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Yesterday, I discussed Fort Sackville Foundation v. Darby Estate, 2010 NSSC 27 (CanLII). Today, I will discuss the matter of the costs of the proceedings, reported at .Fort Sackville Foundation v. Darby Estate, 2010 NSSC 45 (CanLII)

The court had dismissed the application by the charity for a declaration that it was the successor charity, or that it was entitled to the bequest upon the application of the cy-pres doctrine.

The charity requested solicitor and client costs from the estate. The successful residual beneficiaries suggested that the charity should receive no costs at all, or at best, party and party costs. The residual beneficiaries noted that any award of costs would come from their entitlement under the estate, and thus, in effect, the successful parties would be paying the unsuccessful party’s costs.

The court awarded solicitor and client costs to the charity. The court noted that the “dispute” was created less by the parties, and more by the wording used by the testator, which wording “fuelled” the issues. Although the arguments of the charity failed, they were “justified” arguments, and arguments “based on reason”.

In Ontario, the court has made similar costs rulings in circumstances where it can be said that the parties have acted reasonably in bringing the matter before the court. However, a different outcome might result if the court was of the view that one of the parties acted unreasonably.

Thank you for reading.

Paul E. Trudelle - Click here for more information on Paul Trudelle.

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John Darby died in 2008. In his July 2007 Will, he left his residence and contents to the “Heritage Society of Bedford” [Nova Scotia] on specific conditions. The conditions included a requirement that the Society commit to retain his property and contents as a heritage property; a commitment to use the building to house a museum or some other specified uses; to make such commitments within 1 year; and to open the residence for the stipulated purposes within 3 years. If they did not, the property was to fall into the residue.

However, at the time of his death (or at the time of the making of the Will, for that matter), there was no entity known as the “Heritage Society of Bedford”. There was a charity known as the “Bedford Heritage Society”. However, that charity disposed of its assets and surrendered its certificate of incorporation many years earlier.

The Fort Sackville Foundation claimed that it was the successor charity. The court rejected this claim, holding that there was no amalgamation. While the court will take a broad approach to legal successorship in such circumstances, it cannot find a successor where an entity ceased to exist.

The court went on to consider whether the doctrine of cy-pres applied. The doctrine will be applied where:

a.      the gift as it stands is either impossible or impractical to effect; and

b.      the donor expressed a general charitable intent in making the gift.

The court held that neither test had been met. 

As to the first branch of the test, the gift was not impossible or impractical to effect. Because the gift provided for a gift-over, it could readily be given effect.

As to the second branch, the conditions of the gift narrowed the focus of the gift so as to take away a general charitable intent. The purpose of the gift was to preserve the deceased’s property. If that could not be done, the proceeds were to pass to the residual beneficiaries. Thus, it was held that there was no general charitable intent.

As a result, the proceeds of the sale passed to the residual beneficiaries.

See here for the reported decision.

Tomorrow, I will turn to the issue of costs.

Thank you for reading.

Paul E. Trudelle - Click here for more information on Paul Trudelle.

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Cy pres is the equitable doctrine under which a court interprets a document containing a gift to charity by substituting another charity to reflect as closely as possible the donor’s intention. Courts use cy pres when a donor’s original charitable purpose cannot be exactly fulfilled. When literal compliance is impossible, the general intention of the donor should still be carried out as nearly as possible (cy pres) so that the charitable bequest does not fail.  

In our area of expertise, estate and trust litigation, cy pres applications are quite common to determine the proper beneficiary(s) of a subject testamentary bequest.  Megan Connolly has blogged on the application of the cy pres doctrine to charitable bequests in Wills. Cy pres has been applied in other areas of the law.

In the context of class action proceedings, settlements increasingly include cy pres orders (as they are often called) where part of the settlement funds are paid to charitable and non-profit organizations, to be applied to activities that may reasonably be expected to benefit class members. In a recent decision approving the settlement of a class action against a financial institution involving alleged unauthorized charges for foreign currency transactions, Justice Cullity reviewed cy pres orders in class action settlements and ultimately made an order for the Law Foundation of Ontario to receive $14.2 million to create a trust fund “for the purpose of advancing public access to justice in Canada”. Justice Cullity noted that access to justice had been used as a ground for certifying the proceeding. Class members and other members of the public would benefit from enhanced access to justice in the future. 

Thanks for reading,

Bianca La Neve

Bianca La Neve - Click here for more information on Bianca La Neve.