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Leasing Māori freehold land

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There are many unique features of Māori freehold land. In particular, there are many legal intricacies of leasing Māori freehold land that are unknown even though a significant portion of Māori freehold land is leased.

According to the Māori Land Court, about five percent of land in New Zealand (about 1.3 million hectares) is now designated as Māori freehold land. Of that five percent, the Māori Land Court has identified that a significant proportion is leased, and that the majority of those leases are leases of rural land.

It is important both owners and those leasing Māori freehold land are aware of the requirements and responsibilities when leasing Māori freehold land.

Ownership structures

There are a variety of ownership structures for Māori freehold land. The most common are:

  • Ahu Whenua Trust;
  • Incorporation; and
  • Owners in common.

An Ahu Whenua Trust is a land management trust designed to manage whole blocks of land. Ahu Whenua Trusts are often used for commercial purposes. Trustees of the Ahu Whenua Trust represent the beneficiaries/shareholders of the land.

Incorporations are also designed to manage whole blocks of land. Of all Māori land management structures, incorporations are seen as the most commercial, as the structure is similar to that of a company.

Owners in common (or shareholders) are responsible for the management of blocks of Māori freehold land where no other land management structure is in place. We recommend owners establish a land management structure, particularly if they intend to lease the property.

Lease requirements

Te Ture Whenua Māori Act 1993 (“the Act”) sets out the requirements to lease Māori freehold land.

There is no ability to lease any interest in Māori freehold land other than in accordance with the Act.

There are a range of specific rules set out in the Act. For example, there is a prohibition against leases which contain a provision enabling a tenant to purchase the land. This is because historically, Māori freehold land passed into the hands of tenants as a result of owners having to compensate tenants for improvements on the land. As a result, if owners did not have the financial resources to compensate tenants, tenants took ownership of land against the interests of the owners.

The Act also requires that Ahu Whenua Trusts and Incorporations send a copy of each lease that exceeds 21 years (but is less than 52 years) to the Registrar of the Māori Land Court for noting. Owners in common are required to get a certificate of confirmation issued and noted by the Registrar where the lease term exceeds three years. For all ownership structures, leases exceeding 52 years require Māori Land Court approval and the consent of 50% of the shareholding in the land (see attached diagram). There are also special quorum requirements for owners in common to agree to a lease, with the exact requirements depending on the lease term.

Special lease terms

When acting for owners of Māori freehold land we incorporate special lease terms that are specific to Māori freehold land, including provision for the protection of wāhi tapu located on the land. We also incorporate provision for the surrender of part of the leased land, where owners may later wish to use or occupy the land for instance to establish papakainga or an urupā. These allow the unique nature of Māori freehold land to be balanced with commercial interests.

If you would like further information please contact Kylee Katipo on 07 958 7424.

New discovery process in the High Court: High Court Amendment Rules (No 2) 2011

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Discovery is a large part of litigation whereby one party lists, and makes available, relevant documents to the opposing side.

A recent amendment to the High Court Rules regarding the discovery process has meant that the steps for disclosing documents to the other parties in Court proceedings changed considerably from 1 February 2012.

The District Court has also adopted the High Court Amendment Rules (No 2) 2011 (“the new Rules”).

Principles of the new Rules

The key principles under the new Rules are:

  • Co-operation;
  • Proportionality;
  • Practical arrangements;
  • Use of technology;
  • Case management.

Overall, the new Rules are designed to reduce disproportionate costs and delays caused by discovery as well as reducing the tactical use of disclosure.

Key changes
Co-operation

Parties must cooperate to ensure discovery is proportionate and as practical as possible. Parties are encouraged to agree on the arrangements, particularly how documents will be listed and the format for exchange.

Preservation of documents

As soon as litigation is “reasonably contemplated”, prospective parties must take all reasonable steps to preserve documents that are reasonably likely to be discoverable. This includes keeping all emails, correspondence and documents which relate to the issues.

Initial disclosure

A party must make “initial disclosure” of key documents when preparing a Statement of Claim, Notice of Defence or other originating document.

For example, where a contract is relied on in a Statement of Claim then it should be attached to that document when filed and served.

Exchange of documents

Previously, documents disclosed to the other party in Court proceedings were usually exchanged in hard copy. This led to considerable paperwork and finding specific documents could be like finding a needle in a haystack. The default position under the new Rules has now changed and documents are to be exchanged in electronic format.

This ties in with the focus on the use of technology under the new Rules. The general idea is that wherever technology can reduce costs and effort, and increase efficiency, then it is strongly encouraged by the Courts.

That said, given that the overarching goal of the new Rules is to make discovery as easy as possible for the parties, the parties can agree on whatever method of exchanging documents suits the proceedings.

Parties’ obligations

The result of these changes is that there are now a number of obligations on lawyers and parties to a dispute. Those obligations apply as soon as litigation is “reasonably contemplated” so this will generally be some time before Court proceedings are commenced.

Parties must keep all documents, both electronic and hard copy, from such time as litigation is “reasonably contemplated”. The definition of this is not set out in the new Rules and will no doubt be tested through the Courts.

A clear example of when litigation is reasonably contemplated is where one party formally records, in writing, an intention to take a dispute to Court if settlement cannot reached. This would clearly put the other party on notice that litigation is being considered. From that point onwards (at least), both parties would be required to keep all documents which may be relevant to the dispute.

The obligation to keep documents is ongoing throughout the Court proceedings for both parties and their legal counsel. It is also important to note that for companies or other entities who are parties to Court proceedings, the obligation applies to all employees or representatives of the entity (not just the person responsible for dealing with the dispute).

Consequences for breach

Where those obligations are breached, the consequences are dependent on the extent of the breach but include:

  • Order for particular discovery;
  • Costs order against the party in breach;
  • Adverse evidentiary inference by the Court based on the failure to keep documents;
  • Punishment for contempt under the Court’s inherent jurisdiction; and
  • Criminal penalties under the Crimes Act.
Timeframes/transition

The new Rules came into force on 1 February 2012. From that point onwards the new Rules apply to:

  • All new proceedings brought before the Courts; and
  • Any proceedings currently before the Court with discovery orders made after 1 February 2012.

Matters that were already before the Court on 1 February 2012 with existing discovery orders continue under the old Rules unless and until new discovery orders are made.

Renika is an Associate in our Dispute Resolution Team and can be contacted on 07 958 7429.

Abolition of the Charities Commission

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As of 1 July 2012, the Charities Commission has been wound up and its core functions have been moved to the Department of Internal Affairs. These functions include education, registration, monitoring and investigation. A new board has been appointed to make decisions about registration and de-registration.

A press release from the Minister for the Community and Voluntary Sector sets out that there will be no substantive changes for registered charities or for those organisations seeking registration.

If you would like further information please contact Jessica Middleton on 07 958 7436.

What’s wrong with management rights

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The recent decision in Atrium Management Ltd v Quayside Trustee Limited (in receivership and in liquidation) [2012] NZCA 26 (21 February 2012) potentially represents a significant change in the regulation of body corporate management agreements in New Zealand. Before Atrium Management, the key principles of the case law on body corporate management agreements could have been stated as follows:

  • A body corporate rule entrenching a particular form of management agreement was unenforceable (see Body Corporate 201036 v Broadway Developments Ltd (2010) 11 NZCPR 627).
  • “Exclusive letting” arrangements in management agreements were unenforceable under the Unit Titles Act 1972 (see Russell Management Ltd v Body Corporate 341073 (2008) 10 NZCPR 136 (HC); Gilbert, Liquidator of Crystal Waters Management Ltd (in liquidation) and Anor v About Body Corporates Ltd and Anor (High Court, Auckland CIV-2009-404-2048, 23 June 2009, Justice Harrison).
  • A long term was not necessarily an issue, as long as there was an ability to terminate for non-performance (see Russell Management, where a 10-year contract with two times 10-year rights of renewal was acceptable).
  • If problematic, it was likely that particular clauses would be struck out, rather than the whole agreement being unenforceable (see Russell Management; Low v Body Corporate 384911 [2011] 2 NZLR 263 (HC)).
  • Where the agreement essentially provided for the manager to replace the body corporate and its duties, the whole agreement could be void (see Rendall v Jackson Mews Management Ltd (District Court, Lower Hutt CIV-2004-032-634, 17 December 2010, Judge SE Thomas).

These principles have now been upended (or ‘clarified’) by Atrium Management – particularly in respect of the striking out of entire agreements. That is, we must now add:

  • For the whole agreement to be struck out, an unenforceable matter must be fundamental to the agreement. Where exclusive letting arrangements are fundamental to the contract, the whole agreement may be unenforceable (Atrium Management).
The Atrium Management decision

Management rights are big business, particularly when sold at a significant multiplier based on the term of a management agreement. It is significant that Atrium Management did not involve an effort by a body corporate to challenge a management agreement, but rather a vendor-purchaser situation.

Quayside developed a residential and retail mixed-use complex. In 2006, Atrium agreed to purchase a manager’s unit and separately, but contemporaneously and interdependently, agreed to purchase management rights, including provision for exclusive on-site letting service rights. A clause in the agreement for the purchase of the management rights (the October agreement) stated that Quayside would deliver the signed management agreement on payment of the purchase price.

In 2009, Quayside had not yet procured the executed management agreement, and Atrium gave notice to Quayside of cancellation, relying on the decision in Russell Management, delivered in late 2008, where it was held that the grant by a body corporate of exclusive letting rights to a manager was ultra vires sections 37(5)-(6) of the Unit Titles Act 1972 (though it can be noted that these provisions relate to body corporate rules, not body corporate decisions as such).

Atrium was of the view that the body corporate would be acting ultra vires if it granted the management rights described in the October agreement, and that Quayside would not be able to perform the contract. Atrium therefore cancelled the October agreement based on anticipatory breach. Quayside considered this a repudiation, and served notice demanding settlement. When settlement did not occur, Quayside issued proceedings, stating that the offending provisions should be able to be severed, and seeking a declaration as to the enforceability of the management rights. Quayside’s claim for specific performance was subsequently altered to damages.

Atrium counterclaimed and sought summary judgment. Summary judgment was denied in the High Court on the basis that Quayside had an arguable defence, including that it could seek severance of part of the agreement. Atrium then appealed this decision not to grant summary judgment.

Court of Appeal

The Court of Appeal:

  • Held that frustration was not a good reason for cancelling.
  • Held that the consideration payable under the October agreement was “substantially attributable” to the exclusive letting service (at [34]). That is, the exclusivity was an essential part of the agreement to purchase the management rights, a point amplified by the express ability of Atrium to cancel if Quayside did not comply with a settlement notice. Based on the context of the October agreement, the Court of Appeal held that further evidence was not necessary to determine that the exclusive letting rights were essential.
  • Looked to Humphries v The Proprietors ‘Surfers Palms North’ Group Titles Plan 1955 (1994) 179 CLR 597, a decision of the High Court of Australia in which there was no severance of an offending term – the whole agreement was struck down. This decision was referred to in Russell Management, but not followed. The Court of Appeal was of the view that the exclusivity of the arrangements was fundamental to the management agreement, and as an essential term could not be severed.

As a result, the Court of Appeal was satisfied that Quayside could not succeed at trial, and granted summary judgment to Atrium, meaning Atrium’s cancellation was justified.

The bigger picture

If management rights are big business, then the big picture is what this decision means for other management rights.

Following Russell Management, it was already clear under existing law that exclusive letting rights granted by a body corporate would be unenforceable; though four points can be noted. First, subsections 37(5)-(6) of the Unit Titles Act 1972, which were referred to in Russell Management, relate to body corporate rules, not necessarily general decisions of a body corporate. It needs to be emphasised that ultra vires body corporate rules and ultra vires body corporate actions can too easily be confused. Second, while subsections 37(5)-(6) remain in place until the end of September 2012 under the transitional provisions, there is no equivalent of these under the Unit Titles Act 2010. Third, the decision in Russell Management might not stop those rights being linked directly to owners through an encumbrance mechanism rather than through the body corporate or body corporate rules. Russell Management also suggested that a Court would be likely to sever any offending provisions, rather than strike down the whole agreement.

After Atrium Management, this approach seems unlikely to be followed. The Court of Appeal has held that where an unenforceable term of an agreement – such as the grant of exclusive letting rights – is essential to that agreement, the whole agreement will be struck down. It can be imagined that there will be many other agreements now subject to challenge. Some of these may be challenged under Atrium Management principles, while others may be challenged under section 140 of the Unit Titles Act 2010.

But, in assessing the implications of Atrium Management, it is important to remember that this was a decision about the sale of management rights. One party was unable to deliver the management rights as agreed to the other, so the agreement to sell the management rights came to an end. This was not, in the end, a challenge to the management rights themselves, though there are some indications the Court of Appeal thought it was. This case was also an appeal from a summary judgment decision, and not a good place for new law to be made. Exclusive letting rights will also not be essential to all management agreements – many of them are about (or also about) building or common area maintenance, or other matters. All of these points suggest it may be appropriate to read it restrictively – rather than as open season on management rights.

Thomas is a Director in our Property Team and can be contacted on 07 958 7465.

Building practitioners: Are you licensed?

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The Licensed Building Practitioners (“LBP”) regime came into full effect on 1 March 2012. It will come as no surprise to many in the industry as the regime has been in the pipelines for a number of years now to give those effected time to adjust. From 1 March 2012 any building work that comes within the definition of “restricted building work” and does not satisfy the DIY exemption must be carried out or supervised by an LBP.

What is restricted building work?

Restricted building work is work related to the primary structure or external moisture management system of a house or small-to-medium apartment building and includes bricklaying/blocklaying, carpentry, external plastering, foundations, roofing and design.

In terms of design work, any fire-safety system attached to or forming part of a small-to-medium apartment building is specifically declared to be restricted building work.

Monitoring of compliance

Before restricted building work commences under a building consent, an owner must give the relevant building consent authority written notice of the name of every LBP who has been engaged to carry out or supervise the restricted building work that is the subject of the consent (where not already stated in the application for consent). Written notice must also be given of any changes regarding the LBP that is carrying out or supervising the work.

On the completion of restricted building work, LBPs must provide the owner and the relevant territorial authority with a record of work. The record of work must be in a certain form, and state what restricted building work the LBP carried out or supervised. The owner must provide a copy of the record with an application for a code compliance certificate.

Consequences of non-compliance

Code compliance certificates will not be issued for building work that includes restricted building work without satisfactory evidence of the involvement of an LBP. Both building practitioners and homeowners are potentially liable for substantial fines of up to $20,000 if they breach the LBP requirements.

Other requirements

To remain licensed, LBPs must continue to meet minimum competency standards (to be prescribed by regulation). LBP qualifications and disciplinary history are also recorded on a public register, and they are subject to a disciplinary regime administered by the Building Practitioners Board.

If you would like further information please contact Daniel Shore on 07 958 7477.

Changes to the Charities Act

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Introduction

Three significant changes to the Charities Act have come into force from 25 February 2012. These affect:

  • Disqualification of officers;
  • Recognition of those involved in management or treasury as officers; and
  • Charitable purposes – particularly for amateur sport.
Disqualification of officers

All registered charities must now tell the Charities Commission if a certified officer becomes disqualified (section 40(1)).

An officer will be no longer qualify to be an officer of a registered charity if the officer:

  • Is adjudicated bankrupt;
  • Is convicted of a crime of dishonesty and sentenced;
  • Is prohibited from being a director or promoter under company or securities legislation;
  • Becomes subject to a property order under the Protection of Personal and Property Rights Act 1988; or
  • Is disqualified from being an officer under the rules of the charity.

There is an ongoing obligation to notify the Charities Commission if an officer is disqualified. If an officer becomes disqualified, the charity must send notice to the Charities Commission. If a charity does not remove a disqualified officer, the charity will no longer qualify for registration.

We recommend having a regular agenda item at meetings for “Qualification of Officers”, with each officer confirming that he or she still qualifies.

Recognition of management and treasury as officers

The definition of “officers” has been extended. Charities must now certify as officers the members of their highest governing body and all people in a position to have significant influence over the management or administration of the Charity.

This change does not apply to trusts, but for incorporated societies and other charities, spreads a wider net for who may be an “officer”.

According to the Charities Commission, positions of significant influence are voluntary or paid positions that have significant influence over a charity’s:

  • Management or administration;
  • Decision-making;
  • Expenditure of funds or resources; and
  • Day-to-day operations.

Positions of significant influence include:

  • Chief executive;
  • Treasurer;
  • Finance officer;
  • Paid or unpaid staff who manage contracts for the charity; and
  • Paid or unpaid staff that have access to, or control over, the charity’s funds or its financial arrangements.

Every charity will need to ensure that officer certification forms are completed for every Officer and every person in a position of significant influence.

Amateur sports

Whether sport is charitable has for some time been a tricky question. However, a new change to the Charities Act clarifies that the promotion of amateur sport may be a charitable purpose – if it is the means by which other charitable purposes (the relief of poverty, the advancement of education or religion, or the provision of another benefit to the community) – are pursued.

So, for example, a rugby or tennis club with a focus on promoting health and education through physical activities among young people may be charitable – providing more certainty in this area.

If you would like further information please contact Jessica Middleton on 07 958 7436.

Marine and Coastal Area (Takutai Moana) Act 2011 replaces Foreshore and Seabed Act

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Purpose of the new Act

The purpose of the Marine and Coastal Area (Takutai Moana) Act 2011 (“the Act”) is to restore and protect legitimate, customary interests and recognise the mana tuku iho exercised by iwi, hapū, and whānau as tangata whenua. The new Act is an attempt to acknowledge Te Tiriti o Waitangi, which the former Act did not.

Whānau, hapū or iwi groups have until March 2017 to seek Customary Marine Title. This can be done through specific negotiations with the Crown or through an application to the High Court.

Differences from Foreshore and Seabed Act 2004 (“the old Act”)

The Act is innovative but does retain the same structure as the old Act. There are however a few differences, the main ones being that the new Act:

  • Acknowledges the Treaty of Waitangi;
  • Restores native title, which was extinguished under the old Act; and
  • Limits the ability to obtain title through fulfilment of the statutory legal test.
The “common marine and coastal area”

The Act creates a common space in the marine and coastal area called the “common marine and coastal area”. This was previously referred to as the “foreshore and seabed” under the old Act. The new Act guarantees free public access in that area, but it does not affect private titles.

The Crown does not own the common marine and coastal area, nor is it capable of being owned by anyone else (including iwi, hapū or whānau groups).

Protections
Protected customary rights

The Act also provides for the protection of “customary rights”, meaning longstanding rights that continue to be exercised. The Act protects these rights through affording them the status of mana tuku iho, which formalises existing best practice in coastal management and will allow Māori to take part in conservation processes in the area. Customary rights include the collection of hāngi stones and the launching of waka.

Customary rights are not territorial (and therefore the public cannot be excluded). This is because the recognition of customary rights relates primarily to an activity and not an area of marine and coastal space.

Customary rights holders have to give written permission in relation to third party applications for resource consents for activities that will have an adverse impact (more than minor) on the customary activity.

Legal test for obtaining Protected Customary Rights

Under the Act, a “Protected Customary Right” is a right that an applicant group can show that they have exercised since 1840, and continues to do so in accordance with the tikanga of the area.

Customary marine title

Under the Act, Māori can also apply for recognition of “customary marine title” for areas within which whānau, iwi or hapū have a longstanding and exclusive history of use and occupation. Customary marine titles will be subject to the right of public access and they cannot be sold.

Customary marine title is the “stronger” of the two forms of protections available under the Act. It will, among other things, give holders:

  • The right to permit/withhold permission for activities requiring a resource consent;
  • The right to permit/withhold permission for certain conservation processes; and
  • Prima facie ownership of newly found taonga tuturu (historical artefacts).

Legal test for obtaining customary marine title

To gain customary marine title, applicants will have to fulfil the statutory test of showing that they have exclusively used and occupied the area without substantial interruption since 1840.

The “without substantial interruption” test has been altered slightly when compared to the old Act. The new Act allows recognition of a right “whether it continues to be exercised in exactly the same way or a similar way, or evolves over time.” This is an important change, as it allows applicant groups to show that the right has evolved or progressed since 1840. Importantly, there is no longer a need for the right to be exercised in precisely the same way as it was in 1840.

Applying for recognition of customary marine title or protected customary rights

As referred to above, an applicant group can seek recognition of its rights either through:

  • Notifying the Crown that the applicant group has an intention to seek an agreement with the Crown (i.e. through direct negotiations); or
  • By filing an application for a recognition order with the High Court.

The notification or application (as desired) must be presented or filed in Court no later than March 2017.

If you would like further information please contact Renika Siciliano on 07 958 7429.

When is a charity not a charity?

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The four heads of charity

It is a basic matter of law that to be able to be registered under the Charities Act (the Act), an organisation (whether a trust, society, or otherwise) must have a charitable purpose within one or more of the following “heads”:

  • Advancement of education;
  • Advancement of religion;
  • Relief of poverty; and
  • Other benefit to the community.

The principles behind these go as far back as the Statute of Elizabeth 1601 (which also, we might add, lists “marriage of poor maids” as a charitable purpose). The fourth head of charity is widely known as the most difficult “head” to satisfy, as the Court does not presume that there is any charitable benefit. Rather, the charity must show that its purpose is beneficial to the community and within the spirit of the Statute of Elizabeth 1601. It must also be demonstrated that the purpose is of a public nature.

A number of charities have been unable to show their purposes are charitable under this head – the most recent example being a High Court appeal by the Grand Lodge of Antient Free and Accepted Masons in New Zealand.

The Freemasons case

The Grand Lodge was refused registration as a charity by the Charities Commission. The Grand Lodge appealed to the High Court, making two arguments:

  • First, that the Commission “got it wrong”, or erred in its assessment; and
  • Second, that Grand Lodge had held charitable status with the IRD for over 50 years, and therefore the Commission could not refuse registration.

The Grand Lodge is the overarching body which administers and governs freemasonry in New Zealand. Freemasonry was described as essentially a male character building organisation. The Grand Lodge had been a tax exempt charity for over 50 years. Like many other charities, however it was required to re-apply for registration to the Charities Commission when the Act came into force. Its application for registration specified “matters beneficial to the community” as its charitable purpose. As noted above, this is the most problematic head, and the application failed.

The assets of the Grand Lodge fell into three groups, which included in short, assets held under the Fund of Benevolence, those held for particular purposes, and those held for general purposes. The Court did not deny that the Grand Lodge’s Fund of Benevolence fell within the charitable purpose definition. However, this was only part of the Lodge’s activities. The Lodge organised training seminars, ceremonial meetings and other activities exclusively for its members. The spending of this money was governed by section 222 of the Constitution. Section 222b provided that any income after such expenses was to be distributed for charitable purposes. Exactly how much the expenses and the income after expenses would be was undeterminable.

The Court therefore held that the main purposes of the Grand Lodge were those listed above and these were not all charitable – in particular, some were instead for the benefit just of members and not the public.

Further, the Court was not satisfied that the above activities were really “ancillary” to charitable purposes, as section 5 of the Act permits.

In relation to the second argument, the High Court found that the Charities Commission was not bound by decisions of the IRD about charitable status. In other words, the Charities Commission makes its own assessment. This could mean there are a number of organisations out there which had previously relied on IRD determinations or “letters of comfort”, which will not be charitable under the Charities Commission regime.

For many of these kinds of organisations, a reassessment of the terms of the constitution/rules will be necessary, and amendment is likely to be required to bring them within the scope of the Charities Act – and so registrable as a charity.

Canterbury Development Corporation

Another recent case was also an appeal against a Charities Commission decision to refuse registration of an organisation as a charity – in this case, Canterbury Development Corporation (CDC). The main purpose of CDC (and its interrelated affiliates) was to promote economic development in the Canterbury region, and this was achieved by promoting the establishment and development of businesses in the region, providing technical and financial advice to businesses and in some cases, providing financial assistance to eligible businesses.

CDC was incorporated and registered as a charitable trust under the Charitable Trusts Act 1957.

The Charities Commission declined the applications of CDC and its affiliates on the grounds that a community development purpose was only charitable where the relevant community was disadvantaged. On appeal, CDC argued that supporting businesses and promoting economic development were beneficial to the community and of public benefit. CDC also argued that the purpose of the organisation was to relieve poverty and to provide education for businesses – with the relief of poverty and providing education being charitable purposes on their own.

However, the High Court took the view that the fourth head of charity required a community benefit to meet an identified need: for example, providing services to a deprived rural community. As CDC could not establish that Canterbury was a disadvantaged region, the Court found CDC had not established that it could fall under the fourth head.

The Court held that the purpose of CDC was not to assist the unemployed and relieve poverty. Rather, the aim of the organisation was to assist businesses to prosper. Creating jobs and decreasing unemployment was seen as ancillary to this purpose and the benefit was indirect.

Therefore, the High Court supported the decision of the Charities Commission to refuse registration.

Conclusion

The Freemasons and the Canterbury Development Corporation are not the only organisations to be “caught out” by having to re-register under the Charities Act, and then being declined registration: it seems many other prominent charities, particularly those that undertake advocacy, are in the same boat.

Organisations that are refused registration as charities lose their tax-exempt status, though they can still apply to Inland Revenue to keep tax deductibility for their donors. Clearly the effects of this are significant. In practical terms:

  • Being a “charitable trust” under the Charitable Trusts Act does not mean an organisation is a “charitable entity” for the purposes of the Charities Act;
  • The charitable purpose of an organisation must be obvious;
  • Many existing “charities” may need to review their documentation to ensure their purposes are properly charitable; and
  • The Charities Commission and the Courts may also look beyond the wording in the rules of “charities”, to what these organisations do in practice – but getting the purpose and wording right is the essential first step.

If you would like further information please contact Jessica Middleton on 07 958 7436.

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