Mar 2019 Charity & NFP Law Update
On March 11, 2019, the Ontario Court of Appeal released its decision in Faas v Centre for Addiction and Mental Health Foundation, affirming the lower court’s decision (which was discussed in the June 2018 Charity & NFP Law Update) in rejecting a section 6 application under the Charities Accounting Act. The application, if granted, would have required the Public Guardian and Trustee (“PGT”) to investigate the use of donated funds by a public foundation and registered charity, the Centre for Addiction and Mental Health Foundation (“CAMH”).
By way of context, a donation of $1-million had been made by the Faas Foundation and its principal, Andrew Faas (“Faas”) to CAMH for the development of a workplace mental health program, using a written Donor Investment Agreement (“DIA”) that contained terms requiring CAMH to provide an annual status report to the donor. Subsequently, Mr. Faas became dissatisfied with the progress of the program’s development, its design and implementation by CAMH and the disclosure of information provided by CAMH, including financial accounting. As a result, Mr. Faas brought a section 6 application on the basis that it was in the public interest for the PGT to investigate whether the donation had been used for its designated purpose as agreed to in the DIA.
In dismissing the appeal, the Court of Appeal found that the motion judge did not err in finding that there were no grounds to order an investigation by the PGT and that such investigation would not serve any identifiable public interest, as Mr. Faas’ section 6 application was “based on conjecture” and “[n]o mischief has been identified, and no misuse of funds is apparent from the record.” The Court of Appeal held that the motion judge was “entitled to accept that evidence” that there had been no mismanagement of funds, and that the donation was being properly used for its designated purpose. As such, the Court of Appeal affirmed the lower courts’ finding that Mr. Faas did not have a right to a “detailed accounting of CAMH’s program and its use of funds.”
Section 6 investigations are conducted at the cost of the public and, as demonstrated in this appeal decision, courts do not grant such applications unless there is an identifiable mischief and the application is for the benefit of the public. Nevertheless, charities should be careful when expending any donated funds to ensure that such donations are used to further their charitable purposes and, where specific restricted terms are imposed on a gift by a donor and agreed to by the charity, in accordance with the said restricted terms.