This week’s blog has been written by Darren Lund

In Ontario, as in most common law jurisdictions, charitable gifts are treated differently than other gifts in important ways. One of the clearest examples of this is that a gift for a charitable purpose will generally not fail for uncertainty. In addition, the court’s inherent “scheme-making power” may save a charitable gift where the charitable purpose cannot be carried out, or the means by which the charitable purpose is to be carried out are unclear or incomplete.

The “scheme-making power” is an umbrella term that refers to two different types of schemes: (1) administrative schemes; and (2) cy-près schemes. Although the lines between them are sometimes difficult to discern in practice, they are separate schemes with different purposes and legal requirements.

A court may use the administrative scheme-making power where there is a gift for a valid charitable purpose, but either the manner of carrying out the charitable purpose is unclear, there are gaps in the administrative provisions for carrying out the charitable purpose, or changes to existing administrative provisions (which may include investment provisions) are sought in order to better carry out the charitable purpose. The key aspect of administrative schemes is that they do not vary the charitable purpose; rather, they seek to more effectively carry it out.[1]

In a cy-près  scheme, a court is asked to approve a charitable purpose that is as close as possible to the original charitable purpose (e.g. in a will). Not surprisingly, therefore, a court must first conclude that the original charitable purpose cannot be carried out before it can approve a scheme under its cy-près jurisdiction. In legal terms, it must be “impossible or impracticable” to carry out the charitable purpose.[2]

Interestingly, the legal test for the application of a cy-près  scheme is different depending on when the impossibility or impracticability occurs. If the impossibility or impracticability arises at the time the gift takes effect (known as an “initial impossibility or impracticability”), then in order for the court to approve a cy-près scheme it must find that the donor had a “general charitable intention”.[3] By way of example, if a donor intended to benefit only a specific named charity, and that charity does not exist at the time the gift takes effect, then the court cannot approve a cy-près  scheme and the gift will fail. However, if on a balance of probabilities the court determines that the donor’s charitable intention was a general intention, not limited to only the named charity, then the court could, in this example, approve a cy-près scheme in favour of a charitable purpose that is as close as possible to the named charity that no longer exists.

The test is different if a charitable purpose can be carried out at the time the gift takes effect, but at some later date it becomes impossible or impracticable to do so. This is known as a “supervening impossibility or impracticability”. In this scenario, it is not necessary for there to be a general charitable intention. Rather, the court must conclude that subject matter of the gift is exclusively dedicated to charity such that “no other interests exist in it, either in the donor or anyone else.”[4] The practical effect is that it is much less likely that a charitable gift will fail where there is a supervening impossibility or impracticability.

“Schemes” often have a negative connotation as the term is used in everyday conversation, but the court’s inherent scheme-making power in the context of charitable gifts is just the opposite – a useful and helpful tool to save or improve the implementation a charitable gift that may otherwise fail or be difficult or impossible to implement.

[1]      Waters’ Law of Trusts in Canada, 4^th edition, at pp. 807-810.

[2]      Waters, pp. 812-813.

[3]      Waters, at p. 819.

[4]      Waters at p. 828.