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Alberta Courts Establish Rules of Fair Election Process to Restore Stability to a Not-for-profit Society

In Muslim Assn. of Calgary v. Osman (released October 2015), Nixon J. of the Alberta Court of Queen's Bench set out rules for a court-ordered election process designed to remove uncertainties about who was governing a not-for-profit corporation incorporated under the Religious Societies' Land Act (Alberta) (RSLA).   The trial court decision was affirmed by the Alberta Court of Appeal in a judgment released in March 2016.

1. Facts

The Muslim Association of Calgary was formed under the RSLA.  The Muslim community had been in conflict about governance matters for two years, including who were the legitimate directors, who had financial and banking authority, who controls the website and the funds donated online and who may make corporate filings on behalf of the corporation.

Out of this chaos, one faction of members arranged a meeting of members, issuing a notice declaring the date, time and location of the meeting.  The notice was not mailed to all members.

2. Ruling at Trial

At trial, Justice Nixon held that the members of the corporation are entitled to know who has authority to govern them and third parties contracting, or otherwise dealing, with the corporation require certainty about who has the legal authority to act on behalf of the corporation.  There was also uncertainty about which set of by-laws applied.

The judge found the meeting called by a group of members and without notice to all members was seriously deficient.

As a result, the judge made declarations as to the identity of the members of the current board and which by-laws were in force.  The judge order an election be conducted as follows:

  • a deadline was set for the appointment of an election committee and the composition of the election committee;
  • the election committee must conduct the election in accordance with the by-laws designed as corrected by the court and shall seek nominations by a nominations deadline and call and conduct the election with a prescribed time frame;
  • the election was to be conducted by secret ballot, with those directors receiving the highest number of votes being elected; and
  • the number of directors was determined. Each nominee must satisfy the eligibility requirements set out in the by-laws.

3. Appeal

By the time the appeal in Muslim Assn. v. Osman was heard, a meeting of members to elect directors had been successfully held, rendering many of the issues in the appeal moot.

Nevertheless, in brief concurring reasons, the Court of Appeal agreed that the meeting that had been originally called by a faction was not held in accordance with the association by-laws and was, therefore, invalid.  In particular, the by-laws required that notice of meetings be mailed to the last known address of each member.  Moreover, that the office of secretary was vacant did not mean that any member of the society could usurp the secretary's authority.  Rather, in the absence of a secretary, the presumption is that the board would give the president or vice-president authority to discharge the duties of the office of secretary.

4. Key Observations

Nothing is worse than rival factions claiming control of the same corporation, creating chaos for the corporation, its members and those conducting business or having other dealings with the corporation.  As observed by the judge in this case, all parties require the certainty of knowing who is in control of the corporation and what set of by-law provisions apply.  Without certainty on these fundamentals, there is no choice but to seek judicial intervention.

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