buildings. 1087 Those three words were a values statement or declaration for which people were willing to die and a hope of what society might be.
‘Liberty, equality, fraternity’ are three words that carry the great themes of Dickens’s tale and inform categorisation for the purposes of favour in this thesis. They are a part of the overall argument of the next chapter.
1087 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 285, 288 and 290.
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VIII BENEFIT LAW
A. Preamble
Darnay survived, it will be recalled from chapter I, because Sydney Carton gave his life in
Darnay’s place. That sacrifice was only possible because of a confusion. Dickens lays the foundation for the confusion that is central to the climax of A Tale of Two Cities , in a courtroom. 1088 A case was decided in a particular way because it was plain to all present that
Sydney Carton looked very similar to Charles Darnay. The reader was prepared, then, for subsequent confusion based on a similarity of appearance. Dickens’s reader later readily accepts Carton passing himself off as Darnay and thus going to the guillotine in his place, because a court of law had been satisfied the two looked alike.
B. Introduction
Looking alike, even being passed-off as another, is very different from being the same. That is particularly the case with confusion surrounding the doctrine of charitable purpose. There is a difference between the jurisdiction of the Courts of Chancery, which was defined by the doctrine of charitable purpose and mapped the space of voluntary regulation for charity commissioners on the one hand, and determining entitlement to favours, such as tax exemption, on the other. These two functions of the doctrine of charitable purpose may look alike in a court of law but that does not mean that they are the same. Calling them both the same name – charitable purpose – has, as in Dickens’s Tale , led to understandable confusion.
This chapter seeks to highlight how that confusion arose and in the process enlighten a way out of the confusion.
Whereas in the last chapter the discussion began with cross disciplinary theory and social context, this chapter takes the opposite approach. This chapter involves a close reading of
Pemsel’s case and discussion of the Preamble . This occupies the first substantive section of
1088 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 79.
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the chapter. This approach is taken because it is necessary to build the jurisprudence proposed in this thesis from within the existing case law. Pemsel’s case and the Preamble are the foundation of that law. 1089 I will argue that the division between Association law, which is an expression of freedom, and Benefit law which justifies favour – a distinction made at the beginning of the last chapter – is a division that can be justified on a reading of
Pemsel’s case .
I also argue that the most important words of the judgment of Lord Macnaghten are not those setting out the famous ‘four principal divisions’, but those set out at the beginning of this thesis that: ‘The Court of Chancery has always regarded with peculiar favour those trusts of a public nature which, according to the doctrine of the Court derived from the piety of early times, are considered to be charitable.’ 1090
In the first section I contend that the ratio decidendi of the case, contextualised in the reasons and the obiter remarks of all of the Law Lords, provides a way out of the confusion identified in Chapters II and III. For this way out of the confusion to be taken, all that is required is for usual legal methodology discussed in Chapter III to be applied instead of focusing on the ‘four principal divisions’ set out in Lord Macnaghten’s opinion. The case provides both a basis for, and an example of, alternative ordering of the class of purposes that scope the doctrine of charitable purpose.
Second, I argue that the meaning of ‘charitable purpose’ need not be rigidly partitioned into four heads but takes its colour from context. ‘It is flexible to an immeasurable degree, as can
1089 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999); Peter Luxton, The Law of Charities (2001); J Warburton, D Morris and N F Riddle, Tudor on Charities (2003); Gino Dal Pont, Charity Law in Australia and New Zealand (2000); Gino Dal Pont, Equity and Trusts in Australia and New Zealand (2 nd ed, 2000); Donald Bourgeois, The Law of Charitable and Non-Profit Organisations (1990); John Mowbray, Lewin on Trusts (18 th ed, 2008); National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 52-53 (Lord Porter); Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168; Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204; AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42. 1090 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten).
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be seen by reference to the judgments of such eminent masters of law and language as the judges who sat in Pemsel's Case’ .1091 Charitable purpose when applied in an enabling or regulatory context to define the organisations enabled or regulated is different in scope from when it is applied as a basis for favour such as in an income taxing statute to decide which enabled or regulated organisations are entitled to particular favours. As a consequence, there could be two related but different scopes of application of the doctrine of charitable purpose. 1092
In the third and fourth sections altruism and the absence of coercion are considered on the basis that they, together, can replace reference to the ‘spirit and intendment’ of the Preamble .
They are closely related concepts and, I suggest, are the contemporary articulation of the
‘piety of earlier times’, 1093 I theorise that they can replace reference to the ‘spirit and intendment’ of the Preamble to define both charities and more broadly civil society organisations. Continual reference to the ‘extensive Elizabethan meaning’ must be abandoned if common law countries are to have ‘a sensible meaning’ or rather meanings, of charitable, and also to ‘prevent tautology.’ 1094
In the fifth section, I argue that the broad amorphous concept of public benefit rigidly applied from within the Pemselian partitioning is in need of theoretical development and this need for development is all the more pressing in a context where, following legislation in some common law countries, public benefit may not any longer be presumed with respect to the first three heads of Pemselian purposes . Other majority opinions in Pemsel’s case , particularly the often neglected judgments of Lord Watson and Lord Herschell, provide
1091 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362, 384 (Isaacs J) (overruled). 1092 Peter Luxton, The Law of Charities (2001) 30. 1093 This current, dominant articulation of the doctrine is from Pemsel’s case [1891] AC 531, 583. (Lord Macnaghten). For the status of charitable purpose as a doctrine see also: National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 52 (Lord Porter). 1094 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362, 384 (Isaacs J) (overruled).
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different approaches to public benefit and these fertile sources are utilised as a basis for development of the concept of public benefit into three alternative categories.
In the sixth section I suggest that the concept of charitable purpose can be extended to include a broader range of organisations than merely the orthodox class of charities. It extends, I suggest, to all civil society organisations in the way that Justice Isaacs applied it to
Blackstone’s concept of the eleemosynary corporation. 1095
In summary then, Chapter VII approached regulation of civil society organisations from foundational freedoms and built towards regulatory theory which was conceptual and abstract. This Chapter starts with the leading cases and proceeds inductively towards the same outcome of a different but unified jurisprudence. The question of entitlement to favour was not addressed in Chapter VII. It is taken up in this chapter. In summary, it is proposed that favour is extended to civil society organisations based on contributions to public benefit.
At its simplest, I suggest the greater the contribution to public benefit the greater the entitlement to favour. A more sophisticated division of public benefit is also offered, though, by developing from the four heads of Pemsel’s case , three broader classes.
C. Pemsel’s Case
Pemsel’s case was a decision of the House of Lords in the United Kingdom on appeal from
Scotland, decided by majority in 1891. The question for the Court was whether or not certain religious purposes were charitable, and thus entitled to income tax exemption.
1. The Facts
Pemsel was the treasurer of the Church of the United Brethren commonly called
Moravians. 1096 Commissioners for Special Purposes were tax collectors. 1097 Bates was a
1095 Refered to in Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362, 384 (Isaacs J) (overruled). 1096 Pemsel’s case [1891] AC 531, 554 (Lord Watson).
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benefactor who had given land on trust to trustees for the Moravians. The trustees of that land had enjoyed income tax exemption on the rents and other income from that land for over seventy years when the Commissioners, under the leadership of Gladstone, decided not to allow income tax exemption on part of the income. 1098 The central question for the court was, then, whether the purposes set out in the trusts were charitable purposes under a particular Victorian statute 1099 and thus exempt. 1100 The relevant wording of the trust provided:
(1.) As to two equal fourth parts thereof, for the general purposes of maintaining, supporting, and
advancing the missionary establishments among heathen nations of the Protestant Episcopal
Church, known by the name of Unitas Fratrum, or United Brethren. (2.) As to another equal fourth
part, towards the maintenance, support, and education of the children of ministers and
missionaries educated, at the school and academy at Fulner, near Leeds, special regard being had
to the children of such ministers as are least able to support the expense of their children's
education, or for the benefit and purposes of any similar school, academy, or establishment
elsewhere within the United Kingdom. (3.) As to the remaining equal fourth part or residue, for
the maintenance and support of certain establishments appertaining to the said Church for single
persons, called choir-houses, within the United Kingdom. 1101
The argument for the Commissioners was essentially that in Scotland, from where the appeal originated, the expression ‘charitable purpose’ excluded advancement of religion and was confined to aspects of poverty relief. It was conceded by counsel for both parties, and accepted by all of the Law Lords, that the popular meaning of the term ‘charitable purpose’
1097 Pemsel’s case [1891] AC 531, 554-5 (Lord Watson). 1098 Pemsel’s case [1891] AC 531, 574 (Lord Macnaghten). The year of settlement was 1813. See also Myles McGregor-Lowndes, 'Public/Private Accountability and the Tax Exempt Status of a Charitable Organisation' (Seminar Paper, Social Policy Research Centre, University of New South Wales, 2003) citing 3 Hansard 170:200ff; W E Gladstone, The Financial Statements of 1853 (1863) 458. 1099 5 & 6 Vict c 35 s 61, No.VI. 1100 Pemsel’s case [1891] AC 531, 539, 541 (Lord Chancellor Halsbury), 554 (Lord Watson), 563-564 (Lord Bramwell), 568-570 (Lord Herschell) and 514 (Lord Macnaghten). 1101 Pemsel’s case [1891] AC 531, 541 (Lord Chancellor Halsbury).
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was problematic. 1102 The extent to which the popular and legal meaning of ‘charitable purpose’ were coterminus was strenuously argued. 1103 There was a line of case law reaching back prior to the Statute of Elizabeth , by which the Courts of Chancery, and later the common law courts, had exercised jurisdiction over trusts for charitable purposes. Those trusts had been for purposes other than the relief of poverty. 1104 Importantly, they extended to include trusts for the advancement of religion. 1105 For the Commissioners to succeed, then, a majority would have to hold that a narrow, Scottish meaning, limited to the relief of poverty, applied to define charitable purpose at law; and that in this case from Scotland (at least) that meaning excluded the religious purposes set out in this trust settled by Bates.
2. The Ratio Decidendi of the Decision and the Orthodox Reading of the Case
By a majority of four to two, the House of Lords held that the use of the words ‘charitable purpose’ in the relevant taxing Act 1106 extended exemption to the income in question of the
Moravians. The majority view was that income applied ‘for the general purposes of maintaining, supporting, and advancing the missionary establishments among heathen nations of the Protestant Episcopal Church, known by the name of Unitas Fratrum, or United
Brethren 1107 is applied for a charitable purpose. (The whole court held that the later two objects were charitable purposes.) 1108
1102 Pemsel’s case [1891] AC 531, 542-545 (Lord Chancellor Halsbury), 556-558, 561 (Lord Watson), 566 (Lord Bramwell), 569-573 (Lord Herschell), 580-584 (Lord Macnaghten) and 592 (Lord Morris). 1103 Pemsel’s case [1891] AC 531, 532-539. 1104 Pemsel’s case [1891] AC 531, 534, 543 (Lord Chancellor Halsbury) (‘not necessarily’), 557-559 (Lord Watson), 573 (Lord Herschell) and 583 (Lord Macnaghten). 1105 Pemsel’s case [1891] AC 531, 534. 1106 5 & 6 Vict, c 35, s 61 No. VI Sched.C. 1107 Pemsel’s case [1891] AC 531, 541 (Lord Chancellor Halsbury). 1108 As to the minority view, Lord Chancellor Halsbury in his dissent opined at 554: ‘That there are some objects which would be charitable objects under these trusts, I do not deny; but the question here argued is whether the funds are all applicable and applied to charitable purposes. For these reasons I am of opinion that the judgment appealed from ought to be reversed.’ Pemsel’s case [1891] AC 531, 554. Lord Bramwell, who wrote his own dissenting opinion concurred with the Lord Chancellor stating: ‘My Lords, I agree that the respondent is entitled to judgment as to one half of the tax paid. As to the other half I entirely agree in the opinion of the Lord Chancellor, his reasons and conclusions, and the way he has applied his authorities. But I have some observations of my own to make.’ Pemsel’s case [1891] AC 531, 563.
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Parts of a judgment are usually cited as articulating the ratio decidendi of a case. That has particularly been so in Pemsel’s case where the following words from the judgment of Lord
Macnaghten have become famous for articulation of the principle of law emerging from the case which is that the meaning of the expression ‘charitable purpose’ is not confined in a taxing statute to relief of poverty but extends to include advancement of religion, as it did in defining the jurisdiction of the Courts of Chancery. Lord Macnaghten opined:
How far then, it may be asked, does the popular meaning of the word ‘charity’ correspond with its
legal meaning? ‘Charity’ in its legal sense comprises four principal divisions: trusts for the relief
of poverty; trusts for the advancement of education; trusts for the advancement of religion; and
trusts for other purposes beneficial to the community, not falling under any of the preceding
heads. The trusts last referred to are not the less charitable in the eye of the law, because
incidentally they benefit the rich as well as the poor, as indeed, every charity that deserves the
name must do either directly or indirectly. It seems to me that a person of education, at any rate,
if he were speaking as the Act is speaking with reference to endowed charities, would include in
the category educational and religious charities, as well as charities for the relief of the poor.
Roughly speaking, I think he would exclude the fourth division. Even there it is difficult to draw
the line. A layman would probably be amused if he were told that a gift to the Chancellor of the
Exchequer for the benefit of the nation was a charity. Many people, I think, would consider a gift
for the support of a lifeboat a charitable gift, though its object is not the advancement of religion,
or the advancement of education, or the relief of the poor. And even a layman might take the
same favourable view of a gratuitous supply of pure water for the benefit of a crowded
neighbourhood. But after all, this is rather an academical discussion. If a gentleman of education,
without legal training, were asked what is the meaning of ‘a trust for charitable purposes,’ I think
he would most probably reply, ‘that sounds like a legal phrase. You had better ask a lawyer. 1109
Within fifty years, and even though Lord Macnaghten’s opinion is quite open textured, this classification in a ‘legal sense’ into ‘four principal divisions’ had become so dominant that all legal analysis of the definition of charitable purpose was undertaken with reference to the
1109 Pemsel's case [1891] AC 531, 583-584.
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classification. 1110 The focus on these four categories has increased rather than decreased since 1947 with all of the major texts analysing charitable purpose in terms of the four heads. 1111 Most recently, the High Court of Australia has elected not to disturb this approach 1112 and the Supreme Court of Canada has reached a similar decision.1113 It follows that charitable purpose, as presently understood in common law countries, is read through a particular lens that lets through only images shaped according to the ‘four principal divisions’.
I do not quibble with taking this passage from Lord Macnaghten’s opinion as a declaration of the ratio decidendi of Pemsel’s case . I might not even quibble with a case that looks to the four principal divisions as proof that a purpose is charitable. My quibble is with replacing the method of reasoning that led to the decision in Pemsel’s case with a reference only to the four heads. The current orthodox reading focuses only on the four heads and in so doing excludes from view the jurisprudential discussion in which Lord Macnaghten’s judgment is contextualised. Resolution of the unsatisfactory state of the law at present and addressing the social concerns discussed in Chatper II requires the identification of the essence and differentia - unique characteristics that make purposes charitable and differentiate those purposes from other purposes. 1114 Put in a slightly oversimplified manner, I say that the methodology applied in Pemsel’s case across all the opinions which sought to identify whether ‘maintaining, supporting and advancing the missionary establishments among heathen nations’ 1115 was a charitable purpose has been replaced by a process that requires all claims to charitable purpose to assert that they come within one of the four categories. I
1110 National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 52 -53 (Lord Porter). 1111 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999); Peter Luxton, The Law of Charities (2001); J Warburton, D Morris and N F Riddle, Tudor on Charities (2003); Gino Dal Pont, Charity Law in Australia and New Zealand (2000); Gino Dal Pont, Equity and Trusts in Australia and New Zealand (2 nd ed, 2000); Donald J Bourgeois, The Law of Charitable and Non-Profit Organisations (1990); John Mowbray, Lewin on Trusts (18 th ed, 2008). 1112 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168 and Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204. 1113 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42. 1114 See list of reports and inquiries at footnote 22 and discussion in Chapters II and III. 1115 Pemsel’s case [1891] AC 531, 541 (Lord Chancellor Halsbury).
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hasten to add that categorisation is of great utility. I will soon argue for a classification of forms of public benefit as a solution to the problems discussed earlier. 1116 Classification follows definition of the genus, though, and cannot replace it.
Reading each of the six opinions it is clear that each Law Lord explored the essence of charitable purpose and the identification of that which differentiates charitable from non- charitable purpose. The court was divided, but that does not mean that they were divided on the appropriate method – only on the outcome of application of the common law method to the facts. The majority comprised Lord Watson, Lord Herschell, Lord Macnaghten and Lord
Morris. In dissent were the Lord Chancellor and Lord Bramwell. Not one of these Law
Lords proceeded by analogy with purposes listed in the Preamble . This was even though it was observed that the Preamble had become a list or chart or chart of purposes considered charitable. 1117 Nor did any Law Lord rely upon the ‘four principal divisions’. They all applied usual principles of legal reasoning. 1118 The opinions focus on two things in exploring the concept of charitable purpose at law. Importantly:
a. the centrality of public benefit; 1119 and
b. the antecedent jurisprudence anchored in the concept of the pious use. 1120
None of the Law Lords, in contrast with the problems listed in Chapter III, opined that the
Preamble does anything other than set out the context of the Statute of Elizabeth . None
1116 See Chapter II Section 5. 1117 Pemsel’s case [1891] AC 531, 581 (Lord Macnaghten). 1118 Pemsel’s case [1891] AC 531, 551-552 (Lord Chancellor Halsbury dissenting), 561 (Lord Watson), 564 (Lord Bramwell also dissenting), 573 (Lord Herschell), 583-584 (Lord Macnaghten), and 592 (Lord Morris). 1119 All agreed on the centrality of benefiting others, particularly poor persons, to the concept of charitable purpose. The controversy was whether public benefit extended to evangelisation of the heathen. See Pemsel’s case [1891] AC 531, 541, 552 (Lord Chancellor Halsbury) 556-557 (Lord Watson); 564-566 (Lord Bramwell also dissenting); 571-573 (Lord Herschell but note rejection of limitation for public good at 572); 583-584 (Lord Macnaghten); and 592 (Lord Morris). 1120 Pemsel’s case [1891] AC 531, 549 (Lord Chancellor Halsbury agreeing with Lord Watson on application and interchange of pious and godly in charitable purpose but not as to the extent of its application); 558-559 (Lord Watson); cf 564 (Lord Bramwell also dissenting but arguably, in agreeing with Lord Chancellor Halsbury, accepts Lord Watson’s analysis on this point – but not the extent of its application. Note, though, that Lord Bramwell defined charitable purpose without any reference to motive); 572 (Lord Herschell ‘compassion and sympathy’); 580-581 (Lord Macnaghten); and 592 (Lord Morris).
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considered that it contained the definition of anything in particular of charitable purpose – at most the Preamble was affirmed as an index or chart. 1121
Only Lord Bramwell (who was in the minority) attempted a comprehensive definition of charitable purpose. 1122 The majority were content to decide that religion was within the scope of the popular and legal definition. The majority pointed to characteristics of charitable purpose and reasons why advancement of religion was within those particular characteristics. The ‘four principal divisions’ were not treated as a classification but an illustration of the central issue in the case, which was that the advancement of religion is clearly within the scope of the operation of the doctrine of charitable purpose. 1123 This is illustrated by Lord Macnaghten himself who, in the critical section of his reasons so often quoted observed:
Many people, I think, would consider a gift for the support of a lifeboat a charitable gift, though
its object is not the advancement of religion, or the advancement of education, or the relief of the
poor. And even a layman might take the same favourable view of a gratuitous supply of pure
water for the benefit of a crowded neighbourhood. But after all, this is rather an academical
discussion 1124
So, whilst the ‘four principal divisions’ are clearly integral to the ratio decidendi of the case, they:
a. do not vitiate or replace the underlying jurisprudence that defines the jurisdiction
of courts; and,
b. do not operate as a definition of either:
i. the essence; or
1121 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 4. See particularly Pemsel’s case [1891] AC 531, 542-544 (Lord Chancellor Halsbury dissenting), 559 (Lord Watson), 566 (Lord Bramwell also dissenting), 581 (Lord Macnaghten), and 592 (Lord Morris). 1122 Pemsel’s case [1891] AC 531, 563-568 (Lord Bramwell). 1123 Pemsel’s case [1891] AC 531, 557 (Lord Watson), 572 (Lord Herschell), 583 (Lord Macnaghten), and 592 (Lord Morris). 1124 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten).
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ii. the differentiating features of charitable purpose; but rather,
c. operate as declaratory that certain characteristics, namely: poverty relief;
advancement of education; and advancement of religion, are within the legal
definition of charitable purposes.
D. Two Charitable Purposes: Defining Jurisdiction and Justifying Favour
‘There is no necessary link between charitable status and tax relief,’ declared Luxton 1125 – and he is right. This is not a new idea. The need to distinguish the two different functions performed by what the law labels ‘charitable purpose’ was highlighted by Lord Chancellor
Halsbury who did not have difficulty with a broad interpretation of the doctrine of charitable purpose for defining the jurisdiction of the court for regulatory purposes as the Court of
Chancery had done, but considered a different definition should apply to the granting of favour. He opined:
Now, before proceeding to discuss the words themselves, I somewhat protest against the
assumption that the alternative is to be between a popular and what is called a technical meaning,
unless the word "technical" itself receives a construction different from that which is its ordinary
use. There are, doubtless, some words to which the law had attached in the stricter sense a
technical meaning; but the word "charitable" is not one of those words, though I do not deny that
the old Court of Chancery, in enforcing the performance of charitable trusts, included in that
phrase a number of subjects which undoubtedly no one outside the Court of Chancery would have
supposed to be comprehended within that term. The alternative, therefore, to my mind may be
more accurately stated as lying between the popular and ordinary interpretation of the word
"charitable", and the interpretation given by the Court of Chancery to the use of those words in the
statute of 43 Elizabeth. 1126
The Lord Chancellor was, then, of the opinion that, for the purposes of defining jurisdiction for a taxing statute, a narrow construction of charitable purpose was appropriate but for the
1125 Peter Luxton, The Law of Charities (2001) 30. 1126 Pemsel’s case [1891] AC 531, 542 (Lord Halsbury).
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purposes of a regulating statute, a broad interpretation was in order. 1127 Now it might be said at this point that the Lord Chancellor was in the minority. All of the other Law Lords concurred, though, on this point that context informs charitable purpose. 1128
If all six Law Lords in Pemsel’s case allow for a flexible reading of the meaning of charitable purpose at common law, I contend that Pemsel’s case itself is authority for freedom to develop the doctrine of charitable purpose beyond the Pemselian partitioning . If it is accepted that the ‘four principal divisions’ are not fixed categories determining the technical, legal definition of charitable purpose, but rather that ‘charitable purpose ‘is used at different times in varying senses, broader or narrower’ 1129 there is a basis for at least two readings of charitable purpose – one broad and one narrow. These two different readings of charitable purpose logically follow the two quite different functions being fulfilled at law by the doctrine of charitable purpose. A broad reading logically applies to the defining of a jurisidiction which I have said is for enabling participation and regulating that participation. 1130 A second, narrow reading is appropriate in the situation where the doctrine determines entitlement to favour. This division is, I contend, a threshold. It is a threshold that Lord Cross was willing to acknowedge in observing that the definition of charitable purpose was influenced in the late twentieth century by revenue considerations. 1131 Even if it is not a division that presently informs the doctrine of charitable purpose, it is a division which can be reasoned from within the methodology applied in Pemsel’s case but not by focusing exclusively on Lord Macnaghten’s classification. Following this approach, a gift for a purpose which is not charitable, for example a gift for a superstitious or indifferent
1127 Pemsel’s case [1891] AC 531, 542 (Lord Halsbury). 1128 Pemsel’s case [1891] AC 531, 573 (Lord Herschell); 565 (Lord Bramwell); 573 (Lord Watson); 586 (Lord Macnaghten); 592 (Lord Morris). 1129 Pemsel’s case [1891] AC 531, 573 (Lord Herschell). 1130 For example this was the original intent of the Statute of Elizabeth. 1131 Dingle v Turner and Others [1972] AC 601, 625, but note that the majority expressly rejected this. J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 3. It has been explicitly acknowledged as relevant in Canada. See AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42.
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purpose, could be recognised as a purpose gift but entitlement to the favours available to charitable purpose trusts could be declined. 1132
The point has been reached where I have argued that regulating can be separated from favouring as a logical development of the common law traceable to the opinions in Pemsel’s case . In the next two sections I set out a basis for replacing reference to the spirit and intendment of the Preamble with reference to altruism and the absence of coercion.
Altruism and coercion are addressed separately. This is because they must be considered separately for the purposes of defining the organisations that are expressions of civil society; that is when defining jurisdiction. When the doctrine of charitable purpose determines favours it seems altruism and voluntarism are opposite sides of the same coin and may be treated as one. This point will be developed across the next two sections.
E. Reintroducing Altruism in Going Beyond ‘Spirit and Intendment’
It will be recalled that the orthodox understanding of the law is that for a purpose to be charitable at law, it must fall within one of the four heads of charitable purpose listed by
Lord Macnaghten in Pemsel’s case and be for public benefit. 1133 The four heads of charitable purpose were distilled from the Preamble 1134 and charitable purpose remains defined by reference to the spirit and intendment of the Preamble and public benefit. I suggest that theory has reached a point where the characteristics of voluntarism and altruism can replace the reference to ‘spirit and intendment’. Recommendation 7 of the Australian
Charities Definition Inquiry was: ‘That the public benefit test be strengthened by requiring that the dominant purpose of a charitable entity must be altruistic.’ 1135 This is not enough,
1132 Morice v Bishop of Durham (1805) 10 Ves Jr 522; see too Adam J. Hirsch, 'Bequests for Purposes: A Unified Theory' (1999) 33 Washington and Lee Law Review 33, 62. 1133 See discussion at Chapter II part 2. 1134 The text of the Preamble was set out in Chapter I. 1135 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 14.
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though, because the absence of coercion is an equally important complementary variable for both defining scope and for acting as a gateway to favour.
Turning then to altruism, and leaving the absence of coercion to the next section, it will be recalled Lord Macnaghten opined that the foundation of the concept of charitable use is not in the categories he listed, nor in the Preamble per se but in ‘the piety of early times’. 1136
This piety, and its expression through pious uses or charitable purposes, is as important to the concept of charitable purpose as public benefit. He continued:
… no one I think who takes the trouble to investigate the question can doubt that [the law of
charities] was recognised and the jurisdiction established before the [Statute of Elizabeth] and
quite independently of that Act. The object of that statute was merely to provide new machinery
for the reformation of abuses in regard to charities. 1137
In Chapter III, it was noted that the poetic antecedents of the text of the Preamble have interested jurists. What is remarkable is that the law that lay behind it has not. As the author’s of Tudor on Charities pointed out, by looking to the Preamble ‘and not behind it, the courts have built up a great body of case law’.1138
What then was behind the Preamble ? The relevant law prior to the Statute of Elizabeth was organised around a relatively simple concept of the pious use. Defining ‘pious use’ in the context of the law as it was before the passing of the Statute of Elizabeth is not as simple as may be thought at first. That is not because a simple legal definition cannot be set out, but rather because the bare definition without explanation denudes the idea of its very essence.
It must be remembered that the idea of charity in the Preamble was an idea anchored in notions of civil relations which preceded the present property rights discourse. It may seem
1136 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten). 1137 Pemsel’s case [1891] AC 531, 581. 1138 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 13.
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strange to the twenty-first century citizen of a common law country to be focused on the use to which something is put rather than on the title or right to use. There is now a widely accepted belief that once something is ‘owned’ the owner may do as he or she pleases with it, regardless of moral constraints. 1139 The concept of pious use belongs to a different moral frame. It developed in a community where philosophical, theological and legal debates were not over the absolute right to private property, but rather whether it was possible to be property-less as the Franciscans claimed. 1140 The use to which something was put, and in particular whether it was a pious use, was a defining question in this context. The foundations for the ideas are no doubt Christian 1141 and the following quote from Augustine, in a less well-known work directed to widows, exemplifies the expectation. He wrote ‘but in you let the love of riches grow cold, and let a pious use of what property you possess be directed to spiritual delights, that your liberality wax warm rather in helping such as are in want than in enriching covetous persons’ .1142
Both words, ‘pious’ and ‘use’ are important. The ‘use’ must be directed to others who are in need. The motive must be ‘liberality’ which is contrasted with the self-interested ‘love of riches’ but this motive is known by its application of property to uses that benefit others. It is fundamentally a focus on the supply side of the transaction but the reason for supply is manifest in the form of beneficiary to whom the transfer is made. A twentieth century Pope illustrated the continuance of the concept and the ideas behind it:
It is very important for these words to sink deep into the mind of every priest. If someone owns
things that are rightfully his, let him be careful not to hang on to them greedily. Instead he should
1139 Matthew Turnour, 'The Stewardship Paradigm' (School of Humanities, Queensland University of Technology, 1999), 48. 1140 Paul Vincent Spade, William of Ockham (2006) Stanford Encyclopedia of Philsophy
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remember that the prescriptions of the Code of Canon Law dealing with church benefices make it
clear that he has a serious obligation "to use superfluous income for the poor or for pious causes."
May God grant that no one of us ever lets that terrible sentence that the parish priest of Ars once
used in rebuking his flock fall on him: "There are many people keeping their money hidden away
while many others are dying of hunger." 1143
Charitable trusts understood in this context are vehicles for legl title – ownership – so that pious purposes – motives – can be carried into effect. It was this vehicle – a charitable trust
– that the benefactor, Bates created that gave rise to the contest in Pemsel’s case. In such a context it is not surprising that Lord Watson, whose reasoning was accepted by a majority on this point, 1144 found not just public benefit, but also ‘pious’ motive to be integral to the concept of charitable purpose at law. He opined:
So far as I am able to discover, "godly" and "pious" as applied to trusts or uses, had, in early times
much the same significance in Scotland as in England. Their meaning was not limited to objects
of a religious or eleemosynary character, but embraced all objects which a well-disposed person
might promote from motives of philanthropy. 1145
Lord Watson continued to explain with examples that the epithet ‘godly’ was applied to a gift by Queen Mary of lands and annual rents for sustentation of the ministry within the burgh of Edinburgh and the entertainment of its hospitals. In relation to the word ‘pious’ he gave three examples: ‘the building and repairing of bridges, repairing of churches or entertainment of the poor’ and referred also to the case of Lord Saltoun v Lady Pitsligo where ‘the Court of Session held that the repair of a public harbour was a pious use’ within the meaning of the relevant legislation. His point was clear: if a ‘well-disposed person’ was
1143 Papal Encyclicals, Sacerdotii Nostri Primordia, Encyclical of Pope John XXIII On August 1, 1959 (2000-2008) Papal Encyclicals Online
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motivated by ‘philanthropy’ the courts could find charitable intent as the traditional conception of pious use or godliness had broad application. Lord Watson did not, though, just point to motives of philanthropy leading to the provision of physical needs but also those motives could be to make contributions to religious, 1146 intellectual and moral culture. 1147
Like Lord Watson, Lord Herschell, whilst agreeing with Lord Macnaghten, wrote his own opinion. He, also, did not categorise charitable purposes but referenced a motive of benevolence as integral to charitable purpose. He held:
I think, then, that the popular conception of a charitable purpose covers the relief of any form of
necessity, destitution, or helplessness which excites the compassion or sympathy of men, and so
appeals to their benevolence for relief. 1148
Lord Herschell continued:
Nor am I prepared to say that the relief of what is often termed spiritual destitution or need is
excluded from this conception of charity. On the contrary, no insignificant portion of the
community consider what are termed spiritual necessities as not less imperatively calling for
relief, and regard the relief of them not less as a charitable purpose than the ministering to
physical needs; …It is a mistake to suppose that men limit their use of the word "charity" to those
forms of benevolent assistance which they deem to be wise, expedient, and for the public good.
There is no common consent in this country as to the kind of assistance which it is to the public
advantage that men should render to their fellows, or as to the relative importance of the different
forms which this assistance takes. …1149
My point, then, is that pious uses or charitable purposes are not just public benefiting purposes. They also have as a central dimension, motive to serve others which is not the
1146 Pemsel’s case [1891] AC 531, 558 (Lord Watson). 1147 Pemsel’s case [1891] AC 531, 561 (Lord Watson). 1148 Pemsel’s case [1891] AC 531, 571-572 (Lord Herschell), emphasis added. 1149 Pemsel’s case [1891] AC 531, 571-572 (Lord Herschell), emphasis added.
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orthodox reading of the law as it presently stands.1150 Ignoring motive is justified under the doctrine of charitable purpose by focusing entirely on the side of the recipient – the demand side – not on the supplier, but abandoning that focus to look at the supply side as well as the demand side overcomes the problems which flowed from focus on public benefit alone. It is an approach that has assisted economists and can assist lawyers in like fashion. It is, I suggest, an essential step in bringing clarity to the gatekeeping function of access to favours.
It is critical, I contend, that the motive for supply of a charitable good be for the benefit of others. To this I will add in the next section that it also be voluntarily provided.
Returning to literature discussed in Chapter V, altruism, it will be recalled, was argued by people such as Atkinson to be the continental divide between the businesses and civil society organisations. 1151 The non-distribution constraint is accepted as the defining feature, at least in the context of economic analysis of civil society organisations. If the non-distribution constraint is considered to be an expression of a very broad form of altruism, then for analytical purposes there is one characteristic – altruism – as a unit for analysis. If altruism is accepted as a rough equivalent of pious use, there is, then, a characteristic drawn from and embedded in the jurisprudence which identifies the uniqueness of the space without reference to the ‘spirit and intendment’ of the Preamble or the four heads of Pemsel’s case.
The Preamble no longer has any legislative force in Australia, 1152 Canada and other common law countries and the time has come to let it go. 1153 If the quest for the ‘spirit and intendment’ of the Preamble is replaced in part by altruism, and if the economic and social sciences have methods of identifying and possibly even measuring altruism, then jurisprudence can draw upon those insights to shape the development of the law in this area.
I conclude this section noting that just as the ‘spirit and intendment’ did not stand alone, but
1150 J Warburton, D Morris and N F Riddle, Tudor on Charities (2003) 7. 1151 See Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501. 1152 For discussion of history generally see: Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 44-57. 1153 See also Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] 1 SCR 10 particularly Gonthier J dissenting at 32, 40 and Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 200- 204 (Kirby J).
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operated in collaboration with public benefit, so altruism does not stand alone, but works in conjunction with public benefit. I suggest a third dimension; the absence of coercion is also needed to complete the theory. Absence of coercion is now considered.
F. Reintroducing Coercion in Going Beyond ‘Spirit and Intendment’
It will be recalled that Lord Macnaghten held in that most famous part of his opinion that ‘a layman would probably be amused if he were told that a gift to the Chancellor of the
Exchequer for the benefit of the nation was a charity’. 1154 It is not an absolute rule that a gift to government cannot be charitable. Lord Chancellor Halsbury in Pemsel’s case cites a number of authorities to that effect. 1155 In Re Cain ,1156 a gift to the government of the State of Victoria Department of Health was held to be for a charitable purpose. Nevertheless there is a clear dividing line between organisations pursuing charitable purposes and government at common law. 1157 Charitable purpose is characterised by voluntariness. It is the motive for the gift not the manner in which the public is benefited that distinguishes charitable from government purposes. Justice Gonthier summarised the law on this point in Vancouver
Society of Immigrant Women:
Two central principles have long been embedded in the case law. Speaking of the existing Pemsel
categories, Rand J. observed …, that "the attributes attaching to all are their voluntariness and,
directly or indirectly, their reflex on public welfare". These two principles, namely, (1)
voluntariness (or what I shall refer to as altruism, that is, giving to third parties without receiving
anything in return other than the pleasure of giving); and (2) public welfare or benefit in an
objectively measurable sense, underlie the existing categories of charitable purposes, and should
be the touchstones guiding their further development. 1158
1154 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten). 1155 Pemsel’s case [1891] AC 531, 544. 1156 In re Cain (decd); The National Trustees Executors Agency Co of Australasia Ltd v Jeffrey [1950] VLR 382, 387. 1157 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168. 1158 Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 57-58.
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Justice Gonthier effectively equated voluntariness and altruism and I suggest that nothing is lost by referring to voluntariness and altruism as coterminous when considering the role of charitable purpose as one of determining favour . For theoretical clarity, though, when defining civil society organisations for the purposes of enabling or regulating, I contend it is helpful to keep them separate.
If the provision of a good is coerced then it is not supplied charitably. How much coercion is tolerable, though, for a purpose to remain charitable? Some funding and perhaps some contributions of time flow from coercion. A most obvious example is where civil society organisations pursuing community service purposes are entirely funded by government and subject to detailed compliance requirements and directions (set out in the form of a contract or other form of arrangement). 1159 Does this remove the requisite voluntariness? In
Australia, at least, the level of independence needed for charities to be distinguished from government would seem to be low. 1160 The outcome of that debate, too, will shape the form of favour. If the law compels membership of professional associations like a law society or trade union membership, is that law society or trade union a civil society organisation? How do we judge these things? The answer, I propose, is that there must be a continuum and the criterion will not be fundamentally different from that applied when considering altruism.
The difference is that test will be voluntariness as identified by absence of coercion not altruism as evidenced by absence of self-interest. At some point or points between the entirely voluntary pursuit of purposes and entirely coerced pursuit of those same purposes, a threshold will be crossed. That threshold will mark the boundary between civil society and government.
The supply side variables are capable of measurement in a way that reference to the spirit and intendment is not. It will be recalled from Chapters V and VI that altruism and coercion
1159 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168, 181. 1160 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2006) 228 CLR 168.
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can be identified and measured. This is not to oblige theory development to move to complex measurement. I suggest that for theory development it is enough to simply decide that the motive is charitable in a particular case. I leave open the possibility that at a slightly more sophisticated level altruism and voluntariness might also be measured on a continuum and inform the basis for favour. The possibility of legislators drawing upon quantitative analysis of both altruism and voluntariness when determining tax law is possible under this approach. This is because altruism could be measured in some way. Coercion could be identified by reference to such things as the capacity to oblige participation, to require allocation of funds to particular objects, or compel delivery of charitable goods. These possibilities will be explored in the final chapter.
What though of the role of voluntarism in defining the gateway to favours? If altruism and voluntarism can be conceptualised as on a continuum then jurisdictions may differ as to the evidence of altruism and voluntarism needed to access favour. There is not, though, the classification of either altruism or voluntarism evident in the cases on charitable purpose that there is in relation to public benefit. Nor is it necessary for theory development in the context of developing a framework for entitlement to favour to go beyond stating that for a purpose to be charitable it must be an altruistic and voluntary supply. 1161 This is because public benefit is capable of carrying the burden of differentiating between charitable purposes.
Different levels of public benefit are evident in the cases for different charitable purposes.
The level of public benefit evident to establish poverty relief is less than that required to evidence advancement of education. 1162 Importantly, then, from a theoretical perspective, favour is more appropriately linked to public benefit than motive of supply. This is because it is the outcome not the intent that provides the more compelling justification for favour. In
1161 Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 57-58. 1162 Internal Revenue Commissioners v Baddeley [1955] AC 572, 591 (Viscount Simmonds).
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the next section public benefit is discussed principally as a framework for determining access to favour.
G. Reintroducing Public Benefit as a Justification for Favour
In this section I take up the topic of public benefit. I have already discussed how public benefit can be used to mark out the boundary between civil society organisations and other forms of association, so I do not revisit that discussion here. In this section I suggest how public benefit might be used as a justification for favour. In constructing this argument I take it as given that there is requisite evidence of altruism and voluntariness (absence of coercion) for the organisations in question to be civil society organisations. I suggest that civil society organisations are granted favours because they meet a need for charitable goods.
Charitable goods can be segmented for jurisprudential purposes, I suggest, according to the extent and nature of the public benefit. By extent I mean the extent to which a purpose is for public benefit. By nature I mean classification into categories of public benefit according to qualities. Both of these forms of classification seem evident in the cases and I therefore endeavour to theorise both. The simpler of the two is the extent to which public benefit is evident and I begin with that. When turning to classification it is evident, though, that the extent of public benefit informs categories so the theory regarding the nature of the benefit is informed by, and builds from, the discussion of the extent of the benefit.
1. A Continuum of Public Benefit
At its simplest the extent of public benefit could be assessed on a scale similar to that proposed by Weisbrod as a ‘collectiveness index’. 1163 The greater the evidence of public benefit the greater the entitlement to favour. This is a very simple, but arguably effective, framework for progressing jurisprudential development.
1163 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 73.
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An important implication for this way of progressing, worth highlighting at the outset, is that it provides a way of addressing problems with the concept of public benefit which are compounding with statutorily added heads of charitable purpose. 1164 It will be recalled from
Chapter II, that with only four heads at common law the concept of public benefit was deeply problematised. 1165 It was not possible to state clearly what public benefit was and what it was not. The delimiters of public benefit did not work. There were problems with the levels of public benefit. These are compounded as heads are added. If there are 12 heads of charitable purpose, as is now the situation in England and Wales, 1166 and each head must prove public benefit but all are different, then how is public benefit to be theorised? In response to these problems, I suggest that it is possible to maintain one concept of benefit and to theorise it as a continuum between private and public benefit.
Such a continuum is a logical development from the hierachy which is already the accepted law set out in the charitable purpose cases. It is well established that the doctrine of charitable purpose ranked contributions to public benefit in a hierarchical way. Lord
Simonds summarised the case law on this point. He held in Gilmour v Coats :
…[W]hile in every category of legal charity some element of public benefit must be present, the
Court had not adopted the same measure in regard to different categories, but had accepted one
standard in regard to those gifts which are alleged to be for the advancement of education and
another for those, which are alleged to be for the advancement of religion, and it may be yet
another in regard to the relief of poverty. To argue by a method of syllogism or analogy from the
category of education to that of religion ignores the historical process of the law. 1167
1164 Extension of Charitable Purpose Act 2004 (Cth); Charities Act 1979 (Barbados) Volume VIII, Title XVIII, Chapter 243; Charities Act 2006 (Eng.&W) c 50; Charities and Trustees Investment Act 2005 (Scotland), and Charities Act 2008 (NI). 1165 Chapter II Section 5. 1166 Charities Act 2006 (Eng.&W) c 50, s 2(2). 1167 Gilmour v Coats [1949] AC 426, 449.
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The House of Lords reaffirmed these general principles in IRC v Baddeley where, again,
Viscount Simonds, having flagged the so-called ‘poor relations cases’ – which have such a narrow requirement of public benefit as to be ostensibly private – and having noted that ‘a different degree of public benefit is requisite according to the class in which the charity is said to fall’, 1168 went on to hold that if a purpose was to fall within ‘the fourth class’ [of charitable purpose listed in Lord Macnaghten’s judgment in Pemsel’s case ] ‘it must be for the benefit of the whole community or at least of all the inhabitants of a sufficient area.’ 1169
He warned that failure to take such a broad view of the fourth head was to fail to recognise that ‘here is a slippery slope.’ 1170
In summary, then, the common law has a long history of having one class of public benefit, but assessing it in different ways according to the charitable purpose in question. It is a logical development of the law to theorise public benefit as on a continuum and to link entitlement to favour to the extent of public benefit.
Once the concept of a continuum is accepted it does not matter whether there are three heads,
13 heads or any other number of heads of charitable purpose. The question is only where on the continuum between private and public benefit the threshold for entitlement to favour is satisfied for a particular expression of charitable purpose. For some heads, such as poverty relief, more ostensibly private benefit is acceptable as being sufficiently public to be charitable than for other purposes such as advancement of education.
2. Categories of Public Benefit.
The discussion in the last section highlighted that different expressions of charitable purpose required different levels of public benefit. What that means, stated inversely, is that public
1168 Internal Revenue Commissioners v Baddeley [1955] AC 572, 590. 1169 Internal Revenue Commissioners v Baddeley [1955] AC 572, 590. 1170 Internal Revenue Commissioners v Baddeley [1955] AC 572, 591.
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benefit is divisible into different levels having regard to the expression of charitable purpose.
In this subsection I suggest that the four ‘principal divisions’ of charitable purpose set out by
Lord Macnaghten as categories of purposes within the spirit and intendment of the Preamble can be simplified and expanded into three categories of public benefit. Those categories link to whether the benefit is ostensibly private, quasi-public or public. A number of comments will help by way of introduction to clear the ground for this construction.
First, Lord Macnaghten held the classification into ‘four principal divisions’ was
‘academical’, so, in and of themselves, his reasons provide freedom to recategorise. 1171
Second, it is often overlooked that Lord Watson and Lord Herschell, who also comprised the majority, categorised charitable puposes differently. The four principal divisions are not the only framework emanating from Pemsel’s case and it is appropriate to bear in mind the discussion of the earlier part of this chapter in this context . Third, categorising is, in law as much as in any other discipline, as William James observed, ‘teleological’. Concepts are ordered and arranged having regard to the similarities or differences chosen at the particular time for the particular purpose. 1172 It follows from these three observations that given the level of dissatisfaction with the present law, 1173 revisiting the purpose of the arrangement is appropriate. Further, it is appropriate to ask, if common law courts were freed of the
Pemselian partitioning as the organising idea, and returned to the underlying jurisprudence, as I contend they may, then what architecture would best suit those developments? Put differently: if the organising is ‘teleological’ and ‘the ground of conception, varies with the end we have in view’ 1174 then what is the purpose of organising charitable purpose?
Charitable purpose is a legal tool, I suggest, to provide a way of addressing society’s concerns, including those that were set out in Chapter II. Returning to those challenges, it
1171 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten). 1172 William James, The Principles of Psychology (first published 1890, 1991 ed) 670. 1173 See discussion in Chapters I, II and III. 1174 William James, The Principles of Psychology (first published 1890, 1991 ed) 670.
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will be recalled that the issues were divided into two broad classes: issues that have to do with the preservation of space free from government and issues that have to do with entitlement to favour for civil society organisations. I focused on the first of these in Chapter
VII so now put those aside for present purposes. It is the second set of challenges that determine the purpose of the organising – how to organise entitlement to favour, and how to justify favour - that is the concern of this section.
Recalling the insight of the late twentieth century, French philosopher, Michel Foucault and his image of things spread out on a table and arranged to conceptualise the way people bring order to things I suggest that the charitable purposes cases can be re-organised into three categories. I contend that favour is extended to civil society organisations when they supply charitable goods:
1. that Deal with Disadvantage;
2. that Encourage Edification; or
3. that Facilitate Freedom.
Across the next three subsections I will explain what I mean by these terms and why they are collectively exhaustive although not mutually exclusive categories.
H. Towards an Alternative Classification
1. Beyond Relief of Poverty to Dealing with Disadvantage
Relief of poverty is the first head of Pemsel’s case but conceptually poverty is but one form of disadvantage. There are many forms of disadvantage and addressing these is frequently recognised as the pursuit of a charitable purpose. Why is this so? I contend it is because by dealing with a disadvantage, such as relieving poverty, the citizen helped is able to enjoy equally with other citizens the benefits and burdens of citizenship in a common law country.
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The foundation of the common law’s jurisprudential obligation to equality under the law is, according to Brooks, traceable to Cicero. 1175 If the common law is taken to have a commitment to equality, then granting favours to those who voluntarily relieve and prevent poverty and thus assist the weak to join with the strong in society is to encourage that which the law itself deigns. As the French Declaration of the Rights of Man put it: ‘[A]ll citizens, being equal in the eyes of the law, are equally eligible to all dignities and to all public positions and occupations, according to their abilities, and without distinction except that of their virtues and talents. 1176 It becomes a function of citizens of goodwill to endeavour to lift all other citizens up so that they may enjoy that equality. This form of charitable good I call
Dealing with Disadvantage.
When Dealing with Disadvantage by the supply of goods, it is enough to supply private goods to individual persons at a disadvantage. Relief of poverty is the Pemselian genesis of this category but it is not appropriate to limit the category of relief of poverty because poverty is but one kind of disadvantage. The broader class of organisation recognised as
Dealing with Disadvantage would include ‘open and nondiscriminatory self help groups’, added by statute to the list of charitable purposes in Australia 1177 for federal purposes only, and ‘the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage’ added by statute in England and Wales. 1178 It is possible and, I contend preferable, to reframe the category more broadly to Dealing with
Disadvantage.
So whilst relief of poverty is the head of the doctrine of charitable purpose from which this category is developed, the category goes beyond relief of poverty to the supply of the goods that enable those at a disadvantage to enjoy equally with other citizens the basic rights and
1175 Christopher W Brooks, Lawyers, Litigation and English Society Since 1450 (1998) 208. 1176 The Declaration of the Rights of Man 1789. 1177 Extension of Charitable Purpose Act 2004 (Cth) ss 4-5. 1178 Charities Act 2006 (Eng.&W) c 50, s 2(2).
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obligations of citizenship in society. The charitable purpose cases relating to poor relations and poor employees suggest that as the law presently stands, when Dealing with
Disadvantage, the goods supplied may be private goods and the transferee could be a relative or an employee.
It is important though to recognise that the class is confined to persons at a disadvantage. It will be recalled from Chapter II that one of the problems with the Pemselian purpose known as relief of poverty was that it could be invoke if someone had to ‘go short’ in the ordinary acceptation of that term, due regard being had to their status in life.’ 1179 Within this alternative jurisprudence disadvantage must be established sufficient to invoke the law’s intervention to advance equality.
Beyond advancing equality there is a second reason why dealing with disadvantage, even for only one person, is for public benefit in twenty-first century common law countries. It is because governments in most common law countries take responsibility for this seemingly private provision by welfare payments. At the most basic level, therefore, the public benefits by government not having to supply this need. It makes sense, then, that the law would favour organisations which are the vehicles for Dealing with Disadvantage – at least to the extent that this reduces the burden on government. This argument is at its clearest in the context of the supply of private goods but it applies generally to all goods supplied by civil society organisations that would otherwise have been supplied by goverment. As Ware succinctly summarised: ‘charities are an excellent instrument for making government cheaper’. 1180
There is then one category: Dealing with Disadvantage. Dealing with Disadvantage does not, though, cover the field of charitable purpose. There is a need for at least one other
1179 Re Coulthurst [1951] Ch 661, 666. 1180 Alan Ware, Between Profit and State (1989) 142.
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category of purpose that goes beyond the supply of private goods that Deal with
Disadvantage.
2. Beyond Advancement of Education to Encouraging Edification
Advancement of Education is the second head of charitable purpose drawn from Lord
Macnaghten’s opinion in Pemsel’s case but conceptually advancement of education is but one purpose that finds expression in the supply of quasi-public good that benefit ‘the rich as well as the poor’. 1181 I suggest that advancement of education, and many of the other purposes that are recognised as charitable purposes under the fourth head are recognised because they belong to a broad category of goods that edify society. If that is so then a category of purposes that centre on community development by the provision of quasi public goods that ‘benefits the rich as well as the poor’ 1182 is required. Lord Watson identified the class with reference to ‘intellectual and moral culture’ and seems to include advancement of religion within it. 1183 I call this category ‘Encouraging Edification’. To fall within this category a purpose must demonstrate that its advancement leads to a greater measure of public benefit than Dealing with Disadvantage. Encouraging Edification calls for greater publicness in either the good supplied or the class of recipient. For a purpose to be within this category the enjoyment of the benefit must be ‘socialised’ to at least subsections of communities which are sufficiently large to be considered public. 1184 Purposes that involve the provision of social goods such as public art and other cultural activities, are examples of this. I theorise that it also involves the provision of physical infrastructure that literally
‘edifies’ a community of which the Bridges Portes Havens Causwaies … Seabanks and
Highewaies’ enumerated in the Preamble 1185 are the exemplar and of course the twenty-first century equivalents of such infrastructure such as, public libraries and museums.
1181 Pemsel’s case [1891] AC 531, 583-584 (Lord McNaghten). 1182 Pemsel’s case [1891] AC 531, 583-584 (Lord McNaghten). 1183 Pemsel’s case [1891] AC 531, 557-559 (Lord Watson). 1184 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 565-66. 1185 Preamble to Statute of Charitable Uses 1601 (Eng.&W) 43 Eliz c 4.
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The socialisation of goods suggests communal sharing and so I suggest that favouring purposes that pursue this edifying role is justified because it advances fraternity . I suggest advancement of fraternity must at least include purposes that edify the ‘intellectual and moral culture’ and advancement of religion is justifiable on this basis. 1186
Fraternity is a value that may take different forms in different common law countries.
Montesquieu noted and it is worth remembering that ‘[t]he laws of education will be ... different in each species of government: in monarchies they will have honour for their object; in republics, virtue; in despotic governments, fear.’ 1187 Applying this observation to the current debate over the supply of charitable goods, the point is that what a particular community will wish to encourage and consequently how it justifies favour will vary according to its form of government. It will be recalled from the discussion of altruism, that different nations value public goods differently. Some contribute strongly to overseas aid and others to blood donation. 1188 The level of public benefit needed to satisfy particular aspects of this class, will therefore be expected to vary between common law countries. The broader principles that will be consistent, though, are that to be entitled to favour under this head, a civil society organisation must benefit people which means at least a sub-community of the community, not just an individual person. Second, and importantly, in the case of
Encouraging Edification, the charitable good supplied may be enjoyed by the rich as well as the poor (as the object is advancement of fraternity not equality). 1189 Having regard to the economic discourse in such a context, it could be required that the good supplied be both non-rivalrous and non-excludable for the civil society organisation to be entitled to favour on the basis of Encouraging Edification.
1186 Pemsel’s case [1891] AC 531, 557-559 (Lord Watson). 1187 Baron Charles De Montesquieu, The Spirit of the Laws, Great Books of the Western World (Thomas Nugent trans, first published 1748, 1992 ed) 13. 1188 See pages 189-191. 1189 See Pemsel’s case [1891] AC 531, 583-584.
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This class of Encouraging Edification is the logical development I contend of the third head of advancement of education and an over extended fourth head. It will be recalled from
Chapter II that elephant rides by children were included within the third head. It will also be recalled that the fourth head is simply a grab bag overflowing with purposes that clearly benefit larger groups of people. I mentioned that the Pemselian purpose of advancement of religion could be subsumed in this general category of Encouraging Edification. It seems to me though, that there is a broader function that religion plays, and more generally, that all of the purposes recognised as charitable cannot be adequately explained within the categories of
Dealing with Disadvantage and Encouraging Edification. Accordingly I propose a third class which I call Facilitating Freedom.
3. Beyond Advancement of Religion to Facilitating Freedom
As Dealing with Disadvantage and Encouraging Edification focus principally on the provision of goods that are either tangible or find tangible expression, but the charitable purpose cases and statutory extension clearly include spiritual and less tangible benefiting purposes, I propose a third category that begins from, but builds beyond, the advancement of religion.
This category, I contend, may be seen through the wide angle lens of freedom under the rule of law. I theorise that it extends beyond organisations pursuing the advancement of religion, to other civil society organisations that similarly contribute to the common weal. This argument – that it is possible to move beyond advancement of religion to a broader class of organisations that contribute to the common weal by fortifying the foundations of society – is developed from the role of religion in society. As Tocqueville observed with reference to the role of religion in the United States: ‘Thus, while the law permits the Americans to do what they please, religion prevents them from conceiving, and forbids them to commit, what
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is rash or unjust.’ 1190 His point was that religion operated as a moral restraint on unbridled freedom to ensure that people in that newly democratic nation exercised their liberty as they should; that is, having regard to others.
Three nineteenth century American cases discussed by Picarda 1191 ground the charitable function of advancement of religion and the role religion plays in encouraging concern for others and self restraint. This is because these qualities are essential to civilisation and the welfare of society. In Holland v Peck the court held that religion was ‘the surest basis on which to rest the superstructure of social order.’ 1192 In People ex rel Seminary of Our Lady of Angels v Barber religion was described as necessary to the advancement of civilisation and the promotion of the welfare of society’. 1193 In Gass and Bonta v Wilhite it was held that religion is a 'valuable constituent in the character of our citizens’. 1194 In such a context, advancement of religion is recognised as a charitable purpose enjoying the favour it does because of its role in underpinning the social order and creating social cohesion. 1195 These ostensibly charitable purpose cases, read in the context of the common law history set out in the previous chapter, point to advancement of religion cases forming part of a wider stream of common law jurisprudence related to the foundations of society. It is not just the
American judges and Picarda who draw this connection. 1196 Chief Justice Gleeson of the
High Court of Australia is reported to have declared similarly that ‘religion continues to be relevant in Australian society because it provides a bridge between “private conscience” and
“the general acceptance of values that sustains the law and social behaviour.”’ 1197 The
1190 Alexis de Tocqueville, Democracy in America, Great Books of the Western World (George Lawrence trans, first published in 1835, 1992 ed). 1191 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 84. 1192 Holland v Peck (1842) 37 NC 255, 258. 1193 People ex rel Seminary of Our Lady of Angels v Barber (1886) 3 NY St Rep 367 affirmed in (1887) 13 NE 936. 1194 Gass and Bonta v Wilhite (1834) 32 Ky 170, 180. 1195 Patrick M Garry, 'Religious Freedom Deserves more than Neutrality: The Constitutional Argument for Non-Preferential Favouritism of Religion' (2005) 57(1) Florida Law Review 1, 12. 1196 H Picarda, The Law and Practice Relating to Charities (3 rd ed, 1999) 84. 1197 H R Sorensen and A K Thompson, 'The Advancement of Religion is Still a Valid Charitable Object' (Paper presented at the Charitable Law in the Pacific Rim Conference, QUT, October 2001) 15.
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Nathan Report of 1952-53 pointed to a similar connection. 1198 Analogous observations were made by the Australian Charities Definition Inquiry .1199
That religion operates as a force obliging people to be good and thus underpins society is anchored in a widely accepted proposition that even though there is a great diversity of belief amongst religions, in the out-workings of behaviour, all of the major religions teach the equivalent of what is known in most common law countries as the golden rule. The golden rule which is often articulated as, ‘do to others as you would have them do to you’ 1200 exhorts adherents to behave altruistically. The consequence is an argument that religion provides a glue that binds society together voluntarily into community of citizens – a polis in the classical Greek sense or civitas in the Latin expression. The effect of such a voluntary binding together is that it reduces the need for coercive compliance though enforced law. It also provides the substrate for voluntary concern for others as religious messages ‘conveyed from pulpits and in numerous publications’ are effective at ‘invigorating ... informal giving and support’ even if ‘not wholly consistent’. 1201 Focused on guilds in the Middle Ages, but with an eye to the present, Richardson has underscored the role religion plays in ‘bringing individuals together’ in voluntary associations that ‘fostered trust’ and ‘cooperation’. In such a context, ‘[c]oercion hovered in the background to force the recalcitrant to contribute their share and to reassure the compliant’, but it was the religion that unified. 1202
This role of religion arguably underpins the judicial pronouncement by Lord Cross, that the law ‘assumes that any religion is at least likely to be better than none.’ 1203 This role for
1198 See Charitable Trusts Committee (UK), Report of the Committee on the Law and Practice Relating to Charitable Trusts , Cmd 8710 (1952-53). 1199 See Gino Dal Pont, Charity Law in Australia and New Zealand (2000) 148, adopted by the Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 175. 1200 The Holy Bible New International Version (1984) Luke 6:31. 1201 Ilana Krausman Ben-Amos, The Culture of Giving: Informal Support and Gift-Exchange in Early Modern England` (2008) 14 and chapter 7. 1202 Gary Richardson, 'Craft Guilds and Christianity in Late-Medieval England' (2005) 17(2) Rationality and Society 139, 177. 1203 Neville Estates Ltd v Madden [1962] 1 Ch 832, 853.
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religion also seems acknowledged by the famous humanists Ariel and Will Durant, who observed that no society has yet formed a way of developing morality without reference to religion. 1204 In a legal context Lord Devlin, has noted that no society has yet solved the problem of how to teach morality without religion. 1205 My point in setting this out is not to argue the polemic point over the virtue or otherwise of religion, but to anchor advancement of religion as a purpose warranting favour upon its intangible but integral contribution to public benefit. Further, it is to argue that that contribution is fundamentally rooted in its role as a moral restraint upon licence so that people voluntarily choose to be good and do good and this increases liberty. This is because if people willingly choose to be good and do good, they do not need to be coerced not to do bad and therefore, there is less coercive law required in that society. Less coercive law means more freedom. The advancement of religion is therefore favoured in its own right, differently from any role religious organisations play in
Dealing with Disadvantage or in Encouraging Edification. This justification of favour rests on the role that organisations that advance religion play in encouraging people to be good and do good and this facilitates freedom .
If this proposition is accepted – that advancement of religion is favoured at least in part because advancing religion facilitates freedom – it is the facilitating of freedom that is favoured not just the advancement of religion. The next step in developing a cohesive jurisprudence that explains a more general basis for favouring advancement of religion and providing a basis for going beyond this Pemselian purpose is to anchor the basis for favouring organisations that advance religion in one dimension of freedom recognized by law; namely the freedom to associate.
1204 Will Durant and Ariel Durant, Rousseau and Revolution: A History of Civilization in France, England and Germany from 1756 and in the Remainder of Europe from 1716 to 1789, Story of Civilization (1967) 184. 1205 Patrick Devlin, The Enforcement of Morals (1965) 42 .
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Now it might be that a common law country takes the view that the two are coterminous.
That is that the whole space for facilitating freedom is occupied exclusively by advancement of religion. It might be thought, that without the centrality of piety and other-centredness taught by (the Christian) religion that underpinned the common law, there would not be a justification for extending benefit. But that need not be so. For present purposes, it is enough to suggest that the concept of advancement of religion can be expanded to a broader concept. If this is accepted then the following purposes defined as charitable purposes by the
Charities Act 2006 (Eng.&W) s 2(2) could be said to fall within this broader class.
1. the advancement of citizenship or community development; and
2. the advancement of human rights, conflict resolution or reconciliation or the
promotion of religious or racial harmony or equality and diversity.
As these two examples from England and Wales illustrate, common law countries do favour organisations other than religious organisations that help build and sustain the infrastructure of democracy. Political parties are also favoured.1206 Given this broader classification, I contend that the simpler way to address the challenges discussed in Chapter II, regarding the impossibility of rationally distinguishing political parties and religious charities, is to accept that they both belong to this one broader class of organisations that facilitate freedom and in so doing underpin and uphold the infrastructure of a democracy. It follows that the Benefit law dimension could go beyond the advancement of religion to include a variety of civil society organisations that facilitate freedom and this could include political parties.
This understanding of the basis for favour that is founded upon, but goes beyond, the favour granted at common law to charitable trusts for the advancement of religion is enhanced by
1206 Richard Steinberg, 'Economic Theories of Nonprofit Organisations' in Walter W. Powell and Richard Steinberg (eds), The Nonprofit Sector: A Research Handbook (2 nd ed, 2006) 117, 123.
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returning to the Roman root meaning of religion. Etymologically, religion is that which binds together. It has its root in ‘ligare’ from which the English word ligament is derived. 1207
Given the inherently intangible nature of the public benefit associated with this class of favour how are the indicia of public benefit to be assessed? 1208 First it can be said, following
Cocks v Manners that organisations that are ‘adverse to the very foundation of all religion’ 1209 or ‘subversive of all morality or religion’ 1210 are not entitled to favour. This would seem foundational. Second, as the advancement of religion head of charitable purpose does not have to demonstrate public benefit as tangibly as the advancement of education so the public benefit of this head is more ephemeral. This is illustrated by comparing the following cases. In Re Watson ,1211 the foisting on the public of religious views the value of which seemingly was ‘nil’, was a charitable purpose but in Re Pinion , the
‘foisting upon the public of [a] mass of junk’ was not. 1212 It seems that the common law freedom to articulate views which are ‘in a great measure incoherent and confused’, 1213 is something warranting favourable treatment provided there is some contribution to the social and political infrastructure that sustains society in the common law country. Lord Herschell, in particular, commented on the danger of endeavouring to find a consensus on demonstrated public benefit in this context. 1214 The number of people gathered into the relevant association can be very small and yet, it would seem, there can be public benefit flowing from the association provided the congregations disperses and ‘mix with their fellow citizens
1207 Oxford English Dictionary Online, Definition of Ligament Oxford English Dictionary Online
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in the world.’ 1215 Chief Justice Barwick explained why this was so when holding that the publication of law reports was a charitable purpose. He held that the ‘public benefit lies in fortifying the foundations because a society cannot exist as such if it is not based upon and protected by justice under law: and nurtured by obedience to law.’ 1216
4. Reasons for Adopting Liberty, Equality and Fraternity
Three categories have now been proposed. I suggest that all of the charitable purposes cases can be located in one or more of these categories. I have also suggested that whilst the categories are extensions of the Pemselian purposes they are actually favoured because they advance values accepted internationally, namely liberty, equality and fraternity. Before closing this section I must address two concerns and explain why I have chosen advancement of liberty, equality and fraternity as bases for favour.
First, in relation to liberty, if a very broad reading of advancement of religion is taken at common law, is there not a risk of advancement of religion being a cloak to cover religious terrorism? The answer is: no! because the common law already has a mechanism for dealing with this problem. The common law is clear that the class of advancement of religion is not open to associations that purport to be religious but are ‘adverse to the very foundation of all religion’ 1217 or ‘subversive of all morality or religion’. 1218 At a foundational level, there are some fundamentals that almost all major religions affirm and which underpin civil society.
It would be a logical development of the common law to clarify that entitlement to favour usually afforded to organisations that advance religion is dependent upon them not actually adverse to liberty. Put in its simplest, the question of whether a religious or other association
Facilitates Freedom, and thus warrants entitlement to favour, could be determined by the
1215 Peter Luxton, The Law of Charities (2001) 179 citing Neville Estates Ltd v Madden [1962] Ch 832. 1216 Incorporated Council of Law Reporting of the State of Queensland v Federal Commisioner of Taxation (1971) CLR 659, 669; [1972] ALR 127, 133. The references are set out in context below. 1217 In Re Watson, Decd Hobbs v Smith and Others [1973] 1 WLR 1472, 1473. 1218 Thornton v Howe (1862) 31 Beav. 14.
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extent to which its purposes are to encourage adherents to exercise self restraint and obedience to the golden rule – love your neighbour as yourself 1219 – or, if the organisation does not subscribe to the Christian tradition, the secular or other religion equivalent.
Recalling the discussion in Chapter VII, the lack of public benefiting purpose does not affect the rights of the organisations to exist. That is a different issue. It does, though, affect the right to access favour. If the organisation does not have as its central purpose the advancement of the golden rule and self restraint (or its secular or other religious equivalent) then it must show how it otherwise facilitates the freedoms on which common law society rests. For the purpose of accessing favour all religions are not equal. All religions are not equal for not all encourage self restraint and the golden rule or a similar other regarding principle. This brings me to the next point.
Second, is this approach to liberty not encouraging discrimination on the basis of religion – something which the law is loathe to do? The answer to this also is no; as the basis for discrimination is contribution to public benefit. Whether or not any organisation is entitled to favour is based on contribution to public benefit and that is evidenced in the case of the well established Christian religious traditions by a long history of social contribution across a great diversity of common law jurisdictions. All religions are not equal for not all encourage self restraint and the golden rule or a similar other regarding principle. Arguably that makes it easier for traditional Christian organisations to evidence public benefit as there is a history supported by case law. My point, though, is that other small or new associations should also be considered as falling within this class of organisations and entitled to the same favour provided they too, can demonstrate purposes that Facilitate Freedom by demonstrating that their purpose is to encourage self restraint and adhere to the golden rule or a similar other regarding principle. It will be recalled from Chapter I that I mentioned that my Christian faith informed my approach and that my faith was fundamentally relational not institutional.
1219 The Holy Bible New International Version (1984) Matthew 22:38-40.
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Whilst I have proposed categories that I believe express the doctrine of charitable purpose better, I cannot avoid the observation that those categories sit comfortably with my Christian faith.
Why did I choose liberty, equality and fraternity? First and most importantly, when it came to rearranging the charitable purpose cases on the jurisprudential table in the manner suggested by Foucault, the evident similarity between these values as broader classes and the existing heads in Pemsel’s case , stood out. The large fourth head of other purposes beneficial to the community 1220 seemed to both subsume all the others and cried out for further segmentation. These factors pointed to the possibility that the heads in the Pemselian partitioning ‘are but instances’ 1221 of these broader classes. Second, recalling the discussion in Chapter VII of the capacity of the common law to be informed by the law of nations, the values have broad international acceptance. The concepts of liberty, equality and fraternity are set out in the twentieth century’s great charter of human rights. 1222 These three values have been adopted as three heads of the Charter of Fundamental Rights of the European
Union .1223 Some common law countries are signatories to that Charter and so it is easy in their case to embrace these values. The Constitution of the Republic of South Africa gives substantial expression to the sentiments. 1224 Most other common law countries are democracies and these values are at least consistent with democracy. It was adopted as the banner of the ‘social religion’ of the Enlightenment ushered in by the French Revolution. It was ultimately adopted into the Constitution of France in 1870 and remains in the
1220 See Pemsel’s case [1891] AC 531, 583 (Lord MacNaghten). 1221 Donoghue v Stevenson [1932] AC 562, 580, setting out a model for legal theory development. 1222 For the genesis of this framework see: Karel Vasak, ‘Human Rights: A Thirty-Year Struggle: the Sustained Efforts to give Force of law to the Universal Declaration of Human Rights’ (1977) 30 UNESCO Courier 11. 1223 The six heads are: dignity, freedoms, equality, solidarity, citizens' rights, and justice. http://en.wikipedia.org/wiki/Charter_of_Fundamental_Rights_of_the_European_Union. 1224 Constitution of the Republic of South Africa 1996 as adopted on 8 May 1996 and amended on 11 October 1996 by the Constitutional Assembly One Law for One Nation Act 108 of 1996; s 7 (1) provides: ‘This Bill of Rights is a cornerstone of democracy in South Africa. It enshrines the rights of all people in our country and affirms the democratic values of human dignity, equality and freedom..’
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Constitution of France today. 1225 Of these words, Pope John Paul II declared: ‘In the final analysis, these are Christian ideas.’ 1226 After almost three hundred years, those three graffiti words, those values, have become a framework for discussing the foundations of society in it spolitical expression. 1227 Second, it follows returning to case law, that if I wish to make a case that the Pemselian partitioning categories ‘are but instances’ 1228 of public benefiting purposes that people will voluntarily and altruistically pursue, that the values of liberty, equality and fraternity – which seem to be implicit and which articulate values accepted by both secular and sacred – should be made the explicit standards bearers. My third reason for adopting these values is their long history in philosophy. Adopting the phrase ‘liberty, equality, fraternity’ and bringing the ideas as individual concepts into jurisprudential discourse, explicitly enriches the debate over favour with the debates over these values that found the common law heritage. My fourth and final reason is that this approach builds a bridge between the common law and civil tradition (between two cities) by suggesting how the common law values can be expressed in civil language.
I. From Charities to Eleemosynary Corporations to Civil Society Organisations
The discussion in this chapter, to this point, has focused on purposes but those purposes must find expression through legal entities. In this section the ancient concept of eleemosynary corporations is identified as a foundation for civil society organisations in common law countries. The common law has a long history of recognising not just purpose trusts but other organisational forms by which purposes similar to charitable purposes are carried out.
The ancient concept of an eleemosynary corporation is an example of such an entity that could be rediscovered in the twenty-first century and the concept of charitable purpose could be extended to include a broader range of organisations than charities. The concept of
1225 Constitution of 4 October 1958, Article 2. 1226 Homily at Le Bourget (1 June 1980), 5: AAS 72 (1980), 720. http://www.vatican.va/roman_curia/pontifical_councils/justpeace/documents/rc_pc_justpeace_doc_20060526_compendio-dott- soc_en.html. 1227 See Leo N Tolstoy, War and Peace, Great Books (Louise and Aylmer Maude trans, first published 1889, 1992 ed), 682. 1228 Donoghue v Stevenson [1932] AC 562.
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charities as defined in the orthodox way leads back to the definition of an eleemosynary corporation, provided by Blackstone but rejected by the Privy Council, 1229 which ‘is not confined to mere relief of poverty’ and brings a broader class of organisations into the common law classification. 1230 It will be recalled that Justice Isaacs cited Blackstone as defining eleemosynary corporations, as organisations that
are constituted for the perpetual distribution of the free alms, or bounty, of the founder of them to
such persons as he has directed. Of this kind are all hospitals for the maintenance of the poor, sick,
and impotent; and all colleges, both in our universities and out of them: which colleges are
founded for two purposes; 1. For the promotion of piety and learning by proper regulations and
ordinances. 2. For imparting assistance to the members of those bodies, in order to enable them to
prosecute their devotion and studies with greater ease and assiduity. This, of course, is not
exhaustive, but is illustrative. 1231
I do not adopt the title eleemosynary corporation, and the definition is ‘not exhaustive, but is illustrative’, but if the discourse returns to this juncture it can build from it to a broad class of civil society organisations and break out of the preoccupation with charities as defined with reference to trusts in an orthodox way. Recalling the discussion in Chapter III the foundations for this development are embedded in the common law prior to the Statute of
Elizabeth.
J. Conclusion
In summary, it is possible to read Pemsel’s case in such a way as to accept the division between regulating and favouring. It is also possible to read Pemsel’s case as not compelling a reading of the Preamble through the the Pemselian partitioning which became the orthodox approach in the twentieth century. The consequence of that is that, in relation
1229 Chesterman v Federal Commissioner of Taxation [1926] AC 128. 1230 Chesterman v Federal Commissioner of Taxation [1926] AC 128. 1231 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362, 384 (Isaacs J).
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to setting out a basis for entitlement to favour , charitable purposes are those purposes pursued through a civil society organisation by which charitable goods are provided for public benefit. Charitable goods supplied for public benefit are capable of being arranged on a continuum. This enables difference of extent to be identified and helps with clarity.
Second, the nature of charitable goods can be reclassified. I propose as an example that public benefit be reclassified into three categories:
a. private goods supplied to a person for the purposes of Dealing with
Disadvantage; thereby advancing equality ;
b. quasi-public or public goods supplied to people for the purposes of Encouraging
Edification; thereby advancing fraternity ; and
c. ligaments binding the polis together which Facilitate Freedom and thus advance
liberty .
I suggest that these three categories of advancement of equality, fraternity and liberty can be utilised as bases for favour. I suggest that these classes can be more useful for discriminating between those seeking entitlement to favourable treatment based on voluntary, altruistic contributions of public benefit. It may well be that the groups are subsegmented or placed into only one category or set out on one continuum. Finally, I pointed to the ancient concept of eleemosynary corporations as an idea from which the concept of civil society organisation could be developed.
K. Postscript
This chapter opened with reflections on the confusion between Charles Darnay and the lawyer who gave his life for his client, Sydney Carton. Sydney Carton was a most unlikely hero. He was described as more like a jackal than a lion. 1232 His faults were legion but he had a singular ability which is often found in lawyers: the capacity to distil from the
1232 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 90.
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disparate and sometimes conflicting evidence an explanation that is consistent with the case being made. The next chapter is Sydney Carton’s. This and the earlier chapters, like witness statements taken in preparation for court, provide the disparate and sometimes conflicting evidence. In the next chapter, the essential information now fully extracted, is parsimoniously organised into a useful alternative theory: a jurisprudence for civil society.
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IX A JURISPRUDENCE FOR CIVIL SOCIETY
A. Preamble
Chapter II began with the image of an old Dr Manette voluntarily imprisoned and cobbling shoes. Notwithstanding this initial impression of a man past his prime and incapable of substantial contribution, Dr Manette continued a central character in Dickens’s Tale for he was, to use Dickens’s phrase, ‘recalled to life’. 1233 He was led out of that little room into a social context where there was significant foment against the way society and law were constituted. Into that context, he sought to make a significant contribution for good as he had historically and in the midst of controversy. Dr Manette remains a typology of charitable purpose in common law societies. Led out of its imprisonment behind the
Pemselian partitioning , I suggest that charitable purpose, also, can be ‘recalled to life’. 1234
Acknowledging there may be controversy and misunderstandings in its history, and yet also because of that controversial and misundertood history, charitable purpose remains a potent force for good. Like Dr Manette, charitable purpose, freed of the Pemselian partitioning , can continue to play a central role in the development of this branch of the law that serves social engagement and voluntary contribution in common law countries. This chapter suggests how.
B. Introduction
This thesis began with an observation that a jurisprudence for civil society could be seen in outline in the doctrine of charitable purpose and more distinctly, when contextualised in those branches of law that regulate and favour altruism and voluntary contributions of public benefit. This Chapter brings together the principles developed in each of the chapters discussed and so completes the argument of this thesis: that Beyond Charity: Outlines of a
Jurisprudence for Civil Society provides a framework for reconciling, into cohesive
1233 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 5-54. 1234 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 14.
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jurisprudential architecture, the laws applying specifically to civil society organisations, not just charities. Across the previous eight chapters the elements of that outline have been identified. The overarching hypothesis set out in Chapter I has been tested. A way in which the doctrine of charitable purpose could be released from the Pemselian partitioning and developed by returning to the use of usual common law method has been proposed. A way of developing the doctrine of charitable purpose into a jurisprudence for civil society has also been suggested. Further, each of the subhypotheses have also been tested.
1. It is evident from the analysis in Chapter II, that there are at least some aspects
of the doctrine of charitable purpose that warrant development.
2. It is evident from Chapter III, that the doctrine of charitable purpose is capable
of development using the common law method. The ossification of the doctrine
of charitable purpose is due to failure to appropriately apply common law
methodology. This problem can be overcome by abandoning the ‘technical’,
one-dimensional concept of charitable purpose by which:
a. charities are defined, and by which the jurisdiction of the law of
charities is determined; and
b. by which entitlement to favour is determined,
in favour of a jurisdiction derived from common law principles yet determined
by reference to civil society organisations.
3. Across Chapters VII and VIII, it has been argued that the law applying to civil
society organisations has two dimensions which correspond to the two functions
performed by the doctrine of charitable purpose. They are: first, determining
jurisdiction for the application of laws, and second determining entitlement to
favours. This broader class of civil society organisations proposed here, is still
identified by reference to charitable purposes. The charitable purposes
referenced, though, are not technically defined and entitlement to favour is also
not technically defined.
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4. Across Chapters IV, V and VI, it has been shown that the charitable purposes by
which civil society organisations are defined, are in essence purposes which are:
a. altruistic;
b. for public benefit;
c. performed without coercion.
These charitable puposes differentiate civil society organisations from the three
other organisational forms and purposes, namely:
a. business, which is manifest in the pursuit of self-interest, that is, lack
of altruism;
b. government, which is characterised by coercion, that is, lack of
voluntariness or freedom; and
c. family, which is characterised by being private not public.
5. Across Chapters IV, V and VI, it has been argued that the charitable purposes by
which entitlement to favour is determined, are those purposes pursued through a
civil society organisation by which charitable goods are supplied for public
benefit. Charitable goods supplied for public benefit are usually supplied
through a civil society organisation, and can be set out on a continuum and
arranged into alternative categories. Three alternative categories of public
benefit proposed are:
a. private goods supplied to a person for the purposes of Dealing with
Disadvantage, thereby advancing equality;
b. quasi-public or public goods supplied to people for the purposes of
Encouraging Edification, thereby advancing fraternity ; and
c. ligaments binding the polis together which Facilitate F reedom to
advance liberty .
The argument is, then, well advanced, but has not yet fully delivered on the
promise made in Chapter I, as the final subhypothesis has not been tested. It will
be recalled that the final subhypothesis was:
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6. These developments amount to the outline of an alternative jurisprudence which
warrants its own space in legal theory.
It remains then to offer outlines of a fully fledged jurisprudence for civil society. The process is undertaken in a series of steps. First the one dimensional limitations in the doctrine of charitable purpose are developed into a two dimensional space for laws that regulate participation in civil society. This two dimensional space is then developed into three dimensions to accommodate favour . A discussion of how ordinal, and possibly cardinal, units of measure might be applied within the now completely constructed framework follows. That leads to a discussion of seven ways in which this framework of a jurisprudence for civil society is superior to the law of charities. Examples of the way the framework could be applied judicially and in a policy context are offered to assist in explaining its operation. Included in these examples are definitions of charitable purpose and civil society organisation suitable for jurisprudential application. Difficulties envisioned in implementing the framework are then discussed. It remains only to locate this fully fledged alternative jurisprudence within the wider body of jurisprudential discourse. The law of charities is presently positioned in legal theory as a subset of private law. I suggest that if this alternative jurisprudence is accepted, there is a need to create space for this new body of theory between the present division of laws into public and private. A ‘third’ space in legal theory is proposed. Suggested paths for further research close the substantive discussion in this chapter, which leads into concluding comments on the thesis as a whole.
C. One Dimension: Rediscovering the heart of charitable purpose
As the common law presently stands, charitable purpose has lost its heart. It is technically defined and it is one dimensional – a civil society organisation either has a technically defined charitable purpose, or it does not. The analysis is confined to nominal measurement: to which class does an organisation belong, charitable or not charitable? This concept of charitable purpose does not provide any way of distinguishing the regulating function of law
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from the favouring. It also does not provide broad, useful categories for distinguishing types of charitable purpose further, or the extent to which the public must benefit.
In this new alternative jurisprudence, a common meaning of charitable purpose takes centre stage, and not a technical definition. The heart of charitable purpose is rediscovered. This is not achieved by abandoning the theory from which the technical meaning emerged, but rather by returning to it, and fulfilling it more completely. Second, within the class of charitable purposes there are presently the four classes: relief of poverty, advancement of religion, advancement of education, and other purposes beneficial to the community, but these classes (as presently limited) do not advance inquiry beyond ‘nominal’ measurement.
They simply assist in answering the broader question: charitable purpose or not? As presently applied, they are not useful classes for differentiating between purposes. These heads do point, however, to reasons why the common law grants favour to civil society organisations. The challenge taken up from this one dimensional approach is to develop, from within this jurisprudential space, differentiated classes that are helpful in distinguishing between civil society organisations and their others, and also for differentiating within the class of civil society organisations.
In summary then, the one dimensional mapping of the common law into charities and non- charities, following the current orthodox approach of the law of charities, is not a particularly useful categorisation for analytic purposes. It provides, though, a way of identifying essence, it points to indicia of differentiation, and it suggests characteristics of classes for more sophisticated subcategorisation. A better form of ‘measurement’ of the organisations regulated or favoured as civil society organisations would be preferable. Toward that outcome, the next two sections build from these core concepts.
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D. Two Dimensions: Rediscovering differentia
1. Introducing the Components of the Theory
In the orthodox understanding of the doctrine of charitable purpose, the regulating function was not distinguished from the role of favouring.
The scope of the regulating dimension of the jurisprudence is all of the laws that enable and regulate voluntary association for common purposes. It is the subject of this section. At the centre of the regulating dimension of the jurisprudence is the formation, conduct, regulation and dissolution of civil society organisations including (but not limited to) charities. It is necessary to define the characteristics of civil society organisations so that it is clear which organisations are within the class of organisations to be enabled or regulated, as the case may be, and which are not. Clearly it is necessary to go beyond the Preamble and the Pemsel's case categorisations for the definition, as the scope is broader than charities.
Over the last six chapters, it has been theorised that civil society organisations have as their essence charitable purpose and as their ‘others’ business, government and family. Civil society organisations are those organisations that manifest:
i. Altruism;
ii. Benefit for the public; and where
iii. Coercion is sufficiently absent for the association to be voluntary.
From the earlier chapters it was established that for the purposes of this jurisprudential analysis, altruism, benefit of others and absence of coercion, are identified by a combination of two of three factors. The three factors are:
1. The otherwise remoteness of the people associating (‘xenos’ – for convenience
labelled ‘X’);
2. The reason for associating is voluntarily to benefit others (‘why’ – for
convenience labelled ‘Y’); and
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3. The number of persons associating (for convenience labelled ‘Z’).
Altruism can be assessed by a combination of X and Y. When strangers associate to pursue purposes which benefit persons other than themselves, altruism is present. The more disparate the origins of the persons, and the more the purposes are for others’ benefit, the greater the altruism. A civil society organisation is altruistic.
Benefit can be assessed by a combination of X and Z. If a large number of people, who would otherwise be strangers, voluntarily associate then the association is public. If a small number of people associate for private purposes (such as a family gathering to celebrate
Christmas) the association is private. A civil society organisation is public benefiting.
Coercion ’s absence can be assessed by a combination of Y and Z. If the association is of a large group of person but the reason for association is coerced, then the fundamental character of voluntariness is missing. It is an arm of government. A civil society organisation is a voluntary association.
These three dimensions – altruism, benefiting the public and absence of coercion – are set out in relationship for the purpose of theory development. They are now discussed in order.
2. Altruism
In Chapter II and III, it was noted that the doctrine of charitable purpose set the boundary between charities and their other by reference to the Preamble, and its spirit and intendment; and in Chapter V, it was observed that other disciplines would look for more direct evidences of altruism. It will be recalled from Chapter V that the United Nations Handbook of National Accounting: Handbook on Non-Profit Institutions in the Systems of National
Accounts provides a method for valuing volunteer labour input, having regard to the two
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presently dominant methods of opportunity cost and market or replacement cost. 1235 As gifts of time and money are indicia of altruism and are capable of quantitative measurement they could be utilised in law as indicia of charitable purpose. I contend that the time has come to abandon reference to the spirit and intendment, of the Preamble . The reasons why the
Preamble continued to be adopted were discussed in Chapter III, but the conclusion to which
I came by the end of Chapters V and VIII, was that if there were ever legitimate reasons requiring reference to the Preamble, those reasons were no longer an insurmountable obstacle to an alternative, based solely on assessment of altruism and absence of coercion. It will be recalled from Chapter V that there was a vast array of organisational forms that all manifest altruistic purposes to differing extents. It was suggested there that the altruism, manifest in the purposes of these organisations, was not the same. Some purposes were more altruistic then others. It followed that organisations might be valued according to the extent to which they manifested altruism. A manifestation of altruism could be, for example, the source or application of resources being gifts of time or money. The ranking could be set out diagrammatically in the figure below:
Figure 5 Altruism Continuum
Charity Self interest
Altruism Continuum
It was suggested that different courts, legislators or regulators may draw upon different factors to inform them of how much, or how little, altruism was evident in a particular purpose. As Lord Macnaghten observed: ‘Many people, I think, would consider a gift for the support of a lifeboat a charitable gift,’ and ‘even a layman might take the same favourable view of a gratuitous supply of pure water for the benefit of a crowded
1235 United Nations Department of Economic and Social Affairs Statistics Division, Handbook on Non-Profit Institutions in the System of National Accounts (2003) 69. See also Matthias Benz, 'Not for the Profit, but for the Satisfaction? - Evidence on Worker Well- Being in Non-Profit Firms' (2005) 58 Kyklos 155.
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neighbourhood’ 1236 but how are judges, legislators and regulators to decide? The problem is how to measure, and possibly compare, altruism as an indicium of charitable purpose in lifesaving organisations and aquaduct service providers. There was not a universally agreed means of measurement of altruism. Factors that inform altruism and indicia of altruism capable of quantitative measurement were, however, identified. It may therefore be possible not only to rank but to quantitatively compare organisations according to the extent that they manifest altruistic purposes. Reducing the measurement to a percentage or scale of zero to
100, a continuum suited to Anheier’s civil society diamond analysis emerges. 1237
3. Benefit
It will be recalled from Chapters II and VIII that it is clear from the cases on charitable purpose that manifestations of public benefit are necessary for charitable purpose to be established and that the level of publicness in those manifestations varies within the four heads of charitable purpose set out in Pemsel’s case . The level of publicness required for advancement of religion and relief of poverty is significantly lower than that required to establish a charitable purpose based on advancement of education or the more general fourth head, other purposes beneficial to the community. It was also evident from Chapter IV that scholarship over the last 30 years has theorised public benefit, refining it significantly beyond the general proposition set out in the cases on charitable purposes. In Chapter IV it was concluded that, as with altruism, there is evidence in the literature of methods of grading or ranking publicness, and objective criteria by which publicness can be assessed. That ranking turned upon the extent to which the purpose is to benefit the public as distinct from being for private benefit. It was observed that between the completely public purposes which lie at the heart of charitable trusts, and the purposes of civil society organisations that exist entirely for the private benefit of families, lies a continuum of publicness. At one extreme is the most public of trusts. At the other there are small private clubs. This
1236 Pemsel’s case [1891] AC 531, 584 (Lord Macnaghten). 1237 Helmut Anheier, Civil Society Measurement, Evaluation, Policy (2004) 32.
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continuum is conveniently labelled the ‘Benefit Continuum’ and can be represented diagrammatically as follows:
Figure 6 Benefit Continuum
Charity Private benefit
Benefit Continuum
It was concluded that whilst different courts, legislators or regulators may draw upon different factors to inform them of how much, or how little, public benefit must be evident to belong to civil society, and different factors may be taken into account, or differently weighed, in deciding the extent to which public benefit was evident, some quite sophisticated criteria for assessing publicness have emerged. These indicia could significantly inform the more general principles for legal theory development. It will be recalled from Chapter III, that all charitable trusts were originally considered public trusts and if charitable trusts are taken as the foundation typology of the voluntary public, organisational form for the supply of goods (which they were), then charitable purpose resides at one extreme of the Benefit continuum and at the other there are organisational forms which are purely for private purposes. In Chapter VIII the ranking (and categorising) of public benefit was discussed in some detail. This ranking provides a basis for legal theory to go beyond the general idea of
‘public’ to a continuum of publicness which may be ranked on a Benefit continuum.
4. Coercion
Charitable trusts, and more generally charitable organisations, are recognised by the voluntariness of involvement and the voluntariness of supply of goods and services. In that voluntariness, these organisations are distinguishable from government. 1238 Through government members of a community participate and contribute goods and services, but the participation and contribution are obliged by the coercive force of law. If a citizen does not
1238 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168, 181.
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comply with the rules of a society in a given jurisdiction, sanctions can be imposed and compliance compelled. By contrast, in civil society organisations, particularly those pursuing charitable purposes, participation is characterised by voluntariness. Similarly, a citizen does not have freedom to choose whether or not to repair ’[b]ridges Portes Havens
Causwaies … Seabanks and Highewaies’ 1239 or contribute to poverty relief where the government pursues these purposes – contributions are compellable by law and the transfer of assets through taxation to government of those purposes is coerced. These differences between civil society organisations and government were identified generally in Chapter VI and explored in a legal context in Chapter VII.
As with the recognition of altruism and public benefit in civil society organisations, it was noted that coercion is not one dimensional. Whilst all people and organisations in a jurisdiction are subject to myriad laws of a general nature (such as the traffic control regulations) there is a continuum of coercion. At one extreme, again, is the religious charitable trust where the common law protects the right to voluntary involvement in the pursuit of objects that advance religion. At the other extreme are civil society organisations over which government exercises substantial control through setting of purposes by statute; control over who is appointed to or removed from the board; and control over funding.
Examples of the latter include some professional bodies with responsibility for regulation of whole sectors of society such as those overseeing the registration and conduct of various professions. The continuum between these extremes again can be illustrated on a continuum as follows:
Figure 7 Coercion Continuum
Charity Government
Coercion Continuum
1239 Preamble.
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The philosophical contests over the extent to which citizens should be permitted to associate free of the coercive influences of government are such that different courts, legislators and regulators may draw upon different factors to inform them of how much, or how little, communities should be allowed to self organise and self regulate through civil society organisations. There may be debates over whether too much external regulation might be a threat to the trust and charity which are the very essence of the sector itself. 1240 Different factors may be taken into account, or differently weighed, in deciding the extent to which such freely chosen organisation must be for common good to be allowed to occur. There is no dispute, though, that there is a coercion continuum between the religious freedom enjoyed at common law and the complete control by government. At some point the level of coercion is so great that the organisation is an arm of government.
E. Civil Society Space
Redefined as altruistic, public benefiting, voluntary associations, the legal space defined by reference to charitable purpose could become coterminous with the definition of civil society set out above. All of the continua have charitable purpose as a starting point and charity is differentiated from three others. Those three others are: business (the first sector); government (the second sector); and family (the fourth sector). Charities and related organisations are included in the third sector. At some point on these lines, drawn between organisations with charitable purposes and each of these others, a boundary is crossed from civil society (as it is emerging), to one of these others.
1240 Michael Power, The Audit Society: Rituals of Verification (1999) 97-98.
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Figure 8 Charity Continua
When drawn in this way, the overlapping conceptions between charity and civil society are even more apparent. Civil society is differentiated from business by altruism, from family by benefits being public not private, and from government by its voluntariness, that is, absence of coercion. At a certain point there is insufficient altruism, public benefit or voluntariness to call the organisation a civil society organisation. When the concept of a charitable purpose is expanded in the way proposed here, it reaches to the borders of civil society. By joining the lines, then, a theoretical space is created which is the bounds of this new jurisprudence for civil society which has charitable purpose – as expanded – at its centre. That space looks, in a theoretical sense, like this:
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Figure 9 Charity Continua and Civil Society Space
The theoretical space will change shape according to the society. For example, in the context of a small government state where voluntary philanthropic organisations are constrained compared to business and family, but carry a larger share of responsibility for the meeting of society’s needs, the space would be diagrammatically expressed as follows:
Figure 10 Defining Boundaries and Expanded Civil Society
In a society where the government, business and family dominate, the space would be contracted on all sides and might be expressed as follows.
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Figure 11 Defining Boundaries and Constrained Civil Society
F. Introducing Dynamic Boundaries
Once a definition of the whole of civil society is set out in this way, it is apparent that there will be contests over where each of these theoretical boundaries is to be drawn. In the
Scottish context, the common law concept of the public trust 1241 might be rediscovered as a progenitor of the common law civil society organisation in addition to, or separate from, the creatures of statute in the country. In the United States there are hundreds of thousands of organisations, including literary clubs, sporting organisations, unions, trade associations, political organisations, churches, hospitals, condominium and neighbourhood associations which are exempt from income tax, and yet their exempt status is not linked explicitly to pursuing a common law, charitable purpose. There the link is to a list in a statute – the scope is set by section 501(c)(3) of the Internal Revenue Code . The Australian, 1242 New
1241 In that jurisdiction it is clear that public trusts are a broader class and charities are a subclass of that broader class and the effect of the passsing of the Charities and Trustees Investment Act 2005 (Scotland) has been that the ranks of non-charitable public trusts may well be increased by trusts which either are unable to satisfy the new public benefit requirement or choose not to register as a charity under the legislation. See The Scottish Law Commission, Report on Variation and Termination of Trusts , Report No 206 (2007) Para 6.4. See also: Christine R. Barker, 'The Reform of Charity Law in Scotland' in Paul Bater, Frits Hondius and Penina Kessler Lieber (eds), The Tax Treatment of NGOs: Legal, Ethical and Fiscal Frameworks for Promoting NGOs and their Activities (2004) 33. 34. 1242 Income Tax Act 1997 (Cth), Division 30.
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Zealand 1243 and United Kingdom 1244 governments assess differently what is, and what is not, to be favoured with donor preferred status, with a more direct focus on charitable purpose.
There are, though, many organisations that enjoy the same favours as charities but which are not charities. 1245 A notion of dynamic boundaries is needed to accommodate these differences, for some common law countries may wish to include some organisations thought to be at the margins, which others wish to exclude. Examples include trade associations that might be considered business, small religious cults that might be considered family, and some government-controlled professional associations. The contests over where these boundaries lie are, though, reducible to three, so far as is relevant to the development of this jurisprudence, and they are over:
1. the extent to which the purpose is altruistic , which is manifest in the contest over
where the boundary between the space for civil society should end and the space
for business begin; and
2. whether the association is private or public , which is manifest in the contested
boundary between civil society on the one hand and small private groups such as
family on the other; and
3. freedom , which is manifest in the contest over the boundary between the space
for civil society on the one hand and the extent of government intrusion into that
space on the other.
Diagrammatically, the space for civil society and consequently, its organisations, is then better described in the more complex way below, with charitable purposes as the essence. On each of the three continua of altruism, benefit and coercion, there is a contested point where the space for civil society ceases and its other begins. That is the point of differentiation.
1243 Income Tax Act 2004 (NZ) s CW36. 1244 Income Tax Act 2007 c 3 (UK) ss 413-446. 1245 E.g. Income Tax Act 1997 (Cth) Division 50.
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Figure 12 Dynamic Boundaries for Civil Society Space
The law of charities marks out more than just a space. It also involves a basis for entitlement to favour. It is now appropriate to introduce this next dimension into the framework.
G. Three Dimensions: Adding Depth by Favour
1. Introducing the Elements of Favour
The second dimension of this jurisprudence for civil society is that it sets out a framework for analysing entitlement to favour. This framework goes beyond, but is built from, the general proposition that the common law grants favour to civil society organisations that manifest charitable purposes. The common law favours are, though, relatively modest compared with the statutory, particularly taxation favours. The common law classification is important, more as a gateway to statutory favours, than in its own right. I suggest that once there is evidence of voluntariness and altruism it is the extent or nature of public benefit that justifies favour. If extent is taken as the relevant criterion then benefit can be theorised as on a continuum between private and public. Once the requisite level of publicness is attained entitlement to favour follows. If the nature of the public benefit is the criterion, I propose that the classes of charitable purposes – relief of poverty, advancement of religion, advancement of education, and other purposes beneficial to the community – become the guides to broader categories justifying favour. Within this alternative framework, favours
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are enjoyed by civil society organisations when they pursue charitable purposes by which charitable goods are supplied for public benefit.
Charitable goods supplied for public benefit are:
a. private goods supplied to a person for the purposes of Dealing with
Disadvantage thereby advancing equality ;
b. quasi-public or public goods supplied to people for the purposes of
Encouraging Edification thereby advancing fraternity ; and
c. ligaments binding the polis which Facilitate Freedom to advance liberty .
2. Dealing with Disadvantage
When Dealing with Disadvantage, even the supply of private goods to individual persons at a disadvantage is a supply of charitable good. Relief of poverty is the head of the doctrine of charitable purpose from which this category is developed. The framework goes beyond relief of poverty, though, to the supply of the goods that enable those at a disadvantage to enjoy the basic rights and obligations of citizenship equally with other citizens. It advances equality. The charitable purpose cases relating to poor relations and poor employees suggest that as the law presently stands, when Dealing with Disadvantage, the goods supplied may be private goods and the transferee could be a relative or an employee. 1246 It is to the public benefit for private goods to be supplied to a person at a disadvantage, such as bread to be supplied to a starving person, whether or not the person is a relative. When dealing with disadvantage to bring equality, a common good can be a private good supplied to an individual person.
1246 Dingle v Turner [1972] 1 All ER 878, 888.
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3. Encouraging Edification
To be classified as a common good that Encourages Edification and thus, advances fraternity, greater publicness in either the goods supplied, or the class of recipient for the good or service, is required. 1247 Advancement of education and the more general category of other purposes beneficial to the community are the heads of the doctrine of charitable purpose from which this category is developed. The framework goes beyond advancement of education and other purposes beneficial to the public, though, to the supply of goods that are at least quasi public and that encourage the edification of communities – or at least subsections of communities which are sufficiently large to be considered public. The provision of social goods, such as the arts and other cultural activities, are examples of this kind of common good; as is the provision of physical infrastructure like bridges, sea banks, public libraries and public museums. A greater level of public benefit is required when pursuing purposes classed as Encouraging Edification than when pursuing purposes Dealing with Disadvantage. To be entitled to favour for pursuing purposes that Encourage
Edification, as the law presently stands, a civil society organisation is likely to be required to supply at least quasi-public goods and many people must enjoy the benefit. In the case of this class of Encouraging Edification, the quasi-public good may be enjoyed by rich as well as poor 1248 (as the object is advancement of fraternity not equality). In economic terms, arguably, to be common goods that Encourage Edification, the goods or services supplied must be both non-rivalrous and non-excludable. When Encouraging Edification, a common good must be for people , not just a person .
4. Facilitating Freedom
Facilitating Freedom is the basis for favour based on holding society together. This basis for favour is founded upon, but goes beyond, the favour granted at common law to charitable trusts for the advancement of religion. The charitable purpose cases make it clear that
1247 Gilmour v Coats [1949] AC 426, 449. 1248 Morice v Bishop of Durham (1805) 10 Ves Jr 522; Pemsel’s case [1891] AC 531.
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religion is to be favoured. The public benefit in the advancement of religion was self evident in the much more homogenous social context in which the law of charities developed.
Religion plays a role in binding people together in society through encouraging self-restraint and concern for others. This binding together voluntarily reduces the need for unity coerced by government and thus Facilitates Freedom. This advances liberty. It follows from this discussion, that advancement of religion need not be the only purpose entitled to favour. The recent extension of charitable purpose by statute in England and Wales 1249 to include advancement of citizenship or community development, the advancement of human rights and conflict resolution or reconciliation, can all be included within this aspect of this legal universe. The definition of this class is a matter for each common law country to determine.
At its narrowest, the class could be confined to advancement of religion as it has been at common law. 1250 At its broadest, the class could be extended to include all civil society organisations that are vehicles by which social cohesion is strengthened. The class would be extended to include organisations pursuing political purposes and more generally, lobbying and advocacy. This means that goods that are both rivalrous and non-rivalrous, excludable and non-excludable could be within this class.
5. Summary of Third Dimension of Favour
In summary then, within the framework of this jurisprudence, favour is afforded to civil society organisations that voluntarily provide charitable goods that advances equality, fraternity or liberty. The good of the polis is the basis for favouring civil society organisations with purposes that Facilitate Freedom. The benefiting of people is the basis for
Encouraging Edification in civil society organisations. When Dealing with Disadvantage is the basis for favouring a civil society organisation, it is enough that the public benefit
1249 Charities Act 2006 (Eng.&W) c 50, s 2(2). 1250 Ian Ellis-Jones, Beyond the Scientology case: Towards a Better Definition of What Constitutes a Religion for Legal Purposes in Australia Having Regard to the Salient Judicial Authorities from the United States of America as well as Important Non-Judicial Authorities (PhD Thesis, Sydney University of Technology 2007).
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manifests in the supply of a good to a person who is at a disadvantage. This could be summarised in a table.
Figure 13 Extent of Benefit Guide to Essential Characteristics
Extent of Benefit Rivalry Excludability Dealing with Person Rivalrous Excludable Disadvantage Encouraging People Non-rivalrous Non-excludable Edification Facilitating Freedom polis (community as Both rivalrous and Both excludable and a whole) non-rivalrous non-excludable
In the same way that concepts of measurement were applied to altruism, benefit and coercion, measurement principles can be applied generally to public benefit or to the specific expressions of equality, fraternity and liberty. So within this jurisprudence, these concepts can be treated as dynamic, and the entitlement to favour will move with the values of the particular common law country along a continuum of favour, if all are aggregated as public benefit, or along continua of equality, fraternity and liberty. Laying each of these concepts out on a continuum or continua, rather than confining the discourse within the rigid
Pemselian partitioning , sets out the architecture for a more expansive discussion.
It follows that because both ‘public’ and ‘benefit’ are contested concepts, different levels of publicness are required for Dealing with Disadvantage, Encouraging Edification and
Facilitating Freedom. Further, different common law countries will place different weight, at different times, on different forms of benefit. To return to the example of Gladstone, 1251 he might confine the concept of charitable purpose only to the supply of charitable goods that Deal with Disadvantage, but his government might allow such charitable goods to be
1251 Myles McGregor-Lowndes, 'Public/Private Accountability and the Tax Exempt Status of a Charitable Organisation' (Seminar Paper, Social Policy Research Centre, University of New South Wales, 2003) citing W E Gladstone in 3 Hansard 170, 200 reported in The Financial Statements of 1853 (1860-63) 458.
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supplied to relatives. It is to be expected, then, that theorists will sometimes return to the foundational variables for identifying civil society organisations and apply those variables to valuing the supply of charitable good. It will be recalled that the foundational variables are:
1. the otherwise remoteness of the people associating (‘xenos’, for convenience
labelled ‘X’),
2. the motive for associating is voluntary to benefit others (‘why’ for
convenience labelled ‘Y’), and
3. the number of person associating ( for convenience labelled ‘Z’)
So I suggest that, as with charitable purpose, the definition of charitable goods will also be informed by reference to a combination of ‘X’, ‘Y’ and ‘Z.’
As a matter of logic, entitlement to favour extended to civil society organisations cannot ever be greater than the space allowed for civil society organisations. So in the context of this jurisprudence, Benefit law can be considered as a third dimension built upon Association law. 1252 This entitlement to favour is also built upon, and developed from the conceptions of charitable purpose, so it conceptually makes sense to set favour as a third dimension. It is appropriate to express it diagrammatically as a third dimension in the form set out below.
1252 An important caveat which is beyond the scope of this thesis to explore is that businesses sometimes enjoy benefits similar to civil society organisations For example, Export Expansion Grants Act 1978 (Cth).
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Figure 14 Civil Society Space and the Favour Dimension Pyramid
Dealing with Disadvantage
Encouraging Edification
Facilitating Freedom
This basis for favour, built on a foundation of liberty, is ‘the surest basis on which to rest the superstructure of social order’ 1253 and is ‘necessary to the advancement of civilisation and the promotion of the welfare of society.’ 1254 It forms the basis of a robust jurisprudence to guide legal reform and maintenance of social space where people voluntarily associate for purposes of public benefit.
H. Moving Beyond ‘Nominal’ Measurement of Charitable Purpose
At the end of Chapter III it was noted that the analysis of charitable purpose was limited to
‘nominal’ measurement (charitable purpose or not). Moving beyond nominal measurement, to at least ordinal ranking of altruism, public benefit and coercion, is clearly a possibility in light of the discussion in chapters IV, V and VI. Authors such as Hansmann, 1255 Atkinson 1256 and James 1257 have offered alternative classifications and rankings for division of the social space occupied by civil society organisatons. Nominal measurement was proposed by
1253 Holland v Peck (1842) 37 NC 255, 258. 1254 People ex rel Seminary of Our Lady of Angels v Barber (1886) 3 NY St Rep 367 affirmed in (1887) 13 NE 936. 1255 Henry Hansmann, 'Reforming Nonprofit Corporation Law' (1981) 129 University of Pennsylvania Law Review 500, 503. 1256 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 565-66. 1257 Estelle James, 'The Nonprofit Sector in Developing Countries: The Case of Sri Lanka' in Estelle James (ed), The Nonprofit Sector in International Perspective - Studies in Comparative Culture and Policy (1989) 289, 292.
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Weisbrod for classification of these organisations, according to contributions to public benefit, through a collectiveness index. 1258 Colombo and Hall pointed to the use of money received by way of donation in the context of deciding taxation favours for charities. 1259
These are important insights that could inform common law development of the theoretical analysis of the space occupied by civil society organisations, and entitlement to favours associated with the provision of charitable goods in civil society. Without an overarching framework that shows how these insights can be located in common law theory, however, they remain of no practical use to a jurist seeking to give voice to the underlying philosophical battles in a policy context. Adopting an alternative jurisprudence which centres not on charities, but on civil society organisations, in the way proposed here, facilitates adoption of these insights into common law theory development. This is possible because, even at the highest level of ratio measurement, there is the possibility of objectively and numerically measuring the variables with ratio measures such as money, time or hours.
If that is so, then each of the variables could be set out not just on a continuum, but on a continuum which is quantitatively measured. The diagram below is an example:
Figure 15 Variables on a Continuum Quantitatively Measured
Charities Others
0 10 20 30 40 50 60 70 80 90 100
Variables on a Continuum
Whilst it is beyond the scope of this thesis to descend into policy, it should be noted that over the thirty years since Weisbrod’s linear specifications, economists have developed quite
1258 Burton A Weisbrod, 'Toward a Theory of the Voluntary Nonprofit Sector in a Three-Sector Economy' in Burton A Weisbrod (ed), The Voluntary Nonprofit Sector (1977) 51, 73. 1259 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 217.
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sophisticated models of measurement. 1260 These insights could inform jurists seeking to develop policy if they could be set free from the present orthodox understanding, an understanding which requires reasoning by analogy from a long list of purposes, some of which are irrelevant (payment of sixteens), and some of which are inappropriate (marriage of poor maids). The next section illustrates how this alternative jurisprudence could be applied whilst remaining at the level of theory – without descending to policy.
I. A More Powerful Analytical Framework is Available for Legal Theorising
The jurisprudential framework developed in this thesis is arguably a superior analytical tool for legal theorising than the present Pemselian partioning , because it does not just say what the law is, it explains why it is the way it is. It demonstrates this superiority in at least seven ways:
First, the jurisprudence proposed here goes beyond the law of charities in that it sets out a way of bringing the laws specifically applying to civil society organisations into a coherent framework. Taking charity in its popular sense as the starting point, it has been argued that all laws specific to civil society either enable or regulate association, that is, they are laws facilitating freedom of association or they are laws granting favour. As favour is built on freedom to provide charitable goods voluntarily, the disparate regulating law and the plethora of exceptions and exemptions to laws that apply to individuals and business may be perceived not as exceptions, but as part of a way that a society favours voluntary, altruistic contributions of public benefit.
Second, this jurisprudence adopts methodologically sound categorisations. In this alternative jurisprudence the categories are clearly defined with explicit and recognisable differentia.
1260 See for examples Ottorino Chillemi and Gui Benedetto, 'Uninformed Customers and Nonprofit Organisations: Modelling 'Contract Failure' Theory' (1991) 35 Economics Letters 5; and John Cullis, Philip Jones and Constantine Thanassoulas, 'Are charities efficient 'firms'? A Preliminary Test of the UK Charitable Sector' (1984) 44 Public Choice 367, 369.
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By returning to classical definitional tools, it is possible to go beyond what has become the
‘orthodox’ reading of Pemsel’s case , to that case’s underlying jurisprudence and build, from that underlying jurisprudence, a framework. This framework is not plagued by the problems of method besetting the ‘orthodox’ reading of the Preamble and Pemsel’s case , and already articulated in overruled authority. 1261 This jurisprudence for civil society provides a way of breaking free from the ‘spirit and intendment’ of the Preamble . This legal theory is thus suitable for use in addressing twenty-first century issues, without violating the common law commitment to precedent.
Third, this jurisprudence expands and yet marries the space of charitable purpose with civil society in a way that enables and encourages law to be informed by, and to accommodate, cross disciplinary analysis and debate.
Fourth, this jurisprudence accommodates diversity of worldviews through dynamic boundaries where the law of charities is fixed and excludes or suppresses diverse voices. In the philosophically, politically and religiously diverse multicultural circumstances of most common law countries at the beginning of the twenty-first century, providing a framework that can accommodate debate over changes, and setting out a framework in which those changes can be implemented, are integral to providing access to justice.
Fifth, the jurisprudence provides a more just foundation for all civil society, by going beyond advancement of religion, to freedom of association and beyond that in the context of favour to advance liberty. In pluralist common law countries it may well be appropriate to favour organisations that advance religion. But if it is not the religion itself but the contribution religion makes that justifies favour then it is just for other organisations that make a similar contribution to enjoy favour also.
1261 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362.
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Sixth, the jurisprudential framework proposed provides either a measurable continuum of public benefit to assess the extent of public benefit or categories that cover the field and allow subsequent development by going beyond:
1. poverty relief to Dealing with Disadvantage to advance equality;
2. advancement of education and other purposes beneficial to the community to
Encouraging Edification to advance fraternity; and
3. advancement of religion to Facilitate Freedom.
Seventh, this proposed alternative jurisprudence for civil society redefines the theoretical landscape so that charity, as it is commonly understood, reclaims the central position in jurisprudential thought in this area of law. The release from the technical legal meaning of charitable purpose makes the concepts more intelligible to lay participants in the sector.
J. Applying a Jurisprudence for Civil Society to Go Beyond Charities
1. Introduction
A theoretical contribution is not significant unless others can discern the implications of that theory. So, whilst this work is entirely theoretical, in this section examples of how the theory could be applied are provided. A narrow path is journeyed. Every endeavour is made not to stray into the valley of policy, nor ascend the mountain of normative pronouncements.
In each illustration the focus is on options, not outcomes.
This thesis began with a chorus of dissatisfaction and frustration with the present understanding of the doctrine of charitable purpose. It will be recalled that the dissatisfaction and frustration is such that common law countries have had almost 30 inquiries into the law and regulation of charities over the last 60 years. It will be recalled, also, that many jurisdictions have passed legislation defining or extending the common law definition of charitable purpose. These legislative patches do not address, let alone resolve,
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the underlying problem associated with defining a charitable purpose. Jurists required to distinguish charitable purposes from other purposes remain without explicit rationale for differentiation. The first example suggests how the ideas set out in this thesis provide a basis for identifiying the essence of charitable purpose and distinguishing it from non-charitable purposes. It sets out a basis for developing theory to the next stage of a ‘coherent basis for the law for civil society in general’. 1262 Chapter II began with the realisation that ‘there are no existing theories of civil society regulation on which the laws could be placed’. 1263 In this subsection, practical ways in which this theory could be used to solve these problems are offered.
In the second example, problems with the concept of public benefit are discussed. It will be recalled from Chapter II that the concept of public benefit was deeply problematised and from Chapter I that Irish and Scottish legislation 1264 provide recent, substantive attempts to define public benefit in the context of charities. This second subsection maps a bridge between the theory set out in this thesis and the practical challenges faced by judges and regulators, in applying the concept of public benefit set out in that legislation.
A third example suggests ways in which the theory might be applied to resolve some of the deeper challenges embedded in relying upon the common law doctrine of charitable purposes as a gateway to favour under taxation legislation. This section addresses the more general challenge, also identified in Chapter I, of articulating principles to regulate access to favours enjoyed by civil society organisations under taxation laws across the common law world.
1262 Mark Freedland, 'Charity Law and the Public/Private Distinction' in Charles Mitchell and Susan Moody (eds), Foundations of Charity (2000) 111, 123. 1263 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 44B (citations removed). 1264 Charites Act 2008 (NI) s 3; Charities and Trustees Investment Act 2005 (Scotland) 10, s 8.
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The final subsection points to the discussion across chapters IV, V and VI as examples of how the philosophical contests can inform policy debate.
2. Resolving Foundational Puzzles and Identifying Genus and Form
It will be recalled from Chapter I that the central puzzle is how to define the relevant organisations. In extending the definition of charitable purpose to the boundaries of civil society, and by defining civil society in a dynamic way, the thesis provides definitions that may be formulated classically. Such a definition of charitable purpose formulated in a classical way might be phrased as:
A charitable purpose is a purpose pursued voluntarily, altruistically and for public
benefit. A business, government or family purpose is not a charitable purpose.
An implication of this for judicial officers is that the alternative jurisprudence requested by
Justice Kirby and required by the Australian High Court before change would be contemplated, has been framed. 1265 An argument has been advanced in this thesis as to how the common law doctrine of charitable purpose could be developed beyond the Pemselian purposes .
Defining charitable purpose is not, however, enough. The threshold central puzzle is how to define the relevant organisations that make up civil society. So, of equal if not greater importance, is the need for a comprehensive definition of the organisations that make up the sector as a whole. Such a definition, formulated in a classical way, might be as follows:
1265 Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1. See comments of the majority (Gleeson CJ, Callinan, Heydon and Crennan JJ) at footnote 6 and 15-37 (Kirby J). The Australian High Court stands alone in this request. The Canadian Supreme Court has eschewed responsibility for this development declaring that, ‘wholesale reform [as distinct from] incremental change… is best left to Parliament. … [and] substantial change in the definition of charity must come from the legislature rather than the courts.’ See AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42 [44] (Rothstein J delivering the judgment of McLachlin CJ, Bastarache, Binnie, LeBel, Deschamps, Fish, Charron and Rothstein JJ).
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A civil society organisation is an organisation that pursues purposes voluntarily,
altruistically and for public benefit. Civil society organisations are distinguished
from government organisations by their voluntariness, from businesses by
participation being for altruistic purposes, and from family and other private groups
by the purposes being public.
An implication of this definition of civil society organisations is that legislators such as the
Australian Senate, seeking to develop law for the sector as a whole, 1266 has a comprehensive definition of the organisations making up the sector as a whole. A second implication is that it provides a theoretical basis for the extensions that have already occurred. Take the extension of charitable purpose to include ‘open and non discriminatory self help groups’ as an example. 1267 It will be recalled from Chapter II that the eighth recommendation of the
Australian Charities Definition Inquiry was ‘that self-help groups which have open and non- discriminatory membership be regarded as having met the public benefit test’. 1268 The theoretical challenge was how such an apparently private purpose could be theorised as being charitable? Participation in such a group is voluntary and altruistic, but the challenge is to identify the public benefit as distinct from private benefit. Within the context of this discussion it is evident that the public benefit is in Dealing with Disadvantage. The legislation actually adopts this concept and limits the purpose to ‘assisting individuals affected by …a particular disadvantage or discrimination’. 1269 This theory provides a rationale.
1266 Australia Parliament Senate, 'Inquiry into the Disclosure Regimes for Charities and Not-For-Profit Organisations' (2008). 1267 Extension of Charitable Purpose Act 2004 (Cth) ss 4, 5. 1268 Inquiry into the Definition of Charities and Related Organisations Report of the Inquiry into the Definition of Charities and Related Organisations (2001) 14 1269 Extension of Charitable Purpose Act 2004 (Cth) s 5(2).
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The dynamic nature of these definitions of charitable purpose and civil society organisations, informed by the variable continua of altruism, benefit and coercion, (the elements of charitable purpose) permit different jurisdictions to draw different, but nevertheless quite bright lines between what is a civil society organisation and what is not. Take the area of coercion as an example. Courts in one jurisdiction might determine that any control of an organisation by government, such as a veto right with respect to appointment of a board member, might take the organisation out of the class of civil society organisations into the class of government organisations. Courts in another jurisdiction might consider an organisation to be a government organisation only if the majority of the board were appointed by government. A third might look only to the capacity of government to control membership. In each case, the line between what is a civil society organisation and what is a government organisation is clear, but different. Where the boundary line is drawn will almost certainly be different from one common law country to another, but what is critical for theory development is that the boundary can be drawn and in different places having regard to the extent of coercion.
It is possible to push the theory much further, however, by having regard to the measurability of the variables that inform the concept of charitable purpose. If altruism, benefit and coercion are measurable, and measured, and then the inter-relation of these variables is considered, conceptions of both charitable purpose and civil society organisation can be lifted to new levels of precision. The remainder of this subsection suggests how.
Assume that altruism drives the pursuit of an ostensibly charitable purpose and can be measured as the percentage of the organisation's income that is sourced from donations.
Assume that donations come in only two forms, money and time, and that the value of time can be converted to money. It is possible, then, to have a value of between zero and 100 for altruism. Call this value ‘A’. If the pursuit of a charitable purpose is evidenced by altruism, and altruism is measured only by the supply side of an organisation’s income and is further
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limited only to donations, as a percentage of income, then a way of distinguishing genuine civil society organisations from for-profits in disguise is apparent. 1270 If there is no evidence of altruistic purpose then the organisation is a business. Most civil society organisations would have a voluntary board, at least, and usually some additional voluntary donations of labour. A voluntary board coupled, with a non-distribution constraint in the organisation’s constituent documents, may be sufficient evidence of altruism for some, even most courts, legislatures and regulators to conclude that there is sufficient altruism evident for an organisation to be a civil society organisation. 1271 That might not always, however, be the case.
This jurisprudence enables calculation of an altruism value to assist more precise analysis of purpose. Once a value for altruism has been calculated in the manner suggested above, then a fixed amount of altruism evidenced by donations as a percentage of total income could be set as a prerequisite in a manner similar to that proposed by Columbo and Hall. 1272 For example, for an organisation to be a civil society organisation, not less than five percent, of its income must be sourced from donations. If less than five percent of the income of an organisation is from donations then the organisation could be deemed to be a business, as it would lack sufficient evidence of altruism. A similar approach can be taken with public benefit and coercion. Public benefit is discussed next.
Assume that pursuit of public benefiting purposes can be measured as a percentage of the organisation's income that is applied to delivering charitable goods. Again, assume that charitable goods are provided in only two forms, money and time, and that the value of time
1270 For simplicity in theory development the discussion is confined to income but it could be extended to include capital contributions. This extension could be important in practice because, as Atkinson has observed, one of the fundamental indicia of a civil society organisation is that the initial capital was donated. See Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 523. 1271 Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 523. 1272 John Colombo and Mark Hall, The Charitable Tax Exemption (1995) 217.
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can be converted to money. It is possible, then, to have a value of between zero and 100 for assessing levels of public benefit. As with altruism, discussed above, organisations that did not evidence a satisfactory level of public benefiting purpose would be excluded from the class of civil society organisations. At the simplest level only minor public benefit might be required. For example, in the context of a religious organisation, courts, legislatures and regulators may conclude that there is sufficient public benefit evident for the organisation to be a civil society organisation if it provides services of public worship available to the community as a whole and the occasional wedding or funeral for anyone in the polis . That might not always, however, be the case.
This jurisprudence enables calculation of a public benefit value of a purpose to assist more precise analysis. At the simplest level a fixed amount of income, perhaps ten percent, might need to be applied for a purpose to evidence public benefit. Determining how much income is applied for public benefit might be achieved in a number of ways. Atkinson’s idea of requiring evidence that the funds applied have been ‘socialised’ contains possibilities. 1273 In the context of a Christian religious congregation, a socialising calculation of the value of time (lay and clergy) and the amount of money applied for the benefit of non-members as a percentage of total income in a particular period could be made. For example, if less than five percent of total income was ‘socialised’ for the benefit of the polis by application to non-members then it might be determined that the religious organisation should be treated as a private club, and a part of the class called ‘family’ in this thesis, and not a civil society organisation.
It will also be recalled that public benefit can be theorised as divided into categories of goods that Deal with Disadvantage, Encourage Edification, or Facilitate Freedom. Different levels of public benefit might be required for these different categories of public benefiting
1273 Rob Atkinson, 'Altruism in Nonprofit Organisations' (1990) 31 Boston College Law Review 501, 565-566.
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purpose. For example, an organisation that has the purpose of Dealing with Disadvantage by the supply of private goods , such as bread to persons , might be excluded from the class of civil society organisation if for example more than five percent of the private goods supplied were provided to members or were sold at fair market value. This is because both supply to members and sales at fair market value are indicia of private benefiting purposes. In a context where the good supplied is essentially private a high standard of publicness might be set. For quasi-public goods , the threshold percentage of members benefiting or fair market value sales might be lifted while still allowing for the good to be ‘socialised’. In addition to the requirement of ‘socialisation’ of funds applied by an organisation, courts, legislatures and regulators could require a minimum number of persons to be in financial and voting membership of an organisation for any good applied for the benefit of members generally to be socialised. For example, the Australia Income Tax legislation requires, among other things, that if an environmental organisation is a corporation and enjoys donor preferred status it must maintain no fewer than 50 individuals who are financial and voting members. 1274 For public goods such as a free-to-air radio station it might be enough that it provides the service in compliance with relevant laws to the polis generally.
Coercion as the reason for pursuit of a purpose can be similarly theorised as a continuum and the example discussed at the outset of this section dealing with the concept of dynamic boundaries illustrated this. For simplicity, because in practice coercion is often perceived as either-or, and to progress the discussion, assume that an organisation is either controlled or not controlled by government. 1275 If government controls the organisation, it would have a coercion value of zero. If government cannot control the organisation at all it would a coercion value of 100. Call this value ‘C’.
1274 Income Tax Assessment Act 1997 (Cth) s 30-260. 1275 The law of common law countries provides sometimes quite sophisticated methods of assessing control and these could inform this discussion e.g. Corporations Act 2001 (Cth) s.50AA.
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Once altruism, benefit and coercion all have values of between zero and 100 it is possible not just to assess the variables that evidence a civil society organisation but also to bring these together to assess civil society organisations as a whole in the manner proposed by
Anheier. 1276 Using the variables above, if the value of A x B x C is zero, then the organisation is government controlled and not a civil society organisation. On the other hand, if the value of A x B x C is not zero, then the organisation could be a civil society organisation. Whether or not the organisation is a civil society organisation would depend upon where the numeric ‘line’ was drawn between civil society organisations on the one hand and businesses and family on the other. There could be one number to assess charitable purpose and there could be a minimum number applied to the source of funds to assess altruism, or to the application of funds to assess public benefit. Below these numbers an organisation is not a civil society organisation. This would be because there is insufficient altruism, or public benefit and consequently there is insufficient charitable purpose. How could such numbers be calculated?
To apply these principles a jurist could take the financial statements of a civil society organisation. From the financial statements of any well managed civil society organisation with adequate recording systems it would be possible to calculate the source and application of funds. From these records it would usually be possible to identify what percentage of income is sourced from donations. Also from these records, it would be possible to assess the application of the funds and, using criteria discussed in this thesis, the extent to which funds were applied to private purposes could be calculated. For these purposes some courts, legislatures and regulators might be satisfied with that level of discussion and fixing these variables in the way suggested so far.
1276 See discussion at pages 252 to 255.
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It is possible, though, to drill deeper and in particular contexts that may be necessary. It will be recalled that informing these variables of altruism, benefit and coercion is another layer of variables:
1. the otherwise remoteness of the people associating (X),
2. the motive for associating being voluntary to benefit others (Y), and
3. the number of persons associating ( Z).
Civil society organisations could be even more precisely defined having regard to these deeper variables in assessing charitable purpose, if necessary. This may be particularly helpful in developing criteria to assess the source and application of funds for the pursuit of a particular charitable purpose. For example, no evidence of remoteness might be required if a good supplied is a public good but at least some remoteness might be required if the good supplied is a private good. Thus the inclusion of self help groups within the class of charities in Australia required that the group be open and non-discriminatory. 1277 This requirement would not be needed for a public radio station as any person with access to the frequency could listen.
Exceptions are readily identifiable for all of the examples set out in this subsection. There is a need for sophisticated development of the measurement of charitable purpose. Some organisations evidence little or no altruism and are entirely commercially funded but the extent of their public benefiting and the absence of coercion clearly establish them as charitable. Some organisations evidence low levels of altruism and public benefit but are clearly not government, business or family so must, by definition, be civil society organisations. It is a matter for the relevant court, legislature or regulator to decide where the lines are. This could be informed by developments in the doctrine of private benefit and the way in which section 501(c)(3) of the Internal Revenue Code of the United States has
1277 Extension of Charitable Purpose Act 2004 (Cth) ss 4-5.
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been applied. 1278 It is beyond the scope of this discussion to explore these further. The point is that this theory provides principles for the development of much more sophisticated tools for analysis than the nominative charitable-purpose-or-not approach of the present law of charities framework.
3. Practical Guidance for Determining Public Benefit
Public benefit is a concept central to charitable purpose but, as Chapter II illustrated, is deeply problematic. It will be recalled from Chapter I that an approach taken in the United
Kingdom is to require public benefit to be proved. Both Scotland and Ireland have legislation that sets out the criteria for assessment and the Charities Commission discharges this function for England and Wales. 1279 The Irish legislation, which substantially follows the Scottish model, provides a public benefit test. The relevant section provides:
The “public benefit” test
3.—(1) This section applies in connection with the requirement in section 2(1)(b) that a purpose
falling within section 2(2) must be for the public benefit if it is to be a charitable
purpose.
(2) In determining whether that requirement is satisfied in relation to any such purpose,
it is not to be presumed that a purpose of a particular description is for the public benefit.
(3) In determining whether an institution provides or intends to provide public benefit,
regard must be had to—
(a) how any—
(i) benefit gained or likely to be gained by members of the institution
or any other persons (other than as members of the public), and
(ii) detriment incurred or likely to be incurred by the public,
1278 John Colombo, 'In Search of Private Benefit' (2006) 58(5) Florida Law Review 1063, 1064-1080. 1279 Charites Act 2008 (NI) s 3; Charities and Trustees Investment Act 2005 (Scotland) 10, s 8; Charities Act 2006 (Eng.&W) s 4. The Charities Commission released further guidelines in December 2008. See The Charity Commission for England and Wales, Charities and Public Benefit: The Charity Commission's General Guidance on Public Benefit (2008).
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in consequence of the institution exercising its functions compares
with the benefit gained or likely to be gained by the public in that
consequence, and
(b) where benefit is, or is likely to be, provided to a section of the public only,
whether any condition on obtaining that benefit (including any charge or fee) is
unduly restrictive. 1280
When both the Irish and Scottish Explanatory Memoranda are referred to for guidance there is nothing of substance to assist the judges or regulators in deciding how this duty is to be discharged. 1281 The factors to be taken into account are simply listed. It will therefore be necessary for judicial officers and regulators to develop criteria by which they discriminate between organisations that are charities and those that are not. The way in which public benefit is theorised in this thesis could assist in providing criteria for assessing public benefit in two principal ways.
First, the notion of a continuum of public benefit might assist. In deciding whether or not an organisation provides or intends to provide public benefit the judge or regulator is required to undertake a weighing of factors. This is not explicated as a continuum, but the concept of a continuum is implicit or can be drawn from the wording of the section. In weighing publicness of the benefit when considering subsection (a) the factors to which regard must be had may be summarised as:
1. remoteness (X), informed by whether or not the persons benefiting are members;
and,
2. the number of persons benefiting (Z) measured in part by the extent to which the
numbers benefiting may be described as the public as a whole or only a subsection
1280 Charities Act 200 8 (NI) s 3. The Scottish legislaiton is in similar terms. See Charities and Trustees Investment Act 2005 (Scotland) 10, s 8. 1281 See Explanatory Memorandum to Charities Act 2008 (NI) and Expanatory Memorandum Charities and Trustees Investment Act 2005 (Scotland).
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of it. 1282
Second, when the factors set out in subsection (b) are considered there will be challenges for judges and regulators, when assessing fees or charges, to find a basis for discriminating between appropriate and inappropriate fees. In this context the distinction between public, quasi-public and private goods utilised in economics and applied within this alternative jurisprudence provides another useful tool. This thesis provides a bridge for the introduction of those economic concepts into the doctrine of charitable purpose. The categories of
Dealing with Disadvantage to advance equality for persons , Encouraging Edification to advance fraternity for people and Facilitating Freedom to advance liberty for the polis provide useful categories to assist in this discriminatory analysis. 1283 The table below illustrates this.
Figure 16 Type of Charitable Goods and Public Benefit Guide
Column 1 Column 2 Column 3 Column 4 Type of Extent of Requirement to be of public Example of evidence of Charitable Good Benefit benefit public benefit purpose Private good Person Deals with Disadvantage to Providing bread to advance equality starving persons. Quasi-public good People Encourages Edification to Providing free drawing advance fraternity classes for children. Public good polis Facilitate Freedom to advance Providing free-to-air (community as a liberty radio whole)
In Ireland or Scotland, the judge or regulator must inquire as to the extent of the benefit.
Here the division into three classes may be particularly useful. For example, the judge or regulator might utilise the division set out in Column 2 to ascertain whether persons, people or the polis benefit. In that context having different classes such as those listed in column 3
1282 Notably motive (Y) is not included. 1283 The Charity Commission for England and Wales has stated that the test is ‘whether or not there is sufficient opportunity to benefit for those who cannot afford to pay’: The Charity Commission for England and Wales, Public Benefit and Fee-charging (2008) 3-5 and Annex C.
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may assist. As case law develops the examples in Column 4 would become otiose but in the short term may guide classification as to whether or not the purposes pursued benefit the public.
In the context of private goods such as the supply of food to persons clearly the person receiving it would have to be at a disadvantage denying them equality . A much broader category of people would need to benefit if the good is a quasi-public good that advances fraternity such as education in the form of free drawing classes for children. Recalling the discussion in relation to liberty in Chapters II and VIII, the polis could be benefitted by the public good of a free-to-air radio station including one conducted by religious organisations, ethical societies, or any community association. This could be so even though the membership of the civil society organisation Facilitiating Freedom is quite small and ostensibly the benefit is enjoyed by a relatively small number of persons who are predominantly members. The utilisation of the measurement of benefit and, importantly
‘detriment’ (the Irish legislation term) or ‘disbenefit’ (the Scottish legislation word) or ‘any detriment or harm’ (the UK Charity Commission) 1284 discussed earlier, might also inform consideration of these issues having regard to issues raised by Atkinson, and having regard to the Bob Jones University case from the United States. 1285
4. Applying A Jurisprudence for Civil Society to Income-Tax Issues
The problem of distinguishing public from private benefit, discussed in the last section, often forms part of a broader concern which centres on the level of favour granted to charities under income taxation legislation. This broader issue, identified in Chapter I, has troubled jurists across the centuries. The issue remains the same: from Lord Bramwell’s colourful dissenting conclusion in Pemsel’s case in 1891:
1284 The Charity Commission for England and Wales, Charities and Public Benefit: The Charity Commission's General Guidance on Public Benefit (2008). 1285 Bob Jones University v United States , 461 US 574, 591 (1983) discussed in Rob Atkinson, 'Nonprofit Symposium: Theories of the Federal Income Tax Exemption for Charities: Thesis, Antithesis, and Syntheses' (1997) 27 Stetson Law Review 395, 426.
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... the State will be a subscriber of £17 a year to supporting, maintaining, and subsidising "the
missionary establishment among heathen nations of the Protestant Episcopal Church known by
the name of the Unitas Fratrum, or United Brethren." Whether this was meant by the authors of
the Income Tax Act, if it was, why, and whether it will be continued, are questions not before
us. 1286
to Justice Kirby’s like dissent in December 2008 that:
Although the Parliament may provide specific exemptions, as a generally applicable principle it is
important to spare general taxpayers from the obligation to pay income tax effectively to support
or underwrite the activities of religious (and also political) organisations with which they
disagree. 1287
The issue is that there are differring opinions on the extent to which the pursuit of charitable purposes should entitle an organisation to favourable treatment under the particular income tax laws of the relevant common law country. Put generally, it will be recalled from Chapter
I, the question is: how can income tax favours extended to charities be justified?
This section does not seek to answer the question but to illustrate how the theory, developed in this thesis, can be utilised to justify or deny favours in a much more sophisticated way than the simple charitable-or-not paradigm presently utilised by the common law.
Recalling the measurement theory discussed at the end of Chapter III, charitable purpose does not have to be confined to simple nominal measurement. For example, if charitable purpose is ranked on a scale of zero to 100, and theorists value entitlement to income tax favours on a similar scale, then it could be argued that the greater the charitable purpose
1286 Pemsel’s case [1891] AC 531, 568 (Bramwell LJ). 1287 Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204, 248 (Kirby J dissenting).
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value, the greater the claim to entitlement to favour. The graph set out below illustrates this point.
Figure 17 Tax Exemptions and Charitable Purpose Continuum
Grants recipient Favour continuum continuum Favour Donor favoured
Tax exempt
Partially taxed (Mutuals)
Taxed self interest pure charity Charitable purpose continuum
It is possible to progress the framework further. Entitlement to favour is linked to the supply of charitable goods. Charitable goods have both a source and an application dimension. As to source, charitable goods can be altruistically and voluntarily supplied. As to application, charitable goods can be applied for public benefit. These indicia of charitable purpose provide not only a mechanism justifying favour but also tools for precluding from favour.
The criteria can be quite simple. Favour is justified if it is extended to civil society organisations that pursue purposes that facilitate altruistic and voluntary supply of charitable goods that are applied for public benefit. Each jurisdiction can decide where to draw the line in relation to the different forms of favour such as tax exemption and donor preferred status. The principle is relatively clear, however, and the tools for assessing the extent of charitable purpose elucidated above are capable of application in this context. There are two significant implications of this for policy development.
First, access to favour should be related directly to the criteria that justify favour – not the
Pemselian purposes . It follows that there is a need to distinguish between the extent or
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nature of contributions to public benefit. This thesis provides tools for that project which has so confounded the orthodox understanding of the doctrine of charitable purpose. As the common law is presently framed, a charitable trust for promulgation of seemingly useless religious writings, such as was the case in Thornton v Howe 1288 will enjoy all the same favours as any other charitable trust. This thesis separates conceptually the freedom of persons to form and conduct a charitable trust from that trust’s entitlement to enjoy favours.
A common law country adopting this alternative jurisprudence, that separates entitlement to exist from favour, may chose to favour or not favour a trust for promulgation of seemingly useless religious writings without denying the underlying charitable nature of the trust.
Second, building from the first point made in this section, the concept of dynamic boundaries provides opportunities for significantly greater flexibility, particularly to legislators and regulators wishing to subsegment charities. For example, as a matter of policy a common law country’s government could choose to extend or reduce the purposes linked to favour in very precise ways over very precise periods of time. Significant complexity in the implementation of these options can be foreseen, but the point for policy development is that when the entitlement to favour is shifted from charitable purpose per se to the extent or nature of public benefit, policymakers are given greater flexibility with the concept of charitable purpose than has hitherto been the case. This flexibility is increased because within this jurisprudence the boundary between public benefiting purposes enjoying favour and public benefiting purposes not enjoying favour is dynamic.
In setting out these observations my purpose is not to argue for a particular form of taxation of charities or more generally civil society organisations. My purpose is to illustrate how, concerns regarding taxation policy related to civil society organisations in general and
1288 (1862) 31 Beav. 14.
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charities in particular, could be addressed by focusing on concepts of altruism, voluntarism and public benefit as indicia of charitable purpose.
5. Applying the Principles in Foundational Philosophical Contests
Finally, but equally importantly, there is architecture for policy debate in which the contested philosophical a priori assumptions find voice. This occurs through the debates regarding the contested variables – altruism, benefit and coercion. Across Chapters IV, V and VI ideas as to how the debate process might evolve from contested philosophical foundations was canvassed. Importantly for policy development, there is a way forward. The discussions across chapters IV, V and VI suggest directions but not answers.
Each of the subject areas of contested a priori assumptions - altruism, benefit and coercion - have been set out for theoretical discussion as on continua where the philosophical contest can be expressed. The exploration has led to the possiblity of measurement of the variables at a much more sophisticated level than merely a nominal measurement approach. Case law and policy development can draw explicitly upon the long and often divergent philosophic history of ideas that inform conceptions of altruism, public benefit and the role of the state.
Part I closed with a concern that as jurists journeyed into the deeper, philosophical contests over the factors that inform charitable purpose, they were embarking on a trip like the trip
Merry and Pippin made into Fangorn Forest where, having entered, it seems there is no way out. 1289 The journey into this theory, has produced, though, quite the opposite result. The deeper the investigation into a priori assumptions the clearer the jurisprudential framework for their analyis that has emerged.
1289 J R R Tolkien, The Lord of The Rings, The Two Towers (1965) 74-109.
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K. An Analytical Framework that may be Difficult to Implement
In the preceding section some of the problems with implementing this theory were touched upon but the thrust of the argument was as to its usefulness. Having stated the reasons why the framework should appeal, and how it might be applied to address some of the challenges raised in Chapter II, it is appropriate to note some reasons why this alternative jurisprudence might not be attractive.
First, the model could mean the end of the unity of the common law concept of charities. As this body of law with its statutory overlays in various common law countries, is already quite diverse, this framework, far from unifying, arguably licenses further differentiation across common law jurisdictions. 1290
Second, the hope for clarity in conceptions of public benefit through better measurement, might be thwarted either by complexity or by the lack of measurability of key variables. The cost of measurement could prove prohibitive. I have set up, but not chosen between, a concept of public benefit as on a continuum and also as divided into three categories developed from the Pemselian purposes . This could lead to confusion, make implemention difficult in the context of one particular jurisdiction, and make it unworkable across jurisdictions.
Third, there are significant obstacles to its acceptance at an applied level even if it is theoretically appealing, and those obstacles themselves may warrant its abandonment. The highest courts across the common law world have all affirmed the Pemselian partitioning. It is almost universally declared not only by the judiciary, but by almost all commentators, that if there is to be a change, it is the responsibility of the parliaments and not the courts. When we turn to parliamentary responses, it is uniformly to retreat to the four heads of Pemsel’s
1290 Kerry O'Halloran, Charity Law and Social Inclusion: An International Study (2007) 3.
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case and add further heads. Even if a superior court wished to undertake the changes, whilst technically possible by returning to the common meaning of charitable purpose, incremental judicial would be difficult. Further, the beginning would have to be for a court not bound by the jurisprudence in Pemsel’s case to adopt that approach. That would be unlikely in the current context without the judgment affirming part of a larger theoretical work such as that set out here, and that is an unusual approach for a common law court. 1291
Fourth, the widening of the class that includes charities is likely to startle revenue authorities and could be seen as a threat to those organisations already enjoying the favours. 1292 This is likely, in the broader political arena, to further prejudice the prospects of changing to a framework such as that set out here.
Fifth, the arguments in this thesis have been confined to the common law at an international level. The constitutional and narrower statutory context has been ignored. These are significant limitations associated with this approach which have been mentioned in Chapter
I. Beyond that though, even if the framework itself is useful, the content may be deeply contested, making what appears relatively clear in theory difficult to apply in practice. For example, I have suggested that it is possible to draw from and build on Garton’s thesis, 1293 by simply declaring that the unique identifier is the common meaning of charitable purpose. It might be, though, that the purpose of civil society is something else, or as Garton suggests, it is impossible to state. Further, using classical definitional theory to develop a quite sophisticated concept of charitable purpose as the heart of civil society, might be only one alternative applying in one jurisdiction. There are other ways of viewing both charitable purpose and civil society organisations. Both the sectoral analysis and the division of laws
1291 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42, [44] (Rothstein J) ; Vancouver Society of Immigrant and Visible Minority Women v MNR [1999] Can Sup Ct Lexis 12, 57-58; Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 229 ALR 1, 15-37 (Kirby J). 1292 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) 2007 SCC 42, [44] (Rothstein J) . 1293 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005).
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into public and private can be suggested at an international level but are not uniformly accepted. 1294
Sixth, the breadth of the work has come at the price of depth of legal analysis. The thousands of cases following Pemsel’s case by which the orthodox approach developed have not been analysed. It is my view that the decision in Chesterman’s case 1295 is a critical juncture, and that retracing steps back to that case provides a way out. However, the exploration of that case law is beyond an outline such as this, and there is a need to test the thesis sketched here against the cases following Pemsel’s case . Similarly, the law antecedent to Pemsel’s case has only been touched upon. The concept of the pious use is a very rich concept but it has only been partially explored and others could take a different view on how it might inform theory development. At many points the opportunity to go deeper has been sacrificed to the overarching object of sketching the wider vista of all of civil society and that arguably renders the work too theoretical to be of practical use in particular contexts.
Seventh and finally, all change brings with it instability. Changes of the magnitude which could flow from adopting this alternative jurisprudence, are capable of creating significant instability. 1296 That instability itself is likely to be an obstacle to implementing changes consonant with the theory laid out here.
1294 As was mentioned in Chapter I Section 3, analysis of society in terms of sectors, particularly when discussing civil society organisations, came to prominence through the United States Filer Commission, although it was initially suggested by Amitai Etzioni. See Helmut Anheier and Regina List, A Dictionary of Civil Society, Philanthropy and the Non-Profit Sector (2005) 264. The black market arguably amounts to a fifth sector to be considered. See Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 44A. That there should be any sectoral analysis of society is contested. See Simone Chambers and Will Kymlicka, Alternative Conceptions of Civil Society, The Ethikon Series in Comparative Ethics (2002). Margaret Thatcher’s famous quote: ‘There’s no such thing as society’ evidences that even the concept of society is contested. See Brian Deer, Epitaph for the Eighties? 'There is no such thing as society' (2006)
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Acknowledging that these (and no doubt other) objections can be raised to this alternative jurisprudence, my object is now substantially completed. My object has simply been to sketch the outline of one alternative jurisprudence. In so far as the work is an attempt to traverse between the current non-legal literature and the jurisprudence, crossings have been forged but completed bridges have not been constructed. Others may choose to cross in other ways and at other places. This outline points some ways, though, that those non-legal streams of discourse can inform legal theory. The next section completes the thesis by suggesting where this alternative jurisprudence might be located in current jurisprudential theory.
L. Location in Current Jurisprudential Theory
From Chapter I it will be recalled that the sectoral analysis of society led to recognition of what was initially called the third sector, and which is here labelled civil society. The argument developed so far points to a need for legal theory to develop a recognition of this
‘third’ space and a body of law here called a jurisprudence for civil society. Just as civil society is characterised by voluntary participation so a jurisprudence for civil society has as its foundation, voluntary association. As most common law societies are free and encourage voluntary contributions of public benefit, this jurisprudence has a second dimension. That second dimension is that it is the body of law by which ‘peculiar favour’ 1297 is extended to civiil society organisations. The alternative jurisprudence proposed in this thesis encompasses, then, only two types of laws: laws that regulate and laws that grant favour .
Where people wish to contribute voluntarily for public benefit, the function of the law changes from that of proscribing, to that of enabling through minimum regulation. The law may go further and favour but it does not have to favour. The laws by which society regulates, and sometimes favours, those organisations by which citizens voluntarily
1297 Pemsel’s case [1891] AC 531, 583 (Lord Macnaghten).
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participate and contribute to society (other than for personal gain), sets the scope of this alternative framework.
The re-categorisation to include a jurisprudence for civil society is based on realigning boundaries between classes of laws to bring into one class the laws applying to civil society organisations. Once that broad class is recognised it is argued that class is capable of division into two subcategories. Association law is the first subcategory. It is the umbrella under which is gathered all the laws that enable and regulate persons as they associate freely for the voluntary pursuit of common interests beyond business, government and family.
Benefit law is the second. It is the subcategory of law that grants favours to organisations that contribute to public benefit which a society wishes particularly to encourage by granting favours. I mentioned in Chapter I that in this body of law it is the organisations, as distinct from individuals or institutions, that are the focus of this thesis. 1298 I set out reasons for this in Chapter I and they do not need to be canvassed again here. It follows that if the law does not relate to civil society organisations it is not a part of this body of law.
Civil society law stands between, but is differentiated from, the two great dividers of legal theory: private law and public law. 1299 It warrants its own space in legal theory. Figure 18 below, developed from Figure 1, illustrates. 1300
1298 See page 20. 1299 John H Farrar and Anthony M Dugdale, Introduction to Legal Method (3 ed, 1994) 15. 1300 See page 24.
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Figure 18 Jurisprudence with a ‘third’ Space for Civil Society
Law
Public Law Civil Society Private
La w La w
Association Law Benefit Law
It may be asked why Benefit law is not drawn as a complete subject of Association law. It is true that most of the time it will be a subset of Association law. There are cases though, where civil society is strengthened by favouring businesses through such things as favourable income tax treatment and grants. For that reason, it seemed better to treat it as a separate division.
Common law development, unlike some other areas of law, does not require a revolution.
By gradual changes, building from precedent in accordance with the principles laid out here, the common law can be developed. Such a process can give voice to the values of liberty, equality and fraternity that are so central to democracy without depriving citizens, like
Sydney Carton and his young seamstress friend, of their liberty, let alone their life. 1301
M. Paths for Further Reseach
This thesis has constructed an architecture that is highly contestable. In this section, some of the more obvious paths for further research are suggested.
1301 Charles Dickens, A Tale of Two Cities (first published 1859, 2000 ed) 388-389.
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First, the suggestion summarised in the last section needs to be tested. That is, whether it is appropriate for law to follow other disciplines in this way is a threshold question for research. It follows that there is a need for inquiry into the broader implications of this conception, whether it is sustainable and, if it is, theory and policy implications flowing from it.
Second, the bridge between law and other disciplines has been spanned but needs fortification from both sides for ideas to travel efficiently to and from the island that is the law of charities. For example, theorists in disciplines other than law, particularly those working with Anheier’s civil society diamond, might explore how the interface sketched here works in policy development. This will probably best be achieved at the specific, applied level of topics such as favouring the pursuit of political purposes, public benefit and measurement of altruism.
Third, the suggestion that all of the cases on charitable purpose fit within this alternative jurisprudence needs to be tested.
Fourth, the link between the foundations of charitable purpose and the constitutional freedoms are not well developed. Research to test the strength of support for the overarching concept is required, to ascertain the level to which precedent exists in a particular common law jurisdiction to support the general proposition suggested here.
Fifth, the thesis avoided many of the challenges raised in philosophical theory by taking the common law, casuist approach and limiting discussion to particular examples from the case law. That approach begs the question as to whether this framework could be located within broader philosophical paradigms. In Chapter I, the possibility of links to Rawls were
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avoided, but a Rawlsian analysis of the approach would be interesting. 1302 Similarly, there was reference to Rorty and whether this thesis could sit within a postmodern legal agenda. 1303 These broader philosophical questions are open for consideration.
Finally, each of the seven factors commending this alternative jurisprudence mentioned in section I and each of the seven difficulties mentioned in section K of this chapter, suggest paths for further research.
N. Conclusion
A theoretical framework, bringing together the laws applicable to civil society organisations, has now been outlined. Arguably the gap in legal theory which surrounded the third sector’s law has been filled. This has been achieved by the expansion of the doctrine of charitable purpose to the boundary of civil society. The doctrine has been located in a wider jurisprudence, linked to the sectoral analysis adopted in other disciplines and a class has been created which Garton hoped for, but doubted was possible. 1304 The law applying to the variety of ways that people associate and transfer goods voluntarily in common law countries in the twenty-first century has been brought into an overarching framework which is no longer centred on that small percentage of the total number of civil society organisations called charities. 1305 The doctrine of charitable purpose has been released from the ossified shackles of ‘four principal divisions’ and is free to develop having regard to statutory developments. The research question shaping the thesis has been answered. A jurisprudence for civil society has been offered that brings into a unifying whole the common law centred on the doctrine of charitable purpose that regulates and favours voluntary contributions of public benefit. It offers a simpler and more cohesive explanation of this ‘legal universe’. By
1302 See page 35. 1303 See page 36. 1304 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 30. 1305 Jonathan Edward Garton, The Regulation of Charities and Civil Society (D Phil Thesis, University of London, 2005) 14; Myles McGregor-Lowndes and Matthew Turnour, 'From Charity to Civil Society' (Paper presented at the ARNOVA Conference, Atlanta, 15 - 17 November 2007) 3.
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not being referent to an ancient statute nor dependent upon inadequate categories set in a nineteenth century case, but rather being drawn from, and integrated into, current conceptions of civil society it is, to repeat Copernicus, ‘that which is easiest to grasp’. 1306
Further, this jurisprudence for civil society is not that radical, for its pedigree leads back through Pemsel’s case to the foundations of the law that preceded the Preamble . The only difference, arguably, is that instead of referencing the cumbersome and incomplete list in the
Preamble, or the definitionally unsatisfactory four principal divisions set out in Pemsel’s case , the reference is to a concept of charitable purpose which is more parsimonious and more definitionally satisfactory. In this jurisprudential universe it is ‘charitable purpose’ in an ordinary broad sense – the sense overruled in the Australian High Court’s decision in
Chesterman’s case 1307 – that is the central concept. This concept of charitable purpose identifies charitable organisations by their altruism, public benefit and absence of coercion.
It is a concept of charitable purpose that identifies charitable goods as goods sourced altruistically and voluntarily and applied for public benefit. It is this concept of charitable purpose that is the gravitational force that holds all of the laws of this legal universe together.
Closer to the centre of this universe, charitable purpose is more evident because altruism, voluntarism and the benefit to the public are more evident. The more evident altruism, voluntarism and public benefit in the purpose pursued, the more favour is justified.
Acknowledging that departure from reference to the Preamble and Pemsel’s case is a paradigm shift, I nevertheless contend that it is a logical development and one well overdue.
Contributions to philosophy are rarely much more than the application and extension of old insights to emerging challenges. As I was developing this paradigm it became evident to me that what was emerging seemed very close to an exhortation the apostle Paul wrote to the early Christian community in Galatia and I close acknowledging his prescience: ‘You…
1306 Nicolaus Copernicus, On the Revolutions of the Heavenly Spheres (2 nd ed, 1542) 508. 1307 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362, 384 (Isaacs J).
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were called to be free. But do not use your freedom to indulge the sinful nature; rather, serve one another in love. The entire law is summed up in a single command: ‘Love your neighbour as yourself’. 1308
O. A Final Postscript
At the outset I stated that the city metaphors of Dickens and Augustine enriched exploration of charitable purpose. Those typologies carry the concluding thoughts. In the earthly city, as Augustine observed, people found peace in a form of government that bound people together through expression of common values. Common law countries recognise the right of the individual to personal peace and part of that is not only freedom of religion but also freedom of association. They have also recognised the role of religion in binding society together. Enabling free association permits those of like mind to so govern themselves corporately having regard to the appropriate limits. The rivalry between this association and the state has been identified, and as Dickens retold, will lead to bloody violence if liberty, equality and fraternity are denied by the state. In the earthly city, peace is achieved by accommodating contested self-interest. Peaceful association through accommodating competing interests is not, though, the end of city metaphors or the scope of law for civil society; for civil society, is more than self-government.
There is a second city in Augustine’s framework and that is a city founded on charity. It is his heavenly city which, it will be recalled, is commingled with the earthly city. There is another city in Dickens’s Tale also. It is the city that did not experience a bloody revolution.
It was the sanctuary to which Dickens’s ‘heroes’ fled: a common law city that affirmed and defended a space for charity in its law. A jurisprudence for civil society is both a defence of the voluntarily chosen earthly city and a framework for encouraging by favours, the pursuit of a journey to the heavenly city. It is a tale of two cities in a very specific context.
1308 The Holy Bible New International Version (1984) Galatians 5:13-14.
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