Christian Brothers of Ireland in Canada (Re), 2000 CanLII 5712 (ON CA)

Re Christian Brothers of Ireland in Canada [Indexed as: Christian Brothers of Ireland in Canada (Re)]

47 O.R. (3d) 674

[2000] O.J. No. 1117

No. C29290

Court of Appeal for Ontario

Doherty, Abella and Feldman JJ.A.

April 10, 2000

*Application for leave to appeal to the Supreme Court of Canada was dismissed November 16, 2000 (McLachlin C.J., Iacobucci and Major JJ.). S.C.C. File No. 27958. S.C.C. Bulletin, 2000, p. 1865.

Debtor and creditor -- Execution -- Exigibility of assets of charitable trust -- Charitable corporation carrying on temporal affairs of religious teaching order -- Tort claims being brought against corporation by victims of abuse who had been in care of members of religious order -- Corporation being wound up to ensure maximum payment to victims -- Charitable corporation not immune from tort liability because of its charitable objects -- No doctrine of charitable immunity from tort claims -- Assets of charitable corporation exigible to satisfy tort claims -- Assets acquired for specific charitable purpose trust also exigible -- No principle that exigibility of assets of specific charitable purpose trust depending upon whether wrong perpetrated within framework of particular charitable purpose.

Trusts and trustees -- Charitable trusts -- Exigibility of charitable trust's assets to tort claims -- Charitable corporation carrying on temporal affairs of religious teaching order -- Tort claims being brought against corporation by victims of abuse who had been in the care of members of religious order -- Corporation being wound up to ensure maximum payment to victims -- Charitable corporation not immune from tort liability because of its charitable objects -- No doctrine of charitable immunity from tort claims -- Assets of charitable corporation exigible to satisfy tort claims -- Assets acquired for specific charitable purpose trust also exigible -- No principle that exigibility of assets of specific charitable purpose trust depending upon whether wrong perpetrated within framework of particular charitable purpose.

In 1962, the Christian Brothers in Canada ("CBIC"), the Canadian branch of the Congregation of Christian Brothers ("the Brothers"), a world-wide teaching order of the Catholic Church, was incorporated by Act of Parliament. CBIC operated schools, educational institutions, and orphanages in various parts of the country. In 1996, the Brothers sought to wind up CBIC under the Winding-up and Restructuring Act, R.S.C. 1985, c. W-11. The purpose of the application was to make assets available to compensate former residents of the Mount Cashel Orphanage in Newfoundland who had suffered abuse while at the orphanage. A liquidator was appointed, and it applied to the court for directions about: (1) the exigibility of the assets of a charity; (2) the determination of the ownership of two Catholic high schools in British Columbia that were administered by CBIC, that is, Vancouver College Ltd., which had assets valued at approximately $31.5 million, and St. Thomas More Collegiate Ltd., which had assets valued at approximately $7 million; and (3) the manner of resolving the claims of the victims, whose claims were estimated to reach $36 million.

On November 1997, Blair J. granted an order for leave for proceedings in British Columbia to determine the ownership of the shares of the two high schools and whether the shares were held in trust for the specific purposes of those schools. In those proceedings, it was the position of the schools that their assets were not beneficially owned by CBIC but were held in trust for the specific purposes of the schools and, therefore, were not included in the assets of CBIC, which, without the inclusion of the two schools, had a value of approximately $4 million. By judgment dated February 27, 1998, Blair J. also ordered that: (1) CBIC was not immune from liability because of its charitable objects; (2) all CBIC's assets were exigible to pay tort claims but assets held as a special purpose trust were only exigible to pay tort claims when the wrong was perpetrated within the framework of the particular charitable purpose; (3) the liquidator should compromise the individual tort claims in accordance with a formula f or proof of the claims and for determining the damages; and (4) his reasons were not intended to effect the determination of the questions before the Supreme Court of British Columbia.

The liquidator appealed the orders: (1) that assets held on a special purpose trust were exigible only with respect to tort claims associated with the particular charitable purpose; and (2) that the judgment dated February 27, 1998 was not binding in respect of the British Columbia proceedings.

Held, the appeal should be allowed.

Per Feldman J.A. (Abella J.A. concurring): In Canada, there is no doctrine of charitable immunity from tort claims and the assets of a charity, be they beneficially owned or be they "trust funds", are available to respond to tort liability. Courts in England and Canada have fully considered the issue of whether the fact that the charity trustees hold the charity's funds in trust means that the funds are required to be used only directly for the charitable purposes for which they are held and not to compensate tort victims for wrongs done in the operation of the charity, and the courts have firmly rejected the "trust fund theory" of immunity that would prevent property dedicated to charity from being used to pay claims against the charity. The "trust fund theory" emerges from three concepts, working either alone or together. The first is that the intent of the donor is that money given to a charity is to be held in trust and used only for the good works carried out by the charity and, therefore, it would be a breach of trust to use the funds to pay liabilities. The second is that the trustee holds only legal title to the trust assets which are beneficially owned by the trust purposes and, therefore, judgment obtained against the trustee cannot be enforced against the assets since the trustee does not own them in his or her own right. The third is that if the trustee is held liable to an injured party, the trustee is not entitled to be reimbursed out of trust funds if he or she is guilty of wrongdoing and, therefore, the victim is not entitled to obtain access to the funds either. Each of these rationales for the trust fund theory was either expressly or impliedly rejected with the rejection of charitable immunity. Accordingly, (1) all the assets of a charitable corporation are available to pay its liabilities; (2) there exists no law of liability that requires that the claims of a plaintiff be related to particular assets of a corporation, nor is it part of the defence to establish in relation to which of its objects the tort occurred; (3) there is no valid policy objective to introduce the concept of relating a wrong done by a charity to the operation of or administration of a particular endeavour in order to protect other assets of the charity from responding to legitimate tort victims of the charity; (4) directors of the charitable corporation would find themselves in a hopeless conflict of interest if, in any proceedings with the victims, they attempted to protect the assets of certain purposes at the expense of the other assets; and (5) the concept of special purpose trusts in the case law about gifts to charities that might fail allows the courts to propound a scheme for the gift but was not meant to immunize such gifts from liability to victims of wrongdoing by the charity. The conclusion that tort claims against one specific charitable purpose could not be asserted against other specific charitable purposes was wrong in law as well as policy and could create serious problems that demonstrated that the concept of attempting to relate the wrong done to particular assets of the charity was fatally flawed and incompatible with the long-standing rule of charitable immunity.

The part of the order that the judgment was not binding in respect of the British Columbia proceedings should be struck out. The findings or determinations in the reasons for judgment and order have effect for all purposes within the liquidation and are equally effective in respect of all assets of the corporation, wherever situate. However, the reasons for judgment that clarify that the Supreme Court of British Columbia was free to make its factual determinations regarding ownership and shareholding of the schools was a proper statement of the role of any specific findings of fact by the motions judge on those issues.

Per Doherty J.A. (concurring): A winding-up is a time for a final accounting. That accounting should look at the charitable corporation as a single whole entity and not as a number of separate pieces, each with its own set of obligations and assets. In the context of a winding-up, equity favours making all property held by the charitable corporation by way of charitable purpose trusts available to answer legitimate tort claims arising out of the corporation's pursuit of its charitable purposes.

APPEAL from a judgment of Blair J. (1998), 37 O.R. (3d) 367, 38 B.L.R. (2d) 286, 21 E.T.R. (2d) 93 (Gen. Div.), made in proceedings under the Winding-up and Restructuring Act, R.S.C. 1985, c. W-11.

Cases referred to ARMS (Multiple Sclerosis Research) Ltd. (Re), [1997] 2 All E.R. 679 (Ch. D.); B. (P.A.) v. Curry, 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534, 62 B.C.L.R. (3d) 173, 174 D.L.R. (4th) 45, 241 N.R. 266, [1999] 8 W.W.R. 197, 43 C.C.E.L. (2d) 1, 46 C.C.L.T. (2d) 1, 99 C.L.L.C. 210-033, affg (1997), 1997 CanLII 10834 (BC CA), 30 B.C.L.R. (3d) 1, 146 D.L.R. (4th) 72, [1997] 4 W.W.R. 431, 26 C.C.E.L. (2d) 161, 34 C.C.L.T. (2d) 241 (B.C.C.A.) (sub nom. B. (P.A.) v. Children's Foundation); Bennett v. Wyndham (1862), 4 De G.F. & J. 259; Bowman v. Secular Society Ltd., [1917] A.C. 406, [1916-17] All E.R. Rep. 1, 86 L.J. Ch. 568, 117 L.T. 161, 33 T.L.R. 376, 61 Sol. Jo. 478 (H.L.); Buchanan Estate (Re) (1996), 1997 CanLII 2620 (BC CA), 11 E.T.R. (2d) 8 (B.C.S.C.) [affd (1997), 44 B.C.L.R. (3d) 283, 20 E.T.R. (2d) 100 (B.C.C.A.)]; Coopérants Mutual Life Insurance Society (Liquidator of) v. Dubois, 1996 CanLII 242 (SCC), [1996] 1 S.C.R. 900, 133 D.L.R. (4th) 643, 196 N.R. 81, 39 C.B.R. (3d) 253; Donaldson v. Commissioners of General Public Hospital in Saint John (1890), 1890 CanLII 211 (NB SC), 30 N.B.R. 279 (C.A.); Duncan v. Findlater, [1839] VI Cl. & Fin. 894, 7 E.R. 934 (H.L.); E. (S.M.) v. Christian Brothers of Ireland in Canada (1995), 1995 CanLII 10575 (NL SC), 136 Nfld. & P.E.I.R. 52, 423 A.P.R. 52 (Nfld. T.D.); Feoffees of Heriot's Hospital v. Ross, [1846] XII Cl. & Fin. 507, 8 E.R. 1508 (H.L.); Finger's Will Trusts (Re), [1972] 1 Ch. 286, [1971] 3 All E.R. 1050, [1971] 3 W.L.R. 775, 115 Sol. Jo. 790; Holliday v. St. Leonard's, Shoreditch (1861), 11 C.B. (N.S.) 192, 142 E.R. 769 (H.L.); Jellett v. Wilkie (1896), 1896 CanLII 49 (SCC), 26 S.C.R. 282; K. (W.) v. Pornbacher (1997), 1997 CanLII 12565 (BC SC), 32 B.C.L.R. (3d) 360, [1998] 3 W.W.R. 149, 27 C.C.E.L. (2d) 315, 34 C.C.L.T. (2d) 174 (S.C.); Kimniak v. Anderson (1929), 1929 CanLII 367 (ON CA), 63 O.L.R. 428, [1929] 2 D.L.R. 204 (C.A.); Lapointe v. Ontario (Public Trustee) (1993), 1 E.T.R. (2d) 203 (Ont. Gen. Div.), supp. reasons 7 E.T.R. (2d) 45 (Ont. Gen. Div.); Lavere v. Smith's Falls Public Hospital os(1915), 1915 CanLII 558 (ON CA), 35 O.L.R. 98, 26 D.L.R. 346 (C.A.); Liverpool and District Hospital For Diseases of the Heart v. A.-G., [1981] 1 Ch. 193, [1981] 1 All E.R. 994, [1981] 2 W.L.R. 379, 125 Sol. Jo. 79; McCaw v. United Church of Canada (1991), 1991 CanLII 7048 (ON CA), 4 O.R. (3d) 481, 82 D.L.R. (4th) 289, 37 C.C.E.L. 214, 91 C.L.L.C. 14,035 (C.A.); Mersey Docks and Harbour Board of Trustees v. Gibbs (1866), 11 E.R. 1500, [1861-73] All E.R. Rep. 397, L.R. 1 H.L. 93, 11 H.L. Cas. 686, 35 L.J. Ex. 225, 14 L.T. 677, 30 J.P. 467 (H.L.); Meyers (Re), [1951] 1 All E.R. 538 (Ch. D.); Morgan's Will Trusts (Re), [1950] 1 All E.R. 1097 (Ch. D.); Nyberg v. Provost Municipal Hospital Board, 1927 CanLII 46 (SCC), [1927] S.C.R. 226, [1927] 1 D.L.R. 969; Partington v. Cushing (1906), 1 E.L.R. 493 (N.B.S.C.); Pittman Estate v. Bain (1994), 1994 CanLII 7489 (ON SC), 112 D.L.R. (4th) 257, 19 C.C.L.T. (2d) 1 (Ont. Gen. Div.), supp. reasons 1994 CanLII 7490 (ON SC), 112 D.L.R. (4th) 482 (Ont. Gen. Div.), supp. reasons 1994 CanLII 7491 (ON SC), 112 D.L.R. (4th) 494, 35 C.P.C. (3d) 55 (Ont. Gen. Div.), supp. reasons 35 C.P.C. (3d) 67 (Ont. Gen. Div.); President and Directors of Georgetown College v. Hughes, 130 Fed.Rep.2d 810 (1942); R. v. Church of Scientology of Toronto (1997), 1997 CanLII 16226 (ON CA), 33 O.R. (3d) 65, 42 C.R.R. (2d) 284, 116 C.C.C. (3d) 1, 7 C.R. (5th) 267 (C.A.) [leave to appeal to S.C.C. refused (1998), 51 C.R.R. (2d) 376n, 227 N.R. 291n]; Raybould v. Turner, [1900] 1 Ch. 199, 69 L.J. Ch. 249, 82 L.T. 46, 48 W.R. 301; Stewart Estate (Re) (1999), 1999 CanLII 4760 (PE SCTD), 174 Nfld. & P.E.I.R. 147, 533 A.P.R. 147, 27 E.T.R. (2d) 92 (P.E.I.T.D.); T. (G.) v. Griffiths (1997), 1997 CanLII 12485 (BC CA), 31 B.C.L.R. (3d) 1, [1997] 5 W.W.R. 203, 27 C.C.E.L. (2d) 307 (C.A.) (sub nom. J. v. Griffiths, Jacobi v. Griffiths) [affd 1999 CanLII 693 (SCC), [1999] 2 S.C.R. 570, 63 B.C.L.R. (3d) 1, 174 D.L.R. (4th) 71, 241 N.R. 201, [1999] 9 W.W.R. 1, 44 C.C.E.L. (2d) 169, 46 C.C.L.T. (2d) 49, 99 C.L.L.C. 210-034]; Tucker v. Mobile Infirmary Association, 68 Sou.Reptr. 4 (1915); Ve rnon's Will Trusts (1862), [1971] 3 All E.R. 1061 (Ch. D.) Statutes referred to An Act to Incorporate The Christian Brothers of Ireland in Canada, S.C. 1961-62, c. 22 Winding-up and Restructuring Act, R.S.C. 1985, c. W-11, ss. 19, 21, 103 Authorities referred to Keeton and Sheridan, The Law of Trusts, 10th ed. (1974), p. 5 "The Quality of Mercy: 'Charitable Torts' and Their Continuing Immunity", [1987] Harvard Law Rev. 1382, pp. 1384-85 Picarda, The Law and Practice Relating to Charities (London: Butterworths, 1977), p. 219 Tudor on Charities, 8th ed. (1995), p. 159 Waters, "Comment: Charity -- Cy-Près -- Supervening Impossibility" (1974), 52 Can. Bar Rev. 598, pp. 599, 602 Waters, Law of Trusts in Canada, 2nd ed. (1984), pp. 12, 503 et seq.

David R. Wingfield and M. Kate Stephenson, for liquidator, Arthur Andersen. Douglas G. Garbig, representative counsel for abuse victims. Donald H. Burrage, for Attorney General of Newfoundland. Neil Finkelstein and Sandra Forbes, representative counsel for charitable objects. David E. Baird, Q.C., and John A. Terry, for Vancouver College Limited. Timothy H. Gilbert, for St. Thomas More Collegiate Ltd.

FELDMAN J.A. (ABELLA J.A. concurring): --

INTRODUCTION

1This is an appeal from the judgment of Blair J. of February 27, 1998, made in the context of the winding up of The Christian Brothers of Ireland in Canada ("CBIC") under the Winding-up and Restructuring Act, R.S.C. 1985, c. W-11, pursuant to leave granted under s. 103 [See Note 1 at end of document] by McMurtry C.J.O. on July 14, 1998.

2The CBIC was incorporated in 1962 by Act of Parliament entitled An Act to Incorporate The Christian Brothers of Ireland in Canada, S.C. 1962-63, c. 22. The CBIC is the Canadian branch of the Congregation of Christian Brothers, a world-wide teaching order of the Catholic Church. Its activities included operating schools, educational institutions and orphanages in various parts of the country. The context of the winding-up application by the CBIC is the many claims made by boys and men who suffered abuse in the '60s, '70s and '80s at the hands of some of the Brothers at the Mount Cashel Orphanage in Newfoundland. As a result of the number of claims arising from the public exposure of these unspeakable events, the Brothers felt compelled to seek the wind up of their temporal affairs in Canada with a view to making their assets available to compensate the victims. In his affidavit in support of the winding-up application, Brother Barry Lynch stated that the application was brought to "ensure that the maximum amount of the Corporation's assets . . . are employed compensating all of the claimants in a fair and expedited manner".

3Blair J. was asked to decide whether, in law, the assets of a charity are available to compensate tort claimants and, if so, whether any particular assets of the CBIC are nevertheless protected and cannot be used to pay compensation to the Mount Cashel victims. Two schools operated by the CBIC in British Columbia constitute the most valuable assets potentially available to pay these claims. Blair J. confirmed that charities are not immune from liability to tort claimants who have suffered damage or injury at the hands of the charity. Whether the assets are held as a charitable trust or beneficially by a charity organized in corporate form, they are exigible to pay such claims. However, he went on to carve out an exception for property held on a "special purpose trust". He found that if the British Columbia schools are held by the CBIC as "special purpose trusts", then those assets could be used to compensate a claimant whose claim arose at those schools, but they cannot be used to pay tort victims abused at other CBIC institutions including Mount Cashel. For the reasons set out below, I agree that charities are not immune from liability to tort victims, but I do not agree that there is any exception for assets held on a special purpose trust.

BACKGROUND OF THE MOTION

4The winding-up order was granted by Houlden J. on October 28, 1996. The effect of a winding-up order was stated as follows by the New Brunswick Supreme Court in Partington v. Cushing (1906), 1 E.L.R. 493 at pp. 494-95, quoted with approval by the Supreme Court of Canada in Coopérants Mutual Life Insurance Society (Liquidator of) v. Dubois, 1996 CanLII 242 (SCC), [1996] 1 S.C.R. 900 at p. 914, 133 D.L.R. (4th) 643:

. . . The title to the company's property remains in the company; the control and management and disposal of it is taken from the directors and placed in the liquidators, who simply are officers of the Court, receivers and managers acting under the direction of the Court, for the purposes of closing up the company's business, realizing its assets and making a legal distribution thereof among the creditors and shareholders. . . . Every statutory power conferred upon the liquidators is given with a view to the speedy, inexpensive and effectual accomplishment of this object.

5Before any claims could be paid, the liquidator required the direction of the court on three issues. The first was the general issue of whether assets of a charity are available to pay creditors or whether they are immune on the basis that they are in effect held by the charity in trust to be used only for the charitable purposes of the charity. The second issue relates specifically to the two most valuable properties administered by the Christian Brothers, two Catholic high schools in British Columbia, and whether these properties are beneficially owned by the corporation or whether they are held in trust and, if held in trust, whether that makes them unavailable for the victims of abuse at Mount Cashel. The third issue was whether the liquidator should admit liability to individual victim claimants and compromise claims for which the corporation may be liable. These issues were brought before the court on a motion by the liquidator for advice and directions.

6A further order made by Houlden J. on July 18, 1997 provided for the appointment of representative counsel to speak on behalf of all the potential interests in the assets to ensure that all relevant arguments would be presented to the court for full consideration.

7A very full record was developed for the motion dealing with the history of the Congregation of Christian Brothers, the incorporation of The Christian Brothers of Ireland in Canada, the history of its properties and assets, how the charity and these assets were administered, the holding of the shares of Vancouver College Limited and of St. Thomas More Collegiate, the events at Mount Cashel and the claims arising from those events, as well as the events leading up to the wind-up of the corporation. Blair J. noted that the facts were not in dispute, except in respect of the two British Columbia schools.

8On November 14, 1997, Blair J. granted an order to the representatives of the two British Columbia schools for leave, as required under s. 21 of the Winding-up and Restructuring Act, [See Note 2 at end of document] to commence proceedings in the Supreme Court of British Columbia. The purpose of those proceedings is to determine the ownership of the shares of each of the schools and whether they are held in trust for the specific purposes of those schools. In other words, the factual findings regarding ownership and any particular terms of ownership of those assets are to be determined not by the court exercising the winding-up jurisdiction, but by the superior court of the province where the properties are situated. There is no appeal from the order of November 14, 1997.

9In the result, the Ontario court was not asked to make factual findings with respect to how the two British Columbia schools are held and then on that basis to determine whether those assets will form part of the liquidation and be available to pay the claims of the tort victims. Rather, the questions posed for the Ontario court were treated as general or generic questions, the answers to which could be applied by the liquidator to particular assets as required and based on the facts regarding each asset. On the other hand, it was clear that because the two major properties in issue are the two schools in British Columbia, the possible status of the ownership of those two schools formed the only backdrop or context for the answers to the questions. I will comment later in these reasons about the desirability of deciding issues such as these in a factual vacuum.

10Vancouver College Limited is a Catholic private school in Vancouver. It is itself a registered charity under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). Since the incorporation of the school in 1927, the shares of the corporation have been held from time to time by four individual Brothers in trust for "the Christian Brothers of Ireland." The assets of the school are valued at approximately $31.5 million. The liquidator submits that the CBIC owns the shares of the college beneficially. The college submits that its shares are held by the individual Brothers on trust "for the purposes of operating Vancouver College as a Catholic independent school committed to the Congregation's mission to educate young people in British Columbia".

11St. Thomas More Collegiate Ltd. is a Catholic high school in Burnaby, British Columbia. It is also a registered charity under the Income Tax Act. It was incorporated in 1962. There are three shares of the company, two of which are in the name of The Christian Brothers of Ireland in Canada, while the third is held by John Burnell as Trustee for The Christian Brothers of Ireland in Canada. Mr. Burnell is a teacher at the school but not a Brother. The assets of the school are valued at approximately $7 million. The original funding for the school was a gift from the Archdiocese of Vancouver under an agreement that the Brothers would administer the school. The liquidator submits that the CBIC is the beneficial owner of the shares of the company. The position of the school and of Mr. Burnell is that the shares are held in trust "for the charitable purpose of establishing and carrying on a Roman Catholic high school at 7450 - 12th Avenue, Burnaby, British Columbia".

12Essentially, the position asserted by the two British Columbia schools is that their assets are not owned beneficially by the CBIC, but are held in trust for the specific purposes of their schools in British Columbia and therefore are not part of the assets to be wound up and are not to be used to pay the claims of the victims of the Christian Brothers at the Mount Cashel Orphanage in Newfoundland. At stake are the competing claims of the innocent victims of abuse in Newfoundland versus the innocent students and their Catholic communities in Vancouver and Burnaby, British Columbia. Without the assets of the two schools, CBIC has available approximately $4 million to compensate victims, whose claims are estimated to reach $36 million.

13The three specific questions were stated by the motions judge and answered in the following way:

(i) Whether, because of its charitable objects, The Christian Brothers of Ireland in Canada is immune from liability to persons with tort claims ("the charitable immunity issue")?

A.: No, the corporation is not immune from liability.

(ii) If The Christian Brothers of Ireland in Canada is not so immune from liability, whether any or all of its assets are exigible to satisfy any judgments which may be entered against the Corporation by those persons ("the exigibility issue")?

A.: All of the assets are exigible to pay the tort claims. However, if any assets are held as a special purpose trust, then such assets are only exigible to pay tort claims when the wrong was perpetrated within the framework of the particular charitable purpose.

(iii) Following determination of the above questions, directions to the Liquidator with respect to the defence or compromise of the claims for which The Christian Brothers of Ireland in Canada may be liable ("the liability issue").

A.: The liquidator was directed to compromise the individual tort claims by admitting liability where claims are proved in accordance with a formula to be proposed by the liquidator for proof of the claims and for determining the damages.

14Blair J. was at pains to assure the parties that the issues to be decided by the British Columbia court were not being decided by him, but that once those issues of ownership were decided, the order of the winding-up court would apply to determine in law the issue of the exigibility of the British Columbia properties and assets. Paragraph 5 of the order was based on the reasons for judgment on this issue:

5. THIS COURT ORDERS AND DIRECTS that nothing in the Reasons of Blair J. released February 27, 1998 in this matter or the within Order is intended to affect the determination by the British Columbia Supreme Court of the questions raised in the Petitions in that Court with respect to which leave was granted by the Order of the Ontario Court (General Division) on November 14, 1997 in the within matter.

THE ISSUES ON APPEAL

15The liquidator, supported by representative counsel for the victims and by the Government of Newfoundland which also has some liability to the victims, raised two issues on appeal:

(a) They appeal from the portion of the answer to question 2 (exigibility) where Blair J. held that there is in law a special purpose charitable trust which has the effect of protecting the assets within that trust from all tort claimants except those whose claims arose in relation to the purposes of that trust.

(b) They appeal the jurisdiction of Blair J. to make an order which provides that it is not binding in respect of British Columbia assets. They seek an order deleting para. 5 of the order so that the order does not purport to say that it is not binding in respect of the British Columbia properties.

16Representative counsel for the charitable objects did not file a notice of cross-appeal, but in their written and oral submissions, challenged all of the findings of Blair J. in respect of the exigibility of assets of the charity, and submitted that any assets held in trust by the CBIC are not available to any tort claimants. These assets include all assets previously held in trust by the Congregation of Christian Brothers before incorporation, or by individual Brothers, and all assets held in trust by the corporation for its charitable objects. In the alternative, representative counsel for the charitable objects submitted that Blair J. was correct in limiting the exigibility of assets in a special purpose trust to tort claimants injured within the purposes of that trust.

17The two British Columbia schools supported the decision of Blair J. in its entirety.

THE JUDGMENT BELOW [See Note 3 at end of document]

18Blair J.'s analysis began with the issue of general charitable immunity. In the mid-19th century, a doctrine had developed that a charity, or those who operate it, held its assets in trust for the objects of the charity and, therefore, such assets could not be used to pay damages for the actions of those who manage the fund. However, this doctrine was overruled in 1867 by the House of Lords in the case of Mersey Docks and Harbour Board of Trustees v. Gibbs (1846), 11 E.R. 1500, [1861-73] All E.R. Rep. 397.

19In Canada the charitable immunity theory was never adopted but was expressly rejected in Lavere v. Smith's Falls Public Hospital (1915), 1915 CanLII 558 (ON CA), 35 O.L.R. 98 (C.A.) and Nyberg v. Provost Municipal Hospital Board, 1927 CanLII 46 (SCC), [1927] S.C.R. 226. Blair J. noted that that early rejection of the doctrine is consistent with recent case law in British Columbia and Ontario where charities have been held liable to tort victims: B. (P.A.) v. Curry, 1997 CanLII 10834 (BC CA), [1997] 4 W.W.R. 431, 146 D.L.R. (4th) 72 (B.C.C.A.) (since affirmed 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534, 174 D.L.R. (4th) 45); T. (G.) v. Griffiths, 1997 CanLII 12485 (BC CA), [1997] 5 W.W.R. 203, 31 B.C.L.R. (3d) 1 (C.A.); K. (W.) v. Pornbacher (1997), 1997 CanLII 12565 (BC SC), 34 C.C.L.T. (2d) 174, 32 B.C.L.R. (3d) 360 (S.C.); McCaw v. United Church of Canada (1991), 1991 CanLII 7048 (ON CA), 4 O.R. (3d) 481 (C.A.); and to pay a large fine: R. v. Church of Scientology of Toronto (1997), 1997 CanLII 16226 (ON CA), 33 O.R. (3d) 65, 42 C.R.R. (2d) 284 (C.A.).

20Having confirmed that the law in Canada is that a charity, whether it takes the form of a trust or a charitable corporation, is not immune from liability for the negligent acts of those who administer the charity, Blair J. turned to the second question and proceeded to consider whether any of the assets of the charity enjoyed immunity from exigibility depending on how the asset was held by the charity. He stated as a general principle that a charitable corporation does not hold its assets as trustee for its charitable purposes but rather holds them beneficially as does any other corporation.

21Blair J. then discussed how a charitable corporation must use its funds in the furtherance of its corporate objects because the position of a charitable corporation is analogous to that of a trustee in that respect. However, that does not preclude the use of the funds to compensate tort victims who were abused when the charitable objects were carried out in an uncharitable way. Blair J. noted how large and financially significant the charitable sector is today in our society and posed this question rhetorically in reference to charities: "Why, then, should such a large segment of society have its assets protected from answering for wrongs done in the course of the pursuit of these charitable purposes?" (p. 393). He pointed out that such immunity has been rejected in Ontario in respect of criminal responsibility in the case of R. v. Church of Scientology, supra.

22Blair J. also rejected as ill-founded, both legally and practically, the concept that a charity be required to maintain records of the sources and respective intended uses of donated funds. He concluded that he was satisfied both on a legal and policy basis that the funds donated to a charity to be used for its charitable purposes should be available to tort victims of abuse at the hands of those who were intended to be carrying out those purposes.

23He then went on to address what he identified as the most problematic aspect of the issue, that is, the status of funds donated to the charitable corporation but earmarked or designated not for the general purposes of the corporation but for a specific purpose. He distinguished between gifts given in what is sometimes referred to as a precatory trust and those given as a specific charitable purpose trust.

24A precatory trust is not a true trust, but rather an expression of the desire of the donor to have the funds used for a specific purpose without the creation of a true trust for the purpose. That desire is not binding on the corporation and such funds are beneficially owned by the corporation and not shielded from execution. Blair J. included in this category funds raised through general fundraising campaigns or even campaigns for a particular project of the corporation.

25This is to be distinguished from the case where the three certainties of a trust are present: certainty of intention, certainty of subject-matter and certainty of objects (in this case charitable purposes) so that a charitable purpose trust is created. However, although trust property is not available to the personal creditors of a trustee, where the claim is for wrongs done by the trustee in the course of carrying out the charitable purposes, Blair J. concluded that the trust funds should be available for such claimants.

26This conclusion is consistent with his preceding analysis that when funds are donated to the charity to be used only for its charitable purposes, those purposes must include the payment of legitimate claims of people abused in the course of the carrying out of those purposes.

27However, Blair J. then went on to hold that in order to qualify as a claim payable out of the trust funds, the claim must relate to a wrong done only while the trustee was carrying out the specific purpose of the trust, and not any of the other charitable objects of the corporation. That finding is key in this case, because it means that if the two British Columbia schools or their assets are held by the corporation as special purpose trusts, then the victims of abuse at the Mount Cashel Orphanage in Newfoundland or other schools cannot look to those properties to satisfy their claims.

ANALYSIS

28In my view, Blair J. was led into a fundamental error by the way in which the questions for the court were formulated. Once he had determined that there is no doctrine of charitable immunity in Canada, it became redundant to then analyze whether the assets are held on trust in order to determine if they are exigible to pay the claims of tort victims of the charity in the context of the winding-up of the charitable corporation. Because a charity is not immune from liability to those who have suffered wrong at its hands, either through its trustees, employees or other agents for whom the charity is responsible, the assets of the charity, be they beneficially owned or be they "trust funds", are available to respond to those liabilities. That has been the law of Canada for almost a century. It is neither necessary, nor logically probative, to examine each asset of the charity on an individual basis to determine its availability to be answerable for the debts of the charity on a wind-up, based on whether that asset is held in trust for one or more charitable purposes. To do so, is to re-introduce into our law the rejected doctrine of charitable immunity by resurrecting the equally rejected trust fund theory.

29The traditional trust arose out of both the common law and equity. [See Note 4 at end of document] The establishment of a trust required the three certainties: the intention of the settlor to create a trust (and therefore to appoint a trustee), the assets of the trust, and the beneficiaries or objects of the trust. Initially, the beneficiaries had to be persons who could enforce the trust. However, an exception was allowed whereby the objects could be charitable purposes, for which the Crown could enforce the trust on behalf of the public. The charitable purpose trust thereby allowed a settlor to leave money or other assets on trust to trustees obliged to hold and administer the assets for the designated charitable purposes. This type of trust attracted other legal advantages not available to private trusts. One was that the trust could vest beyond the perpetuity period, and another, that it could remain in existence forever, whereas private trusts could neither vest nor exist beyond the defined perpetuity period. The third advant age was that a charitable trust would not fail if the objects of the trust were uncertain as long as the court could determine that the settlor had a general charitable intention. In that case the court has the power to devise a scheme to remove the uncertainty and give effect to the trust. Furthermore, if the charitable object becomes impracticable or impossible to carry out after the gift has vested in the charity, then the court again has the power to alter the charitable object and to apply the funds cy-pres to another charitable object. In effect the court has supervisory power over the trust.

30The concept that the trust funds held by the trustees of a public charity will not be answerable for the tort liabilities incurred by actions taken by or on behalf of the charity, was formulated in three 19th century cases from the House of Lords, Feoffees of Heriot's Hospital v. Ross, [1846] XII Cl. & Fin. 507, 8 E.R. 1508, which followed Duncan v. Findlater, [1839] VI Cl. & Fin. 894, 7 E.R. 934 and Holliday v. St. Leonard's, Shoreditch (1861), 11 C.B. (N.S.) 192, 142 E.R. 769. [See Note 5 at end of document] In Heriot's Hospital, a charity had been established for a home for fatherless boys, but the plaintiff Ross, who was fatherless and otherwise qualified, had been excluded from the home. As he was too old for admission by the time his case was determined, the only issue was whether he was entitled to damages from the trust funds used for the home. Lord Cottenham determined that this was not possible and following his earlier decision in Duncan, supra, articulated his reasons as follows (at p. 1510):

He sues in this proceeding not the individual trustee, nor is this a personal action against any of them; it is a proceeding against them in their corporate capacity as feoffees of the charity funds. He does not in terms pray for the payment of damages, from the trust funds, but still as the summons is constituted, he cannot receive damages should he receive them at all, except from those funds; and it has been throughout the proceedings understood that, if there are to be any damages at all, they must be paid out of the trust fund. The question then comes to this, -- whether by the law of Scotland a person who claims damages from those who are managers of a trust fund, in respect of their management of that fund, can make it liable in payment. It is obvious that it would be a direct violation, in all cases, of the purposes of a trust, if this could be done; for there is not any person who ever created a trust fund that provided for payment out of it of damages to be recovered from those who had the manag ement of the fund. No such provision has been made here. There is a trust, and there are persons intended to manage it for the benefit of those who are to be the objects of the charity. To give damages out of a trust fund would not be to apply it to those objects who the author of the fund had in view, but would be to divert it to a completely different purpose.

In a concurring judgment, Lord Campbell stated that if the trustees had done wrong, then they alone were personally responsible for the loss suffered.

31To the extent that there had thereby developed a concept of charitable immunity in England, it was very shortlived. In Mersey Docks and Harbour Board Trustees v. Gibbs, supra, the Board was sued by the owners of a ship and its cargo, damaged when the ship got stuck in mud at the mouth of the harbour. The Board was held to be negligent, but the issue was whether the Board and the funds it collected and administered to operate the docks could be answerable to an action for negligence. The argument was that because the funds were held by the trustees in trust for the benefit of the public, they could not be used to compensate tort claimants against the Board. The House of Lords firmly rejected the concept of such immunity. In so doing Lord Westbury rejected Lord Cottenham's reasoning from the Duncan case as follows (pp. 412-13):

I can well divine what was at that time passing in the mind of my Lord Cottenham. He seems to have thought that, if a corporation be trustees of property for the direct benefit of certain individuals and there is no other corporate property, and if in their capacity as trustees an act is done by order of the corporation which amounts to a tort or trespass and gives a right of action and a right to damages to any private individual, a court of equity would not permit an execution to issue on any judgment that might be recovered against the property of the corporation, seeing that it is property held upon trust for certain beneficiaries and that the corporation as trustees have no interest therein. But, my Lords, I apprehend that was a misapprehension on the part of the noble and learned Lord, and that it would lead to very mischievous consequences. It is by no means true that a court of equity is able to protect the property of beneficiaries against the act of trustees. If trustees alienate property for valuable consideration to a person who pays that consideration without notice of the trust, the interest of the beneficiaries suffers from that act, and it would be a very unreasonable and a very mischievous thing if, in the case of a corporation dealing with the public or with individuals, such corporation should, by any act of theirs in respect of property committed to their care, give a right of action to individuals, that such individuals should be deprived of the ordinary right of resorting for a remedy against the body doing or authorising those acts, and should be driven to seek a remedy against the individual corporators whose decision or order in the name of the corporation may have led to the mischief complained of. It is much more reasonable in such a case that the trust or corporate property should be amenable to the individuals injured, because there is then no failure of justice, seeing that the beneficiary will always have his right of complaint and his title to relief against the individual corpor ators who have wrongfully used the name of the corporation.

. . . Those observations of Lord Cottenham, which directly tend to this conclusion, that the corporation in the case supposed would not be amenable, nor would the corporate property be liable, but that the party injured would be obliged to have resort to the individual members who directed the act to be done, would, if they were recognized as the law, undoubtedly lead to very great evil and injury.

32Interestingly, an anomalous development occurred in the United States. There the courts imported the doctrine of charitable immunity from England after 1866, unaware that it had already been overruled. They developed various theories to support the doctrine including:

(a) the "trust fund" model which focused on the donor's intention that the funds be used for the charitable purposes only and not to pay tort claims;

(b) the concept that respondeat superior did not apply to charities because they did not profit from their employees' work;

(c) the doctrine that the beneficiaries of the charity could not sue for any damage because they assumed the risk of negligence; and

(d) in order to ensure the continued viability of charities, public policy required that donors be assured that the money donated would be used only for the good works of the charity.

33Because the immunity of charities conflicted with the general liability of others to answer for wrongs done, a number of exceptions developed to the immunity doctrine in different U.S. jurisdictions, including:

(a) charities were liable to strangers but not to beneficiaries of the charity;

(b) charities were liable for the negligence of managing officials but not of servants;

(c) charities were liable if they had insurance but not otherwise;

(d) charities could pay tort judgments from commercial funds or funds from paying beneficiaries but not from their charitable funds.[See Note 6 at end of document]

34The inconsistent state of American law on charitable immunity was fully addressed in the important decision of the U.S. Court of Appeals for the District of Columbia, President and Directors of Georgetown College v. Hughes, 130 Fed.Rep.2d 810 (1942). The action was brought by a nurse against the hospital for injuries sustained from a swinging door. The negligence case was made out. Three judges of the court sustained the liability of the hospital on the basis that the nurse was a stranger to the charity. Rutledge J., speaking for the other three, upheld the verdict but on the ground that there was no sound basis in law or public policy for the maintenance of any doctrine of charitable immunity. He summarized his analysis in this way (pp. 824-25):

The chief arguments, therefore, for sustaining the immunity, namely ultra vires marked out by authority or intent of the donor and danger of destroying or preventing the creation of charitable institutions, no longer have, if they ever had, compelling effect. Changes in the law and in the organization and mores of community life have taken away their major force. That is true, whether for full or for modified immunity . . .

As against the factors favouring it, may be mentioned the tendency of immunity to foster neglect and of liability to induce care and caution; the departure from the general rule of liability; the anomaly of exempting charitable corporations and trust funds, when charity is not a defence to others; the injustice of giving benefit to some at the cost of injury to others and of the injured individual's having to bear the loss wrongfully inflicted upon him, at a time when the direction of the law is towards social distribution of losses through liability for fault, liability without fault, and legislation which gives the person disabled to work what is commonly but inaccurately called "social" security. There are others we do not stop to mention.

It is hardly necessary to discuss the various theories of exemption or their application in various modifications. Whether immunity be founded on the "trust fund" theory, the rule of respondeat superior, so-called "public policy", or the more indefensible doctrine of "implied waiver", is not for us a controlling consideration. At bottom, except possibly for the last, these come down to the same thing, supported by the same considerations. They are merely different names for the same idea, cast according to the predilection of the user for technical or for broader terminology. The "trust fund theory" comprehends all that is involved in "public policy", with only an apparent difference in approach. This is true likewise of respondeat superior and implied waiver. In any event the result is a departure from general, and we think right, principles of liability. The differences in foundation do not affect even the extent of the departure. We think it should be complete and that charitable corp orations should respond as others do for the wrongs inflicted by persons who act in their behalf about their business and within the course of their duties, actual or apparent. Immunity, whether full or partial, is to be granted only when compelling reason requires it. If there has been, there is no longer such reason. The reasons which support governmental immunity, where it remains, are largely different, but even so they too give way gradually to liability imposed or permitted by legislation.

He concluded with the following observation, which is consistent with current thinking in Canada (p. 827):

The law's emphasis ordinarily is on liability, not immunity, for wrongdoing. Respondeat superior has widened it in an institutionally, and to a large extent corporately, organized community. Charity is generally no defense. When it has been organized as a trust or corporation, emphasis has shifted from liability to immunity. The conditions of law and of fact which created the shift have changed. The rule of immunity is out of step with the general trend of legislative and judicial policy in distributing losses incurred by individuals through the operation of an enterprise among all who benefit by it rather than in leaving them wholly to be borne by those who sustain them.

35Although the law on charitable immunity remains inconsistent in some U.S. states, the doctrine of charitable immunity has never been the law in Canada.

36In Donaldson v. Commissioners of the General Public Hospital in Saint John (1890), 1890 CanLII 211 (NB SC), 30 N.B.R. 279 (C.A.), an action was brought by a patient against a public charitable hospital for negligent care by the doctors and nurses. It was argued that the hospital could not be held liable because it was a charity. The majority firmly rejected this proposition after reviewing the state of the law in England including the fact that the Mersey Docks case had overruled the Heriot's Hospital and Duncan cases, and held that (pp. 299-300):

. . . the funds of the Hospital would be applicable for the payment of the damages, if any should be recovered in this action as incident to the administration of the trust.

37In Ontario, Riddell J.A. dispelled the "trust fund" theory of immunity in the 1915 case Lavere v. Smith's Falls Public Hospital, supra. There the hospital was held liable for the negligence of a nurse in the course of her duty. Riddell J.A. approved the conclusion of the majority of the Supreme Court of Alabama in Tucker v. Mobile Infirmary Association, 68 Sou.Reptr.4 (1915) that: "a charitable hospital is in no higher position than any other corporation in respect of liability for the negligence of its servants, the "charitable trusts" theory, though supported by a great weight of authority in the American Courts, being untenable" (p. 113). He concluded (p. 114):

After all the cases, it is plain that once the "trust fund theory" is got rid of -- and it is conceded that it has now no footing in our law -- the case is reduced to the question, what did the defendants undertake to do? If only to supply a nurse, then supplying a nurse selected with due care is enough; if to nurse, then, the nurse doing that which the defendants undertook to do, they are responsible for her negligence as in contract -- respondeat superior.

I am of the opinion that the plaintiff should succeed.

38In the 1926 Supreme Court of Canada decision in Nyberg v. Provost Municipal Hospital Board, supra, the court held, relying on the Mersey Docks decision of the House of Lords, that a public not-for-profit hospital is not free from liability for the negligence of its servants. The majority approved the observation of Mignault J. that the opposite contention was "hopeless" in light of the authority. As recently as 1994 in Pittman Estate v. Bain, 1994 CanLII 7489 (ON SC), 112 D.L.R. (4th) 257 at p. 351, 19 C.C.L.T. (2d) 1 (Ont. Gen. Div.), Lang J. noted that the immunity doctrine was long defunct in Canadian law and expressed the sentiment that it should not be resurrected under another guise.

39Most recently in B. (P.A.) v. Curry, supra, the Supreme Court reaffirmed that a charity enjoys no immunity from liability to its tort victims. The court approached the issue without relying on previous case law, but instead addressed the issue afresh, applying a principled analysis. The court considered and rejected the following three submissions made in favour of immunity at pp. 563-64 (para. 48):

(1) that it is unfair to fix liability without fault on non- profit organizations performing needed services on behalf of the general public;

(2) that non-profit organizations are less able to control and supervise the conduct of their agents, many of whom are volunteers, which enhances the unfairness of imposing vicarious liability and diminishes its deterrent effect; and

(3) that the practical effect of making non-profit organizations vicariously liable for the misconduct of their agents would be to make it difficult or impossible for such organizations to carry out their important work.

40In rejecting these arguments, the court concluded that as between the innocent victim and the charity which had the opportunity to prevent the loss, fairness demands that the loss should be borne by the charity. The court doubted that the public social benefit from the existence and operation of charitable institutions justified leaving a victim without a remedy, in effect making the victim a significant and disproportionate contributor to that public benefit.

CONCLUSION ON CHARITABLE IMMUNITY DOCTRINE

41This review of the history of the issue of "charity immunity", whether charities enjoy immunity from liability to victims of torts perpetrated by or on behalf of the charity and for which the charity is in law responsible, leaves no doubt that there is not, nor was there ever in Canada, any such immunity. This was also the conclusion reached by Blair J. and his answer to the first question posed for the court.

42However, the law goes much further. The courts in England and Canada have fully considered the issue of whether the fact that the charity trustees hold the charity's funds in trust, means that those funds are required to be used only directly for the charitable purposes for which they are held, and not indirectly to compensate tort victims for wrongs done in the operation of the charity. Our courts have firmly rejected the "trust fund theory" of immunity which had earlier been articulated by Lord Cottenham in the Duncan, supra, and Heriot's Hospital, supra, cases.

43In other words, the question of charitable immunity was not raised and resolved as a hollow issue addressing only whether judgment could be registered against a charitable corporation or Board of Trustees. The immunity issue addressed and decided that the funds of the charity, held by the board or by the corporation as the case may be, are available to satisfy the tort claims. The fact that they may be held on charitable trusts by the trustees, does not make those funds immune from execution.

ANALYSIS OF THE EXIGIBILITY ISSUE

44With respect to Blair J., in my view he erred by proceeding to answer the second question, whether the assets of a charity are exigible to satisfy tort claims, by analyzing that issue separately, embarking on a trust analysis of the way charities hold their assets. In my view, by so doing he simply re-addressed the same immunity issue by asking the question in a different manner.

45Blair J. noted that trust funds are immune from execution to pay creditors of the trustee for debts or other obligations incurred by the trustee in the trustee's personal life: Kimniak v. Anderson (1929), 1929 CanLII 367 (ON CA), 63 O.L.R. 428, [1929] 2 D.L.R. 904 (C.A.).

46However, the essential reason why our courts rejected the "trust theory" analysis of charitable immunity -- i.e., immunity of the trust assets because they belonged beneficially to the charitable purposes and not to the trustee -- was because in those cases, tort liability was not incurred by trustees in their personal life, but rather in the administration of the trust, or by a servant or agent of the trust who was carrying out duties for the trust and under its auspices. In those circumstances where a tort was committed by or on behalf of or in the name of the charitable agency, our courts have recognized that the trust assets must answer for the wrong done: see for example Mersey Docks, supra; Donaldson, supra; Lavere, supra; and Nyberg, supra.

47One question that has continued to vex the courts over the years is whether, in the particular case, the tort was committed by or on behalf of the charity and whether the charity should be held responsible in law for the acts of the person who caused the damage to the claimant, for example, where it is alleged that the wrongdoer was acting outside his or her authority. Again in 1999 in the Curry case, the court first had to find that the charity was vicariously liable for the sexual abuse perpetrated by its employee on the victim. The court then went on to consider, on a policy basis, whether in spite of vicarious liability the charity should have immunity, and concluded that it should not.

48What is the basis of the "trust fund theory" which suggests that the funds held by charities may not be available in law or equity to pay tort claimants against the charity? I discern that the theory emerges from three concepts, working either alone or together. The first is the intent of the donor: that when a donor gives money to a charity or to be used for charitable purposes, the intention is that it is to be held in trust and used for those purposes only, that is, for the good works carried out by the charity, and therefore it would be a breach of trust to use the funds to pay liabilities incurred in the course of carrying out those good works. The second is that charities originally took the form of charitable trusts where gifts were given to a trustee to be held for certain charitable purposes or objects. Because there was a trust, the trustee held the legal title to the trust assets but they were owned beneficially by the trust purposes. Therefore, a judgment obtained against the trustee could not be enforced against the assets because the trustee did not own them in his or her own right. The third is that if a trustee is held liable to an injured party, the trustee is not entitled to be reimbursed out of the trust funds if he or she was guilty of any wrongdoing. Therefore neither is the victim entitled to obtain access to the funds by that route.

49I am satisfied that each of these rationales for the trust theory was either expressly or impliedly rejected with the rejection of charitable immunity.

A. The Intention of the Donor

50This issue was raised squarely in the Heriot's case as the rationale for denying the plaintiff any damages from the funds of the charity. Lord Cottenham, in the passage quoted earlier in para. 30 [pp. 687-88 ante], stated that it would be a "direct violation, in all cases, of the purposes of a trust" to allow the funds to be used for that purpose. He observed in support of his conclusion that no one who creates a trust fund provides that it can be used to recover damages from those who manage it. Although the intention of the donor was not specifically addressed, by rejecting the concept of charitable immunity, the court in Mersey Docks also necessarily rejected the notion that the donor's intention should govern, either as a matter of policy or of law. I agree with the statement of Blair J. (p. 393) that "the payment of properly established tort claims is as much a part of the conduct of the corporation's charitable calling as are the 'good works' aspect of its mandate."

51In later discussions of the policy arguments for and against immunity, such as in Curry and in the U.S. cases, courts have considered seriously whether allowing the funds to be used for payment to tort victims would undermine charitable giving generally and discourage donors on a broad scale. Ultimately this fear is discounted, based on the increase in the size and number of charities operating within our societies today and because based on fairness, the need for compensation of the victims is recognized as paramount.

B. The Issue of Split Ownership

52Originally the trust developed where one person held property, but for the use of another. That obligation was enforced by the courts of equity. Out of this concept which applied in the strict sense only to land and not to personalty, [See Note 7 at end of document] a trustee is said to hold the legal title to trust property, while the beneficial or equitable title belongs to the beneficiary. In effect, a trust is a relationship where the trustee owes duties to the beneficiary in respect of the trust property. In The Law of Trusts, 10th ed. (1974) by G.W. Keeton and L.A. Sheridan, the authors describe a trust as follows (p. 5):

All that can be said of a trust, therefore, is that it is the relationship which arises whenever a person called the trustee is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one, and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries or other objects of the trust.

It is problematic to conceptualize charitable purposes as "owning" the equitable interest in trust property. In this context, whether the purposes can be said to "own" the equitable interest in trust property, that property is held by the trustees for use only for the charitable purposes and that obligation is enforced by the Attorney General through the courts. [See Note 8 at end of document]

53It is the duality of ownership which compels the rule in debtor/creditor law that where a trustee is subject to a judgment obtained in respect of an act done in his or her personal capacity and not in connection with the administration of the trust, then the property held by the trustee not for him or herself but for the beneficiaries of the trust, is not answerable for the personal debts of the trustee: Jellett v. Wilkie (1896), 1896 CanLII 49 (SCC), 26 S.C.R. 282; Kimniak v. Anderson, supra.

54In Mersey Docks, Lord Westbury specifically rejected the concept that because the property was held for the benefit of beneficiaries, it could not be reached by individuals who had suffered damage from the acts of trustees in carrying out their trust duties. He concluded that equity will not protect the property of beneficiaries from the consequences of the acts of their trustees where those acts are done in respect of the property committed to the care of the trustees, and where members of the public who deal with them have a right of action as a result. In his view this result was fair, because the beneficiaries would have the right to seek compensation from the trustees who have done wrong. In other words, the fact that the property was held in trust did not affect its exigibility for victims of acts of the trustees when the trustees were acting on behalf of the trust.

C. A Trustee Can Only Be Reimbursed if He or She Did Not Act Wrongfully

55Counsel for the trust objects take the position that all assets of the charity are trust assets which are not exigible to pay tort claimants. They argue that a tort claimant cannot sue a charitable trust directly but only the trustee, and that the trustee may only seek indemnity from the trust assets if the trustee acted with due diligence and reasonably and was not personally at fault. The tort claimant, having successfully obtained judgment against the trustee, can only seek recovery from the trust assets if those same circumstances apply. This proposition is derived from two 19th century English Chancery cases: Raybould v. Turner, [1900] 1 Ch. 199, 69 L.J. Ch. 249, following Bennett v. Wyndham (1862), 4 De G.F. & J. 259. Blair J. was concerned about the implications of this line of authority because there is some evidence of CBIC complicity and cover-up of the actions of certain of the perpetrators of the abuse at Mount Cashel.

56In my view, the two Chancery decisions, which were made in the context of private and not charitable trusts, were never consistent with the authorities which established that there is no charitable immunity for torts perpetrated by or on behalf of a charity. First, I do not believe that those cases hold that no action lies against the trust but only the trustees. Technically, there is no entity to sue but the trustees. The issue is whether the judgment against the trustees is against them in their personal capacity or is it effective against the corpus of the trust. In Mersey Docks, the judgment obtained against the Board of Trustees, who were found responsible for the condition of the port which caused the damage, was explicitly said by the Law Lords to be recoverable from the funds held by the Board.

57However, any doubt on the issue has been put to rest by the Curry decision which defined the rule for determining when an employer, including a charity, will be held liable for the unauthorized, intentional wrongs perpetrated by an employee. The court held at p. 563, para. 46, that "the test . . . should focus on whether the employer's enterprise and empowerment of the employee materially increased the risk of . . . the harm" with a view to "the policy considerations that justify the imposition of vicarious liability -- fair and efficient compensation for wrong and deterrence". In my view it follows that the risk of harm and the policy of compensation will apply even more strongly if there is any suggestion that the wrongful acts of employees (or other agents) were in some way condoned or implicitly authorized by the charity. If the Attorney General on behalf of the charitable objects may seek compensation from the wrongdoers, that is a separate issue which does not affect the rights of the victims.

58In this case, the issue of the CBIC's liability to the victims of abuse at the hands of individual brothers has been determined. In one action [See Note 9 at end of document] the corporation admitted liability. In respect of the other claims, Blair J. ruled in answer to the third question posed, that the liquidator should admit the claims subject to proof. That ruling has not been appealed. He approved the position of the liquidator, standing in the shoes of the corporation, that liability should be admitted to claimants able to prove that they suffered physical, emotional or sexual assault or abuse by a Christian Brother at an institution managed or operated by the CBIC. Therefore, in this case there is vicarious liability of the CBIC for the abuse perpetrated by individual Christian Brothers.

THE EXIGIBILITY OF SPECIFIC ASSETS OF CBIC

59Blair J. approached the issue of exigibility of specific assets by analyzing how the assets of a charity are held and in particular, whether they are held on trust. For the reasons which I have already stated, this inquiry was redundant when the doctrine of no charitable immunity for trust assets had been established. Blair J.'s analysis followed these steps to the conclusion which he reached:

(1) The CBIC is a charitable corporation. Charitable corporations generally hold their assets beneficially as do other corporations.

(2) However, the charitable corporation must use those assets only in a manner consistent with its charitable purposes.

(3) A charitable corporation is in a position analogous to a trustee (a trust-like capacity) with respect to the use and disposition of its property.

(4) Using moneys held in a trust-like capacity to pay tort claims is not inconsistent with the trust-like obligations of the charity. Rather, "the payment of properly established tort claims is as much a part of the conduct of the corporation's charitable calling as are the 'good works' aspect of its mandate" (p. 393).

(5) It would be impractical for a charity to operate on the presumption that donations are given in trust for the charitable purposes of the corporation and for that reason to keep donations segregated from other funds held beneficially such as insurance proceeds, fees, or government grants.

(6) Property which has been earmarked by the donor for a particular charitable purpose of the charity and takes the form of a precatory trust is still held beneficially by the corporation and therefore is available to execution creditors.

(7) Property which is held by a trustee on trust for beneficiaries is not available to the creditors of the trustee or to satisfy a personal judgment against a trustee, because the trustee has legal title, but the beneficiary has beneficial ownership of that property. This principle does not apply, however, when the trust object is a charitable purpose, not a person, and when the wrong done is not in the trustee's personal affairs, but in the context of the charitable purpose. In those circumstances, the trust property is held subject to the equities which include legitimate tort claims incurred in respect of the charitable purpose.

60The critical conclusion is stated as follows (p. 400):

The charitable purpose property must be available to satisfy claims legitimately made against the charitable corporation in relation to it, for the reasons I have articulated in earlier parts of these reasons.

Thus, property held by The Christian Brothers of Ireland in Canada on trust for a specific charitable purpose is not necessarily protected from attachment at the hands of tort claimants asserting claims against the corporation, simply because of the "trust" nature of such an arrangement. Exigibility of such property depends upon whether the wrong has been perpetrated within the framework of the particular charitable purpose in question, as I have earlier delineated it. I do not think that tort claims legitimately asserted against one specific charitable purpose property can be asserted against other specific charitable purpose property that may be held by that same charitable corporation.

(Emphasis added)

No authority was cited for this conclusion. The judgment broke new ground by suggesting that tort claimants against the corporation assert their claims against specific properties or assets depending upon where, by whom or in what situation the tort occurred or the damage was suffered.

61In my view this conclusion is wrong in law as well as policy. It undermines the rule that there is no charitable immunity from compensating tort victims, by requiring before payment of any claim, an analysis of how each asset of the charity was acquired, to determine whether that asset may be available to pay the particular victim. Examples of potential problems arising from the application of this principle are not difficult to conceive. They were alluded to by Blair J. in an earlier part of the reasons where he queried rhetorically:

What of the building, or the piece of equipment, that is built or acquired with a combination of gifts, bequests, grants and fees for service? Are they to be divided up into pieces, some of which will be available to creditors and some of which will not? To say that the onus is on the trustee to keep such donations (and assets acquired with them) separate at the risk of having all assets swept into the classification of trust funds if they are co-mingled with other assets or revenues hardly addresses the problem. Rather, it rewards the charitable organization and encourages the co-mingling, at the expense of the tort victims, by shielding all assets from the reach of creditors -- on the trust analysis basis!

62Because in this case the potential "special purpose properties" are free-standing schools which may appear to be easily severable from the balance of the charity's assets, the concept of relating the tort to the property and having that property respond may appear to be a straightforward one. However, the result is more complex and difficult in the following examples. Example 1: there is a "special purpose trust" of a gift of funds to a hospital on trust, to be used to construct a cardiac care wing. Torts are committed in the surgical wing, and the hospital must be sold or mortgaged in order to pay the claims. In those circumstances, can the whole hospital be sold, arguably breaching the trust with respect to the cardiac care wing? Can the cardiac care wing be mortgaged and put in financial jeopardy to pay tort victims whose claims arose in another part of the hospital? Is a hospital to be viewed as an integrated facility for the purpose of determining within which special purpose property the tort was perpetrated, or as a collection of separate parts, assuming some parts were built with special purpose trust funds?

63Example 2: assume a donation on trust was given to the CBIC to be used by the CBIC to establish and provide a music program in each of its schools. The money was used to equip a music room in each school. Abuse took place at one of the schools but not in the music room. The question then becomes, did the wrong have to be committed in the music room in order to make that room and its contents available to pay the claim?

64The result reached below does not address how to determine what is to be considered as the specific charitable purpose when deciding whether the tort was committed within the framework of the purpose. Is it the charitable purpose itself, for example, providing education, or is it a particular project at a particular location, such as an entire school, or can it be a portion of a specific project, such as one room within the school? By defining "specific charitable purpose" in terms of any specific use of funds designated by a donor, the tort claimants seeking to maximize their recovery will always be pitted against the interests of those who wish to preserve as many of the assets of the charity intact as possible, who will argue the narrowest scope for the definition of the charitable purpose within which the wrong was perpetrated. As suggested by the music room and hospital wing examples, if different rooms within an educational institution or hospital are endowed on trust for the purpose of the room or wing, one could argue that because the wrong was not committed in that room or wing, therefore that asset is not exigible and should be preserved.

65In its factum the liquidator refers to practical problems it will face associated with determining whether specific assets including but not limited to the two British Columbia schools, are held by the CBIC on special purpose trusts.

66In my view, the articulation of these problems demonstrates that the concept of attempting to relate the wrong done to the particular assets of the charity is fatally flawed, as well as being incompatible with the long-standing rule of charitable non-immunity.

67The fundamental problem with the analysis and result reached below is that its logic is not reconcilable with the accepted rule that assets donated on trust for the general charitable purposes of a charity will be answerable to tort claims which may arise out of a particular operation of a charity. The effect is that if the tort arises within the context of one of the operations of the charity, then the trust funds donated to benefit all the purposes generally will go to pay that claim, with the result that the other trust purposes for which the funds were also donated will suffer, although the funds were supposed to be in trust for those purposes as well. This result is the accepted consequence of the no-immunity rule. There is no logical basis not to apply the same consequence when the funds were donated for only one of the charity's purposes or establishments.

68I do not discern that an inconsistent application or result was ever intended by the House of Lords in Mersey Docks or by the courts that followed its authority. Those courts recognized that the public who were intended to benefit from the charity's operations would have to lose out when judgments were executed against property held on trust by the trustees of the public institution.

MODERN RECOGNITION OF "A SPECIAL PURPOSE TRUST"

69For many years organized charities have taken the form of corporations incorporated to carry out charitable objects. It is generally accepted that charitable corporations receive and hold their assets beneficially as all corporations do. However, they are obliged to use those assets only to further the charitable purposes of the corporation. The position was well-summarized by Slade J. in Liverpool and District Hospital For Diseases of the Heart v. A.-G., [1981] 1 Ch. 193 at p. 209, [1981] 1 All E.R. 994 as follows:

In a broad sense a corporate body may no doubt aptly be said to hold its assets as a "trustee" for charitable purposes in any case where the terms of its constitution place a legally binding restriction upon it which obliges it to apply its assets for exclusively charitable purposes. In a broad sense it may even be said, in such a case, that the company is not the "beneficial owner" of its assets. In my judgment, however, none of the authorities on which Mr. Mummery has relied, including the decision in Construction Industry Training Board v. Attorney General, [1973] Ch. 173, establish that a company formed under the Companies Act 1948 for charitable purposes is a trustee in the strict sense of its corporate assets, so that on a winding up these assets do not fall to be dealt with in accordance with the provisions of s. 257 et seq. of that Act. They do, in my opinion, clearly establish that such a company is in a position analogous to that of a trustee in relation to its corporate assets, such as ordinarily to give rise to the jurisdiction of the court to intervene in its affairs; but that is quite a different matter.

(Emphasis in original)

70He went on to support this conclusion in part by reference to the 1917 decision of the House of Lords in Bowman v. Secular Society Ltd., [1917] A.C. 406, [1916-17] All E.R. Rep. 1, where it was held that a person who gives a gift to a corporation does not do so in trust for the objects of that corporation, even where the donor gave the gift with certain objects in mind.

71Because of the trust-like obligations of the charitable corporation, it is accepted that the court maintains its supervisory scheme-making power whether a charity's legal form is as a charitable trust or a charitable corporation: Liverpool Hospital v. A.-G., supra, at p. 213. This is to continue to ensure that gifts made with charitable intent will not fail even if the object of the gift is unclear or uncertain, or if the gift is directed to a charitable corporation which is misnamed or the corporation no longer exists: Re Vernon's Will Trusts (1962), [1971] 3 All E.R. 1061n, [1972] Ch. 300n (Ch. D.); Re Meyers, [1951] 1 All E.R. 538 (Ch. D.); Re Morgan's Will Trusts, [1950] 1 All E.R. 1097, [1950] Ch. 637 (Ch. D.); Re Finger's Will Trusts, [1972] 1 Ch. 286, [1971] 3 All E.R. 1050; Re Buchanan Estate (1996), 1997 CanLII 2620 (BC CA), 11 E.T.R. (2d) 8 (B.C.S.C.). This power of the court is referred to as the cy-pres doctrine. It i s described in the Restatement of the Law of Trusts, 2nd, s. 399 as follows:

If property is given in trust to be applied to a particular charitable purpose, and it is or becomes impossible or impracticable or illegal to carry out the particular purpose, and if the settlor manifested a more general intention to devote the property to charitable purposes, the trust will not fail but the court will direct the application of the property to some charitable purpose which falls within the general charitable intention of the settlor. [See Note 10 at end of document]

72It was in the context of a testamentary gift to a charity which no longer existed under the same name that Buckley J. discussed the nature of gifts to an incorporated and an unincorporated charity in Re Vernon's Will Trusts, supra (p. 1064):

Every bequest to an unincorporated charity by name without more must take effect as a gift for a charitable purpose. . . .

A bequest to a corporate body, on the other hand, takes effect simply as a gift to that body beneficially, unless there are circumstances which show that the recipient is to take the gift as a trustee . . . the natural construction is that the bequest is made to the corporate body as part of its general funds, that is to say, beneficially and without the imposition of a trust.

(Emphasis added)

73The issue of whether a gift was given "in trust" to an incorporated charity has arisen in those cases in the context of determining whether a testamentary gift can be saved which was left to charity but with problems of interpreting the true intent of the donor; specifically, whether a gift left to a named corporate or unincorporated charity which either no longer existed or which had changed its objects by the time the gift was to take effect, was intended as a gift to that corporation or charity or, alternatively, as a trust for the purposes of the corporation or charity. For example, in Re Finger's Will Trusts, supra, the testatrix left a share of the residue of her estate to the National Radium Commission, an unincorporated body which had ceased to exist, and to the National Council for Maternity and Child Welfare, an incorporated body which had also ceased to exist. The court viewed the situation in the following way (p. 294):

Both gifts therefore fail unless they can be supported as purpose gifts in which case they will be applicable by way of scheme for the indicated purpose, and if either or both cannot so stand there remains a final question, whether the will discloses a general charitable intention, in which case of course the share or shares will be applicable by scheme cy-pres, failing which there is an intestacy.

74The public policy which the courts wish to implement is to save charitable gifts and to apply them as far as possible to the purposes intended by the donor: Lapointe v. Ontario, supra, at p. 208; Re Buchanan Estate, supra, at p. 15. To do that, the court can determine that a gift was intended as a trust, even though left to a corporate charity, in order to save the gift where the particular corporate charity is no longer available to receive the gift.

75Another example where that law was applied is the case of Re ARMS (Multiple Sclerosis Research) Ltd., [1997] 2 All E.R. 679 (Ch. D.), which involved the winding-up of an incorporated charity. The issue for the court to determine was whether gifts which did not vest until after the charity was in liquidation still took effect, and therefore would be used in the liquidation for the payment of the debts of the charity, or whether the liquidation meant that there was initial impossibility and the court should propound a scheme. Neuberger J. held that a bequest to a company takes effect as long as the company is still in existence, whether in liquidation or not, so that even though the company was no longer carrying out its charitable purposes, the gift would not fail, unless it was given in trust. Presumably in that circumstance, the court would apply cy-pres because the charitable purpose for which the gift was given in trust was no longer being carried out by the charity. The court rejected the argument that the situation was analogous to the cases where a gift was left as a special purpose trust but that purpose was no longer being carried on, that is, initial impossibility: "It appears to me, however, that there is a clear difference between a gift to a specific company, which still exists (albeit that it is in liquidation), and a gift for a specific charitable purpose, where that purpose no longer exists" (p. 684). [See Note 11 at end of document]

76The authors of Tudor on Charities, 8th ed. (1995), p. 159, have extrapolated from this law the proposition that a charitable company may hold particular property on trust for specific charitable purposes, distinct from its other property, and that "clearly to misapply such property would be a breach of trust." I agree with the authors of Tudor on Charities as to the obligations of the charity when it accepts such a gift, but with the following qualifications: (a) as long as the charity is in operation, and (b) subject to any cy-pres order of the court, the charity would be obliged to use the funds for the purpose stipulated by the trust.

77(a) Where a corporation is no longer in operation but is wound up, s. 19 of the Winding-up and Restructuring Act provides:

19. A company, from the time of the making of a winding-up order, shall cease to carry on its business, except in so far as is, in the opinion of the liquidator, required for the beneficial winding-up thereof, but the corporate state and all the corporate powers of the company, notwithstanding that it is otherwise provided by the Act, charter or instrument of incorporation of the company, continue until the affairs of the company are wound up.

Therefore, where a corporate charity is wound up, the charity is obliged to stop carrying out its charitable purposes in order to allow the liquidator to proceed to wind up the charity.

78(b) The trustees may be required to seek approval of the court to use the trust property for another purpose where the purpose originally stipulated has become impossible or impracticable to carry out. The second branch of the cy-pres doctrine known as "supervening impossibility" (as opposed to "initial impossibility") applies where a particular object of a charity becomes impossible or impracticable to carry out after the gift for that purpose has vested in the charity. It is succinctly described by Waters in the following passage:

When impossibility or impracticability occurs after the instrument has taken effect, a so-called supervening impossibility or impracticability has occurred.

In these circumstances the court now looks to see whether the instrument of gift has given the property in question exclusively to the charitable purpose. . . . However, if there is an exclusive dedication, and the purpose can no longer be carried out because of impossibility or impracticability, the property is regarded as dedicated to charity, and passes to the Crown in right of the province as the ultimate protector of charity and charities. By long custom, the Crown will now agree to the drawing up of a cy- pres scheme for the approval of the court. [See Note 12 at end of document]

79We do not know to what extent large charitable corporations accept donations to be held in perpetuity on trust for a particular purpose within their charitable objects, and thereby accept true trust obligations with respect to such donations. Some of the issues that would confront the corporation if it were prepared to accept a donation on such terms include: what would be involved in keeping separate accounts, how and to what extent other corporate funds could be used and applied to the operation of the trust property, the effect of the application of other funds from the charity to the purpose for its ongoing operation or for other purposes.

80However, assuming that a corporate charity with multiple objects will accept gifts on trust for special purposes, the question that confronts this court is whether it would be a breach of trust for the charity, or the liquidator standing in the shoes of the charity, to allow such property to be used to satisfy tort claims which did not arise in connection with that property or the purpose for which that property was donated. Or, stated in the context of exigibility, does the fact that such property is held on trust for one charitable purpose of the corporation mean that if the corporation incurs a liability for a wrong done by the corporation but not in connection with that particular charitable object, then that property is not exigible because of the trust?

81I am satisfied that the answer to both questions is no for the following reasons.

82First, the concept of vicarious liability is that the entire corporation is responsible to the victim for the wrong which was done, although it may have been committed by only one person for whose actions that corporation is responsible. Judgment is obtained against the corporation. All of its assets are answerable for that judgment whether they are held beneficially or on trust for the charitable purposes of the corporation, including one or more of those purposes.

83Second, there exists no law of liability which requires that the claims of a plaintiff be related to particular assets of a corporation. Nor is it a part of the defence to establish in relation to which of its objects the tort occurred. It would not be an issue in an action against the charitable corporation for the court to determine in connection with which asset or charitable purpose the wrong occurred. As I have tried to demonstrate by some of the examples, the answer could be very broad (the charitable purpose is a particular hospital) or very narrow (the charitable purpose was one room, or one bed in the hospital), depending on the interests of the parties.

84Third, there is no valid policy objective to introduce into our law the concept of relating a wrong done by a charity to the operation or administration of a particular endeavour of the corporation in order to protect other assets of the charity from responding to legitimate tort victims of the charity. In this case, the potential result is that the assets of the charity available to satisfy the tort claims will fall woefully short. After the policy analysis recently carried out by the Supreme Court of Canada in the Curry case, McLachlin J. concluded at p. 566, para. 54: ". . . the suggestion that the victim must remain remediless for the greater good smacks of crass and unsubstantiated utilitarianism. Indeed, it is far from clear to me that the 'net' good produced by non-profit institutions justifies the price placed on the individual victim, nor that this is a fair way for society to order its resources."

85A major part of the concern traditionally asserted on behalf of charitable institutions is that donors will be reluctant to give if they believe that the donations will not be used for the good works of the charity but rather to pay tort claims. Whether or not this may be a more legitimate concern in recent years where there have been several instances of large charities held responsible for damage to large numbers of victims, both charities and their donors may see the special charitable purpose trust as a device to enable them to segregate the assets of the charity and to try in that way to make it difficult for tort claimants to collect judgments from the assets of the charity. This would be contrary to the policy conclusion of Curry and the other decisions which rejected charitable immunity on the basis that fairness requires that the victim be compensated out of the assets of the charity.

86Fourth, would not the directors of the charitable corporation find themselves in a hopeless conflict of interest, given their obligations as directors to act in the best interests of the entire charity including all of its objects, if in any proceeding with the victims they attempted to protect the assets of certain purposes at the expense of all of the other assets, perhaps including some which also were not related to the wrong which was perpetrated?

87Fifth, the purpose of the reference in recent case law dealing with the disposition of certain charitable gifts, to the concept of a testator leaving a gift as a special purpose trust is not to immunize such gifts from liability to victims of wrongdoing by the charity. It is to allow a court to apply the doctrine of cy-pres to such a gift and, rather than have the gift fail ab initio, the court may propound a scheme for the funds to be used as closely as possible to the use the testator intended. However, if there is no problem of interpretation and such a gift becomes vested in the charity and used as directed, if the charity is then wound up, the charity can no longer carry out any of its purposes (s. 19 of the Winding-up and Restructuring Act) because it must cease its business except as required by the liquidator for the winding up. In that case, all the purposes of the charity including the special purpose have become impossible for the charity to continue, except to pay the claims incurred by the charity while it was operating. [See Note 13 at end of document] The court may be called on to propound a scheme, however, if there is a surplus: Liverpool and District Hospital for Diseases of the Heart v. A.-G., supra.

88One statement made by Slade J. in Liverpool requires comment as it appears to revert to the concept that property held on trust for charitable purposes is not exigible. He states at p. 205 that the "surplus" and the "property of a company" (under the Companies Act 1948, 11 & 12 Geo. VI, c. 38), "will not . . . comprise assets of which the company at the date of its liquidation was merely a trustee (in the strict sense) for third parties or for charitable purposes, even though the legal title may have been vested in it." This statement was not considered in the context of the doctrine of no charitable immunity and the cases which hold that the assets of a charitable trust are answerable to tort claimants. Therefore, I do not read this statement as a contradiction of those long-established principles.

SUMMARY OF CONCLUSIONS WITH RESPECT TO THE EFFECT OF A SPECIAL PURPOSE TRUST

89The purpose of the recognition by courts of the possibility that assets can be given to a charitable corporation on a special purpose trust is to allow the courts to propound a scheme for the gift, rather then have it fail if the corporation has been misnamed or no longer exists. It was not to give immunity from exigibility to such a gift in the hands of the charity.

90A wrong done to a tort victim by or on behalf of the charity is done by or on behalf of all of its objects because the corporation is a single legal entity for the purpose of vicarious liability. The charitable objects are not severable as actors nor as separate legal units individually vicariously liable. Nor are the assets used in furtherance of particular objects referable to particular tortious conduct in any legally relevant way.

91Because assets held for charitable purposes are not immune from execution on the "trust theory", assets held for one or more than one of the charitable purposes of the corporation are answerable for the obligation of the corporation as a whole to tort claimants, once that obligation is established.

92To the extent that charitable corporations do accept donations in trust for one of their charitable purposes, as opposed to in the form of a precatory trust, or a non-trust agreement governing the conditions and use of the gift, the trust obliges the charity to use the donation only for the specific objects of the trust while the charity is operating, again subject to any court order that may be sought for cy-pres if while the charity itself continues to operate, that purpose or object becomes impossible or impracticable to continue. If the charity, while still operating, determined that it was in the best interests of the charity to use the assets held on special purpose trust instead of other assets to pay tort claims, that may be a situation where the charity would seek the approval of the court for the scheme, if the consequence would be that the particular purpose would no longer be carried out by the charity.

93When a corporation is wound up, the "business" of the corporation ceases except insofar as in the opinion of the liquidator is required for the beneficial winding up (s. 19 of the Winding-up and Restructuring Act). Where the corporation is a charity, this means that the charity ceases to carry out its charitable purposes. The obligation of the charity to use assets held on trust for one or more of the trust purposes also ceases as it may no longer carry on. If there is a surplus after the completion of the winding-up, then the assets can be applied cy-pres to another charity with similar purposes.

CONCLUSION ON THE EXIGIBILITY ISSUE

94For the purposes of this winding-up procedure, all assets of the CBIC, whether owned beneficially or on trust for one or more charitable purposes, are exigible and may be used by the liquidator to pay the claims of the tort victims.

95However, the liquidator is free, in accordance with its obligations, to seek the advice and assistance of the court in respect of any particular asset where there remains an issue with respect to its ownership or exigibility.

THE JURISDICTION ISSUE

96The liquidator appeals from para. 5 of the order of Blair J. which provides:

THIS COURT ORDERS AND DIRECTS that nothing contained in the Reasons of Blair J. released February 27, 1998 in this matter or the within Order is intended to affect the determination by the British Columbia Supreme Court of the questions raised in the Petitions in that Court with respect to which leave was granted by Order of the Ontario Court (General Division) on November 14, 1997.

and from the portions of the reasons for judgment upon which that paragraph was based.

97The liquidator's concern is the intent and extent of that parapraph and its effect on the findings of the court and on the balance of the order. The liquidator's position is that the rulings of the winding up court are applicable and enforceable by the liquidator throughout Canada and are therefore binding in all jurisdictions and in respect of all assets. The winding up court cannot limit the effect of its own decisions.

98The question whether para. 5 of the order was necessary, as the same statement was made in the reasons for judgment, or whether as a middle position, it should have been placed in the preamble to the order, was considered in an endorsement of Blair J. dated June 1, 1998. He determined that in substance it made no difference because the determination had already been made and included in the reasons, but that on balance, the paragraph should go into the body of the order.

99In my view, Blair J.'s intent in para. 5 is clear. He made the order under s. 21 of the Winding-up and Restructuring Act allowing representatives for the two British Columbia schools to bring petitions in the Supreme Court of British Columbia for the court to determine how their shares are held and the ownership of those shares for the purposes of the winding-up. Although there was a substantial record before the winding-up court on the history of the schools and of their shares, he noted that that record was incomplete. As the British Columbia court would have before it the complete record, its factual findings with respect to the issue before it would be based on that full record.

100I am satisfied that Blair J.'s intent was to reassure those involved in the British Columbia proceedings that any statements about the history of the schools and their shareholdings in his reasons for judgment were not intended to be taken as determinative of the issues which were to be litigated in the British Columbia court. The reason I say reassure, is because this would be the legal result, whether or not this statement was made by the judge in his reasons.

101However, this statement in the reasons and paragraph in the order are not intended to have the effect of making any of the other findings or determinations in the reasons and the order any less binding. As an example, para. 1 of the order provides:

THIS COURT ORDERS AND DECLARES that the intent and legal effect of "An Act to Incorporate the Christian Brother of Ireland in Canada", 11 Elizabeth II, Chap. 22 is to establish a corporate body which is the civil law entity through which the Congregation of Christian Brothers ("Congregation") conducts its temporal affairs in Canada and that the Corporation is in all respects the temporal identity and actor of the Congregation in Canada.

This determination was made and has effect for all purposes within the liquidation, and is equally effective in respect of all assets of the corporation, wherever situated.

102In my view, para. 5 as part of the order is unnecessary and should be struck out. It is unclear who is ordered and directed in that paragraph. It would not be another court. However, the reasons for judgment which seek to clarify that the British Columbia court is free to make its factual determinations regarding the ownership and shareholding of the two British Columbia schools, are a proper statement of the role of any specific finding of fact by Blair J. on those issues (p. 376):

I agree that the winding-up court must be cautious in this respect, and I wish to make it clear that nothing contained in these reasons and the order providing advice and directions emanating from them is intended to affect the determination by the British Columbia Supreme Court of the questions raised in the Petitions in that court with respect to which leave was granted in this court's order of November 14, 1997.

It is inevitable, though, that some of the directions given here, in response to the questions posed by Justice Houlden's order, will have a bearing on the way in which the findings of the British Columbia court -- once those determinations have been made -- will fit into the winding-up proceedings regarding the Christian Brothers of Ireland in Canada. I am satisfied that the state of the record before me justifies proceeding to that extent, in the interests of all concerned and the effective administration of that estate.

CONCLUSION

103The issues faced by the liquidator in this winding-up procedure caused it to seek the direction of the court on broad questions with respect to the application of the assets of the charity to its obligations to tort victims. As well-meaning as this exercise may have been, in my view it is not a path upon which the court ought to be asked to embark. The role of a court is to pronounce on legal issues in the context of facts found based on evidence. That evidence and those facts form the framework within which the law is developed. The liquidator should seek the advice of the court only in respect of the particular assets about which there is a factual or legal issue or dispute, and present the facts to the court upon which the law is to be determined and applied.

RESULT

104The appeal is allowed in part. Paragraph 2, question 2, answer 6 of the order is struck out. The fact that any asset is held by the corporation on trust does not affect its exigibility in respect of the claims of the tort victims of the CBIC. Paragraph 5 of the order is struck out but the reasons for judgment of Blair J. referred to in para. 102 above are approved.

105DOHERTY J.A. (concurring): -- I agree with the reasons of Blair J. with one significant exception. After holding that property held by a charitable corporation by way of a charitable purposes trust may be exigible to answer tort claims, he added this important qualification [1998 CanLII 14640 (ON SC), 37 O.R. (3d) 367 at p. 400]:

Exigibility of such property depends upon whether the wrong has been perpetrated within the framework of the particular charitable purpose in question, as I have earlier delineated it. I do not think that tort claims legitimately asserted against one specific charitable purpose property can be asserted against other specific charitable purpose properties that may be held by the same charitable corporation.

106While the distinction drawn by Blair J. is an attractive one, I do not think it is tenable in the context of a winding-up of a charitable corporation. The winding-up process sounds the end of the charitable corporation. It ceases to carry on any and all of the charitable purposes it formerly served. Its obligation to use particular property to further specific charitable purposes must also terminate. A winding-up is a time for a final accounting. That accounting should look at the charitable corporation as a single whole entity and not as a number of separate pieces each with its own set of obligations and assets.

107Blair J. correctly observed that the determination of the extent to which property held by a charitable corporation by way of a charitable purpose trust should be exigible to satisfy tort claims is ultimately a matter of equity (pp. 398-99). The practical and policy considerations effectively marshalled by my colleague, Feldman J.A. at paras. 61-66 and 84-85 satisfy me that, in the context of a winding-up, equity favours making all property held by the charitable corporation by way of charitable purpose trusts available to answer legitimate tort claims arising out of the corporation's pursuit of its charitable purposes.

108I concur in the result reached by Feldman J.A.

Order accordingly.

Notes

Note 1: 103. Any person dissatisfied with an order or a decision of the court or a single judge in any proceeding under this Act may,

(a) if the question to be raised on the appeal involves future rights,

(b) if the order or decision is likely to affect other cases of a similar nature in the winding-up proceedings, or

(c) if the amount involved in the appeal exceeds five hundred dollars,

by leave of a judge of the court, or by leave of the court or a judge of the court to which the appeal lies, appeal therefrom.

Note 2: 21. After a winding-up order is made in respect of a company, no suit, action or other proceeding shall be proceeded with or commenced against the company, except with the leave of the court and subject to such terms as the court imposes.

Note 3: Reported at (1998), 1998 CanLII 14640 (ON SC), 37 O.R. (3d) 367, 38 B.L.R. (2d) 286.

Note 4: D.W.M. Waters, Law of Trusts in Canada, 2nd ed. (1984), p. 503 et seq.

Note 5: In Duncan v. Findlater, supra, the plaintiff was injured and his son killed when their carriage struck a pile of rocks left negligently in the middle of a highway by repairmen working on the adjacent ditch. He sued for damages against the trustees charged with the maintenance of the highway. The trustees were appointed under an act which specified that they were to use the highway toll moneys for making, improving and repairing the highways, but "to no other purposes whatsoever" (p. 939). Lord Cottenham found that the workmen were not servants of the trustess and the trustees were not personally liable for the damage. Furthermore, there could be no resort to the trust funds because this was not the intention of the legislature in creating the trust. He stated:

It is impossible to suppose that the framers of this statute contemplated that any part of this fund would be appropriated for the purpose of affording compensation for any act of the persons who might be employed under the authority of the trustees. If the thing is done within the statute, it is clear that no compensation can be afforded for any damage sustained thereby, except so far as the statute itself has provided it; and this is clear on the legal presumption that the act creating damage being within the statute must be a lawful act. On the other hand, if the thing done is not within the statute, either from the party doing it having exceeded the powers conferred on him by the statute, or from the manner in which he has thought fit to perform the work, why should the public fund be liable to make good his private error or misconduct?

Similar facts led to an even broader expression of charitable immunity in Holliday v. St. Leonard's, Shoreditch, supra. Here, the trustees of the parish has instructed workmen to repair a street. The workmen negligently left a pile of paving stones in the middle of the street, which the plaintiff's carriage promptly struck. The carriage overturned and the plaintiff was injured. Relying on Duncan v. Findlater, Erle J. held that "persons intrusted with the performance of a public duty, discharging it gratuitously, and themselves taking no personal share in the mode of its performance, are exempted from liability for the negligent acts of persons employred by them."

Note 6: "The Quality of Mercy: 'Charitable Torts' And Their Continuing Immunity", [1987] Harvard Law Review 1382, at pp. 1384-85.

Note 7: D.W.M. Waters, supra, p. 12.

Note 8: D.W.M. Waters, "Comment: Charity - Cy-Près - Supervening Impossibility" (1974), 52 Can. Bar Rev. 598 (p. 602):

The object or purpose need not be a "legal entity", in the sense of a legal or quasi-legal personality, in order to be vested with a beneficial interest in trust property. That bridge was crossed when courts of Chancery recognized the exceptional validity of trusts for charitable purposes, as opposed to the usual trusts for persons. The Crown as parens patriae makes itself responsible for enforcing the obligations of charitable trustees. And there is never any question of the "vesting of trust property in a mere purpose".

Note 9: E. (S.M.) v. Christian Brothers of Ireland in Canada (1995), 1995 CanLII 10575 (NL SC), 136 Nfld. & P.E.I.R. 52 (Nfld. T.D.).

Note 10: Quoted with approval by Rutherford J. in Lapointe v. Ontario (Public Trustee) (1993), 1 E.T.R. (2d) 203 (Ont. Gen. Div.), from Picarda, The Law and Practice Relating to Charities (London: Butterworths, 1977), p. 219.

Note 11: See also Re Stewart Estate (1999), 1999 CanLII 4760 (PE SCTD), 174 Nfld. & P.E.I.R. 147, 27 E.T.R. (2d) 92 (P.E.I.T.D.).

Note 12: Waters, Comment, supra, note 8, at p. 599.

Note 13: It would be facetious to argue that the winding up itself makes the specific purpose impossible to carry out and that the assets, without the liabilities, should be applied cy-pres to allow the charitable purpose to be continued, free of the liabilities of the corporation. This would wholly undermine the winding-up process and its purpose.