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June 2017 Archives

Conflict of Interest Rules for Directors under the OCA

The Ontario Corporations Act contains a set of rules that directors of all non-share capital corporations must observe if they wish to avoid having certain contracts or transactions, or proposed contracts or transactions, set aside. If set aside, the director or officer may also be required to account for any profit. This conflict of interest regime is superimposed on the duty of loyalty and, in the case of a corporation carrying on charitable activities, on charity law.

SCC Grants Leave in Jehovah's Witness Expulsion Case

On April 13, 2017, the Supreme Court of Canada granted leave in Wall v. Highwood Congregation of Jehovah's Witnesses (Judicial Committee). The hearing of the appeal in the Supreme Court has been tentatively set for November 2, 2017, meaning that a decision is likely in 2018. In reasons released in September 2016, the Alberta Court of Appeal delivered a split decision on whether the court had jurisdiction to hear an application for judicial review of the appeal committee of an unincorporated religious organization. The committee had upheld an internal process expelling the applicant, Randy Wall, from membership in the organization and shunning him. For our analysis of the Alberta Court of Appeal majority and minority reasons, see Two Views on the Justiciability of Decisions of Religious Organizations.

Distinction Between Temporal and Spiritual Bodies

In its 1940 decision in Ukrainian Greek Orthodox Church v. Ukrainian Greek Orthodox Cathedral of St. Mary the Protectress, the Supreme Court of Canada recognized the important distinction between the temporal and spiritual aspects of religious organizations and ruled that, while courts can intervene in temporal matters, they cannot do so in spiritual matters.

Saskatchewan Court Refuses to Issue Yellow Card in Soccer Case

In Kroczynski v. Regina Soccer Assn. (released April 2016), the Saskatchewan Court of Queen's Bench was asked to declare as nullities votes to amend the by-laws of the Regina Soccer Association Inc. and to elect directors at an annual meeting. Justice Barrington-Foote refused to do so. His reasons are instructive for other cases in which the losing party in an election or membership vote seek the assistance of the court.

Refusal to Admit Members can be Oppressive Conduct

In PCL Industrial Constructors Inc. v. CLR Construction Labour Relations Assn. of Saskatchewan, the Saskatchewan Court of Appeal unanimously affirmed a trial court decision finding that the bargaining representative of employers in the construction sector acted oppressively in refusing to admit two employers on the basis that they had both unionized and non-unionized workforces, whereas its other members had only purely unionized workforces.

Professional Services by a Director of a Charitable Corporation

Ontario (Public Guardian & Trustee) v. Unity Church of Truth, a 1998 decision of the Ontario Court of Justice (General Division), involved a director of a charitable corporation who received a commission in his capacity as a licensed real estate broker on two real property transactions involving the church.

Ontario Court Takes Surgical Approach to Requisitioned Meeting of Members

In Jacobs v. Ontario Medical Association. (released August 2016), Justice Perell of the Ontario Court of Justice used a scalpel to cut through the various demands of a dissident group of members of the Ontario Medical Association, finding merit only in the OMA's form of proxy and making adjustments to the proxy to address the court's concerns.

Obsessing About Elections

In his 2014 decision in Hunjan v. Singh, Justice Sproat of the Ontario Superior Court of Justice wisely points out that often too much time, effort and expense is devoted to fighting over the validity of meetings of members and the validity of elections. The time, effort and resources are generally better spent on building a solid foundation for future meetings and elections, rather than contesting results of the past.

No Foul: Court Declines to Apply Oppression Remedy to NFP Corporation

In Regina Soccer Assn. Inc. v. Saskatchewan Soccer Assn. Inc. (released January 2016), the Saskatchewan Court of Appeal was asked to apply the statutory oppression remedy in favour of a regional member of a provincial soccer association. However, applying the leading jurisprudence on the oppression remedy developed under business corporations legislation, the Court did not find that the provincial association acted oppressively in refusing to give the local member exclusive rights to govern the administration of the sport in its geographic region.

Expulsion of a Member of a Religious Corporation

Lakeside Colony of Hutterian Brethern v. Hofer is the seminal 1992 decision of the Supreme Court of Canada on the expulsion of a member of a religious corporation. The most important enduring aspects of the decision are the extent to which courts will intervene in the internal affairs of religious corporations, accept evidence of an organization's custom and tradition, and require adherence to the rules of natural justice in the process of expelling members.

Legal Status of Unincorporated Organizations - Trade Unions

In Berry v. Pulley, the Supreme Court of Canada recognized that a trade union is a legal entity that can enter into contracts with its members and that can sue and be sued on those contracts. A party suing a trade union can recover judgment from the assets of the union but not from the personal assets of its members. However, while recognizing the legal status of trade unions, the Court was careful to say that this recognition does not automatically extend to other unincorporated associations.

Effectiveness of a Director's Resignation

Can an individual resign from the board of a not-for-profit corporation, but subsequently withdraw the resignation? Ontario (President of the Assn. of Professional Engineers) v. Assn. of Professional Engineers (Ontario), decided in 2012, dealt with the effectiveness of a director's voluntary resignation.

Do the Technical Requirements of Meetings Apply Equally to NFP Corporations?

In Lee v. Lee's Benevolent Assn. of Ontario (decided in 2004), Justice Nordheimer of the Ontario Superior Court of Justice stated, in the context of a disputed election of directors at a meeting of members of a not-for-profit (NFP) corporation incorporated under the Ontario Corporations Act, that NFP organizations should not be required to adhere rigorously to all of the technical requirements of corporate procedure for their meetings, so long as the basic process is fair. On appeal, the Ontario Divisional Court affirmed the trial court's decision but neither embraced or refuted Justice Nordheimer's statement about the standard applicable to meetings of NFP organizations.

Distinction between the Appointment of a Receiver-Manager and an Independent Adviser

In Lee v. Métis Nation-Saskatchewan Secretariat Inc. (decided February 2017), the Saskatchewan Court of Queen's Bench held that a firm of chartered professional accountants had been appointed as independent oversight advisers of a non-profit corporation established under The Métis Act (Saskatchewan) and that, therefore, the powers of the corporation's board had not been suspended under The Non-profit Corporations Act (Saskatchewan).

Court-Ordered Meetings of Members

Montreal & Canadian Diocese of the Russian Orthodox Church Outside of Russia Inc. v. Protection of the Holy Virgin Russian Orthodox Church (Outside of Russia) in Ottawa Inc., a 2002 decision of the Ontario Court of Appeal, stands as the leading authority on court-ordered meetings of members of not-for-profit corporations, including charitable corporations.

Court Approval Required to Pay Directors Remuneration Earned in Another Capacity

Harold G. Fox Education Fund v. Ontario (Public Trustee), decided by Ontario High Court of Justice in 1989, is a leading decision on when a court will approve remuneration paid to a director of a charitable corporation who acts for the corporation in a capacity other than that of director.

B.C. Court of Appeal Reverses Lower Court Decision Upholding on Election of Directors

In Bhandal v. Khalsa Diwan Society of Victoria (decided in 2014), the British Columbia Court of Appeal unanimously upheld the validity of an election of directors at a Sikh society, reversing the contrary decision of the lower court. The Court of Appeal interpreted the constitution and by-laws of the Society as a type of contract and found that the admission of members did not contravene the provisions of the constating documents.

Access to Membership Lists

Lawrence v. Toronto Humane Society, a 2006 decision of the Ontario Court of Appeal, is the leading authority on the right of access to membership lists. This case held that a member was entitled to a copy of the membership list so that he could try to influence the membership to change its approach to defending against grievances involving its unionized workforce.

How to Build a Disaffiliation Mechanism to Protect a Charity's Brand

In a previous post, we stated that the Supreme Court of British Columbia's 2015 ruling in Habitat for Humanity Canada v. Hearts and Hands for Homes Society provides a textbook illustration of how an umbrella charitable organization can protect its brand, not only at the time that it accepts local organizations as affiliates but also when handling the disaffiliation process should the local organization become a threat to the larger brand. In a decision released in May 2016, the British Columbia Court of Appeal unanimously affirmed the lower court ruling.

Inappropriate Use of a Plan of Arrangement

In its 2010 decision in Ovarian Cancer Awareness & Treatment in Saskatchewan Corp., Re., the Saskatchewan Court of Queen's Bench refused to allow a plan of arrangement to be used to exempt a corporation from the requirement to convene a meeting of members to approve an amendment to its articles of incorporation.

Dismissal of Priest Ecclesiastical in Nature and Governed by Canon Law

In its 2011 decision in Hart v. Roman Catholic Episcopal Corp. of the Diocese of Kingston, the Ontario Court of Appeal held that the office of a pastor or priest is ecclesiastical in nature and, as such, governed by canon law. Under canon law, the church can remit a matter to the civil law courts but the church had never remitted a pastor's removal from office.

No Oppression in Disbursement of Hospital Foundation's Funds

In its 2011 decision in Thiessen v. Borden Hospital Foundation Inc., the Saskatchewan Court of Queen's Bench was asked to find that the disbursement of about $306,000 in Foundation funds for the construction of an additional 10-bed care home in Borden, Saskatchewan breached the duties of the Foundation's directors and was oppressive. Justice Acton held otherwise, dismissed the application and held the applicant liable to pay the Foundation's costs of the application on a solicitor/client basis. This case highlights the perils that a dissenting director faces when asking a court to subvert the will of the majority.

Court Overturns Decision to Disqualify an Elected Officer of Student Association

In Courchene v. Carleton University Students' Association, Inc. (released May 2016) Ray, J. of the Ontario Superior Court of Justice overturned the internal decision of a student association, with the result that the student who received the greatest number of votes in a campus election was not disqualified and was accordingly reinstated to his elective office. 

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