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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).

1. Facts and Issues

The Métis Nation-Saskatchewan Secretariat Inc. is a non-profit corporation established under The Métis Act (Saskatchewan) to which The Non-profit Corporations Act (Saskatchewan) also applies. The corporation had been beset by internal strife and political struggle between various members and factions, spawning a series of cases in the Saskatchewan courts.

Eventually, this led to the federal government suspending funding for the corporation in 2014. Without this funding, the corporation could not pay for its ongoing operations. In 2015, the corporation closed its head office in Saskatoon.

In early 2016, the federal government agreed to reinstate funding to the corporation if it retained an expert advisor to act in an independent advisory role and receive the monies dispensed by the government.

The corporation promptly entered into an engagement letter with Ernst & Young, chartered accountants to satisfy the role of expert advisor. Under the terms of the engagement letter, E&Y would receive amounts payable to the corporation from the Government of Canada and would hold up to three provincial Métis council meetings, retain a third party neutral facilitator to assist the corporation, including assisting at meetings, preserving Métis citizenship records and paying rent and other necessary occupancy and asset preservation costs. However, except as otherwise provided in the engagement letter, E&Y would not exercise any decision-making authority on behalf of the corporation, assume any management responsibilities, assume any form of control over the corporation's operations, business affairs or employees, act as employer of any of the employees of the corporation or, except for the backup records, take possession of any corporate property. Also, E&Y expressly disclaimed that it was acting as a receiver or receiver-manager by virtue of any court order or legislative provision.

Nevertheless, the applicants took the position that E&Y was acting as receiver-manager of the corporation and, therefore, the powers of its board were suspended by operation of the Act.

2. Rulings

Justice Labach had no difficulty in finding that E&Y had been appointed as independent expert adviser and not as a receiver-manager of the corporation. The engagement letter and E&Y's report made its status and purely advisory role clear. E&Y was not exercising any decision-making authority or assuming any management responsibilities on behalf of the corporation. Nor was E&Y assuming any form of control over the corporation's operations or business affairs.

Therefore, the powers of the board were not suspended under the Act.

3. Key Observations

The engagement of E&Y was carefully crafted to ensure that it was limited to acting as an independent expert adviser to the corporation and not as a receiver or receiver-manager. Justice Labach was correct to not accept an attempt to re-characterize the engagement as something it was not. The powers of a receiver-manager would go well beyond the limited mandate given to E&Y in this case. Therefore, there was no basis for the argument that the powers of the board were suspended by the engagement of E&Y as an expert adviser.

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