by admin | Feb 25, 2016 | Charity & Not-for-Profit Law
Following the enactment of the new British Columbia Societies Act on May 14, 2015, the Lieutenant Governor in Council issued Order No. 673 on November 23, 2016, stating that a majority of the provisions in the new Act will come into force on November 28, 2016 (sections 1 to 263, 265 to 268, 270 to 274, 276, 279, 281 to 288, 291 to 295, 297 to 299, 301 to 322, 324, 325, 327 to 338, 340 to 349, 351 to 354 and 356 to 365).
The Order also introduced a new Societies Regulation, effective November 23, 2016, repealing the Society Act Regulations, B.C. Reg. 4/78. The new Regulation address various issues referred to in the new Act, including a new model by-law for societies; the maximum fees that may be charged in various scenarios; how reporting on remuneration of directors, employees and contractors in the financial statements are to be made; when a person who is 16 or 17 years old may be a director or senior manager of a society; the funding threshold for member-funded societies; and reporting society provisions.
A pre-existing society must transition under the new Act within two years of it coming into force by filing a constitution, by-laws (consolidated into a single set of bylaws) and a statement of directors and registered office of the society.
by admin | Feb 25, 2016 | Charity & Not-for-Profit Law
On July 10, 2015, the Ontario Superior Court of Justice released its decision in Creppin v The University of Ottawa and Allan Rock, in which it dealt with a motion to dismiss a claim on the basis that it did not disclose a reasonable cause of action pursuant to Rule 21.01(1)(b) of the Rules of Civil Procedure. In the statement of claim, which was brought under the Class Proceedings Act, the plaintiffs, through Mr. Creppin as the lead plaintiff (the “Plaintiffs”), alleged that the University of Ottawa and its president, Allan Rock (the “Defendants”), mishandled allegations of sexual assault against two members of the university hockey team. Specifically, the plaintiffs allege that publicly announcing a suspension of the entire team unfairly cast suspicion and guilt on the entire team and breached their duties to the plaintiffs in several ways.
For a motion to strike a pleading to be successful, it must be plain and obvious that it does not disclose a reasonable cause of action. Courts must approach this analysis in a generous manner and remain open to allowing novel but arguable claims to proceed. In response to the Plaintiffs’ various accusations, the Defendants argued:
- the Defendants, as university leaders have broad discretion and even if unfair there is no cause of action having to do with a breach of natural justice,
- the Plaintiffs did not plead sufficient facts to make out a claim for negligence on part of the Defendants,
- the university president did not have a fiduciary duty to the students in this case, and
- there is not a cause of action against Mr. Rock for misfeasance in public office
In response to the first ground, Justice Phillips found that although the Defendants do enjoy broad discretion, their actions could be construed as disciplinary against students that were not involved with the sexual assault allegations. Discretion, albeit broad, is not unlimited and the court, therefore, found that it was not plain and obvious that the actions were within the Defendants’ discretion.
In response to the second ground, the Court again found that it was not plain and obvious that a claim for negligence could not be made out. A duty of care has been judicially recognized to arise within the relationship between a university and its students. Failing to become informed of all the facts before reprimanding uninvolved students could be seen to have created foreseeable harm.
In contrast, the Court found that it was plain and obvious that a claim for breach of fiduciary duty could not succeed. The court found that the Plaintiffs, as paying students, represent a vulnerable class of persons, and they had substantial practical interests that were negatively affected by the Defendants’ actions. However, the Court reviewed the objects and purposes in the University of Ottawa Act and determined that “the objects and purposes of the University are to look out for its various constituent elements as a whole.” As a result, the Defendants were obligated to consider all of these elements in making a decision and the Court therefore struck the claim of breach of fiduciary duty.
Finally, the Court also found that it was plain and obvious that misfeasance in public office was not a reasonable cause of action. As the Court stated, this tort involves bad faith and/or dishonesty and, as an intentional tort, the Defendants must have been aware that such conduct would cause harm. While the actions of the Defendants may well have been negligent, Justice Phillips stated that the deliberate moral turpitude was not present to meet the misfeasance claim and accordingly struck this allegation from the pleadings.
Since the motion to strike the statement of claim by the Defendants was not successful, the claim that the Defendants acted negligently may be determined in a further court decision. As a result, universities, but also other charities and not-for-profits that are involved in disciplining their students, members, or other beneficiaries, should follow this case to determine how the outcome of the claim may impact their discipline process.
by admin | Feb 25, 2016 | Charity & Not-for-Profit Law
On December 2, 2015, the Supreme Court of British Columbia released its decision in R. v. Raza, in which it convicted three individuals for defrauding the provincial and federal governments of tax revenue by way of a false charitable donation scheme. The three accused, Fareed Raza, Saheem Raza (collectively the “Razas”) and Faiz Kahn (with all three being the “Accused”) were convicted under section 380(1)(a) of the Criminal Code for defrauding the federal and provincial governments for amounts exceeding $5,000 for the periods of December 31, 2002 to June 24, 2011 for the Razas, and June 31, 2008 to June 24, 2011 for Mr. Kahn, respectively,.
The Razas were both directors in an accounting corporation where tax returns were prepared for clients who approached them on a referral basis hoping to receive better tax refunds for their respective businesses. The evidence provided by police and former client witnesses revealed that clients were told by the Accused that they would be able to collect refunds if they made donations to a registered charity named Mehfuz Children Welfare Trust (“Mehfuz”). In most cases, clients were told to donate $500 to Mehfuz, though amounts ranged from a few hundred dollars to several thousand. The said clients would then provide the Accused with these cash donations for each tax year and, in return, their tax returns were prepared reflecting charitable donations to Mehfuz that grossly exaggerated the amounts actually donated. The Razas also attached receipts from Mehfuz to their clients’ tax returns that they were not authorized to issue on behalf of Mehfuz.
The number of alleged false tax returns prepared by the Razas during the period in question was over 1,700. The total of false donations set out on the said fraudulent returns amounted to $11.4 million, and amounted to $4.909 million in lost revenue for the Crown. By comparison, the total amount of donation revenue reported by Mehfuz during the same period of time was $815,000.
The court found that the evidence against the Accused was sufficient to prove beyond a reasonable doubt that all of them were guilty of the charges. The Razas were convicted of fraud over $5,000 for generating false documentation that deprived the Crown of tax revenue. Since there was only evidence that Mr. Kahn prepared one false return, he was convicted of the lesser charge of attempted fraud under $5,000 for his role. Since he was not a director of the company and did not have his name on an office, he was not found to be implicated in the broader scheme, as with the case with the Razas.
This case serves as a reminder for organizations that proper records of cash donations to registered charities need to be maintained in order to avoid becoming an unwitting victim of charitable tax fraud schemes.
by admin | Feb 25, 2016 | Privacy Law & Anti-Spam
On January 27, 2016, the Canadian Radio-television and Telecommunications Commission (“CRTC”) made an announcement that it executed a warrant pursuant to Canada’s anti-spam legislation (“CASL”) at two sites in Ontario’s Niagara Region. This is the second warrant that has been issued since CASL came into force in 2014. Further information about the first of these warrants, issued on December 3, 2015, may be found in our January 2016 Charity & NFP Law Update.
The CRTC is responsible for enforcement under CASL, and actions taken by the CRTC can include administrative monetary penalties and investigations, among other actions. The CRTC does not comment on active investigations or names of individuals or companies that are being investigated but disclosed that this particular warrant was in response to an ongoing investigation of the installation of malware and the alteration or transmission data. The investigation was initiated after the CRTC received information from FireEye Inc., a company that specializes in cyber threat protection and forensics.
In the announcement, the CRTC asserted that it will continue to collaborate with local and international authorities to “aggressively pursue investigations of alleged violations under CASL” and encouraged Canadians to report spam and electronic threats to the Spam Reporting Centre. Charities and not-for-profits should take measures to ensure that their networks are not compromised by various forms of malware or viruses in order to protect themselves and their constituents from similar attacks.
by admin | Feb 25, 2016 | Charity & Not-for-Profit Law
The Ontario Nonprofit Network (“ONN”) made a written submission to the Social Enterprise Branch of the Ministry of Economic Development, Employment and Infrastructure on December 1, 2015, (the “Submission”) proposing that that the Branch ensures a “real focus on nonprofit social enterprise” in the development of social enterprises in Ontario, notwithstanding that the for-profit model for social enterprise may currently be better understood. The Submission by ONN is directed at the Ontario government’s recent initiative to facilitate the growth and success of social enterprises in Ontario. For more information about the government initiative, see Impact: A Social Enterprise Strategy for Ontario.
The Submission encourages a “principled approach” that recognizes that social enterprises, whatever their corporate form, must exist “to provide public benefit, contribute to and grow community wealth and wellbeing.” In consultation with its network of 55,000 not-for-profits and charities in Ontario, ONN developed six key policy recommendations which are set out below along with a brief summary of accompanying commentary where appropriate:
- “Approaches to social enterprise development must maintain a clear focus and clarity of purpose and principle” In this regard, ONN submits that social enterprise development must maintain commitment to the public good and operate with a holistic approach. This could be facilitated if social enterprises received funding similar to that received by other application of social enterprise, such as for-profit or dual-purpose enterprises.
- “The Government of Ontario should focus on improving access to appropriate capital investment for social enterprise.” The government should recognize that social enterprises require access to a wide variety of capital and improve accessibility accordingly.
- “The Government should develop a Social Procurement Action Plan.” Targeted social procurement could help provide economic opportunities for social enterprises.
- “A provincial approach means including regional approaches.” The government need to focus on social enterprise initiatives in rural and remote contexts, as well as in urban contexts.
- “The government of Ontario should move forward with enabling amendments to legislation and regulation for the 88% of social enterprises operating as non-share capital organizations, so they may earn income to grow their enterprises, attract capital, and increase sustainability while maintaining the public’s trust.”
- “Modifications to the Ontario Business Corporations Act to provide for dual purpose ‘private profit and social good’ corporations should not be undertaken at this time.” ONN’s background research indicates that dual purpose corporations do not adequately address the needs of social entrepreneurs, communities, investors or governments. For more information concerning the possibility of dual purpose corporations in Ontario, see Dual Purpose Corporate Structure Legislation: Stakeholder Engagement Report, which was released by the Ontario Ministry of Government and Consumer Services on January 29, 2015.
For more information on the submission by ONN, please see the ONN’s Policy Blueprint for Social Enterprise.
by Dev User | Feb 25, 2016 | Counter Terrorism Law, Expertise
From February 17 to 19, 2016, a Plenary Meeting (the “Plenary”) of the Financial Action Task Force (“FATF”) was held in Paris, France. The FATF is an inter-governmental policy-making institution responsible for setting and monitoring international standards for combating money laundering and the financing of terrorism, which is promulgated, among other ways, via a series of Recommendations for its member countries. This most recent Plenary was largely focused on advancing the FATF’s work to combat terrorist financing in a variety of sectors.
At the Plenary, the FATF adopted a Consolidated FATF Strategy on Combatting Terrorist Financing (“Consolidated Strategy”), which lays out an updated consolidation of the FATF’s stated “key objectives” to meet terrorist threats from perceived facilitating organizations that fund and support the terrorist groups or individuals. The Consolidated Strategy seeks to achieve the following: achieving a full understanding of the scope of terrorist financing, ensuring that FATF Recommendations provide appropriate counter measures and that member countries are maintaining compliance.
The published outcomes of the Plenary make special note that since 2015, the FATF has been “call[ing]” on its member states to provide more information on terrorist financing and identify barriers to “effective information sharing – at international and domestic levels.” The FATF has been reviewing this information and sharing practices and tools for overcoming these “barriers” with member states. The FATF has restated its commitment to ensuring the free flow of information in order to combat terrorist financing. The FATF reaffirmed their commitment to continue this work at all levels domestically and internationally, with government agencies and in the private sector.
This campaign to strengthen and remove perceived barriers to information sharing was reflected recently in Canada in the Anti-terrorism Act, 2015 (otherwise known as Bill C-51). This legislation garnered some significant concern about safeguards that might be necessary in an evolving world where information is shared between government agencies, the private sector and internationally. Charities and not-for-profits, particularly those that have programs internationally or that operate in “conflict zones” need to be aware of this increasingly free-flow of information globally, as it is being institutionalized and significantly increased. The impact of this globally shared information should not be underestimated as the information (which may include simple allegations) could lead to or be a part of potential revocation of charitable status and/or charges under the broad definition of “facilitation” of the Criminal Code, among other serious liabilities. For more information please see Anti-Terrorism & Charity Law Bulletin No. 39, which discusses the impact of Bill C-51 on charities and not-for-profits.
