Reference Articles > A Charity's Duty to Defend Bequests

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This article describes what is called a charity’s duty to defend bequests (and other gifts).    

A charity is usually a non share organization incorporated under provincial or federal legislation.[1]  As such, it is managed by a board of directors. Those directors have a duty to protect the charity’s objects and interests and carry out the activities of the charity in a manner that is consistent with the stated objects. This duty holds directors of the charity to a high standard. Directors are considered fiduciaries.   

When a charity is a beneficiary of an estate this duty should override all decisions regarding the administration including when an estate is faced with litigation. As estate litigation can be lengthy and costly charities sometimes prefer not to get involved. Although this is certainly an option, in light of the duties facing charities, it may not be the appropriate option. The directors should recognize they owe the charity a duty to protect it’s interest in the estate and that if they do not participate in the estate litigation they may be in breach of those fiduciary duties.

Rather, the duties should be exercised with diligence. How?  First, the litigation should be assessed properly. This means acquiring all of the relevant facts such as the parties involved, the value of the estate, the impact on the charity’s interest and the views of estate counsel. Next, the charity (ideally with the assistance of legal counsel) should try to get a feel for the likelihood of success of the litigation. Unless the amount of the bequest is not material or the matter is covered by a specific policy, a special meeting (with minutes taken) should be held to discuss the matter.  A vote may result to either defend the litigation, not take a position and in effect do nothing (in Ontario called submitting one’s rights) or renounce the gift.

Part of this duty also means trying to minimize the costs of litigation. One way to do this is to form alliances, if possible, with similar interested beneficiaries, charitable or not. It is helpful for similarly minded beneficiaries to contact and work together. This makes for a unified front.  There is strength in numbers.

It is also important to recognize that in Ontario court costs in estate litigation are not dealt with differently than in general litigation, with one exception. Unless the reason for the litigation is the testator the cost may not be paid out of the estate. For example, if the will was poorly drafted and required it to be interpreted by the court, then the litigation is considered the “fault” of the testator and his estate bears the costs. Otherwise, costs follow the normally course of following “the cause” and the losing party could be partly or fully responsible for the winning party’s cost. If there are sufficient and reasonable grounds to bring the litigation then the court may exercise its discretion and relief the “losing” party, even though unsuccessful, from paying costs.  Who pays the costs can be a difficult matter to predict and ultimately rests on the court’s discretion to award or not award them.

Charities and their directors or trustees should remember their fiduciary obligations, especially when the administration of an estate involves litigation.  

For more information on estate, trust, powers of attorney or guardianship topics please see accompanying articles. Remember these articles are provided for information only and are not meant to be legal advice. Please consult with a professional.

M. Jasmine Sweatman practices at the law firm Sweatman Law Firm and can be contacted directly by telephone at (905)337-3307 or by email at jasmine@sweatmanlaw.com.