With the rise in online crowdfunding on sites such as GoFundMe and Kickstarter, a new law in Saskatchewan that regulates payouts was tested in the courts for the first time Wednesday.
Justice Neil Gabrielson of the Saskatchewan Court of Queen’s Bench granted the order to set in motion the court-supervised disbursement of the money raised by the Humboldt Broncos Memorial Fund, which brought in donations from all over the world.
The funds were raised for those affected by the Humboldt Broncos bus accident. In April, in the immediate aftermath of the crash, more than $15 million was raised for the survivors and families in just 12 days. The accident killed 16 junior hockey players and training staff, with another 13 surviving.
“What that order does for future cases is to be decided, but it certainly does provide some authority or support for the notion that the statute can be used for its intended purpose: that crowdfunding situations, where donations are raised in response to a catastrophe or a tragedy on an informal basis based on a public appeal, in appropriate cases, can utilize this legislation to obtain a court-supervised process to allocate the funds,” says Jeff Lee, a partner at MLT Aikins, who is acting for the memorial fund pro bono.
The order was brought under the Informal Public Appeals Act, which was enacted in 2015 and which, Lee says, had not yet been applied in Saskatchewan. It is the only law of its kind in Canada.
The Informal Public Appeals Act fills in legal gaps highlighted by online crowdfunding, but the problems it confronts have been around since much before the technology existed, says David Freedman, a professor at Queen’s University Faculty of Law and counsel at Gowling WLG LLP.
“This question has been around for ages,” he says. “It's an old problem, but it's certainly made much more relevant given social media. It seems like not a big deal, not an important piece of legislation, but actually it’s really important.”
Counsel for the Humboldt Broncos Memorial Fund Inc. filed a proposed order to the Court of Queen’s Bench to establish the money raised as a trust with the memorial fund as trustee, to establish an advisory committee to make recommendations to the board of the fund, to entitle them to invest the money in a high-interest savings account and to distribute 29 payments of $50,000 to the 13 survivors and the families of those who died.
The order was granted today with modifications, which included pushing back the date the advisory committee is to report a month, allowing families of people on the bus when the accident occurred to meet directly with the advisory committee if they choose to, and that the advisory committee report be delivered to the families who request a copy.
The Informal Public Appeals Act is intended to ensure funds raised through a public appeal are held in trust and to create a default scheme for the trust and a mechanism for use of surplus funds, establish powers and duties of trustees and create “user-friendly” forms for the public to access when initiating public appeals, according to a 2014 report from the Saskatchewan standing committee on intergovernmental affairs and justice.
When a tragedy or cause ignites widespread public compassion and action, the pool of money raised for those affected can create five “administrative and emotional” issues, says Kenneth Feinberg, a Washington D.C. lawyer who has administered the compensation funds for Vietnam veterans sickened by Agent Orange, the victims of the Boston Marathon bombing, the Sept. 11 terrorist attacks, the BP oil spill, the Virginia Tech shooting and the Pulse nightclub shooting in Orlando, among others.
“One: How much money do you have to distribute? Two: Who is eligible to receive the funds? Three: What is the methodology for deciding who gets what in an allocation? Four: What are the proof requirements as to the recipient of the funds; how do you make sure the right person is receiving the money? Five: Are there any due process considerations? Do you want to give any family member or injured victim the opportunity to be heard in a hearing in confidence?” Feinberg says.
“Those are the key issues you don’t have in Saskatchewan,” he says. “That streamlines everything.”
Typically, when an informal group of people raises money in the wake of some tragic event or natural disaster, they could treat it as a charitable trust and have a “scheme” ordered by the court, says Freedman.
“That’s a really awkward way to do things that never really pleased anybody,” he says. “So, the point of this legislation really is to arm the courts with a new set of powers where a judge in essence can create a trust out of the money that’s collected and impose terms.”
The Uniform Law Conference of Canada Civil Section created a working group to develop a way to regulate crowd-funding campaigns in 2009. In 2011, it produced the Uniform Informal Public Appeals Act, which served as a model for the Saskatchewan law. No other province has a similar law on the books.
One issue dealt with through the Informal Public Appeals Act is what to do with excess funds.
The ULCC exemplified the gap in common law with the 1958 Re Gillingham bus disaster fund. In 1951, a bus hit 50 marine cadets between the ages of 10 and 13, who were marching in the street. A fund to pay for the funerals of the 24 killed raised £10,000 ($16,687), but most was not required because the bus company’s insurance came up with the money as well. The judge ruled that the surplus funds should go back to the donors, but they could not be found and the money stayed with the court for 42 years.
The Humboldt Broncos Memorial Fund’s advisory committee will gather its information and report back to the board of directors of the memorial fund by Nov. 15 and the board will return to court and seek approval to distribute the remainder of the money.