by Dev User | Feb 24, 2022 | Charity & Not-for-Profit Law, Employment Law
Feb 2022 Charity & NFP Law Update
Employer Liable for Damages Caused by Employee’s Negligence in Car Accident: Court of Appeal
An Ontario Court of Appeal decision affirming that an employer was vicariously liable for a motor vehicle accident involving an employee should remind charities and not-for-profits of the importance of non-owned automobile insurance. Published on January 28, 2022, Dagenais v Pellerin, 2022 ONCA 76 (the “Appeal”) upheld a lower court finding of vicarious liability (the “Judgment”) after the defendant employee (the “Employee”) admitted liability when his car collided with the plaintiff’s on Highway 17 while he was driving to a work site from Ottawa to Petawawa. Damages claimed by the plaintiffs exceeded the Employee’s $2 million personal automobile insurance coverage. The accident occurred in 2013 and, after some delay due to the pandemic, a summary judgment was granted by the Ontario Superior Court of Justice on June 25, 2021. The Employee worked as a concrete pourer for Slavko Concrete Finishing Inc. (the “Employer”) and was directed by the Employer to drive the two-hour route to the work site and back on the same day in his own car; he was also paid under the terms of a collective agreement. The Employer argued they should not be liable because the Employee, who was pulling into a Tim Hortons at the time the accident occurred, was not authorized to take such a coffee break. The Judgment applied a Supreme Court of Canada precedent involving a non-profit organization to conclude that the Employer was liable, a decision which the Employer then appealed.
In Bazley v Curry, [1999] 2 SCR 534 (Bazley), the Supreme Court of Canada (SCC) found that a non-profit organization was vicariously liable for tortious conduct of an employee, establishing that there is no exemption for non-profits, which would include charities and not-for-profit organizations. The SCC applied a two-part common law test for finding vicarious liability, known as the Salmond test, which
… posits that employers are vicariously liable for (1) employee acts authorized by the employer; or (2) unauthorized acts so connected with authorized acts that they may be regarded as modes (albeit improper modes) of doing an authorized act.
The Judgment concluded on the facts that the Employee was authorized to take a coffee break and that satisfied the first part of the Salmond test. If the second part of the test applied, then a further test would be required to assess the facts, from the Bazley precedent, based on policies of fairness and deterrence. Although the Employer argued on this point in the Appeal, the court upheld the Judgment, citing the phrase that a coffee break by the Employee was not a “ ‘frolic of his own’ … where the employee went off to socialize for a lengthy period during the drive’.” Therefore, there was no reason to interfere with the Judgment. The amount of damages to be awarded has been left for trial.
Charities and not-for-profits should be careful to note that vicarious liability may involve no wrongdoing by or negligence of the organization, and liability can ensue even in the absence of fault. Non-owned automobile insurance is advisable if a charity or not-for-profit requires personnel to use their own vehicles for work-related duties. Non-owned automobile insurance coverage provides insurance protection when an employee occasionally has to drive his or her personally owned vehicle for the purposes of their employment. This assumes that the vehicle is not owned, registered or contracted in the organization’s name or on the organization’s behalf.
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by Dev User | Feb 24, 2022 | Charity & Not-for-Profit Law
Feb 2022 Charity & NFP Law Update
Presented by The Honourable Ratna Omidvar, C.M., O. Ont, Senator for Ontario
On February 17, 2022, the Honourable Ratna Omidvar, C.M., O. Ont, Senator for Ontario, delivered a presentation setting out the context of Bill S-216, An Act to amend the Income Tax Act (use of resources of a registered charity). The Senator explained why the Bill is necessary and how it addresses the needs and lives of vulnerable communities. The presentation, given at the 2022 Ottawa Region Charity & Not-for-Profit Law Webinar, includes helpful information about the domestic and international context of resource accountability in the charitable sector and points towards a better alternative.
The following is a transcript of the presentation. Select questions raised at the conclusion of Senator Omidvar’s presentation have also been included. For the full transcript, please click here.
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by Dev User | Feb 24, 2022 | Uncategorized
Feb 2022 Charity & NFP Law Update
Mr. Jim Crerar sought a declaration from the Supreme Court of British Columbia that the trust agreement he created was a valid charitable purpose trust. In Jim Crerar Charitable Trust (Re), released on January 14, 2022, the court found the trust’s purpose – to provide funds to people to prosecute wrongful dismissal claims against former employers – was not “charitable”.
Mr. Crerar had been terminated from a job earlier in his life, but did not have the funds to pursue a wrongful dismissal claim. He decided to set up a trust to help others who might find themselves in similar circumstances and wrongfully dismissed. The trust would distribute funds to “any poor person, who […] requires funds for the prosecution of a wrongful dismissal claim against a former employer” no matter if they were a unionized or non-unionized employee, “as a means of alleviating his or her poverty”. There was no definition of poor person.
In considering whether the trust was valid, the court outlined that there must be a specific beneficiary of a trust or the trust must be recognized as a charitable purpose trust. In order to be a charitable purpose trust, the trust must be one of the four categories of charitable purposes which were set out in the case of Pemsel v Special Commissioners of Income Tax and include: relief of poverty, advancement of education, advancement of religion, and other purposes beneficial to the community.
The court found that providing funds to prosecute wrongful dismissal claims did not have “at its core the relief of poverty” because it would not “provide funding for retraining, job search, daily living expenses, or even compensation for what might have been a proper period of notification or termination”. Rather, the court found that such litigation may result in a settlement for the employee which they “may or may not be able to collect on”. The court also highlighted the concern that if an employee loses their claim “they may well face a costs order, which would drive them further into poverty”. Because “the only guaranteed beneficiary is legal counsel”, the court declined to find that the trust had a charitable purpose for the relief of poverty.
Mr. Crerar also argued that the trust was for a purpose beneficial to the community, but the court was not satisfied that he provided any basis for this assertion. Where there is a trust that is for the benefit of the community, the court will consider whether there is a section of the community that can be identified as being helped by the trust. However, there was no evidence of this and the court declined to take judicial notice that there was a sizable segment of society that faces access to justice issues related to wrongful termination.
In its conclusion, the court found that the Mr. Crerar failed to establish that the trust had a charitable purpose. While the court may have reached a different conclusion regarding whether there was a purpose beneficial to the community if more evidence had been provided, its analysis of whether there was a purpose for the relief of poverty was relatively narrow, as it was based on the Court’s conclusion that it was an “ineffective tool for that purpose” when compared to more “immediate, short term assistance”. This case serves as a reminder that whether a purpose is “charitable” is fact-dependent and grounded in the common-law understanding of the components of the four heads of charity.
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by Dev User | Feb 24, 2022 | Uncategorized
Feb 2022 Charity & NFP Law Update
A decision from the Ontario Superior Court of Justice emphasized that a tax-exempt organization that receives a gift from an individual’s estate cannot spend the funds as it wishes. Rather, funds must be used according to the terms of use set out in the will. The court, in its January 31, 2022 unreported decision of County of Bruce v Office of the Public Guardian and Trustee, ultimately concluded that the funds from the estate were misused and that there had been a breach of trust.
Bruce Krug was an expert in local and natural history, well known for his financial support of Bruce and Grey County museums and historical societies. In his will, he gave $500,000 to the County of Bruce “for the archives building for the storage and display of the archives of the county”, thus creating a restricted charitable purpose trust. The will also set out that if any beneficiaries named in the will declined or refused to comply with the conditions attached to the legacy bequeathed to them, then that amount would lapse and fall into the residue of his estate.
In March 2014, about a year after Mr. Krug passed, the County of Bruce (the “County”) passed a by-law to establish the Bruce County Archives Krug Reserve Fund (the “Fund”). The County spent about $30,000 of the Fund commissioning plans regarding the development of its museum, but the majority of the Fund was spent in March 2018 when the County purchased the property adjacent to its museum (the “property”) for $550,000.
The Southampton Cultural Heritage Conservancy (“Southampton”) brought an application before the court seeking, among other things, an order that the County breached the restricted purpose charitable trust when it purchased the property using money from the Fund. The County also brought an application requesting an order dismissing Southampton’s application and confirming that the language of Mr. Krug’s will was broad enough to encompass the County’s plans.
In reviewing the facts before it, the court expressed concern regarding the County’s actions, noting that the County had unlawfully closed to the public at least 18 of its meetings relating to the purchase and use of the property, that it had demonstrated extreme reluctance to produce relevant records, and that “on the admitted record, the County’s behaviour has been atrocious throughout.” The court also highlighted concerns that “the County has not spent any of the Krug trust funds on the archives building” nor on “the storage and display of the archives of the County” contrary to the terms of the will.
The County’s submission urged the court to consider whether the words of Mr. Krug’s will, particularly regarding the gift “for the archives building for the storage and display of the archives of the county”, meant that “approval should be given to the County to expend funds for a new archival structure”. However, in reviewing the record, the court found that there was no clear intent by the County to use the property for the archives building; the County could only provide that it had “no intent not to use this property for archival storage” (emphasis added). Further, there was no explanation regarding why the Fund was used to pay for the entire lot “when the archive did not need the full lot”. Ultimately, the court found that the Fund was “used to buy land in the name of the County for its own benefit”.
The County had also requested that, in the alternative, the court consider if the cy-près doctrine applied. The cy-près doctrine allows a court to make orders to give effect to a charitable gift where the charitable objectives of the gift are clear but are impossible or impracticable to carry out. The County requested that because the existing archives building had reached its capacity and it would be impossible or impracticable to spend money from the Fund to expand the building, the court should apply the cy-près doctrine to allow the Fund to be used for the purpose of maintaining a museum archives at a different location and in a different building. However, the court disagreed that it would be impossible or impracticable to use the Fund for the purposes set out in the will. Even if that were true, the will set out a “gift over clause” that if any of the beneficiaries declined or refused to comply with the conditions attached to the legacy, the legacy would lapse and fall into the residue of Mr. Krug’s estate. Ultimately, the court concluded that it “need not apply the cy-près doctrine in these circumstances and on this record”.
The court found that the County was in breach of trust for using the majority of the Fund to buy the property and “required the assistance of both the [Public Guardian and Trustee] and Estate Trustee” to make submissions “with respect to what should occur next”. This decision is a reminder for charities and other qualified donees (such as municipalities) that when they receive a gift from an individual’s will, there are obligations to use the property in accordance with the restricted terms of the will. Failure to do so will be a breach of trust and may result in consequences, including a review by the Ontario Public Guardian and Trustee as well as possibly the court.
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by Dev User | Feb 24, 2022 | Uncategorized
Feb 2022 Charity & NFP Law Update
The Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”) was finally proclaimed into force on October 19, 2021. Incorporation as a new not-for-profit corporation in Ontario is now governed under the ONCA. As well, the ONCA automatically applies to all not-for-profit corporations previously incorporated under Part III of the Ontario Corporations Act (“OCA”). These corporations have three years from the date of the ONCA’s proclamation to undertake an optional “transition process” to amend their governing documents to comply with the requirements of the ONCA before they are automatically amended to comply with the ONCA on October 19, 2024.
As a result of the repeated delay in the proclamation of the ONCA since its enactment in 2010, Ontario corporations had been left in corporate limbo for 11 years, struggling with whether to update their objects and by-laws under the OCA to further their mission or to wait for the proclamation of the ONCA before making those changes. Many Ontario corporations had to make the difficult decision of whether to give up waiting for the proclamation of the ONCA by continuing under the federal Canada Not-for-Profit Corporations Act (“CNCA”). Charity & NFP Law Bulletin No. 379 explained the steps involved and key considerations for such a move.
Now that the ONCA is proclaimed into force, Ontario corporations are faced with the new of dilemma of whether to undertake the transition process to continue to remain under the ONCA, or whether it is time to take a second look at whether to go federal under the CNCA. This Bulletin reviews some of the key factors that should be considered when deciding which move to make.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 508
Read the February 2022 Charity & NFP Law Update
