Worried about donation chill, museums seek to join court fight

A group of museums that includes the Vancouver Art Gallery and the Royal Ontario Museum wants to intervene in a legal fight between Ottawa and a prominent auction house after saying the battle has caused a drop in their charitable donations.

The court case, between the Attorney-General of Canada and Heffel Gallery Ltd., concerns Canada’s rules for allowing valuable art to leave the country. In June, the Federal Court sided with Heffel, ruling that the regime, which can delay the removal of art that has been deemed to be important to Canadian heritage, was unfair to exporters. The Attorney-General is appealing.

But importance to national heritage is also considered in determining whether a donated work is eligible to bring its owner a generous tax break, and the government uses the same test to decide heritage value for donations and for exports. So when the criteria for making the determination were narrowed in relation to exporting art, the tax measure was also affected. Now the tax break applies to fewer works of art – particularly pieces by international artists – when they are donated.

The institutions have applied to the Federal Court of Appeal to intervene in the case to present their concerns. In effect, the galleries say, the courts have inadvertently limited institutions' ability to add expensive works to their collections by restricting a key tool they use to entice wealthy donors to give.

The Canadian Art Museum Directors Organization, which has helped lead the charge to intervene, said it did not want to comment before the Federal Court weighed in on its application.

In an opinion piece published in The Globe and Mail in August, the directors of three major art galleries said the court decision has affected their collections.

“Already, donations that were in progress – even from recognized Canadian collections – have been frozen, preventing our institutions from acquiring major works," Nathalie Bondil, Kathleen Bartels and Stephen Jost wrote.

The group of nine trying to intervene includes museums and galleries such as the Art Gallery of Ontario, the Montreal Museum of Fine Arts and the Winnipeg Art Gallery, and a library (the Thomas Fisher Rare Book Library at the University of Toronto). They are essentially on the same side as the government, seeking a return to the old system.

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The case concerns a French Impressionist painting – the 1892 Gustave Caillebotte canvas Iris bleus, jardin du Petit Gennevilliers – that was sold at a Heffel auction in 2016 to a British gallery for $678,500. The painting − created in France by a French artist of a French subject − was brought to Canada by a private collector in the 1960s and has only once been publicly displayed.

Shortly after the painting was sold, Heffel applied to the government for a permit to export it. The application was denied on the advice of an independent expert who judged it to be of outstanding significance and national importance. Heffel appealed to the Canadian Cultural Property Export Review Board (CCPERB), which sided with the expert and said the art must not leave the country for six months, as the rules require. During that time, public galleries could offer to buy it. The Art Gallery of Ontario did so. The export rules would have obliged Heffel to take the AGO’s bid or reapply in two years. Disliking either option, and the uncertainty for the buyer, Heffel took to the courts.

In June, Federal Court Justice Michael Manson said the review board did not show that the French Impressionist painting had a demonstrable connection to Canada’s national heritage and should reconsider its refusal to approve a permit. He also outlined new guidelines for establishing heritage value that would require a stronger connection to Canada.

The board had to rewrite its rules in response. At the heart of the rules is the test of whether a cultural item, such as a painting or a historical artifact, is of both “outstanding significance” and sufficient “national importance” that losing it would tear a hole in the country’s cultural fabric. That test is used both in the export process and to assess donated artworks for the special tax break because they were created in the same piece of legislation in the 1970s.

Heffel says that they currently have no position on whether the museums should be allowed to intervene, but that they are opposing a motion from the museums to add affidavits to the case’s evidentiary record.

In documents filed in court, the auction house’s lawyers said the case should stay focused on export permits. Politicians should fix any problem with the donation system, they argue.

“The proper forum for the resolution of these policy concerns is Parliament, and not this court,” Heffel’s lawyers, Thomas Conway and Julie Mouris of Conway Baxter Wilson LLP, wrote in their submission.

The Federal Court of Appeal has not yet set a date for a hearing.

Editor’s note: Editor's note: An earlier version of this story incorrectly said Heffel opposed the museum's motion to intervene. In fact, the auction house opposes a motion from the museums to add affidavits to the case's evidentiary record. Heffel says it does not currently have a position on the motion to intervene. This version of the story has been corrected.