BC Supreme Court Applies Cy-près Doctrine to “Flow-through Gift” 
April 2021 Charity & NFP Law Update
Published on April 29, 2021

By Jacqueline M. Demczur


Galloway Estate v British Columbia Society for the Prevention of Cruelty to Animals (“Galloway”) is a March 10, 2021 judgment of the Supreme Court of British Columbia regarding an interesting application of the cy-près doctrine in the case of testamentary gifts.

In Galloway, the wills of twin sisters, Sheila Holland (“Sheila”) and Lea Galloway (“Lea”), contained similarly worded residual provisions which provided, on the death of the surviving sister, a testamentary gift to the Pacific Coast Public Television Association (“PCPTA”), among other charities. PCPTA was, at the time that these wills were made, a Canadian registered charity. Each bequest stated that the gift would only be made if PCPTA continued to be “in existence” at the time of the respective testator's death. Sheila passed away on September 4, 2010 and Lea on May 3, 2020. Both testamentary gifts would, therefore, be distributed upon Lea’s death. However, while PCPTA had been in existence at the time of Sheila’s death, it was dissolved during Lea’s lifetime. The petition of the estate trustee sought direction from the court for the distribution of the estates. Of note, in relation to the testamentary gifts to PCPTA, the court issued a cy-près order in favour of the US corporation which had been earlier designated to receive all “flow through gifts” from PCPTA.

In terms of the key background facts, PCPTA was incorporated in 1987 and was registered as a charity in Canada in order to issue tax receipts to Canadian donors wishing to support the programming of KCTS Television (“KCTS”), a US public broadcasting company that owned and operated a commercial-free educational channel, KCTS 9 or PBS Channel 9. KCTS was succeeded in 2015 by a US non-profit, Cascade Public Media (“CPM”).

A key piece of information that was not included in the reasons for judgement in Galloway was that CPM is a 501(c)(3) organization in the US, which is generally considered to be the equivalent of a charity in Canada, with the ability to issue donation receipts for tax purposes. In addition, from the date of PCPTA’s incorporation, a Sponsorship Agreement had been in place which directed all donations to PCPTA over to CPM (or its predecessor, KCTS, before 2015).

In 2017, the CRA began investigating organizations established for similar reasons as PCPTA and, as a result, determined that they were not independent, arms-length Canadian charities. PCPTA, anticipating that it would likewise be investigated by the CRA and assessed to be “merely an agent” for CPM under the Sponsorship Agreement then in place, filed to have its Canadian charitable status voluntarily revoked. This revocation became effective on March 24, 2018. PCPTA subsequently took steps to dissolve itself as a not-for-profit corporation on October 18, 2018.

CPM took the position that it was “in substance” the successor to PCPTA because, prior to PCPTA”s dissolution, a gift to PCPTA was effectively a gift to CPM for which a Canadian tax receipt would be issued. In addition, CPM submitted that, pursuant to a separate Agency & Assumption Agreement between the parties for a period of ten years, CPM, as PCPTA’s agent under this Agreement, assumed the debts and liabilities connected with PCPTA’s wind-up and dissolution. Accordingly, it was CPM’s position that a gift to PCPTA was “in effect, a flow through gift”, and, therefore, fulfilled the testators’ intention. Finally, given the “exclusive relationship” between PCPTA and KCTS 9, now operated by CPM, it was argued that there were no other British Columbia- or Vancouver-based charitable organizations whose purposes were similar in nature to the purposes of PCPTA.

The Attorney General of British Columbia (“AG”) took the position that the gift given by Sheila disclosed a general charitable intent because PCPTA was in existence at the time of her death in 2010 and the gift should be subject to distribution under a cy-près scheme due to the exclusive relationship between PCPTA and KCTS 9, which was succeeded by CPM. However, the gift given by Lea, in the opinion of the AG, did not disclose a general charitable intent and should not be distributed to CPM under the cy-près doctrine because PCPTA was no longer in existence at the time of Lea’s death. The AG argued that Lea’s gift to PCPTA fails and should become part of the net estate to be divided among the remaining charitable organizations in existence at the time of her death.

Ultimately, the court agreed with CPM that there was an important relationship between PCPTA and CPM, and stated that the concept of a “successor” under the cy-près doctrine is not limited to a strict corporate successor but that the focus should be on which organization “succeeds” in meeting the testator’s charitable intent. As such, the court held that the testator “can be taken to have known that the sole purpose for the incorporation of PCPTA was to flow donations intended for the public broadcaster […], now operated by CPM, through a Canadian charity which could issue charitable tax receipts to Canadian donors”. As a result, the court concluded that the gift left to PCPTA should be distributed to CPM under the cy-près doctrine.

The decision is important to emphasize to charitable corporations which dissolve themselves to ensure that they take appropriate steps prior to dissolution to appoint their successors in the event that future estate gifts may be received. As well, the decision is significant in making clear that courts will not be limited to applying the cy-près doctrine to benefitting only Canadian registered charities, particularly where a donor’s charitable intent is clear that they wished to benefit an intermediary with whom a Canadian charity worked closely.


Read the April 2021 Charity & NFP Law Update