by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
Following the introduction of Bill 154 on September 14, 2017, proposing changes to the OCA, the ONCA, as well as other legislation, Bill 154 was passed by the Ontario Legislature at an amazing speed on November 1, 2017, and received Royal Assent on November 14, 2017. Notwithstanding the introduction of Bill 154 amending the ONCA, it is still not known when the ONCA will be proclaimed. Since the Ontario Government continues its commitment to give the not-for-profit sector at least 24 months’ notice before the ONCA comes into force, the earliest that the ONCA might be proclaimed will be at least 2 years from now. As such, amendments to the OCA contained in Bill 154 are of immediate interest to Ontario Part III OCA not-for-profit corporations because the changes would allow them to enjoy some of the modernized rules contained in the ONCA and would provide more flexibility to their operations. In this regard, upon Royal Assent of Bill 154, a number of the changes to the OCA contained in schedule 7 became effective immediately, and other changes will become effective 60 days later (i.e., January 13, 2018). These changes are reviewed in this Bulletin.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 412.
Read the November 2017 Charity & NFP Law Update
by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
As indicated above, Bill 154 received Royal Assent on November 14, 2017. Schedule 2 of Bill 154 includes amendments to the CAA that permit “social investments”, as explained in Charity & NFP Law Bulletin No. 407 dated September 28, 2017. The only change from the original wording of Bill 154 concerning social investments is the new subsection 10.2(7) added before third reading in order to provide liability protection for directors and trustees if certain conditions are met. The new subsection 10.2(7) reads as follows:
A trustee is not liable for loss to the trust arising from the making of a social investment if, in doing so, the trustee acted honestly and in good faith in accordance with the duties, restrictions and limitations that apply under this Act and the terms of the trust.
While this is a welcome addition to the original proposed legislation which had not provided any liability protection for directors and trustees with regard to social investments, the wording of section 10.2(7) does not go as far as the protection from liability provided for prudent investments under section 28 of the Trustee Act. In this regard, and for comparison purposes, section 28 provides that “a trustee is not liable for a loss to the trust arising from the investment of trust property if the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment of the trust property, comprising reasonable assessments of risk and return, that a prudent investor could adopt under comparable circumstances.”
It is expected that the Ministry of the Attorney General’s Office of the Public Guardian and Trustee (“OPGT”) will in due course provide some type of written guidance to clarify the new provisions of the CAA on social investments. As such, before making a social investment, charities may want to wait for what the OPGT has to say about these new rules under the CAA, which may include insight on the protection from liability available under subsection 10.2(7). As well, it will be important for charities wishing to make a social investment to first seek advice from their legal counsel to assist them with understanding all of the legal requirements involved in making a social investment, including whether or not to seek advice pursuant to section 10.4 of the CAA and what sort of advice it would need to be.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law, Faith-Based Organizations
Nov 2017 Charity & NFP Law Update
On November 2, 2017, the Supreme Court of Canada (the “SCC”) delivered its judgement in the case of Ktunaxa Nation v. British Columbia (Forests, Lands and Natural Resource Operations), which arose after the British Columbia Minister of Forests, Lands and Natural Resource Operations declared that reasonable consultation had occurred prior to the approval of a proposed ski resort development in an area of spiritual significance for the Ktunaxa people. The Ktunaxa people played an active role in a lengthy regulatory approval and consultation process extending over twenty years and some of their concerns were addressed. However, the Ktunaxa eventually rejected the development altogether claiming it would drive Grizzly Bear Spirit, “a principal spirit within Ktunaxa religious beliefs and cosmology”, away from their sacred land, and irrevocably impair their freedom of religion under the Canadian Charter of Rights and Freedoms (the “Charter”). Although the SCC took into account many considerations in rendering its judgment, this Church Law Bulletin provides only a brief overview of its ruling on freedom of religion under s. 2(a) of the Charter.
For the balance of this Bulletin, please see Church Law Bulletin No. 51.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
On September 22, 2017, the Ontario Superior Court of Justice released its decision in Ahmed v Hossain, which involved a governance dispute at the Danforth Community Center (the “Center”), a not-for-profit corporation established under the OCA. The By-law for the Center (the “By-law”) established two separate boards, a “Board of Trustees” and a “Board of Directors” to govern different aspects of the Center. The By-law stated that the Board of Trustees was responsible to hold the property for the Center, monitor usage of the said property, provide accountability over the Board of Directors, and act as the Board of Directors if that board was dissolved, but only until such time that a new Board of Directors had been elected. The By-law stated that the Board of Directors was responsible for the day-to-day operations of the Center, as outlined in greater detail in the By-law.
An emergency meeting of the members was called, at which the Board of Trustees purported to dissolve the Board of Directors and usurp the authority of the Board of Directors. In separate incidents, the Board of Trustees also purported to bar a member indefinitely from entering the Center’s mosque and also bar two of the members (who were also applicants to the above case) from running for any administrative office at the Center for ten years.
The court held that neither the Board of Trustees nor the members had the authority under the Center’s general operating by-law, the OCA, or under the applicable common law to dissolve the Board of Directors, to install the Trustees in place of the Board of Directors, or to suspend the rights of the members as outlined above. As such, the court declared the purported dissolution of the previous Board of Directors and the steps taken by the Board of Trustees to suspend the rights of the applicant members to be unlawful and of no force or effect. The court noted that since proper notice of the emergency membership meeting was not given, even if the By-law did provide authority to carry out the above actions, those decisions would have been invalid due to insufficient notice.
This case confirms that while courts are generally reluctant to intervene in the internal affairs of not-for-profits, where an organization does not comply with its general operating by-law or the applicable corporate statute, the courts may take steps to intervene in those situations. In addition, as a practical suggestion, a single board structure is much simpler to work with from a governance perspective and will help to avoid confusion on the allocation of responsibilities that could otherwise arise where a double-board structure is utilised, as evidenced by this case.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
On October 26, 2017, the Court of Appeal for Ontario (the “Court of Appeal”) released its decision in Teixeira v Markgraf Estate, upholding the trial court’s decision previously reported in the September 2017 Charity & NFP Law Update concerning an unfunded cheque. The trial court had held that a gift by means of a $100,000 cheque from Maria Markgraf (“Markgraf”) to Arlindo Teixeira (“Teixeira”) was unenforceable when the cheque could not be cashed due to insufficient funds in Markgraf’s chequing account, as it could not be properly delivered to the intended recipient, Teixeira. On appeal, Teixeira advanced four separate arguments, two of which included that the gift by cheque was perfected by delivery, and the principle from the English trusts law case Pennington v Waine that “equity will not strive officiously to defeat a gift.”
Concerning the argument that the gift by cheque was perfected by delivery, the Court of Appeal upheld the trial court’s holding that the cheque was an inter vivos gift, and that the three elements of a gift outlined by the trial court were required for the gift to be valid. As the third element of a gift requires a sufficient act of delivery or transfer of the property, the Court of Appeal considered whether the delivery of the cheque into Teixeira’s hands could be a sufficient act of delivery despite insufficient funds in Markgraf’s account.
The Court of Appeal stated that cheques are directions by the drawer to the bank to pay money to a payee and can be revoked by the drawer before the cheque is cashed. As such, it stated that a gift by cheque is not complete until the cheque has been cashed or has cleared. Additionally, it stated that the death of a cheque drawer prior to the cheque being cashed would subsequently revoke the bank’s authority to pay funds to the payee. The Court of Appeal therefore upheld the trial court’s decision that the inter vivos gift failed because it was not delivered before the bank had received notice of Markgraf’s death.
Concerning the principle that equity will not strive officiously to defeat a gift, Teixeira argued that “an imperfect gift, which is not perfected by a transfer of possession to the donee, may nevertheless be effective where the donor retains possession of the gift but makes a declaration evidencing an intention to hold the property in trust for the donee.” However, the Court of Appeal stated that there must be a “clearly ascertainable point in time at which it can be said that the gift was completed, and this point in time must be arrived at on a principled basis.” Given the extensive law concerning delivery of gifts by way of cheque, the Court of Appeal found no basis for the application of this principle.
As all three elements of a gift are required to create a valid gift, this case is a reminder to charities that the receipt of a physical cheque is insufficient to satisfy the delivery element of a gift, and that the cheque must be cashed before the gift is considered to be made. Further, inter vivos gifts given via cheque should be cashed soon after they are received to avoid the loss of a potential gift due to unforeseen circumstances, including cancelled cheques or the death of a donor, as was the case here.
Read the November 2017 Charity & NFP Law Update
