Ten legal trends not-for-profits should watch in 2025

These are:

1. the importance of organisational records
2. bank “de-risking”
3. discrimination cases
4. historical sexual abuse allegations
5. bequests to misnamed or non-existent charities
6. legal adjustments to existing gifts and funds
7. the rising use of civil penalties against NFPs
8. sporting head injuries
9. challenges involving not-for-profit advocacy
10. the misdeeds of foundations.

Professor Myles McGregor-Lowndes is a former director of the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS), and sits on ICDA’s expert advisory board, the Community Directors Council.

“After summarising nearly 200 cases in 2024 from across the charity jurisdictions, I stand back and reflect on how the dots can be joined to discover trends,” McGregor-Lowndes explains in the ACPNS’s latest case notes series.

“In some instances, the trends continue over from previous years, while others have newly arisen, or are a forecast of things to come.”

Records in the firing line

According to McGregor-Lowndes’ analysis, failures to keep good organisational records have landed several organisations in court.

In a case involving the Rooty Hill District Racing Pigeon Club (examined in detail by ICDA here), the organisation ruffled feathers by failing to keep a membership register.

There was also the Khmer Buddhist temple which kept constitutional and membership records that clashed, and the Cocos Island Co-op, which had great trouble reconstructing records after the death of its general manager, who kept all the transactions in his head.

In other instances, donors ran into trouble with the Australian Taxation Office for failing to hang onto proper receipts, while the Melbourne Football Club was able to rely on its board minutes in a case brought by businessman and would-be board member Peter Lawrence when he accused the club of “oppressive conduct”.

Other court rulings clarified that some cases, such as child sex abuse claims, would still need to go ahead in the absence of complete records.

A case involving the charities regulator, the Australian Charities and Not-for-profits Commission (ACNC), and Hillsong College highlighted the importance of minutes and set a precedent for what should be in them.

The ACPNS examination also highlighted court battles in the UK and Canada in which record-keeping was at the crux of the case. Some may feel sympathy for regulators forced to wade through millions of transactions, emails and files in pursuing those cases.

Banks avoiding risk

McGregor-Lowndes has been tracking the phenomenon of “bank de-risking”, in which financial institutions shut down what they perceive to be high-risk accounts.

Most of the cases have appeared – so far – in North America and the United Kingdom, often as a way of cracking down on money laundering or terrorism. In the UK, up to 12% of charities have had accounts closed.

There was also a case in New Zealand involving a “self-sustaining Christian community” called Gloriavale, accused in media reports of exploiting child workers, prompting the Bank of New Zealand to close its accounts. The court upheld its right to do so.

Discrimination cases rise

The ACPNS summary highlighted a string of discrimination cases affecting not-for-profits and charities in the past year.

In Queensland, the Australian Muslim Advocacy Network succeeded in arguing that Twitter (now X) was subject to the state’s anti-discrimination laws, a Christian school was found to have discriminated against a bisexual child, and a parent failed to stop a school from applying its hairstyle policy.

In New South Wales, a woman failed in her bid to force Anglicare Community Services to give her a carpark as part of a tenancy, while a student of Ghanian descent succeeded in her claim that the principal of an Anglican school peppered her with racist questions during a school trip to an International Women’s Day function.

In Victoria, it was found that there was no human rights breach in holding a men-only golf tournament at the Cerberus Golf Club, and Dogs Victoria was found to have victimised long-time member Frank Tipping, then 83, for his conviction for car theft at the age of 16, after he attempted to stand as the organisation’s vice president.

In some cases, charities won exemptions from discrimination, such as:

• Turnaround Management Association Australia for its scholarships for women
• Brisbane Housing Company, which provides housing for disadvantaged people
• Rights in Action, which wanted to recruit staff with lived experience of disability.

The ACPNS study also highlighted a series of overseas discrimination cases involving not-for-profits, including that of a New Zealand woman who won a sexual discrimination claim against the South Auckland Muslim Association over her unfavourable treatment after she ran for election on its executive.

Historical sexual abuse cases continue

McGregor-Lowndes said the number of cases involving sexual abuse claims had grown so much that “we now only report those of major legal significance”.

“The plight of victims and sometimes the betrayal of trust by organisations that tout themselves as the most trustworthy in our society can be sobering reading.”

One of the major cases of the year [KB1] [MS2] concerned the fallout from the acts of paedophile Catholic priest Father Bryan Coffey, who allegedly abused a five-year-old in the western Victorian seaside town of Port Fairy in 1971.

The Catholic Church won a High Court appeal overturning previous court rulings that it was “vicariously liable” for its employees, including Father Coffey, who died in 2013.

A Canadian case of interest found the Catholic Church was not covered by insurance where it had known of the abuse before it took out the cover.

Wills mix-ups costly for charities

The ACPNS has again highlighted the problem of bequests to wrongly named, ceased, or non-existent charities.

McGregor-Lowndes said over the past three years the issue had been exacerbated by “rapid mergers and consolidation of the community services sector”.

In one UK case, doubts arose about seven of the 15 gifts to charities a woman left in her will. In a Victorian case, a court was asked to adjudicate whether changes to a will by friends of the deceased were still valid.

“When naming an organisation in your will, how do you know it will still exist at the time of the distribution of your estate?” McGregor-Lowndes asks, in summing up the quandary.

He notes that more charities are including ABNs in sample bequest clauses and introducing back-up clauses governing distribution of the funds elsewhere if the primary gift fails.

Redirecting funds to meet a charity’s purpose

Courts can have the power to change the purpose for which a charity’s assets or funds can be directed, in a process known as “cy près”, a French term that can be understood as “as near as possible”.

The ACPNS believes such applications will become more frequent here as charities “age”, and its trends summary highlighted these rulings:

• the NSW case of a couple wanting to create a new property trust aimed at helping university research
• a New Zealand case in which a “home for the poor” had no money to operate
• a New Zealand school which allowed land to be used to secure funds for its operations.

Charities and NFPs now liable for civil penalties

Charities and NFPs could be fined as agencies such as the National Disability Insurance Service (NDIS) Commission consider dishing out civil penalties.

The ACPNS notes in its legal trends report that civil penalties require a lower threshold of proof than criminal ones, and while they don’t involve a criminal conviction, they can still be painful.

For instance, last year the Commissioner of the NDIS Quality and Safeguards Commission found that LiveBetter Services, a registered charity and the the largest provider of disability services in western NSW, had breached the NDIS Act 17 times after a 28-year-old woman with profound disabilities was given a bath in which she suffered fatal burns to 40% of her body. The organisation was fined $1.8 million.

In a separate NSW case, a court found that Marist Youth Care had failed to provide a safe workplace for two female workers who had suffered verbal and racial abuse, and physical and sexual assault. The organisation was fined $300,000 and was forced to pay SafeWork NSW’s $140,000 worth of legal fees.

Advocacy work being tested in court

The ACPNS is watching the growing tendency for NFP advocates to use the courts to drive their agendas.

Advocacy organisations are using the legal system to call governments and others to account, such as when Save the Children Australia attempted (but failed) to force the federal government to repatriate Australian women and children detained in Syria.

Other cases included that of Farm Transparency International, which failed to successfully defend charges of trespass and damage worth $100,000 by its animal activists against the Game Meats company, which slaughters goats at its abattoir at Eurobin, in northeast Victoria.

It’s not the first time the organisation has ended up in court for its activism. In 2022 it lost a High Court case in which it sought an exemption from surveillance laws that prevented it from using footage it had obtained illegally to expose animal cruelty.

McGregor-Lowndes also summarised overseas cases in which advocacy organisations had used legal avenues, such as that of a child advocacy group that sought to enforce the rights of children in Northern Ireland, another group that investigated human rights abuses of Uyghur people by clothing makers, and a US-based -covid “hoax” campaign group that had tried to dodge charity registration rules in the UK.

Head injuries testing sporting groups

The ACPNS notes that “initial proceedings” concerning head injuries caused by sport have begun to appear, and McGregor-Lowndes compares the potential for liability costs with those borne by religious organisations over sexual abuse.

“How will sporting bodies financially cope with the potential liability? Unlike churches, they do not have extensive redundant properties that can be liquidated,” he notes.

He said a critical issue would be limitations on periods for launching legal action, which generally must be within six years, but recent cases involving the Australian Football League (AFL) have seen some extensions granted.

Philanthropic foundations taken to task

The ACPNS believes certain recent US cases involving philanthropic foundations “could be the scripts for award-winning television documentaries” and hinted these kinds of cases could soon emerge in Australia.

It highlighted one involving the victims of medical experiments who were unknowingly given sexually transmitted diseases, another concerning looted Nazi artworks, and another involving the handling of charitable trusts stemming from the du Pont family fortune.