The British Columbia Court of Appeal (BCCA) recently considered the validity of a conditional donation made to a registered charity. In Norman Estate v Watch Tower Bible and Tract Society of Canada (2014 BCCA 277), the BCCA agreed with the trial judge’s decision that the conditional gift in question was an inter vivos gift (meaning it took effect during the lifetime of the donors) and not a testamentary gift as the Estate argued.
The donors, Lloyd and Lily Norman, made regular monetary gifts to the Watch Tower Bible and Tract Society (“Society”), a registered charity. One of their gifts included a letter from Mr. Norman stating that the money ($200,000) should be returned to the Normans on their request and that, on both of their deaths, the money would remain the property of the Society. The letter stated that, in the case of a conditional donation, any funds that had not previously been returned to the donors would automatically remain with the Society.
The Normans and the Society subsequently entered into a Conditional Donation Agreement (“Agreement”) to confirm this arrangement. Accordingly, after the deaths of Lloyd and Lily Norman, the Society issued a charitable donation receipt for the amount of funds, but the Normans’ Estate claimed that the Society was not entitled to the said monies.
The issue before the courts was whether the Agreement between the Normans and the Society was a testamentary disposition or an inter vivos trust. If it was found that the Agreement created a testamentary disposition, then the result would be that the Agreement would be found to be invalid because it was signed without witnesses and, therefore, did not comply with the British Columbia Wills Act (RSBC 1996, c 489).
The trial judge concluded that the gift was an inter vivos trust because the Normans made the gift during their lifetime with the intent that the gift would be effective immediately. The trial judge used the “guiding principle” of considering whether the donor intended that the gifts should be dependent on his death. She concluded that:
The Conditional Donation Agreement on its face did have immediate effect and the extrinsic evidence is consistent with that conclusion. The Conditional Donation Agreement itself was not revocable, although the Normans had the right to a refund of their donations in accordance with its terms... the [Society] obtained both an immediate and future interest in the funds and the Normans’ rights in respect of the funds became subject to the Conditional Donation Agreement.
The BCCA upheld the trial decision and found that the Society had an immediate interest in the donated funds and any refund request from the Normans had to be in accordance with the terms of the Agreement. As a result of the finding that the gift was inter vivos, the Society was entitled to keep the funds in question.
As a result of this decision, charities should be careful when drafting conditional donation agreements if they want to ensure that any gift given under such Agreement will remain with the charity after the death of the donor(s).
The case is available online at: http://canlii.ca/t/g7x3h.
A partner with Carters, Jacqueline M. Demczur practices in charity and not-for-profit law, including incorporation, corporate restructuring, and legal risk management reviews. Mrs. Demczur has been recognized as a leading expert in charity and not-for-profit law by Lexpert. She is a contributing author to Industry Canada's Primer for Directors of Not-For-Profit Corporations, and has written numerous articles on charity and not-for-profit issues for the Lawyers Weekly, The Philanthropist and Charity Law Bulletin, among others. Ms. Demczur is also a regular speaker at the annual Church & Charity Law Seminar.