by admin | Jun 25, 2015 | Charity & Not-for-Profit Law, Privacy Law & Anti-Spam
Charities and not-for-profits often publish privacy policies on their websites as a way to inform the
public of their practices regarding the handling of personal information. It is important that charities and
not-for-profits properly implement their privacy policies and ensure that all individuals within the
organization are familiar with the privacy policy, in order to avoid the exposure to liability, as was the
case in Albayate v Bank of Montreal (“Albayate”).
In this case, the Bank of Montreal (the “Bank”) changed Ms. Albayate’s address without her consent,
which resulted in letters being mistakenly sent to her ex-husband, as well as inaccurately reported Ms.
Albayate’s address to two credit reporting agencies. Although the British Columbia Supreme Court did
not accept all of Ms. Albayate’s claims, the Court did conclude that the Bank breached Ms. Albayate’s
privacy rights under British Columbia’s Privacy Act when it released her information to the credit
bureaus, and also breached its privacy policy, which formed part of the contract between Ms. Albayate
and the Bank.
Although Ms. Albayate was unable to prove any damages, the Court awarded her nominal compensation
in the amount of $2000, which was based on case law before the Court in which compensation had been awarded for breach of privacy or contract where applicants had not established they suffered a pecuniary
loss. It is important to note that the case law also established that such awards can often be much
greater, in some cases up to $20,000, despite the ability to prove any damages.
Prior to advancing the current claims, Ms. Albayate had filed two complaints, based on the current facts,
with the Office of the Privacy Commissioner of Canada. In each case, the Privacy Commissioner
conducted a complaint review. It determined that in the first complaint the Bank had contravened the
principles of PIPEDA related to collecting personal information and that the second complaint was wellfounded and the issue had been sufficiently resolved.
Although this case relied upon British Columbia’s Privacy Act, for jurisdictions in Canada which have
not adopted a cause of action by statute for breach of privacy, some provincial jurisdictions provide
recourse at the common law for a cause of action concerning breach of privacy. For example, in Ontario,
the Court of Appeal recently recognized a cause of action identified as “intrusion upon seclusion” (for
more information on this newly recognized tort, see Charity Law Bulletin No. 277).
Despite the relatively low damage award in this case, charities and not-for-profits should be aware that
breaching an individual’s privacy can result in various causes of action, complaints to the Office of the
Privacy Commissioner of Canada, loss of reputation to the organization, and legal costs. As Albayate
illustrates, simply enacting a privacy policy without allocating sufficient resources to properly
implement the privacy policy will render it meaningless and may expose charities and not-for-profits to
the sanctions and penalties available under various laws. Accordingly, charities and not-for-profits
should take steps to appropriately implement the terms of their privacy policies at the operational level,
and ensure that employees, staff and volunteers know how to recognize potential privacy issues.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
On April 17, 2015, the Ontario Superior Court of Justice released its decision in the matter of Vaughan Community Health Centre Corporation v Annibale (“Vaughan”). In contrast to the decision in Saskatchewan WTF Taekwondo et al v Taekwondo Canada, discussed earlier in this Charity Law Update the Court in Vaughan declared that the subject matter of a proposed resolution that the members of a not-for-profit corporation governed by the Corporations Act (Ontario) (the “OCA”) wanted to pass was inconsistent with the OCA and the corporation’s by-laws, and also stated that the resolution was not consistent with the role of corporate members.
In this regard, a portion of the corporate membership of Vaughan Community Health Centre Corporation attempted to requisition a meeting to remove certain directors, and make amendments to the by-laws of the corporation concerning the qualifications and number of directors.
After a review of the facts, the Court determined that the members are not entitled to unilaterally make amendments to the by-laws of a not-for-profit corporation under the OCA. In this regard, the OCA provides that the ability to pass by-laws, subject to confirmation or rejection by the members, rests solely with the directors, which was mirrored in the by-laws of the corporation. In addition, with respect to the changes concerning directors, the OCA requires a special resolution to increase or decrease the number of directors, which by definition first requires a resolution to be passed by the directors, then confirmed by the members. In addition, while the OCA provides for the ability for the membership to remove directors if the by-laws so provide, in this case, the by-laws required that reasons for removal be given and that the directors be allowed to respond. Since that did not occur in this instance, the Court found that such removal would not comply with the by-laws.
While this case does not provide any new interpretations of significance concerning the OCA, the detailed review of both the OCA and by-laws by the court in relation to the resolution that the members wished to pass indicates that a not-for-profit corporation will not always be provided any latitude with respect to compliance with its governing documents. As such, it is important to confirm that corporate decisions taken by a not-for-profit corporation, whether under the OCA or other not-for-profit legislation, will not be off-side either the statutory provisions or the by-laws.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
In Kamloops-Cariboo Regional Immigrants Society v Herman, the plaintiffs, including Kamloops-Cariboo Regional Immigrants Society (the “Society”) and one of the Society’s directors, alleged that Wanda Herman, the former executive director of the Society, had committed a number of torts against them. The Society is a not-for-profit society incorporated under the British Columbia Society Act with charitable status and a mandate to assist immigrants and visible minorities integrate into Canadian society. Prior to the case being brought to court, several employees of the Society, including Ms. Herman, had a tumultuous relationship with the Society’s Board, resulting in some employees taking medical leave for stress, as well as accusations of mistreatment and harassment from Board members that in a few cases resulted in human rights complaints.
The plaintiffs brought the action against Ms. Herman on a number of grounds, including allegations of (1) breach of confidentiality, (2) breach of fiduciary duties, and (3) conspiracy to injure the Society. The plaintiffs alleged that Ms. Herman breached her duty of confidentiality to the Society by sharing information concerning internal efforts to resolve the Society’s employment disputes to the press and with the human rights tribunal (“HRT”). The plaintiffs alleged that Ms. Herman breached her fiduciary duties when she established a committee that had the intention of replacing the Board, and filing complaints with the HRT, among other things. The Board’s allegations involving Ms. Herman’s conspiracy to injure the Society included Ms. Herman’s attempt to arrange a meeting of members to replace the Board, as well as filing complaints with the HRT against the Society and its board.
In dismissing all of the causes of action, the court found that Ms. Herman did owe a fiduciary duty to the Society, as an officer of the Society, and that she had acted in compliance with her duty to the Society. The court stated that the Plaintiffs had not demonstrated that the complaints to the HRT were unfounded and that Ms. Herman’s actions were not done in malice. Instead, the court found that Ms. Herman’s actions were taken based on her perception that the Board’s actions were putting the Society at risk. With respect to the allegations of breaches of confidentiality, the court found there was no evidence Ms. Herman directly made statements to the press concerning the Society (the comments were attributed to other Committee members); and the information concerning employment disputes were not subject to confidentiality since that information was obtained through other employees who contacted Ms. Herman while Ms. Herman was on sick leave (i.e., not during Ms. Herman’s term as executive director).
The court further found that the tort of conspiracy to injure the Society should fail because Ms. Herman’s actions were lawful, and she did not act in a way that would imply intent to injure the Society. Instead, the court found Ms. Herman had genuine concerns with the function and role of the Board, as did many other Society members, and that Ms. Herman’s actions were taken to remediate what the judge described as the Society’s “chronic dysfunction.”
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
In a recently issued technical interpretation (#2014-0548841E5), Canada Revenue Agency (“CRA”) commented on the required retention periods for books and records of corporations and unincorporated entities under the Income Tax Act (“ITA”) and the Income Tax Regulations (the “Regulations”). In particular, a taxpayer had sought clarity on the “interaction between the general requirements with respect to the retention of books and records outlined under subsection 230(4) of the Act and the specific requirements in section 5800 of the Regulations.” The analysis of CRA’s Income Tax Rulings Directorate appears to introduce a novel distinction between records it identifies as permanent and those it identifies as non-permanent. Although the technical interpretation is silent on the books and records of incorporated and unincorporated qualified donees and non-profit organizations, presumably the distinction would also apply to these entities where the ITA and Regulations parallel.
Paragraph 230(4)(a) of the ITA stipulates that certain books and records along with “every account and voucher necessary to verify the information contained therein” must be retained for a prescribed period. Subsection 5800(1) of the Regulations sets out the prescribed periods “[f]or the purposes of paragraph 230(4)(a) of the Act.” More specifically, paragraph 5800(1)(a) of the Regulations sets out the prescribed period for certain books and records relating to corporations such as a general ledger or other books of final entry and certain meeting minutes. Paragraph 5800(1)(c) establishes the prescribed period for similar records held by unincorporated businesses. The technical interpretation refers to these paragraph 5800(1)(a) and (c) records as “permanent records,” which must be kept from the time of incorporation until two years after corporate dissolution or six years after the end of an unincorporated business’ taxation year when it ceases to operate.
Paragraph 230(4)(b) of the ITA establishes that “all other records and books of account referred to in this section, together with every account and voucher necessary to verify the information contained therein” must be retained for six years from the end of the tax year to which they relate. The technical interpretation refers to both paragraph 230(4)(b) records and the additional corporate records prescribed in paragraph 5800(1)(b) of the Regulations as “non-permanent” records.
Interestingly, this distinction between permanent and non-permanent records does not appear to have been previously made in other CRA guides and publications related to records. However, because the text of the taxpayer’s enquiry was not included in the technical interpretation, it is unclear whether the distinction was generated by CRA or the taxpayer.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
Canada Revenue Agency (“CRA”) recently released a CRA View (#2014-0517481E5) that comments on issues related to third-party fundraising. This View was released in response to an inquiry regarding the tax implications to an organizer (i.e., the fundraiser) of a fundraising event, where the organizer as a non-profit organisation intended to give the proceeds of the event to a registered charity.
In response, CRA stated that, generally, fundraising is considered a profit activity, but CRA may allow a non-profit organization, as defined under paragraph 149(1)(l) of the Income Tax Act (“ITA”), to carry out some fundraising activity without jeopardizing its tax exempt status if the scope of the fundraising activities does not escalate to the point where it could be considered a purpose of the organization. However, if the scope of the fundraising does reach this point, then the organization will no longer qualify for tax-exempt status under section 149(1)(l) of the ITA. Consequently, CRA went on to state that “organizations that are established and operated for the sole purpose of raising funds are not considered non-profit organizations even if all the profit from a fundraising activity is donated to a registered charity.” In this particular circumstance, CRA could not determine whether the scope of fundraising activities in relation to other activities was so great as to be considered an organizational purpose.
CRA then went on to review the issue of whether fundraisers are carrying on a business or if amounts that they receive can be considered gifts, an issue that CRA indicated was always a question of fact. In this regard, CRA further indicated that when fundraising generates income from a business, this income should generally be included in calculating income under section 9 of the ITA. In such circumstances, where the fundraised amounts were donated to a registered charity, a donation receipt may be available to the fundraiser, allowing it to reduce either taxable income or taxes payable.
However, CRA is of the opinion that, in many cases, the amounts raised would be considered gifts from the outset and would, therefore, not treated as taxable income. This is because CRA would view the fundraisers as acting as agents for the persons from whom the funds were collected and, therefore, responsible for transferring the property collected from the persons over to the registered charities in question. CRA concluded that “generally, it is the CRA’s view that where fundraisers collect funds from the general public and pay the amounts to a registered charity the fundraisers would not be entitled to a donation receipt.”
It is also noteworthy that, in its response, CRA referenced the fact that in the Federal Budget 2014, the Minister of Finance announced that there would be a public consultation on the income tax framework for non-profit organizations and that “we encourage all interested persons to participate in the consultation process.” To date, it does not appear that the Department of Finance has officially launched this consultation process. Non-profit organizations should keep an eye out for developments in this regard.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
In St. Catharines Seniors Apartments Phase Three Inc. v Municipal Property Assessment Corporation et al, a recent endorsement in the Ontario Superior Court released on June 17, 2015, the court addresses an application by a housing charity for exemption from municipal taxation. Specifically, the housing provider sought exemption under paragraph 12(iii) of section 3(1) of the Ontario Assessment Act (the “Act”), which exempts from taxation lands owned by “any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.”
The charity operates a residential apartment building for low income seniors. The issue before the court was whether the residents of the apartment building could be considered “poor” as contemplated by the Act to relieve poverty, or whether it merely provides affordable housing to seniors.
The court clarified that in determining a charity’s purpose, it is the actual operation of the organization rather than its corporate objects that is the determining factor. It was therefore immaterial that the corporate objects of the applicant do not mention “the poor.” The court also held that “poor” is a relative term; it does not mean the very poorest or the completely destitute. Instead, only an element of economic deprivation or need is required.
After comparing the low income cut-off statistic numbers for the community where the building is located with the income of the residents, the court was satisfied that the average annual income of $24,140 and a median annual income of $22,042 of the residents would equate with any common sense notion of “poor” as envisioned by the Act. Even if 5 of the 35 units did not meet the definition of “poor”, the court was satisfied that the remaining 30 units being rented to the “poor” meant that the primary actual purpose of the charity continued to be to provide affordable housing for poor senior citizens.
This case follows the decisions of previous cases upon which charities in Ontario that provide housing for the “poor” with public funds rely upon exemption from municipal taxes. With the continuing trend of the growth of the senior population in many cities, this tax benefit is especially helpful to those that provide housing to “poor” seniors.
