A recent decision of the Ontario Superior Court of Justice addressed a claim by a donor seeking a return of a charitable donation. The case is a reminder of the critical importance of documenting clearly in writing the terms of charitable gifts that are intended to be used for a specific purpose, as the absence of such clear terms can lead to disputes over whether the gift was used properly by the charity.
In The McKay Cross Foundation v. ICSS, 2018 ONSC 6422 released on October 30, 2018, the Court considered a motion for summary judgment to dismiss a claim by a donor seeking the return of a donation of $100,000 that had been made to the Innovative Community Support Services (ICSS), a registered charity. The factual background surrounding the donation was somewhat complicated but can be summarized as follows:
- The president of The McKay Cross Foundation, Ms. Cross, had a disabled adult grandson who was dependent on others for care. Ms. Cross identified ICSS as a potential agency that could provide care to her grandson as well as to two other disabled individuals with whom her grandson had lived. Ms. Cross discussed with ICSS the possibility of building or purchasing a home to accommodate these individuals, and both parties engaged in a search for appropriate housing.
- In June 2012, Ms. Cross prepared a draft agreement with ICSS that proposed a donation of $300,000 over four years for the purchase of a home for these three individuals, contingent on ICSS obtaining equal funding from the Ontario Ministry of Health and Long Term Care.
- The parties disagreed as to what followed. Ms. Cross stated that ICSS agreed to accept a donation from Ms. Cross in exchange for a tax receipt, subject to a clear commitment to use the funds to purchase the home for the three individuals. ICSS stated that it had communicated to Ms. Cross that the proposed terms were problematic.
- ICSS continued to look for a suitable home and also investigated options for the construction of a home. ICSS proposed in September 2012 that Ms. Cross simplify the contract, making an initial $100,000 donation “no strings attached” plus $50,000 each year for the next three years. ICSS indicated that the earlier proposed conditions were inconsistent with the payment being treated as a donation.
- Ms. Cross responded by stating that she wanted a good home for the three individuals, and wanted her donation to help make this possible. Ms. Cross indicated that she would be prepared to make a donation of $100,000 before Christmas 2012 and another $100,000 before June 30, 2013.
- The $100,000 donation was made on September 19, 2012, from a company controlled by Ms. Cross. There was no written documentation or terms attached. ICSS issued a donation receipt. The parties disagreed as to what verbal commitments were made in respect of this gift. The three individuals in Ms. Cross’ care were placed temporarily in a home managed by ICSS and the parties continued to seek a house for these three young men. This continued until September 2013, at which point ICSS determined that it did not have the funding necessary to buy or construct a house. Ms. Cross then purchased a house in the name of The McKay Cross Foundation, which was rented to and renovated by ICSS. The three young men moved into the home in 2014.
- The McKay Cross Foundation wrote to ICSS on December 1, 2014 demanding a return of the $100,000 donation. The Foundation, along with Ms. Cross and her controlled corporation, launched a claim against ICSS in May 2015 claiming that the $100,000 donation had been made for the sole and express purpose of purchasing a home for the three individuals. They argued that ICSS had breached its fiduciary obligations to ensure that the donation was applied according to the instructions of the donor.
- ICSS responded with a motion to dismiss the claim, arguing that the claim did not disclose any genuine issues for trial.
The Court granted ICSS’ motion to dismiss the claim. The Court stated that the case turned on the factual disagreement between the parties as to the terms agreed upon with respect to the donation, and was satisfied that a trial was unnecessary and would add disproportionate delay and expense relative to the amount at issue.
The Court noted that the parties disagreed about the nature of the discussions following the delivery of the draft agreement in June 2012. It noted that ICSS admitted that it was looking for a house and that the donation was tied to the house. However, ICSS also argued that the donation was made with “no strings attached”.
The Court accepted that the donation was made without specific terms. The Court found that the conduct of the parties following the donation – in particular, the decision by Ms. Cross to purchase a house in the name of the Foundation without asking for assistance from ICSS and inviting it to pay rent and fund renovations – was inconsistent with the assertion that the donation was made for the sole purpose of funding the purchase of a home (or a down payment on a home). The Court held that, at best, the evidence might support a non-binding designation that ICSS would pursue the purchase of a home, which it did. As such, the claim for a return of the donation was dismissed.
This case is a reminder to both charities and donors of the importance of putting in place written gift agreements that clearly state the terms upon which a donation is made. Had a clear commitment in writing been made to use the donation for a specific purpose, both parties would have known clearly the “strings” that were attached to the donation and could have acted accordingly. In the absence of such clear written terms, the parties could not be certain of what had been agreed upon and it was necessary to resort to the Courts to resolve the dispute. The Court was left to sift through conflicting and incomplete evidence as to the terms of the gift.
The case is also a reminder of the need to keep careful notes of any discussions and meetings with donors, to ensure a contemporaneous record of any discussions around the use of the gift. In the absence of such notes, the parties will have only the imperfect recollections of the individuals involved in the discussions. This can again lead to confusion and uncertainty, particularly as time passes.