Nov 2018 Charity & NFP Law Update
On October 30, 2018, the Ontario Superior Court of Justice released its decision in The McKay Cross Foundation v ICSS, concerning a motion for summary judgment dismissing an action by The McKay Cross Foundation (the “Foundation”), CAM 88 Inc., and Ann Cross (collectively the “Plaintiffs”) claiming the return of a $100,000 donation to a registered charity, Innovative Community Support Services (“ICSS”). In this case, the court considered the agreement between both parties in order to determine whether the donated funds were specific purpose charitable funds.
In late 2011, Ms. Cross sought to purchase or build a residence where her developmentally disabled grandson and two other disabled men could receive quality care. After approaching ICSS about this, a draft agreement was proposed in June 2012, whereby Ms. Cross would provide $300,000 to purchase a house to be held by ICSS on the condition that ICSS would obtain certain government funding. While not explicitly stated in the decision, it does not appear that the agreement was signed by the parties. In a subsequent email, ICSS suggested that Ms. Cross donate $100,000 “no strings attached,” and that she donate $50,000 each year for the following three years. Ms. Cross responded that she could give $100,000 before Christmas 2012 and $100,000 after Christmas 2012 but before June 30, 2013. On September 19, 2012, ICSS received a $100,000 cheque from Ms. Cross marked “Donation”.
By November 2012, ICSS temporarily placed the three men in a separate residence that it managed until another house could be found. Although ICSS continued to make efforts to find funding, it informed Ms. Cross by September 2013 that government funding would not be available for some time. Ms. Cross subsequently informed ICSS that she would purchase a house, and did so under The McKay Cross Foundation’s name. This was then rented to ICSS to manage. The three men moved into this house in 2014 and have lived there under ICSS’ care since then. However, on December 1, 2014, The McKay Cross Foundation wrote to ICSS demanding the return of Ms. Cross’ $100,000 donation.
At court, the Plaintiffs argued that there was an agreement for Ms. Cross to donate funds in exchange for a tax receipt, but that the donated funds were restricted to the specific purpose of purchasing a home for the men. They further claimed that ICSS had breached its fiduciary obligations when it did not ensure that the donation was applied in accordance with the alleged restricted purpose. ICSS, on the other hand, claimed there was no genuine issue requiring a trial, as the Plaintiffs had no evidence to support their arguments. Further, it argued that Ms. Cross’ donation was made with no strings attached.
In examining the evidence, the court found that the donation was made with no strings attached. Throughout email exchanges between Ms. Cross and ICSS concerning Ms. Cross’ purchase of the house, it found that Ms. Cross never asked or mentioned that the $100,000 donation should be applied to the purchase. Rather, it stated that “she communicated quite cooperatively with [ICSS] seeking their assistance to help fund required renovations.” The court also noted that the contract alleged by the Plaintiffs would have been “too vague to be enforceable,” as it did not address the parties, the terms, legal title to the house, how the parties were to be bound by it, or the required circumstances for a return of the donation or a portion thereof. Therefore, any potential breach of contract claim would have failed. Given the communication between both parties, the court therefore held that there was no evidence that the donation was restricted to being used for a down payment for a house for the three men, and found that there was no genuine issue requiring trial. Accordingly, the court dismissed the Plaintiffs’ action, assessed costs of $24,280 against the Plaintiffs and allowed ICSS to keep the $100,000 donation.
This case provides a good illustration of the importance for charities and donors of drafting and entering into proper gifting agreements before donations are made. This is particularly important where the donor wishes to restrict their donation to a specific purpose. Without such an agreement, the intention of either or both parties may be misunderstood. In such circumstances, as was the case here, unnecessary money and time in court may need to be spent in order to determine the true intention of the parties.