This blog post was written by Darren G. Lund, a Partner at Fasken LLP

I recently had occasion to work with a type of trust that is less common for estate planners than the typical testamentary or inter vivos family trusts we see every day: the non-charitable purpose trust. Coincidentally, there is a relatively recent decision of the Ontario Superior Court of Justice that provides a succinct summary of the key issues for these trusts: Fletcher’s Fields Limited v The Ontario Rugger Union, 2023 ONSC 373. And if you happen to be a rugby enthusiast in the Toronto area, stay tuned for some local rugby history!

In the early 1960’s, the Ontario Rugger Union (“ORU”) purchased six rugby fields in what is now Markham, Ontario. The ORU was comprised of six rugby clubs, and each club was intended to have the use of one field. Since the clubs were unincorporated associations, they agreed that the ORU would hold title to the fields in trust for the six clubs. This trust intention was documented in a written agreement in 1966.

Fletcher’s Fields Limited (“FFL”) was incorporated in 1970 as a corporation with share capital, but it has operated for most or all of its existence as a not-for-profit organization, for the purpose of promoting and developing the sport of rugby in the Toronto area.

In 1971, the ORU conveyed the rugby fields to FFL. The conveyancing documents acknowledged that the ORU held the properties in trust for the purpose of playing rugby, and expressed an intention that the purpose continue. FFL registered a declaration of trust on title in 1972 acknowledging its status as trustee. In 1979, FFL amended its Articles to confirm it is operated without the purpose of gain for its shareholders, there would be no distributions to shareholders, and all revenue would be used to promote its objects. The shareholders of FFL are the ORU and five rugby clubs.

In September, 2021, FFL sold the rugby fields to the Town of Markham, Ontario in order to meet financial commitments. The fields were sold for $21.5 million, with provision for FFL to lease the fields at no cost until October 31, 2024. The same year, FFL donated $11.65 million to the Canadian Rugby Foundation.

Following the sale of the rugby fields, a question arose to the ownership and distribution of the proceeds of sale.

The Court was asked to determine if a valid trust had been created, and accordingly examined whether the “three certainties” required to create a valid trust were present: (i) “certainty of intention” (to create a trust relationship); (ii) “certainty of subject matter” (i.e. the property to be held in trust); and (iii) “certainty of objects”. The Court had no difficulty concluding that the various agreements demonstrated an intention to create a trust, and the six rugby fields were the subject matter of the trust. The central question was whether there was certainty of objects.

Trusts are typically established for the benefit of persons, namely the beneficiaries of the trust. However, a trust may also be created to advance a purpose, rather than direct benefits to persons, in certain limited circumstances, the most common being a charitable purpose trust. The Court concluded that the purpose of promoting and playing rugby is not charitable at law, and so turned its attention to the rules applicable to non-charitable purpose trusts.

At common law, at least originally, most non-charitable purpose trusts were invalid, since they violate both the principle that there must be a beneficiary to enforce the trust and the rule against perpetuities. The Court noted that in Ontario, section 16 of the Perpetuities Act will save a “specific” non-charitable purpose trust if it creates “no enforceable equitable interest in a specific person”. Specifically, subsection 16(1) will construe the trust as a power to appoint income or capital for a period of 21 years. Section 16(2) provides that if the income and capital is not fully appointed within 21 years, then the persons who would have been entitled to the property had the trust been invalid from the outset, are entitled to the remaining income and capital.

On the facts, the Court concluded that the purpose of promoting and playing rugby, and social events related to it, were sufficiently clear to be considered a “specific” non-charitable purpose, and the fact that some individuals indirectly benefited from the trust did not preclude it from being a purpose trust. In terms of the historical objection that a purpose trust lacks a beneficiary to enforce it, the Court ruled that the modern approach is to be flexible. On these facts, the Court concluded that the ORU and the shareholders of FFL would have sufficient standing to enforce the trust. In the result, the Court ruled that a valid non-charitable purpose trust had been created.

With respect to the distribution of the proceeds of sale of the rugby fields, the Court held that FFL was “unambiguously” entitled to the proceeds of sale. Although the ORU was the original title holder when the non-charitable purpose trust was created in 1966, it conveyed its interest to FFL in 1971. Applying subsection 16(2) of the Perpetuities Act, the Court concluded that after 21 years the property accordingly reverted to FFL.

Fletcher’s Fields is a good starting point for anyone who wishes to learn more about the rules applicable to non-charitable purpose trusts. It is also a reminder for planners that the original common law rules that severely restricted the use of non-charitable purpose trusts (e.g. for the care of graves) have been modified both by case law and the Perpetuities Act, such that there is now greater scope for their use.