One could do worse than to study charity law to understand some of the key elements in the Canadian legal system. There are the constitutional questions raised by overlapping federal and provincial jurisdiction with respect to the subject matter. There is the use of the common law – progressive development by judges of a legal framework through reliance on precedent and a commitment to treat like situations alike – to determine what is a charity. The power of superior courts to supervise charity matters is a notable example of the doctrine of inherent jurisdiction.
As well, there are a host of statutory and common law issues, arising from core concepts in other areas such as trusts, tax, corporate, and property law, which may come into play.
It might be expected that this mix would lead to lots of interesting Canadian jurisprudence and a fertile legal environment. But that has not proved to be the case. Instead, the field is marked by countless narrow rulings, often taking their tenor from foreign and archaic cases, and numerous situations where a compelling legal question has yet to be joined. Moreover, various factors – the high cost of litigation; limited resources of many charities and groups seeking to qualify as charities; and, heavy reliance on volunteers in running and advising organizations – contribute to litigation at the appeals level being a rarity.
The Federal Court of Appeal has, by statute, jurisdiction over registration and revocation of status as a charity under the federal Income Tax Act (I.T.A.). … the pace of change in the scope of the meaning of charity in Canada has been glacial.. The Federal Tax Court deals with all other I.T.A. charity matters. Superior provincial courts have inherent jurisdiction over charities, and deal with such things as cy pres applications (In certain circumstances if a charitable purpose becomes impossible to fulfill, the cy-près doctrine allows a court to alter the purpose to one as close as possible to the original intention.)
The courts have provided little guidance on the intersection of the I.T.A. provisions governing registered charities and provincial constitutional authority, set out in section 92(7) of the Constitution Act, 1867 (UK), over the “Establishment, Maintenance, and Management of Hospitals, Asylums, Charities, and Eleemosynary Institutions in and for the Province”. As well, notwithstanding the imperative set out in the leading case Scottish Burial Reform and Cremation Society Ltd. v Glasgow Corporation “to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied”, the pace of change in the scope of the meaning of charity in Canada has been glacial.
The application of the law of trusts to charities is inconsistent from province to province – something that is problematic for organizations with assets in multiple jurisdictions. In another important area, liability of charity board members, there is a scant case law, leaving directors uncertain about their obligations and the conduct expected of them.
A new organization, The Pemsel Case Foundation (Pemsel), was recently created to foster better understanding and clarification of Canadian law of, and related to, charities. [Note: the author of this article serves as Pemsel’s Executive director.] Named after the seminal 1891 House of Lords case Commissioners for Special Purposes of the Income Tax v. Pemsel that established the four principal heads of charity in the current legal classification, Pemsel will undertake research, education and possibly interventions in existing litigation to further its mandate.
In its approach to litigation, Pemsel hopes to build on the previous interventions by the Canadian Centre for Philanthropy, and its successor organization, Imagine Canada in Supreme Court of Canada cases dealing with charity law. Those interventions were less concerned with arguing for particular outcomes in the case at hand, and focused instead on the appropriate legal test that should be used by the Court to make its determination.
One particularly intractable problem in charity law is what is “political” and how engagement by charities in that realm should be treated. The common law criteria for charity include rules that constrain or preclude charities’ political engagement based on their purposes. The I.T.A. features another set of rules that constrain or preclude charities’ political engagement based on their activities. There is very little case law on reconciling these two sets of rules, and the case law that does exist does not provide adequate clarity on what is and what is not permitted. In practice, this means that charities often do not engage in political work even though doing so might efficaciously advance their mandate.
The Pemsel Case Foundation asked Maurice Cullity, a retired Justice of the Ontario Superior Court of Justice and a former Osgoode Hall law professor, to try to sort through the complexities of this problem. His analysis of the issue, Charity and Politics in Canada – A Legal Analysis, is the first of a series of occasional papers to be published by Pemsel.
Pemsel hopes that Justice Cullity’s piece will be the first of many contributions the Foundation can make to a clearer and more dynamic understanding of Canadian charity law. By doing so, we hope that, as well as more fully exploring the many-faceted aspects of the law in this area, we will help facilitate the work of Canadian charities and other voluntary sector groups.
An extended version of this article can be found in The Philanthropist, Vol 25, Issue 4.
About Peter Broder
