In PART 1, I discussed how a charity can either be a corporation or a charitable trust. To be designated as a charity, both have the same requirements under the federal Income Tax Act^[1] and the common law, namely:

• An exclusive dedication of property;
• To a charitable purpose; and
• That provides a public benefit.

This part will examine these 3 requirements in greater detail.

Exclusive dedication of property

For a charitable trust to be valid, its purposes must be exclusively for the benefit of charity. The rationale being that if a trustee were allowed to exercise discretion for non-charitable purposes, it would make the terms of the trust challenging to enforce.

Difficulties arise for the court where a settlor of the trust uses language which appears to include charitable and non-charitable purposes. If this occurs, the court can employ several techniques to save the charitable trust. For instance, in Jones v. T. Eaton Co. (Re Bethel)^[2], the settlor’s use of the word ‘deserving’ in the sentence “needy and deserving” was found to also mean ‘needy’ as opposed to “meritorious” and the gift was saved, falling under the charitable purpose of relief of poverty.

The court may find an exclusively charitable intent, from the character of the person appointed as trustee. In Blais v. Touchet^[3], a parish priest wrote a Will that appointed his bishop as estate trustee. The Will provided that his property was to be used for “works as would aid the cause of French Canadians of his diocese”. The Supreme Court of Canada held that there was a valid charitable trust, given that the testator appointed a bishop and would likely have intended that the bishop would carry out charitable purposes.^[4]

Moreover, the court has the inherent jurisdiction to sever any non-charitable portions of the trust, so long as this is not inconsistent with the settlor’s intention. Several Canadian provinces, including British Columbia, Alberta and Manitoba, have codified this power to save a gift which has charitable and non-charitable purposes attached to it. For instance, section 47 of British Columbia’s Law and Equity Act^[5] provides:

Charitable Trusts

47 If a person gives, devises or bequeaths property in trust for a charitable purpose that is linked conjunctively or disjunctively in the instrument by which the trust is created with a noncharitable purpose, and the gift, devise or bequest would be void for uncertainty or remoteness, the gift, devise or bequest is not invalid as a result but operates solely for the benefit of the charitable purpose.^[6]

2. Charitable purpose

The trust must be established for a charitable purpose. In Canada, there are four requirements respecting charitable purposes:

1. The Relief of Poverty;
2. The Advancement of Education;
3. The Advancement of Religion; or,
4. Any other purpose that is beneficial to the community.^[7]

As highlighted previously, these charitable purposes derive from the Elizabethan Charitable Uses Act^[8] and Lord Macnaghten in Commissioners for Special Purposes of Income Tax v. Pemsel.^[9] Each of these heads of charity will be explored in turn.

(a)  Relief of Poverty

The Charitable Uses Act refers to the relief of poverty as, “the relief of aged, impotent and poor people”. While helpful, this definition lacks precision as to what degree of poverty is required and what forms of relief are accepted.

The courts have found that poverty is a relative term and may shift over time.^[10] Accordingly, what is determined as poverty now may differ from what it was fifty years ago and the courts analysis will reflect this.

The relief of poverty encompasses more than just the provision of basic needs such as food, clothing or housing. For instance, in Brown v. Brown^[11], a gift to a treasurer of a poor house to provide “luxuries for the inmates of the poor house in addition to the regular supplies” was found to be a valid charitable gift.

Notably, the relief of poverty does not encompass the prevention of poverty. In Credit Counselling Services of Atlantic Canada Inc. v. Canada (National Revenue),^[12] the court found that an organization with a purpose of preventing poverty through financial education and counselling programs was not a charity. The court considered the meaning of ‘relief of poverty’ and interpreted it to be directed towards those actually in poverty. The court concluded by saying:

In the United Kingdom, Parliament adopted the Charities Act 2011 (U.K.), c. 25 and in so doing included the prevention of poverty (in addition to the relief of poverty) as a charitable purpose. In effect, the appellant is asking this Court to do that which required an act of the U.K. Parliament to do. In my view, just as in the United Kingdom, it will require an act of Parliament to add the prevention of poverty as a charitable purpose.^[13]

(b) The Advancement of Education

The Charitable Uses Act refers to “schools of learning, free schools and scholars in universities” as well as “education of orphans”. The courts have since expanded this definition greatly to incorporate libraries, non-profit schools, learning societies, institutions of an educational nature as well as public research.

The Supreme Court of Canada considered the meaning of ‘advancement of education’ in Vancouver Society of Immigrant and Visible Minority Women v. M.N.R.^[14] Importantly, Justice Iacobucci stated:

so long as information or training is provided in a structured manner and for a genuinely educational purpose […] and not solely to promote a particular point of view or political orientation, it may properly be viewed as falling within the advancement of education.^[15]

For this reason, the advancement of education does not include the furtherance of political ideals but instead of genuine education and learning.

(c) The Advancement of Religion

The only language referencing religion in the Charitable Uses Act is “the repair of churches”. Nevertheless, the advancement of religion has come to encompass trusts for the teaching of religious belief, the building and maintenance of churches and other places of worship, and the work of ministers of religion.

A question arises regarding what the law constitutes as a ‘religion’ for the purpose of charitable trusts. Given there is no statutory definition of religion for this purpose, the courts in Canada have generally meant religion to mean:

1. faith in a god: and
2. worship of that god.

In Re South Place Ethical Society^[16], a trust was established for “the study and dissemination of ethical principles and cultivation of a rational religious sentiment” and for the discovery of truth through intellect rather than belief in a god. The court found that the trust did not fall under the advancement of religion, stating that religion is concerned with one’s relationship with God or a god, whereas ‘ethics’ is concerned with a person’s relationship with another.

(d) Any other purpose beneficial to the community

Finally, the concept of encompassing any other purpose that is beneficial to the community. On its own, it appears that this head reduces the charitable purpose test to a public benefit test, in effect making the other factors irrelevant.

Instead, to fit under this fourth category the purpose must be based on an analogy to the preamble or based on a previously accepted analogy.^[17] The court will construe the purpose narrowly as to not fit under the first three heads of charity.^[18]

Through this analysis, the courts have accepted the following purposes to be charitable:

• helping the sick and elderly;
• disaster relief;
• provision for animal welfare;
• aiding prisoners and veterans; and
• public works such as parks or cemeteries.

3. Public benefit

The court must engage in an analysis of whether the charitable purpose trust provides a ‘public benefit’ and will consider this factor in respect of the four heads of charity.

Determining whether a public benefit exists encompasses a two-part test. First, is there a benefit of some kind? The charitable trust must provide some practical utility. The court will presume that a trust established for a charitable purpose will provide a public benefit. However, this is a rebuttable presumption and evidence to the contrary will be considered by a court.^[19]

Second, is the benefit to the public? To be considered ‘the public’, the persons who are to benefit must be a “section of the community” or otherwise the community at large. The section of the community must also not be “numerically negligible”.^[20] Moreover, the quality that distinguishes the persons who could benefit from other members of the community must not depend on their relationship to a particular individual (i.e. they cannot be related).^[21]

Thus, in Gilmour v. Coats^[22], a trust for a Catholic priory of secluded nuns found not to be a charitable purpose trust, despite its purpose of the advancement of religion, given it did not provide a public benefit.

Summary

In summary, the law of charitable purpose trusts has developed steadily since the Charitable Uses Act in 1601. In Canada, the courts still make use of English common law in determining the validity of a charity.

A valid charitable purpose trust must therefore:

1. exclusively allocate property;
2. for a charitable purpose; and
3. for a public benefit.

The next part in this series will examine the court’s powers regarding charitable trusts, through the cy-pres doctrine and scheme making powers.

—

[1] Income Tax Act, (R.S.C., 1985, c. 1 (5th Supp.)).

[2] Jones v. T. Eaton Co. (Re Bethel), [1973] SCR 635.

[3] Blais v. Touchet, 1963 CanLII 64 (SCC), [1963] SCR 358.

[4] Ibid. at page 360.

[5] Law And Equity Act, [RSBC 1996] CHAPTER 253.

[6] Ibid. at section 47.

[7] Doukhobor Heritage Retreat Society #1999 v Community Foundation of the South Okanagan, 2017 BCSC 1379 (CanLII) at para 22.

[8] (U.K.), 43 Eliz. I, c. 4.

[9] Commissioners for Special Purposes of Income Tax v. Pemsel, 1891 CanLII 21 (FOREP) (“Pemsel’s case”).

[10] Jones v. T. Eaton Co., [1971] 2. O.R. 316, 17 D.L.R (3d); Credit Counselling Services of Atlantic Canada Inc. v. Canada (National Revenue), 2016 FCA 193 (CanLII), [2017] 1 FCR 480.

[11] Brown v. Brown (1900) 32. O.R. 323 (H.C.).

[12] Credit Counselling Services of atlantic Canada Inc. v. Canada (National Revenue), 2016 FCA 193 (CanLII), [2017] 1 FCR 480.

[13] Ibid. at para 18 [emphasis added].

[14] Vancouver Society of Immigrant and Visible Minority Women v. M.N.R, [1999] 1 S.C.R 10.

[15] Ibid. at para 169.

[16] Re South Place Ethical Society [1980] 1 WLR 1565.

[17] Pemsel’s case.

[18] Vancouver Society of Immigrant and Visible Minority Women v. Canada (Minister of National Revenue ‑ M.N.R.), 1999 CanLII 704 (SCC), [1999] 1 S.C.R. 10 at paras. 143-148.

[19] National Anti-Vivisection Society v. Inland Revenue Commissioners [1948] A.C 31 [H.L] at 65.

[20] Cox (Re) (1952), 1952 CanLII 13, [1953] 1 S.C.R. 94 (S.C.C.).

[21] Oppenheim v. Tobacco Securities Trust Company [1951] A.C. 297 HL at 305.

[22] Gilmoure v. Coats, [1949] 1 All E.R 848 (H.L).