Court Finds that Donors are not Trust Beneficiaries in Sale of Charity’s Property
June 2022 Charity & NFP Law Update
Published on June 29 2022

By Esther S.J. Oh
   
 

The Ontario Superior Court of Justice has confirmed that donating time and money to a charity for the upkeep of a park does not create a trust relationship, nor does it entitle the donors to be beneficiaries of the property held in trust. In the case of Mee et al. v. Y.M.C.A. Properties Inc., et al., several individuals and a newly incorporated organization “The Friends of Geneva Park” (the “Applicants”) brought an application a few days before the sale of the Geneva Park property, an ecologically sensitive area located on the traditional territory of the Anishinaabe people, the Chippewas of Rama First Nation (“Geneva Park”) by Y.M.C.A. Properties Incorporated (“YMCA”) was scheduled to close. The Applicants brought their application pursuant to section 10 of the Charities Accounting Act and sought, among other things, (1) an interim injunction restraining the sale from closing and (2) a declaration that YMCA Simcoe/Muskoka (“YSM”) held Geneva Park in trust for the members and community of Geneva Park (including the Applicants) as beneficial owners. The court ultimately dismissed the application.

Geneva Park was a property in Orillia, Ontario, held by YMCA in trust for YSM. Both YMCA and YSM are registered charitable organizations. Several of the buildings (which included a number of cottages and cabins) in Geneva Park were rented to the public and there was a tradition of family camping and not-for-profit conferences being held on the Geneva Park property. Over the years, many families who camped at Geneva Park, including the Applicants, donated millions of dollars to the YMCA for the building and upkeep of the Geneva Park property and to support YSM’s family camp and leadership programs.

In January 2021, YSM announced that it intended to begin the process of selling Geneva Park due to financial pressures resulting from the impacts of the COVID-19 pandemic. In selling Geneva Park, YSM engaged a company with experience in working with not-for-profits which would assist with continuing the legacy of the property, as much as possible and proceed with the sale in a transparent and inclusive manner. The Applicants remained in communication with YSM and submitted an expression of interest in September 2021 and two revised expressions of interest in February 2022, in which there were no statements suggesting the Applicants were asserting a beneficial ownership or trust relationship in relation to Geneva Park. However, in communications from March 2022, when it became clear that the YMCA was likely pursuing a sale to an anonymous private buyer, correspondence from the Applicants first referenced a “charitable trust”. On April 4, 2022, YSM advised the Applicants that Geneva Park was being sold with a scheduled closing on April 29, 2022.

In reviewing its jurisdiction to consider the application, the court carried out an analysis of whether sections 6 or 10 of the Charities Accounting Act (“CAA”) would apply.   The court found that section 6 of the CAA (which permits any member of the public to complain about the manner in which funds were solicited, procured or disposed of funds received from the public) did not apply. The court stated that charities are entitled to a presumption that they are complying with the law and found there was no evidence that the YMCA/YSM had solicited funds improperly because donated funds were used for the purposes intended: the upkeep of Geneva Park.

The court found that section 10 (which entitles any member of the public to file an application to the court where there is an alleged breach of trust) did not apply because there was no evidence that the charitable property was being misused. Instead, the court found that based on the evidence it would have been irresponsible for YMCA/YSM to continue to try to maintain the upkeep of Geneva Park given the substantial cost of operations, and the deficits that had been incurred over the years. Therefore, YMCA/YSM had dealt with the property responsibly by putting it up for sale.

In addition to arguments under the CAA, the Applicant also argued that a trust had been created in their favour. A trust is created when three “certainties” are present: certainty of intention (when there is a clear intent by the owner of property to create a trust), certainty of subject matter (it is clear what property is held in trust) and certainty of object (there are ascertainable beneficiaries of the trust). However, the court unequivocally dismissed the argument that a trust had been created, because there was no evidence demonstrating an intention by YSM to hold Geneva Park in trust for the Applicants or anyone: 

There is absolutely no evidence in this case that YSM has held the Property in trust for the Applicants, or frankly for anyone. All of the evidence provided, which this court has carefully considered, would demonstrate the opposite. […]

The Applicants argue that the donations and contributions by the Geneva Park family camp community have been given to the YCMA and the YSM on the basis that they were holding the property in trust for the said community.  This cannot possibly be so.  There is nothing in the communication that indicates or even hints at this conclusion.  The fact that [the Applicants] advocated in relation to the sale and made an expression of interest in the property seems to contradict this proposition.

The Applicants urged the court to conclude that their gifts to the YMCA were subject to conditions subsequent and precedent such that the donations should be conditional on the continued operation of Geneva Park. With the sale of Geneva Park, the donations, in the form of real property, should revert back to the Applicants. However, the courts quoted Griffith v Davidson, which states that “when a gift is not expressed to be conditional at the time it is given, the fact that the donor comes to regret the gift based upon an unexpected turn of events cannot somehow cause an otherwise absolute gift to morph into a conditional one.”

The court rejected the Applicants’ request for an interlocutory injunction halting the sale of the property because the Applicants did not demonstrate that they met the requirements of three-part test from RJR-MacDonald as follows: (1) there a serious issue to be tried; (2) the Applicants would suffer irreparable harm if their injunction was refused; and (3) the balance of convenience favoured granting an injunction. The court found that the Applicants failed on all three grounds.

In its concluding comments, the court took note of how the COVID-19 pandemic “has had a significant impact on many” and that as charitable organizations, YMCA and YSM were required to look at the big picture and determine whether continued ownership of Geneva Park was a viable one for their purpose and mission. To draw a conclusion “that donating time and money to a charity could result in a trust relationship” would be “an absurd result” and “an irrational precedent” for charities law. Therefore, the court dismissed the application. This case confirms a basic principle, that providing donations and support to a charity does not provide entitlement or rights to the donors, even where the donor disagrees with the direction adopted by the charity. 

   
 

Read the June 2022 Charity & NFP Law Update