M. Eburn

Spending brigade money on a social celebration

In Fire on September 2, 2015 at 12:03 am

This complex question comes from a NSW RFS brigade.  Without access to detailed financial manuals and delegations this answer must be very general and, as anyone who reads to the end will see, I cannot come to a conclusive answer.   My correspondent tells me that he or she is:

…  a member of a volunteer NSW RFS brigade and we are having issues with the brigade spending money on certain items/activities out of our accounts.

One particular event coming up is a significant brigade anniversary. This event includes the anniversary dinner, internal award presentations at this dinner as well as the invitation of dignitaries such as the RFS Commissioner, Members of government, RFS Senior management and District Management.

This dinner has a fee payable per head. The fee or charge includes a three course meal, non-alcoholic drinks and Coffee/Tea only. It does NOT include any alcohol at all. However there is a bar available if members wish to purchase other drinks themselves out of their own pocket.

We have three monetary accounts:

  1. One which is for profit made from a soft drink fridge and foods
  2. DGR Acc of which donated monies, profit from raffles etc as well as payment for services rendered such as assisting in local events
  3. Investment Acc which consist of DGR monies and other monies that has been invested in term deposits

With  our brigade anniversary coming up soon and would like to use monies from either the DGR or Investment Accounts to partially subsidise the tickets for the members and their partners (50% subsidy), fully subsidise tickets for dignitaries and Life Members of the brigade.

We have been told by word of mouth from brigade senior management that ‘The brigade cannot spend money on such activities as it is public monies’. We have been referred to RFS Service Standard 1.1.16 quoting in particular:

“2.3 A member of the Service may not, under any circumstances, accept or receive any personal remuneration or reward for, or in relation to, any service they provide as a volunteer member of the Service or which are provided by a brigade.”

Another member, who is also the brigade accounts auditor (yearly audit) also refers to public monies not being able to be spent on social functions. However does not provide points of reference or a source further than above. Several of us had done some homework although only utilising the RFS Service Standards of which we found that two of these apply; SS 8.1.3 Ceremonies and Events (Issue date 13 June 2012)

1.2 Ceremonial events strengthen and develop a healthy service culture for members and their families. maintaining the correct ceremonial protocols and procedures sets a standard of respect, pride and acknowledgement necessary each time NSW RFS personnel come together.

2.1 A Ceremony or event may include, but is not limited to any of the following;

(b) Presentation of internally or externally awarded medals to service personnel

(c) Brigade Anniversaries or similar celebratory/appreciation events

(g) Any event where the Commissioner or a member of Parliament is either invited to attend or hosts.

So by our understanding this Anniversary dinner satisfies at least three of the points listed in the whole SS 8.1.3 as a Ceremony or Event listed by the RFS and therefore if it is classified as such would then become a part of an “associated” fire or emergency service activity.

SS 2.1.14 is Management of DGR …………

3.6          Tax legislation provides that tax deductible donations received by brigades can only be used in support of activities that are ASSOCIATED with the brigade’s volunteer-based fire and emergency services activities.

Our undertaking of this SS is that because it states “used in support of activities that are ASSOCIATED with the brigade’s volunteer-based fire and emergency services activities” and also because of the SS I have listed above that this anniversary dinner actually qualifies the brigade to spend DGR monies for such an event.

I would like to reiterate that:

  • There will be no alcohol provided by the brigade or its accounts
  • This Anniversary Dinner is an official brigade function as per the relevant SS

We would appreciate your professional opinion at your earliest convenience.

Service Standard 1.1.16 is headed ‘Fundraising Activities (Provision of Goods and Services)’. Paragraph [1.2] says:

This Service Standard applies to services that may be provided to a third party in the context of brigade fund raising activities.

It goes onto say (at [2.3]):

A member of the Service may not, under any circumstances, accept or receive any personal remuneration or reward for, or in relation to, any service they provide as a volunteer member of the Service or which are provided by a brigade.

In context it appears to me that the Service Standard is referring to a situation where a brigade may, for example, set up at a fete to make the fete more attractive for local children.  The fete organisers may, in return, give a donation to the brigade. That money must go to the brigade but not to the members who are there with the brigade’s appliance.  It is not applicable in this context as this is not a fund raising activity (though it is a fund expending activity).

Service Standard 2.1.14 refers to ‘Management of Deductible Gift Recipient Status for NSW RFS Brigades’.   Rural fire brigades can receive gifts that are tax deductible for the gift giver – that makes the brigade a Deductible Gift Recipient or DGR.  Tax deductible receipts can only be given

… for genuine gifts/donations (i.e. where the donor does not receive a benefit except for the tax deductible receipt). Proceeds of raffles, charity auctions, fund-raising dinners, sponsorships and commercial activities are not deductible gifts/donations.

If that is the case the DGR account should not have ‘profit from raffles etc as well as payment for services rendered such as assisting in local events’ as that income would not be a tax deductible gift.    A gift fund (the DGR account) must not receive any money other than a tax deductible gift (Income Tax Assessment Act 1997 (Cth) s 30.130(1)).

The Income Tax Assessment Act 1997 (Cth) says that money received as a tax deductible gift may be used ‘only for the principal purpose of the fund, authority or institution’ (ss 30.130(2) and 30.130(4)).   ‘Principal purpose’ is not defined but in a web based guide to the law, the ATO gives the following example (<Can you be endorsed as a DGR?> 20 July 2015, accessed 1 September 2015):

A local government council that is a DGR for the operation of its public library sets up a fund for donations towards the annual picnic for its library staff. The fund is not for the principal purpose of the public library and so cannot be a gift fund.

Notwithstanding this general provisions, there are specific provisions regarding donations to funds for fire and emergency services.  A donation is tax deductible if it is made to a fund maintained by a government agency (which must include the RFS; s 995.1 definition of ‘Australian Government Agency’) and:

(b) the principal activity of the entity is the provision of volunteer based emergency services that are regulated by a *State law or a *Territory law;

(c) the fund is established and maintained solely for the purpose of supporting the volunteer based emergency service activities of the entity (Income Tax Assessment Act 1997 (Cth) s 30.102(12A.1.3)).

Running a celebration for a rural fire brigade may not be the brigade’s ‘principal purpose’ but it is ‘in support of activities that are associated with the brigade’s volunteer-based fire and emergency service activities’ (Service Standard 2.1.14, [3.6]).  The brigade members are volunteers, not staff, so their service has to be recognised by means other than salary, and as the RFS recognises, ‘Ceremonial events strengthen and develop a healthy service culture for members and their families’; matters fundamental to maintaining a volunteer brigade (Service Standard 8.1.3, [1.2]).

Service Standard 8.1.3 is headed ‘Ceremonies and Events’ and is supplemented by SOP 8.1.3 – 1 ‘Conducting Ceremonies and Events’.  If the RFS is going to have a service standard and SOP on ceremonies, it stands to reason that it is expected that ceremonies will be held, and will be paid for.   Unfortunately neither the Service Standard nor its SOP make reference to how the events will be funded.

Application

The RFS accepts, even encourages, ceremonies such as a brigade anniversary celebration.  I can see no objection to spending brigade funds that have been raised by selling ‘from a soft drink fridge and foods’ or money raised by raffles or other approved fund raising activities provided it wasn’t said that the funds were being raised for a particular purpose.  If, for example, a raffle was run in order to ‘raise funds to buy a new pump’ then the funds should be spent only on that new pump.  If however the raffle is for the benefit of the Kickatinalong Rural Fire Brigade then the funds can be spent on any legitimate purposes of the brigade which must include a brigade celebration held in compliance with Service Standard 8.1.3.

If the money has been paid as a tax deductible donation then it must be spent ‘only for the principal purpose of the fund, authority or institution’.  The principal purpose of the RFS may be fire fighting but a legitimate purpose of a DGR fund includes ‘supporting the volunteer based emergency service activities’.  Minds may differ on what that means.  I would have no problem in saying that includes a celebration held in compliance with Service Standard 8.1.3 but others may take a different view.    If the money is spent on a celebration and someone alleges that is a breach of the tax laws they would have to satisfy a court that this activity was outside ‘activities that are associated with the brigades volunteer-based fire and emergency service activities’.   If the RFS wants to take a cautious view they can determine that those funds cannot be spent that way.    It may be that the RFS has direction from the Treasury which they too must comply with.

Conclusion

Without access to treasury and RFS financial policies and delegations I am not able to reach a definitive conclusion.  It would be my view however that:

  1. Unless money has been solicited for a particular purpose, money raised by selling drinks and food from the station fridge, as well as money raised by raffles and other fund raising could be spent on a celebration that is conducted in accordance with Service Standard 8.1.3.
  2. Money that has been received as a tax deductable donation, again assuming it was not given for a specific purpose, must be spent ‘for the principal purpose of the fund, authority or institution’.  I am unable to resolve whether that would extend to a ‘celebration’.  To answer that the RFS or the brigade would need to seek advice from a specialist tax lawyer or accountant.  Of course if the RFS has a policy position, the brigade would need to comply with that policy determination.

What’s to be done?

The members of the brigade should not rely on ‘word of mouth’.  No doubt there is a process to raise the matter with senior management and get a definitive ruling either from them or RFS head office as he RFS can, if need be, seek advice from its lawyers or financial managers.  Once an answer is obtained it must be honoured.

Firefighters and the need to consult with landowners in WA

In Fire on September 1, 2015 at 3:08 pm

This question comes from a firefighter in Western Australia. I am asked

If you’re not an FCO and you are turned out to a report of smoke do you have to ask for permission before entering the property to investigate from the land owner if present? Section 44 states that you have to consult with the occupier, if he/she be present, but what does this mean in the real world? In the context does consulting mean asking for permission? The general consensus was that you do have to get permission, but I’m not so sure and I wonder whether there’s any legal basis from which to form this view. Any help would be very much appreciated.

An FCO is a Fire Control Officer appointed by a Local Government (Bush Fires Act 1954 (WA) s 38).

Section 44(1) says:

Subject to this Act … for the purpose of controlling and extinguishing or preventing the occurrence or spread or extension of a bush fire, or for any other prescribed purpose, the captain, or, in his absence, the next senior officer of a bush fire brigade, or in the absence of the captain and all other officers, any other member of the bush fire brigade, after consulting with the occupier of the land if he be present, has and may exercise all or any of the following powers and authorities, he may —

(a)         …

(b)         either alone or with others under his command or direction, enter on land or into premises which may be on fire or in the neighbourhood of a fire for the purpose of taking such steps as he deems necessary for the control or extinguishment or for the prevention of the spread or extension of the fire, or take or give directions for taking such apparatus required to be used at a fire into, through, or upon land or premises as he considers convenient for the purpose;

(c)         …

(d)         enter or give directions for entering land or premises, and take or cause to be taken water from any source whatsoever, other than that for use at a school or the domestic supply of an occupier contained in a tank at his dwelling-house, whether the water is upon private land or other land, and in all other respects, when and as often as in his opinion he deems it necessary or expedient to do so, exercise all the powers and authorities of a bush fire control officer under this Act;

(e)         either alone or with others under his command or direction enter a building which he believes to be on fire and take such steps as he considers necessary to extinguish such fire or prevent it from spreading.

‘Consult’ cannot mean ‘get permission’.  If it did that is what the legislature would have said and secondly, it would defeat the broad powers that are intended to be given.   According to the online Oxford dictionary defines ‘consult’ as, inter alia, ‘Have discussions with (someone), typically before undertaking a course of action’.

In Yallingup Residents Association (Inc) v State Administrative Tribunal & Ors [2006] WASC 162, Johnson J of the WA Supreme Court had to consider what ‘consult’ meant in the Town Planning and Development Act 1928 (WA).   He said (at [89] and [90]):

In Darling Casino Ltd v Minister for Planning (at 12), Pearlman J, in considering the meaning of the term “consultation” in the context of an environmental planning policy, referred to the following conclusion of Bucknill J in Rollo & Anor v Minister of Town and Country Planning [1948] 1 All ER 13 (at 17):

“A certain amount has been said as to what consultation means … it means that, on the one side, the Minister must supply sufficient information to the local authority to enable them to tender advice, and, on the other hand, a sufficient opportunity must be given to the local authority to tender that advice.”

It can be seen that this interpretation requires, as counsel for the Association noted, a two step process:

(a)          the provision of sufficient information; and

(b)          a sufficient opportunity to respond.

In TVW Enterprises Ltd v Duffy & Ors (No 2) (1985) 7 FCR 172 Toohey J (at 178 – 179) observed that, irrespective of the statutory context, the obligation to  consult  carries a responsibility to give those consulted an opportunity to be heard and express their views so they may be taken into account.

It seems axiomatic that an obligation to ‘consult’ with the occupier of the land would be to let the occupier know what the fire brigade want to do and ask the landowner for his or her advice or comments.   That makes sense.  First it invites the occupier to agree and may therefore reduce the need or threat of force or damage.  It may well reveal to the fire brigades things they don’t know such as ‘be careful of the bull in that paddock’.  It would allow the occupier to ask the brigade to consider the occupier’s interests eg the occupier may point out their prize rose garden and ask the brigade to minimise the impact of their operations there if that is possible.

Consulting with the occupier reflects that emergency management is not the sole responsibility of the fire service but involves cooperation with those involved, and people have rights and interests in land that need to be respected to the extent that they can be.  Consulting, however, does not equate to gaining consent and it may be that after consultation, the brigade has to act contrary to the person’s wishes.

As Johnson J noted (at [93]) ‘The extent of the obligation “to make reasonable endeavours to  consult ” must be construed by reference to the language of the Act viewed as a whole, including the regulations made under that Act’.  The obligation to consult under the Bush Fires Act where immediate action is required, will not be the same as the obligation under the Town Planning and Development Act 1928 (WA), as it was.  In a town planning decision a local government may be able to send out notices to affected landowners inviting them to comment on the plan and allowing a period for comments to be made.  A bush fire brigade does not have that luxury so consultation may be quite abridged.  Even so ‘the requirement of consultation is never to be treated perfunctorily or as a mere formality” ([91]).

Conclusion

In my view the duty to consult referred to in s 44 would mean that, to the extent possible taking into account the nature of the call out, a bush fire brigade would need to try to let the occupier know what they, the brigade, want to do and then take the occupier’s advice, concerns, requests or objections into account when formulating their incident action plan.

Class action over the 2013 Blue Mountains (NSW) fires starts –but who’s suing who?

In Fire, Insurance and NDRRA on August 24, 2015 at 10:02 pm

A class action over damages caused in the Blue Mountains (NSW) in 2013 has been commenced in the NSW Supreme Court. In NSW a ‘class action’ is an ‘opt out’ process.   A person who has been injured or suffered a loss can begin an action on behalf of the ‘class’ of people who suffered losses in the same event. Once that happens all members of the class are part of the litigation unless they ‘opt out’.   The idea is not to have multiple cases going over the same ground and the same facts. In this instance all the people who suffered losses shouldn’t have to sue the same defendant; if the representative plaintiff can prove that the defendant was negligent then everyone should get the benefit of that finding thereby reducing duplication and expense.

So it was that Mr Johnston instructed Maddens lawyers to commence a legal action against Endeavour Energy alleging that they were responsible, in negligence, for the fire that broke out on 17 October 2013 in Springwood.   Mr Johnston defined the class of plaintiffs broadly and as required by the rules various notices were sent out and published to bring the action to their attention so that they could exercise their rights to ‘opt out’.

Many of the people who had suffered a loss were insured by insurance companies owned by Insurance Australia Group Ltd (IAG). IAG owns NRMA Insurance, CGU Insurance and Wesfarmers Insurance which also traded as Coles Insurance and Lumley’s.   The various insurance companies had paid out on policies to 565 individuals and companies that were included in the class of plaintiff’s in Mr Johnston’s case.   IAG purported to exercise its rights as the insurer to act on behalf of those it had insured.

The rule is a rule of subrogation. Put simply it means that if an insurer has paid out on the policy it stands with all the rights of the insured and can sue, in the insured’s own name, to recover the amount it has paid out. What the IAG insurers want to do here was to also recover, on behalf of their policy holders, the uninsured losses. That is if an insured person had cover for $600 000 but the cost of rebuilding was $800 000 then they had an uninsured loss of $200 000. The IAG wanted to run the litigation to recover all the money; it would be entitled to keep what it had paid out and give the extra to the policy holder. To achieve that objective, two people commenced another class action. The insurers advised Mr Johnston that all the people who they insured were ‘opting out’ of that class action and would instead be in the class action that IAG was running.   But they never asked their policy holders if that is what they wanted …

So in Johnston v Endeavour Energy [2015] NSWSC 1117, Garling J had to decide who was in what ‘class’.   His Honour first looked at the law of subrogation and found it is not as simple as my description, above. In particular where a person was under insured or suffered uninsured as well as insured losses, they retained the right to bring their own action to recover damages. They would have an obligation to repay the insurer for any amount the insurer had paid under the policy, but the insurer was not able to commence proceedings in the name of the insured: ‘where the insurer’s payment to an insured does not cover the whole of the insured’s loss, an insured has and retains the right to recover his entire loss as the litigating plaintiff … without interference from the insurer’ [174].

An insurer could however litigate in the policy holders name if that was a term of the insurance contract. Here Garling J went through the various policies. Some did say that the insurer could conduct litigation to recover both the insured and uninsured losses and for people who had that policy, it was the end of the matter and the ‘opt out’ notices served by IAG were effective.

Other policies were not so worded.   Some said that IAG may seek to recover uninsured losses if they were asked to do so by the insured, some said that the insurer could seek to recover insured losses but made no mention of uninsured losses.   In those cases there was no right, under the contract, that would allow IAG insurance companies to conduct litigation on behalf of their policy holders to recover their uninsured losses.

It would appear that the driving issue was ‘priority’. If the claimants remained part of the Johnston class, then if they recovered they would get their uninsured losses, and any amount recovered above that would be repaid to their insurers. If they were part of the insurance company’s litigation, then it would be the insurers that would be paid first and any amount recovered in excess of the insured losses would go to the policy holders.   As Garling J said (at [145]) ‘one might be forgiven for thinking that the real issue is whether it is the insurer or the insured who will carry the shortfall on any sums recovered’.

Result

For some 30 claimants, their insurance policy gave to their insurance company the right to sue in their name to recover both their insured, and uninsured, losses. For those people the ‘opt out’ notice served by IAG was effective and they were removed from the Johnston class action with their rights to be determined by the class action that would be run by the insurers.

For the other 533 the ‘opt out’ notices were invalid as they were served by the insurer without proper authority.   Those claimants, who had not chosen to ‘opt out’ of the Johnston action, now remain part of that action in order to recover their uninsured losses. The insurance company’s do retain the right to stand in the shoes of their policy holder in order to recover any money paid under the insurance policy (ie the insured losses) and so the two actions will no doubt proceed in tandem.

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