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Trusts - Charitable Trusts. Friends of Toronto Public Cemeteries Inc. v. Public Guardian and Trustee
In Friends of Toronto Public Cemeteries Inc. v. Public Guardian and Trustee (Ont CA, 2020) the Court of Appeal addressed an unusual case dealing with the history and antiquated statutes of Mount Pleasant Cemetery in Toronto. One issue was whether the cemetery was a charitable trust for purposes of the Charities Accounting Act or not (they weren't):(2) Analysis
[157] The origin of the contest in this case has little to do with the traditional lens through which a request for a charitable designation often arises. Typically, the contextual framework for such a request is income tax based. In Vancouver Society, Gonthier J., in dissent, described the considerable privileges that attach to charitable status. Organizations seek the ability to generate donations that produce charitable receipts, which in turn justify a deduction from income so as to achieve a reduced tax exposure. In that same decision, Iacobucci J, writing for the majority, also commented on the tremendous tax advantages and the consequent loss of revenue to the public treasury that arises from a charitable status designation. In A.Y.S.A. Amateur Youth Soccer Assn. v. Canada Revenue Agency, 2007 SCC 42, [2007] 3 S.C.R. 217, Rothstein J. observed, at para. 6, that associations that qualify as non-profit organizations under the ITA, but not as registered charities, pay no tax on income but cannot issue tax receipts to donors.
[158] As with the CAA, the ITA relies on the common law definition of charity, which is subject to incremental change as the common law adapts to societal change: A.Y.S.A., at para. 8. Rothstein J. explained that “[u]nless legislation provides otherwise, it will be for the courts, through the jurisprudence, to determine what is or is not a charity for legal purposes”: at para. 8.
[159] In this case, the issue of charitable status has already been canvassed with the Minister of National Revenue, and in 1977, Revenue Canada communicated its advice that MPGC was not a charity for tax purposes. MPGC does not solicit funds and is entirely self-sufficient. The income tax context is totally absent from this case. Furthermore, the 1871 Act itself provided that “the said cemeteries or burying grounds shall be, and are hereby declared exempt from all public taxes, rates or assessments”.[11]
[160] Here, the charitable status designation is sought so that the respondent FTPC can avail itself of the provisions of the CAA and obtain an order that MPGC be investigated by the PGT. However, as already discussed, MPGC is heavily regulated under the Bereavement Authority of Ontario, the FBCSA, and its regulations. So, by way of example, the PGT may require a funeral operator such as MPGC to provide audited financial statements on any trust account or trust fund that is required to be established under the FBCSA. Upon receiving a written direction from the PGT, a person who is required under the FBCSA to establish a trust fund or hold money in trust shall apply to the Superior Court of Justice to pass accounts. MPGC must also have appropriate licences for its operations, maintain certain trust accounts, provide certain audited financial statements, maintain certain records, and report certain changes to the Registrar under the FBCSA. The FBCSA also provides for a separate complaint and inspection procedure. No charitable designation is required for any of this.
[161] All this is to say that the framework within which the issue of charitable status arises in this case presents a very different context.
(A) Statutory Trust
[162] As conceded by counsel for the appellant, and, in any event, as found by the application judge, the appellant is the trustee of a statutory trust. The parties’ submissions on this third ground of appeal focused on the definition of “charitable purpose” under the common law. However, all parties concede that MPGC is a statutory trust and there is no appeal of that issue.
[163] A statutory trust, as the name implies, is a creature of statute: The Guarantee Company of North America v. Royal Bank of Canada, 2019 ONCA 9, 144 O.R. (3d) 225, at para. 18. Being a creature of statute, a statutory trust does not have to fulfill the requirements of the common law of trusts: British Columbia v. Henfrey Samson Belair Ltd., 1989 CanLII 43 (SCC), [1989] 2 S.C.R. 24; Guarantee, at paras. 36, 47. Indeed, the authors of Oosterhoff on Trusts suggest that statutory trusts are generally imposed in the absence of at least one of the three certainties of trust law (certainty of intention, subject matter, and object): A.H. Oosterhoff, Robert Chambers & Mitchell McInnes, Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed. (Toronto: Carswell, 2014), at p. 29. As noted by the Supreme Court, the provincial governments “may define “trust” as they choose for matters within their own legislative competence…”: Henfrey, at p. 35.
[164] These authorities indicate that a statutory trust is a flexible device. In XMCO Canada Ltd., Re, 1991 CarswellOnt 161 (C.J.), for example, Killeen J. described it as “expansive” and having a “special form”: at paras. 18, 20. (See also: Guarantee, at paras. 50, 79; Henfrey, at pp. 34-35.) As such, and being a creature of statute, a statutory trust may be altered by the Legislature.
[165] Statutory trusts are a difficult fit with charitable purpose trusts. A statutory trust is a creature of statute and clear statutory language reflecting a legislative intention to create a charitable purpose trust would be expected. I see no such language in any of the relevant Acts. In this regard, it is telling that the Legislature did not use the word “charitable” or “charity”, even though the modern concept of charities dates back to the 17th century Statute of Elizabeth. One feature of a statutory trust is that, as a creature of statute, it can be changed by the Legislature. No party in this case contends that the Legislature could not change further the legislation affecting MPGC.
[166] Statutes are to be read as being coherent: Sullivan, at para. 11.2. The CAA supplements the court’s inherent jurisdiction to supervise the activities of charitable organizations: Asian Outreach Canada v. Hutchinson, 1999 CarswellOnt 1794 (S.C.), at para. 26. As noted by van Rensburg J. (as she then was) in Friends of Camp Aneesh v. Girl Guides of Canada, 2012 ONSC 6855, at para. 25, “the CAA creates machinery and provides procedures and does not significantly extend the jurisdiction of the Court over the matters to which it refers”. In Re Centenary Hospital Association (1989), 1989 CanLII 4357 (ON SC), 59 D.L.R. (4th) 449 (Ont. S.C.), after reviewing the legislative history of the CAA and other Acts governing public hospitals, the court found that the activities of public hospitals were not covered by the CAA because:…the [Public Hospitals Act, R.S.O. 1980, c. 410] was intended to provide an exclusive statutory scheme for the supervision and regulation of public hospitals and it was not contemplated that the Charities Accounting Act should apply nor that the Public Trustee should have a role… Had [the Charities Accounting Act] been intended to give the Public Trustee, for the first time, power to supervise the financial affairs of public hospitals, quite independently of and possibly in a manner that would conflict with the powers of the Lieutenant Governor in Council and the Minister under the Public Hospitals Act, it would have been plainly so stated in the legislation: at pp. 463-464. [167] As discussed, MPGC is already heavily regulated under the Bereavement Authority of Ontario, the FBCSA, and its regulations, and before these enactments, by a different comprehensive regulatory regime. The Legislature could not have intended that the CAA also apply to MPGC.
[168] MPGC is a statutory trust. If the Legislature had wished to make MPGC a charitable purpose trust, it could have done so. Indeed, presumably it still could. Moreover, when invited to change the legislation, albeit for a different purpose, in 2010, the Ontario Government declined to take any action. And, when the issue of charitable status was taken up with the PGT in 1991 and then again in later years, the PGT took no further action in the face of MPGC’s stated rejection of such a characterization.
[169] For these reasons, I conclude that it was not open to the application judge to treat the statutory trust as a charitable purpose trust under the CAA.
[170] Having said that, in light of the other arguments made by the parties, I will also address why I would not consider this to be a charitable purpose trust in any event.
(B) Charitable Purpose Trust
[171] Although in the context of the ITA rather than the CAA, in A.Y.S.A., Rothstein J. traced the evolution of the law on charitable purpose trusts and noted, at para. 25, that the cases often start by citing the preamble to the Charitable Uses Act, 1601 (Eng.), 43 Eliz. 1, c.4 (commonly referred to as the Statute of Elizabeth or the Statute of Charitable Uses), which provided a list of examples of charitable purposes. (I would observe in passing that a cemetery is not one of them.) The list was then refined into four categories in Commissioners for Special Purposes of the Income Tax v. Pemsel, [1891] A.C. 531 (H.L.). The Pemsel approach was subsequently adopted by the Supreme Court of Canada in three tax cases: Dames du Bon Pasteur v. R., 1952 CanLII 34 (SCC), [1952] 2 S.C.R. 76; Towle Estate v. Minister of National Revenue (1966), 1966 CanLII 40 (SCC), [1967] S.C.R. 133; and Vancouver Society.
[172] The CAA incorporated the same scheme to determine a charitable purpose. Section 7 of the CAA provides that charitable purpose means: (a) the relief of poverty, (b) education, (c) the advancement of religion, and (d) any purpose beneficial to the community, not falling under clause (a), (b) or (c).
[173] Only category (d), the basket clause, is relevant to the analysis in this case. In A.Y.S.A., Rothstein J. explained, at para. 27:In Vancouver Society, the majority held that under the fourth head, the purposes of the organization must be of (a) “public benefit” or “beneficial to the community” and (b) “in a way the law regards as charitable” (para. 176). Recognizing that this reasoning was circular and that the law was not clear, Iacobucci J., at para. 177, adopted the following test from D’Aguiar v. Guyana Commissioner of Inland Revenue, [1970] T.R. 31, at p. 33:[The Court] must first consider the trend of those decisions which have established certain objects as charitable under this heading, and ask whether, by reasonable extension or analogy, the instant case may be considered to be in line with these. Secondly, it must examine certain accepted anomalies to see whether they fairly cover the objects under consideration. Thirdly — and this is really a cross‑check upon the others — it must ask whether, consistently with the objects declared, the income and property in question can be applied for purposes clearly falling outside the scope of charity; if so, the argument for charity must fail. Iacobucci J. then added to the test:To this I would add the general requirement…that the purpose must also be “for the benefit of the community or of an appreciably important class of the community” rather than for private advantage. [174] In A.Y.S.A., Rothstein J. then highlighted that “[i]n a case involving the meaning of charity for purposes of the ITA, we are not applying the common law in a vacuum. It will be necessary to consider not only the common law, but the common law in relation to the scheme of the ITA: A.Y.S.A., at para. 30. Rothstein J. summarized the proper approach, at para. 31:To summarize, in determining if an organization is charitable under the fourth head of Pemsel for purposes of registration under the [Income Tax Act], it will be necessary to consider the trend of cases to decide if the purposes are for a public benefit which the law regards as charitable. It will also be necessary to consider the scheme of the [Income Tax Act]. Finally, it is necessary to determine whether what is sought is an incremental change or a reform best left to Parliament. [175] As in A.Y.S.A., “we are not applying the common law in a vacuum”, but in relation to the scheme of the CAA. Based on A.Y.S.A., to determine whether an organization is charitable under the fourth category of Pemsel, for the purposes of the CAA, it is necessary to first examine the trend of cases to decide if the purposes are for a public benefit which the law regards as charitable.[12] Second, it is necessary to consider the scheme of the statute in question (in A.Y.S.A., the ITA, and in this case, the CAA). Finally, it is necessary to consider whether the proposed charitable designation is in the nature of a reform demanding legislative action.
[176] Before applying this test, I must also emphasize that the law of charity is a moving subject that should evolve as new social needs arise or as old needs become obsolete or satisfied: Vancouver Society, at paras. 146, 150; A.Y.S.A., at para. 28. To quote from Iacobucci J. in Vancouver Society, at para. 146:[T]he court has always had the jurisdiction to decide what is charitable and was never bound by the preamble. Nonetheless, the preamble proved to be a rich source of examples and the law of charities has proceeded by way of analogy to the purposes enumerated in the preamble. Indeed, as Lord Wilberforce observed in Scottish Burial Reform and Cremation Society v. Glasgow Corporation, [1968] A.C. 138 (H.L.), at p. 154:
…it is now accepted that what must be regarded is not the wording of the preamble itself, but the effect of decisions given by the courts as to its scope, decisions which have endeavoured to keep the law as to charities moving as new social needs arise or old ones become obsolete or satisfied. 1. No Compelling Jurisprudential Trend
[177] Dealing firstly with the issue of whether there is a jurisprudential trend, disposal of the dead used to be regarded as a religious activity in the advancement of religion (the third charitable purpose category) because burials traditionally took place in a churchyard. However, as the application judge noted, some cases support the proposition that non-denominational cemeteries may also have a charitable purpose. None of the cases cited by the application judge post-date 1949 in Canada and 1968 in the United Kingdom.
[178] The 1949 decision of the Manitoba Court of King’s Bench in Re Oldfield involved a gift for the maintenance of a communal cemetery unconnected with any church or religious denomination. The court decided that the bequest had a charitable purpose. Similarly, in Re Quinn’s Wills Trusts (1953), 88, I.L.T.R. 161 (H. C.), the High Court in Ireland found that a gift for the annual improvement of a non-denominational cemetery was a charitable bequest within the fourth category. The PGT also referred this court to the 1976 decision in Re Robinson (1976), 1976 CanLII 626 (ON SC), 75 D.L.R. (3d) 532 (Ont. S.C.), which found that a bequest of $5,000 for the general upkeep of a cemetery was charitable in nature: at p. 533. Importantly, these cases involved bequests, a very different factual context than a statutory trust established by the Legislature.
[179] Scottish Burial involved a limited company that had been incorporated to promote inexpensive and sanitary methods of burial in Scotland, particularly through cremation, and to publish information in that regard. The company charged fees, but these fees were not intended to yield a profit. As its name implies, the focus of the company was burial reform and cremation. The House of Lords accepted that this was a charity under the basket clause. Arguably, Scottish Burial simply stands for the proposition that the promotion of reform in methods of disposal of the dead may constitute a charitable purpose.
[180] Even if these cases could be given a broader interpretation, it is fair to conclude that the jurisprudence on the charitable nature of cemeteries is extremely limited. It certainly cannot be characterized as a trend as described in A.Y.S.A. In the circumstances of such limited jurisprudence, this court was not referred to any separate anomalous cases: Vancouver Society, at para. 177. Moreover, as mentioned, MPGC is a statutory trust. I do not view the above cases as authority for the proposition that a statutory trust created for the operation of a non-denominational cemetery has a charitable purpose under the common law. This is a circumstance where, “[consistent] with the objects declared, the income and property in question can be applied for purposes clearly falling outside the scope of charity”: Vancouver Society, at para. 177.
[181] In addition to having a purpose that the law regards as charitable, under the basket clause, the charitable purpose of an organization must also be for the benefit of the community or an appreciably important class of the community: Vancouver Society, at paras. 175-177; A.Y.S.A., at para. 27. As Iacobucci J. explained in Vancouver Society, charitable activity is not concerned with the conferment of private advantage: at para. 147.
[182] The application judge noted that MPGC did not dispute that its activities are intended to benefit the public: at para. 139. MPGC nevertheless emphasizes to this court that, even if its activities are beneficial to the public, providing a public benefit is not MPGC’s primary purpose. As I have found that MPGC does not have a charitable purpose for other reasons, it is unnecessary to further consider this part of the test. I would note, however, that as MPGC is a statutory trust, one would expect there to be a public benefit.
2. Scheme of Statute
[183] In examining the scheme of the statute, I have already addressed this issue. However, I would also observe that the circumstances surrounding MPGC’s establishment had a business component. The Legislature’s initial focus was to create a vehicle for multiple individuals to hold land together for a non-denominational cemetery. And, as mandated in s. 6 of the 1871 Act, “the said corporation may sell, convey or otherwise dispose of the said lots to any person or persons on such terms and conditions and subject to such by laws of the corporation, and at such prices as shall be agreed on…”. Consistent with such a mandate, MPGC provides services and receives payment for doing so. It charges market and above market rates, and is not limited to cost recovery. Although fees do not preclude charitable status, this is another factor suggesting that MPGC’s purpose is not charitable.
[184] Even if one were to accept that MPGC’s purpose was charitable in nature, that purpose has become obsolete today. The law of charities is a moving subject: Vancouver Society, at para. 146. As the record amply illustrates, there are numerous cemeteries, denominational and non-denominational alike, some charitable and some not. Any charitable purpose that potentially could have animated MPGC is spent.
[185] MPGC operates as a non-profit organization and has done so for decades, if not centuries. I see no basis to alter this characterization.
[186] Lastly, I recognize that the ITA differs from the CAA and that Revenue Canada’s determination that MPGC is not a charity is not determinative. Nonetheless, it is not unfortunate that MPGC’s characterization remains stable and consistent with Revenue Canada’s position on the issue.
[187] In conclusion, I am unable to conclude that MPGC falls within the scheme and parameters of s. 7 of the CAA.
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