ACPNS Quarterly Case Notes Summary–Fourth Quarter 2020

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McGregor-Lowndes, Myles& Hannah, Frances (2020) ACPNS Quarterly Case Notes Summary – Fourth Quarter 2020. [Working Paper]

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c The Australian Centre for Philanthropy and Nonproﬁt Studies (ACPNS)

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ACPNS QUARTERLY CASE NOTES – SEPTEMBER TO DECEMBER 2020

A summary of significant cases involving charitable, philanthropic, nonprofit and social enterprises organisations in Australia and overseas.

The Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) produces succinct case notes for lawyers, accountants and managers involved in the nonprofit sector throughout each year.

The ACPNS Quarterly Case Notes Series summarises cases noted in each quarter and links them directly to its full case notes posted to QUT ePrints, an institutional Internet repository of research output of QUT staff and postgraduate students. The papers deposited in QUT ePrints are freely available, with an advanced search facility available.

Further resources on grant-seeking, fundraising and philanthropy are available from the QUT Community Collection for grant-seekers, fundraisers and philanthropists.

This case note summary collects and summarises cases of particular interest from the second quarter of 2020-21.

The experts pick of cases to consider:

Murray Baird – Advisor on Charity Law, Inaugural General Counsel ACNC, Adjunct Professor University of Western Australia Law School, Senior Fellow University of Melbourne Law School.

YWCA Australia v Chief Commissioner of State Revenue has wide-ranging implications for charity law in Australia as is apparent from the case note. The judgement includes an extensive survey of Australian case law on the application of the concept of relief of poverty (at [35]-[50]) which, the court concludes, must have regard to contemporary conceptions of poverty in Australia beyond “poverty line” assessments. “Poverty is a complex state of affairs linked to various societal issues…” (at [51]). The case also applies the principles in Word Investments in the context of state revenue legislation and gives helpful guidance on the concept of “predominantly” in charity law.

It is a timely case when the ACNC is currently considering revision of Commissioners Interpretation Statements in relation to charity housing and public benevolent institutions. Contrast the status of YWCA as a charity for the relief of poverty and advancement of education to that of YMCA as a religious institution: Young Men's Christian Association of Melbourne v Federal Commissioner of Taxation [1926] HCA 2; (1926) 37 CLR 351 (18 March 1926).

Maria Cowen – Herbert Smith Freehills

McLachlan & South Ozz Shelter (Charity Licence No. Ccp3261) an incorporated charitable institution v Hamilton (McLachlan) raises questions about the legal relationship which is created, or obligations which arise, when a donor provides funds through a ‘donate now’ button on a website. This issue will become increasingly significant due to the prevalence of crowd funding campaigns, particularly in circumstances where the charity that receives the funds has no control over the representations made as to the use of those funds. 1

Last year, we saw significant uncertainty about the permitted use of funds raised in Celeste Barber’s online bushfire appeal, a campaign which unexpectedly raised more than $51m for the NSW Rural Fire Service. In that case, despite Ms Barber’s representations as to how some of the funds would be used (and despite the donors’ intentions that the funds be used in those ways), such uses were ultimately not permitted.

In McLachlan, the court confirmed the previous decision that a charitable trust was created when money was donated online with the presumed intention that it would be used for a particular charitable purpose. This reasoning may also support an emerging line of authorities that indicate that a charitable company holds its assets on charitable trust, a proposition which has a multitude of administrative and legal implications.

Anne Robinson, Consultant, Prolegis Lawyers

In the matter of The Ethiopian Orthodox Tewahedo Church St Mary of Debre Tsion, London [2020] EWHC 1493 (Ch) was an internal dispute case involving rival branches of the Ethiopian Tewahedo Church. The importance of this case is that it applied the test of good faith set out in both section 220 of the Charities Act UK and also in the model CIO constitution. The charity concerned had re-constituted as a CIO, and therefore came under the specific provisions of section 220. Of course, the charitable corporation in Lehtimäki and Others v Cooper was not a CIO and the decision of the Supreme Court there was not directly relevant.

The circumstances of this case would also have to be distinguished from circumstances which may arise in Australia because the members in question, in voting the way they did, acted in breach of their fiduciary duties arising under clause 10.3 of the CIO constitution referred to below and section 220 of the Charities Act which provides that: “Each member of the CIO must exercise the powers that the member has in that capacity in the way that the member decides, in good faith, would be most likely to further the purposes of the CIO”. Australia does not have a CIO with its express statutory “in good faith” provision.

The Court did not expressly cite or apply Lehtimäki and Others v Cooper [2020] UKSC 33. However, it did note that In the previous decision in this long running saga, Children’s Investment Foundation Fund (UK) v Attorney General [2019] Ch 139, the Court of Appeal held that members of a charitable company owed a duty corresponding to that specifically imposed on members of CIOs by section 220 of the Charities Act 2011 (at [48]).

The significance of the case for me therefore is two-fold: firstly, that the Court considered the application of the good faith test: “In other words, the member must exercise the powers that he has in that capacity in the way that he decides, in good faith, would be most likely to further the purposes of [the charitable company]. It should be stressed that this duty is subjective: in other words, that what matters is the member’s state of mind (compare e.g. Regentcrest Plc v Cohen [2001] 2 BCLC 80, para 120, dealing with company directors)”. This was because the Court could not say that the members had not applied their minds to their proper duty. However, in conducting future elections the Court recommended reminding members in the meeting that in voting “they do owe a duty to the CIO/Church to exercise an independent judgment, and to vote in the way that they, in good faith, consider the interests of the CIO/Church would be best furthered”([at [59]).

The second point of significance of this case for the governance of charitable corporations is that there were a significant number of members of the charity concerned, not the small number as in Lehtimäki and Others v Cooper, where the Court commented on (though it was not directly relevant) whether the principle of fiduciary duties of members would apply to charities with large numbers.

It remains to be seen whether a court in Australia would find an implicit fiduciary or fiduciary-like duty notwithstanding the lack of an equivalent provision to section 220 of the UK Charities Act.

Charity + In Attorney General v Zedra Fiduciary Services UK Ltd [2020] EHWC 2988 (Ch) the issue before the Court was whether a trust established to discharge the National Debt was for charitable purposes, and, if those purposes having failed, whether the fund could be applied cy-près. An anonymous donor settled an amount of cash and securities in 1928 initially valued at almost £500,000. This amount was to be held by Barings as trustees to accumulate income and profits until the date fixed by the trustees as being the date when, either alone or together with other funds then available for the purpose, it was sufficient to discharge the National Debt. At the commencement of the proceedings the fund stood at £512m, approximately 0.026% of the current UK National Debt of £2,004 billion. It was agreed that while there were reasonable prospects to discharge the national debt sometime in the future at the time of the deed’s execution, the prospects were now described as “vanishingly small” (at [34]). The trust was held to be for a charitable purpose and a further hearing will be held about applying the cy-près doctrine.

+ Greenpeace of New Zealand Inc v Charities Registration Board [2020] NZHC 2993 was litigation following a decision confirming that Greenpeace of New Zealand Inc was entitled to be registered as a charity under the Charities Act 2005 (NZ): see Greenpeace of New Zealand Inc v Charities Registration Board [2020] NZHC 1999. The parties agreed that Greenpeace NZ’s charitable status should be backdated, but disagreed as to the relevant date. The difference on registration date that was being argued in this case was 15 months. The Court ordered that backdating be to the initial properly completed application for registration.

+ Preservation and Promotion of the Arts Ltd, R (On The Application of) v Manchester Magistrates' Court [2020] EWHC 2435 (Admin) concerned an appeal against the refusal of rates relief for an alleged arts charity. The arrangements were between charitable organisations and the owners of otherwise untenanted premises by which those premises were leased to the charitable organisation for a peppercorn rent to display works of art. The charity occupied 18 floors of a building, events were hardly advertised and public access was an issue. The charitable organisation (and not the landlord) then became liable for the payment of business rates, but subject to mandatory relief. The Court discussed the scope of “arts” under the charity heads.

Internal Disputes + In the matter of The Ethiopian Orthodox Tewahedo Church St Mary of Debre Tsion, London [2020] EWHC 1493 (Ch) concerned a dispute between rival branches of the Ethiopian Tewahedo Church. This was an application seeking court directions for the holding of church meetings. The Court noted that In Children’s Investment Foundation Fund (UK) v Attorney General [2019] Ch 139, a part of the long-running litigation preceding Lehtimäki and Others v Cooper [2020] UKSC 33, the Court of Appeal held that members of a charitable company owed a duty corresponding to that specifically imposed on members of CIOs by section 220 of the Charities Act 2011 (at [48]). The judgment of the Court went on to say at: “In other words, the member must exercise the powers that he has in that capacity in the way that he decides, in good faith, would be most likely to further the purposes of [the charitable company]. It should be stressed that this duty is subjective: in other words, that what matters is the member’s state of mind (compare e.g. Regentcrest Plc v Cohen [2001] 2 BCLC 80, para 120, dealing with company directors)”.

+ In Smolonogov v Our Lady Of Kazan Russian Community of Lidcombe Inc [2020] NSWSC 1484 a cy-près scheme was approved in settlement of a dispute between factions of a church congregation. The church structures involved a charitable trust deed and an incorporated association. The resolution grew out of a member’s application to injunct the AGM considering a proposal to change the congregation’s denominational alignment from the Russian True Orthodox Church Abroad, the original pre-Soviet era Church, to the Russian Orthodox Church Abroad.

+ Lianos v Order of AHEPA NSW Inc (No 3) [2020] NSWCA 340 was a procedural hearing in a long-running internal dispute involving a stay of proceedings while further parties were joined to an appeal. This dispute has a significant history before the courts (In the Matter of Order of AHEPA NSW Inc. [2019] NSWSC 1329; Lianos v Order of AHEPA NSW Inc [2020] NSWCA 193; In the Matter of Order of AHEPA NSW Incorporated [2018] NSWSC 458; In the Matter of AHEPA NSW Incorporated [2020] NSWSC 138). The case concerned an internal dispute within the Order of the Australasian Hellenic Educational Progressive Association Inc. in New South Wales. The Order of AHEPA NSW (AHEPA NSW) is an incorporated association governed by the Associations Incorporation Act 2009 (NSW). Underlying this dispute was disagreement about the management of, and the relationship between, AHEPA NSW and the constituent units of an unincorporated association known as the Order of the Australasian Hellenic Educational Progressive Association.

+ Lauri v Shwe [2020] WASC 471 was a case about incorporated associations and whether the constitution of an association properly addressed all matters required by the relevant legislation. The incorporated associations legislation in Western Australia will only imply the model rules into a defective constitution where the topic or issue is not covered at all.

+ Islamic Society of Victoria v Ozyurek & Ors (No 1) [2019] VSC 662 concerned the affairs of the Islamic Co-ordinating Council of Victoria Pty Ltd (ICCV). The plaintiff in this application sought an order that a solicitor who was both a defendant and solicitor for other defendants be restrained from also acting as solicitor on the record for the plaintiffs. The application was not granted and the matter settled. Islamic Society of Melbourne Eastern Region Inc v Islamic Coordinating Council of Victoria Pty Ltd & Ors (Costs Ruling) [2020] VSC 887 was a dispute about costs which arose out of the previous case’s deed of settlement. The Court held that as the plaintiff has been put to the expense of obtaining an order from the Court to validate the nomination of its representative on the ICCV board, it was entitled to be compensated for its costs.

+ Faamate & Ors v Congregational Christian Church In Samoa-Australia (Ipswich Congregation) & Ors [2020] QCA 263 was a Queensland Supreme Court of Appeal decision about who should bear the costs of an appeal concerning an internal dispute in a religious organisation involving many members personally, with misconduct related to the litigation. The Court found that the case contained unusual circumstances and took account of the misconduct of the minister of the congregation. Faamate & Ors v Congregational Christian Church in Samoa-Australia (Ipswich Congregation) & Ors [2020] QCA 87 concerned whether an incorporated association, which was also a functioning church, should be wound up on the just and equitable ground. It was an appeal from Faamate & Ors v Congregational Christian Church in Samoa-Australia (Ipswich Congregation) ABN 90 103 392 182 & Ors [2019] QSC 194. The appeal was dismissed.

+ In the Matter of St Gregory’s Armenian School Inc (In Liq) (No 2) [2020] NSWSC 1601 concerned the issue of whether bankruptcy would stay proceedings to approve the distribution of assets of an incorporated association. The bankrupts had acrimonious dealings with the successive liquidators of the association through several court proceedings: In The Matter Of St Gregory’s Armenian School Inc [2020] NSWSC 1124 and John McInerny and Phillip Campbell-Wilson in their capacity as Liquidators of St Gregory’s Armenian School Inc v Michael Ghougassian & Anor [2020] NSWSC 197.

+ In Chen v The Australian Shaanxi Chamber of Commerce Inc [2020] NSWSC 1594 an interlocutory application for an injunction against the president of an incorporated association was refused. A group of members were unhappy with the way in which the annual elections of office bearers were conducted, and initiated court proceedings. The complaint was about the Chamber’s strategic partnership with the Qinshang Bairen Association, and that that body was in some way associated with or controlled by the Chinese Communist Party. The Court was not convinced that there was anything contrary to the objects of the association in the agreement, or in the Chamber’s ability to govern itself. Further,

the new office bearers had been managing the association for over a year, and delay in seeking interlocutory remedies was held against the old committee members.

+ Farrish v Delta Hospice Society, 2020 BCCA 312 was an appeal from the primary decision in Farrish v Delta Hospice Society, 2020 BCSC 968. The Society is a not-for-profit community-based organisation that offers compassionate care and support for persons in the last stages of living, primarily through the operation of a hospice. It also supports individuals dealing with life threatening illness, and grieving loved ones. This was a dispute between two camps in the Society, those who supported medically-assisted dying (MAiD) and those who did not. It involved stacking of meetings. It also illustrated the tension engendered between entrenching the founder’s views of the world, and allowing for a future membership to democratically guide the organisation to meet contemporary challenges.

+ In Campara v Australian Islamic Society of Bosnia Herzegovina Inc [2020] NSWSC 1739 a declaration and costs were sought in relation to the invalid removal of incorporated association committee members. The Court declared that committee members had been invalidly removed, that their replacements’ appointments were also invalid, and set out a process for an AGM to be convened. As to costs, the Court decided to make no order, so that parties bore their own costs.

+ Surrey Knights Junior Hockey v. The Pacific Junior Hockey League, 2020 BCCA 348 was an appeal concerning the suspension of an ice hockey team due to the alleged conduct of its coach. The Court considered whether fair process had been provided in the determination, and if the process amounted to oppression of members. The Court recognised that re-litigation of a matter that has already been determined in another forum may constitute an abuse of process.

Taxation + In YWCA Australia v Chief Commissioner of State Revenue [2020] NSWSC 1798 the YWCA sought transfer duty exemption for land transferred under a scheme of arrangement to create a national body. The judgement contains clarification on the contemporary meaning of “the relief of poverty”, distinguishes narrow Canadian decisions, outlines accounting methods for establishing accounting evaluations of “use of resources”, and confirms that a purely evaluative approach, rather than a mathematical calculation, is also warranted.

+ Eisbrenner v Canada 2020 FCA 93 involved a scheme to claim charitable donation tax credits in relation to participation in the Canadian Humanitarian Trust. The in-kind donation involved pharmaceuticals. It was found to be sham. There was an attempt to implement a similar scheme in Australia, modelled on an earlier Canadian scheme: Commissioner of Taxation v Arnold (No 2) [2015] FCA 34 (Federal Court of Australia, Edmonds J, 4 February 2015) which resulted in a civil penalty of $1.5 million in favour of the ATO.

+ See also Preservation and Promotion of the Arts Ltd, R (On The Application of) v Manchester Magistrates' Court [2020] EWHC 2435 (Admin) above under Charity.

Liability + In WCB v Roman Catholic Trusts Corporation for the Diocese of Sale (No 2) [2020] VSC 639 the Court considered whether a plaintiff’s claim for damages in an historical sexual abuse case was barred by a previously settled deed. The matter involved interpretation of the amended limitation of action statute. The Court decided that as the statute was remedial, it should be interpreted generously.

+ Tapp v Australian Bushmen's Campdraft & Rodeo Association Ltd [2020] NSWCA 263 was an appeal from a previously summarised case report concerning liability of a volunteer association for personal injury (Tapp v Australian Bushmen’s Campdraft & Rodeo Association Ltd [2019] NSWSC 1506. The appeal established that only a natural person can be a volunteer within the meaning of the Civil Liability Act 2002 (NSW), and not the community organisation itself.

+ GMB v Unitingcare West [2020] WADC 165 is a case of historical child sexual abuse. The issue was whether a stay of proceedings would be granted where the employer involved had no opportunity to investigate the matter prior to the death of the main offender. The stay was granted as a fair trial was found not to be possible.

+ In Dann v Port Sorell Bowls Club Inc [2020] TASSC 47 a volunteer at a bowls club function was burnt while cooking on the club BBQ. The volunteer sued the bowls club in negligence for his injuries, receiving over a million dollars in compensation. The bowls club was found to have breached its duty of care to the volunteer, who was regarded under statute as a “worker”.

+ Dickson v Northern Lakes Rugby League Sport & Recreation Club Inc [2020] NSWCA 294 considered whether the Civil Liability Act or the common law applied to a football injury. D claimed damages for personal injury he suffered in the course of a rugby league match in 2016. He asserted that his injuries were caused by the negligence of the second respondent F in spear tackling him during a game of rugby league. D also claimed that Northern Lakes Rugby League Sport & Recreation Club Inc (the Club) was vicariously liable for F’s negligence as the player was contracted to the Club. The incident was filmed on video. At trial, F conceded that the spear tackle was an intentional act, but not done with intent to cause injury. A spear tackle is inherently dangerous and is contrary to the Laws of the Game. The question was whether F intended to cause injury, thereby excluding the operation of the Civil Liability Act 2005 (NSW) (CLA) by reason of s 3B(1)(a). By s 3B(1)(a) the CLA does not apply to the civil liability of a person in respect of an intentional act done with intent to cause injury or death.

Bequests + In Olsen v James [2020] NSWSC 1432 an estate worth just under $600,000 was assessed with litigation costs in excess of $550,000 and the executor was required to pay a charity named under the will $55,000. The executor has commenced proceedings against his lawyers seeking damages or compensation by way of indemnity against the liabilities which were found in this judgment.

+ Knipe v The British Racing Drivers’ Motor Sport Charity And Others [2020] 3295 EWHC (Ch) was a case from the UK concerning a will where the residuary of an estate was given to ambiguous or non-existent charities. The court determined that the gift was one with a general charitable intention, so that the executor was entitled to apply it to the charitable purpose identified by the Court as he saw fit.

+ Re Coghlan; Merriman v Attorney-General (No 2) [2020] VSC 668 concerned the settling of an administrative scheme where a bequest was declared void for uncertainty. The three entities in contention were Diabetes Australia, Diabetes NSW and Diabetes Australia-Victoria. The Court decided for the national umbrella body. This matter is a further hearing after the decision in Re Coghlan; Merriman v Attorney-General for the State of Victoria [2020] VSC 392 that found the bequest was void for uncertainty.

+ In Yu v Yu [2020] NSWSC 1904 a will left the residue of an estate to charity, but some property was located outside the jurisdiction in Taiwan, and was subject to that country’s laws. The Court found that the parties’ common misapprehension that the Taiwan funds would be held on trust for a charity as part of the deceased’s residuary estate was not fundamental to an agreement to settle a dispute over the will. The agreement stood.

Fundraising + McLachlan & South Ozz Shelter (Charity Licence No. Ccp3261) an incorporated charitable institution v Hamilton [2020] SASCFC 123 was a leave to appeal application from McLachlan & South Ozz Shelter v Hamilton [2020] SASC 126, a case concerning public donations from a website page, and whether and by whom they were held on trust for an animal shelter. The ultimate order may be one remitting the action to the Magistrates Court to receive further evidence on the contents of the webpage and to make a finding as to who is the trustee.

Politics + Johnston v The Greens NSW [2020] NSWCA 357 involved an application for leave to appeal against the finding that the processes of The Greens NSW were based on their internal constitution rather than the Federal Constitution. Leave was refused. This decision treated The Greens NSW as an incorporated association with a contractual basis. Without this approach, the case would not have been justiciable.

+ Haque v Hussain And Others [2020] EWHC 2739 (Ch) was a case for interim relief sought by an unincorporated political association over property held on trust for its predecessor association. It involved the Muttahida Quami Movement, founded in 1984 in Pakistan, and a schism in the association in 2016. At the heart of the issues was the ownership of extensive real property holdings in London and the application of income from those properties.

+ Harris v Victorian Electoral Commission [2020] VSC 676 considered whether a proposed payment from one political party to another, in line with a coalition agreement, was a political donation or gift under the Electoral Act 2002 (Vic).

Advocacy + Ecojustice Canada Society v Alberta 2020 ABQB 736 involved an injunction to stop a government inquiry continuing until a full hearing of an application about the inquiry was settled. The Alberta government established an inquiry in July 2019 to investigate allegations that environmental campaigns against Alberta’s oil and gas sector were being funded by foreign interest groups. Ecojustice Canada Society is a nonprofit organisation that brings public interest lawsuits involving environmental problems in Canada. It brought an application for judicial review of the inquiry. Ecojustice applied for an injunction to stay the inquiry until the Court had disposed of its application for judicial review. The Court declined to grant the application, despite finding that there was a serious issue to be tried.

Discrimination + In R (on The Application of Z and Anor) (Ap) v Hackney London Borough Council and Anor [2020] UKSC 40 a charitable housing association with the primary purpose of housing members of the Orthodox Jewish community successfully defended a claim under the Equality Act 2010 (UK). The charity’s allocation policy was found to be proportionate and lawful under the Act. The Court also noted that the allocation policy operated as a direct counter to discrimination suffered by the Orthodox Jewish community in seeking to obtain housing in the private sector.

+ In Webb v Surf Life Saving New South Wales [2020] NSWCATAD 232, a club member alleged that he had been victimised by having his membership suspended. He alleged being victimised for supporting a female club member who had been discriminated against by the club. The issue was whether it was fair and just to proceed with an application for leave to proceed with a complaint of victimisation. The Tribunal found that the true cause of the member’s suspension was not that he lodged a complaint or made an allegation of contravening conduct, but because he sent a copy of his correspondence with the club to the local Mayor. The application was refused.

Volunteers + Refer to the case of Dann v Port Sorell Bowls Club Inc [2020] TASSC 47 above under Liability.

NDIS + VGCP and National Disability Insurance Agency [2020] AATA 5107 considered the ability of the NDIA to put further questions to allied health professionals.

Author: McGregor-Lowndes, Myles & Hannah, Frances M.

Email: [email protected]

Date of creation: February 2021

Disclaimer: The material included in this document is produced by QUT’s Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) with contribution from some authors outside QUT. It is designed and intended to provide general information in summary form for general informational purposes only. The material may not apply to all jurisdictions. The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.

Creative Commons Licence: This work is licensed under a Creative Commons Attribution 4.0 International License (CC-BY)