In Saskatchewan WTF Taekwondo Assn. Inc. v. Taekwondo Canada (released May 2015), Justice Dunphy gave judicial support to a member-requisitioned meeting and knocked-down various obstacles that the incumbent board of directors tried to put in the way of holding the requisitioned meeting. The judgment strongly endorses democratic values in the governance of corporations formed under the Canada Not-for-profit Corporations Act (Act).
Taekwondo Canada is a federal not-for-profit corporation that is the national association of the sport of Taekwondo. Its members consist of various provincial associations.
There was a history of litigation involving the corporation, expulsion of members and denial of voting rights. Justice Dunphy found that the root of the differences were sincerely held differences of philosophy and style between the incumbent directors and some or all of the applicant provincial bodies.
In February 2015, three of the applicants (the provincial Taekwondo associations of Québec, Manitoba and PEI) requisitioned a meeting of members for the purpose or reinstating four suspended provincial associations as members and the removal of six members of the board of directors.
The board erected a series of obstacles in order to block the requested meeting:
- First, the board characterized the primary purpose of the motions as the enforcement of a personal claim or redress of a personal grievance against the corporation and certain of its directors. On that basis, the directors would be entitled under the Act to refuse to a call the meeting.
- Second, in response to requisitionists attempt to call the meeting themselves (which they have he right to do if the board does not call the meeting within 21 days of receiving the requisition), the board refused to supply a list of members so that the requisitionists could send proper notices of the meeting to each member.
- Third, the directors caused the corporation to apply to the Director (federal regulator under the Act) for an exemption from the requirement under the Act to provide a list of members, claiming that production of the list would be detrimental to the corporation or any member.
The result was to frustrate the all efforts of the requisitions to appeal to the membership at large.
In a strong decision, Justice Dunphy held that this is an appropriate case to vindicate the substantive right of the members to have a meeting. Only the members can determine whose path is the right one for the national association. The right to requisition a meeting is a substantive right, that it was not to be lightly interfered with and that the board cannot substitute it with an entirely different right (namely, the right to attend an annual meeting six or seven months later as and when called or the right to make member proposals at an annual meeting when called).
- Dunphy J. rejected the claim that the requisitions were clearly to redress personal grievances, emphasizing that only requisitions that clearly address personal grievances may bar the right of members to requisition a meeting. Where the meeting is requisitioned for a purpose that includes removing a significant number of the directors who are assessing the matter, the court will be attentive to see whether of the board have possibly allowed there personal views or interests in holding onto their seats influence their reaction to the requisition.
- The judge also rejected the claim that the application to the Director to allow the corporation to withhold delivery of the list of members can be raised to block holding a requisitioned meeting. The application to the Director for a discretionary exemption (which was still pending) does not create a right to a stay of proceedings merely by applying for an exemption.
In the result, Justice Dunphy ordered the corporation to call the meeting and set out various terms, including the a deadline for settling the terms of the notice of meeting, the time, date and place of the meeting and the precise language of the resolutions.
3. Key Observations
Justice Dunphy delivered a strong and clear decision. The right of members to call a meeting is critical to the self-governance regime of NFP corporations. Boards exist at the pleasure of the members, and it is only by members exercising their power to change the composition of the board that directors can be held accountable. The Act provides that a requisitioned meeting will be called within 21 days of the time that the requisition is received by the corporation.
As Dunphy J. clearly articulates, the power of the board to refuse to hold a meeting on the grounds that the primary purpose is clearly to enforce a personal grievance or carry out a vendetta cannot be invoked to frustrate the expression of membership will at a meeting. After Saskatchewan Taekwondo, it will be highly unlikely that this ground will ever block a meeting of members called to oust a significant portion of the board.
Provision of a list of members is crucial to the whole process of member-requisitioned meetings and board's accountability to the members. Without access to a current list, members cannot send a valid notice of meeting nor explain their case to the entire membership. While the decision in Saskatchewan Taekwondo was intentionally narrow (so that the court did not have to rule on the Director's power to exempt a corporation from delivering a list of members), the Director's power in s. 25 is not meant to defeat the critical substantive right of the members to hold a meeting. It is to protect the names and contact particulars of members identified in the list from being abused for non-corporate purposes. Since the Director had not yet ruled on the application for an exemption, the judge was correct to say, as he did, that the pending application does not operate to stay the requisitioned meeting.