Ontario Court Rejects Property Tax Exemption Based on Hypothetical
November 2020 Charity & NFP Law Update
The Ontario Superior Court of Justice released its decision in London Jewish Community Village v The Municipal Property Assessment Corporation, Region 23 et al on November 5, 2020, which serves as an important reminder to charities and not-for-profits that they are generally subject to property taxes unless their property is specifically exempt. In this case, the court heard an application brought by the London Jewish Community Village (“the Village”) concerning the tax assessment of a portion of property that it owned. The Village is a not-for-profit corporation, with stated objects to provide housing and accommodation of senior citizens and/or low-income families, and to promote social services benefitting those individuals.
The Village owns 3.33 acres of land in London on which a seniors’ apartment building and community centre were constructed in 1980. Subsequently in 2008, the Village constructed a separate building on its land, which was leased to a not-for-profit Hebrew day school co-operative (the “School”).
The Village sought tax relief solely for the portion of its property occupied by the School pursuant to an exemption under paragraph 3(1)5 of the Assessment Act, which exempts from property tax “[l]and owned, used and occupied solely by a non-profit philanthropic, religious or educational seminary of learning or land leased and occupied by any of them if the land would be exempt from taxation if it was occupied by the owner. This paragraph applies only to buildings and up to 50 acres of land.” The Village argued that its land was only 3.33 acres in size, the space was “leased and occupied” by the School as a “non-profit philanthropic, religious or educational seminary of learning”, and the land would be exempt from taxation if it was occupied by the Village.
In relation to its third argument, the Village’s position was that the land would be exempt if it was occupied by the owner pursuant to paragraph 3(1)5, relying indirectly on subparagraph 3(1)12(iii), which exempts from tax “[l]and owned, used and occupied by any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.” In support of this, the Village argued that it is and would remain a charitable, non-profit philanthropic corporation; that, while it did not currently provide relief of the poor, it “could and would” own, use and occupy the space “for the relief of the poor”; and that it would be “supported in part by public funds.”
The court, however, stated property tax exemptions should be based on current circumstances, rather than what could be. The court also stressed that, despite the good work provided by the Village, “it bears repeating that it was not the Legislature’s intention to grant tax exemptions to all worthwhile charitable institutions, however commendable their work might be.” Rather, the exemptions were limited, and the Village’s use of the property did not or would not in actuality have fallen within the enumerated exemptions – their intention to carry out relief of the poor was insufficient, even with these activities included in their incorporating documents. The court therefore dismissed the Village’s application for an exemption.
This case is a helpful reminder to charities and not-for-profits that they will not be exempt from paying property taxes based solely on their status as a charity or not-for-profit. Rather, property taxes are levied based on their actual, and not hypothetical, use of the lands in question. Where lands are leased to a seminary of learning, the lands may be exempt from property tax as well, provided that the owner has objective evidence to demonstrate through its present circumstances that its hypothetical use of the lands would also result in an exemption.
Court of Appeal Confirms Innocent Misrepresentation by Diocese
November 2020 Charity & NFP Law Update
The Court of Appeal for Ontario released its decision in Deschenes v Lalonde on May 20, 2020, in the midst of a large volume of cases related to COVID-19, amongst other legal matters. In its decision, the court dismissed the appeal from the judgment of the Superior Court of Justice, dated November 27, 2018 (the “Original Decision”). The Original Decision had resulted from a case which had previously been settled on consent and dismissed by the parties. However, there had been an attempt to rescind and set aside the settlement agreement between the appellant, the Roman Catholic Episcopal Corporation of the Diocese of London in Ontario (the “Diocese”), and the respondent, Irene Deschenes (“Deschenes”).
The underlying facts of the case relate to an action against Father Sylvestre and the Diocese by Deschenes in 1996 (“1996 Action”), alleging she was sexually assaulted as a child by Father Sylvestre in the early 1970s and claiming that the Diocese was vicariously liable for Father Sylvestre’s actions and negligent in failing to prevent the assaults when it knew or ought to have known that Father Sylvestre was or might be assaulting members of the parish.
During the time of the settlement of the 1996 Action, a representative of the Diocese affirmed that, having conducted a search of the records of the Diocese and made diligent inquiries, no one in the Diocese had any knowledge or reason to believe there were any problems with Father Sylvestre until 1989, when a fellow priest raised concerns about his possible alcohol abuse and he was removed from the parish where he was then serving and sent to a treatment centre. The Diocese also stated that it had no knowledge of the alleged sexual propensities or acts of Father Sylvestre until October 1992, before he retired in 1993. Based on the Diocese’s representations with regard to its knowledge of the conduct of Father Sylvestre, Deschenes agreed to settle the 1996 Action in 2000 for a payment of $100,000 by the Diocese.
Father Sylvestre, however, in 2006 pleaded guilty to having sexually assaulted 47 girls under the age of 18, including Deschenes. At this point, it came to light that, well before Deschenes was assaulted, the Diocese had received police statements in 1962 alleging that Father Sylvestre had assaulted other girls. The executive assistant of the Bishop of the Diocese was able to find the police statements from 1962 in a filing cabinet where they had been misfiled with old accounting records. As such, Deschenes commenced a new action against the Diocese and others, claiming rescission of the settlement agreement entered into in 2000 and other relief, and the parties brought competing motions for summary judgment.
In its analysis, the Court of Appeal stated that, there is a strong presumption in favour of the finality of settlements in broad terms and a settlement agreement will not be rescinded on the basis of new information that has come to light after the settlement. The Court of Appeal noted, however, that a settlement agreement (which is simply a contract) may be rescinded on the basis of the equitable basis of misrepresentation. This means that if a false or misleading representation is material to forming a contract, even if the misrepresentation was made innocently by a party who believed it was true, that contract may be rescinded.
Therefore, the Court of Appeal noted that, although the motion judge in the Original Decision characterized the misrepresentation as a “unilateral mistake of the Diocese,” there was no error in the motion judge’s analysis that the settlement agreement should be rescinded. Although it had previously been alleged as material to the settlement of the 1996 Action, the Court of Appeal found that there had been a material misrepresentation in light of the fact that the Diocese did have knowledge of Father Sylvestre’s abuse of children as far back as 1962. The Court of Appeal found that this misrepresentation was material, and that Deschenes had relied on the misrepresentation in accepting the terms of the settlement agreement in 2000 of the 1996 Action. As such, the Court of Appeal dismissed the appeal and agreed with the conclusion of the motion judge in the Original Decision that it would be fair and just to rescind the settlement agreement.
On August 14, 2020, the Diocese filed an application for leave to appeal to the Supreme Court of Canada. There has been no decision with regard to this application, but the progress can be followed on the Supreme Court of Canada website. This case is an important reminder to charities and not-for-profits that although settlements of proceedings before the courts usually provide relative certainty for the future regarding liability, it cannot be founded on a material misrepresentation by any party, as the settlement may be revoked.
Digital Charter Implementation Act, 2020
November 2020 Charity & NFP Law Update
On November 17, 2020, the Minister of Innovation Science and Industry introduced Bill C-11, the proposed Digital Charter Implementation Act, 2020 (“Bill C-11”). If passed, Bill C-11 would replace the privacy protection measures set out in the Personal Information Protection and Electronic Documents Act with the Consumer Privacy and Protection Act (“CPPA”) and the Personal Information and Data Protection Tribunal Act significantly overhauling Canada’s private sector privacy law regime. The balance of this Bulletin will provide a high-level overview of the CPPA and, where applicable, its relevance to charities and not-for-profits.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 481.
Ontario Superior Court Applied Cy-Près Doctrine to Testamentary Gift to Dissolved Parish
November 2020 Charity & NFP Law Update
The Ontario Superior Court of Justice released its reasons for judgement in the case of Romanic et al v. La Fabrique de la Paroisse Sainte-Sophie et al, on June 5, 2020. In this case, an application was brought to the court seeking direction with regard to a gift of the residue in the Last Will and Testament of Joseph Jacques Wilfrid Clavelle dated August 29, 2012 (the “Will”) to the Paroisse Sainte-Therese-de-L’Enfant-Jesus (“Sainte-Therese”), which had been dissolved prior to Mr. Clavelle’s death. Applying the cy-près doctrine, the court directed the testamentary gift to be received by another parish.
Sainte-Therese was created in 2001 as a result of the amalgamation of the old La Fabrique de la Paroisse Sainte-Sophie (“Old Sainte-Sophie”) with Saint-Antoine parish (“Old Saint-Antoine”). However, several months before Mr. Clavelle’s death, Sainte-Therese was dissolved and two new parishes were formed, being New Sainte-Sophie and New Saint-Antoine. The New Sainte-Sophie parish continued to operate out of the Old Sainte-Sophie/Sainte-Therese church site and argued that it was the successor of Sainte-Therese and thereby was entitled to receive the gift.
Because Sainte-Therese had been dissolved at the time of Mr. Clavelle’s death, the court held that the bequest to Sainte-Therese lapsed. The court also held that the law of successorship did not apply because New Sainte-Sophie was not a successor to Sainte-Therese, which simply ceased to exist with no successor entity.
However, the court directed the gift to be received by New Sainte-Sophie by applying the cy-près doctrine. In this regard, the court referred to the decision of the British Columbia Supreme Court in Re McGregor Estate, which held that where a testator leaves a legacy to an institution which later ceases to exist, then the gift either lapses and falls to be distributed on an intestacy, or comes under the cy-près doctrine if the court can infer that the testator intended to devote that property to a general charitable purpose. The cy-près doctrine may be used to direct a testamentary gift to an institution or organization other than the one named in the Will if: (a) the gift in the Will is impractical or impossible; (b) the testator manifested a general charitable intention in making the gift in the Will; and (c) the gift to the alternative institution or organization would be a gift resembling the initial purpose of the gift in the Will.
In this case, the court found that Mr. Clavelle’s gift in question met all the requirements because (a) Sainte-Theresa had ceased to exist making it impossible to carry out the gift; (b) there was a general charitable intention that the court could infer from the Will in the absence of a gift over or alternate residual beneficiary, because Mr. Clavelle was a devout Catholic and had long-standing ties to New Sainte-Sophie, where he chose to be buried, and because at the time the Will was made the work of the church was carried out by Sainte-Therese; and (c) directing the gift to New Sainte-Sophie would be a gift that best resembles the initial purpose of the gift in the Will. Accordingly, the court held that not directing the gift of the residue of Mr. Clavelle’s estate to New Sainte-Sophie would be to defeat his clear intentions.