Mission Impractical: Varying Charitable Trust Purposes, Impracticality, And The Boys And Girls Club Decision

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It's a familiar story. A charity receives a gift of property. The donor requires the charity to hold the property in trust for specific charitable purposes. Years later, the charity has other pressing needs and priorities.
Canada Corporate/Commercial Law
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It's a familiar story. A charity receives a gift of property. The donor requires the charity to hold the property in trust for specific charitable purposes. Years later, the charity has other pressing needs and priorities. Many of the charity's other programs are underfunded. Let's say the cost of maintaining the trust property itself has also increased significantly.

Can the charity change the purpose of the trust and use the property for another purpose?

Under something called the "cy-près" doctrine, courts can change the purposes of a trust if those purposes have become impossible or impractical to achieve.

An "impossible" purpose is often easy to identify. For instance, if the purpose of a trust is to pay for medical equipment and beds at a certain hospital but the hospital no longer exists, it is safe to say that it is impossible to carry out the trust's stated purpose.

But what if it is not impossible to fulfill the trust's purpose – just very difficult? Would those difficulties or challenges rise to the level of "impractical" and pass the cy-près test?

A recent British Columbia court decision says "not so fast" and reminds charities that the threshold for proving impracticality remains a very high one.

In Boys and Girls Club of Greater Victoria Foundation v. British Columbia (Attorney General), 2024 BCSC 442, the petitioner Foundation sought a cy-près order from the BC Supreme Court to change the purposes of a trust in which the Foundation held land and two investment funds associated with the land.

The Foundation argued that the land (on which the Foundation's sister society ran a youth wilderness camp) was underused and costly to maintain. By contrast, the sister society ran other programs that were oversubscribed and in need of more funding. The Foundation wanted the court to vary the purposes of the trusts so that the Foundation could sell the land and repurpose the funds for its other charitable needs.

The Honourable Madam Justice Marzari declined to use the cy-près doctrine to disturb the purpose of the trusts. In the court's view, the Foundation had not proved that it was impractical for it to continue to hold the land and funds for their original specific charitable purposes.

The decision will be instructive to charities seeking their own cy-près orders to vary specific charitable trust purposes on grounds of impracticality. The key takeaways from Justice Marzari's reasons are:

  • If holding trust property costs more than it brings in, impracticality may still not be proven, especially if a charity's other resources (which the charity holds for its general charitable purposes) could be used to pay for the cost of holding or maintaining the trust property.
  • The fact that a charity has other pressing needs does not weigh significantly in the cy-près analysis in cases where the trust funds do not exceed what is needed to fulfill the purposes of the trust.
  • Impracticality requires more than a trustee's deeply held belief that the trust property could be used more productively for other charitable purposes. Impracticality also requires evidence of more than a decrease in the usefulness or cost-effectiveness of the trust property.
  • Solid facts and evidence on a cy-près application are paramount. The Foundation's case was undermined, in part, by its own documents which showed that camp enrollment was increasing and that the Foundation had more than $300,000 in other specific purpose trust funds available to pay the costs associated with the land.

The Foundation had unsuccessfully tried to convince the court that its situation was similar to that facing the Diocese in the New Brunswick Court of King's Bench decision of Évêque Catholique Romain de Bathurst v. New Brunswick (Attorney General), 2010 NBQB 400 (for full disclosure, Miller Thomson lawyers had acted for the Diocese).

In Bathurst, the court approved a cy-près plan where the Diocese would keep $1.5 million in existing trust funds (dedicated to training future priests) and reallocate more than $2.5 million from those same trust funds for the purpose of settling abuse claims.

In accepting the Diocese's impracticality argument, the New Brunswick court noted the "unique combination of circumstances" that warranted cy-près relief. Priest candidates had dwindled substantially in the last few decades, while the abuse claims threatened to bankrupt the Diocese entirely. The NB court found that the "primordial intention" of those who created the trusts was to have the Diocese continue its religious mission for as long as possible. The cy-près plan would help the Diocese avoid a financial demise and was consistent with that intention.

The Foundation in Boys and Girls Club invoked Bathurst but could not clear the high hurdle of impracticality. Besides failing to give sufficiently persuasive evidence on its petition, the Foundation also tendered no information as to its very own financial situation and whether the Foundation's existence would be jeopardized if it continued to act as trustee with the existing purposes in place – as was the case in Bathurst.

Proving impracticality on a cy-près application remains a high bar to overcome. As both the New Brunswick and British Columbia courts have said, the public must continue to have confidence that, when a charitable purpose trust is established, it will only be in limited and justifiable circumstances that a court will intervene and change what the settlor had intended. For charities, courts, and provincial trustees, Boys and Girls Club is another decision reminding us and shedding light on what impracticality is – and what it isn't.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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