by admin | Jun 30, 2016 | Charity & Not-for-Profit Law
At the 2016 National Charity Law Symposium held on May 27, 2016, it was announced that Cathy Hawara has been promoted from her position as Director General of the CRA Charities Directorate to Deputy Assistant Commissioner of the CRA Legislative Policy and Regulatory Affairs Branch effective June 6, 2016. Fortunately for the charitable sector, Ms. Hawara will continue to have oversight of the Charities Directorate in her new position.
After six and a half years, Ms. Hawara has been one of the longest serving Director Generals of the Charities Directorate. Throughout her tenure at the Charities Directorate, Ms. Hawara has encouraged greater engagement with the sector on issues related to the federal regulation of registered charities under the Income Tax Act. In addition, Ms. Hawara has led the Charities Directorate during a time of unprecedented change to the regulatory regime, including the introduction of new rules for qualifed donees, the ineligible individual provisions, the political activities audit program, and innovations related to the Charities Directorate’s delivery of guidance products, webinars, and other client service improvements. Ms. Hawara will be missed by the charitable sector and will no doubt be a hard act to follow.
by admin | Jun 30, 2016 | Charity & Not-for-Profit Law, Privacy Law & Anti-Spam
On June 14, 2016, the Canadian Radio-television and Telecommunications Commission (“CRTC”) released an announcement that it had signed a Memorandum of Understanding (“MOU”) with 10 international enforcement agencies. The purpose of the MOU is to foster and facilitate cooperation between the 11 signatory agencies, with a view to fighting “unlawful spam and unsolicited telecommunications”.
The participating agencies were all part of the London Action Plan, which was a 2004 initiative involving 27 countries to address spam proliferation and related problems, such as electronic fraud and the spread of viruses. The agencies specifically involved with the MOU are the following:
- The Office of the Privacy Commissioner of Canada
- The United States’ Federal Trade Commission and Federal Communications Commission
- The Australian Communications and Media Authority
- The Netherlands’ Authority for Consumers & Markets
- The United Kingdom’s Information Commissioner’s Office and National Trading Standards Intelligence Team
- The Korea Internet & Security Agency
- The New Zealand Department of Internal Affairs
- The South Africa National Consumer Commission
Charities and not-for-profits that communicate with their donors or members through email, social media, or by telephone, should be aware of the move toward increased information sharing between agencies concerning the enforcement of anti-spam legislation, domestically and internationally. The current MOU reflects this trend and follows closely on the heels of the signing of a previous bilateral agreement between the CRTC and the US Federal Trade Commission on March 24, 2016, regarding anti-spam enforcement, as discussed in our April 2016 Charity & NFP Law Update.
by admin | Jun 30, 2016 | Charity & Not-for-Profit Law
On June 9, 2016, the Supreme Court of Canada denied leave to appeal in the case of Spence v BMO Trust Company (“Spence Case”). As a result, the Ontario Court of Appeal decision of Spence v BMO Trust Company, that was reported on in our March 2016 Update remains the law in Ontario. The Spence Case arose out of a dispute between Eric Spence’s estate and Verolin Spence, Eric’s daughter (“Verolin”), when Verolin was excluded from Eric’s Will. The claim made by Verolin was that her exclusion from the Will was made on a discriminatory basis, specifically because she had a child whose father was white and that Eric disapproved of her decision in this regard. In particular, Verolin claimed, on the basis of extrinsic evidence, that Eric’s intention in excluding her from his Will was based on a “clearly stated racist principle,” and offended public policy. However, according to the Court of Appeal, the Will did not express such an intention.
The Ontario Court of Appeal stated that “[a] testator’s freedom to distribute her property as she chooses is a deeply entrenched common law principle” and that “[a]bsent valid legislative provision to the contrary, the common law principle of testamentary freedom thus protects the testator’s right to unconditionally dispose of her property and choose her beneficiaries as she wishes, even on discriminatory grounds.” In coming to this decision, the Court of Appeal sent a clear signal that it will continue to uphold testamentary freedom in private will cases concluding that to apply public policy doctrine to void unconditional bequests would be to effect a “material and unwarranted expansion of the public policy doctrine.”
by admin | Jun 30, 2016 | Charity & Not-for-Profit Law
On June 20, 2016, the Ontario Superior Court of Justice allowed the Crown’s motion to strike the Plaintiff’s statement of claim for failing to disclose a reasonable cause of action in the case of Deluca v The Queen. The Plaintiff participated in a charitable tax shelter, which involved the Plaintiff taking a loan from a barter organization for which he received “TradeBux” and then making donations to Liberty Wellness Initiate Foundation (“LWIF”), a registered charity at the time. The Plaintiff received “very substantial tax refunds” for donations he made under the scheme in 2007, 2008, and 2009. In 2010, LWIF’s charitable registration was revoked. While the decision does not specify a time frame, at some point the Plaintiff was issued notices of reassessment for his 2007 and 2008 taxation years. Although the Plaintiff is disputing these reassessments in the Tax Court of Canada, he also brought a claim against the Crown and two individual CRA employees, asserting that they “failed to take prompt actions to warn the public” about problems it was aware of with the tax shelter “and the risks in dealing with them until April 2010.” This, the Plaintiff alleged, constituted negligence on the part of the CRA and was “a breach of a public and private law duty of care” that resulted in the denial of the Plaintiff’s charitable donations and the resulting credits for their respective tax years.
One of the issues central to the decision was whether CRA owed a duty of care to the Plaintiff, since CRA was aware of problems with the tax shelter and LWIF failed to take steps to warn the public. In its analysis, the Court rejected the claim that there was a duty of care for a number of reasons. First, the Court held that the “loss of value of a tax deduction stemming from a questioned (and questionable) in-kind donation” was not a “foreseeable consequence of failing to police the registration of charitable organizations.” Second, the Court held that there was no statutory duty under the Income Tax Act (“ITA”) “from which the necessary degree of proximity might be inferred” and would be required to establish the duty of care. In commenting on this point the Court clearly stated that the purpose of issuing charitable registrations or tax shelter identification number is “to protect the tax base administered by CRA” and that the “ITA cannot be construed to impose a duty on the Minister or his or her officials to administer the registration and supervision of registered charities in order to protect taxpayers from the risk of dealing with them.” As a result, the Court found that the relationship between the Plaintiff and CRA “lacks the elements of foreseeability of harm and proximity necessary to sustain a claimed duty of care” and the Court therefore struck the Plaintiff’s claim for this, and a number of other reasons including public policy. As the Court summarized “There is no duty to warn taxpayers away from participating in tax shelter schemes that prove unsuccessful”. It is not yet known if the Plaintiff plans to appeal, but this decision will likely have a strong persuasive effect in similar types of actions.
by admin | Jun 30, 2016 | Charity & Not-for-Profit Law, Intellectual Property Law
As reported in Charity & NFP Law Bulletin No. 360, on June 19, 2014, amendments to Canada’s Trademarks Act were passed into law. As a result of these amendments, on June 6, 2016, CIPO released consultation documents which includes the proposed trademark fee changes that will apply when the amendments come into force, and has set a deadline of July 5, 2016 for public comment.
The main proposal with respect to the trademark fee structure is to implement fees per classification of goods and services. Currently, Canada does not require classification of goods and services into specific categories. As such, trademark applicants can include an unlimited number of goods and services in a trademark application without any additional government fees, regardless of how broad the list of goods and services is. When the amendments are implemented, the goods and services will have to be categorized into one of 45 classes and the proposal by CIPO reflects fees per class of goods and services, both at filing and renewal.
The proposed new government fees for online trademark filing are $330 for one class of goods and services, and $100 per additional class. Current fees for filing and registration are $450 combined for application and registration, regardless of the number of classes. To avoid the proposed fees per class, charities and not-for-profits wishing to protect their brands in multiple classes should consider filing trademark applications now with a broad “wish list” of goods and services prior to the amendments being implemented.
by admin | Jun 30, 2016 | Charity & Not-for-Profit Law
On May 20, 2016, the B.C. Court of Appeal upheld a claim for specific performance by Habitat for Humanity Canada (“Habitat”) pursuant to an affiliation agreement in an appeal of the decision of the B.C. Supreme Court by Hearts and Hands for Homes Society (“HHHS”).
The case involved a dispute between Habitat as a national umbrella organization and HHHS as one of Habitat’s affiliate members. As a Habitat affiliate, HHHS is also required to enter into an affiliation agreement with Habitat. The agreement gives affiliates a non-exclusive sublicense to use the intellectual property associated with the “Habitat for Humanity” marks, to solicit donations, and to carry out the charitable activities to provide affordable housing to individuals in need in Canada.
The dispute arose as a result of HHHS’s non-compliance with the requirements under the affiliation agreement, which led to Habitat invoking the disaffiliation process set out in Habitat’s disaffiliation policies. Upon completion of all six stages of the disaffiliation process, Habitat determined that HHHS did not bring itself into compliance with the affiliation requirements, disaffiliated HHHS, and proceeded to enforce the provision of the affiliation agreement to require the net assets of HHHS be transferred to Habitat.
We reported in our JulyAugust 2015 Charity & NFP Law Update regarding the decision of the lower court released on July 8, 2015. On appeal, the BCCA dismissed all grounds of the appeal and upheld the specific performance as granted by the trial judge, declaring that the net assets of HHHS are assets of Habitat.
Many umbrella organizations utilize a similar structure whereby affiliates or chapters are required to comply with certain requirements or standards, non-compliance with which would lead to disaffiliation. For these organizations, a few lessons can be learned from this case in structuring such a relationship:
First, this case shows the willingness of the courts to uphold reasonable provisions set out in an affiliation agreement entered into between charities.
Second, it is important for parties to comply with the process set out in their policies and agreements. Both courts in this case agreed that their role was not to conduct a judicial review of the reasonableness of Habitat’s decision to disaffiliate HHHS, but to determine whether Habitat complied with the process in its own disaffiliation policy.
Third, when structuring the mechanism for the disaffiliation process, it is important to consider the purpose of such a process and the fairness of the process. It is interesting to note that the Court of Appeal “agree[d] with the judge’s comments … that the disaffiliation policy is designed to benefit affiliates experiencing difficulty as it offers a defined path to remain in or return to good standing. The aim is to keep the affiliate in the Habitat family. The policy should be interpreted with this goal in mind.”
Fourth, before entering into an affiliation agreement, affiliates should be given an opportunity to provide input or feedback to the terms of the agreement. In this case, the court found that HHHS did not provide any input although an opportunity was given by Habitat.
Fifth, it is helpful for parties to confirm in the affiliation agreement and constating documents their respective purposes and how they align with each other. In this case, the court held that HHHS did not have a “distinct charitable purpose from that of Habitat.” Instead, HHHS’s charitable purpose was substantially the same as that of Habitat and the affiliation agreement states that the affiliate’s purpose is consistent with the purpose of Habitat.
