On 28 June 2022, the New Zealand Supreme Court released its long-awaited charity law decision regarding Family First New Zealand - rejecting Family First's claim to charitable status.^[1] Family First will now be deregistered under the Charities Act 2005, with consequent income tax implications and loss of donation tax incentives for the organisation.

While opinions may differ on the result, the key point of interest is how the Supreme Court’s decision will be applied to other organisations. Now that Family First is no longer accepted as charitable, are its Charities Act registered social policy opponents also in the firing line?

This article covers the history of the litigation, the Supreme Court’s decision and key aspects of its analysis, the immediate implications for Family First, and the wider implications for other organisations - including organisations whose Charities Act registration may be at risk.

Key points

• The Supreme Court has re-affirmed that there is only limited scope for cause advocacy organisations to be accepted as charities under New Zealand charity law

• If your organisation is an educational charity that espouses any particular viewpoint and/or has a substantial focus on cause advocacy (especially in relation to controversial social policy issues), you should review your rules and your activities to make sure your charitable status is not at risk

• If your organisation is not exclusively charitable, consider revising your rules and activities or using a separate structure for your charitable work

If your organisation may be affected by the Supreme Court’s decision, please get in touch with one of our charity law experts (pictured right).

History of the Family First litigation

Family First was established as a charitable trust with a board of trustees incorporated under the Charitable Trusts Act 1957 back in 2006. In broad terms, its stated purposes, as set out in its trust deed, are principally focused on research, education, publicity and advocacy in support of marriage and family as foundational to a strong and enduring society.

Family First was accepted for registration as a charitable entity under the Charities Act 2005 when registrations under that Act commenced in 2007. Its Charities Act registration was also subsequently reviewed and affirmed by the Charities Act regulator (at that time, the Charities Commission) in 2010.

Then, around the time of the Marriage (Definition of Marriage) Amendment Bill debates of 2012/2013 (Family First submitting in opposition to the Bill), the Charities Act regulator (now DIA Charities Services and the Charities Registration Board) reviewed Family First’s position and in 2013 the Charities Registration Board determined that it would deregister Family First.

Family First appealed to the High Court, but there followed a hiatus during which the Supreme Court’s charitable status decision regarding Greenpeace was issued in 2014.^[2] In 2015, the High Court upheld Family First’s appeal and referred the matter back to the Charities Registration Board to reconsider Family First’s position, in light of the Greenpeace decision.

In 2017, the Charities Registration Board determined again that it would deregister Family First, a decision that was upheld by the High Court in 2018 but reversed by the Court of Appeal (by 2:1 majority) in 2020. The majority of the Court of Appeal held that Family First is charitable and qualifies for registration under the Charities Act.

The Supreme Court has now overturned the Court of Appeal decision, rejecting Family First's claim to charitable status.

The Supreme Court’s decision

The focus throughout the litigation has been whether or not Family First meets the primary requirement for a trust to qualify for registration under the Charities Act – that its trustees derive income “in trust for charitable purposes”.^[3]

Under the Charities Act, the term “charitable purposes” covers the longstanding ‘four heads of charity’ recognised by New Zealand charity law, namely: (1) relief of poverty; (2) advancement of education; (3) advancement of religion; and (4) any other matter beneficial to the community.

In addition, the Charities Act affirms that any non-charitable purpose that is merely ancillary to an organisation’s charitable purposes (not an independent purpose) does not prevent the organisation from being charitable and qualifying for registration.

In relation to Family First, the Supreme Court had to consider whether Family First’s purposes fall within the second and/or fourth heads of charity noted above. The Supreme Court unanimously^[4] held that they do not, in particular on the basis that:

• Family First’s purported educational purposes (and related activities) fall on the wrong side of the line between genuine education and one-sided viewpoint advocacy or ‘propaganda’;

• Family First’s advocacy in support of marriage and family, in a traditional man/woman and nuclear sense, as foundational to a strong and enduring society is not self-evidently beneficial to the community and is ‘discriminatory’; and

• even if that advocacy purpose had been charitable, Family First’s advocacy in relation to issues such as abortion, euthanasia, prostitution, censorship, gambling and other matters of social policy involves independent non-charitable ‘political’ purposes.

Key aspects of the Supreme Court’s analysis

1. Affirmation of the Supreme Court’s Greenpeace decision

Throughout its decision, the Supreme Court essentially affirms the approach taken in its 2014 charitable status decision regarding Greenpeace, which ultimately resulted in Greenpeace’s charitable status and registration being upheld by the High Court in 2020.^[5]

In Greenpeace, the Supreme Court held that a ‘political’ purpose can be charitable but also that there is only limited scope for organisations whose purposes include promotion of an abstract or intangible end, ie cause advocacy, to be accepted as charities under New Zealand charity law. 

2. Activities always relevant to determining/assessing an organisation’s purposes

The Supreme Court held that in determining and assessing Family First’s purposes, one can and should look at both its stated purposes, as per its trust deed, and its activities. It rejected submissions from both Family First and the Charity Law Association of Australia and New Zealand (CLAANZ), as intervener, that an organisation’s purposes should primarily be determined with reference to its trust deed or other constitutional document, with activities referred to only if the stated purposes are ambiguous or unclear.

This aspect of the Supreme Court’s decision, and the lack of detailed analysis of the issues arising, is disappointing and potentially problematic. It blurs the distinction between an organisation’s purposes or ends, which must be charitable, and the various activities or means that may be chosen by the organisation to advance or achieve its purposes, and it raises the spectre of highly subjective positions being taken in relation to an organisation’s ‘true’ purposes based on its activities.

It also ignores or undermines the importance of an organisation’s constitutional document. If the purposes prescribed by such a document are unambiguously charitable, the organisation’s activities must be undertaken to advance or achieve those purposes. Any departure from that requirement raises an issue of non-compliance with the constitutional document, not non-charitable status.

The latter point is particularly important from a charitable trust law perspective. The validity of a purpose trust is generally dependent upon the trust’s purpose(s) being charitable and this must surely be primarily determined with reference to the trust instrument, not the activities undertaken by the trustee(s) from time to time.

3. One-sided viewpoint advocacy or ‘propaganda’ is not ‘charitable education’

In relation to the second head of charity, the Supreme Court held that the purported advancement of education by an organisation that involves espousing a viewpoint will only be ‘charitable education’ if:

• there is a genuine purpose to educate (which can involve educating about a viewpoint and the case for that viewpoint), rather than just to advocate for a cause (ie, merely seeking to ‘persuade, indoctrinate or convert’ others to a viewpoint); and

• the means by which education is said to be advanced by the organisation is consistent with that genuine educational purpose, and in particular involves balance/objectivity and not bias towards a particular outcome or view.

The Supreme Court then reviewed Family First’s stated purposes and its activities, including its commissioning and publication of research reports, its annual conferences, its online ‘virtual reading room’ and its participation in the legislative process and debates regarding social policy, and held that Family First’s purported advancement of education falls on the wrong side of the line, ie it is one-sided viewpoint advocacy or ‘propaganda’.

The result under the second head of charity is perhaps less surprising than the extent to which Family First focused on that head, rather than the fourth head of charity, at the Supreme Court hearing. In our view, the litigation was always going to turn on the approach taken to the fourth head, and this should have been the focus of the hearing.

4. Advocacy in support of marriage and family, in a traditional sense, as foundational to a strong and enduring society is not beneficial to the public and is not charitable

In relation to the fourth head of charity, the Supreme Court held that Family First’s core purpose, to advocate in support of marriage and family, in a ‘traditional’ sense, as foundational to a strong and enduring society, is not charitable, on the basis that:

• it is not analogous to other purposes previously held to be charitable under the fourth head, including purposes relating to the promotion of the mental and moral improvement of society (and the court also queried the charitable nature of such purposes) and advocacy for the promotion or protection of ends such as human rights, the environment, and community amenities; and

• it is not self-evidently beneficial to the public and to the contrary may be viewed as detrimental, because the court considered Family First’s core purpose to be ‘discriminatory’ and even speculated that its detriments may outweigh its benefits.

Here, it seems, the Supreme Court has made a significant ‘cultural’ call, and it is unfortunate that Family First’s focus on the advancement of education head of charity at the hearing meant that the issues involved in making that call were not fully canvassed and explored in that forum. At the hearing, Family First largely left the Court of Appeal majority’s decision to speak for itself regarding the fourth head of charity.

The Court of Appeal majority had accepted that advocacy in support of the longstanding social institutions of marriage and family, albeit in a ‘traditional’ sense, as foundational to a stable society is charitable, and in doing so took into account that marriage and family are predominantly ‘traditional’.  In contrast, the Supreme Court was only willing to accept that advocacy in support of the institutions of family and marriage in a non-restrictive sense as foundational to a stable society could be charitable, and considered Family First’s advocacy of a ‘particular version of the family and of marriage between a man and a woman’ to be problematic.

5. Non-ancillary, non-charitable advocacy regarding ‘free-standing political issues’

Family First’s claim to charitable status was also scuppered by its engagement and advocacy for and against reform of the law relating to abortion, euthanasia and other social policy issues. The Supreme Court viewed such matters as ‘free-standing political issues’ and considered that the advocacy in respect of those matters was neither merely ancillary to any charitable purpose nor charitable in its own right.

Although this part of the Supreme Court’s decision is a bit unclear, it appears that the court does accept that advocacy in relation to controversial issues of the type identified can, in appropriate circumstances, be a legitimate means of pursuing charitable ends, rather than being a disqualifying non-ancillary, non-charitable purpose. That makes sense – if the purpose or end of such advocacy is a charitable purpose (such as the promotion or protection of human rights, the environment, or even the institution of family (in a non-restrictive sense)), then the advocacy should be capable of being viewed as merely an activity (not a purpose) or as a merely ancillary purpose of the relevant organisation. There would also appear to be significant value in getting such an organisation’s perspective, focusing on its particular charitable purpose(s), in relation to controversial issues of the type identified.

This part of the decision is also a red flag for any other ‘charitable’ organisation that is, or has been, involved in advocacy relating to any ‘free-standing political issue’ of the type identified by the Supreme Court – regardless of the organisation’s stance on the relevant issue (‘conservative’, ‘liberal’ or otherwise). If the advocacy is not undertaken as a means of advancing, or is not ancillary to, a recognised charitable purpose, the organisation’s charitable status will be at risk.

6. Submissions on fiscal considerations and s14 of the NZBORA rejected

The Supreme Court rejected a submission from CLAANZ, supported by Family First, that fiscal considerations (ie, the tax treatment of charities) should not be taken into account in determining whether a new purpose is to be recognised as charitable. The court confirmed its previous position in its Greenpeace decision that determining that issue using the method of analogy to purposes previously held to be charitable is ‘the safer policy since charitable status has significant fiscal consequences’.

The Supreme Court also rejected CLAANZ’s submission that withdrawal of charitable status from an organisation that engages in political advocacy, with its consequent adverse tax implications, may be an impermissible interference with the organisation’s freedom of expression under s 14 of the New Zealand Bill of Rights Act 1990.

Implications of the decision for Family First

Given the strength of Family First’s conviction in its core purpose and the way it pursues that purpose, it seems inconceivable that Family First would alter its purposes or what it does in order to toe the lines drawn by the Supreme Court in relation to the second and fourth heads of charity. There also does not appear to be any basis for Family First to split out non-charitable and charitable aspects of its work into separate structures.

That being the case, the Charities Act deregistration issues that Family First may now need to grapple with include:

• the validity and sustainability of its charitable trust structure;

• loss of exemption from income tax, and potential deemed taxable income one year after deregistration (unless steps are taken to address this); and

• loss of donation tax incentives for gifts of money to support Family First.

Complications may well arise in respect of some or all of these issues – for example, in relation to the point in time at which loss of exemption from income tax and donation tax incentives kicks in, and in the latter case the implications for donors (including donors who have supported Family First in response to the Supreme Court decision).

Implications of the decision for other ‘charitable’ organisations

Many organisations do not need to be concerned at all about the Supreme Court’s decision. They are not involved in cause advocacy, or any cause advocacy is minor or clearly ancillary to a recognised charitable purpose.

Your organisation may be affected by the decision, and the organisation’s Charities Act registration (if applicable) may be at risk (if the regulator reviews the organisation’s registration, which may be a regulator-initiated review or may occur in response to a third party complaint to the regulator), if:

• the organisation’s claim to charitable status is based on the ‘advancement of education’ head of charity and the organisation’s education involves espousing a particular viewpoint on any matter;

• the organisation’s claim to charitable status is based on the ‘other purposes beneficial to the community’ head of charity and the organisation’s focus is, or includes, cause advocacy; and/or

• the organisation is involved in advocacy in respect of any ‘free-standing political issue’, and in particular the type of controversial social policy issue identified in the decision, regardless of whether the organisation’s position on the issue may be characterised as conservative, liberal or otherwise.

Unlike Family First, other affected organisations may be able and willing to review and if necessary revise their trust deed or other constitutional document (if this is permitted under the document) and/or their activities to ensure they toe the lines drawn by the Supreme Court.

In some cases, splitting out aspects of an organisation’s operations that are clearly charitable into a separate charitable trust or other charitable entity structure should be considered.

Get in touch

We have experts who are highly experienced in New Zealand charity law, regularly dealing with and resolving issues relating to charitable trusts and other charitable entities, Charities Act registration and compliance, and charity tax concessions.

Get in touch with one of our charity law experts (pictured right) if you have any questions about the Supreme Court’s decision and its potential implications for your organisation.

Special thanks to Shaan Kumar for his assistance in writing this article.