Liberty Trust v Charities Commission

• Jurisdiction: New Zealand
• Judge: MALLON J
• Judgment Date: 02 June 2011
• Neutral Citation: [2011] NZHC 577
• Docket Number: CIV 2010-485-000831
• Court: High Court
• Date: 02 June 2011

UNDER the Charities Act 2005 (“the Act”)

In The Matter Of an appeal pursuant to s 59 of the Act

BETWEEN

Liberty Trust

Appellant

and

Charities Commission

Respondent

[2011] NZHC 577

Judges:

Mallon J

CIV 2010-485-000831

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

Appeal from Charities Commission's (“CC”) decision to remove appellant trust from the Charities Register — trust was “Christian charitable community” enabling people to own their own home etc without long term debt — main purpose was lending scheme that advanced religion — funded almost entirely by donations — contributors entitled to interest free loan calculated on the amount of contribution — complaint made against appellant led to CC investigation — whether the appellant's purposes were exclusively charitable.

Counsel:

Mr I Millard QC for the Applicant

Ms T Warburton and Mr R Berkeley for the Respondent

JUDGMENT OF MALLON J

Contents

Introduction	[1]
The Charities Act	[4]
Liberty Trust	[29]
The Charities Commission's decision	[44]
Application for further evidence	[48]
Advancement of religion?	[51]
Context	[51]
Religion	[57]
Advancement	[58]
Public Benefit	[99]
Result	[124]

Introduction

1 Liberty Trust was registered as a charitable entity under the Charities Act 2005 on 8 October 2007. Its main activity is a mortgage lending scheme, funded largely by donations, which makes interest free loans to its donors and others. Its lending scheme prompted a review of its charitable status and in turn a decision by the Charities Commission to remove it from the Charities Register. Liberty Trust appeals from that decision.

2 Liberty Trust submits that its lending scheme advances religion, which is a charitable purpose. It submits that its lending scheme does this by teaching, through action, financial principles derived from the Bible. That is, the Trust seeks to practice what is preached. 1 The Charities Commission?s view was that teaching financial principles derived from the Bible was at best conducive to religion but did not advance religion. It considered that the main purpose of Liberty Trust, through its lending scheme, was to provide private benefits for its members. As such the Charities Commission considered that Liberty Trust was not exclusively for charitable purposes.

3 The issues on this appeal are whether Liberty Trust “advances” religion and whether it meets the “public” benefit test. Liberty Trust says that the Charities Commission erred by concluding that its activities did not advance religion and by not considering the public benefit that charities law assumes to arise from advancing religion. It also says that it was taken by surprise by the Commission?s decision because the notice of intention to deregister had accepted that teaching biblical financial principles was a charitable purpose as advancing religion. It is because of this surprise that it makes an application for leave to adduce further evidence (discussed below).

The Charities Act

4 The Charities Act provides for the registration of charitable entities. Where the entity is a trust, to qualify for registration the trust must be “of a kind in relation to which an amount of income is derived by the trustees in trust for charitable purposes.” 2 A “charitable purpose includes every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community.” 3

5 If the trust has a purpose which is ancillary to a charitable purpose, this does not disqualify the entity from eligibility for registration. 4 An ancillary purpose is defined as being one which is “ancillary, secondary, subordinate, or incidental to a charitable purpose of the trust” 5 and “not an independent purpose of the trust.” 6

6 An entity which has been registered as a charitable entity may be removed from the register if “the entity is not, or is no longer, qualified for registration as a charitable entity.” 7 Decisions on registration and deregistration are made by the Charities Commission.

7 Before removing an entity from the register the Charities Commission must give a notice to the entity specifying “the grounds on which, it is intended to remove the entity from the register.” 8 The entity can submit an objection to the removal with a specified time. 9 In that event the Charities Commission cannot proceed with the removal unless it is satisfied that it is in the public interest to proceed with the removal and that the grounds for removal have been satisfied. 10 In considering whether to remove the entity the Charities Commission is required to “observe the rules of natural justice” 11 and to “give the entity a reasonable opportunity to make

submissions to the Commission on the matter.” 12 If the Charities Commission decides to proceed with the removal it must give the entity notice of its decision and the reasons for its decision. 13

8 A person aggrieved by a decision of the Charities Commission may appeal to the High Court. 14 This is a general appeal in respect of which this Court must form its own view on the merits.

Liberty Trust

9 Liberty Trust describes itself as a “Christian charitable community enabling New Zealanders to own their own homes, churches and ministries without long term debt, so that they can be free to fulfil God's call upon their lives.” 15

10 It was formally established by a trust deed executed on 18 April 1989. The objects of Liberty Trust as set out in the trust deed are:

• 1. TO use and employ the Trust Property and the income therefrom for any of the following objects within New Zealand:

  • (a) For the undertaking of social welfare and outreach Christian ministries of the Whakatane Baptist Church and Whakatane Christian Fellowship church or any other churches as may be determined from time to time (hereinafter called “The participating churches”).

  • (b) For the demonstration of Christian care for the social, physical, emotional and spiritual needs of the community.

  • (c) To assist those in financial need and to bring relief from financial pressures.

  • (d) For the presentation of the Gospel of the Kingdom of God to the community through demonstrations of Christian compassion and care.

  • (e) For the establishment of whatever centres, programmes and facilities that may be necessary to achieve the aforesaid objects.

  • (f) For such other charitable purposes as the Board shall determine.

11 Liberty Trust's powers, as set out in the trust deed, include:

• 2. FOR the objects as aforesaid:

  …

  • (c) TO organise and conduct religious services, public meetings, missionary meetings, exhibitions and lectures.

  • (d) TO publish or contribute to the publication of any periodical, journal or magazine and to print and circulate books, papers, pamphlets and information in the interest of the Board generally and to provide and circulate any annual or other report of the Board and its proceedings and work.

  • (e) TO accept or refuse donations, subscriptions, legacies, conveyances and endowments either of money or of property of whatever kind or nature whatsoever and either absolutely or conditionally or in trust to apply the same or the income therefore for any of the objects of the Board or for any special object connected therewith.

  • (f) TO assist people to alleviate financial difficulties or pressure by the provision of budgeting advice or such other assistances as the Board shall from time to time determine.

• …

12 By clause 4 of the trust deed “profits and other income” are required to be applied solely in promoting the objects of the Trust (as set out in clause 1) and none of the assets, income or profits may be distributed to the Trustees or associated persons (although they may be paid reasonable out of pocket expenses). By clause 16 of the trust deed on a winding up or dissolution, property or assets are to be applied to Christian or charitable objects.

13 The background to the establishment of Liberty Trust is described on its website. 16 A person by the name of Bruce McDonald, a pastor, was praying about the plight of mortgaged families in the church. He was convinced that debt and interest were not in accordance with “God's Word.” He shared this with the elders of his church, the Whakatane Christian Fellowship. Work began on establishing fund to which contributions would be made. The pooled resources from the contributions

would be available for interest-free loans for the purchase or refinancing of homes when sufficient funds were available. Once repaid the funds remained in the pool and available for interest-free mortgages to others

14 Liberty Trust, as established, is funded almost entirely from donations from “contributors.” Those who contribute to Liberty Trust for 5 to 10 years are eligible for an interest free loan. Once there are sufficient funds, loans are offered in the order of joining Liberty Trust. The standard contribution rate is 20% of the loan application for 10 years. For this, the contributor can expect to be offered a 7 year interest free loan of 5 times their contribution balance. To receive a longer repayment period the contributor can choose to wait longer or contribute more. Similarly, to receive a loan sooner the contributor can contribute more than 20%. Loans are offered for up to 100% of the valuation of a property and are secured by a mortgage over the property.

15 Once a loan has been “earned” (through contributions of a sufficient amount over a sufficient period), and providing there are sufficient funds to offer a loan to the contributor, a contributor can take up the loan, postpone taking up the loan or transfer it to another person either in part or in full. According to statistics submitted by Liberty Trust to the Charities Commission, 30% of the loans are transferred to...