A Matter of Trust — A Backgrounder on Legal Issues concerning Scouting Property
By Ted Claxton
This article is meant to inform our members and the membership of Scouts Canada generally, about the position recently adopted by Scouts Canada that there are no trust obligations on scouting real estate, that if there were such obligations, Scouts Canada is relieved of those obligations by the abolition of the District and Regional Councils, and that the members' rights are restricted to participation in meetings and the ability to apply to participate in scout activities.
In Scouting, the deeds to real estate (real property) have long been held by trust instruments.
While the fundamental principles reflected in this article are applicable throughout Canada, the law of each province may have some particular twist that this article may not address. I am writing this from the perspective of Ontario law and my particular experience with the Ontario Incorporated Body.
Under the Charities Accounting Act of Ontario any Charitable Corporation is, by law, constituted a Trustee of real and personal property held in its name. Furthermore its incorporating instrument is deemed to be an instrument in writing (i.e. a trust instrument). This Statute applies despite any provision in the instrument that excludes the application of the Statute or despite the fact that the trustee is given discretion as to the application of property or funds if that property or those funds are for the use of religious, educational, charitable or other public purposes.
In a Charitable Trust the trustee holds the legal title to property for the benefit of the charitable use or charitable object, not for or on behalf of any individual.
In Scouting, the deeds to real estate (real property) have long been held by trust instruments. In the United Kingdom the Policies, Organization and Rules of the Scout Association provide a whole section detailing how trustees are appointed and trust property is to be dealt with.
When a trust has been created two types of interest are conferred, a legal interest and an equitable or beneficial interest. In a Charitable Trust the trustee holds the legal title to property for the benefit of the charitable use or charitable object, not for or on behalf of any individual. A charitable trust can be created for religious, educational, charitable purposes (e.g. relief of poverty, advance of the arts and science, aid of the infirm etc.) or other public purposes that the law recognizes as being in the public interest. A charitable purpose excludes individual benefit; you cannot make yourself or anyone else the single object of charitable trust.
You may be wondering what the difference is between a legal interest and a beneficial interest. The most common example can be found in a mortgage. When property is mortgaged the lender (Bank, financial institution or individual) becomes the legal owner. The borrower becomes the equitable or beneficial owner. Usually the lender holds only the bare legal title and takes no part in the maintenance, upkeep or management of the property. The lender's right extends only to receive the mortgage payments unless there is default. In that case the lender can sell the property, pay off the balance and pay the remainder to the borrower. Where the borrower meets the obligation and pays off the mortgage debt the borrower has an absolute right to have the title signed back. This is called the equity of redemption. If the lender fails to sign back the legal title the court will make an order removing the lender from the title and declaring the borrower to be the legal owner.
The By-laws of Scouts Canada, prior to June 1, 2003, provided that a Provincial Council, with regard to property of the provincial council, or any division or group in the Council, could arrange to have the property held in the name of Boy Scouts of Canada (the National Corporation), or in the name of the Council, or it could provide that property be held by an approved trust company or it could provide that property be held by a corporation completely owned or controlled by the provincial council that was "incorporated for the sole purpose of holding property." In the case where property was held in the name of the Council it would have to be held by trustees because the Provincial Councils were not entities that would be recognized as having separate legal capacity.
...with the exception of National Headquarters, almost no property is held directly in the name of the National Corporation.
In Scouts Canada, with the exception of National Headquarters, almost no property is held directly in the name of the National Corporation. It has not been the policy in Ontario to register property in the name of the National Corporation. Until the Provincial Incorporated Body was created in the early 1960's, the policy of the Ontario Council was that property of the divisions and groups was held by approved trust companies. Starting in the early 1980's the directive was changed so that property was directed to be held in the name of the Provincial Incorporated Body rather than in the name of a Trust Company.
There have been trusts of real property for many, many years. I have three examples. The Deed to the property for Peacehaven Camp, beneficially owned by South Waterloo, has since its inception and, so far as I am informed, until now, been held in the name of the Waterloo Trust (now known as the TD Canada Trust). This is the case in the deeds to both parcels of land that make up the camp, purchased in 1936 and 1948 respectively.
In North Waterloo, the deeds to Camp Mohawk, Scout Headquarters and Camp Everton were also held in the name of the Waterloo Trust until the early 1980's. At that time the Provincial Council decided that property should be held in the name of the Provincial Incorporated Body. In 1982 the North Waterloo properties were transferred to the name of that corporation "as trustee for the North Waterloo District Council, Boy Scouts of Canada." That deed, and many others, contained a clause that grants a power of appointment (i.e. the right to designate to whom property will be transferred) to the authorized representatives of the District Council of the lands held for the benefit of the Council.
The Scouts Canada By-laws, both No. 1 and No. 2, contain what is known as a "saving clause".
The Elgin District's deed does not have in the recital of transfer an express statement of trust but, by operation of the Charities Accounting Act and the By-laws of Scouts Canada, at the very least there is a deemed or implied trust. That deed contains the same clause creating the power of appointment as is found in the North Waterloo deed. Although there is no recital of the trust in the name listed on the first page of the deed there are express terms in the body of the deed that signify beneficial ownerships that would constitute the deed as a trust instrument.
The Scouts Canada By-laws, both No.1 and No.2, contain what is known as a "saving clause". This clause is a standard clause attached to amendments. Its effect is to declare that any right, title, obligation, or interest existing at the time of an amendment to the By-law is not affected by the change in the By-law. The By-laws, at least in matters where obligations or rights are concerned, preserve those pre-existing positions, the status quo is to be maintained.
Despite the statutory requirements that impose a trust for real property upon the Provincial Incorporated Body and despite the clear express trust provisions found in many deeds, Brian Moore, a Scouts Canada employee, in a sworn declaration filed in Court alleges that: "There is no express trust between Scouts Canada or Provincial Council (by which he means the Provincial Incorporated Body) and any local Scout Council or sub-unit." His assertion is patently unsubstantiated and is patently incorrect.
Whether an express trust has or has not been declared is of little consequence because the Provincial Incorporated Body is bound by the Statutory Trust created by the Charities Accounting Act. The only real question is; "for whom does the corporation hold the charitable beneficial interest or the charitable use?"
With regard to the beneficial interest or use of property, the change in structure is of no real consequence.
In 2002, Scouts Canada began to be restructured. In the process, the District Councils were abolished and replaced by Areas. Scouts Canada management, and particularly the officers of the Provincial Incorporated Body, have asserted that the Districts are now dead, defunct, with the result that the Provincial Incorporated Body has become both the legal and beneficial owner of property held by it for the benefit of those Councils. This is just an exercise in playing a shell game. With regard to the beneficial interest or use of property, the change in structure is of no real consequence. This is so because the Scouts Canada By-laws use only generic terms "division" and "group" and do not refer to "Councils" or "Districts." The groups and the membership within the former districts certainly continue to exist. They are not defunct, they have not ceased to exist except in the mind of Scouts Canada management. Their position is that the trust interest is gone and that the authorized officers of those former districts have no authority. They have obviously shut their eyes to the terms of the power of appointment, to the wording of the By-laws, and not the least, to the scouting spirit. All of this is being done to consolidate control of the organization within the management clique in complete disregard for the obligations that rest upon the officers of these corporations and the corporations themselves.
A property trustee has in law an equitable obligation to look after the interests of the beneficial owners of property.
A property trustee has in law an equitable obligation to look after the interests of the beneficial owners of property. This is referred to in the law as their fiduciary duty. The Black's Law Dictionary uses this description of a fiduciary duty, "A relation subsisting between two persons in regard to a business, contract, or piece of property, or in regard to the general business or estate of one of them, of such a character that each must repose trust and confidence in the other and must exercise a corresponding degree of fairness and good faith."
Every trust, in order to operate requires a trustee, trust property, and trust objects. In the case of a Scout Camp that trustee is, by our By-laws and policies, the Provincial Council as trustee, an authorized trust company or a provincial incorporated body controlled by Scouting. The "trust property" is the real and personal (immovable and movable property) that constitutes the camp "property." The trust object is the charitable purpose, namely the object of scouting being the non-formal education of young people. It is obvious that this purpose can be promoted in numerous different ways. Scouts Canada, as a corporation carrying on a charitable object could have, and indeed provided in the By-laws for the possibility, that all real property would be registered in the name of Scouts Canada. This, however, was not done. Because Scouting is a Movement the management early on recognized the importance of and indeed the necessity for local management and control of property. It must have been obvious to everyone that the local groups and divisions would not expend their energy and resources to create a local infrastructure for scouting just to hand it over to the whim and vagaries of the National corporate body. For the most part, the trust deeds specify the local organization as the repository of the charitable object for which the trust property is to be applied. Until 2003, when the idea of total centralization was instituted under By-law No.2, and the Provincial Incorporated Body in Ontario began to adopt the role of micro manager, there was never any question that the beneficial charitable use of trust property was being held for the groups and divisions specified in the trust instruments. The idea that all property is held for the general benefit of the National Corporation, Scouts Canada, or its Provincial Incorporated Bodies, as its or their absolute property, is a concoction of recent origin created with the intent to remove any local authority or autonomy. This corporatization of the Movement is contrary to the spirit of scouting and has led the management to disavow their fiduciary obligation to the local beneficial interest. This is why there are legal challenges currently before the Courts or in contemplation.
This corporatization of the Movement is contrary to the spirit of scouting and has led the management to disavow their fiduciary obligation to the local beneficial interest.
The management of the Ontario Incorporated Body is pretending that it has no such fiduciary obligations. Brian Moore, in his Affidavit filed in the Elgin Area proceedings states, "An individual member's interest in Scouts Canada extends only to the right to attend Scout meetings and to apply to participate in scout activities. The benefit is a participatory one, rather than a legal beneficial interest in property held by Scouts Canada at any level of its organization." Such statements are an affront to all members of Scouting. The World Organization of the Scout Movement declares that the members are part owners and stakeholders in the organization. Our Scouts Canada organization specifically created By-laws that took this into account and implemented policies and procedures that gave effect to control by the local organization of the resources that had been acquired, developed and maintained by them to promote the purpose and mission of Scouting. By asserting that the members are mere appendages to the corporate structure, Brian Moore, on behalf of the Provincial Incorporated Body, and indeed on behalf to Scouts Canada for whom he purports to make these assertions, is denying that Scouting is a movement and denying that the members have any real interest in the movement. In permitting him to do so, Scouts Canada and the Provincial Incorporated Body have disavowed their fiduciary obligation and disavowed the mutual trust that should be the hallmark of the movement. In doing so they are wilfully disregarding the fundamental principles of the Scout Movement.
In the face of this egregious conduct the local scouting organizations are fully justified in taking their grievances to the Courts. Those Courts have a special inherent jurisdiction to oversee, supervise and protect the interests of charities, especially concerning the administration or maladministration of charitable trusts. It is truly regrettable that the local scouting organizations have been driven to knock on the door of the courts and that having done so, that our organization has stooped to threats and intimidation (see "Council Commissioner threatens all members in Elgin Area") , rather than seeking equity and justice.