Link: Case Summary Document
Citation: [2018] SKQB 341 (CanLII)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
Summary:
This Canadian decision resulted from a traffic collision on 6 April 2018 in which 16 players and staff of the junior Humboldt Broncos hockey team were killed. An online GoFundMe campaign was commenced and kept open for 12 days during which $15 million was raised from donors in 80 countries.
The Saskatchewan Court of Queen’s Bench was originally asked by the Humboldt Broncos Memorial Fund Inc. (HBMFI) to establish the $15 million raised as a trust with the HBMFI as trustee, to establish an advisory committee to make recommendations to the board of the fund, to entitle the board to invest the money in a high-interest savings account, and to distribute 29 payments of
$50,000 to each of the 13 survivors, and the families of the 16 team personnel who died. The Court granted the order requested by the Memorial Fund, with some minor modifications. The order was requested under the Informal Public Appeals Act 2015 (Chapter I-9.0001 of The Statutes of Saskatchewan, 2014) (IPAA) which had never before been used. It is the only law of its kind in Canada that attempts to deal with online fundraising, social media fundraising and crowdfunding.
The advisory committee then filed its recommendation to the HBMFI on 10 November 2018. The advisory committee recommended that the funds held by the HBMFI be allocated as follows:
(a) in addition to the initial payment of $50,000.00 made to each of the families of the 16 persons who died in the accident, to pay the sum of $475,000.00 to each such family for a total of $525,000.00.
(b)in addition to the initial payment of $50,000.00 made to each of the 13 surviving claimants, to pay the sum of $425,000.00 to each claimant; and
(c) to distribute any remaining funds in trust to the 13 surviving claimants in equal shares, share and share alike.
HBMFI accepted the recommendation of the advisory committee and applied to the court in this hearing for approval of a final order under the IPAA. The court accepted and approved the recommendation of the committee (at [11]-[12]):
I have decided to accept the recommendation of the Committee. The Committee went through in detail the options they faced and made thoughtful recommendations. They took into account the fact that the survivors of the crash may have available to them insurance under The Automobile Accident Insurance Act, RSS 1978, c A-35, The Workers’ Compensation Act, 2013, SS 2013, c W-17.11, Hockey Canada, the Western Hockey League and other insurance sources. They took into account the wishes of the survivors that they all benefit equally no matter what their medical condition so as to not create any rift between them by the allocation of funds… The simplicity and the reasonableness of the recommendation appeals to me and I adopt the reasons for the distribution recommended.
The case may be viewed at: https://www.canlii.org/en/sk/skqb/doc/2018/2018skqb341/2018skqb341.html
Implications of this decision
Public appeals that occur on a regular basis are usually conducted by registered charities and other organisations having the benefit of experienced fundraisers and professional advice. However, in a social media world, spontaneous public appeals also occur after natural disasters, mass casualty events, publication of news items about a family or individual in distress, or on behalf of a child requiring specialised medical treatment overseas. When a very large sum is raised by online or social media giving, there are clearly issues to be resolved about how the fund is to be administered, who is eligible to receive funds, how much each should receive, what methodology is to be used to disburse funds, what proof measures need to be in place, and due process (such as the right to be heard by recipients and their families).
The Saskatchewan Informal Public Appeals Act (IPAA) attempts to deal with legal gaps arising from online crowdfunding on sites such as GoFundMe, Kickstarter and Facebook. Its purpose is to provide some structure for the disbursement of funds raised by informal (such as on social media) and specific-site online methods. The campaign in this case raised $15.1 million, of which
$14.6 million is available for disbursement after processing fees and contested donations. The online fundraiser charges payment-processing fees of 2.9% of the total raised plus 30 cents per donation processed. Without legislation of this type, there would be no controls over disbursement of funds raised informally or online.
The IPAA came into force in Saskatchewan on 1 January 2015 in response to a consultation paper published by the Uniform Law Conference, a national body that proposes changes to Canadian provincial, territorial and (where necessary) federal laws to increase harmonisation and develop uniform statutes across the country. The Uniform Law Conference recommended that all provincial and territorial governments enact legislation on informal public appeals for donations. The main concerns raised in the consultation paper were to ensure funds raised through a public appeal were held in trust, to create a default scheme for the trust and a mechanism for use of surplus funds, to establish powers and duties of trustees, and to create user- friendly forms for the public to access when initiating public appeals.
The Saskatchewan legislation is aimed at avoiding difficulties with the establishment of charitable trusts or schemes ordered by courts. Rather, the legislation gives the courts another method of creating a trust out of the money raised and setting terms for administration and disbursement. The IPAA governs all appeals to the public for donations by individuals or groups initiated after the coming into force of the statute other than appeals by ‘qualified donees’. Under the Income Tax Act in Canada qualified donees are registered charities and certain other entities that can issue donation tax receipts.
Therefore, registered charities are not covered by the IPAA. However, the Uniform Law Conference’s draft legislation excluded both registered charities and ‘any other incorporation or unincorporated body for the advancement of its usual objects’ from the application of the legislation, whereas the IPAA excludes only public appeals by ‘qualified donees’. This means that other entities in the philanthropic sector, such as nonprofits and groups of individuals raising money informally on behalf of a registered charity, are subject to the provisions of the IPAA, and potentially court oversight of the distribution of funds or surplus from a fundraising campaign.
This case provides an interesting precedent for the distribution of funds raised through crowdfunding campaigns. Charities and not-for-profits in other parts of Canada will also want to monitor whether, in the coming years, other provinces decide to adopt comparable legislation to that currently in place in Saskatchewan.