Some Recent Lessons in Charity Law

As we move into a new year, we paused for a moment to reflect on last year’s lessons in charity law and the issues we expect will emerge in the next year. We published some brief observations on our Linkedin page and summarise a few of them in this post.

Lesson 1: Employment is still not a broad enough concept to explain all relationships between churches and their ministers.

In Fihaki v Uniting Church in Australia, Qld Synod [2023] FWC 1650, the Fair Work Commission found that the appointment of a minister of the Uniting Church did not create an employment contract and it therefore did not have the jurisdiction to hear the minister’s unfair dismissal application.  The Full Bench did not give the minister permission to appeal.

The minister was notified of his appointment by a ‘Letter of Call’ that referred to entitlement including (but not limited to) a stipend, leave and superannuation. The letter invited the minister to accept a call to placement, confirmed that his congregation was ‘acting under the Constitution and Regulations of the Uniting Church in Australia’ by issuing the call but that he would be ‘responsible to the Presbytery for the exercise of [his] ministry’. The letter did not refer to specific duties.

The minister was paid a stipend that was given as a living allowance and not for service performed. Control over the minister’s duties was exercised extensively by the Presbytery rather than the congregation and was prescribed by the regulations of the Church. The relationship was therefore taken to be governed by Church law rather than a negotiated agreement.

In Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 398 ALR 404, the High Court held that ‘a contract under which a relationship of employment is established and maintained need not be a contract that deals solely with the subject matter’ of employment. This means that contractual obligations found within the rules or canons of a church can create an employment relationship notwithstanding that the rules or canons deal with subject matter in addition to the role of a minister. But an employment contract still fundamentally requires that ‘there is an exchange of work and remuneration’ and of ‘promises to employ and be employed’. The Fair Work Commission found that this exchange was missing in the case of Mr Fihaki’s engagement as a minister.

While there is now significant overlap between the concept of employment and the role of religious ministers that appears to have resulted in an increase in the frequency and number of cases that are being heard by Courts, the Courts are still upholding a difference between an exchange of promises to employ and be employed and the acceptance of a call to perform duties necessary to advance the objects of a church.

Lesson 2: The State Attorneys-General, via the Courts, may have more extensive scope to intervene in the affairs of charities than the Australian Charities and Not-for-profits Commission.

In Grain Technology Australia Ltd v Rosewood Research Pty Ltd (No 3) [2023] NSWSC 238 (‘the Bread Research Institute Case’), the Supreme Court of New South Wales considered whether the assets of three companies (‘the BRI companies’) were held on trust for the advancement of charitable purposes. The companies existed to research and develop ‘improvements in the wheat and other grains used in [the manufacture of bread] and improvement in the manufacturing processes themselves’, and it was submitted that these were objects that advanced education and benefitted the community.

The Court held that the BRI companies were not charitable institutions with exclusively charitable objects and that the assets held by the BRI companies were not held on trust for charitable purposes. One of the objects of the BRI companies was ‘to advise, consult and provide services to the grains, milling, baking and allied industries’. No words of limitation included in that object expressly limited it to a charitable purpose nor, in the view of the Court, could it be read in a way that so limited it. Separately, the Court also expressed some hesitation at finding that activities advancing a particular industry could be understood as beneficial to the public, in the charitable sense.

Ordinarily, a company can be a charitable institution if its ‘main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects, are charitable’ (see Commissioner of Taxation of the Commonwealth of Australia v Word Investments Limited [2008] HCA 55, [17]). In this case, the Court strictly applied the words used in objects clause to conclude that the companies were not limited to giving advice, consultation and services charitably. The object ‘to advise, consult and provide services’ was therefore not ‘concomitant, incidental or ancillary’ to a charitable object.

Charities are required to comply with statutory and regulatory requirements for registration as a charity and endorsement as a tax-exempt entity. They may also be subject to the jurisdiction of the Courts to supervise, and of the Attorneys-General to protect, charitable trusts. In the Bread Research Institute Case, the Court also determined that it has jurisdiction to grant ‘equitable remedies of a trust nature against charitable corporations and those who control them’ ([350]) and may even have a broader ‘visitatorial’ jurisdiction over corporations.

If the historical nature of the role of a visitor is instructive, this may give the Attorneys-General and the Courts a broader scope to intervene in the affairs of a charity than that ostensibly given to the Australian Charities and Not-for-profits Commission.

Lesson 3: Charities intending to sell or transfer real property should consider whether to first seek the sanction of the Court.

When property is transferred to a charity to be held and used for its charitable purposes, that property is generally expected to be held for those purposes forever. This expectation translates to a duty, which Lord Langdale MR described in Attorney-General v The South Sea Company [1841] EngR 1082 (‘The South Sea Company’) as the duty of the trustees of a charity so to manage and dispose of the property intrusted to them as may best promote and maintain the charitable purposes of the founder”.

In The Presbyterian Church of Queensland Incorporated by Letters Patent v Attorney-General for the State of Queensland [2022] QSC 306, the Supreme Court of Queensland was asked by the Receivers and Managers of the assets and undertaking of The Presbyterian Church of Queensland (‘PCQ’) to sanction the sale of some property owned by PCQ. In sanctioning the proposed sale, the Court (referring to earlier judgments in the same proceeding) observed that it would normally be imprudent for a charitable trust to dispose of property without first obtaining the sanction of the Court“.

Charitable trusts are usually intended to be permanent. People who give property to a charity to be held for its purposes usually have an expectation that it will continue to be held for those purposes permanently. If the sale of the property would change or defeat the charitable purposes for which it is held, the sale may be in breach of trust (see James Cook University v Townsville City Council & Anor [2011] QSC 209, [13]; referring to Oldham Metropolitan Borough Council v Attorney General [2993] Ch 210).

If the transfer of property is necessitated by the circumstances of the charity, occurs openly, transparently and free from any conflict of interest and will preserve the permanent and lasting interests of the charity, it may be justifiable. However, if there is any question over those factors, there is a risk that the transfer may be in breach of trust.

The trustees of a charitable trust are able to approach the Courts to seek orders or directions about the administration of trust property. The case we discussed in lesson 2suggests that the Courts may have a similar jurisdiction over charitable corporations whether or not they hold property on trust for charitable purposes. If the Court orders or directs that a trustee is justified in transferring property, the trustee will be protected from any claim for breach of trust.

The lessons in charity law from these cases are that it may be prudent for the owner of property held for charitable purposes to protect itself and its purposes by seeking the sanction of the Court before selling or transferring the property.

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