Cy-Près and Impracticability
1. Introduction
The recent case, Boys and Girls Club of Greater Victoria Foundation v British Columbia (Attorney General)[1] is yet another case in which a charity made an application for cy-près to vary the terms of the trusts under which it operated, the reason adduced being impracticability. The alleged impracticability arose after the trusts were established and therefore this was a case of supervening, rather than initial impracticability.
2. Facts
The Boys and Girls Club of Greater Victoria Foundation (‘BGC’ or ‘Foundation’) held a 98-acre Property and two investment funds (the ‘Capital Funds’) upon specific purpose charitable trusts. The purposes of the Foundation were to promote and further the aims and interests of its sister charity, the Boy and Girls Club Services Society (the ‘Services Society’). The Services Society provided various services to youth and children on southern Vancouver Island on the Property. The Foundation organized fundraising programs, received donations, managed assets, and paid moneys to support the Services Society.
The Foundation argued that the interest in the programs operated by the Services Society had waned significantly, whereas the costs of running the programs and maintaining the property kept increasing. However, the Services Society runs other programs on southern Vancouver Island that are oversubscribed and have waiting lists. Therefore, the Foundation wanted to sell the Property and reallocate the proceeds, as well as the Capital Funds, to fund those programs.
The Attorney General opposed the application because: (a) the Foundation did not fully disclose its role as trustee in relation to the Property and the Capital Funds; (2) it proceeded in a hurried manner with limited disclosure; and (c) it failed to establish a level of impracticability that would allow the court to relieve the Foundation of its role as trustee for the specific charitable purposes for which it holds the Property and the Capital Funds.
3. Analysis and Judgment
Justice Marzari found that the Foundation raised funds during a special campaign, in part, to purchase the Property and to establish endowment funds to maintain and operate the Property, and that the funds were kept separate. She concluded from the evidence that the funds were raised to establish a specific purpose charitable trust in relation to the Property, with the Foundation as its trustee. Similarly, the Foundation also held the Capital Funds upon separate specific purpose trusts.
The Foundation did not provide detailed financial evidence, or supporting information such as construction budgets for a planned Dining Hall. Indeed, the Foundation failed to establish that the purposes of the Capital Funds cannot be achieved on the Property, because it wants to sell the Property and apply the Funds for other charitable needs financed by the Foundation.
The Foundation did give information about the loss of provincial funding. This meant that it had to use general charitable purpose funds to continue to offer services at the Property, while also charging fees for the programs offered. In addition, the Property has lost its tax exemption from municipal taxes. Further the cost of utilities and liability insurance continues to increase. However, Justice Marzari found that the Foundation failed to provide documentation or financial statements to support the alleged increases in costs. It also failed to provide the projected budget for the coming year to support the alleged income, costs, and shortfall, although the Foundation projects a shortfall of some $200,000 in funding. Presumably, that shortfall would have to be covered with general purpose charitable funds.
In 2023 the Foundation entered into a purchase and sale agreement to sell the Property, but it is subject to the condition that the court grants the application.
Justice Marzari then turned to the law of cy-près. She noted that the court may, in the exercise of its inherent jurisdiction, intervene when the purposes of a charitable trust have become impracticable and alter the terms of the trust. However, the court may not intervene if the purposes are not impracticable. Thus, the trustee must prove the alleged impracticability. The law is clear that if the original objects can still be carried out, even though in a more limited way than originally, the court cannot grant the cy-près application.[2] In contrast, the Foundation argued in favour of a concept of impracticability that is much broader than that recognized by existing law.
Justice Marzari held that the Foundation failed to establish that it was impracticable to continue to hold and maintain the Property for its specific charitable purposes. The financial evidence failed to show that the Foundation lacked sufficient funds to maintain and operate the Property. Also, other evidence showed that some 400 children and youths benefited from the programs on the Property in 2023. Moreover, the Foundation failed to establish that its financial existence is put in jeopardy if it is required to continue to act as trustee under the trusts in relation to the Property. In any event, she held that converting the value of the Property and the Capital Funds to unrelated charitable purposes, is not a purpose as close as possible (cy-près) to the original purpose of the trusts.
–a
[1] 2024 BCSC 442.
[2] See, e.g., Sidney and North Saanich Memorial Park Society v British Columbia (Attorney General), 2016 BCSC 589, paras 47-49; In Re Dominion Students’ Hall Trust, [1947] Ch 183 at 186; Lee v Board of Education of North Vancouver School District No 44, 2011 BCSC 222; Re TLC The Land Conservancy of British Columbia Inc No S36826, 2014 BCSC 97 (reversed on unrelated grounds 2013 BCCA 473); and L’Evêque Catholique Romain de Bathurst v New Brunswick, 2010 NBQB 400. All these are cited in the case.
Menu
Written by: Albert Oosterhoff
Posted on: December 30, 2024
Categories: Commentary, WEL Newsletter
1. Introduction
The recent case, Boys and Girls Club of Greater Victoria Foundation v British Columbia (Attorney General)[1] is yet another case in which a charity made an application for cy-près to vary the terms of the trusts under which it operated, the reason adduced being impracticability. The alleged impracticability arose after the trusts were established and therefore this was a case of supervening, rather than initial impracticability.
2. Facts
The Boys and Girls Club of Greater Victoria Foundation (‘BGC’ or ‘Foundation’) held a 98-acre Property and two investment funds (the ‘Capital Funds’) upon specific purpose charitable trusts. The purposes of the Foundation were to promote and further the aims and interests of its sister charity, the Boy and Girls Club Services Society (the ‘Services Society’). The Services Society provided various services to youth and children on southern Vancouver Island on the Property. The Foundation organized fundraising programs, received donations, managed assets, and paid moneys to support the Services Society.
The Foundation argued that the interest in the programs operated by the Services Society had waned significantly, whereas the costs of running the programs and maintaining the property kept increasing. However, the Services Society runs other programs on southern Vancouver Island that are oversubscribed and have waiting lists. Therefore, the Foundation wanted to sell the Property and reallocate the proceeds, as well as the Capital Funds, to fund those programs.
The Attorney General opposed the application because: (a) the Foundation did not fully disclose its role as trustee in relation to the Property and the Capital Funds; (2) it proceeded in a hurried manner with limited disclosure; and (c) it failed to establish a level of impracticability that would allow the court to relieve the Foundation of its role as trustee for the specific charitable purposes for which it holds the Property and the Capital Funds.
3. Analysis and Judgment
Justice Marzari found that the Foundation raised funds during a special campaign, in part, to purchase the Property and to establish endowment funds to maintain and operate the Property, and that the funds were kept separate. She concluded from the evidence that the funds were raised to establish a specific purpose charitable trust in relation to the Property, with the Foundation as its trustee. Similarly, the Foundation also held the Capital Funds upon separate specific purpose trusts.
The Foundation did not provide detailed financial evidence, or supporting information such as construction budgets for a planned Dining Hall. Indeed, the Foundation failed to establish that the purposes of the Capital Funds cannot be achieved on the Property, because it wants to sell the Property and apply the Funds for other charitable needs financed by the Foundation.
The Foundation did give information about the loss of provincial funding. This meant that it had to use general charitable purpose funds to continue to offer services at the Property, while also charging fees for the programs offered. In addition, the Property has lost its tax exemption from municipal taxes. Further the cost of utilities and liability insurance continues to increase. However, Justice Marzari found that the Foundation failed to provide documentation or financial statements to support the alleged increases in costs. It also failed to provide the projected budget for the coming year to support the alleged income, costs, and shortfall, although the Foundation projects a shortfall of some $200,000 in funding. Presumably, that shortfall would have to be covered with general purpose charitable funds.
In 2023 the Foundation entered into a purchase and sale agreement to sell the Property, but it is subject to the condition that the court grants the application.
Justice Marzari then turned to the law of cy-près. She noted that the court may, in the exercise of its inherent jurisdiction, intervene when the purposes of a charitable trust have become impracticable and alter the terms of the trust. However, the court may not intervene if the purposes are not impracticable. Thus, the trustee must prove the alleged impracticability. The law is clear that if the original objects can still be carried out, even though in a more limited way than originally, the court cannot grant the cy-près application.[2] In contrast, the Foundation argued in favour of a concept of impracticability that is much broader than that recognized by existing law.
Justice Marzari held that the Foundation failed to establish that it was impracticable to continue to hold and maintain the Property for its specific charitable purposes. The financial evidence failed to show that the Foundation lacked sufficient funds to maintain and operate the Property. Also, other evidence showed that some 400 children and youths benefited from the programs on the Property in 2023. Moreover, the Foundation failed to establish that its financial existence is put in jeopardy if it is required to continue to act as trustee under the trusts in relation to the Property. In any event, she held that converting the value of the Property and the Capital Funds to unrelated charitable purposes, is not a purpose as close as possible (cy-près) to the original purpose of the trusts.
–a
[1] 2024 BCSC 442.
[2] See, e.g., Sidney and North Saanich Memorial Park Society v British Columbia (Attorney General), 2016 BCSC 589, paras 47-49; In Re Dominion Students’ Hall Trust, [1947] Ch 183 at 186; Lee v Board of Education of North Vancouver School District No 44, 2011 BCSC 222; Re TLC The Land Conservancy of British Columbia Inc No S36826, 2014 BCSC 97 (reversed on unrelated grounds 2013 BCCA 473); and L’Evêque Catholique Romain de Bathurst v New Brunswick, 2010 NBQB 400. All these are cited in the case.
Author
View all posts