What is a charitable purpose? Jim Crerar Charitable Trust (Re)

What “charity” is in the legal sense developed through the common law established by judges. The definition is important because organizations that are registered charities must be established and operated exclusively for charitable purposes. This is also important for charitable trusts (whether or not they are registered charities), because to be a valid charitable trust, the trust must be set up for charitable purposes.

The starting point for determining what is charitable in a legal sense is the classification described in the 1891 decision of the Pemsell c. Special Income Tax Commissioners. This case established what are known as the Four Heads of Charity:

  1. poverty relief;
  2. the advancement of education;
  3. the advancement of religion; and
  4. other purposes beneficial to the community.

The fourth heading “other purposes beneficial to the community” requires that the purpose be within the “spirit and intent” of the preamble to the Status of Elizabeth (a Charitable Uses Act 1601) and the purpose must also be in the public interest.

We depend on how the courts have defined charity over time. However, charitable cases are infrequent and the development of the law in this area is gradual.

Jim Crerar Charitable Trust (Re), 2022 BCSC 60, is a recent decision of the British Columbia Supreme Court for charitable purposes. Mr. Crerar set up a trust to help poor people file wrongful dismissal suits against their former employers. The issue for the Court to decide was whether the trust was a valid charitable trust because it was established for charitable purposes. The purpose of the trust was:

“…to be distributed 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 (whether said poor person was employed in a business unionized or not union capacity) as a means of alleviating his poverty.

The Court considered whether this was a charitable purpose under the heads of relief of poverty and other purposes beneficial to the community.

poverty relief

The Court found that providing funds to help people sue for wrongful dismissal did not alleviate poverty. The Court’s description of “correct” activities that relieve the poverty of people who have lost their jobs suggests that the activities must provide some type of immediate financial assistance, such as “funding for retraining, job search, employment, living expenses, or even compensation during what might have been an appropriate termination notice period. In the Court’s view, assisting a person to sue for wrongful dismissal was too remote for the activity to alleviate poverty, as the individual would have only one hope that their claim would be successful and that they would may receive a monetary settlement or judgment as a result.

Beneficial objective for the community

The Court also considered whether the trust was charitable on the grounds that it benefits the community in a way that the law regards as charitable. The promotion of access to justice has already been considered charitable (Cassano v. Toronto-Dominion Bank, (2007), 230 OAC 224 (CA)). In this sense, providing access to justice means helping a person who otherwise would not have had access to obtain access to justice in order to protect and enforce their legal rights. A person may have been unable to access justice for financial reasons, but there may also be other barriers.

The Court determined that the trust was not established for the benefit of the community. For a purpose to be charitable under the fourth count, it must benefit the community or the public, which requires that a substantially large or substantial segment of society benefit from it. The Court concluded that no evidence had been provided that there were sufficient numbers of poor people who had been wrongfully dismissed and who lacked the financial means to hire a lawyer to constitute a significant segment of the society.

This decision is disappointing, particularly as it suggests that for an activity to relieve poverty, it must provide the recipient with immediate financial/economic relief, which is a very narrow interpretation of activities that relieve poverty. Although they do not have the force of law, the Canada Revenue Agency guidelines recognize that the provision of simple amenities, necessary for a modest but adequate standard of living, can alleviate poverty and that these activities can take different forms, including legal services. Additionally, as noted in the decision, providing access to justice for those who face barriers to obtaining legal representation is also a recognized charitable purpose. It is surprising that the trust was found to be non-charitable on the grounds that there is not a sufficient segment of the population that could benefit from its purpose.

The deadline to appeal this decision has not expired and it is possible that the decision will be appealed. If the decision is not appealed, it is unlikely to have a significant impact, as the decision mainly depended on whether sufficient evidence had been provided in this case to demonstrate that the objectives were going to alleviate poverty or benefit a sufficient segment of the population.

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