The importance of understanding how a charitable trust may use donated funds

In late 2019 and early 2020, Australia, and particularly the east coast, suffered various catastrophic bushfires.  In typical Aussie battler form, Australia rallied and raised significant funds to help those affected by the bushfires.  Fundraising efforts were many and varied and included comedian Celeste Barber (Ms Barber) launching a crowdfunding appeal in January 2020, with this campaign alone raising over $51 million.

Ms Barber had nominated the Rural Fire Service & Brigades Donations Fund (the RFS Fund) as the proposed recipient of the appeal donations.  Donations were facilitated through an electronic payment system, the PayPal Giving Fund.  Despite the best intentions Ms Barber and the donors, issues arose with respect to how the funds could then be utilised. 

Pursuant to section 63 of the Trustee Act 1925 (NSW) where a Trustee seeks an opinion, advice or direction from the Court with respect to the interpretation of the trust instrument, and acts accordingly, the Trustee is deemed to have discharged their duty as trustee. The Trustee of the RFS Fund applied to the Court for direction as to how the significant funds could be allocated. 

How does PayPal Giving Fund work?

The PayPal Giving Fund is a trust.  The PayPal Giving Fund collects donations from donors and passes it on to the charity indicated/recommended by the donor.  The charity must then distribute the monies in accordance with its own trust deed.

By using the PayPal Giving Fund, donors agree to its terms including that the PayPal Trustee “must pay or apply the Trust Fund solely for the purpose of providing money, property or benefits to or for Eligible Entities…”.  The RFS qualifies as an ‘Eligible Entity’.

The PayPal Giving Fund terms of service include:

"4)   When you donate to PayPal Giving Fund you will recommend that PayPal Giving Fund make a corresponding grant to an Eligible Charity in the amount of your donation.

5)   PayPal Giving Fund will make every effort to grant the funds you donate to your recommended Eligible Charity […]You understand that PayPal Giving Fund, as required by law, retains exclusive legal control over all donations and may redirect funds to a similar Eligible Charity If it is unable to follow your recommendation.
As outlined by Slattery J at [29], in the case of Ms Barber’s campaign, each donor’s act of “making a donation to the PayPal Giving Fund, through the Facebook page displaying the RFS Fund as the nominated charity for Ms Barber’s appeal, constitutes a “recommendation" of the RFS Fund within the meaning of that term in the Donor Terms of Service, clauses 4 and 5”.

The donors’ ‘recommendation’ posts on Facebook were broadly assessed as fitting into 4 categories, which became the subject of the questions the Court was asked to answer. 

Could the funds be used for:

1. paying money to other charities;
2. setting up or contributing to a fund to support rural firefighters injured while firefighting, or the families of rural firefighters killed while firefighting;
3. providing various forms of physical and emotional/mental health assistance to volunteer firefighters; or
4. setting up or contributing to a fund to meet the costs for volunteer rural firefighters to attend and complete courses that improve skills related to the volunteer-based fire and emergency services activities of the brigades

The PayPay Giving Fund transferred all the appeal monies to the RFS Fund, and the monies were held subject to the RFS Trust Deed.

The RFS Trust Deed

The RFS Trust Deed states that the RFS Fund “will be established and operated solely for the purpose of supporting the volunteer-based fire and emergency services activities of the Brigades”.  “Brigades” is defined “all brigades establish from time to time under the Rural Fires Act 1997 (NSW) as amended.” 

The RFS Trust Deed provides, essentially, that all gifts are to be used solely for the Purpose of the Trust.

The purpose of the RFS Trust is:

…to pay or apply the income from the Trust Fund… as follows:
(a)   to or for the Brigades…to meet the costs of purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and/or to otherwise meet the administrative expenses of the Brigades which are associated with their volunteer-based fire and emergency service activities;
(b)   for Authorised Investments which are consistent with carrying out the purpose in paragraph (a) above;
(c)   to meet the reasonable costs of the current and continuing operation and management of the Trust.”

The decision

As PayPal Giving Fund had transferred the donated monies to the RFS Fund, the monies all had to be used by the RFS Fund.

The Court was required to analyse the terms of the RFS Trust to determine the manner in which the funds could be utilised.  The Court answered the questions as follows:

Could the RFS Fund use the funds for:

1. paying money to other charities - No;
2. setting up or contributing to a fund to support rural firefighters injured while firefighting, or the families of rural firefighters killed while firefighting - Yes;
3. providing various forms of physical and emotional/mental health assistance to volunteer firefighters - Yes; or
4. setting up or contributing to a fund to meet the costs for volunteer rural firefighters to attend and complete courses that improve skills related to the volunteer-based fire and emergency services activities of the brigades - Yes.

Lavan comment

This is a timely reminder that a trust deed, and the purposes of a trust, absolutely govern how the trust is to operate.  When providing donations, it is important for both donors and organisers to understand how any donation will reach its target source. 

If using an intermediary such as PayPal Giving Fund, it is of utmost importance that the donor/organiser understands how each entity (the PayPal Giving Fund Trust, and the intended recipient) will interact and the limits of each to operate in particular ways.

If you plan on arranging a fundraising appeal, or have concerns about where your donated money may end up, you should seek legal advice.