Full Text of Judgement.
** Unedited **
Indexed as:
Vancouver Regional FreeNet Assn. v. Canada (Minister of
National Revenue - M.N.R.)
Between
Vancouver Regional FreeNet Association, appellant, and
Minister of National Revenue, respondent
[1996] F.C.J. No. 914
Court File No. A-413-94
Federal Court of Appeal
Vancouver, British Columbia
Pratte, Hugessen and Decary JJ.
Heard: June 10, 1996.
Judgment: July 8, 1996.
(23 pp.)
Counsel:
James R. Aldridge and Marcus Bartley, for the appellant.
Roger Leclaire, for the respondent.
Reasons for judgment by: Hugessen J. Concurred in by:
Pratte J. Dissenting reasons by: Decary J.
[para1] HUGESSEN J.:-- In this appeal we are called upon
to decide whether the provision of free access to the
information highway is a charitable activity so as to qualify
the organization providing such access as a registered charity
within the meaning of the Income Tax Act. The Minister and my
brother Decary J.A. think that it is not. With respect, I
have a different view.
[para2] Somewhat anomalously, the Act does not provide a
useful definition of "charity" or "charitable" so that the
Courts of necessity are thrown back to an obscure and not
always entirely consistent corner of the law of England.
Judging from the number of times that this Court has been
called upon in recent years to apply that ancient law to the
circumstances of life on the eve of the third millennium, I
may be forgiven for expressing the wish that this is an area
where some creative legislative intervention would not be out
of order.
[para3] The starting point is the Charitable Uses Act,
1601 [See Note 1 below], sometimes called the Statute of
Elizabeth. The preamble to that statute contains a list of
what were then considered by Parliament to be charitable
purposes. Rendered into modern English spelling, it is as
follows:
----------------
Note 1: 43 Eliz. 1, c. 4.
----------------
The relief of aged, impotent, and poor people; the
maintenance of sick and maimed soldiers and mariners,
schools of learning, free schools, and scholars in
universities; the repair of bridges, ports, havens,
causeways, churches, seabanks, and highways; the
education and preferment of orphans; the relief, stock,
or maintenance of houses of correction; marriage of poor
maids; supportation, aid, and help of young tradesmen,
handicraftsmen, and persons decayed; the relief or
redemption of prisoners or captives; and the aid or ease
of any poor inhabitants concerning payment of fifteens,
setting out of soldiers, and other taxes.
[para4] This list is not exhaustive; for many years now
courts have considered that purposes within the spirit and
intendment of the preamble may be charitable even though they
are not specifically listed therein. The following
categorization of charitable purposes, now considered to be
classic, is taken from the speech of Lord Macnaghten in
Pemsel's case [See Note 2 below]:
----------------
Note 2: Commissioners for Special Purposes of Income Tax v.
Pemsel, [1891] A.C. 531.
----------------
"Charity" in its legal sense comprises four
principal divisions: trusts for the relief of poverty;
trusts for the advancement of education; trusts for the
advancement of religion; and trusts for other purposes
beneficial to the community, not falling under any of the
preceding heads. The trusts last referred to are not the
less charitable in the eye of the law, because
incidentally they benefit the rich as well as the poor,
as indeed, every charity that deserves the name must do
either directly or indirectly. It seems to me that a
person of education, at any rate, if he were speaking as
the Act is speaking with reference to endowed charities,
would include in the category educational and religious
charities, as well as charities for the relief of the
poor. Roughly speaking, I think he would exclude the
fourth division. Even there it is difficult to draw the
line. A layman would probably be amused if he were told
that a gift to the Chancellor of the Exchequer for the
benefit of the nation was a charity. Many people, I
think, would consider a gift for the support of a
lifeboat a charitable gift, though its object is not the
advancement of religion, or the advancement of education,
or the relief of the poor. And even a layman might take
the same favourable view of a gratuitous supply of pure
water for the benefit of a crowded neighbourhood.
[at pages 583-584]
[para5] As Lord Macnaghten's comments make clear, it is
the fourth head which was then, and continues to be, the
source of confusion and difficulty. Tudor on Charities [See
Note 3 below] gives the following non-exhaustive list of the
kinds of undertakings which have been held from time to time
to be charitable:
----------------
Note 3: Spencer G. Maurice, David B. Parker, 7th edition,
(London, Sweet & Maxwell, 1984) at pages 90-91.
----------------
Public works, etc. Trusts falling under this
sub-head include trusts for the provision of public
works, services or facilities, which in modern times are
not usually paid for out of trust funds provided by
public spirited donors or testators, but by some public
authority out of public funds which the authority is
bound or entitled to apply for the purpose in question.
Such trusts comprise trusts for purposes which have been
held charitable under Lord Macnaghten's fourth head of
charity but, in fact, also fall under Sir Samuel
Romilly's fourth head. Examples of such trusts are
trusts for the repair of highways; to build bridges; to
provide a supply of pure water for the use of the
inhabitants of a town; to provide a town with lighting;
for the improvement of a town; to build a courthouse; to
build a workhouse; to provide a cemetery; or a
crematorium; or the support of the poor of the parish.
[footnotes omitted]
[para6] The same authors, in an attempt to synthesize the
decided cases, state their understanding of the law as
follows:
Although it has been contended that Lord
Macnaghten's fourth class, as distinguished from Sir
Samuel Romilly's fourth class, is not exclusively
represented in the preamble by the repair of bridges,
etc., or the maintenance of houses of correction, it is
considered that trusts for the provision of public works,
services or facilities are for objects of general public
utility, and that general public utility, with the
strongest possible emphasis on the adjective "general",
was the charitable characteristic possessed in common by
the purposes recited in the preamble and by the other
purposes, which, in the cases cited above, were held
charitable. In none of those cases were the community at
large or any of the inhabitants of the geographical area
of the trust excluded from benefit because they lacked
some personal qualification such as membership of a
specified religious body or profession or because they
were not engaged in a specified trade, business or
calling. It is considered that the primary test to apply
for the purpose of deciding whether the trust has the
necessary public character is not whether the number of
persons who may be able and willing to avail themselves
of the benefits is large or small, but whether or not any
inhabitant of the area of the trust is excluded because
he lacks some personal qualification.
[para7] In Canada the leading authority on the subject is
Stone J.A.'s masterful review of the law in Native
Communication Society of B.C. v. M.N.R. [See Note 4 below]. He
lays down the principles to be applied as follows:
----------------
Note 4: (1986), 86 DTC 6353.
----------------
A review of decided cases suggests that at least the
following propositions may be stated as necessary
preliminaries to a determination whether a particular
purpose can be regarded as a charitable one falling under
the fourth head found in Lord Macnaghten's
classification:
(a) the purpose must be beneficial to the community in
a way which the law regards as charitable by coming
within the "spirit and intendment" of the preamble to the
Statute of Elizabeth if not within its letter. (National
Anti-Vivisection Society v. Inland Revenue Commissioners,
[1948] A.C. 31 (H.L.) at pages 63-64; In re Strakosch,
[1949] Ch. 529 (C.A.) at pages 537-538), and
(b) whether a purpose would or may operate for the
public benefit is to be answered by the Court on the
basis of the record before it and in exercise of its
equitable jurisdiction in matters of charity (National
Anti-Vivisection Society v. Inland Revenue Commissioners
(supra) at pages 44-45, 63).
Can it be said that the purposes of the appellant
fall within "the spirit and intendment" of the preamble
to the Statute of Elizabeth and, therefore, within the
fourth head of Lord Macnaghten's definition of the word
"charity"? In answering this question we must bear in
mind what Lord Greene, M.R. had to say in In re Strakosch
(supra) at 537:
In Williams' Trustees v. Inland Revenue
Commissioners ([1947] A.C. 447) the House of Lords
has laid down very clearly that in order to come
within Lord Macnaghten's fourth class, the gift must
be not only for the benefit of the community but
beneficial in a way which the law regards as
charitable. In order to satisfy the latter it must
be within the "spirit and intendment" of the
preamble to the Statute of Elizabeth. That preamble
set out what were then regarded as purposes which
should be treated as charitable in law. It is
obvious that as time passed and conditions changed
common opinion as to what was properly covered by
the word charitable also changed. This has been
recognized by the courts as the most cursory
examination of the cases shows. (emphasis in
original text)
More recently, in Scottish Burial Reform and
Cremation Society Ltd. v. Glasgow Corporation,, [1968]
A.C. 138 (H.L.), Lord Wilberforce reminds us that "the
law of charity is a moving subject". I refer more fully
to his opinion on the point as expressed at page 154 of
the report:
On this subject, the law of England, though no
doubt not very satisfactory and in need of
rationalisation, is tolerably clear. The purposes
in question, to be charitable, must be shown to be
for the benefit of the public, or the community, in
a sense or manner within the intendment of the
preamble to the statute 43 Eliz. 1, c. 4. The
latter requirement does not mean quite what it says;
for it is now accepted that what must be regarded is
not the wording of the preamble itself, but the
effect of decisions given by the courts as to its
scope, decisions which have endeavoured to keep the
law as to charities moving according as new social
needs arise or old ones become obsolete or
satisfied. Lord Macnaghten's grouping of the heads
of recognised charity in Pemsel's case ([1891] A.C.
531, 583) is one that has proved to be of value and
there are many problems which it solves. But three
things may be said about it, which its author would
surely not have denied: first that, since it is a
classification of convenience, there may well be
purposes which do not fit neatly into one or other
of the headings; secondly, that the words used must
not be given the force of a statute to be construed;
and thirdly, that the law of charity is a moving
subject which may well have evolved even since 1891.
(emphasis in original text)
Nor should we ignore the advice of Lord Upjohn as
expressed in the same case. In deciding whether the
charity there in question fell within the spirit and
intendment of the preamble to the Statute of Elizabeth,
he said (at page 150):
This so-called fourth class is incapable of
further definition and can to-day hardly be regarded
as more than a portmanteau to receive those objects
which enlightened opinion would regard as qualifying
for consideration under the second heading.
[at page 6357]
[para8] Against this background, we may now look at the
facts of the present appeal. The appellant, as its name
indicates, is a "FreeNet" organization. That term is usefully
defined by Gilster [See Note 5 below]:
----------------
Note 5: Paul Gilster, The New Internet Navigator, (New
York: John Wiley & Sons, Inc.) glossary.
----------------
Free-Net A community-based, volunteer-built network.
Free-Nets are springing up in cities around the world, as
citizens work to provide free access to selected network
resources, and to make local information available
on-line.
[para9] The appellant is incorporated under the Society
Act of British Columbia [See Note 6 below]. Its constitution
includes the following paragraphs:
----------------
Note 6: R.S.B.C. 1979, c. 390.
----------------
PURPOSES
2. The purposes of the society are to:
(a) develop, operate and own a free, publicly
accessible community computer utility in the Lower
Mainland of British Columbia providing the broadest
possible range of information and possibilities for
the exchange of experience, ideas and wisdom;
(b) establish and operate a FreeNet community
computer utility in the Lower Mainland of B.C.;
(c) encourage the development of a wide range of
community electronic information resources;
(d) encourage the broadest possible participation
of information providers in making their information
available on FreeNet;
(e) work toward building a network of similar
services in cities and towns internationally;
(f) work toward the widest possible public access
to government and other information through FreeNet
and other non-profit organizations such as
libraries;
(g) work with other Canadian FreeNets to create a
Canadian freenet network;
(h) educate and encourage the public in the use of
computer telecommunications and information
retrieval; and
(i) research ways to improve and expand public
access to and use of electronic information
resources and facilities.
WINDING-UP
3. In the event of winding-up or dissolution of the
Society, funds and assets of the Society remaining after
the satisfaction of its debts and liabilities, shall be
given or transferred to such organization or
organizations promoting the same purposes as this
Society, as may be determined by the members of the
Society at the time of winding up or dissolution, and if
effect cannot be given to the aforesaid provisions, then
such funds shall be given or transferred to some other
organization or organizations, provided however that such
organization referred to in this paragraph shall be a
registered charity recognized by Revenue Canada Taxation
as being qualified as such under the provisions of the
Income Tax Act of Canada from time to time in effect.
NON-PROFIT
4. The purposes of the Society shall be carried out
without purpose of gain for its members and any profits
or other accretions to the society shall be used for
promoting its purposes.
UNALTERABLE
5. Paragraphs 3, 4 and 5 of the constitution are
unalterable in accordance with the Society Act.
[para10] As the case material makes plain, the appellant
provides free public access to all members of the community
who wish such service in the lower mainland of British
Columbia. It allows its users access to the Internet as well
as to information stored in the appellant's own system by
community organizations. Access to such information is
available to FreeNet users whether or not they register with
the appellant but those who do register gain the additional
facility of being able to exchange information with one
another either through on-line discussion groups or by
individual communication through E-mail. While it is the
appellant's policy not to censor information stored in its
system, it does reserve the right to review and remove
information should it be necessary to do so for legal reasons.
[para11] As I have previously indicated, the Minister took
the view that the appellant does not qualify as a registered
charity within the meaning of the Income Tax Act. The
following paragraphs from the Minister's refusal letter fairly
summarize his views:
You contest our opinion on the basis that the
Association's role and function are analogous to
corresponding physical facilities. In particular, you
submit that the Association's "facility" has two distinct
aspects:
1. electronic library; and
2. electronic community centre.
I have considered your argument, and while the
library analogy is compelling, there is no clear judicial
precedent to recognize networks, electronic or otherwise,
and in particular computer networks, as charitable.
As explained in our letter of March 16 (copy
attached), the provision of a community facility for
public use for a variety of community events is
charitable. This is so, insofar as the adminstration of
such a facility retains sufficient control over the use
to which the facility is applied.
In the case at hand, I am not satisfied that in its
role as an "electronic" community centre, the Association
serves the same purpose as a "physical" community
facility. The Association's "electronic community
centre" would appear to be a vehicle for the exchange of
information. I am also concerned that a user of E-mail
does not have to be a member, and that the messages
transmitted can be either private or personal. In my
view, this demonstrates that the Association does not
have sufficient control over how the facility is used.
(Case material, page 7)
[para12] It is from that decision that the appellant has
appealed to this Court.
[para13] I may say at the outset that I find the
Minister's decision to be revealing. He describes the analogy
to a public library as "compelling" but refuses to accept it
because of the absence of a "clear judicial precedent". There
could hardly be a clearer invitation to this Court to provide
such a precedent. I shall have more to say shortly about the
Minister's apparent concern over the appellant's absence of
control of the information stored in its system.
[para14] As I understand the law stated in the authorities
previously cited, this Court, in deciding whether the
appellant falls within the fourth category of charities, is
required to determine whether its purposes fall within the
spirit and intendment of the Statute of Elizabeth. That, in
its turn, requires us to look at the appellant to see if it
has the same type of purpose as those listed in the preamble
to the statute. The detail of how those types of purposes
will work themselves out in the real world will, of course,
change as society changes but the types themselves will not.
[para15] Information is the currency of modern life. This
has been properly called the information age. The free
exchange of information amongst members of society has long
been recognized as a public good. It is indeed essential to
the maintenance of democracy, and modern experience
demonstrates more and more frequently that it, more than any
force of arms, has the power to destroy authoritarianism. The
recognition of freedom of speech as a core value in society is
but one aspect of the importance of freedom of information.
[para16] The preamble to the Statute of Elizabeth speaks
of the repair of bridges, ports, causeways and highways.
These were, of course, at the time the essential means of
communication. With the passage of time they have been
considered so essential to the public welfare that they have
been almost entirely taken over by public authorities. The
same is true of the example given by Lord Macnaghten in
Pemsel's case, and the supply of pure water, though generally
not "gratuitous", is now viewed as an essential public
service. Likewise, the provision of electric light, one of
the examples listed in the foregoing quotation from Tudor.
[para17] While I do not want to insist unduly on the
analogy to the information highway, there is absolutely no
doubt in my mind that the provision of free access to
information and to a means by which citizens can communicate
with one another on whatever subject they may please is a type
of purpose similar to those which have been held to be
charitable; it is within the spirit and intendment of the
preamble to the Statute of Elizabeth.
[para18] I wish to say a word about the Minister's evident
concern with the question of control of content. In my view,
and with respect for those of a contrary opinion, it misses
the mark. A distinction must be made between the medium and
the message. Where an organization which itself is providing
a message to the public seeks charitable status (e.g. a
newspaper, a television station etc.) there must, of course,
be concern that it controls the messages so as to ensure that
they are consistent with a charitable purpose and are not used
for some other purpose. That is the only type of control with
which the Minister can be legitimately concerned and it is not
applicable to the present case since the appellant provides
access to messages but not the messages themselves. It is, of
course, the case that control of content has historically been
imposed by providers of simple access by reason of physical
limitations: a library cannot stock all the books that have
ever been published and a meeting hall cannot accommodate all
the persons and groups who might conceivably want to use it.
Those limitations, however, are not a condition of their
charitable purpose: an infinite library or a boundless
meeting hall would not lose their charitable character. The
information highway is almost limitless in its scope and
capacity but that is no reason for failing to recognize its
vast potential for public benefit. The appellant's purpose in
providing access to it is one of general public utility.
[para19] Nor should the fact that the appellant's system,
and indeed the Internet itself, can be used for private or
commercial purposes or misused for criminal or destructive
purposes serve to disqualify the free provision of access
thereto from obtaining charitable status under the Act. Once
again, we are dealing only with the medium and not with the
content of the message. A real highway or bridge in the time
of the first Elizabeth was recognized as a public good because
it allowed the inhabitants of a town or village to communicate
with the outside world and vice versa. It might be used by
persons going to market as well as to church or school. It
might also be used by highwaymen or by absconding debtors.
The nature of the traffic, however, did not serve to dilute or
diminish the great public good provided by the facility
itself.
[para20] The appellant's purpose is to provide public
access for the inhabitants of the lower mainland of British
Columbia to the modern information highway. That is, in my
view, as much a charitable purpose in the time of the second
Elizabeth as was the provision of access by more conventional
highways in the time of the first Queen of that name.
[para21] I would allow the appeal, set aside the decision
of the Minister and refer the matter back to the Minister for
reconsideration on the basis that the appellant is a
charitable organization within the meaning of the Income Tax
Act.
HUGESSEN J.
PRATTE J.:-- I agree
[para22] DECARY J. (dissenting):-- The appellant, the
Vancouver Regional FreeNet Association (the "Association")
applied for charitable status pursuant to section 248(1) of
the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), hereinafter
the "Act". The Minister of National Revenue refused the
application, and the appellant now appeals from that
determination pursuant to section 172(3) of the Act.
[para23] The Association is incorporated under the laws of
British Columbia. It is a non-profit organization which
offers free access to the "information highway," including the
Internet. Individuals equipped with personal computers and
modems can, through the Association, access diverse
information sources such as newsletters, community events
calendars, government reports and environmental data.
Registered users enjoy access to on-line discussion groups,
"electronic mail", and a plethora of nationally and
internationally sourced mailboxes. The service offered by
the Association is maintained by community volunteers and is
funded by membership fees and donations.
[para24] The purposes of the Association are defined in
its constitution as follows:
2. The purposes of the society are to:
(a) develop, operate and own a free, publicly accessible
community computer utility in the Lower Mainland of
British Columbia providing the broadest possible
range of information and possibilities for the
exchange of experience, ideas and wisdom;
(b) establish and operate a FreeNet community computer
utility in the Lower Mainland of B.C.;
(c) encourage the development of a wide range of
community electronic information resources;
(d) encourage the broadest possible participation of
information providers in making their information
available on FreeNet;
(e) work toward building a network of similar services
in cities and towns internationally;
(f) work toward the widest possible public access to
government and other information through FreeNet and
other non-profit organizations such as libraries;
(g) work with other Canadian FreeNets to create a
Canadian freenet network;
(h) educate and encourage the public in the use of
computer telecommunications and information
retrieval; and
(i) research ways to improve and expand public access to
and use of electronic information resources and
facilities.
(A.B. at 65)
[para25] The Association applied on July 29, 1993 for
registration as a charity. Following a protracted exchange of
correspondence, the Minister informed the Association by
letter dated July 25, 1994, of its refusal to grant the
application for charitable status. I have selected the
following passages from the Minister's letters of March 16,
1994 and July 25, 1995 as summarizing the essence of his
decision:
...
Your position is that the Association should be
recognized as serving a function of "general public
utility", that it provides a service that is the modern
equivalent of a library, museum, public hall, reading
room, or observatory.
We see important differences between these sorts of
public facilities, and the function served by the
Association.
Essentially, we see the Association as a
telecommunication network, a transmitter of information,
in much the same way as a newspaper, a magazine, or a
radio or television network. In our view, these sorts of
"networks" and "transmitters" are not charitable as
fourth head purposes.
Moreover, it is our understanding that in providing a
library, museum, and reading room, the administrators of
these facilities determine the materials to be housed
within for public use. These organizations select which
materials they wish to provide to the public so that they
may have access to books, scientific objects, works of
art, etc.. In our view, the Association is more a
provider of a "facility" for others to house whatever
information or material they wish within that structure.
The provision of a public hall, a park , or a community
centre facility (real property) for the general use of
the public for a variety of community activities
(including, among others, a meeting place for social
gatherings and events, enjoyment of beauty and nature,
healthy recreation and incidental sports activities) is
charitable. The provision of a communications network
for the public to transmit and receive information
electronically, does not, in our view, provide an
analogous function.
An observatory is more a facility which provides for the
observation of natural phenomena (as in astronomy), and
is devoted exclusively to the study and advancement of
the sciences. The Association is not established for
such purposes or activities.
We appreciate that some of these facilities might
incidentally provide public space for advertising,
similar to a computer bulletin board. Again, however, we
believe that these sorts of organizations are responsible
for ensuring that the materials placed on their public
bulletin boards meet a standard for acceptable content.
On the other hand, the Association's provision of a
bulletin board seems to have more prominence in its
overall function, and it does not seem to regulate the
content of messages, etc., carried on the network.
Request for Analogy
In general, the Department has not taken a restrictive
view of the requirement for analogy to decided cases and
has not felt constrained to deny registration where a
reasonable analogy can be drawn between the purposes at
hand and those previously held to be charitable.
However, the analogies you have drawn do not overcome our
concern that the Association is not established to
operate exclusively for charitable purposes.
...
(March 16, 1994, letter, A.B. at 20-21.)
and
You contest our opinion on the basis that the
Association's role and function are analogous to
corresponding physical facilities. In particular, you
submit that the Association's "facility" has two distinct
aspects:
1. electronic library; and
2. electronic community centre.
I have considered your argument, and while the library
analogy is compelling, there is no clear judicial
precedent to recognize networks, electronic or otherwise,
and in particular computer networks, as charitable.
...
(July 25, 1994, letter, A.B. at 7.)
[para26] The Court finds itself once again compelled to
consider the purport of the legal definition of "charity" as
expressed in the Income Tax Act. Section 248(1) defines
"registered charity" as follows:
"registered charity".- "registered charity" at any time
means
(a) a charitable organization, private foundation or
public foundation within the meanings assigned by
subsection 149.1(1), that is resident in Canada and
was either created or established in Canada...
(b) ...
that has applied to the Minister in prescribed form for
registration and that is at that time registered as a
charitable organization, private foundation or public
foundation;
[para27] The definition of "charitable organization" is
considered in section 149.1(1) of the Act:
149.1(1)(b) "charitable organization".- "charitable
organization means an organization, whether or not
incorporated,
(i) all the resources of which are devoted to
charitable activities carried on by the organization
itself,
... (my emphasis)
[para28] It is well accepted in Canada [See Note 7 below]
that "charity" is defined by reference to the four
classifications elaborated by Lord Macnaghten in Income Tax
Special Commissioners v. Pemsel, [1891] A.C. 531 at 583. An
activity will be deemed charitable at law where its purpose is
the relief of poverty, the advancement of education, the
advancement of religion, or other purposes beneficial to the
community not falling under any of the preceding heads.
----------------
Note 7: Guaranty Trust Company of Canada v. Minister of
National Revenue, [1967] S.C.R. 133 (S.C.C.).
----------------
[para29] The fourth head, with which we are now concerned,
has proven the testbed for the "gradual extension" of the law
of charities beyond those purposes which have been recognized
at common law. This open class is limited only by the
qualification that purposes which benefit the community must
do so in a way the law regards as charitable in order to enjoy
the special status of a charity. The test remains whether the
purpose, and hence the benefit conferred, is within the spirit
and intendment of the Preamble to the Charitable Uses Act 1601
[See Note 8 below]. This law, commonly referred to as the
Statute of Elizabeth, was drafted to curb abuses in the
administration of trusts of a charitable nature, and listed in
its Preamble the following charitable purposes:
----------------
Note 8: An Acte to redresse the Misemployment of Landes
Goodes and Stockes of Money heretofore given to Charitable
Uses (43 Eliz. I, c. 4).
----------------
The relief of the aged, impotent, and poor people; the
maintenance of sick and maimed soldiers and mariners,
schools of learning, free schools and scholars of
universities; the repair of bridges, havens, causeways,
churches, sea banks and highways; the education and
preferment of orphans; the relief, stock or maintenance
of houses of correction; marriages of poor maids;
supportation, aid and help of young tradesmen,
handicraftsmen and persons decayed; the relief or
redemption of prisoners or captives and the aid or ease
of any poor inhabitants concerning payments of fifteens,
setting out of soldiers and other taxes.
[para30] Tudor on Charities [See Note 9 below] identifies
the two approaches that the English Courts have taken when
deciding whether or not a purpose is within the spirit and
intendment of the Preamble. The earlier, restrictive
doctrine required that a purpose could only be brought within
the spirit of the Act by analogy with an existing charitable
purpose: Morice v. The Bishop of Durham (1804), 9 Ves. 399
(Reprinted [1978] 32 E.R. 656.), and more recently Barralet v.
Att. Gen., [1980] 3 All E.R. 918, 926. The later doctrine
adopts a much broader approach in determining whether or not a
purpose is within the spirit and equity of the Preamble. In
Incorporated Council of Law Reporting for England and Wales v.
Att. Gen., [1972] Ch.73, Russell L.J. said, at p. 88 of the
report:
----------------
Note 9: Jean Warburton, Tudor on Charities, 8th ed.,
(London: Sweet & Maxwell, 1995), p.86.
----------------
In a case such as the present, in which in my view the
object cannot be thought otherwise than beneficial to the
community and of general public utility, I believe the
proper question to ask is whether there are any grounds
for holding it to be outside the equity of the Statute;
and I think the answer to that is in the negative.
[para31] In a prior decision, Scottish Burial Reform and
Cremation Society Ltd. v. Glasgow Corporation, [1968] A.C. 138
(H.L.), Lord Wilberforce comments that the classes of
charitable purposes are far from circumscribed:
The latter requirement [that purposes fall within the
spirit and intendment of the preamble] does not mean
quite what it says; for it is now accepted that what must
be regarded is not the wording to the preamble itself,
but the effect of decisions given by the courts as to its
scope, decisions which have endeavoured to keep the law
as to charities moving according as new social needs
arise or old ones become obsolete or satisfied. [See Note
10 below]
----------------
Note 10: At page 154.
----------------
[para32] To begin with, I am not prepared to accept in its
entirety the approach adopted by the English Courts in
Incorporated Council of Law Reporting for England and Wales,
supra. To my mind, there is no Canadian authority for the
principle that all purposes which in some way benefit the
community are presumed to be charitable. There is no such
presumption. To be recognized under the Income Tax Act as a
"charitable organization" is a privilege that the Minister
confers upon being satisfied that an organization meets the
required conditions, an essential one being that all its
resources "are devoted to charitable activities". The onus is
therefore on the organization to convince the Minister, and
eventually this Court, that on paper as well as in reality it
is worthy of such recognition.
[para33] Canadian Courts have acknowledged that the fourth
category is not closed and that the law of charities is a
"moving subject" as evinced by Lord Wilberforce: Native
Communications Society of B.C. v. M.N.R., [1986] 3 F.C. 471
(F.C.A.); Everywoman's Health Centre Society (1988) v.
M.N.R., [1992] 2 F.C. 52 (F.C.A.); Positive Action Against
Pornography v. M.N.R., [1988] 2 F.C. 340 (F.C.A.); Vancouver
Society of Immigrant and Visible Minority Women v. M.N.R.
(March 6, 1996) A-552-94 (F.C.A.), [1996] F.C.J. No. 307;
Briarpatch Incorporated v. The Queen, (April 1, 1996) A-372-89
(F.C.A.), [1996] F.C.J. No. 444. Nonetheless, the "gradual
extension" of the fourth head has been allowed in only the
most meritorious of circumstances. Justice Robertson of this
Court adverted in Briarpatch [See Note 11 below], supra, that:
----------------
Note 11: At page 4.
----------------
Although broadly worded as a residual "catch-all", the
fourth category has been interpreted cautiously, if not
narrowly, by the Courts.
[para34] Notwithstanding that the Court is prepared to
adopt an open-minded approach in characterizing purposes under
the fourth head, it remains that the mere provision of a
benefit to the community is not tantamount to a charitable
purpose: Re Strakosch, [1949] Ch. 529 (Ch.D); In re Macduff,
[1896] 2 Ch. 451 (Ch.D.); Att. Gen. v. National and Provincial
Union Bank of England, [1924] A.C. 262 (H.L.); Williams'
Trustees v. I.R.C., [1947] A.C. 447 (H.L.). In Vancouver
Society of Immigrant and Visible Minority Women, supra, this
Court observed as follows:
The provision of services and workshops to the community,
while laudable, is not necessarily charitable at law and
activities and objects of general public utility are not
always charitable in the legal sense. Lord Wilberforce,
in D'aguiar v. Guyana Commissioner of Inland Revenue
(1970) T.R. 31 (Privy Council), cautioned the courts
against granting charity status where the language used
was "so vague as to permit the property to be used for
non-charitable purposes" (at 34) and where the purpose
was not "sufficiently definite and specific" to enable
the Court to be satisfied that the organization will be
administered "in a manner recognized as charitable." [See
Note 12 below]
(my emphasis)
----------------
Note 12: At page 4.
----------------
[para35] The appellant relies on certain analogies which
have been characterized as charitable under the rubric of
"public works". In particular, counsel for the appellant
proposes to include the Association within the fourth head of
charity as being of "general public utility" in a manner
analogous to public highways, public libraries and public
halls. In my opinion, it would be useful at this point to
dispense with the potentially misleading use of analogies in
determining the charitable nature of the service offered by
the Association. I would borrow the following suggestion of
Stone J.A. as stated in Native Communications, supra:
...it would be a mistake to dispose of this appeal on the
basis of how this purpose or that may or may not have
been seen by the Courts in the decided cases as being
charitable or not. [See Note 13 below]
----------------
Note 13: At page 482.
----------------
Use of analogies is particularly unwarranted because as
observed by Lord Wilberforce in Scottish Burial, supra, old
social needs may become obsolete or satisfied. What was
charitable in the past is not necessarily charitable in the
present age.
[para36] The "information highway" is a concept that is
novel to our era and compares only marginally with the
examples raised by the appellant. The Court should rise above
the constraints of analogy and, rather than compare the
extrinsic qualities of past charitable purposes with the
subject before it, consider the essential charitable nature of
the organization on appeal.
[para37] Public benefit is an interminably broad concept,
which spills over from the pure altruism of community welfare
at one end of the spectrum into the realm of collective
self-interest at the other. It is the Courts' role to decide
in each case whether the community values underpinning a
certain purpose are overshadowed by what is otherwise its
essentially non-charitable character. I note that in Re
Scowcroft, [1898] 2 Ch. 638 (Ch.D.), in finding that the gift
of a reading room was a devise for the public benefit, the
Court did not disregard the objects of the bequest which
stated that the room was "to be kept free from intoxicants and
dancing." [See Note 14 below]
----------------
Note 14: At pages 641-642.
----------------
[para38] In the absence of a statutory definition of
charity, the Courts are bound to exercise their supervisory
role in determining the quantum and quality of "public
benefit" deserving of charitable status. While I do recognize
the value of the service which the Association provides to the
community, I do not believe that the Association is a charity
within the legal meaning of the word. The FreeNet movement is
a visionary community based initiative which strives to fulfil
a demand for affordable and universal access to the
information highway. Many of the information services
provided by the appellant are of great public utility and,
with the proliferation of personal computers, may at some time
become essential services. Health information, news, weather
bulletin boards, and other forms of information services
constitute the core of the important community-oriented
services provided by FreeNets. Nonetheless, a survey of the
record and close scrutiny of the appellant's constituting
document does not permit me to conclude that the appellant
would have restricted its activities exclusively to the
aforementioned charitable purposes.
[para39] The appellant's constitution is drafted in
general terms, with the primary purpose established in
paragraph 2(a). The Association endeavours to "develop,
operate and own a free, publicly accessible community computer
utility..." The remaining purposes, which are collateral to
the main objective of establishing and operating the facility,
constitute essentially in encouraging the proliferation of the
service amongst computer users and throughout Canada, and in
encouraging the development of resources accessible on the
FreeNet. For reasons stated earlier, the mere provision of a
free service to the public does not provide the measure of
public utility sufficient to qualify the service as
charitable. An analysis of the nature and content of the
service is required.
[para40] The appellant raises in support of its
submissions a government document entitled "Competition and
Culture on Canada's Information Highway" [See Note 15 below]
which advocates the development of public access to the
information highway. This illustration is well taken, and had
the record revealed that the Association was to operate solely
as a "public access point" giving users access to a restricted
range of public interest services, I may have concluded
differently. However, the Association's constitution in no
manner reflects what are in my view necessary limits to the
services which the Association, as a charity, should be
authorized to provide. Contrary to the apparently unlimited
scope of the appellant's offerings, the service projected by
the C.R.T.C. is in the nature of a community access point to
a "public lane" offering only selected information highway
services of exclusively community interest.
----------------
Note 15: Canadian Radio-television and Telecommunications
Commission, Competition and Culture on Canada's Information
Highway: Managing the Realities, May 19, 1995, p. 43-44.
----------------
[para41] I have not been convinced that the Association
strives to limit its purposes exclusively to those which the
law would regard as charitable in the nature of "general
public utility". Nor does it appear from the evidence that
the Association would be in a position to exercise control or
impose limits on the types of services to which users have
access. Although I refrain from making a finding with respect
to the respondent's contention that political platforms and
commercial interests might be advanced on the appellant's
service, I have no doubt that this type of activity is well
within the realm of possibility on the Internet. Despite the
formidable capacity of this tool as an information provider
and educator, it is also vested with the manifest capacity to
provide a platform for the expression and promotion of private
interests. This potential, in my view, brings the Association
outside the purview of a purely charitable purpose.
[para42] In Native Communications Society, supra, Stone
J.A. applied a benignant construction in adopting as
charitable the objects of a similarly deficient constituting
document. At issue was whether the Minister had erred in
refusing to register the Society whose purposes included
developing radio and television productions related to the
native people of British Columbia and in publishing a
non-profit newspaper devoted to the same. In allowing the
appeal, Stone J.A. analyzed the content of the newspaper
"Kahtou" which the organization proposed to publish. Ellen
Zwiebel, in an article entitled "A Truly Canadian Definition
of Charity and a Lesson in Drafting Charitable Purposes", [See
Note 16 below] commented on the Court's approach which went
beyond mere consideration of the Native Communications
Society's purposes:
----------------
Note 16: The Philanthropist, (Fall 1987) Vol. VII, No. 1,
p.4.
----------------
The modern trend to broad statements of corporate
purposes developed for the most part because of the need
for business corporations to avoid the doctrine of ultra
vires. A different set of concerns operates for
charitable organizations. Because an organization must
have only charitable purposes to qualify for charitable
status, it is important to have charitable purposes
clearly expressed. The issue presented in subparagraphs
2a through c [of the Native Communications Society's
Certificate of Incorporation] is whether the language is
restrictive enough, or whether it is capable of including
non-charitable subject matter. For instance, programs
"of relevance to native people" could include programs
with partisan political content or the simple
broadcasting of hockey games which, although they might
be appealing to the targeted audience, are devoid of
charitable content. In general the courts have been
willing to look to extrinsic evidence for confirmation
that their purposes are restricted to charitable
activities.
(my emphasis)
[para43] In this regard, Stone J.A. wrote at pages 481-482
of the report:
Counsel for the respondent contends that the newspaper
contains only "news" which cannot be seen as
"educational". I have difficulty in following this
argument for it seems to me that in the minds of its
readers the newspaper could well be regarded as
educational as well as informative. I need not decide
the point. It is apparent that the newspaper is used more
than as a mere vehicle for conveying news. An
examination of its pages shows that through them the
Indian readers are made aware of activities of a cultural
nature going on elsewhere in the wider Indian community
and of attempts being made to foster language and culture
as, for example, through greater use of native languages
and the revival of ancient crafts, music and story
telling. All of this may well instill a degree of pride
of ancestry in the readers of Kahtou, deepen an
appreciation of Indian culture and language and thereby
promote a measure of cohesion among Indian people of
British Columbia that might otherwise be missing. The
record indicates that radio and television programs are
being designated along the same general lines.
(my emphasis)
[para44] The appellant does not undertake in its
constitution to limit the provision of services to those
displaying a clearly public, or charitable nature. Nor does
the Court have before it any "extrinsic evidence" upon which
to base a conclusion regarding the full sweep of the services
which are or may become accessible on the rapidly evolving
information highway. In my view, this is fatal to the
appeal. The Court is prevented, upon analysis of the
Association's stated purposes and activities, from satisfying
itself as to the breadth of the subject matter accessible on
the Vancouver FreeNet. In my opinion, FreeNet is a tool whose
uses, unless specifically prescribed, fall well beyond the
purview of activities which are exclusively charitable in the
legal sense.
[para45] For the above reasons, I am of the opinion that
the appeal should be dismissed.
DECARY J.
qp/d/ln/hbb
End of document.