A. INTRODUCTION
Over the past year, the charitable sector in Canada has
experienced a number of important regulatory and common law developments at the
federal and provincial level that will have a significant impact on how
charities operate in Canada and abroad. The purpose of this Charity Law
Bulletin is to provide a brief overview of some of the more important developments in 2011, including changes to the Income Tax Act (“ITA”), new publications from the Charities Directorate of the Canada
Revenue Agency (“CRA”), and court decisions. Recent developments in federal and
provincial legislation, such as the proclamation of the Canada
Not-for-profit Corporations Act (“CNCA”) and preparation for the
proclamation Ontario Not-for-profit Corporations Act (“ONCA”), will also
be discussed.
B. RECENT LEGISLATIVE INITIATIVES UNDER THE ITA
The 2011 Federal Budget was initially introduced on March
22, 2011. After the dissolution of Parliament and the subsequent election of
the new Tory majority government, the budget was reintroduced on June 6,
2011 in almost identical form. The Ministry of Finance also
released a Notice of Ways and Means to Implement Certain Provisions of the 2011
Budget as Updated on June 6, 2011 (“Ways and Means”). A revised version of the
Ways and Means was released on October 3, 2011 in advance of the Introduction
and First Reading of Bill C-13, An Act to Implement Certain Provisions of
the 2011 Budget as Updated on June 6, 2011 and Other Measures on October 4,
2011. Bill C-13 received Royal Assent on December 15, 2011, The following paragraphs summarize amendments made to the ITA under Bill C-13.
1. New Regulatory Regime for Qualified Donees
Qualified donees may issue official
donation receipts for gifts. “Qualified donees” is a termed defined in the ITA
to include various types of entities, the largest group of which are registered
charities. Bill C-13 has extended certain
regulatory requirements that currently apply to registered charities to the
following list of qualified donees:
· registered Canadian amateur athletic
associations (“RCAAAs”);
· municipalities in Canada;
· municipal or public bodies performing a function
of government in Canada (these entities are proposed to be added to the list of
qualified donees and were previously included in the proposed technical
amendments to the ITA released on July 16, 2010);
· housing corporations in Canada constituted
exclusively to provide low-cost housing for the aged;
· prescribed universities outside of Canada, the
student body of which ordinarily includes students from Canada; and
· certain other charitable organizations outside
of Canada that have received a gift from Her Majesty in right of Canada.
The extension of these new requirements
will not apply to the balance of qualified donees, i.e., the Government of
Canada, provincial and territorial governments in Canada, and the United
Nations and its agencies. Registered national arts service organizations are
deemed to be “registered charities” and are therefore currently subject to the
same requirements that apply to registered charities.
The new requirements that apply to the
above list of qualified donees include:
(1) Certain qualified donees will have to
apply to be identified in a publicly available list maintained by CRA. This
will enable the public to determine which organizations may issue official
donation receipts and whether an organization is a qualified donee for
grant-making purposes.
(2) If a qualified donee does not issue
donation receipts in accordance with the ITA and its regulations, it may be
subject to suspension of receipting privileges or revocation of qualified donee
status.
(3) Monetary penalties associated with
improper issuance of receipts and failing to file an information return that
currently apply to registered charities will be extended to RCAAAs.
(4) Certain qualified donees will be
required to maintain proper books and records and provide access to those books
and records to CRA when requested. If a qualified donee fails to do so, CRA may
suspend its receipting privileges or revoke its qualified donee status.
As well, Bill C-13 has extended the
following additional regulatory requirements (which currently apply to
registered charities) to RCAAAs:
(1) Exclusivity of Purpose and Function-To
qualify as an RCAAA, an association must have the promotion of amateur
athletics in Canada on a nation-wide basis as its exclusive purpose and
exclusive function, rather than its primary purpose and primary function. This
change is not intended to prevent RCAAAs from staging or engaging in
international events and competitions. RCAAAs will also be permitted to carry
on related business activities, such as selling merchandise related to their
sport, and to engage in limited non-partisan political activities. Breach of
these requirements will result in the RCAAA possibly being subject to monetary
penalties, suspension of receipting privileges, or revocation.
(2) Undue Benefits - If an RCAAA provides
an undue benefit to any person (e.g. excessive compensation to staff,
professional fundraiser or any individual or company with whom it does
business), it may be subject to monetary penalties, suspension of its
receipting privileges, or revocation.
(3) Public Access to Information - CRA is
authorized to make available to the public certain information and documents in
respect of RCAAAs, in the same manner as applies to registered charities, e.g.
governing documents, annual information returns, applications for registration
and the names of directors.
2. New Governance Regime for Registered Charities
and RCAAAs
As of January 1, 2012, CRA has been given the discretion
to refuse or to revoke the registration of a charity or a RCAAA or to suspend
its authority to issue official donation receipts, if a member of the board of
directors, a trustee, officer or equivalent official, or any individual who
controls or manages the operation of the charity or RCAAA is an “ineligible
individual” on the basis that he or she:
· has been convicted of a criminal offence in Canada or an offence
outside of Canada that, if committed in Canada, would constitute a criminal
offence under Canadian law, relating to financial dishonesty (including tax
evasion, theft or fraud), or any other criminal offence that is relevant to the
operation of the organization, for which he or she has not received a pardon
(“relevant criminal offence”);
· has been convicted of an offence in Canada within the past five
years, or an offence committed outside Canada within the past five years that,
if committed in Canada, would constitute an offence under Canadian law,
relating to financial dishonesty (including offences under charitable
fundraising legislation, convictions for misrepresentation under consumer
protection legislation or convictions under securities legislation) or any
other offence that is relevant to the operation of the charity or RCAAA
(“relevant offence”);
· was a director, a trustee, officer or like official of, or an
individual who controlled or managed, a charity or RCAAA during a period in
which the organization engaged in serious non-compliance and for which its
registration has been revoked within the past five years; or
· was a promoter (as defined by section 237.1 of the ITA) of a tax
shelter that involved a charity or RCAAA, the registration of which was revoked
within the past five years for reasons that included or were related to its
participation.
3. Recovery of Tax Assistance for Returned Gifts
The amendments to the ITA by Bill C-13 permits CRA to
reassess a taxpayer outside the normal reassessment period and disallow a
taxpayer’s claim for a credit or deduction in any situation where the gifted
property is returned to a donor in order to ensure that tax assistance is not
improperly retained. Where a qualified donee issued an official donation
receipt in respect of a gift of property and subsequently returns that property
to the donor, if the fair market value of that returned property is greater
than $50, the qualified donee must file an information return with CRA (e.g. a
letter) with prescribed information and provide a copy to the donor.
With respect to the return of donated property, Bill C-13
provides rules which address various scenarios that could occur on the return
of a gift, some of which can be summarized as follows:
(1) Irrespective of whether the transfer of the original property was a gift, the person is
considered not to have disposed of the original property at the time that it
was provided to the qualified donee.
(2) If the returned
property is identical to the original property, the returned property is deemed
to be the original property.
(3) If the returned property is not the original property, the person is
deemed to have disposed of the original property at the time that the person
acquires the returned property.
A qualified donee faced with the return of a gift will
therefore want to give consideration to the above rules depending on the
situation and the property donated, as it may result in a different outcome for
the donor depending upon the nature of the original gift and what property is
being returned to the donor.
4. Gifts of Non-Qualifying Securities
Under Bill C-13, where a qualified donee
has received a gift of a non-qualifying security (“NQS”), the tax credit or
deduction will be deferred until such time, within five years of the donation
of the NQS, the qualified donee disposes of the NQS in exchange for
consideration that is not another NQS. If the NQS is not disposed of by
the charity within the five-year period following the date of the gift, there
will be no tax recognition of the gift.
Bill C-13 has also created new anti-avoidance rules to
catch situations whereby, through a series of transactions, a donor avoids the
application of the above NQS rules, but at the end of the series of
transactions the charity receives a NQS.
5. Granting of Options to Qualified Donees
Effective for gifts made on or after
March 22, 2011, Bill C-13 delays the recognition of a gift to a qualified donee
of an option to acquire property until the option has actually been exercised.
Where an option granted to a DQ is exercised and either the total of any
consideration paid for the option and the property by the qualified donee
exceeds 80 per cent of the fair market value of the underlying property, or the donor can establish that the granting of the option and the
exercise thereof was made with the intention of making a gift to a qualified
donee, the gift will be recognized. The new provisions also deal with the value
of the gift for receipting purposes when the option is exercised, and when the
option is disposed of by the qualified donee prior to being exercised, the
proceeds of disposition to the donor and the value of the gift for receipting
purposes.
6. Donations of Publicly Listed Flow-Thru Shares
Bill C-13 limits the availability of the
exemption from tax on capital gains where flow thru shares (“FTS”) are donated
to a qualified donee. Effective on or after March 22, 2011, the exemption from
tax on the capital gain that arises from the donation of FTS will only apply to
the extent that the cumulative capital gains in respect of the gift exceeds the
original cost of the FTS. This will have the effect of substantially reducing
the tax benefits of a gift of FTS so that they are generally no more attractive
an option than any other gift of shares or cash. The Budget also
contains anti-avoidance provisions that are intended to ensure taxpayers are
not able to structure around these changes.
7. Motion 559 Concerning Tax Incentives for
Charitable Donations
The 2011 Budget included Motion 559, a motion sponsored
by the Honorable Peter Braid, which called for the Standing Committee on
Finance (“SCOF”) to study tax incentives for charitable donations. On Tuesday, September 20, 2011, SCOF moved to undertake a
comprehensive study of no less than 12 meetings on the current tax incentives
for charitable donations with a view to encouraging increased giving, including
but not limited to:
· Changes to the charitable tax credit amount;
· Reviewing the possible extension of the capital
gains exemption to private company shares and real estate when donated to a
charitable organization; and
· Considering the feasibility and cost of
implementing these and other measures.
C. NEW GUIDANCE, COMMENTARIES AND OTHER PUBLICATIONS FROM CRA
1. CRA Notice on Disbursement Quota Reform
On February 2, 2011, CRA released a Charities and Giving
Notice on Disbursement Quota Reform. The Notice outlines several disbursement
quota changes that affect charities as a result of the 2010 federal Budget.
Topics include the new requirements under the disbursement quota reform,
details surrounding the capital accumulation rule and the anti-avoidance rule,
and the repeal of the charitable expenditure rule.
2. CRA Notice on Anti-Avoidance Rules and Designated
Gifts
On March 8, 2011, CRA released a Charities and Giving
Notice on Anti-Avoidance Rule and Designated Gifts. The 2010 federal Budget
introduced new anti-avoidance provisions regarding gifts made between
registered charities that are not at arm’s length and also introduced the
concept of a designated gift. In the Notice, CRA reviews the provisions and
clarifies the concept of a designated gift, which is a type of gift made
between registered charities that are not at arm’s length. CRA indicates that
in order to designate a gift the donor charity must indicate this in its
information return for the fiscal period in which the gift is made. The donor
charity cannot use the designated gift to satisfy its disbursement quota.
3. IC84-3R – Gifts to Certain Charitable
Organizations Outside Canada
On March 15, 2011, a revised attachment was added to CRA
Publication IC84-3R, Gifts to Certain Charitable Organizations Outside of
Canada. This attachment lists charitable organizations outside of Canada to
which Her Majesty in the right of Canada has made a gift. These organizations
are deemed to be qualified donees and are therefore eligible to receive gifts
from Canadian registered charities and donors. New organizations were added to
the list, such as Christchurch Earthquake Appeal.
4. Non-qualified investments
CRA updated its policy on non-qualified investments and
has replaced the previous guidance, Summary Policy CSP-N04, with CG-006. This
policy refers to situations where a registered charity that is designated as a
private foundation holds a non-qualified investment.
5. Donation of Gift Certificates or Gift Cards
CRA updated its policy on donations of gift certificates
or gift cards and replaced Policy Statement CPS-018 with CG-007. This policy
provides that registered charities can issue official donation receipts for
income tax purposes for the eligible amount of gifts of gift certificates and
gift cards under specific circumstances. This may be an issue where registered
charities accept gift certificates and use them in fundraising events, such as
auctions and raffles, or to acquire goods or services for use in their
charitable activities.
6. Confidentiality – Public Information
CRA updated its policy on confidentiality and has
replaced Summary Policy CSP-C12 with CG-008. Generally, the confidentiality
provisions of the ITA prevent the CRA from discussing the affairs of a
particular organization without the consent of an authorized representative.
There are, however, specific exceptions that allow CRA to make available to the
public certain information about registered or previously-registered charities.
For instance, general information on a registered or previously registered
charity, including its status, as well as the information contained in the
public portion of a charity’s Information Return (T-3010) is available to the
public in the Charities Listings.
7. Qualified Donees
CRA updated its guidance on qualified donees and replaced
Summary Policy CSP-Q01 with CG-010. .
8. CRA Guidance: Working with Intermediaries
On June 20, 2011, CRA released Guidance CG-004, Using
an Intermediary to Carry out a Charity's Activities within Canada (the
“Guidance”). The Guidance will assist charities and applicants for charitable
status who are intending on conducting charitable activities through an
intermediary within Canada. For the Guidance, an intermediary is defined by CRA
as an individual or non-qualified donee. The Guidance clarifies that CRA’s
administrative guidance concerning operating outside Canada applies equally
within Canada as well. As such, the Guidance is a modified version of Guidance
CG-002, Guidance for Canadian Registered Charities Carrying Out Activities
Outside Canada. While the Guidance contains relatively little new information,
the Guidance modifies certain provisions of CG-002. Specifically, the Guidance
modifies the examples provided in CG-002 with respect to intermediaries, such
as agents and contractors so that they are localized within Canadian borders.
It is recommended that charities, even if they do not
conduct any activities outside Canada, that are conducting any activities
through an intermediary review the Guidance to ensure that they are able to
document the necessary direction and control over their charitable resources.
9. CRA Guidance: Promotion of Animal Welfare and
Charitable Registration
On August 19, 2011, CRA released its new Guidance on the
“Promotion of Animal Welfare and Charitable Registration (“Guidance”). As explained in the Guidance, promoting the welfare of
animals falls under one or both of the charitable heads of “advancement of
education” (second head) or “other purposes beneficial to the community”
(fourth head). According to common law, a charitable purpose must also provide
a benefit to the public. In this context, the courts have determined that the
promotion of animal welfare provides an intangible moral benefit to humanity.
Therefore, the public benefit test is satisfied by the very acts of showing
kindness to animals in need of assistance or care. The Guidance provides a
non-exhaustive list of acceptable charitable activities that could promote
animal welfare.
10. CRA Draft Guidance: Arts
Organizations and Charitable Registration
On November 1, 2011, CRA released a draft Guidance on
Arts Organizations and Charitable Registration (the “Draft Guidance”) for
public consultation. The Draft Guidance is intended to be an interpretation of
the applicable common law and clarifies the position and practice of CRA’s
Charities Directorate for the purpose of determining whether an arts
organization is eligible for initial and on-going registration as a charity. Once
finalized, this Guidance will replace CRA’s Summary Policy CSP-A08 and Summary
Policy CSP-A0A24. Comments or questions for inclusion in the Questions and
Answers to supplement the Draft Guidance were due to CRA on January 13, 2012.
D. TECHNICAL INTERPRETATIONS INVOLVING NON-PROFIT ORGANIZATIONS (“NPOS”)
1. Summary of CRA’s view on NPOs
In technical interpretation Document no. 2010-0380581I7,
dated April 7, 2011, the issue was whether an unregistered
charity can qualify for a tax exemption provided by s. 149(1)(l) of the ITA.
CRA responded by summarizing its views on NPOs. NPOs must operate “exclusively”
for purposes other than a profit. It is permissible for an organization
to earn profits, but the profits should be incidental and arise from activities
that are undertaken to meet the organization’s not-for-profit objectives. Earning
profits to fund not-for-profit objectives is not considered to be itself a
not-for-profit objective. An organization should fund capital projects and
establish reasonable operating reserves from capital contributed by members,
from gifts and grants, or from accumulated, incidental profits. Capital
contributions, gifts and grants, and incidental profits should generally be
accumulated solely for use in the operations of the organization should not be
used to establish long-term reserves designed primarily to generate investment
income.
Maintaining reasonable operating reserves or bank
accounts required for ordinary operations will generally be considered to be an
activity undertaken to meet the not-for-profit objectives of an organization.
Consequently, incidental income arising from these reserves or accounts will
not affect the status of an organization. Limited fundraising activities
involving games of chance or sales of donated or inexpensive goods generally do
not indicate that the organization as a whole is operating for a profit
purpose. In determining whether an organization has any profit purpose, the
activities of the organization must be reviewed both independently and in the
context of the organization as a whole.
2. Shareholders’ cottages
built on organization’s property
In technical interpretation Document no. 2011-0397881E5, dated
June 23, 2011, the issue was whether there was a
benefit to a shareholder for use of property of a s. 149(1)(l) corporation at a
cost below fair market value. CRA has previously expressed the view that
gains realized from the sale of a particular piece of the property would likely
not be taxable to the corporation, which would be able to make payments to its
shareholders without jeopardizing its NPO status, as long as those payments
were made from the gains realized from the sale. Upon receiving additional
information CRA expressed further views that though shareholders may have
acquired a right to use the property along with their shares (or as a share
right), there may be a shareholder benefit if the shareholders are only paying
a cost amount for the use of the property, unless separate fair market value
consideration was paid for the use of the property either at the time of
purchase or subsequently. The shareholder benefit would be the difference
between the current annual cost to the shareholders and the fair market value
of the use of the property.
3. Condo renting space to cell tower
In technical interpretation Document no. 2011-0405541I7, dated July 13, 2011, the issue was whether a cell tower arrangement would jeopardize the
tax-exempt status of a condominium corporation. CRA was of the view that
incidental income from the rental of common areas may be treated as income of
the condo corporation and generally will not affect the tax-exempt status of
the condo. However, where applicable provincial condo legislation supports that
the common area rented out does not belong to the condo corporation, but
belongs to the condo owners as tenants in common, then the income is not the
income of the corporation but is instead the income of the unit owners. In that
situation, CRA was of the view that the condo may be better viewed as acting as
an agent for the unit owners in entering into any cell tower arrangements. If
this is the case, then such arrangements generally would not jeopardize the
tax-exempt status of the condo, although the related profit would have to be
allocated appropriately among unit owners for tax purposes.
On the other hand, where the relevant provincial law
indicates that the income is the income of the condo corporation, and the
income generated is not incidental, then the corporation may not qualify as an
NPO, since the income from a cell tower arrangement would likely be available
for the personal benefit of members of the condo through a material reduction
in members’ condo fees.
E. CORPORATE UPDATE
1. Canada Not-Profit Corporations Act
As of October 17, 2011, the CNCA came into force as the
law that governs the internal affairs of federal not-for-profit corporations.
It is important to note that although the CNCA is in force, it does not
automatically apply to federal not-for-profit corporations. Corporations
incorporated under Part II of the Canada Corporations Act (“CCA”) will
still continue to be governed by the CCA until they transition to the CNCA. All
federal not-for-profit corporations are required to transfer to, or continue
under the CNCA before October 17, 2014, and if they fail to do so they will be
assumed to be inactive and will be dissolved. In order to assist in compliance,
Corporations Canada has produced a helpful guide to transition, which is
available at http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/h_cs04954.html. Until
such time as a corporation transitions to the CNCA, it must continue to fulfil
all obligations under the CCA.
2. Ontario Not-For-Profit Corporations Act, 2010
With the anticipated proclamation of the ONCA in late
2012, it is an appropriate time for not-for-profit (“NFP”) corporations
incorporated under Part III of the Ontario Corporations Act (“OCA”) to
begin familiarizing themselves with the changes that the ONCA will have on
their future corporate structure and governance, and to plan toward continuance
under the ONCA.
For more information, see Ontario’s Ministry of Consumer
Services website, http://www.sse.gov.on.ca/mcs/en/Pages/Not_For_Profit.aspx.
F. ANTI-TERRORISM LAW UPDATE
1. Interim Report of Senate Committee on
Anti-terrorism
The Special Senate Committee on Anti-Terrorism (“the
Committee”) released its Interim Report entitled Security, Freedom and the
Complex Terrorist Threat: Positive Steps Ahead in March, 2011. The
Committee was created and authorized on May 27, 2010 by Order of Reference from
the Senate “to examine and report on matters relating to anti-terrorism.” In
preparing this report the Committee held 11 hearings between May 13, 2010 and
February 14, 2011 and heard from 32 witnesses.
2. Bill C-10: Justice for Victims of Terrorism Act
The Conservative government introduced Bill C-10, An
Act to enact the Justice for Victims of Terrorism Act etc., which is
referred to as the Safe Streets and Communities Act. To date, Bill C-10 has
passed Second Reading in Senate and was referred to the Standing Senate
Committee on Legal and Constitutional Affairs on December 16, 2011.
The stated purpose of this Act is to deter terrorism by
establishing a cause of action that allows victims of terrorism to sue
perpetrators of terrorism and their supporters. Under section 4(1), any person
that has suffered loss or damage in or outside Canada on or after January 1,
1985, as a result of an act or omission that is punishable under the Anti-terrorism
Act, may bring an action to recover an amount equal to the loss or damage
proved to have been suffered.
G. FEDERAL LEGISLATIVE UPDATE
1. Draft Regulations for Anti-Spam Legislation
Bill C-28 is new legislation that regulates spam and
related unsolicited electronic messages (the “Anti-spam Legislation”). Although
the Anti-spam Legislation will not apply to electronic messages — i.e., email
or other electronically distributed messages – that a charity may send
requesting donations or other solicitations for volunteers, charities and
non-profit organizations which send “commercial electronic messages” as it is
defined in the Anti-spam Legislation will need to ensure they are in compliance
with the new legislation. In this regard, charities and non-profit
organizations which send emails or other electronic messages which, for
example, contain offers concerning goods, products or services, or that
advertise or promote such opportunities will want to review the Anti-spam
Legislation and the draft regulations described in this Charity Law
Bulletin. According to a press release from the Minister of Industry
released on August 1, 2011, the Anti-spam Legislation will likely come into
force early in 2012.
2. Canada Consumer Product Safety Act
The Canada Consumer Product Safety Act (“CCPSA”)
received Royal Assent on December 15, 2010 and was proclaimed in force as of
June 20, 2011. Among other things, the CCPSA generally requires those who
manufacture, import or sell consumer products for commercial purposes to prepare
and maintain certain records to ensure that unsafe products can be traced back
to their source. Charities and non-profit organizations that sell “for a
commercial purpose” consumer products regulated by the CCPSA will be required
to maintain records of the name and address of the supplier and purchaser, as
well as the location and time period of when that consumer product was sold or
transferred, for a minimum of six years.
However, Health Canada is currently developing a
regulatory proposal to allow for an exemption from the record keeping
requirements for those persons who receive consumer products that are donated
by a person other than a person who manufactures, imports, or sells consumer
products. This exemption is being prepared in recognition that there may be
situations involving certain donated consumer products, where records of the
source and date of receipt would do little to support product traceability..
This exemption, if adopted, would arguably apply to charities receiving
donations of consumer products from individuals, such as used clothing and
other household goods.
H. ONTARIO LEGISLATIVE UPDATE
1. Accessibility for Ontarians with Disabilities
Act, 2005
January 1, 2012 was the deadline to meet the
accessibility standards required by the Accessibility for Ontarians with
Disabilities Act, 2005. Part of what this statute requires is that all
organizations (public, private and non-profit), that provide goods or services
either directly to the public or to other organizations in Ontario and that
have one or more employees in Ontario, have accessible customer service. These
requirements are detailed in the Regulation Accessibility Standards for
Customer Service.
I. RECENT CASE LAW AFFECTING CHARITIES (IN CHRONOLOGICAL ORDER)
1. Marriage Commissioners Reference Decision
On January 10, 2011 the Saskatchewan Court of Appeal
(“the Court of Appeal”) released its decision in the Marriage Commissioners
Reference. The reference arose out of the Court of Appeal’s decision on November 5,
2004 and the federal Civil Marriage Act of 2005, which broadened the
definition of marriage to include same-sex couples. Following the Court of
Appeal decision, the Director of the Marriage Unit in the Ministry of Justice
and Attorney General advised marriage commissioners that they would be required
to perform marriages for same-sex couples. This resulted in some marriage
commissioners resigning and others becoming involved in human rights and other
civil proceedings.
In an effort to accommodate the religious beliefs of
marriage commissioners, the provincial government proposed two amendments to
the Marriage Act: one a “grandfathering provision” that would not
require a marriage commissioner appointed before November 5, 2004 to solemnize
a marriage if to do so would be contrary to his or her religious beliefs, and
the second which would apply to all marriage commissioners irrespective of
their date of appointment.
The Court of Appeal unanimously held that both proposed
amendments were inconsistent with the Canadian Charter of Rights and
Freedoms (the “Charter”) because they violated the equality rights
of gay and lesbian individuals in a way that could not be justified within the
meaning of section 1 of the Charter.
2. Bentley v. Anglican Synod of the Diocese of
New Westminster
The Supreme Court of Canada
refused to grant leave to appeal by four break-away Anglican parishes from the
B.C. Court of Appeal’s decision in Bentley v. Anglican Synod of the Diocese
of New Westminster, 2010 BCCA 506. On November 25, 2009, the B.C.
Supreme Court ruled that the properties of four incorporated parishes that had
left the ACC in February 2008 were to remain within the Anglican Church of
Canada (“ACC”). While the parishes were separate corporations, the act of incorporation,
the making and amending of by- laws, rules and regulations and mortgage, sale
or other disposition of the property required the consent of the Executive
Committee and the local bishop of the ACC. These limitations led the trial
judge to conclude that they “are intrinsically part of the Diocese and must be
approached in that context.”
On November15, 2010, the B.C. Court of Appeal upheld the
decision of the B.C. Supreme Court on the basis that the purpose of the trusts
on which the parish corporations held the church buildings and other assets is
to further “Anglican ministry in accordance with Anglican doctrine.” The B.C. Court of Appeal held that the General Synod of the ACC has the final
word on doctrinal matters and the definition of “Anglican ministry.”
3. S.L., et al. v. Commission scolaire des Chênes, et al.
On May 18 2011, the Supreme Court of Canada heard a
significant appeal from a decision of the Québec Court of Appeal concerning the
implications of freedom of religion and conscience under the Canadian Charter
of Rights and Freedoms and the Quebec Charter of Human Rights and
Freedoms. The case, S.L., et al. v. Commission scolaire des Chênes, et
al concerns whether parents in a public school can exempt their children
from participation in Québec’s “Ethics and Religious Culture” course (the
“ERC”), which is mandatory for all elementary and secondary students and
required to be taught from a neutral perspective.
The issue in the case is whether the mandatory nature of
the ERC course interferes with the freedom of religion of the Catholic parents
who asked that their children be exempted from the course because it forced
them to have premature contact with beliefs that were incompatible with those
of the family. It is widely anticipated that the case will have repercussions on
freedom of religion and the rights of parents to direct the religious education
of their children far beyond the province of Québec. The Supreme Court is not
expected to render its decision for a few months.
4. News to You Canada v. Minister of National Revenue
On June 7, 2011 the Federal Court of Appeal released its
ruling in News to You Canada v. Minister of National Revenue. After CRA refused its application for charitable registration, News to You
Canada appealed on the basis that its purposes fell within two heads of
charity, the advancement of education and other purposes beneficial to the
community as a whole in a way which the law regards as charitable.
With respect to the advancement of education, the Court
determined that the production and dissemination of in-depth news and public
affairs programs are not sufficiently structured to meet the test established
in Vancouver Society for educational purposes. Regarding the fourth
head, the Court reviewed the decision in Native Communications and concluded,
in part because the corporation identified its audience as the general public
and not any group or community in need of charitable assistance and that the
corporation’s purposes were already being carried out on a commercial basis,
that the mere dissemination of news was not charitableat law. Finally, the
Court stated that, in order to be charitable, the Corporation’s purposes must
be of special benefit to the community, with an eye to society’s current
social, moral, and economic context. The Court did not accept the Corporation’s
contention that presenting the news in an “unbiased and objective” form met
this requirement.
5. Nigerians in Diaspora Organization Canada
(NIDO) v. Peter Ozemoyah
On August 15, 2011, the Ontario Superior Court of Justice
released its decision in Nigerians in Diaspora Organization Canada (NIDO) v.
Peter Ozemoyah. The plaintiff, Nigerians in Diaspora Organization Canada (“NIDO”), a federally
incorporated non-share capital corporation under letters patent dated July 9,
2004, sought summary judgment concerning whether the issue of whether the
defendants were validly elected as the directors of NIDO was a valid issue for
trial.
The court found that the election and composition of the
board is governed by the Canada Corporations Act, under which NIDO was
incorporated, and the general operating by-laws of the corporation. In this
regard, the court adopted the approach of Justice Lederer in the decision of Warriors
of the Cross Asian Church v. Masih, wherein the court found an error that
went to the very heart of an election and as a consequence ordered a winding-up
of the corporation in that matter. As the error in this case pertained to the
qualification of the individuals who purported to vote in the defendant board
or directors, the court found that there was no genuine issue for trial with
respect to the identity of the directors of NIDO, as the only directors could
be the original incorporators.
6. Victoria Order of Nurses for Canada v. Greater Hamilton Wellness Foundation
On September 27, 2011, the Ontario Superior Court of
Justice confirmed that charitable property raised for the benefit of a
particular charitable purpose cannot be unilaterally applied for a different
charitable purpose by simply amending its objects through supplementary letters
patent. In the case of Victoria Order of Nurses for Canada v. Greater
Hamilton Wellness Foundation, the applicants, the Victorian
Order of Nurses for Canada (“VON Canada”) and its Ontario branch (“VON
Ontario”), were successful in obtaining a court order finding that the Greater
Hamilton Wellness Foundation (the “Foundation”) was in breach of its fiduciary
and trust obligations to VON. As a result of those breaches, the assets and
income of the Foundation as of December 15, 2009, were to be transferred in
trust to VON Ontario in accordance with the Foundation’s original charitable
purposes.
While the Court’s conclusion is not at all surprising,
given the facts of the case, the decision serves as a helpful reminder to
charities that charitable property raised for the benefit of a particular
charitable purpose must be applied to that purpose. Otherwise the charity will
need to obtain court approval in order to change the purpose through a cy-près order, or in Ontario, the consent of the PGT on a non-contested basis under
section 13 of the Charities Accounting Act. In addition, the case also
provides useful guidance concerning the interpretation of a charity’s purposes
as set out in its corporate objects.
7. St. John’s Evangelical Lutheran Church of
Toronto v. Steers
On October 24, 2011, Justice Perell of the Ontario
Superior Court of Justice certified a class action against The English District
Lutheran Church Missouri Synod (Canada) and The English District Lutheran
Church Missouri Synod (U.S.A.) in the case of St. John’s Evangelical
Lutheran Church of Toronto v. Steers, [2011] O.J. No. 4758. The representative plaintiffs included St. John's Evangelical Lutheran Church
of Toronto (“St. John’s Church”) and three of its directors.
The class action arose out of the series of disputes
between the leaders and members of the congregation and the defendants
regarding the ownership, autonomy, and operation of St. John's Church and its
property. Although the parties settled their disputes, without court approval,
a settlement would not be binding and all the class members would not be bound
by its terms. Accordingly, the class action certification was sought for the
purpose of obtaining court approval of the settlement.
The class action was certified for the purposes of the
settlement, pursuant to the Class Proceedings Act (Ontario) on the basis
of the following common issues: breach of fiduciary duty; violation of the
Human Rights Code (Ontario); negligent misrepresentation (regarding the
defendant's authority and legal status to install their own church council
without the approval of the members and to appropriate church property);
conversion of church property; conspiracy (to disband and disenfranchise the
class members); and damages.
J. CONCLUSION
The broad extent and number of changes that have occurred
during the past 12 months underscore how complicated the law pertaining to
charities has become in Canada. It is therefore important for those interested
in the sector to keep abreast of developments in the law as they occur.