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.
Daniel Hofer Sr. was a member of the Lakeside Colony, which in turn was a member of the Hutterite Brethren Church, a federal corporation incorporated under a Special Act. Difficulties started to arise when Hofer invented a new form of hog-feeder, which he started to manufacture in the Colony's machine shop. The Colony asked him to stop production of the feeder, which he refused to do. This initial feud escalated into a complete breakdown in relations between the Hofer camp (which included his three adult sons and three other sons who were minors) and others within the Colony. The Colony purported to expel Hofer and his adult and minor sons as members of the Colony and later brought an action to evict them from the Colony's lands.
A majority of the Supreme Court, with (now Chief Justice) McLachlin dissenting found that, in each case, the Colony had failed to observe certain minimum requirements of natural justice and that, therefore, all of the expulsions were invalid, meaning that Hofer and his sons remained members of the Colony, with the right to occupy Colony lands.
The enduring rulings of the Court relate to the extent of judicial intervention in the affairs of a religious corporation, acceptance of evidence of the tradition and custom of the organization and the application of the rules of natural justice to the expulsion or other disciplining of a member.
(a) Judicial Intervention in the Affairs of a Religious Corporation
Under this heading, the court's important rulings may be summarized as follows:
● The courts are hesitant to exercise jurisdiction over the question of membership in a voluntary association, especially a religious one. However, the courts will exercise jurisdiction where a property or civil right turns on the question of membership.
● In deciding membership status, the court must determine whether the individuals have been validly expelled.
● While it is not incumbent on the court to review the merits of the decision to expel a member, the court is called upon to determine whether a purported expulsion was carried out in accordance with the rules of natural justice and not in bad faith.
(b) Tradition and Custom
The Court held that a tradition or custom which is sufficiently well-established may be considered to have the status of rules of the association, on the basis that they are the unexpressed terms of a contract. A long-standing tradition provides a kind of notice to the members of what rules the association will follow. In many cases, expert evidence may assist the court in understanding the relevant traditions and customs.
(c) Principles of Natural Justice
Under this heading, the court's important statements may be summarized as follows:
● The content of the principles of natural justice is flexible and depends on the applicable circumstances;
● The most basic requirements are that of notice, opportunity to make representations and an unbiased tribunal. Natural justice requires procedural fairness no matter how obvious the decision to be made may be. Adhering to the principles of natural justice is what the law requires even if it may not change the result;
● A member must be given notice of the cause for which he is to be expelled. Notice is required so that the person who may be expelled can seek reconciliation or prepare to defend himself and also so that members who must decide on expulsion can attend the meeting and contribute to the discussion (or seek an adjournment);
● A member must be given an adequate opportunity to respond the allegations made against him. There is some flexibility in the scope of the opportunity required;
● While an unbiased tribunal is one of the central requirements of natural justice, the Court recognized that it almost inevitable that the decision-makers will have an least an indirect interest in the issue in question.
In the case of Hofer, the Court found that there was either inadequate notice of the meeting to expel him, and, in the case of Hofer's adult and minor sons, no notice to expel.
3. Key Observations
The Canada Not-for-profit Corporations Act codifies some aspects of the Court's rulings on judicial intervention. In particular, a court is prohibited from making an order in an oppression action, derivative action or court-ordered liquidation if the corporation is a religious corporation and the impugned act, omission or conduct is reasonably based on a tenet of faith held by the corporation's members.
The Act also states that the articles or by-laws may provide for the power to discipline a member or terminate her membership, in which case the articles or by-laws must set out the circumstances and manner in which that power may be exercised. While the Act is silent on the manner of expulsion, corporations should consider providing for the rules of natural justice tailored to the needs of the corporation and the seriousness of the effects on disciplined members.