What is a charitable purpose? Jim Crerar Charitable Trust (Re)

February 10, 2022 | Sarah Fitzpatrick

What is “charity” in a legal sense has developed through judge-made common law. The definition is an important one as organizations that are registered charities must be constituted and operated exclusively for charitable purposes. It is also important for charitable trusts (whether or not they are registered charities) because in order to be a valid charitable trust the trust must be established for a charitable purpose.

The starting point for determining what is charitable in a legal sense is the classification described in the 1891 decision of Pemsel v. Special Commissioners of Income Tax. This case established what are known as the four heads of charity:

  1. relief of poverty;
  2. advancement of education;
  3. advancement of religion; and
  4. other purposes beneficial to the community.

The fourth head “other purposes beneficial to the community” requires the purpose to come within the “spirit and intendment” of the preamble to the Statute of Elizabeth (a 1601 statute on charitable uses) and the purpose must also be for the public benefit.

We are reliant on how courts have defined charity over time. However, cases on what is charitable are infrequent and the evolution of the law in this area is incremental.

Jim Crerar Charitable Trust (Re), 2022 BCSC 60, is a recent decision of the Supreme Court of British Columbia on charitable purposes. Mr. Crerar established a trust to assist poor people in prosecuting wrongful dismissal claims against their former employers. The question to be decided by the Court was whether the trust was a valid charitable trust on the basis of being established for a charitable purpose. The purpose of the trust was:

“… to distribute to any poor person, who, in the sole and absolute discretion of the Trustee, requires funds for the prosecution of a wrongful dismissal claim against a former employer (regardless of whether said poor person was employed in a unionized or non-unionized capacity) as a means of alleviating his or her poverty.”

The Court considered whether this was a charitable purpose under the heads relief of poverty and other purposes beneficial to the community.

Relief of poverty

The Court found that providing funds to assist individuals in bringing wrongful dismissal claims did not relieve poverty. The description that the Court gave of ‘proper’ activities that relieve poverty for people who have lost their jobs suggested that the activities must provide some type of immediate financial relief, such as “funding for retraining, job search, daily living expenses or even compensation for what might have been a proper period of notification of termination”. In the Court’s view, assisting an individual in bringing a wrongful dismissal claim was too remote for the activity to relieve poverty because the individual would only have a hope that their claim would be successful and that they may receive a monetary settlement or judgement as a result.

Purpose beneficial to the community

The Court also considered whether the trust was charitable on the basis that it benefits the community in a way the law regards as charitable. Promoting access to justice has previously been found to be charitable (Cassano v. Toronto-Dominion Bank, (2007), 230 O.A.C. 224 (CA)). In this sense, providing access to justice means assisting a person who otherwise would not have had access to obtain access to justice in order to protect and enforce their legal rights. A person may have been unable to access justice for financial reasons, but there can be other barriers as well.

The Court determined that the trust was not established for a purpose beneficial to the community. In order for a purpose to be charitable under the fourth head is that it must benefit the community or the public, which requires that an appreciably important or sizable segment of society benefit. The Court found that no evidence had been provided that there is a sufficient number of poor people who have been wrongfully dismissed that do not have the financial means to hire a lawyer to be a sizable segment of society.

This decision is disappointing, particularly in how it suggests that in order for an activity to relieve poverty it must provide the beneficiary with immediate financial/economic relief, which is a very narrow interpretation of activities that provide relief from poverty. Though it does not have the weight of law, Canada Revenue Agency’s guidance recognizes that providing simple amenities, necessary for a modest but adequate standard of living can relieve poverty and that these activities may take different forms, including legal services. Further, as noted in the decision, providing access to justice to those who are faced with barriers to obtaining legal representation is also a recognized charitable purpose. It is surprising that the trust was found to not be charitable on the basis that there is not a sufficient segment of the population who may benefit from its purpose.

The period for appealing this decision has not expired, and it is possible the decision will be appealed. If the decision is not appealed, it will likely not have a significant impact as the decision primarily turned on whether sufficient evidence had been provided in this case to demonstrate that the purposes would relieve poverty or benefit a sufficient segment of the population.

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