Saturday, May 07, 2016

The Sidney and North Saanich Memorial Park Society v. British Columbia (Attorney General)

A good thing about charitable purpose trusts is that they can last forever. A bad thing about charitable purpose trusts is that they can last forever. When creating a charitable purpose trusts, or any long-term trust for that matter, it is difficult to predict what the future holds, and build sufficient flexibility into the trust documents to meet the needs of those who are intended to benefit as circumstances change. Fortunately, as illustrated by a recent decision of the Supreme Court of British Columbia in The Sidney and North Saanich Memorial Park Society v. British Columbia (Attorney General), 2016 BCSC 589, superior courts in common law provinces in Canada do have tools to amend charitable trusts.

The Sidney and North Saanich War Memorial Park Society settled a charitable trust (which I will refer to simply as the “Trust”) in 1965 to hold certain lands (the “Lands”) now in the Town of Sidney. In 1965 the Lands included a park, playing fields and tennis courts, a community hall, called Sanscha Hall, and a Cenotaph. The Sidney and North Saanich War Memorial Park Society transferred the Lands to the trustee of the Trust to hold for the residents of the Electoral District of Saanich (the “Residents”) for “community, cultural, athletic and recreational purposes.”

The Trust deed setting out the powers and duties of the trustee contained certain restrictions including:
  1. A portion of the Lands and Premises (the” Cenotaph Area”) had to be used solely for a memorial cairn;
  2. The trustee had the power to lease the remaining Lands and Premises,  or a part of them, for  a term of up to 5 years with an option to renew for 5 years, provided that the tenant permits and encourages the Lands and Premises to be used by the Residents for community, cultural, athletic and recreational purposes and maintains the Cenotaph Area in good repair;
  3. If any part of the Lands and Premises are expropriated  then the funds received for the expropriation would have to be used to purchase, maintain and improve other lands and premises;
  4. The Residents were given a number of powers including the power to require that the trustee terminate any lease on giving the tenant 30 days notice.

There were a number of changes that occurred over the years, including the following:

  1. In 1969, the Province of British Columbia expropriated part of the Lands on which the Cenotaph was located, and the Cenotaph was moved;
  2. In 1983, the Town of Sidney expropriated a portion of the lands and paid approximately $500,000 in compensation;
  3. In 1987, the trustee used some of the proceeds from the expropriation to purchase land and developed a community sports facility known as Blue Heron Park;
  4. The trustee developed a new multi-purpose arts facility, now known as the Mary Winspear Centre, which opened in 2001 and replaced Sanscha Hall.
Some of the provisions in the Trust deed create significant difficulties for the trustees in light of the changes that have occurred since 1965. For example, the current trustee, the Sidney and North Saanich Memorial Park Society, holds approximately $380,000 from the expropriation compensation, which under the terms of the Trust deed must be used to maintain and improve the Blue Heron Park, but the Blue Heron Park does not require the funds, which could be better used to maintain the Mary Winspear Centre. The restrictions on the length of leases and the provision allowing the Residents to require the trustee to terminate any lease to a Tenant on giving a Tenant 30 days notice, prevent the trustee from attracting tenants and entering into long-term profitable leases.

The Sidney and North Saanich Memorial Park Society asked the court to interpret certain provisions of the Trust deed (which I won’t deal with in this post), and to amend the Trust deed as follows:

a.               Removal of the restrictions on the lease term;
b.               Removal of the power granted to the Residents by which they can require the trustee to terminate a lease on 30 days’ notice without cause;
c.               The trustee be permitted to use any Expropriation Funds to maintain and improve all Trust Property, thereby removing the restriction that such funds only be used for the land purchased in substitution;
d.               Inclusion of a specific provision empowering the trustee to carry on business activities on the Trust Property and to permit uses of or activities on the Trust Property, including business use and the earning of rental income, subject to the terms and conditions of the Trust, and requiring that all such activities and use conform to the community, cultural, athletic and recreational purposes of the Trust; and
e.               Inclusion of a provision that the trustee preserve and maintain a memorial cenotaph, sculpture or other structure, on a place on the Trust Property that is prominent and accessible to the public.
In her reasons for judgement, Madam Justice Dardi considered the Court’s jurisdiction to amend a charitable trust. The first is the cy-pres jurisdiction (which I have written about before). The second is the courts inherent jurisdiction for administrative scheme-making. As I read this case, the circumstances in which the cy-pres jurisdiction may be invoked are relatively narrow, that the terms of the trust have are impossible or impracticable to carry out, but once invoked the Court has broad powers to amend the trust. In contrast, the threshold for invoking the administrative scheme-making power is lower, but the Courts powers are narrower.

Madam Justice Dardi neatly summarized the cy-pres jurisdiction as follows:
[47]         Cy-près is a significant doctrine in the law of charities. It determines what happens when property that has been dedicated to charitable purposes cannot be applied in the manner intended by the donor: Haley & McMurtry, Equity and Trusts, 3d ed (London: Sweet & Maxwell, 2011) at 261. Where the purposes or objects of a charitable trust have become impossible or impracticable to achieve, the court, relying on its inherent jurisdiction, may intervene and alter the purposes of the trust, and in doing so, depart from the stated intention of the settlor. The courts may implement modernized or modified objects that are “as near as possible” (cy-près) to the original purposes: Toronto Aged Men’s and Women’s Homes v. Loyal True Blue and Orange Home, [2003] O.J. No. 5381, 68 O.R. (3d) 777 at para. 50 (S.C.J.) [Stillman].
[48]         A cy-près order “must depart from the intentions of the [settlor] only to the extent required to remove the problem that has caused the future administration of the Trust to become impracticable.” It is also imperative that the relative efficiency of the proposed amendments be considered: Stillman at para. 28.
[49]         The threshold requirement for invoking the cy-près doctrine is a finding that carrying out the existing trust terms is either impossible or impracticable. In the absence of such a determination, the court must refuse to exercise its cy-près scheme-making jurisdiction. Despite the narrow ambit of the doctrine, courts have, at times, interpreted impossibility and impracticability broadly: Waters [Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012)] at 683. “Impracticability” is not to be construed as “absolutely impracticable”: In re Dominion Students’ Hall Trust, [1947] Ch. 183 at 186.
[50]         Earlier lines of authority endorsed the notion that cy-près orders should be restricted to cases where there has been a failure of the purposes or objects of a charitable trust as distinct from the malfunction of the directions from the settlor for implementing those objects.
[51]         However, the modern Canadian jurisprudence, as articulated by Mr. Justice Cullity in Stillman at paras. 31-33 and subsequently applied by the court in Fenton Estate, 2014 BCSC 39, establishes that the doctrine extends beyond remedying the failure of objects. It goes further and empowers the court, without amending the purposes, to introduce or adjust administrative trust machinery to accommodate contemporary conditions, so that the charitable purposes can be sustained. The rationale is found in the judicial recognition that the charitable objects should not be frustrated by the trust’s administrative provisions.
Madam Justice Dardi adopted the modern approach to cy-près as set out in Stillman.

She then summarized the administrative scheme-making jurisdiction,

[56]         The jurisprudence establishes that, even absent a finding of impracticability or impossibility, the court retains the inherent jurisdiction for administrative scheme-making with respect to charitable trusts. An administrative scheme addresses the inadequacy of the administrative terms of a trust to achieve its charitable objects: Waters at 807-08. Pursuant to this jurisdiction, the court has the power to supply administrative terms or to alter the administrative machinery of a charitable trust when necessary for the effective operation of the trust. The court directs a scheme in order to secure a more complete attainment of the charitable purposes. This is in keeping with a long-standing recognition by the courts that the dedication of property to charity through a trust involves special rules. The jurisdiction to regulate the administration of charitable trusts should be exercised sparingly.
[57]         Historically, the courts in England have relied on their inherent jurisdiction to  supply administrative terms when the trust instrument is silent, or to vary administrative terms including trustee powers, such as the investment power, when those terms have become obsolete: In re Royal Society’s Charitable Trusts, [1956] Ch. 87.
Madam Justice Dardi considered conflicting case authorities in other provinces, but found that although there are conflicting judicial opinions on the extent of the court’s powers, the jurisdiction is accepted in Canadian law. (Although I will not deal with the conflicting cases in this post, the discussion is quite interesting, and perhaps fodder for a future blog post.)

She wrote,

[76]         I conclude that I have inherent jurisdiction for administrative scheme-making for charitable trusts. In cases where it cannot be said that the requirements to achieve the purposes of a charitable trust have become sufficiently impracticable or impossible so as to engage the cy-press doctrine, the courts may nonetheless, pursuant to this administrative scheme-making jurisdiction, vary the administrative terms of a trust for the furtherance of charitable purposes. 
She found that she had jurisdiction to grant the amendments requested by the Sidney and North Saanich Memorial Park Society under both the cy-près jurisdiction and the administrative scheme-making jurisdiction, and that it was appropriate to grant the orders amending the Trust deed.

With respect to the cy-près jurisdiction she wrote,

[108]     Counsel for the Trustee submits that without these administrative amendments, the Trust will in all likelihood fail because there are insufficient funds held in trust and/or generated by the Trust Property, and available to the Trustee to adequately maintain and preserve the Trust Property in perpetuity. I agree.
[109]     I am satisfied that, in all the circumstances, the purposes of the Trust have become impracticable as a result of the restrictions upon the Trustee to enter into short-term leases, the Resident Oversight Clause, and the restriction placed on the use of the Expropriation Funds. I am satisfied that the Trustee has established economic impracticability of the continuation of strict adherence to these administrative terms. While these administrative terms may have been practical when the Trust was settled, subsequent events have rendered adherence to the strict terms impracticable, such that the court’s cy-près jurisdiction is engaged
[110]     Accordingly, I approve the amendments to the Trust Deed as sought by the Trustee. The Trustee has proposed removing the provisions limiting leases to five- year terms. As an added protection, the Trustee has proposed the inclusion of a clause which requires the Trustee to take steps at least once every five years to satisfy itself that the tenant is not in breach of the terms and conditions of the Trust, including its objects and purposes. I endorse the inclusion of that safeguard.
Madam Justice Dardi wrote in respect of the administrative scheme-making jurisdiction,

[115]     For completeness and if the cy-près doctrine is not engaged, I approve the proposed amendments pursuant to the court’s jurisdiction to regulate the administration of the Trust.
[117]     The amendments that I have approved in this case relate to the Trustee’s power to lease. The directions in the Trust Deed regarding the term of the lease and the Resident Oversight Clause are incidental to the power to lease. These directions are not essential to carry out the paramount intention of the settlor, namely that the Trustee be granted the power to lease. I am satisfied that these particular provisions have become inadequate for contemporary needs and that the proposed amendments will effectively modernize the Trust’s administrative machinery.
[118]     Similarly, the settlor conferred upon the Trustee the power to use the compensation payments it has received for the maintenance and improvements of certain prescribed lands. I conclude that the proposed amendment – to expand the parameters of the use of the Expropriation Funds – updates and enhances the efficacy of that administrative term of the Trust.
[119]     In light of the foregoing, the amendments to the administrative directions of the Trust that I have approved do not subvert the donor’s intentions. Rather, the proposed amendments would allow the settlor’s intentions to be more effectively fulfilled.
[120]     In summary on this issue, I am satisfied that the amendments sought fall within the court’s jurisdiction to regulate the administration of the Trust. I conclude that the amendments to the administrative machinery of the Trust will enhance and facilitate, in light of the altered circumstances, the economic feasibility of carrying out of the settlor’s paramount objective, namely that the Trust Property continue to be used by the Residents for community, cultural, athletic and recreational purposes. The amendments secure the more complete attainment of the charitable objects and ensure that the settlor’s intentions and the charitable purposes of the Trust can be carried out more effectively.

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