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. vii 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..................................................................................