On March 29, 2023, the Associated Press reported that the incoming board appointed by Governor DeSantis to assume control of municipal services over Walt Disney World’s self-governing district would be effectively hamstrung by an agreement executed between Disney and the previous board. That agreement is effective “in perpetuity… if the perpetual term of this Declaration is deemed to violate the “Rule Against Perpetuities,” or any similar law or rule, this Declaration shall continue in effect until twenty one (21) years after the death of the last survivor of the descendants of King Charles III, King of England living as of the date of this Declaration…”. Princess Lilibet of Sussex was born on June 4, 2021, so one can only begin to imagine the horror on the Board’s faces.
Leaving aside the legal schadenfreude, the Disney situation is a nice segue into the case of Fletcher’s Fields Limited v. The Ontario Rugger Union 2023 ONSC 373 (“Fletcher’s Fields“), a case that includes a concise discussion about the validity of non-charitable purpose trusts in the context of the Perpetuities Act.
In the 1960s, six rugby fields (the “Fields”) were purchased by the Ontario Rugger Union (“ORU”) and used by six rugby clubs (the “Clubs”). Under the terms of an agreement, the ORU owned the Fields in trust for the Clubs.
At some later time, Fletcher’s Fields Limited (“FFL”), a not-for-profit organisation promoting and developing rugby in Toronto, executed a conveyance agreement with the ORU and Clubs, agreeing that the Fields would be conveyed from the ORU to FFL. The conveyance agreement acknowledged that the ORU held title to the Fields in trust for itself and the Clubs for the purpose of playing rugby. The conveyance agreement also expressed the parties’ desire that the Fields should continue to be used for playing rugby and social events connected with the sport.
FFL later registered a declaration of trust with the Toronto Registry Office, acknowledging that it owned the Fields in trust for the primary purpose of playing and promoting rugby in Toronto. FFL later experienced financial difficulty and sold the Fields to the City of Markham. The sale proceeds were donated to the Canadian Rugby Foundation, another not-for-profit corporation. An application was brought by the FFL seeking directions from the Court with respect to several questions arising out of the Fields’ sale, one of which related to whether the Fields were in fact held in trust.
As listeners of the Hull on Estates podcast might recall from Episode 633, promotion of sport per se is not a recognised charitable purpose under the Pemsel heads à la A.Y.S.A. Amateur Youth Soccer Association v. CRA, 2007 SCC 42. However, could the trust still be saved as a non-charitable purpose trust?
A non-charitable purpose trust is recognised, as Justice Penny wrote in Fletcher’s Fields, where
- it meets the so-called “three certainties”;
- it does not violate the rule against perpetuities (s. 16 of the Perpetuities Act); and
- there is a person with standing to enforce the trust.
No issues were posed by the three certainties and the rule against perpetuities in the circumstances, and the real sticking point in this part of the Court’s analysis was the perceived lack of any beneficiary to enforce trust on the trustee. After all, the Clubs held no legal or beneficial title to the Fields and the rugby players only indirectly benefitted, a factor insufficient to make them the intended objects. This was no obstacle, however, and Justice Penny opined that “…the modern-day trend is to be flexible when deciding whether non-charitable purpose trusts are valid. Instead of prohibiting non-charitable purpose trusts, the legal rules try to ensure that the intention of the creator of the trust is carried out and that the trustee is able to perform in compliance with that intention”. [emphasis added.]
On that basis, while the members of the ORU and shareholders of the FFL were not direct beneficiaries, they did have sufficient standing to enforce the trust.
Thanks for reading.
Aaron Chan