N.D.G. Neighbourhood Association v. MNR, 88 DTC 6279, [1988] 2 CTC 14 (FCA)

MacGuigan, J.:—This appeal is brought against the respondent's final decision, set out in a letter of June 5, 1986, that the appellant does not qualify for registration as a charity under the Income Tax Act ("the Act").

The relevant provision of the Act is subsection 149.1(1), which reads as follows:

149.1 (1) In this section, section 172 and Part V,

(a) “charitable foundation” means a corporation or trust constituted and operated exclusively for charitable purposes, no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof and that is not a charitable organization;

(b) “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,

(ii) no part of the income of which is payable to, or is otherwise available for, the personal benefit any proprietor, member, shareholder, trustee or settlor thereof,

What is in question in the case at bar is whether the appellant qualifies as a charitable organization under subparagraph 149.1 (1)(b)(i) “all the resources of which are devoted to charitable activities.” Since charity is not defined in the Act, the issue falls to be determined by common-law principles.

The locus classicus at common law is the judgment of Lord Macnaghten in The Commissioners for Special Purposes of the Income Tax v. Pern sei, [1891] A.C. 531 at 583; [1891-4] All E.R. 28 at 55 where charity is classified in a fourfold way: (1) the relief of poverty; (2) the advancement of education; (3) the advancement of religion; and (4) other purposes beneficial to the community, not falling under any of the preceding heads. In argument before this Court the appellant contended that it qualifies under the fourth division as having other community-beneficial purposes.

With respect to this category, it is not enough, the auhorities state, that the activities in question be laudable and worthwhile in themselves. In the words of Stone, J. in this Court in Toronto Volgograd Committee v. M.N.R., [1988] 1 C.T.C. 365 at 375; 88 D.T.C. 6192 at 6199 they must also "meet the test of 'charity' in the sense that they are beneficial to the community in a way the law regards as charitable.”

In D'Aguiar v. Guyana Commissioner of Inland Revenue, [1970] T.R. 31 at 33, Lord Wilberforce outlined the following approach to the question:

The difficulties inherent in the definition of the fourth heading have been well exemplified in the decisions of the Courts both before and since 1891. . . .

But the process which the Court must follow, however difficult, is now fairly well established. It must first consider the trend of those decisions which have established certain objects as charitable under this heading, and ask whether, by reasonable extension or analogy, the instant case may be considered to be in line with these. Secondly, it must examine certain accepted anomalies to see whether they fairly cover the objects under consideration. Thirdly — and this is really a cross-check upon the others — it must ask whether, consistently with the objects declared, the income and property in question can be applied for purposes clearly falling outside the scope of charity: if so, the argument for charity must fail.

A more fundamental approach was taken by Stone, J. in this Court in Native Communications Society of B.C. v. M.N.R., [1986] 3 F.C. 471 at 479-80; [1986] 2 C.T.C. 170 at 174:

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 AntiVivisection Society v. Inland Revenue Commissioners, [1948] A.C. 31 (H.L.), at pages 63-64; In re Strakosch, deed. Temperley v. Attorney-General, [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).

Stone, J. restated the list of charitable objects in the preamble of the Statute of Elizabeth (43 Eliz. I, c. 4) in modern English, according to an English precedent, as follows (at pages 478-9; C.T.C. 174):

. . . the relief of aged, impotent, and poor people . . . maintenance of sick and maimed soldiers and mariners, schools of learning, free schools, and scholars in universities . . . repair of bridges, ports, havens, causeways, churches, seabanks and highways . . . education and preferment of orphans . . . relief, stock or maintenance for houses of correction . . . marriages of poor maids . . . supportation, aid and help of young tradesmen, handicraftsmen and persons decayed . . . relief or redemption of prisoners or captives, and for aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes.

It is in answering the question as to what falls within "the spirit and intendment" of the preamble to the Statute of Elizabeth that some movement has recently occurred in the common law. Stone, J. noted this flexibility, supra, at pages 480-1 (C.T.C. 174-5), as follows:

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 page 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 added.]

More recently, in Scottish Burial Reform and Cremation Society Ltd. v. Glasgow Corpn., [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. I, 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 recognized 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 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 added.]

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.

This Court went on (per Stone, J.) in the Native Communications Society case to hold that a non-profit corporation whose purposes included developing radio and television productions relevent to the native people of British Columbia, training native people as communication workers, and delivering information on issues affecting native people was a charitable organization within the spirit and intendment of the preamble to the Statute of Elizabeth. The Court came to that conclusion despite the large admixture of information-giving in the corporation educational program, thus verifying Lord Upjohn's approach to the fourth class as "a portmanteau to receive those objects which enlightened opinion would regard as qualifying under the second heading,” i.e., the advancement of education.

In the light of this decision there may well be an argument to be made that an organization similarly dedicated to the interests of the urban disadvantaged as the British Columbia society was to the interests of the native people should qualify as a charity. But, on the facts, this is not such a case.

The appellant is the result of a merger between two other local associations (N.D.G. Tenants Association and N.D.G. Block Association) and "took over the objectives of the Block Association because these seemed best suited to the needs of the group and the community" (Appeal Book, p. 65). These objects were as follows (Appeal Book, p. 16):

1. To assist individuals who seek information affecting their condition of life and community services.

2. To provide a forum for group education of interested community members and help animate people in dealing wth social issues that affect them and their community.

3. Through community media and door to door contact, to expand the accessibility to community resources to individuals otherwise lacking the necessary information about community activities, services and issues.

4. Subject to the provisions of the private education act and of the regulations adopted in implementation thereof, to develop, encourage and maintain programs of adult education, free of charge to the public in the member community. Priority is given to education programmes serving the wider community and cultural interests.

5. To direct our services to any individual who is disadvantaged.

The appellant argued that the last object should be taken to subsume all others so that the association would be regarded as having the sole aim of aiding the disadvantaged. I cannot, however, so read the association’s purposes. The groups to be helped under the other objects are already specified: individuals "who seek information affecting their condition of life and community services,” group education "of interested community members," individuals "otherwise lacking the necessary information about community activities, services and issues,” "programs of adult education, free of charge to the public in the member community.” As I read the objects, the scope of association activities is universalist, within the geographical area of Notre Dame de Grace, as defined in the by-law (Appeal Book, p. 43).

With respect to its activities, the appellant's own description of its work is as follows (Appeal Book, p. 66):

The purposes of our Association are certainly to help alleviate poverty and most of our work is with low-income group. However, as stated before, we do not establish "a means test" that is used to screen residents that come to us. This goes against the democratic principles of our Association and would expose the users of service to embarrasing situations. We exist to help residents in the community and this said, must remain fairly open. No, not all members of the community would be availed of our services; the rich will not receive them. A recipient of service does not have to be a member.

It seems to me that this passage reveals the ambivalence of the appellant between being a general neighbourhood association with a universal orientation and one dedicated exclusively to the cause of the urban poor.

The social causes favoured by the appellant are numerous and of both orientations (Appeal Book, p. 102):

Over the years, the former community organizations (N.D.G. Tenant and N.D.G. Block Associations) that merged to form Neighbourhood was [sic] responsible for defending people's rights and tackling large issues that involved the well-being of the community (e.g. Street Safety Campaign, Bus 105 Transportation Campaign, Elmhurst Battle Against Conversion to Condominiums, Renaissance Sherbrooke, Common Front of Tenant Associations and Bill 187, Third Image Oral History Exhibition, Project Investigation, N.D.G. Skate Drive, and the Campaign for the Abolishment of Water Taxes). The Neighbourhood Association wishes to continue this proud tradition.

Arguably, all of these causes are beneficial to the community, but they are not, in my view, within the spirit and intendment of the Statute of Elizabeth, nor do they fulfil the requirement of the Act that “all the resources . . . are devoted to charitable activities." The fundamental problem is not the absence of a means test, for which a rough-and-ready assessment might perhaps be substituted. It is, as I see it, the ambivalence of the appellant as to its real goal. Moreover, there is nothing on the facts in the instant case that would enable Lord Upjohn's analysis to be invoked. It is not a near miss with respect to the advancement of education, which an enlightened public opinion must then recognize through the fourth category. If there were an overriding thrust to the appellant's work, it was apparently an activist one as a tenants' association (Appeal Book, pp. 158-9) rather than as an educational one.

This case also differs from the Native Communications Society case in that there Stone, J. was able to say (at page 484; C.T.C. 177) that "The record before us does not contain even the slightest hint that the appellant engages or intends to engage in political activities.” The authorities have consistently held that the presence of political objectives negatives an organization's claim to benefit the community as a charity. This Court, for example, recently so held in Positive Action Against Pornography v. M.N.R., [1988] 1 C.T.C. 232; 88 D.T.C. 6186, which followed (at page 239; D.T.C. 6191) the definition of political purposes adopted by Slade, J. in McGovern and Others v. Attorney General and Another, [1982] 2 W.L.R. 222 (Ch.D.) at 240; [1982] Ch. 321 at 340 as a direct and principal purpose "to procure changes in the laws of this country" or "to procure a reversal of government policy or of partial decisions of governmental authorities in this country."

In the case at bar, the respondent raised this issue directly with the appellant in its letter of November 28, 1985, as follows (Appeal Book, pp. 155-6):

Object 2 also appears to be primarily directed at the provision of a forum for an exchange of ideas and information, advocating for tenants’ rights and for socializing. Such objects have been held not to be exclusively charitable at law.

In addition, some of the information provided by the Association can be seen as directed towards achieving a political purpose and as such cannot be viewed as an activity directed towards the "advancement of education”. An example of such an instance is the letter writing campaign encouraged by the Association in relation to Federal funding cutbacks in the Canada Works Program. In addition, we also note the Association’s participation in the following: Bus 105 Transportation Campaign, Renaissance Sherbrooke, Common Front of Tenant Association and Bill 1207 Elmhurst Battle Against Conversion to Condominiums, Project Investigation and the Campaign for the Abolishment of Water Taxes.

In connection with this, we would also like to mention that a registered “charitable organization" must devote all of its resources to charitable activities carried on by it. It has been well established by the courts that if a purpose is the attainment of a political objective, such a purpose is not charitable. By the same principle, the furtherance of a particular purpose by political means would not constitute the devotion of an organization's resources to activities of a charitable nature.

Where an organization's efforts are directed toward bringing public pressure to bear upon the decisions of a government with respect to legislative matters, the courts have taken the view that the organization’s activities are political and not charitable. This would include such activities as lobbying, public demonstrations conducted by an organization to influence legislation, solicitation of the public to engage in a letter-writing campaign designed to induce a government to enact or maintain legislation advocated by the organization, the support or opposition of specific candidates for election on the basis of their personal stand on an issue, and other similar types of activities. The fact that such activities are carried out by an organization with charitable objectives does not make the nature of the activity less political.

The Department has long taken the view that the taking of written or oral representations by a registered charity to an elected representative presenting the organization’s interest and point of view is not an activity that would in and of itself be considered political in nature. Similarly, the presentation of briefs, either with or without invitation, to commissions or committees, setting out an organization's views on a matter related to its charitable mandate and recommending corrective measures would not, by itself, constitute a political activity. However, we would reiterate that if an organization attempts to influence a governmental stance or action through the exercise of demand or pressure tactics in order to bring a particular view advocated by the organization into effect, it will have engaged in a non-charitable, political activity.

In the recent budget speech, however, the Government proposed the introduction of a relieving measure to allow a registered charity to engage in nonpartisan, political activities that are ancillary and incidental to its charitable purposes. The proposal recognizes that ancillary and incidental advocacy activities in support of its charitable goals are an appropriate use of a charity's resources. These would include activities intended to influence public opinion generally, such as advertising, mailing or rental of facilities for meetings on public issues.

We would, however, emphasize that an organization constituted for a political purpose or purposes would remain ineligible for registration. Moreover, the percentage of resources that a registered charity may devote to such political activities will be limited.

The relevant part of the “relieving measure" referred to in this letter, applicable to 1985 and subsequent taxation years, is as follows (33-34-35 Eliz. II, 1986, c. 6, subsection 85(2)):

(2) Section 149.1 of the said Act is further amended by adding thereto, immediately after subsection (6) thereof, the following subsection:

“(6.2) For the purposes of paragraph (1)(b), where an organization devotes substantially all of its resources to charitable activities carried on by it and

(a) it devotes part of its resources to political activities,

(b) such political activities are ancillary and incidental to its charitable activities, and

(c) such political activities do not include the direct or indirect support of, or opposition to, any political party or candidate for public office.

the organization shall be considered to be devoting that part of its resources to charitable activities carried on by it.”

The appellant's reply to the respondent's letter was in a letter of February 7, 1986, as follows (Appeal Book, pp. 158-9):

We acknowledge receipt of your letter dated Nov. 28, 85, postmarked Dec. 10, 85, and are replying accordingly. One item that should be clarified right away is that the items that you point out as being political and not for the “advancement of education” are activities that were for the benefit of low-income or poor persons, e.g.

(i) Federal funding cutbacks in the Canada Works Program. These cuts would have stopped many poor children from attending summer day camps in Mtl.

(ii) Bus 105, Transporation changes affected seniors (many poor) whose mobility made it extremely difficult for them to use the new system.

(iii) Renaissance Sherbrooke. Improvement/Renovation of NDC's largest artery would have to be considered a public benefit conferred on the whole community.

(iv) Battle against conversion to condominium at Elmhurst. The effect on the poor (had this conversion occurred) would have been dramatic. Elmhurst is a low rent neighbourhood composed of immigrants, welfare recipients, and unemployed.

(v) Campaign for Water Tax Abolition. This was geared to welfare recipients who were getting evicted.

We strongly believe that we attempt to relieve poverty, advance education, and advance other purposes of benefit to the whole community. There appears to be a very fine line between the presenting of briefs establishing the interests of an organization and the recommending of corrective measures (as all being NONPOLITICAL) and on the other hand, the influencing of the government via demands and pressure tactics to get one's point of view into affect [sic] (as being POLITICAL).

We believe that working on behalf of tenants should be amended as being charitable and that the introduction of a relieving measure to allow a group to engage in non-partisan political activities that are ancillary, incidental to its charitable purposes would be a good idea. It seems that Revenue Canada discriminates against tenant associations while groups like le Comité des Malades (Claude Brunet) have no trouble getting charitable status.

It may fairly be said that in this letter the appellant admitted the facts alleged, but attempted to put them into context.

The key to the application of the relieving measure, it seems to me, is that any political activities carried on must be “ancillary and incidental to its charitable activities." Consequently, the "part of its resources" that may legitimately be devoted to political activities must needs be a small and subordinate part. This interpretation is in keeping with this Court's decision in Positive Action Against Pornography, supra, where Stone, J. said at page 240 (D.T.C. 6192) that the relieving subsection did not assist the appellant in that case "as the appellant's purposes and activities are not ‘ancillary and incidental’ but, rather, are primarily of a political nature and therefore non- charitable."

Even if the appellant cannot be dismissed as merely a tenant association as the respondent suggested, it is apparent to me from the record that it not only has activities beyond education but that it is, in effect, an activist organization. Whether it is that for the most part, or only in large part, I think matters not. It is such in sufficient part not to be able to take advantage of the relieving measure. Thus, for this reason too, it fails to qualify as a charity.

If the appellant's case had been argued in reliance on any of the three other of Lord Macnaghten's categories, there might perhaps have been other issues to canvass. I might, however, add that I cannot see that the appellant would have been further ahead by presenting its case differently. I believe it put its best foot forward in the argument made.

In the result, I must dismiss the appeal, but would exercise discretion and make no order as to costs.

Appeal dismissed.