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Do not pass Go: The case of CDC and whether it was a charity (or not).
18 Jun 2017 Post by: Steven Moe

Do not pass Go: The case of CDC and whether it was a charity (or not).

A fascinating case which came before the courts just a few years ago provides a great lesson and insight in to what makes a “charity”.  Canterbury Development Corporation (CDC) is a great organisation doing a lot of good things in Canterbury and it challenged Charities Services over its decision not to allow CDC to be registered as a charity.  CDC eventually lost the case in the High Court to be registered and have tax exempt status.  This is an interesting case to understand because it is likely that other community focussed groups could also be in the same boat as the CDC. 

CDC helps to promote economic development in the Canterbury region. CDC was therefore arguing that it acted for charitable purposes – specifically the relief of poverty, advancement of education and the beneficial effect to the community (due to the development of industry and commerce).  The case analysed whether CDC could come within one of the four charitable heads contained in the Charities Act 2005 (the only head not argued was that of advancing religion).

The court concluded that CDC was not a charity.  Looking first at education, It decided that this was provided not to a broad section of the public but to a narrow group who met strict eligibility criteria.  The Judge said:

“The objects and work of the CDC are commendable.  Its intention is to help fledgling businesses.  By itself this does not establish CDC as having the necessary focus on charitable intent … These are essentially the provision of help to individual businesses in the hope they will grow.  Not all businesses who ask for or indeed need help are offered it.  Only those within a narrow band.  This help may promote these individual businesses.  It may make them more profitable.  This promotion and profitability is not incidental to the work of CDC.  It is at its core.  This illustrates how the spirit and intendment of charitable purpose is not central to CDC’s function and thereby cannot be charitable.”

Regarding whether CDC promoted the relief of poverty through job creation the judge said:

“What is illustrated by this analysis is that the purpose of the CDC is not relief of poverty through providing those who are unemployed with jobs.  It is to improve the general economic wellbeing of the area.  In that sense, therefore, CDC’s purpose cannot be the relief of poverty.  The possibility of helping someone who is unemployed is too remote for it to qualify as the charitable purpose of relief of poverty.”

Regarding public benefit, the Judge said:

“In CDC… the pursuit of the objects is focused on the development of individual businesses.  The provision of support to those businesses is done in the hope and belief that their economic success would be reflected in the economic wellbeing of the Canterbury region…any public benefit therefore from CDC’s purpose and operations is in my view too remote to establish CDC as a charity. Public benefit is not the primary purpose of CDC’s objects or operation.  It’s primary purpose is the assistance of individual businesses.  The creation of jobs for the unemployed, as opposed to jobs for those who are employed and not in need, is the hoped for, but remote and uncertain, result of the way in which the CDC approaches its task…. The general economic lift for the Canterbury region from CDC’s work is the hoped for result of helping individual businesses.  It is remote from the purpose and operation of CDC. Public benefit is not at the core of CDC’s operation.”

You can read more from the time of the decision here to see how it was portrayed at the time:

This case and the conclusions reached are important for other organisations which may have a broad purpose to assist a region by helping individual businesses in that region.  Just because there is good work being done and there may be positive results it does not mean that the organisation will necessarily be able to register as a charity.  It pays to think about this sooner rather than later if you are at the early stages of forming your charity and we can help work through that process with you.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Steven Moe at stevenmoe@parryfield.com to request this or for any other questions.
Copyright © Parry Field Lawyers 2017.

 

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