A recent decision of the Supreme Court of British Columbia, Boys and Girls Club of Greater Victoria Foundation v British Columbia (Attorney General)1, highlights how difficult it is for a charity to change the purpose of a restricted purpose charitable trust.
The Boys and Girls Club of Greater Victoria Foundation ("the Foundation") sought a cy-près order to alter the terms of a trust upon which it held property, and two investment funds related to capital improvements and maintenance of that property. Essentially, the Foundation wanted to alter the restricted charitable purpose for which it held the property and funds to a purpose similar to its general charitable purpose.
The property was purchased with funds that had been raised for that specific purpose, and the investment funds were established with monies raised for the upkeep and maintenance of the property. All funds related to the property were kept in separate investment accounts.
The property was used to operate a camp for young people. The popularity of the camp and the programs held there had dropped, and the Foundation (and its related charity, the Boys and Girls Club Service Society (the "Service Society")) was having to make up the financial shortfall with general purpose (or unrestricted) funds. The Foundation sought to sell the property and reallocate the equity from the property sale and the investment funds to more in-demand programs and services provided by the Service Society.
The Court refused to grant the requested order.
For the Court to exercise its discretion to alter the purpose for which the trust was created, it must find that carrying out the existing restricted charitable purpose is either impossible or impracticable. Essentially, the trustee (in this case the Foundation) had to prove that "the application of the trust funds would not result in the benefit intended by the donor."2 An impossibility exists when the purpose of the trust can no longer be carried out. An impracticability exists when the purpose of the trust could still be carried out, but the intention of the donor would not be met.
The Court was critical of the lack of evidence provided by the Foundation to establish the impossibility or impracticability required to alter the restricted purpose for which the charitable trusts were established. Justice Marzari noted that the Foundation was to "provide transparent and fulsome disclosure of its costs, expenses and financial situations" in support of the cy-près application. The evidence relied upon by the Foundation fell short.
The Court found that "the fact that the maintenance of the specific [restricted] purpose charitable trust over the Property is not a break-even proposition is not enough to establish impracticability."3 Similarly, showing that there is less usefulness or cost-effectiveness of the trust property will not support the granting of a cy-près order.
The Court noted that even if the Foundation had proved that it no longer wished to be the trustee of the property and the investment funds as a matter of impracticability, it would have to be satisfied that there was not another trustee willing to take on the restricted purpose charitable trusts without alternation to their purposes.
Many donors want to donate to a registered charity to support a specific program or initiative. In doing so, a restricted purpose charitable trust is created. If accepting such a donation, the registered charity should try to establish with the donor a restricted purpose that is broad in nature to try to account for changes in circumstances over time that may make it more difficult (or expensive) to carry out the trust's purpose. More important, is the inclusion of a clause in the gift agreement that allows the charity to alter the restricted purpose in the sole discretion of its board of directors. Such a clause will avoid the expense and difficulty in obtaining a cy-près order.
Footnotes
1. 2024 BCSC 442 (CanLII).
2. Ibid, para 56.
3. Ibid, para 62.
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