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Is recreation charitable?

22 July 2015 - By Mark von Dadelszen

Maria Clarke's thoughtful article, Is sport charitable any more? (LawTalk 862, 10 April 2015) addresses issues for sporting bodies arising from the deregistration of Swimming New Zealand as a charity under the Charities Act 2005.

Maria Clarke does not (as she might) directly criticise the deregistration decision in her article, but there has been other strong criticism of the decision.1 While the Swimming New Zealand deregistration decision2 may be unpopular, it appears to me to be correct as our legislation stands, and in accord with well-established charitable law principles.

Those principles are exemplified in Laing v Commissioner of Stamp Duties [1948] NZLR 154, where bequests to regional rowing, swimming and athletics associations were held not to be charitable; the headnote to the report stating that a "gift for the encouragement of mere sport, although it may be beneficial to the public, cannot be upheld as charitable."

Mere sport

Most people would agree that "mere sport" is an integral and valuable element in our communities, and that Kiwi successes in "mere sport" lift the collective sense of well-being in the community.

I believe that Maria Clarke's article makes a number of sound points:

  • The benefits that sport and physical activity provide to individuals and the public at large are well known and documented. They are not only health benefits, but social and economic ones including reduction in crime and an increase in social connectedness.
  • The pride we have in our country from watching elite sport is a benefit to the public. It has flow-on benefits to our economy and makes us feel good. Whether this comes from our stars taking gold at the Olympics or supporting our Black Caps at the ICC 2015 World Cricket Cup, sport has a special place in this country which positively impacts on us. These social benefits have been well documented following significant sports events such as the 2011 Rugby World Cup.
  • At a time when our health problems and consequential costs are rising, all measures must surely be considered to remedy these alarming metrics. Supporting the organisations that deliver sport and physical activity is an obvious way to do that.

The same arguments can be made for a wide range of recreational and community activities. The fact that the cohesiveness and effectiveness of our society depends on a range of not-for-profit entities was recognised in a 2013 Law Commission Report:3

"New Zealand has over 23,000 incorporated societies spanning a diverse range of interests and purposes. Approximately 45% of them are cultural, sporting and recreational bodies. The remaining 55% comprise a broad range of community activities, including social service providers, religious groups, development and housing bodies, educational and environmental interest groups, and business and professional groups.

"These community organisations play a very important role in New Zealand society. Together they are often referred to as the not-for-profit sector or as the 'third sector', existing alongside the private (for profit) sector and the public (or state) sector. The third sector has a direct impact on New Zealand's social and economic development through the provision of services not provided by the other sectors and the development of strong communities.

"The third sector faces numerous challenges including competing for adequate resourcing and attracting competent leaders (many of whom are volunteers)."

Adverse impacts

In my opinion, there can be little doubt that the current definitions of charity increase the challenges faced by many community organisations (as illustrated by the Charities Board decision deregistering New Zealand Swimming4), detract from the "very important role" "community organisations play … in New Zealand society," and will have strong adverse impacts "on New Zealand's social and economic development … and the development of strong communities."

As is indicated by the broadness of that last assertion, my opinion extends beyond sport (including athletics,5 rugby union, cricket, soccer, tennis, rugby league, surfing, tramping, cycling, lawn bowls, walking, orienteering, wrestling, weight-lifting, petanque, rifle shooting,6 golf, and many others) to other recreational activities (such as choral singing, drama, indoor bowls, playing bridge, mah jong or indoor bowls).

Some of those non-sporting recreational activities may have elements which make them charitable because they seek to relieve poverty, advance education, advance religion, and/or have other purposes beneficial to the community within the spirit and meaning of the 1601 Statute, while others will not but may still be highly beneficial to the community.

A 1943 English Court of Appeal decision, Royal Choral Society v Commissioners of Inland Revenue,7 concluded that teaching and being taught choral singing was charitable despite the fact that people derive pleasure from providing education and from being educated, that the element of pleasure may not be the object but a necessary by-product of the charitable activity, and that the "education of artistic taste is one of the most important things in the development of a civilised human being."

Perhaps one might argue that in New Zealand, "the development of a civilised human being" includes other purposes beneficial to the community apart from "education of artistic taste," such as contributing to the community's "social and economic development through the provision of services not provided by the other sectors."

In Crystal Palace Trustees v Minister of Town and Country Planning [1951] Ch 132; [1950] 2 All ER 857n, an English Court held that the promotion of industry and commerce for the public benefit was charitable; a decision followed in New Zealand in Re Tennant[1996] 2 NZLR 633.

Later English, Canadian and New Zealand decisions have held that promoting economic development and increasing employment are not charitable because those activities promote the interests of individuals engaged in trade and commerce, providing private benefits regardless of likely beneficial consequences for employment.8 While those decisions do not relate to recreational charities, they illustrate the stifling effect of the 1601 Statute of Uses.

Review needed

There have been periodic proposals for the review of our definition of charity; most apparently abandoned because the issue is so complex.

Perhaps the time has now come to be bold, and to recognise that concepts of charity have moved on significantly since 1601, and that we should adopt a broader definition of charitable purposes, such as that now applying in England and Wales under the Charities Act 2011 (revised just five years after the previous new definition in their 2006 statute). This Act can be found at www.legislation.gov.uk/ukpga/2011/25, and the relevant definitional material is in ss 1 to 6.

Adopting such a definition would not open the door to professional sport being treated as charitable (nor, in my opinion, should it), but it would provide better guidance to putative charities and to New Zealand's Charities Board.

The adoption of such a broader definition would also need to include what is currently found in s 5 (2) of our Charities Act 2005:

"However,–

a) the purpose of a trust, society, or institution is a charitable purpose under this Act if the purpose would satisfy the public benefit requirement apart from the fact that the beneficiaries of the trust, or the members of the society or institution, are related by blood; and

b) a marae has a charitable purpose if the physical structure of the marae is situated on land that is a Maori reservation referred to in Te Ture Whenua Maori Act 1993 (Maori Land Act 1993) and the funds of the marae are not used for a purpose other than–

c) the administration and maintenance of the land and of the physical structure of the marae:

d) a purpose that is a charitable purpose other than under this paragraph."

Mark von Dadelszen is a partner of Bannister & von Dadelszen, Hastings, and advises not-for-profit entities, other legal firms, and individuals on issues involving societies and charities. He wrote (and, initially, self-published) a book about meeting procedure, Members' Meetings (now in its 3rd edition, 2012). This was followed by writing Law of Societies in New Zealand – Unincorporated, Incorporated and Charitable(now in its 3rd edition, 2013). Mark was a member of the Project Reference Group (2011-2013) advising the Law Commission on its review of and proposed reforms to the Incorporated Societies Act 1908.

1. See Giving Charities a Helping Hand, Jason Krupp, available at nzinitiative.org.nz/site/nzinitiative/files/Rsearch%20notes/Charities%20Research%20Notes%20Final%20WEB%2018_5_15.pdf.

2. See Swimming NZ, Charities Board Deregistration Decision No D2014-3, 30 September 2014, available at charities.govt.nz/assets/Uploads/Swimming-New-Zealand-Incorporated.pdf.

3. A New Act for Incorporated Societies, Report 129.

4. Other instances where the Charities Board has made such decisions (some of which have been the subject of Court decisions) include Travis Trust v Charities Commission, High Court, Wellington, CIV-2008-485-1689, 3 December 2008; Optimist World NZ Ltd, Charities Commission Decision, Decision No 2011-2, 16 February 2011; Northern Equestrian Trust, Charities Registration Board Decision No 2013-6, 15 April 2013;Southern Zone of NZRL Inc, Charities Registration Board Decision No. 2013-4, 15 April 2013; Greenpeace of New Zealand Incorporated v Charities Commission [2014] NZSC 105; and The National Council of Women of New Zealand Inc. v The Charities Registration Board 2014 NZHC 1297.

5. Noting, however, that in Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] AC 380; [1953] 1 All ER 747 (HL) the encouragement of athletics for the private benefit of members was held to be the primary purpose for which an association was established, despite the fact that this might promote police efficiency which as a matter of public importance would be charitable, and that the association contributed to the physical fitness, keenness, and esprit de corps of the police and therefore its efficiency.

6. In fact, already charitable as it promotes defence of the realm, see Re Stephens (1892) 8 TLR 792).

7. Royal Choral Society v Commissioners of Inland Revenue [1943] 2 All ER 101 at 104–5 (CA) per Lord Greene MR quoted in Canterbury Orchestra Trust v Smitham [1978] 1 NZLR 787 at 807 (CA).

8. IRC v Oldham Training and Enterprise Council (1996) 69 TC 231; Travel Just v Canada (Canada Revenue Agency) 2006 FCA 343; and Canterbury Development Corporation v Charities Commission [2010] 2 NZLR 707.

This article was also published in LawTalk 868, 3 July 2015, page 32.

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Last updated on the 23rd July 2015