Authored by Derek B.M. Ross.

Many charities are “parents” to subsidiaries, branches, or divisions. In many cases, these subsidiary charities are housed in properties owned by the “parent” – many religious denominations, for example, are the legal owners of the church buildings used by their local congregations. Although the “parent charity” owns the property, the mortgage payments and maintenance costs are often paid with funds raised at the local level. A question that often arises is, what happens if the local charity decides to leave the “parent” charity, or if there is a dispute over the use of the property?

A Case on Point

This issue was recently addressed by the Alberta Court of Appeal in Catholic Charities Clothes Bank of Lethbridge v. Roman Catholic Diocese of Calgary.[i] That case arose from a disagreement between a Calgary diocese and a Clothes Bank (which was described as an agency of the Diocese), over the sale of two properties.  The two properties were originally purchased by the Clothes Bank with its own funds, as well as monies borrowed from the Diocese. However, legal title was registered in the name of the Diocese. The central issue before the court was whether the Diocese owned the properties outright, or whether they were held in trust for the Clothes Bank.

The court concluded on the totality of the evidence that the Diocese was the owner of the properties, based on the parties’ intentions at the time the properties were purchased, as well as their subsequent conduct. The court reviewed meeting minutes, correspondence, and financial records, and noted the following:

  • The Clothes Bank, by its own initiative, sought for itself a place in the formal church organization. When the Clothes Bank was incorporated, its objects specifically stated that it would be operated under the auspices of the Diocese.
  • The Clothes Bank specifically sought the approval of the Diocese to purchase both properties.
  • The Clothes Bank considered the issue of ownership and received legal advice, but agreed that title to the properties would be registered in the name of the Diocese.
  • Although the Clothes Bank argued that the Diocese merely held title in trust for the Clothes Bank, there was no evidence of any such arrangement.
  • A letter from the Clothes Bank to a local authorities board confirmed that one of the properties was owned by the Diocese, and that the Clothes Bank operated under the auspice of the Diocese

The court concluded: “[I]f the title was to be held in trust for the Clothes Bank, there would at least have been some mention of that, or even a trust declaration prepared. But there was not. This gives credence to the argument that full title to these properties was given to the Diocese, which was not simply to hold that title in trust for the Clothes Bank…We are satisfied that the Diocese is the legal and beneficial owner of the two properties in question.” (para. 30).

Some Important Principles

It must be noted that each case will be decided on its own facts, but some important general principles can be drawn from the court’s decision:

  • registration of title is the primary indicator of ownership of property, subject only to clear evidence that the parties had intended and agreed to a trust arrangement
  • the clearest evidence of a trust agreement is a written declaration or deed which confirms that a “parent” charity is a trustee of the property, and holds it in trust for the benefit of the “subsidiary” charity
  • in the absence of such agreement, courts will look (in ambiguous cases) to organizations’ records, such as correspondence and meeting minutes, to determine their intentions – clear evidence will be required and the onus of proof of a “resulting trust” will be on the charity that does not have title

Finally, it is important to remember that, even if there is evidence of a trust agreement, there may also still be issues about the “true” beneficiary of the trust, and whether the group that wants to “break away” meets that definition. For example, in a recent conflict that arose between a number of Anglican parishes and the Anglican Church in Canada over doctrinal issues, a B.C. court was asked to determine who owned a number church properties in dispute. The court concluded that the buildings and other assets were held in trust to further Anglican ministry in accordance with Anglican doctrine, and that “in Canada, the General Synod has the final word on doctrinal matters”.[ii] As such, the court concluded, the individuals who wished to remove themselves from the General Synod’s oversight could not do so and retain the right to use the properties held for purposes of Anglican ministry. [ii] This reasoning was followed by an Ontario court hearing a similar dispute.[iii]

Although a local church might argue that they are the “true” adherents of the teachings of the Church for which a charitable trust was established, Canadian cases suggest that courts will defer to denominational leadership to determine official Church doctrine. Thus, even if a local church is the beneficial owner of a property, its members may not be successful in retaining possession in the event of a doctrinal dispute. Again, however, it must be emphasized that each case will be decided on its own facts.

The Practical Lesson?

So what can be learned from these cases? An important lesson is this: even though no one ever wants to contemplate the unfortunate scenario of a charity “split”, it always remains a possibility. To mitigate the likelihood of property disputes or other costly court conflicts in such circumstances, it is best to clearly communicate at the outset of the relationship who retains ownership of property, and how assets will be dealt with in the event of a parting of ways.

[i] 2012 ABCA 390, overturning the decision of the Court of Queen’s Bench of Alberta, reported at 2012 ABQB 180. A link to the Court of Queen’s Bench decision is here.

[ii] Bentley v. Anglican Synod of the Diocese of New Westminster, [2009] B.C.J. No. 2336 (S.C.) at para. 256

[iii] Incorporated Synod of the Diocese of Huron v. Delicata, 2011 ONSC 4403.

Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.

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