This is an abbreviated version of a case comment that was presented by Nicola at the May 24, 2012, CBA Charities Law and Not-For-Profit Section Meeting.
In the Victoria Order of Nurses for Canada v. Greater Hamilton Wellness Foundation the Greater Hamilton Wellness Foundation (the “Foundation”) was set up as an entity to raise funds exclusively for a local Hamilton Victoria Order of Nurses for Canada (“VON”) branch. In the late 1990s there was restructuring within VON and the Foundation and VON ended up having a falling out over various issues. VON Hamilton ceased to exist and VON Ontario took over their operations. The relationship between the VON Ontario branch and the Foundation broke down completely and the Foundation ended up moving out of shared office space in the middle of the night, taking confidential donor information and records with them.
The crux of this case was that due to the relationship falling apart, the Foundation took steps to change their supplementary letters patent to allow for them to apply their funds to groups other than VON entities. This was challenged by VON and went before the courts in Ontario. The Ontario Superior Court of Justice found that the Foundation’s assets were beneficially owned by VON due to the original donor’s donating them under the premise that they would be applied to VON programs. Subsequently, the Foundation had to turn over all of its assets held as of December, 15, 2009 to VON. In supplementary reasons Justice Beaudoin clarified that this amounted to $1,344,607.07 plus any increase or minus any increase in the market value of liquid assets.
This case is an important reminder to charities that are looking to change their statement of purposes. It is crucial that past donors are considered before funds are applied to a new purpose. In this case it was suggested by the court that the Foundation should have sought direction from the Public Guardian and Trustee regarding what to do with the assets it held prior to taking the drastic self-help measures that it did.
It should be noted that the decision on costs is an interesting read on its own. The court found that due to the behaviour of the Foundation and its directors and the multiple breaches of fiduciary duty, the Foundation could not seek immunity from costs as a public interest litigant. The court issued an order that the Applicants and the Public Guardian and Trustee could claim the unpaid amount of such costs awards against the insurer for the Foundation, the Foundation’s Directors and or their insurer.
Although this case is from Ontario, it is an important reminder to charities and their directors that they have a fiduciary duty to their historic donors to apply those donated funds to charitable purposes set out in their corporate objectives at the time the donation was made. In this case the judge set out that the Foundation should have applied to the PGT for direction prior to taking self-help actions. In British Columbia charities should also be aware of the fiduciary duty they owe to their donors and the Charitable Purposes Preservation Act, allows for direction from the court if required.