Today

Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

Doukhobor Heritage Retreat Society #1999 v. Vancouver Foundation, 2019 BCSC 54

KEYWORDS:   Vancouver Foundation Act; Perpetuity Act; Charitable Purpose Trusts; Gifts;

~A gift, once perfected, cannot be retracted, and s. 11 of the Vancouver Foundation Act does not require the Vancouver Foundation to comply with a direction to return a donation after it has been made. ~

Overview

The Doukhobor Heritage Retreat Society #1999 (the “DHRS”) is a registered charity whose mandate is “to preserve the heritage surrounding the Doukhobors’ migration from Russia to Canada at the end of the 19th century, and to promote the Doukhobors’ values of peace and harmony”. It was formed in the mid-1990s to support the Whatshan Lake Retreat, which offers various educational and cultural programs, as well as drug and alcohol treatment for young persons. In 1999 the DHRS received a donation of $100,000, with the intent that those funds would be used as an investment fund and the income used to support the retreat. In 2001 the same donor gifted a further $175,000 to the DHRS, with the same purpose as the first gift. That $175,000 was used to establish the “VF Fund” with the Vancouver Foundation. The Vancouver Foundation is governed by the Vancouver Foundation Act, R.S.B.C. 2000, c. 1, and creates and manages endowment funds that generate income in order to support charities.

Following the 2008 downturn, however, the return on the investments was less than anticipated, and the income was insufficient to cover the costs of the retreat, which was growing in popularity. The DHRS therefore developed a plan to generate income at the retreat by building a water processing facility that would (according to projections) generate sufficient income to support the retreat. This plan required the return of the VF Fund from the Vancouver Foundation to the DHRS. The Vancouver Foundation, however, declined to do so, leading to this petition for the return of the funds.

The DHRS relied on s. 24(3) of the Perpetuity Act, RSBC 1996, c 358, which allows for non-charitable purpose trusts to be voided in certain situations. The first question before the chambers judge was therefore whether the terms of the VF Fund had created a charitable purpose trust. The four recognized heads of charitable purposes are relief of poverty, advancement of education, advancement of religion, and other purposes beneficial to the community; the DHRS took the position that the fund’s purpose did not fall under any of these, but was instead administrative and for the investment and distribution of capital. The chambers judge found otherwise and concluded that, viewed objectively, the purpose of the VF Fund fell under the second and fourth heads of charity. The fund was therefore a charitable purpose trust and not voidable under the Perpetuity Act.

However, ss. 11 and 12 of the Vancouver Foundation Act provide that the Vancouver Foundation is required to carry out the directions of donors if definite directions in writing are given. The DHRS said this section required the Vancouver Foundation to comply with the direction to return the funds. The Foundation’s position was that those sections only applied to directions made at the time the gift is given to the Foundation, but that once the gift is complete the donor has relinquished control.

The chambers judge considered the terms that created the VF Fund, which did not describe a gift to the Vancouver Foundation, but rather expressed an intention to create a “permanent open fund” with the Vancouver Foundation. Reading ss. 11 and 12 of the Vancouver Foundation Act together with these terms, the chambers judge concluded that the $175,000 was not a gift and the use of the word “permanent” simply meant the capital could not be encroached upon. In the result, the Vancouver Foundation was obliged to comply with the direction to return the funds.

On Appeal

The first issue on appeal was whether the appeal was moot, as the Vancouver Foundation had already returned the funds to the DHRS. The Court of Appeal found this did not render the appeal moot, as mere satisfaction of a judgment alone does not render an appeal moot. Further, the Court would have exercised its discretion to hear the appeal even if it were moot, as the interpretation of s. 11 of the Vancouver Foundation Act might have broader consequences.

Turning to the chamber judge’s conclusions regarding the terms of the VF Fund, the Court of Appeal noted that a determination of the terms of the trust required a consideration of the donor’s intent at the time the gift was made. Those circumstances, the Court concluded, led “inexorably” to the conclusion that the $175,000 was intended as “a donation to the Foundation; in other words, it was a gift.” (Emphasis added by the Court.)

Turning to the Vancouver Foundation Act, the Court placed weight on the use of the word “donor” in s. 11. That word indicates someone who makes a gift, which is consistent with the definition of “donation” in the Act as including a “gift, bequest or devise.” The general principle is that a gift cannot be retracted, and that the terms of a gift cannot be varied after the gift is perfected; the phrase “directions of donors” must, therefore, refer to directions made at the time the gift is made.

Properly construed, then, s. 11 of the Vancouver Foundation Act does not require the Foundation to comply with directions given after the gift is complete. As the VF Fund did not reserve to the donor the right to give future directions, the Vancouver Foundation was not obliged to return the funds and the appeal was allowed.

Counsel Comments

Helen Low, Q.C. and Eric Clavier, Counsel for the Appellant:

This decision was of interest generally in the charitable community as the possible outcome of the lower court ruling was that donations made could be potentially subject to a request for retraction. This could potentially wreak havoc in the charity world, and create other negative consequences, including tax donation receipting, asset portfolio management and adverse impact on disbursement quotas. In fact, following the lower court judgment, a number of donors made inquiries with Vancouver Foundation as to whether they could seek a return of the funds that they had donated, to place into other organizations or private foundations rather than retention in the public foundation. The Court of Appeal ruling provides certainty that a gift once made is a gift – it cannot be later sought to be returned – on any principle of trust law, the law of gifting or otherwise.

Start the discussion!

Leave a Reply

(Your email address will not be published or distributed)