In Kamloops-Cariboo Regional Immigrants Society v. Herman (released May 2013), Justice Devlin of the Supreme Court of British Columbia dismissed all claims that a registered charity and its former board chair brought against the society's former executive director (ED) after she was dismissed by the society for cause.
In 2007, Wanda Herman was recruited as the ED of a small local charity dedicated to assisting immigrants, visible minorities and first generation Canadians become full and equal members of Canadian society. When she joined, the office was in a state of disarray.
She lasted as ED for less than two years and was terminated for cause in July 2009. It does not appear that she contested her dismissal for cause or sued the society for wrongful dismissal.
Instead, the society and its former chair sued her for defamation and the society sued her for breach of confidentiality, breach of fiduciary duty, breach of contract and conspiracy to injure the society.
The trial consumed nine days, and the reasons of Justice Devlin take 179 paragraphs to sift through all the allegations and evidence. In the end, Justice Devlin dismissed all causes of action brought against Herman and awarded her party and party (partial indemnity) costs, making this an expensive and wasteful ordeal for all parties, especially for the small local charity at the centre of it.
First, the society and the former chair claimed defamation. Some of these complaints had to do with newspaper accounts that were unflattering to the society and its board. However, there was a lack of evidence that these could be traced to the ED.
Another basis was a complaint filed with the Human Rights Tribunal (HRT). However, the report that emanated from the HRT, which found that the board had failed to provide the ED and others with a harassment-free workplace (including comments of a sexual nature and that were derogatory to women). The board reaction, after receiving the HRT report, was to fire three employees - further victimizing them. Justification was held to be a defence available to Herman.
Interestingly, the court found that, since the society is a non-profit organization and there is some interest in its community relating to its operation, the defence of fair comment was applicable to a defamation suit. Fair comment is available to protect comments that are otherwise defamatory. Fair comment must be on a matter of public interest, be based on fact, meet an objective test and not be actuated by malice.
The court would also have found no or only nominal damages.
(b) Breach of Confidentiality
Herman signed a confidentiality agreement when she was hired as ED in 2007. The society claimed that she shared confidential information about alleged harassment by board members (including the former chair) to a committee formed to oust the board and in sharing other internal information about the society to others on the committee. The society had a personal policy manual which encouraged employees to come forward to express their subjective experience of harassment in the workforce to the board. The court found that Herman was entitled to invoke the internal harassment procedure. Using the harassment procedure did not place her in breach of her confidentiality agreement.
(c) Breach of Fiduciary Duty
A number of claims fell under this rubric. For example, the society claimed that her complaint to the HRT was a breach of her fiduciary duty. The court, however, stated that the victim of harassment, whether perceived or proven, is not disentitled from voicing her concerns by virtue of holding a fiduciary position.
The society pointed to her short-lived but failed attempt to organize a coup to replace the board. The court, however, stated that, generally speaking, a proxy battle in which a member or group of members vies for support to replace a board of directors is a legitimate corporate practice. Herman was both a director and member of the society. The court accepted that, in organizing a possible coup, she was acting as a voting member of the society in what she believed to be the society's best interest. Given the chronic dysfunction at the society and at the board, a reasonable person could agree that replacing the board may mitigate the toxic work environment and improve the society as a whole.
The society argued that it was not Herman's role to represent some of the employees to the detriment of the society as a whole. The court, however, found that her action to protect the employees and listen to their complaints was in the society's interest. A non-profit organization cannot run efficiently and for its charitable purposes without its employees.
(d) Conspiracy to Injure
This far-fetched claim was also rejected. The court added that rendering Herman liable in tort for exercising her rights as an individual subject to harassment in the workplace would set a dangerous precedent - possibly discouraging employees bound by employment contracts or fiduciary duties from voicing their concerns regarding harassment (whether real or perceived).
3. Key Observations
Kamloops-Cariboo v. Herman is a case that should never have been brought in the first place -let alone go to a full trial. It smacks of a dysfunctional board lashing out at its former ED even long after she had been terminated. Directors of charitable corporations exercise a quasi-public trust and must ask themselves whether litigation such as seen in this case is motivated by personal vendetta or the best interests of the corporation. Directors have the power to divert funds that are pledged to the corporation for one purpose to pursue private grudges. But they must strongly resist this temptation. Litigation such as that in Kamloops-Cariboo v. Herman should be entrusted to a special litigation committee comprised entirely of independent, disinterested directors who are represented by independent counsel and have full authority to decide whether the corporation's interests are truly served by engaging in litigation.