Ruling puts donations
at risk for seizure

Creditors may confiscate donations of
bankrupt charities

CW Staff
— Ottawa —

Donations given to charities and held in trust for specific purposes may be confiscated by creditors if the charity goes bankrupt, according to a ruling by the Ontario Court of Appeal and upheld by the Supreme Court of Canada.

The decision is troubling to some religious organizations who say donors may hold back on giving if they fear their money will not be used as intended. The charitable sector raises about $4.5 billion each year, with religious donations topping the list at 51 per cent of the total value, according to the Canadian Centre for Philanthropy.

Now a B.C. school is petitioning the Supreme Court to reconsider the Ontario court decision and rule that trusts set up for specific purposes are exempt should a creditor come calling.

Burnaby’s Vancouver College is operated by the charitable organization Christian Brothers of Ireland in Canada, which is liquidating its assets to pay out an estimated $68 million in compensation to victims of abuse at its orphanage in Mount Cashel, Newfoundland.

Vancouver College, and its sister school St. Thomas More Collegiate, are together worth about $40 million.

The schools have been fighting bankruptcy for more than four years. Vancouver College wants the Supreme Court to reconsider its November 16 refusal to hear an appeal to halt the liquidation of the Roman Catholic school.

Lawyers for the college maintain the school’s assets are held in trust for the specific purposes of the schools and therefore cannot be used to pay the Mount Cashel claims.

The Canadian Bar Association is supporting the bid by Vancouver College. “It’s such an amazing decision, and it’s causing a lot of problems because it appears charitable trusts are no longer exempt from claims by creditors in unrelated matters,” Marni Whitaker, chair of the association’s charity law section, told the National Post.

Potential donors have a right to be concerned, agrees Frank Luellau, executive director of the Canadian Council of Christian Charities, as the new principles pronounced by the court could apply to normal contractual debts as well.

But Luellau says the decision probably won’t have a heavy impact on the evangelical world. “Donors to churches and other Christian charities are normally giving more to current ministries rather than endowments,” he says. “The potential effects will be far greater on universities, hospitals, and cultural groups.”