BC Court Holds Land Transfer to be Gift Rather Than Trust
Jun 2018 Charity & NFP Law Update
On May 15, 2018, the Supreme Court of British Columbia released its decision in Okanagan Equestrian Society v North Okanagan (Regional District) concerning a dispute over the use of land (“Land”) that was transferred by the Vernon Jockey Club (“Jockey Club”) to the City of Vernon, British Columbia (“City”). Although the facts of the case are complex and the court considered ten separate issues, at the heart of the matter was a contract dispute between the City and the Okanagan Equestrian Society (“Society”), which currently owns all shares of the Jockey Club and therefore has control over the Land. The Jockey Club had transferred the Land to the City in 1964 subject to conditions for its future use, subsequently set out in an agreement executed in 1965 (“1965 Agreement”). The 1965 Agreement was to preserve the Jockey Club’s charter by maintaining its right to conduct horse racing and ensuring that the City maintained the racetrack. The Society argued that the 1964 transfer and the 1965 Agreement created a charitable trust, while the City argued that the transfer was a gift, with no charitable trust created.
The court first looked for the intention of the parties to create a trust and found that the registered title documents from the 1964 transfer and the 1965 Agreement itself did not reference or create a trust. It then considered whether the parties could have retroactively created a trust through the 1965 Agreement and whether a trust could be derived from a gift. Quoting from Waters’ Law of Trusts in Canada, it stated that “a person can do nothing to give away what that person has already given away, by whatever means the person attempts to do that.” It therefore held that, in an attempt to transfer a gift with conditions attached to the City, the Jockey Club had engaged the common law of contract rather than the law of trusts. Notable, the court found that “the parties did not conduct themselves as if the 1965 Agreement created a trust.”
The court then considered the “three certainties” of a valid trust – the certainty of intention, subject matter, and objects. While the 1965 Agreement indicated the City’s intention to develop the land into a general recreational area, the court found no certainty of intention, as there was no clear scope of the proposed development. The court also found no certainty of subject matter, as the 1965 Agreement obliged the City to keep “the track presently found on said lands” in good order, but that track had been replaced by a differently-shaped, larger track occupying two additional parcels of land. In this regard, the court held that “while there may have been certainty of subject matter in 1965, the same cannot be said at the time of the hearing in 2017.” Finally, the court found no certainty of objects, as the 1965 Agreement was worded such that it was impossible to determine for whom the City would have been holding the land in trust.
The court also considered the Society’s argument that the 1964 transfer and the 1965 Agreement created a charitable purpose trust in accordance with the four “heads” or categories of charity set out in Pemsel v Special Commissioners of Income Tax. Of the four, the court stated that only the fourth head of charity, “certain other purposes beneficial to the community, not falling under any of the preceding heads,” could be relevant in this case. It then determined whether the preservation of the Jockey Club’s charter was reasonably analogous to other charitable objects that fell under the fourth head, whether “certain accepted anomalies” fairly covered this object, and whether the income and property in question could be applied for purposes outside the scope of charity, including private advantage.
The court found that the language of the 1965 Agreement did not demonstrate an intention to create a charitable purpose trust, particularly because the language did not prohibit the City from using the Land to generate income, for example through a lease. Further, it found that the aspirational, non-mandatory nature of the wording merely set out a recognition of the City’s intention to develop the lands into a general recreational area and left the purposes of the development to the City’s sole discretion. It therefore found that the preservation of the Jockey Club’s charter was not an object that benefitted the community and served no greater purpose for the public good. Based on its reasoning above, it found no charitable purpose trust created, found that the 1964 transfer represented a gift and that no trust was created through the 1965 Agreement, and dismissed the Society’s arguments on this basis.
This case upholds the principle that a trust cannot be retroactively created where a valid gift has already been made. Further, it is a reminder of the importance of proper drafting of gifts agreements and/or trusts documentation to accurately reflect the intentions of a donor, particularly where the subject matter of a gift or trust is high in value, such as with land. If the donor’s intention is to create a charitable purpose trust, the applicable inter vivos or testamentary documentation should be carefully drafted to reflect this intention. Where that intention is unclear and cannot be readily demonstrated, courts may refuse to enforce the transaction as a trust.
June 2018 Charity & NFP Law Update
– SCC Upholds Denial of Accreditation of Trinity Western Due To Mandatory Covenant
– CRA News
– Legislation Update
– Corporate Update
– Tax Court Rules on the Appropriate Methodology for Valuing Wine Donations
– Supreme Court Upholds Religious Autonomy in Wall Decision
– Reporting Obligations for Directors, Trustees and Like Officials and Timing Issues
– Ontario Court Dismisses s. 6 CAA Application for Financial Disclosure
– BC Court Holds Land Transfer to be Gift Rather Than Trust
– Government Signals Changes to PIPEDA Needed
– Special Senate Committee Update
– Reduced Employee Benefits After Age 65 Found to be Discriminatory
– UK Charity Fined £100,000 for Personal Data Breach
– Anti-Terrorism/Money Laundering Update
Reporting Obligations for Directors, Trustees and Like Officials and Timing Issues
Jun 2018 Charity & NFP Law Update
The CRA requires registered charities to file Form T3010, Registered Charity Information Return Charities (“T3010”) with six months of the end of each fiscal year. For charities with a fiscal year-end date of December 31st, this means that a T3010 will need to be filed by June 30th. In addition to the T3010, registered charities in Ontario must also submit at the same time either a Charities RC232WS – Director/Officer Worksheet and Ontario Corporations Information Act Annual Return (“RC232WS”), or a Charities RC232 – Ontario Corporations Information Act Annual Return Worksheet (“RC232”) with a Form T1235, Director/Trustees and Like Officials Worksheet (“T1235”).
The RC232WS and T1235 require charities to identify the dates when directors, trustees and like officials began and finished acting in these roles. This may raise complications where the directors, trustees and like officials have changed during the charity’s fiscal period, raising questions regarding which individuals to list, including whether charities should list directors, trustees and like officials serving at the charity’s year-end or at the time of filing.
For charities that file the T1235, the form states that “each director/trustee and like official who, at any time during the fiscal period of this return, was a member of the charity’s board of directors/trustees” must be listed on the form. This means that all individuals who were directors, officers or like officials at any point in time during the applicable fiscal year will need to be listed on the T1235. However, this is different for corporations filing RC232WS. Charities that file this form, rather than the T1235, must set out the required information for the corporation “as of the date of delivery.” Therefore, only those individuals who are directors, officers or like officials at the time of filing need to be included in the RC232WS.
Charities with a financial year end of December 31st that have yet to file their T3010 with the CRA are reminded of the upcoming June 30th deadline, and of the importance of filing on time. Given the above, it will be important for charities to consider how they report their directors, officers, and like officials for the purposes of the T1235 or RC232WS, as the listing of directors is public information and inaccurate T3010s are often an issue raised by CRA during audits of charities.
CRA News
Jun 2018 Charity & NFP Law Update
Changes to A-Z Index on CRA Charities Directorate webpage
Over the past several months, the Canada Revenue Agency’s (“CRA”) Charities Directorate has been updating its online alphabetical index of topics. As mentioned in the CRA’s Twitter account, the new tool provides a “new user-friendly format [that] allows you to use keywords and filters that make the answers to your questions easier to find.” The search tool can be used by entering search terms which will then filter through the contents of the 389 entries in the index. For example, a search for the term “CED” will lead to Guidance CG-014, Community economic development activities and charitable registration.