28/05/2020

The Supreme Court of NSW ruled this week on how the NSW Rural Fire Service Brigades Donations Fund (NSW RFS Fund) can spend the $51.3M raised by Celeste Barber in her record-breaking Facebook charitable fundraising campaign.

In our view, the Court has pushed the boundaries of what is permissible as far as possible by adopting a liberal interpretation of the word ‘resources’. This should assure many donors, but a large number are still unhappy and left tainted by their giving experience.

Has the Court gone too far?

In the aftermath of last summer’s catastrophic bushfires, Celeste Barber launched a ‘spectacularly successful’ charitable fundraising campaign. The aim of raising $30,000 for the NSW RFS Fund was smashed in a matter of weeks, instead raising a whopping $51.3 million from across the world.

However, the campaign was not without controversy and due to intense public interest the trustee of the NSW RFS Fund asked the NSW Supreme Court to provide guidance as to how the funds could be spent. Earlier this week Justice Slattery of the NSW Supreme Court ruled that despite representations to the contrary, the money could only be distributed to the NSW RFS Fund and, through this fund, to rural fire brigades to support families of fallen or injured firefighters. This has upset and angered many people who believe the money should go to other causes such as WIRES or Red Cross or victims who had endured suffering or loss as a result of the fires.

Representations by Celeste Barber

Although Ms Barber established the campaign via Facebook to specifically support the NSW Rural Fire Service (NSW RFS), as time passed she made various representations via Twitter that the funds may also be distributed to victims, WIRES or Red Cross, or fire authorities in other States or Territories. “I’m going to make sure that Victoria gets some, that South Australia gets some, also families of people who have died in these fires, the wildlife”. This led some donors to believe that their funds would be distributed more broadly than just to the RFS NSW Fund, with one donor commenting on Facebook that they were donating because they thought they were helping animals.

It was clear that Ms Barber wanted to change the scope and intended beneficiaries of her fundraising efforts, however, she didn’t alter the framework that she had already established to ensure that this occurred. While unintentional, it is not surprising that many people were misled by her representations. Anyone who fundraises on behalf of a cause or organisation should be careful about what they say. Whether her representations amounted to ‘misleading or deceptive’ conduct were not questions for the Court to consider in this instance.

Follow the money

When donors paid money to Ms Barber’s campaign on Facebook it was actually gifted to the PayPal Giving Fund (PayPal Fund). The PayPal Fund is a charitable public ancillary fund with DGR2 status meaning that it can receive charitable gifts and in return provide a DGR (tax deductible) receipt to the donor. As a public ancillary fund, the PayPal Fund is obliged to have a trust deed that complies with certain requirements for registration including a clause as to how the funds will be distributed – requiring that those funds only go to entities or funds with DGR1 status (e.g. it could not distribute directly to victims).

What about a refund?

Technically a donor can request a refund from the PayPal Fund (in accordance with the PayPal Giving Fund’s Donor Terms of Service which every donor must “accept” when transferring funds) but a refund requires ‘exceptional circumstances’ and only where the funds have not been granted to the charity. As funds were transferred to the NSW RFS in late January, donors who had hoped their funds would be distributed elsewhere are too late to request a refund.

So what can the NSW RFS spend the money on?

NSW RFS is bound by the terms of its trust deed which state that the money must be spent on ‘purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and/or to otherwise meet the administrative expenses of the Brigades.’ What this means in practice was clarified by the Court who answered 4 specific questions as to where the trustees could spend the money.

  1. Could it pay the money to other charities or rural fire services?
    • No
  2. Could it set up or contribute to a fund to support rural firefighters (or their families) who were killed or injured while firefighting?
    • Yes
  3. Could it provide physical or mental health training or resources or trauma counselling to volunteer firefighters?
    • Yes
  4. Could it set up a fund for rural firefighters to attend training that improve skills relating to volunteer firefighting?
    • Yes

The Court went even further than the above questions noting the theoretical possibility that funds within the NSW RFS Fund can be paid “…to brigades in order for them to purchase and transport food and water to areas and people effected by fires, and to provide temporary accommodation to those who require it as a result of fires” (see Paragraph 76). It will be interesting to see how extensively this is applied in practice in future fire seasons and whether the NSW RFS moves towards providing a broader range of immediate assistance to people who have been affected by fires.

Can the trust deed be amended?

Technically, yes. Whilst it is possible to amend the trust deed, any amendments need to be consistent with the Rural Fires Act (NSW) 1997 which state that the NSW RFS must operate to provide rural fire services to New South Wales (see s 9(1)(a)). To retain the Fund’s deductible gift recipient endorsement, and to thereby be able to receive tax deductible gifts, the trust deed must also comply with the Income Tax Assessment Act 1997 (Cth), an avenue of enquiry that was conspicuously absent from the Court’s decision. Accordingly, any amendment is unlikely to broaden the NSW RFS Fund to include making distributions to other charities, or even to rural fire services in other States and Territories, as some donors may have wished.

Assistance for injured or deceased firefighters

An interesting outcome of the Court’s ruling is that the NSW RFS Fund could apply funds towards supporting firefighters (or their families) who were killed or injured whilst firefighting.  Although the trust deed states that funds can only be applied for the purchase of equipment or facilities, and training and resources, the Court took a liberal interpretation of the term “resources” noting that it could include “human resources” and secondly, a fund that provides for the welfare of its volunteers is more likely to encourage volunteering in the future (see Paragraph 78). 

While the Court can be forgiven for adopting a broad interpretation of the word ‘resources’ in the current circumstances, it is extremely unlikely in our view that the drafters of the relevant underpinning laws intended DGR endorsed fire and emergency funds to be used to assist the families of fallen volunteer firefighters.   

While we would be somewhat surprised if Government makes changes to the laws to narrow this interpretation, we will watch with interest to see whether volunteer firefighting services in other States and Territories adopt this interpretation and choose to apply funds raised from their respective fundraising campaigns for this purpose.

Lessons for the future

The immense public support from around the globe for those affected by the bushfires is truly awe inspiring and a welcome reminder of the amazing capacity of human compassion. Many thousands of people embarked on fundraising campaigns, raising millions upon millions of dollars from thousands of donors. And while Celeste Barber’s incredible efforts are under the spotlight at the moment, there are lessons for all of us to learn.

  • We recommend that fundraisers notify the intended beneficiary before starting or as soon as possible after starting a fundraising campaign. Many registered charities have template agreements that they request fundraisers to enter into to ensure that the fundraisers act in a way and say things are consistent with brand messaging and most importantly, that the funds are handled in a particular way (e.g. to minimise the risk of fraud). 
  • If the aims or scope of a fundraising campaign change it is important to seek advice and to speak to additional charities that are intended to receive fundraising support.
  • It is important for fundraisers and donors to look at the trust document or constitution before giving to a charity to see how the funds can be used. All registered charities are required to upload their governing document to the Australian Charities and Not-for-profits Commission’s charity portal (at www.acnc.gov.au) and are publicly available at any time.
  • In order to provide certainty and control we often suggest donors give funds directly to the organisation they wish to support. This will remove any discretion (or duplication of administration costs) of the trustees of an intermediary fund.

Ms Barber’s campaign demonstrated the incredible scale of generosity of the Australian public and its success will certainly be felt within the NSW RFS for a long time to come and make an enormous positive impact on preparing and defending the State for future bushfire seasons.

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