As Stuart Clark noted in his blog “What Even Is A ‘Charity’”, special considerations and benefits flow from a trust that can be considered a charitable purpose trust, including an exemption from the rule against perpetuities. Stuart has also blogged on what a “charitable purpose” is.  

In considering whether a trust is a charitable purpose trust, the courts will take guidance from the 1891 decision of Pemsel v. Special Commissioners of Income Tax, [1891] A. C. 531 (H.L.).[1] Pemsel established that there are four aims or purposes of charity that are accepted as legitimate heads of charitable purpose (referred to as “the Pemsel heads”). These heads are:

1. Relief of Poverty; 

2. Advancement of Education;  

3. Advancement of religion; and  

4. Other purposes beneficial to the community. 

The Pemsel heads were found to “a comprehensive definition of legal charity” in the Ontario Court of Appeal decision of Re Levy Estate, 1989 CanLII 4382.[2]

Courts have historically been, and continue to be, generous in considering whether the purpose of a trust is charitable. However, although courts have been “charitable” in considering whether a trust is “charitable”, the purpose of the trust will still be closely scrutinized. In Jim Crerar Charitable Trust (Re), 2022 BCSC 60 (CanLII), a trust set up to distribute funds to “any poor person, who … requires funds for the prosecution of a wrongful dismissal claim” was found to NOT satisfy the Pemsel heads, and therefore was not a charitable purpose trust.  

The issue of whether a trust is a charitable purpose trust is often relevant to the residual beneficiaries of an estate, or the intestate beneficiaries. If a trust is found to not be a charitable purpose trust, and therefore in breach of the rule against perpetuities, the trust could fail, and pass to the residual beneficiaries or on an intestacy. 

Thank you for reading. 

Paul Trudelle 

[1] Pemsel was recently considered and applied in Jim Crerar Charitable Trust (Re), 2022 BCSC 60 (CanLII). Pemsel was discussed and applied by the Supreme Court of Canada in Vancouver Society of Immigrant and Visible Minority Women v. M.N.R., 1999 CanLII 704 (SCC). 

[2] Counsel for the appellant was Maurice Cullity, as he then was. Mr. Cullity’s knowledge of and contribution to the law of trusts and estates, both as a lawyer and as a judge, is extraordinary.  The case sets out a history of the development of the law of charitable purpose trusts, no doubt thanks to what the Court of Appeal described as Mr. Cullity’s “learned and comprehensive argument”.