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Does the Court Have Jurisdiction to Vary or Terminate a Charitable Trust?

1. Introduction

The question raised in the title is not raised that often, but it is an important one, I’d like to address it by reference to two cases. One, Re Baker,[1] is almost 40 years old. The other, The Bank of Nova Scotia Trust Company v Burnett,[2] to which, for the sake of economy, I shall refer simply as Burnett, is quite recent. It refers to Baker, though not in detail. The answer to the question is Yes, but the jurisdiction must be exercised sparingly and not indiscriminately. Further, the Public Guardian and Trustee in Ontario or the Attorney General in other provinces has a right to attend and to be heard.

2. Re Baker

The testator, Harold Baker, had been a physician at the Northwestern General Hospital in North York for many years (the “Hospital”). He died in 1980. His Will left the residue of his estate in trust to pay the net income to his wife, Grace Baker, for life, with power in the trustees to encroach on the capital in her favour. On the death of the survivor of him and his wife the trustees had to pay the residue to the named hospital “to be used for the general purposes of the hospital”. He added a wish (clearly non-binding) that the residue be used to construct an auditorium in the hospital that would bear his and his wife’s names.

The hospital had been incorporated in 1950. In 1980 another corporation, Northwestern General Hospital Foundation (the “Foundation”), was created. Its objects were to establish and hold funds for the advancement of medical education and research and related charitable activities, and inter alia also “by way of gift to Northwestern General Hospital”. Thus, its objects were not to maintain and operate a general hospital. In 1982, yet another corporation, the Harold, and Grace Baker Centre (the “Centre”), was created. Its objects were to maintain a nursing home, a retirement home, a day care centre, and a nursery school in North York. It could also transfer funds to the Foundation. Its objects also did not include the operation of a general hospital. However, the Hospital, Foundation, and Centre were all charities.

All the beneficiaries under the Will brought an application for various orders the effect of which would be allow the residue under the Will to be used for the purposes of the Foundation and the Centre. They argued: (1) that the Public Trustee did not have standing to argue the merits; and (2) that the application should be granted either under the rule in Saunders v Vautier[3] or based on the inherent jurisdiction of the court. (The notice of motion seems to have invoked the provisions of the Variation of Trusts Act[4], however the applicants abandoned that statute at the opening of argument.) The Public Trustee (as that corporation sole was then called) opposed the application.

Justice White held that the Charities and Accounting Act[5] in its entirety requires the Public Trustee to protect the public interest and monitor the disposition of property bequeathed for charitable purposes. Thus, the Public Trustee serves as an invigilator of the executor or trustee. Historically, the Attorney General acted on behalf of the Crown in its parens patriae jurisdiction over charities and the Act confers that jurisdiction on the Public Guardian. Alternatively, if necessary, the Public Guardian can be considered to be an amicus curiae. Later in the judgment, at paragraph 30, Justice White relies also on Re Royal Society’s Charitable Trusts[6] to make the point that the court’s jurisdiction is confined to cases in which the Attorney General formerly and now the Public Guardian, “acting on behalf of the Crown as parens patriae consents or does not object to the variation”. Thus, the court should defer to the Public Guardian in charity matters.

On the Saunders v Vautier issue, Justice White acknowledged that a charity can rely on the rule to terminate a trust under which it has been given property absolutely (as distinct from a charitable trust that gives it only the income.[7] However, that it not what the applicants sought to do. They did not seek to terminate the Trust. Rather, they sought to divert the residue from the charity to which Dr Baker gave it in his Will to a different charity. Thus, they could not rely on the rule.

On the inherent jurisdiction of the court issue, the Public Trustee argued that the court lacks jurisdiction to re-write a charitable trust in whole or in part. The court’s role is not to create a trust but to support the original trust. Thus, the court could not redirect the reside to the Foundation or the Centre because they were not named in the Will. Justice White noted that the application did not seek to apply the cy-près doctrine and in any event, it could not be applied since there was no impracticability in carrying out the Trust.

Justice White agreed with Public Trustee’s argument and held that while the three corporations were in some respects inter-related, the objects of the Foundation and the Centre differed from that of the Hospital, and it was only the latter to which the testator directed the residue to be paid. He also agreed that it is not the role of the court to rewrite a trust, and relied, inter alia, on a statement by Farwell J in Re Walker,[8] who said, “I decline to accept any suggestion that the court has an inherent jurisdiction to alter a man’s will because it thinks it beneficial”. He also referred to Chapman v Chapman,[9] which limited the court’s jurisdiction in this regard to four circumstances. However, with respect, this reference seems inapt since Chapman was effectively overruled in England and elsewhere in jurisdictions that enacted the Variation of Trusts Act. Indeed, that statute was enacted to overcome Chapman.

Very significantly Justice White noted, with reference to Re Royal Society’s Charitable Trusts,[10] that the court must exercise its jurisdiction in charitable matters sparingly and not indiscriminately.

Since the Public Trustee opposed the proposed variation, Justice White concluded that the court had no jurisdiction in the matter and dismissed the application.

3. Burnett

The Burnett case is somewhat different. The testator, a retired colonel, had a keen interest in military history. He made his Will in 1957 and died in 1961. The Will left his property on trust to pay the income to his spouse, his children, and certain of his grandchildren. He directed that after the death of the income beneficiaries the residue should be held upon a perpetual trust, the income of which he directed to be used to fund publication of his own unpublished manuscripts if any, as well as Canadian history books, with a bias toward military history. The court interpreted this trust, rightly it seems, as a charitable trust for education.

The Will was unclear and that resulted in disagreement among the grandchildren. The relevant portions of paragraph 3(e) of the Will read:

(i) Upon the death of either of my said children, to pay his or her share of the said net income to the children of my said daughter in equal shares, share and share alike; PROVIDED that if my son die [sic], leaving one grandchild only living at the time of my death, to pay my son’s share of the said net income to all my grandchildren in equal shares, and upon the death of my other child, BETTY ELEANOR, to pay the said net income to all my grandchildren in equal shares.

(ii) Upon the death of any of my grandchildren, to pay his or her share to my remaining grandchildren in equal shares; Upon the death of all my grandchildren, to pay the said net income into a fund to be used annually to publish any of my manuscripts remaining unpublished and after such manuscripts have been published, to pay the said net income to publish Canadian historical books with a strong bias towards the military history of Canada, the choice of such books to be at the discretion of the Dominion Archivist.

The testator’s wife died in 1977. He had two children, Robert and Betty. Betty died in 2008, survived by two daughters, Kathryn, and Betty Jr, both of whom were alive at the testator’s death. Robert died in 2020, survived by two children, Robert Jr and Rosalie. Robert and his first wife adopted the children in 1962 and 1964. Both were alive at the testator’s death, but they had not yet been adopted by then. Robert Jr disappeared in 1970 and, despite the trustee’s reasonable efforts, could not be located. In 2022 Gilmore J ordered that he was not entitled to further notice of the proceedings. Kathryn and Betty Jr have been receiving a share of the net income from the trust since Betty’s death.

In 2022 Rosalie swore an affidavit in which she claimed that after her father Robert’s death she was also entitled to share in the income. She sought to wind up the trust for the benefit of Kathryn, Betty Jr, and herself, but later she abandoned the claim to wind up the trust. Kathryn and Betty Jr argued that Rosalie was not entitled to a share of the income. They did not seek a winding up or variation of trust.

The Public Guardian and Trustee (“PGT”) took the position that the capital of the trust forms a perpetual charitable trust for education, subject only to the interests of the income beneficiaries. The PGT stated that it could not agree to winding up the trust for the benefit of the testator’s descendants because that would conflict with the testator’s charitable purpose. The PGT took no position about which grandchildren were entitled to income.

Justice Dietrich concluded that it was clear that while Betty and Robert were alive, they were entitled equally to the income. Further, when Betty died her children became entitled equally to her share. The Will also provided that when Robert died, Betty’s children were entitled to share in the income Robert had been receiving during his life. But the eligibility of Robert’s children to his share of the income was conditional. A surviving child of Robert was entitled if: (a) the grandchild was living at the testator’s death; and (b) Robert had only one child living at the testator’s death.

It was clear that both Rosalie and Robert Jr were Robert’s children by adoption and although  they were adopted after the testator’s death, under the provisions of section 217 of the Child, Youth, and Family Services Act, 2017[11] and its predecessor, the Child Welfare Act, as interpreted by the courts, when a testator made a will before the 1970 amendments to the former Act and when a child is adopted after the testator’s death, the child is considered to be issue of the testator. While the testator appears to have closed the class of beneficiaries at the date of his death, since Rosalie and Robert Jr were then alive, they qualified as the testator’s grandchildren.

However, the Will inexplicably required that for a child of Robert to share in his share of the trust income there could be only one child of Robert. There was no evidence of surrounding circumstances at the time the Will was made to explain this condition and, therefore, since Robert had two children who survived him and who were living at the testator’s death, neither could share in his share of the income. Consequently, when Robert died, his share of the income also fell to be divided equally among Betty’s two children, Kathryn, and Betty Jr.

Clause 3(e)(ii) of the Will did continue to provide that on the death of any of the testator’s grandchildren, his or her share was to be paid “to my remaining grandchildren”. However, because they did not qualify under the conditions the Will imposed, Rosalie and Robert Jr were not grandchildren entitled to income on their father’s death. Hence, only Kathryn and Betty Jr could qualify as remaining grandchildren.

Justice Dietrich then goes on to consider how the Trust is to be administered on the death of Kathryn and Betty Jr. and asks the question whether the trust can be wound up and the income and capital be paid to the grandchildren. Her remarks that follow would seem to be dicta, since Rosalie abandoned her claim to have the trust wound up. Nevertheless, they are worthy of consideration since she makes some important points.

Justice Dietrich accepted the submission of the PGT that a trust for the advancement of education, such as this trust, if a valid charitable trust. She also accepted the PGT’s submission that the gifts of income during the lifetimes of the life tenants did not taint the testator’s overall charitable intent of a perpetual gift to charity and cited a couple of important cases for this point.[12]She noted that the Will did not empower the Trustee to wind up the trust and distribute the income or capital among the Testator’s grandchildren. Moreover, while the court has broad jurisdiction over charities, including an inherent jurisdiction to vary charitable trusts, that jurisdiction must be exercised sparingly and not indiscriminately. As an example, she pointed to the court’s scheme-making and cy-près jurisdictions. But she noted by reference to Re Baker[13] and other cases that these jurisdictions are not available to the court unless the PGT consents or does not object to the proposed variation.

Her Honour concluded by noting that, even if she had the jurisdiction (which she did not since the PGT refused to consent), winding up or varying the Trust for the benefit of any descendant of the Testator would not be in furtherance of the charitable purposes of the Trust.

4. A Concluding Comment and Caveat[14]

It is indubitable that the PGT has very broad supervisory powers over charities and therefore it appropriately refused to consent to the applications made in Baker and Burnett. It was its right and obligation to prevent diversion of the property given for specific charitable purposes in both of those cases. Similarly, it has supervisory jurisdiction over any trust gift, bequest, or trust given to a charity.

But this does not mean that the PGT can always prevent an action that a charity proposes to take. I refer to Re Centenary Hospital Association[15] on this point. The Association operated a public hospital that was incorporated under the Corporations Act,[16] and thus its purposes were charitable. It owned property adjacent to the hospital and wanted to construct a medical arts building on it, integrated with the hospital, to provide offices for specialists and other health and related services. The project, which was designed to earn income for the hospital, had the blessing of the Minister of Health subject to the approval of the Public Trustee. The hospital had obtained a ruling from the Minister of National Revenue to the effect that the building would be treated as an investment and not as a business. But the Public Trustee regarded the project as a business and refused to approve it. The Public Guardian believed the hospital would not be occupying the land itself and would therefore not be in actual use or occupation of the land for charitable purposes. The Association brought an application for an order determining whether the Public Trustee had any supervisory jurisdiction over the hospital.

Justice Osler noted that under the Public Hospitals Act[17] the Minister of Health has broad powers over public hospitals, including its financial affairs and the acquisition and use of property by them. Hence Justice Osler concluded in paragraph 20:[18]

Thus, with the exception of property subject to specific trusts, the Hospital corporation has the power to deal with its assets, including its lands, in a manner as unfettered as provided for any corporation under the Corporations Act subject only to the necessity to obtain the approval of the Minister of Health for various activities, including the use of its lands, buildings, and other premises.

Justice Osler went on in paragraphs 64 and 65 to say:

64         The activities of public hospitals were not covered by the Charities Accounting Act[19] and in my view the effect of the amendment[20] was to extend the coverage of that statute to corporations incorporated for doing the same things hitherto done by non-incorporated trustees who carried out charitable purposes. Had it been intended to give the Public Trustee, for the first time, power to supervise the financial affairs of public hospitals, quite independently of and possibly in a manner that would conflict with the powers of the Lieutenant-Governor in Council and the Minister under the Public Hospitals Act, it would have been plainly so stated in the legislation.

65  It was submitted by counsel for the Hospital, and not disputed by counsel for the Public Trustee, that in all other cases where the Public Trustee was intended to exercise powers under particular statutes, such powers were expressly conferred. It is impossible to reconcile the view that the Public Trustee has powers to supervise or question the administration of public hospitals with the express provisions in the Public Hospitals Act that such institutions are to have all the powers conferred by the statute under which they are incorporated and the stipulation in the Charities Accounting Act that that statute was not to apply to or affect any rights which any person had under any other Act.

Accordingly, Justice Osler held that the Public Trustee lacked power to refuse to approve the project.

[1]1984 CarswellOnt 560, 47 OR 2d 415 (HC).

[2]2023 ONSC 3639.

[3] (1841), 4 Beav 115, 49 ER 282, affirmed 1 CR & Ph 240, 41 ER 482.

[4] RSO 1980, c 519.

[5] RSO 1980, c 65.

[6] [1956] 1 Ch 87.

[7] See, e.g., Wharton v Masterman, [1895] AC 186; Re Beresford (1966), 57 DLR 2d 380 (BCSC).

[8] [1901] 1 Ch 879 at 885.

[9] [1954] AC 429.

[10] Supra.

[11] SO 2017, c 14, Sched 1.

[12] Re Doering, 1948 CarswellOnt 77, [1948] OR 923; and Canada Trust v Shaver, BCSC 54, paras 44, 46, and 47.

[13] Supra.

[14] The alliteration was unintentional.

[15] 1989 CarswellOnt 530, 69 OR (2d) 1 (HC)

[16] RSA 1980, c 95.

[17] RSO 1980, c 410.

[18] Emphasis supplied.

[19] Footnote 5, supra.

[20] That is the amendment made by SO 1951, c 10, s 23, which brought corporations incorporated for a “religious, educational, charitable or public purpose” under the Act by deeming them to be trustees within the meaning of the Act. That provision is contained in s 1(2) of the Act.

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