Rates: When is a charity a charity? Exclusively charitable purpose necessary

Community Housing Limited (CHL) v Clarence Valley Council [2014] NSWLEC 193 (23 December 2014)

The Land and Environment Court was recently asked to consider whether CHL was a public benevolent institution or a public charity, it was necessary to determine whether they would be exempt from the payment of rates in accordance with section 556(1)(h) of the Local Government Act 1993 (the Act).

In accordance with section 556(1)(h) of the Act, land that belongs to a public benevolent institution or public charity and is used or occupied by the institution or charity for their purposes, is land exempt from all rates (other than water supply special rates and sewerage special rates).

Issues

CHL submitted it was both a public benevolent institution and a public charity within the meaning of section 556(1)(h) of the Act.

It also contended that land it owns is used for such a purpose, and as such the lands are exempt from the payment of rates.

The Council’s position was that:

• CHL was not a public benevolent institution or a public charity; and

• The lands used by CHL are not used or occupied by the company for its purpose as a public benevolent institution or charity.

Therefore the principle issue for determination was what the correct characterisation of CHL was.

In considering this issue, the Court had regard to previous authorities in which proper characterisation is to be made only by reference to the objects and powers, for and which the institute is constituted, not by reference to the activities, which in fact are being pursued by the institution on the land it owns.

Relevantly, Clause 3 of CHL’s constitution provided:

“The object for which the Company is established is to be a non-profit corporation that:

(a)  Acquires on its own behalf, or manages or holds as trustee on behalf of any public, government, semi or local government or charitable person, association, bodies, funds, institutions or organisations, land and buildings so that:

i.  Shelter is provided to persons in crisis and/or who have inadequate access to safe and secure housing;

ii.  Housing may be provided to low income persons including members from ethnic groups, young people (single, dependent or otherwise), people with disabilities, people who are aged, childless couples, single parent families, families and/or other households in need;

(b)  Provides housing advice and referral services which may assist homeless persons into stable and long term housing.

(c)  Provide training, vocational and related education, and skills development to improve employment opportunities.”

The Council submitted that Clause 3 of CHL’s Constitution is split into three components and that with reference to the decision of Bodalla Aboriginal Housing Company Limited v Eurobodalla Shire Council (2011), where there are multiple components an ’all or nothing‘ approach must be exercised as there is no such thing as a partly charitable association.

It submitted that an exclusively charitable purpose could not be identified and that as a result, section 556(1)(h) of the Act did not apply. It pleaded in relation to the components that:

• The holding of land was for two purposes, only one of which was charitable;

• A component was concerned only with the provision of advice, which might be charitable to the extent that it related to homeless persons; and

• The third component could not be construed as charitable in the strict sense.

The Court accepted the Council’s argument in regards to CHL’s charitable status, finding that clause 3(c) of the Constitution does not amount to a charitable purpose and therefore applying the ‘all or nothing’ rule, the company was neither a public benevolent institution nor a public charity. Accordingly, the first limb of section 556(1)(h) of the Act was not satisfied.

In relation to the use of land, the Court held that the leasing of property to ‘very low income’ ‘low income’ and ‘moderate income’ individuals meant that CHL’s properties are being used for the company’s nominated Clause 3 purposes, and therefore the second and third limb of section 556(1)(h) of the Act were satisfied.

Given its finding in relation to the first limb, the proceedings were dismissed.

This decision highlights the complexity surrounding the application of section 556(1)(h) of the Act.  It is important that careful consideration must be given to understanding the nature of the organisation seeking the exemption given the Court’s reliance on the ’all or nothing‘ principle.  As always, we recommend legal advice be sought given the issues confronted in the CHL matter.

Author: Dennis Loether