Charitable Trusts – How Much Discrimination is Too Much?

Authored by Nevena Urosevic, Associate Director of Legal Affairs

What are acceptable forms of discrimination when setting up a charitable trust? What are the factors considered in an assessment of this kind? What is the balance to be struck between a settlor’s wishes and public policy?

The Castanera Case

A recent decision rendered by the Court of Queen’s Bench of Manitoba (“Castanera”) [i] discusses the issue of discrimination in charitable trusts. Dr. Esther G. Castanera, former science student at the University of Manitoba (the “University”), created an award fund from a testamentary gift to support a scholarship for women graduates of the high school she attended who are studying science at the University.

The full bequest states as follows:

“I give, devise and bequeath the remaining fifty percent (50%) of my residuary estate to the University of Manitoba, Winnipeg, Canada for scholarships at the University of Manitoba for needy and qualified women graduates of the Steinbach Collegiate Institute who will study for a Bachelor of Science degree with a major in one of the basic sciences of chemistry, physics, mathematics, biochemistry or molecular biology. This bequest shall be known as the ‘Esther G. Castanera Scholarship Fund.’ It shall be administered upon such conditions as the governing body of the University of Manitoba shall prescribe.”[ii] (emphasis mine)

Ms. Castanera had made clear that she fully intended that the scholarship go specifically to women graduates to the exclusion of men. The University had a policy entitled “Non-Acceptance of Discriminatory Scholarships, Bursaries or Fellowships” (the “Policy”) in place both at the time that the will was drafted, being May 16, 1991, and the date the will became effective, being September 27, 1997. When Dr. Castanera’s gift became available, the Faculty of Science wrote to the Chair of the Senate Awards Committee (the “Committee”) recommending that an exception be granted from the Policy on the basis that women have consistently been underrepresented in the areas intended to be benefitted by the gift. The request was not approved, as the most recent numbers of admissions in those disciplines at the time suggested that women were no longer underrepresented. A second request was made to the Committee by the Associate Dean, but that request was also rejected. A third request was made by the Faculty of Science but the Committee found that an underrepresentation would only arise if the percentage of women in a discipline was less than 40%.

The Castanera Trust was neglected from 2000 to 2012, at which time new efforts were made to deal with the matter, resulting in an application before the courts. The main question before the court was whether the qualification in Ms. Castanera’s will that the fund be used for “women graduates” only offended or violated the Human Rights Code[iii] or public policy.

In order to come to a decision, the judge reviewed the applicable legislation under which sex was a prohibited ground of discrimination. However, the legislation also contained affirmative action exceptions to discrimination. The judge further compared and contrasted two similar discrimination cases to the one at bar.

The Leonard Trust Case

The first of the two cases was the Leonard Trust[iv] case. That case dealt with an inter vivos trust[v] from which income was to be used for the purpose of educational scholarships called “The Leonard Scholarships”. The trust document contained provisions stating that the White Race is best qualified by nature to be entrusted with the development of civilization and general progress of the world, the progress of the world depends on the maintenance of the Christian religion, and the advancement of civilization depends on the prosperity of the British Empire as a whole.[vi]

As such, the trust indenture set out the specific qualities of those to be granted scholarships as “a British Subject of the White Race and of the Christian Religion”.[vii] It further excluded schools, colleges or universities which might be subject to the domination or control of the class of persons excluded in the recitals.[viii]

The issue before the courts in this matter was essentially whether testamentary freedom would trump modern-day notions and legislation regarding human equality. The court ultimately found, in Leonard Trust, that since there was no good reason demonstrated for the discriminatory conditions, they could not withstand modern day notions about equality.[ix] Part of the decision stated:

“The freedom of an owner of property to dispose of his or her property as he or she chooses is an important social interest that has long been recognized in our society and is firmly rooted in our law… That interest must, however, be limited in the case of this trust by public policy considerations. In my opinion, the trust is couched in terms so at odds with today’s social values as to make its continued operation in its present form inimical to the public interest…

According to the document establishing the Leonard Foundation, the Foundation must be taken to stand for two propositions: first, that the white race is best qualified by nature to be entrusted with the preservation, development and progress of civilization along the best lines, and second, that the attainment of the peace of the world and the advancement of civilization are best promoted by the education of students of the white race, of British nationality and of the Christian religion in its Protestant form…

To say that a trust premised on these notions of racism and religious superiority contravenes contemporary public policy is to expatiate the obvious…

To perpetuate a trust that imposes restrictive criteria on the basis of the discriminatory notions espoused in these recitals according to the terms specified by the settlor would not, in my opinion, be conducive to the public interest. The settlor’s freedom to dispose of his property through the creation of a charitable trust fashioned along these lines must give way to current principles of public policy under which all races and religions are to be treated on a footing of equality and accorded equal regard and equal respect…”[x]

The Leonard Trust decision states unequivocally, however, that the decision would not automatically be applied to every scholarship which contained conditions which violated some discriminatory category. In other words, there are acceptable forms of discrimination.[xi]

The University of Victoria Case

The second case evaluated by the court attests to this fact. In the University of Victoria case[xii], the court found that a testamentary trust restricting a scholarship to a Roman Catholic student was acceptable discrimination.

In the University of Victoria case, the court found:[xiii]

1. The University of Victoria, as trustee, ought to be treated in the same way as a testator and since the testator was able to make private gifts, the public aspect required by the Human Rights Code and the notions of public policy did not exist.
2. The Leonard Trust case scholarships were based on blatant religious supremacy and racism and could be distinguished on those facts. The judge found that there was nothing offensive in a testator of a particular faith wishing to promote others of the same faith if the gift was not motivated by notions of supremacy.

How Much Discrimination is Too Much?

Applying the Leonard Trust case and the University of Victoria case to the case at hand, the court, in Castanera, put the emphasis on the purpose and ideas undergirding the discrimination as relevant for consideration. While the Leonard Trust case was based on an idea of superiority based on race, sex, and religion, the Castanera case was motivated by a desire to promote women in a field which historically was a male-dominated area. “Put very simply, the restrictions which drove the decision in the Leonard Trust case were motivated by a belief that white Anglo Protestant people were superior to all other people of different races and different creeds.”[xiv] Furthermore, the judge took the University of Victoria case as a precedent that the promotion of people with the same religious belief is acceptable, at least in some circumstances.

In Castanera, the court found that, even though the disparity between men and women enrolling in the science program was not as large at present, there are many other factors that can be analyzed to see whether there is true substantial equality in those programs.

Furthermore, the court found that where a purpose was not unreasonable at the time the gift was contemplated, it is not unreasonable for the gift to be administered in that way, unless the gift in the mind of the public has become so offensive as to require a variation.The fact that offensiveness is the standard by which the validity of a trust is measured is rather vague and the possibilities of what a court might find offensive are limitless and, undoubtedly, mutable. Nonetheless, the court did put forward the general principle that such matters are to be decided on a case by case basis, with an individual assessment of factors, such as the history or motivation of the giftor.[xv] As such, these two factors seem to be the governing factors in an assessment of this kind.

These considerations were reflected in the analysis of the Leonard Trust case where the motivation was unacceptable to present society, versus the University of Victoria case where it was found that there is nothing offensive about limiting a gift to a particular religious background as long as the gift was not motivated by notions of supremacy. Finally, in the Castanera case, the historical context of the condition of the gift was the large and historically persistent inequality between the number of male to female students in science programs.

Furthermore, the decision stated the delicate balance that must take place between the wishes of the testator and the fact of discrimination. The Court said it the following way:

“Every gift requires a contextual assessment. A one-size-fits-all policy does not fairly provide the necessary comfort to a testator that his/her gift will be treated in the manner anticipated by them.”

Finally, the Court stated that recipients should decline to accept a gift in the first place, if said gift contravenes their policy.

Therefore, the conditions of the trust were allowed to remain as drafted by Dr. Castanera. The court allowed the scholarship to remain for female students only, finding that the qualification in Dr. Castanera’s will that the trust be used for “women graduates” does not violate or offend the Human Rights Code or public policy.

When setting up a charitable trust, it is important to ensure that the conditions or provisions of the trust are not at odds with trustee policies in place or any applicable human rights legislation or public policy generally. The cases seem to show, generally, that while egregious trust provisions will likely be amended or removed, amending provisions generally is the exception and not the rule. The general principle seems to be that where discrimination with respect to charitable trusts is not motivated by principles repugnant to present-day society, and certainly where historical factors justify the discrimination, the provisions will be respected as drafted. The courts still value testamentary freedom and, where possible, wish to provide a testator with the assurance that their gift will be treated in the manner anticipated by them.

References

[i] Re Esther G. Castanera Scholarship Fund, 2015 MBQB 28 (“Castanera”).

[ii] Castanera at para 2.

[iii] C.C.S.M. c. H175.

[iv] Canada Trust Co. v. Ontario (Human Rights Commission) (1990), 74 O.R. (2d) 481 (ONCA) (sub. nom. Leonard Foundation Trust, Re).

[v] An inter vivos trust is a trust that is not a testamentary trust. Unlike a testamentary trust, it commences while the creator (called a settler or trustor) is alive. Inter vivos is latin for “between the living”.

[vi] Castanera at para 25.

[vii] Ibid at para 26.

[viii] Ibid.

[ix] Ibid at para 29.

[x] Ibid at para 28, quoting from Leonard Trust at paras 37-40.

[xi] Ibid at para 30, quoting from Leonard Trust at para 42.

[xii] University of Victoria v. British Columbia (Attorney General), 2000 BSCS 445.

[xiii] Castanera at para 34.

[xiv] Ibid at para 37.

[xv] Castanera at para 39.