Recent High Court decision in Plumbers, Gasfitters and Drainlayers Board case

Jonathan Scragg
Jonathan Scragg

               

Annika Tombleson
Annika Tombleson

For only the second time since the enactment of the Charities Act 2005, the High Court has overturned a decision of the Charities Registration Board (or its predecessor, the Charities Commission) to remove an entity’s charitable status.

In Plumbers, Gasfitters and Drainlayers Board v Charities Registration Board [2013] NZHC 1986, Goddard J held that the regulatory function of the Plumbers, Gasfitters and Drainlayers Board (Board) served the primary purpose of protecting the health and safety of the public. The Charities Registration Board (Registration Board) had previously determined the Board’s purpose was to benefit the Board’s subject industries, not the public.

The decision bucks the trend of unsuccessful appeals against de-registration decisions of the Registration Board and the Charities Commission. The decision also highlights the difficulty of determining why some organisations meet the test for charitable status, while other ostensibly similar organisations, do not.

Background

The Charities Act 2005 governs the requirements for registration as a charity. Under section 13 of the Charities Act an institution qualifies for registration if it is established and maintained exclusively for charitable purposes. To be charitable, a purpose must come within one of the four classic heads of charity; namely, the relief of poverty, the advancement of education, the advancement of religion, or any other matter beneficial to the community; and the purpose must come within the spirit and intendment of the Preamble of the Statute of Charitable Uses 1601 (43 Eliz I c 4) (Preamble). A charity must be exclusively established and maintained for charitable purposes, although an ancillary non-charitable purpose will not prevent an entity from qualifying for registration.

The Board was established under the Plumbers, Gasfitters and Drainlayers Act 2006 (PGD Act) and was registered as a charitable entity on 30 June 2008. The Board is broadly responsible for regulating sanitary plumbing, gasfitting and drainlaying in New Zealand.

Charities Registration Board

Before the Registration Board, the Board argued its purpose was charitable under the fourth head of charity, “any other matter beneficial to the community”. The Board argued the public enjoyed the benefits of the Board and said its purpose came within the Preamble.

The Registration Board determined the protection of the health and safety of the public was not the Board’s exclusive purpose. The Registration Board found the Board’s primary purpose was to benefit the individuals working within the Board’s subject industries, due to the private benefits obtained by the individuals within those industries. The Registration Board also found the public benefit in maintaining professional standards within the Board’s subject industries did not fall within the spirit and intendment of the Preamble.

Appeal to the High Court

The Board appealed to the High Court. The Board made three principal arguments:

  1. The Board’s primary purpose is to protect public health and safety by ensuring the competency of those engaged in the subject industries. The regulatory function of the Board is not an independent purpose but a means of achieving the primary purpose.
  2. The Registration Board gave undue weight to the benefits of registration and licensing to those regulated by the Board. Although there are benefits of registration to those working within the subject industries, those benefits are merely incidental to the primary purpose of the Board.
  3. Maintaining professional standards in the subject industries is a charitable purpose because it falls within the spirit and intendment of the Preamble.

The Board relied on Commissioner of Inland Revenue v Medical Council of New Zealand [1997] 2 NZLR 297 (CA) in which the Court found the Medical Council of New Zealand (MCNZ) was charitable. 

The Board argued it was in an analogous position to the MCNZ. The Board said that while the MCNZ protects the public by regulating the quality of medical and surgical services, so too the Board protects the public by regulating its subject industries.

The High Court focussed on two principal issues in determining the appeal:

  1. Whether the Board is exclusively established for the protection of the public in relation to the quality of services in the Board’s subject industries; and
  2. Whether the protection of the public in respect of the quality of services in the Board’s subject industries is a benefit for the community.

The protection of the public

The Court held that the main functions of the Board, as outlined in section 137 of the PGD Act, include registration, licensing, education, qualification, complaints and prosecution. The Court found that although those functions benefit the Board’s subject industries, the main purpose of the Board is to maintain standards for the safety of the public.

The Court also accepted an analogy could be drawn between the functions of the Board and the MCNZ. The functions of the MCNZ are to maintain a formal system of registration of medical practitioners, the maintenance of discipline within the medical profession, the accreditation and surveillance of appropriate undergraduate and postgraduate education of medical practitioners, the suspension of impaired medical practitioners and the maintenance of systems for identifying, monitoring and rehabilitating impaired medical practitioners.

Applying the approach taken in the Medical Council case, the Court found the Board’s functions may increase public confidence and thereby provide a flow-on benefit to those working in the subject industries. The Court found those benefits were purely collateral and the restriction of the right to practice and the provision for registration has an obvious primary benefit in protecting the public.

Benefit to the community

The Court considered, by reference to the Medical Council case, whether the protection to the public in respect of quality of medical and surgical services is the same as the protection of the public in respect of services within the subject industries. The issue was the nature of risk to the public involved in the provision of services by the subject industries. 

The Court concluded that the activities undertaken by plumbers, gasfitters and drainlayers pose substantial risks to the public if not performed competently. The risks include the possibility of gas explosions, poor quality drinking water and the potential risk to the public health from unsanitary drainage.

The Court also considered relevant section 34 of the PGD Act which requires the Board to submit to the Minister any proposed notice designating classes of registration or providing for prescription of minimum standards of registration and requirements for competent
and safe work place. 

The Court considered by this section, the Act expressly recognised that the purpose of the Board is to regulate for protection of the public, and not to act directly in the interest of those working within the regulated trades.

Professional and trades bodies

While the High Court was prepared to accept the public benefit analogy drawn between the activities of medical practitioners on the one hand and plumbers, gasfitters and drainlayers on the other, many other professional and trades bodies have not fared so well.

The law reports in the United Kingdom and New Zealand reveal that over the last 60 years, there have been a large number of professional and trades bodies that have sought to be recognised as charitable. The successful bodies include:

  • The Plumbers, Gasfitters and Drainlayers Board (Plumbers, Gasfitters and Drainlayers Board v Charities Registration Board [2013] NZHC 1986);
  • The Medical Council of New Zealand (Commissioner of Inland Revenue v Medical Council of New Zealand [1997] 2 NZLR 297 (CA));
  • The Incorporated Council for Law Reporting for England and Wales (Incorporated Council for Law Reporting for England and Wales v Attorney-General & Anor [1971] 3 All ER 1029);
  • The New Zealand Council of Law Reporting (Commissioner of Inland Revenue v New Zealand Council of Law Reporting [1981] 1 NZLR 682);
  • Royal College of Nursing for England and Wales (Royal College of Nursing for England and Wales v St Marylebone Borough Council [1959] 3 All ER 663 (CA));
  • Royal College of Surgeons of England (Royal College of Surgeons of England v National Provincial Bank Ltd [1951] 1 WLR 1077).

The unsuccessful bodies include:

  • The Institution of Professional Engineers New Zealand Inc (Institution of Professional Engineers New Zealand Inc v Commissioner of Inland Revenue [1992] 1 NZLR 570 (HC));
  • The New Zealand Computer Society Inc (Re New Zealand Computer Society Inc (2011) 25 NZTC 20-033 (HC));
  • Auckland District Law Society (Re Mason (deceased) [1971] NZLR 714);
  • NZ Society of Accountants (NZ Society of Accountants v Commissioner of Inland Revenue [1986] 1 NZLR 147).

From a distance it can be difficult to discern a principled basis for understanding why some professional and trades bodies have met the test for charitable status, while others have not.

That may simply reflect the fact that every applicant for charitable status is different and must be assessed on its own merits. The different results may also reflect the fact that different value judgements are made as to the degree of public benefit derived from different organisations.

But while the purposes, activities and structure of each organisation are different, and the statutory charitable regimes differ from time to time and from jurisdiction to jurisdiction, all professional and trades bodies share some fundamental characteristics and all such organisations wishing to acquire charitable status invariably argue that their primary purpose is to benefit the public. 

Although the Board was successful in its appeal, it is clear success cannot be guaranteed for all organisations that share similar functions. What is certain is the difficulty of predicting which professional and trades bodies meet the test for charitable status, and which do not.

This article provides general information and should not be construed as specific legal advice. Jonathan Scragg is a partner and Annika Tombleson a solicitor in the Wellington office of Duncan Cotterill, specialising in litigation and insurance law. Jonathan can be contacted at jonathan.scragg@duncancotterill.com.  

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