Charitable purpose trusts are given special status in the law. While most other types of trusts must have a clear end date, charitable purpose trusts may live forever. All other types of trusts have to have specific and defined beneficiaries, yet charitable purpose trusts may exist in order to further a “charitable purpose.” While courts are generous in determining whether the purpose of a trust is charitable, there are clear guidelines. Failure to meet the definition of “charitable purpose trust” means that the trust itself will fail.
Early in Jim Crerar’s life, he was fired from his job. Mr. Crerar felt he was wrongly dismissed but lacked the resources to hire counsel. After the job loss, he was facing financial ruin, but was saved by a timely inheritance.
Now in his 70s, Mr. Crerar wished to set up a trust to provide funds to people wrongly dismissed so that they could pursue their former employers in court. The relevant provision of the trust deed read: “…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 … as a means of alleviating his or her poverty.” No definition of “poor person” was provided in the trust deed.
An application for directions (Re Jim Crerar Charitable Trust, 2022 BCSC 60) was brought in the Supreme Court of BC for a declaration that the trust deed created a valid charitable purpose trust.
In his decision, Justice Caldwell provided a succinct yet thorough overview of the relevant trust law. (While the case was determined in BC, trust law is based on common law principles which are followed across most of Canada.)
There are four purposes which are accepted as legitimate “charitable purposes”:
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes beneficial to the community.
In this case, the petitioner argued that the trust was either for the “relief of poverty” or the “benefit of the community.” However, the court rejected both arguments.
With regards to the relief of poverty, the court held that providing funds to prosecute wrongful dismissal claims does not have the aim of relieving poverty at its core. Even if it does, it is an “ineffective tool for that purpose.” The court held that there was nothing in the trust which would provide “the type of immediate, short term assistance that people who find themselves terminated from their employment require. The only guaranteed beneficiary is legal counsel whose fees and disbursements are secured by payment from the trust.” For this reason, the court held that the trust failed under this head.
With regards to being “beneficial to the community,” the petitioner argued that the trust facilitated access to justice, which has been recognized as a valid charitable purpose. However, the court held that, to succeed under this head, the petitioner must show that there was a significant number of people who were “poor” and who faced access to justice issues related to wrongful dismissal. In other words, the petitioner must show that the trust would benefit an “appreciably important or sizable segment of society.” If such a group was not shown to exist, the trust would, at best, provide a “private advantage” (the antithesis of a “communal” benefit). Having failed to provide evidence of the number of potential beneficiaries, the court held that the trust failed under this head as well.
Purpose trusts can be a benefit to society and establish the settlor’s lasting legacy. However, they must be carefully designed so as to ensure that they meet the definition of “charitable” purpose trust.” Without the “charitable,” they are simply “purpose trusts,” which fail under Canadian trust law.
It was left open whether the petitioner could reapply to the court once sufficient evidence had been gathered regarding the size of the class of persons who may benefit from the trust. Alternately, the trust will fail and the settlor will have an opportunity to go back to the drawing board.
RICHARD ARBLASTERFebruary 2, 2022 - 9:06 pm
This decision is very worthy of appeal. Hopefully the $$ Mr. Crerar’s will allocated to poor and wrongfully dismissed persons will be an incentive for the estate’s trustees to pursue defending the obligation to carry out the instructions given to them by the testator.