Gifford v Secretary for Education

[2022] NZHC 1875

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-332

[2022] NZHC 1875

UNDER

the Judicial Review Procedure Act 2016

IN THE MATTER OF

changes related to fundraising by the proprietors of integrated schools

BETWEEN

GUY JAMES GIFFORD

Applicant

AND

SECRETARY FOR EDUCATION

First Respondent

NEW ZEALAND CATHOLIC
EDUCATION OFFICE LIMITED

Second Respondent

WHANGANUI COLLEGE BOARD OF TRUSTEES AND WHANGANUI COLLEGIATE SCHOOL BOARD
Third Respondents

NGA TAWA DIOCESAN TRUST BOARD AND NGA TAWA BOARD OF TRUSTEES

Fourth Respondents

Hearing:

19 May 2022

Appearances:

Applicant in person

R I Thornley and A M Piaggi for First Respondent L I van Dam for Second Respondent

P J Radich QC and E J Unsworth for Third Respondents G M Richards for Fourth Respondents

Judgment:

1 August 2022

JUDGMENT OF CHURCHMAN J

GIFFORD v SECRETARY FOR EDUCATION [2022] NZHC 1875 [1 August 2022]

Introduction

[1]        Mr Guy Gifford is a self-represented litigant. He is a retired teacher and has a particular interest in funding arrangements relating to State-integrated schools.

[2]        Since the Private Schools Conditional Integration Act was implemented in 1975, Mr Gifford has taken a keen interest in its operation. He has firm views about what objectives the Act was intended to achieve. Mr Gifford is concerned that certain legislative provisions, which he believes were designed to limit the possibility of some wealthy State-integrated schools obtaining an advantage over other State schools, are not being observed.

[3]        In 2013, Whanganui Collegiate School, a previously private school located in the town  in  which  Mr Gifford  resides,  entered  into  an  integration  agreement. Mr Gifford has taken an interest in the subsequent funding arrangements of that school and another similar school, Nga Tawa, which is located at Marton.

[4]        The documentation on the court file indicates that over the last decade or so Mr Gifford has engaged in extensive correspondence with various bodies about his concerns including the Ministry of Education, the two schools involved, the schools audit office, Inland Revenue, the New Zealand Catholic Education Office (NZCEO) and the Ombudsman.

[5]        Mr Gifford’s actions seem to have resulted in some changes to practices around fees and donations. However, he remained unsatisfied, particularly with what he saw as inappropriate practices of the proprietors of State-integrated schools. He says they are charging what he categorised as inflated charges, for boarding fees and school lunches, so as to able to transfer part of the proceeds to the Board of Trustees for purposes such as improving aspects of tuition. Mr Gifford was of the view that the proprietor of an integrated school was not permitted to make a donation to the Board of Trustees for such purposes. He took that view because that would put the integrated school at an advantage over other State schools, because the Government, as the proprietor of those schools, did not make such donations to those State schools.

[6]        Having been unable to convince the Ministry of Education that his interpretation of the Act was correct, on 29 June 2021, he commenced judicial review proceedings naming the Secretary of Education as the defendant.

[7]        The decision which Mr Gifford sought to review was described in the statement of claim as being the reversal of

…a long-standing interpretation of s 451 [of the Education Act 1989 since replaced by the Education and Training Act 2020, cl 34 of sch 6] on fund raising by proprietors in integrated schools.

[8]        Initially there was some dispute as to whether the statement of claim identified the exercise of any statutory power of decision. In a minute of 2 August 2021, Mallon J held that although the statement of claim suffered from being drafted by a self-represented litigant, the essence of the claim was apparent. This was that it was a challenge to the Ministry of Education’s interpretation of s 451 and that the grounds of review were unreasonableness or breach of the spirit of the Education and Training Act 2020 (the Act). Mallon J said this latter ground was more correctly framed as an error of law.

The respondents

[9]        The NZCEO was served with the proceedings and sought to be joined as the second respondent or heard as an interested party.

[10]      The NZCEO was joined as a second respondent on the direction of Grice J on 7 September 2021. It was initially proposed that the Association of Proprietors of Integrated Schools (APIS) would be joined as a party representing the interests of the 335 State-integrated schools. However, because that body has no legal personality, NZCEO was joined as a representative of all State-integrated schools.

[11]      Because the statement of claim filed by Mr Gifford specifically referred to the Whanganui  Collegiate  School  and  Nga  Tawa  Diocesan  School,  by  minute  of   9 September 2021, Ellis J directed that they be served with a copy of the pleadings.

[12]      By minute of 8 October 2021, Ellis J joined as parties the trustees and boards of both Whanganui Collegiate School and Nga Tawa Diocesan School.

Facts

[13]      Because of the agreement between the parties as to the question which they seek an answer by way of declaration, it is not necessary to go into detail about the specific factual allegations Mr Gifford has made. It is enough to note that he thought that the proprietors of some State-integrated schools were inflating charges for services they provided to students and that what he saw as the “inflated” component of the charges effectively amounted to a “compulsory donation” of a type not permitted by the Act.

[14]The facts relevant to the declaration sought are:

(a)there are five types of State school in New Zealand;

(b)two of those types are the State school and the State-integrated school;

(c)they differ from each other in that the State owns or leases the land and buildings on which a State school operates while, with State-integrated schools, the land and school buildings are owned or leased by a private entity called the proprietor;

(d)the proprietors of State-integrated schools usually charge attendance dues which are a compulsory condition of attendance but such compulsory attendance dues may only be used for the purposes specified in the Act;1

(e)both State and State-integrated schools have boards of trustees who operate the schools and are responsible for the application of government funding;

1      Such purposes include the upkeep of the land and buildings, and making interest and capital payments on loans for the upkeep or improvement of school buildings.

(f)the amount of compulsory attendance dues which the proprietors of State-integrated schools are entitled to levy must be approved by the Minister of Education and cannot be used to provide or improve State- integrated schools’ buildings or associated facilities to a standard higher than that approved as appropriate for a comparable State school;

(g)proprietors may raise additional funding by conducting commercial activities which may include the sale of goods and services (such as boarding or meal services) to students or seek voluntary donations;

(h)if a proprietor seeks voluntary donations for a particular purpose, the donations must be used for that purpose; and

(i)most State-integrated schools have a “special character” often of a religious or philosophical nature, and the proprietor is responsible for funding that special character.

Legal issues

[15]      By a joint memorandum dated 9 December 2021, all parties identified a preliminary legal question that was capable of declaratory answer by the Court as being:

Are there any limitations on the ability of the proprietor of a State-integrated school –

(a)To fund-raise?

(b)To dispose of funds?

[16]      All parties accept that the relevant statute, now the Education and Training Act 2020 (the Act), imposes limitations on the ability of a proprietor of a State-integrated school to fundraise and dispose of funds, but they differ as to what those limits are.

[17]      Mr Gifford submits that there are limits on the ability of proprietors to fundraise and dispose of funds beyond those which are explicitly set out in the Act. He accepts that the Act does not explicitly forbid the transfer of funds from a proprietor

to a board but argues that this is contrary to the scheme of the Act and the purpose of the Act in relation to State-integrated schools more generally.

[18]      Mr Gifford’s submissions are based on the assumptions that the relationship between the proprietor of an integrated school and the Board of that school should, in order to ensure that integrated schools are not unfairly advantaged against State schools, mirror the relationship between the Crown and the board of a State school. He therefore submits that because the Crown would not donate extra funds to the board of a State school, neither does the Act permit a proprietor to donate extra funds to the board of a State-integrated school. He submits that this outcome is reached because:

(a)the original concept of State Integrated Schools articulated in the Private Schools Conditional Integration Act 1975 was premised on the principle of separation between church and State – taxpayer funds were not to be transferred into a private entity, and nor were church funds to be transferred in ways that might influence the board; and

(b)while State-integrated schools were created to prop up a private school system in danger of failing, they were not intended to do so to the detriment of State schools – if a proprietor of a State-integrated school could channel funds into a board where the Crown was not doing the same for State schools, then there would not be a ‘level-playing field’.

[19]      Mr Gifford submits that if this separation is not observed, the Act cannot achieve its objective. He submits that the intention of the Act was to raise “poor” religious schools to the standard of State schools, while limiting their ability to outstrip State schools. He submits that the prohibition on a proprietor passing funds to a board is essential to this objective.

[20]      Mr Gifford submits that it is unnecessary to raise funds through the proprietor and then transfer them to the board, because the board is permitted to raise those funds on its own behalf as stated in cl 37.2 He submits the only possible reason for a

2      Education and Training Act 2020, sch 6 cl 37. All references in this decision to clauses are to the clauses in Sch 6 unless otherwise stated. Schedule 6 sets out the principal powers and responsibilities of the proprietor of a State-integrated school.

proprietor to be raising funds intended for the board is to contrive a situation where donations become compulsory. Mr Gifford submits that this is contrary to the spirit and intention of the Act.

[21]      Mr Gifford submits that Parliament could not have intended to allow proprietors to be able to pass funds to their boards, as this would effectively render oversight of compliance with the Act impossible, as proprietors are not audited in the same ways as school boards. Mr Gifford submits that if a proprietor has raised funds by regular financial contributions from parents then, on the terms of cl 34, they are limited to being disbursed on land, buildings, and associated debts.

Respondents

[22]      The respondents each provided separate submissions, which proceeded largely on the same basis. They accept that the Act creates limitations on the ability of proprietors to raise and dispose of funds but submit that beyond the specific provisions in the Act proprietors are able to do as they please with their funds.   They note     Mr Gifford accepts that the Act does not specifically prohibit the transfer of funds by a proprietor to a board. They argue that the scheme and purpose of the Act does not prohibit this, and that if a proprietor has raised funds by regular financial contributions from parents then, on the terms of cl 34, they are not limited to being disbursed on land, buildings, and associated debts.

[23]      The respondents argue that Mr Gifford’s interpretation of the Act is inconsistent with:

(a)the constitution of proprietors as bodies corporate, and specifically as incorporated trusts;

(b)a proprietor’s function under the Act as to the preservation of education with a special character;

(c)the fact that the Act does not create rigidly separate spheres of financial and governmental influence between proprietors and boards; and

(d)the ability of a board to receive donations, which is not limited by the Act;3

Limitations accepted by the respondents

[24]      While the respondents contest the limitations proposed by Mr Gifford, they do accept that proprietors are limited by the Act in certain respects. Counsel submit that the Act places two limits on a proprietor’s ability to raise funds, these are:

(a)financial contributions must be voluntary whether by way of donation or the purchase of goods and services, with the exception of attendance dues; and

(b)if a proprietor conducts a fundraising activity within school grounds for the purpose of raising funds to meet a debt associated with the school’s land and buildings, the board, principal, staff, and students of the school may not participate in the activity during normal school hours.

[25]      Counsel submit that the Act places three limits on a proprietor’s ability to dispose of funds, these are:

(a)attendance dues are to be used only for the purposes listed in cl 30(3) 4

and must comply with cl 335;

(b)attendance dues are not to be used to provide or improve State- integrated school buildings and associated facilities to a standard higher than that approved by the secretary as appropriate for a comparable State school;6 and

3      Education and Training Act 2020, s 159(1).

4      These purposes are: (a) paying, in respect of the school or group of schools in respect of which it is received, for improvements to the State-integrated school or schools’ buildings and associated facilities  that  are  required  by  any  integration  agreement  or  integration  agreements  under  cl 39(2)(c); (b) any capital works that may be required by the Minister under cl 39(2)(d);

(c)   meeting debts, mortgages, liens, or other charges associated with the land and the buildings that constitute the premises of the State-integrated school or schools.

5      Clause 33 requires that a proprietor permitted to charge attendance dues must keep accounts in a manner approved by the secretary showing total amounts received and how they have been spent. The accounts must be balanced each year and audited by a qualified auditor.

6      Education and Training Act 2020, sch 6 cl 30(4).

(c)where an employee of a State-integrated school is paid in whole or in  part out of money appropriated by Parliament, a proprietor may not pay them any additional amount or grant them conditions of service more favourable than is permitted of persons employed in a State school.7

[26]      Mr Radich QC and Mr Richards submit that there is no equivalent limitation on the use of funds raised through voluntary contributions or other funds as there is for attendance dues. They submit that cl 34(1)(c) clarifies the position set out in cl 30. Their interpretation is that cl 30 provides that compulsory attendance dues are only to be used for the maintenance of land, buildings, and associated debts, and are not to be at a level beyond what is comparable to similar schools. However, cl 34(1)(c) provides that where funds are sought over and above the limits on attendance dues, for the same purpose, these can only be requested on a voluntary basis. They submit that cl 34 does not provide that regular voluntary financial contributions may only be directed towards land, buildings, and associated debts, and that there is no indication Parliament intended to prevent proprietors, or other donors, providing additional resources to integrated schools.

Analysis

Evidence of Natasha Barnett – Group Manager Resourcing in Te Pai Aronui (Operations and Integration), Ministry of Education

[27]      Ms Barnett detailed that the Ministry provides funding to State-integrated schools for a number of purposes. Teachers at State-integrated schools are paid centrally by the Ministry.8 The Ministry provides operational grants yearly to school boards, pursuant to s 550 of the Act. These are unconditional grants provided to be spent as the board sees fit. Proprietors receive ‘Policy One’ funding for capital maintenance and modernisation projects costing more than $5000, with projects under

$5000 being the responsibility of the board, to which proprietors cannot transfer ‘Policy  One’ funding.   Further,  on  a  discretionary  basis  ‘Policy  Two’ funding is

7      Education and Training Act 2020, sch 6 cl 5(4).

8      Education and Training Act 2020, s 579.

available to proprietors for the construction of new buildings at a State-integrated school.9

[28]      Ms Barnett also put in evidence a briefing prepared in February 2018 for the Hon Jenny Salesa, the then Associate Minister of Education, which stated:

Given their legal obligation to provide free enrolment and free education, state and state integrated schools cannot compel payments associated with the delivery of the curriculum. This includes for lessons, trips and activities which are part of a school’s overall curriculum, such as school camps, or form part of the content of a particular course at a school.

However, state and state integrated schools may charge for optional goods and services such as stationary or take-home components of certain curriculum activities (e.g. technology courses) where the student or parent has agreed in advance to purchase the end product.

State and state integrated schools may also seek and accept voluntary donations for any purpose, and may pass these onto their school’s board of trustees. Donations enable schools to provide their students with a higher level of provision than that funded by the government.

Rights and responsibilities of a proprietor

[29]A proprietor is a body corporate10 and:

(a)is responsible for determining, maintaining, preserving, and safeguarding the special character of the school;11

(b)owns, holds in trust, or leases the land and buildings that constitute the premises of the school;12

(c)plans, pays for, and implements, improvements to the school buildings and associated facilities that are required in accordance with their integration agreement to bring the buildings and associated facilities up to the minimum standard laid down by the Secretary for State schools;13

9      Education and Training Act 2020, s 551.

10     Education and Training Act 2020, s 10. The Act does not require that a proprietor be any particular type of body corporate.

11     Education and Training Act 2020, sch 6 cl 1(3).

12     Education and Training Act 2020, sch 6 cl 39(2)(a).

13     Education and Training Act 2020, sch 6 cl 39(2)(c).

(d)plans, implements, and pays for the capital works that are approved or required by the Minister, with a view to replacing, improving, or enlarging the school, its buildings, and its associated facilities to maintain the school, its buildings, and its associated facilities at the minimum standard laid down by the Secretary for comparable State schools;14

(e)accepts and meets the liability for all mortgages, liens, and other charges upon the land and buildings;15

(f)insures all the buildings, chattels, and other assets owned, held on trust, or leased by the proprietor for the purposes of the school against risks normally insured against;16 and

(g)has the power to fund operations of the school through compulsory attendance dues if provided for by the Integration Agreement17 and fundraising.18

[30]      Attendance dues must be approved by the Minister and have limitations as to their use. They are to be used to make improvements to the State-integrated school or schools’ buildings and associated facilities as required, or to meet debts, mortgages, liens, or other charges associated with the land and the buildings of the school.19 A proprietor that is permitted to charge attendance dues must keep accounts showing the amounts received and amounts spent, balanced each year, and audited by a qualified auditor.20

The clause in issue – limitations on a proprietor raising funds

[31]      A proprietor’s ability to raise funds beyond attendance dues at a State- integrated school is contained in cl 34, which provides:

14     Education and Training Act 2020, sch 6 cl 39(2)(d).

15     Education and Training Act 2020, sch 6 cl 39(2)(b).

16     Education and Training Act 2020, sch 6 cl 39(2)(g).

17     Education and Training Act 2020, sch 6 cl 30.

18     Education and Training Act 2020, sch 6 cl 34.

19     Education and Training Act 2020, sch 6 cl 30.

20     Education and Training Act 2020, sch 6 cl 33.

34       Financial contributions

(1)In addition to the power to collect attendance dues under clause 30, the proprietor of a State integrated school may—

(a)conduct fund-raising activities within the school; and

(b)inform the parents of the financial obligations of the proprietor in the prospectus and in other ways; and

(c)request the parents of students attending the school to make regular financial contributions to the proprietor for the benefit of the proprietor in meeting any debt, mortgage, lien, or other charge associated with the land and buildings that constitute the school premises or are associated with the school.

(2)Financial contributions other than attendance dues must be made on a voluntary basis, and no student may be refused enrolment because of the unwillingness of the parents to contribute in this way.

[32]      Mr Gifford’s view is that this clause limits the seeking of regular donations by proprietors to fundraising for the purpose of “meeting any debt, mortgage, lien, or other charge associated with the land and buildings that constitute the school premises or are associated with the school”.

[33]      It is clear that any financial contributions beyond attendance dues, must be voluntary, and have no impact on student enrolment. It is also clear that the function and purpose of a proprietor in respect of a State-integrated school is to supervise, preserve and safeguard the special character of the education provided by the school.21 The respondents’ submission was that the central feature of integration is that schools are entitled to continue to imbue their particular or general religious or philosophical belief and their observances of that belief into their teaching and conduct.

[34]      It is difficult to see how proprietors would be able fulfil this function were they prohibited by the Act to raise funds on a voluntary basis for purposes not connected with the land and buildings associated with the school. Education with a special character is not logically limited to land and fixtures upon that land, and nor would that be consistent with its definition in the Act. Education with a special character is “education within the framework of a particular or general religious or philosophical

21     Education and Training Act 2020, sch 6 cl 1(3).

belief, and associated with observances or traditions relating to that belief”.22 There are many things that could be described as connected to that purpose other than the land and buildings upon and within which that education is conducted, for example specific teaching resources or learning opportunities. I accept Ms van Dam’s submission that these rights and responsibilities are consistent with powers to dispose of funds to a board of trustees and to fundraise for purposes beyond land and buildings.

[35]      In my view, the submissions of Mr Radich and Mr Richards as to the purposes for  which  voluntary  financial  contributions  are  allowed,  are  compelling.   Clause 34(1)(c) clarifies cl 30 in that compulsory attendance dues may only be used for the purposes contained in cl 30(3), but that a proprietor is able to raise further funds for those purposes, on a voluntary basis. It is only compulsory charges that are not to be used to levy amounts that would give integrated schools an advantage over State schools.23 Clause 34 does not limit regular voluntary financial contribution to being used for the purposes of land, buildings, and associate debts. This interpretation is consistent with the function and purpose of a proprietor noted above.

Limitations on a proprietor disposing of funds

[36]      The parties agree that the Act does not explicitly prohibit proprietors from passing funds to school boards. That is the starting position. Section 5 of the Interpretation Act 1999 makes text and purpose the key drivers of statutory interpretation. Therefore, the issue is whether Mr Gifford has been able to establish that the text and purpose of the Act necessarily implies that proprietors are prohibited from passing funds to boards.24 I have not been able to identify anything in the text or purpose of the Act that would support Mr Gifford’s contentions. I have concluded that the respondents’ interpretation of the Act is correct and I now set out the reasons for that conclusion.

[37]      The proprietors of all State-integrated schools have legal personality of one form or other. The third and fourth respondents, as incorporated charitable trusts, may

22     Education and Training Act 2020, s 10.

23     New Zealand Catholic Education Office Ltd v Attorney General [2012] NZHC 793 at [5]-[9].

24     Commerce Commission v Fonterra Co-operative Group Ltd [2007] NZSC 36, [2007] 3 NZLR 767 at [22].

legally dispose of property, including funds, in any way they see fit, provided they are acting in accordance with the law. That is the effect of incorporation as described by s 13 of the Charitable Trusts Act 1957, which provides that incorporated trusts:

…shall be capable of holding real and personal property of whatsoever nature and whether situated in New Zealand or elsewhere, and of suing and being sued, and of doing and suffering all such acts and things as bodies corporate may lawfully do and suffer.

[38]      Incorporation as a charitable trust has a defined legal effect. Where proprietors have incorporated as a trust, company, or some other formal legal mechanism, this creates a legal personality, and with legal personality comes the power to dispose of funds in whatever way the legal entity decides. I accept the respondents’ submission that, if it has legal personality, a proprietor does not have to identify a particular empowering provision when performing an act that a natural person could undertake. This includes selling goods and services, receiving donations, and disposing of funds in ways not restricted by the Act. That, on its own, appears to provide the answer to the agreed issues. However, in view of the effort Mr Gifford has gone to in developing his other arguments I will address them briefly.

[39]      I accept the respondent’s submissions that the Act does not create or impose a rigid financial separation between proprietors and school boards, so as to necessitate the reading in of a prohibition on proprietors disposing of funds to boards. In the normal state of affairs, a proprietor may appoint four members to a school board. This is consistent with the view that a proprietor is permitted to exert some influence over a school board. In addition, as submitted by Ms van Dam, there are no apparent restrictions on the ability of a board to receive donations, provided that they are directed toward the fulfilment of the board’s function.25

[40]      It is also incorrect to say that the Crown does not provide extra funding to State schools, this is clear from Ms Barnett’s evidence. The Crown provides discretionary funding to both State and State-integrated schools and this is empowered by ss 550 and 551 of the Act. The Crown as proprietor of State schools can lawfully provide extra funds to those schools, as well as State-integrated schools. That being the case,

25     Education and Training Act 2020, s 159(1).

there is no obvious reason why proprietors of State-integrated schools should not be able to do the same. Nor does this mean, as Mr Gifford submits, that ensuring compliance with the Act is impossible. A proprietor must comply with the requirements of cl 36, which enforces auditing of funds raised through voluntary contributions.

Result

[41]      I declare that proprietors of State-integrated schools may fundraise for purposes other than the acquisition and maintenance of land and buildings, and may dispose of funds to school boards. While this is not provided for explicitly in the Act, it is supported by its scheme and purpose, and accords with current practise.

[42]      I answer the agreed questions by making the declaration as follows: the only limitations on the ability of a proprietor of a State-integrated school to fundraise or dispose of funds are those expressly set out in the Act or in the Proprietor’s Trust Deed or other governing document or documents.

Costs

[43]      I am of the preliminary view that this is an appropriate case for costs to lie where they fall. Mr Gifford has no personal financial interests in the outcome of the litigation which has a public interest component. However, if the respondents wish to apply for costs, they are to file and serve memoranda within 14 days, with Mr Gifford to have 14 days to reply. I will then decide the matter on the papers.

Churchman J

Solicitors:

Crown Law, Wellington for the First Respondent

Parry Field Lawyers, Christchurch for the Second Respondent Horsley Christie, Whanganui for the Third Respondents Andrea Craven, Palmerston North for the Fourth Respondents

cc:        G J Gifford, Applicant