Uncharted Waters: Donor rights in Canada
Update: June 12, 2018 Justice Morgan denied a donor's appeal for investigation into how a charity spent money in Faas v. CAMH.
Learn more: Charity Intelligence's review: Donor Legal Rights, To be seen, not heard.
In Canada, Carters Law believes a gift agreement is legally enforceable on the charity when the gift involves restrictions. Canadian donors can restrict their gifts by time or purpose. Donations can go towards a specific purpose, like a building campaign, a disaster appeal to a specific country, or a program.
Ontario's laws on abusing restricted gifts are very severe. Charity directors are responsible for fulfilling the donor restrictions. If the court finds restricted money was misspent, the directors of the charity being found in breach of trust, can be fined, and even face a maximum of a year in jail.
Unlike in the US where recent court decisions have upheld donor intent, Canada lacks court decisions. With donors reluctant to take charities to court, or unable to pay what can be exorbitant legal fees challenging goliath universities and hospitals, Canadian case law in the charity sector moves at a "glacial pace". Canadian public opinion strongly support donor rights. This leaves a gap between public expectations and case law.
We may have the opportunity to see if Canadian donor rights are protected, or are all bark and no bite. There is a current challenge to donor rights preparing for trial. The Faas Foundation is currently challenging CAMH Foundation about a restricted donation covered in the media.
Faas is not the only donor upset with CAMH Foundation’s transparency on how it specifically spends restricted donations. David Bird donated $400,000 to CAMH Foundation in 2012. Bird says his gut instinct was to stop payment partway through his commitment, if it had not been made in memory of his 22-year-old son, Graeme. “It’s the reporting that hasn’t been forthcoming. I couldn’t have told you what the money has been spent for.”
Experienced philanthropic advisor, Doug White has seen "misappropriation" of funds from donor restricted gifts many times. His books on giving list many examples.
"Donors need to be far more diligent in tracking how their money is used. They need to hold the charity to account."
Traditionally donors have not had remedies. This is changing in the US. The Garth Brooks case in 2012 saw a jury reimburse the original donation and also award damages.
To learn more about donor legal rights:
Terrance S. Carter, Donor-Restricted Charitable Gifts: A Practical Overview Revisited II (originally published The Philanthropist Fall 2003), 2006 Canadian Association of Gift Planners Annual National Conference, http://carters.ca/pub/article/charity/2006/tsc0421.pdf
Michael Blatchford, Partner, Norton Rose Fulbright: “high costs of litigation and reluctance to go to trial means that the common law of charity advances at a glacial pace, because there isn’t a regular flow of cases calling for adaption.”
Sammy Hudes, “CAMH loses $1 million donation due to ‘issues of accountability’”, Toronto Star, September 29, 2016 https://www.thestar.com/news/gta/2016/09/29/camh-loses-1-million-donation-due-to-issues-of-accountability.html
Sammy Hudes, “CAMH donor says more transparency needed about money”, Toronto Star, October 16, 2016 https://www.thestar.com/news/gta/2016/10/16/camh-donor-says-more-transparency-needed-about-money.html
Allison Vuchnich and Krysia Collyer, Philanthropist rescinds $1 million donation from CAMH citing lack of transparency” Global News, September 29, 2016 https://globalnews.ca/news/2973050/philanthropist-rescinds-1-million-donation-from-camh-citing-lack-of-transparency/