The Taxation Review Authority
One of the key issues the review of the Charities Act needs to address, in the writer’s view, is to reinstate charities’ ability to access an oral hearing of evidence: it is critical that charities have a meaningful opportunity to challenge adverse findings of “fact” made by Charities Services from their internet searches. In principle, an ability to appeal to the Taxation Review Authority (“TRA”) (clause 26 of the Bill) would enable this to happen: under normal TRA processes, even following an elaborate disputes process involving the exchange of considerable amounts of information, citizens challenging decisions of the Inland Revenue Department are permitted a full oral hearing of evidence before either the TRA or the High Court.
However, the Bill proposes to rework the TRA processes so that they operate differently for charities: for example, proposed new sections 58H, 58I(2)-(4) and 58C(4), relating to the nature of the hearing on appeal, have no equivalents in the Taxation Review Authorities Act 1994 (“the TRA Act”), and the provisions of the TRA Act that apply the rules of evidence to the TRA as if it were a court, is not replicated in the Bill. In addition, proposed section 58G(2) enables further TRA procedures to be prescribed by regulations, the content of which we have not seen.
The intention of the Bill appears to be to devolve to an internal “objections” process, conducted and controlled by the Charities Registration Board (“the Board”) and/or Charities Services, followed by only an attenuated appeals process. However, the Board and Charities Services are not judicial and they are not subject to the rules of evidence: this means that their findings of “fact” from their internet searches will remain impossible for charities to properly challenge, causing the entire process to remain unfairly tainted in favour of the original decision-maker. The proposed objection process will therefore only add further cost and delay, while not addressing the fundamental issue.
Promoting transparency, fairness and accountability in decision-making is a stated objective of the Bill. The existing TRA processes that enable an oral hearing of evidence must be available to charities also, just as they are for any other citizen: charities must have the opportunity to test adverse findings of fact made by Charities Services and the Board before an independent judicial authority according to established rules of evidence.
Removing appeals to the Supreme Court
Proposed new section 58A would remove charities’ ability to appeal to the High Court and replace it with an ability to appeal to the TRA only. The stated reason for this change is to “provide greater access to justice because the High Court setting can be legally complex, costly, and time-consuming for charities to follow”. However, unintended consequences of limiting appeals to the TRA would undermine this objective.
For example, if a charity wishes to bring an application for judicial review as well as an appeal (which is often the case), the charity will be required to commence proceedings in the High Court (as the TRA does not have jurisdiction to hear judicial review applications). Proposed new section 58A would therefore require charities to file 2 separate sets of proceedings in 2 different courts (judicial review proceedings in the High Court and appeal proceedings in the TRA), which will significantly increase cost and complexity for all concerned. Proposed new section 58X(1)(b) will give the TRA the power to state a case for the opinion of the High Court on whether the appeal should be heard by the High Court, however, requiring charities to make an application to the TRA in this regard will only add unnecessary uncertainty, cost and delay to the process.
In addition, the ability to commence proceedings in the High Court as of right is important for preserving the ability of charities to appeal to the Supreme Court. Generally, only 2 appeals from a first instance decision are permitted: this means, that, if a charity commences proceedings in the TRA, they will be permitted an appeal of the TRA’s decision to the High Court and, potentially, a subsequent appeal to the Court of Appeal; however, it is very unlikely that the Supreme Court would give leave to hear a third appeal.
If an appeal concerns a legal issue that may require the determination of the highest Court in the land, proceedings would therefore normally be commenced in the High Court, following which an appeal would lie to the Court of Appeal with a potential subsequent appeal to the Supreme Court.
It is most likely for these reasons that those wanting to challenge a decision of the Inland Revenue Department currently have a choice of commencing proceedings in either the High Court or the TRA.
At Charities Services’ annual meeting on 14 October 2022, the Minister stated that removing the ability to commence proceedings in the High Court as of right would not affect charities’ ability to appeal to the Supreme Court. With respect, this statement will be of little comfort to a charity being denied leave to appeal by the Supreme Court on the basis that it has already had 2 appeals.
We strongly recommend that charities are given the option of appealing a decision under the Charities Act to either the TRA or the High Court, at their choice, as is the case for every other person able to appeal to the TRA.
Removing charities’ rights of appeal
The explanatory note to the Bill asserts that giving charities the right to appeal 4 decisions of Charities Services would “expand” charities’ rights of appeal. However, this statement requires critical examination.
In the Charities Act as originally passed, charities were able to appeal all decisions made under the Charities Act (a change made from the original Charities Bill that charities had worked hard to achieve).
When the Charities Commission was disestablished in 2012, it appears that the DIA sought to limit charities’ appeal rights to those of the Board only: such a change would have been very significant as the Board makes only a limited number of decisions. However, there is considerable uncertainty as to whether such a change was actually made: while section 59 of the Charities Act currently states that charities’ appeal rights are limited to those of the Board only, section 61 states that, in determining the appeal, the High Court may confirm, modify, or reverse the decision of the Board or the chief executive.
Clearly, the 2 provisions are inconsistent.
In 2016, the DIA tried to resolve the inconsistency by removing the words “or the chief executive” from section 61: such an amendment would have been very significant, as it would have put it beyond doubt that the vast bulk of charities’ rights of appeal were indeed removed when the Charities Commission was disestablished in 2012.
However, the proposed amendment was not actually made: the Select Committee considering the Statutes Amendment Bill 71-1 removed the impugned amendment from the Bill “due to community concern”.
Despite this history, the Bill simply assumes that the amendment was indeed made and the vast bulk of charities’ rights of appeal were indeed removed when the Charities Commission was disestablished in 2012.
With respect, it is disingenuous to claim that charities’ appeal rights are proposed to be “expanded”: to the contrary, the proposal to limit charities’ appeal rights to a mere 4 decisions of Charities Services represents the fourth attempt, after 3 previously-failed attempts, to remove the vast bulk of charities’ rights of appeal under the Charities Act.
In principle, charities should be able to appeal all decisions made under the Charities Act. Charities Services is the registrar of the charities register: myriad decisions are made on a daily basis in administering any register, which no doubt explains why comparable registration regimes allow an appeal against all decisions (see, for example, section 370 of the Companies Act 1993, section 34B of the Incorporated Societies Act 1908, section 249 of the Incorporated Societies Act 2022 (with a very small number of explicitly-stated exceptions), section 13B of the Industrial and Provident Societies Act 1908, section 161 of the Friendly Societies and Credit Unions Act 1982 s 151, and the Charities Act as originally enacted).
Almost all submitters to the DIA’s review that responded to the question said that all decisions made under the Act should be subject to appeal.
The Bill itself notes that appeal mechanisms are important for encouraging high-quality decision-making and ensuring that decisions are made in accordance with the law. The Bill also notes current poor perceptions of Charities Services and the need for improved accountability and transparency of decision-making. On that basis, it simply makes no sense for the vast bulk of decisions made by Charities Services under the Charities Act to be beyond the scope of an appeal (or even an objection).
Experience clearly indicates that charities do not bring appeals unduly: the costs of any appeal would naturally regulate the number of appeals that are made.
We strongly recommend that proposed new sections 55A, 58A and 58N(2) and (3) are amended to make it clear that charities may continue to appeal all decisions made under the Charities Act.
Given the above history, we would also ask that no further attempts are made to remove charities’ rights of appeal: Charities Services demands very high standards of transparency and accountability from charities; the need for transparency and accountability applies equally to Charities Services itself. We would ask that Charities Services embrace the better decision-making that will arise through better structural accountability.
Charitable purpose reviews
Many have expressed concern that the recent decision of the Supreme Court of New Zealand in Attorney-General v Family First New Zealand  NZSC 80 (“Family First”) sets forward a very subjective test for whether any charity is or remains eligible for registration. Counsel for the Attorney-General has responded to criticism that Family First were deregistered simply for engaging in the democratic process, by arguing that Family First’s deregistration simply turned on a failure to meet the legal test for charitable registration. However, what counsel for the Attorney-General did not say was that the test being used to assess eligibility for charitable registration has now become so distorted that any charity can be deregistered for engaging in the democratic process, simply because the decision-maker happens to disagree with their views. Such an approach undermines the independence of charities, and also our democracy.
Proposed new section 13A of the Bill is of significant concern in this regard, because it would codify Charities Services’ current practice of conducting “charitable purpose reviews”.
Charitable purpose reviews are a euphemism for a subjective vetting of charities’ activities, in isolation from the purpose in furtherance of which they are carried out, and are the key mechanism by which the test for charitable registration has been slowly changed: combined with current difficulties in holding Charities Services accountable for its decision-making, charitable purpose reviews are the key mechanism by which Charities Services has effected a slow-moving and controversial change of underlying paradigm of the Charities Act, from an enabling framework focused on charities’ purposes, to one of increasing subjectivity, inconsistency, uncertainty, and restriction. New Zealand charities are now subject to arguably the most restrictive framework of all comparable jurisdictions, to the point that charities are now being over-regulated, a phenomenon that itself undermines public trust and confidence in charities, and causes people (particularly young people) to turn away from charities as a mode of social action.
The explanatory note to the Bill states that proposed new section 13A would not introduce any new obligations. However, seeking a legal basis for the charitable purpose reviews that are already being carried out begs the question of whether such reviews are being appropriately carried out in the first place, a question that has been specifically not asked. It is ironic that Charities Services’ approach should be codified when the definition of charitable purpose has been specifically excluded from the scope of the review.
Section 13 of the Charities Act already sets out the essential requirements for registration and it is already obvious that a charity must continue to meet these requirements in order to remain qualified for registration. Section 13 might be usefully amended to include a reference to the requirement to have rules. However, proposed new section 13A is entirely unnecessary: it represents regulatory over-reach and should be deleted from the Bill.
Importance of making a submission
The above are only 4 examples of provisions in the Bill that are the cause of considerable concern. In case it might be helpful, a discussion of some other issues can be accessed here.
The Bill is a wolf in sheep’s clothing: although couched in glowing terms, the Bill is really nothing more than a power grab by DIA, reflecting a process that has been captured by DIA from the start; the Bill is unlikely to do anything to benefit New Zealand’s communities, despite the rhetoric otherwise, and is more likely to act perversely to preclude the real issues from being addressed. Even the DIA’s own regulatory impact statement speaks of inadequate consultation, inadequate problem definition, and a lack of evidence to support the proposals. Some of the proposals have not been consulted on at all, while almost every issue of concern for the charitable sector has been taken off the table.
The devil is in the detail, and I would encourage all involved with charities, particularly those that have been denied registration, or encouraged to voluntarily withdraw their registration application, or encouraged to voluntarily deregister, or that have restricted their legitimate activities for fear of losing registration, all on the basis of subjective and controversially narrow interpretations of the definition of charitable purpose, to speak up and make their voices heard. Although the Bill is deeply flawed, it is the best opportunity we have had for almost 20 years to speak truth to power and, if the Bill passes into law, it could be many decades before there is an opportunity to look at these issues again (if ever).
Submissions close on 9 December: the Bill had its first reading shortly before the Parliamentary recess on 28 September and has been referred to the Social Services and Community Select Committee, with submissions originally scheduled to close on 10 November 2022. In response to a request supported by more than 115 charities and others, that timeframe was extended: while still tight, particularly at this time of year with so many other consultations on foot, the granting of the request for an extension is a good result and a testament to the power of collective action.
Note that, in making this change, the Select Committee did not extend its deadline for reporting back (currently scheduled for 28 March 2023). This means that the extension of time for making submissions has been made at the expense of the time available for Select Committee consideration of the Bill. It is to be hoped that the Select Committee will extend its timeframe for reporting back also, so as to ensure that consideration of the Bill, and charities’ opportunity for oral submissions, is not truncated.
It is also to be hoped that the Select Committee will seek independent advice to provide context to the advice it will no doubt receive from DIA. Trust law expertise in particular is critical in this area of law.
This Bill has important implications for the type of society we want to live in: please, whatever you do, make a submission.
Sue Barker is the director of Sue Barker Charities Law, a boutique law firm based in Wellington, New Zealand, specialising in charities law and public tax law. Since its founding in 2012, the firm has won a number of awards, including Boutique Law Firm of the Year at the New Zealand Law Awards. Sue is a member of Charities Services’ Sector Group and a member of the Core Reference Group for the review of the Charities Act. Sue is also a co-author of the text The Law and Practice of Charities in New Zealand (LexisNexis, 2013) and a contributor to a number of texts, including Charity Law: Exploring the Concept of Public Benefit (Routledge, 2022) and Regulating Charities: the Inside Story (Routledge, 2017). In 2016, Sue was made an Honorary National Life Member of the National Council of Women of New Zealand Incorporated for her work assisting the Council with charities law issues. During 2020-2022, Sue was on sabbatical as the New Zealand Law Foundation International Research Fellow Te Karahipi Rangahau ā Taiao, undertaking research into the question “What does a world-leading framework of charities law look like?”. Her report Focus on purpose was released in April 2022 making 70 recommendations for charities law reform in Aotearoa New Zealand. More information about Sue and the research can be found at www.charitieslaw.co and www.charitieslawreform.nz
Contact Sue at [email protected] or connect via LinkedIn
 Part 4A of the Tax Administration Act 1994.
 Foundation for Anti-Aging Research v Charities Registration Board  NZCA 449 at .
 Taxation Review Authorities Act 1994, s 17(3).
 See, for example, Greenpeace of New Zealand Incorporated v Charities Registration Board  NZHC 929 at .
 Charities Bill 169-1 (explanatory note) at 3.
 Charities Amendment Bill 169-1 (explanatory note) at 4.
 See, for example, Greenpeace of New Zealand Incorporated v Charities Registration Board  NZHC 1999 at .
 See section 8(1) of the Judicial Review Procedure Act 2016.
 A challenge is brought under section 138B of the Tax Administration Act 1994 to a “hearing authority”, which is defined in section 3 to mean the TRA or the High Court.
 Charities Bill 169-1 (explanatory note) at 3, 4.
 See Charities Act 2005 as at 3 September 2007 s 59.
 See Charities Bill 108-2 (select committee report) at 13: “The majority considers that charities should not be limited to appealing decisions relating to registration, and that it should be possible to appeal from all decisions of the Commission that adversely impact on a particular entity. The majority recommends that the bill be amended to achieve this end”.
 Internal Affairs Te Tari Taiwhenua Charities Amendment Bill – Report prepared for the Government Administration Committee 5 September 2016 at Appendix C “Section 59 drafting instructions – 6 September 2011”.
 Mostly relating to registration and deregistration: see Charities Act 2005, ss 8(3), 15(e), 16(4)-(9), 19, 20, 31, 44, 46, 48, and 55.
 See chapter 6 of the Focus on purpose report.
 See Charities Act 2005, s 23.
 See chapter 6 of the Focus on purpose report.
 Charities Bill 169-1 (explanatory note) at 2.
 See the discussion in chapter 6 of the Focus on purpose report.
 See, for example, The Supreme Court decision in Family First – a gift to the forces of authoritarianism? 5 July 2022.
 See Charity Law Association of Australia and New Zealand webinar Attorney General v Family First 14 July 2022.
 Charities Bill 169-1 (explanatory note) at 6.