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Jurisdiction of Provincial Courts over NFPs

In Keck v. Balgonie Early Learning Centre Inc. (released April 2017), Judge Demong of the Saskatchewan Provincial Court acknowledged that, while the provincial court has no jurisdiction over termination of a member of a non-profit corporation or other discipline of a member, it does have jurisdiction over a contract entered into between the corporation and the member and can enforce rights and obligations arising under that contract.

1. Facts

Darren and Sandra Keck were parents of an infant, who they enrolled in a licensed early learning and child daycare centre, located in Balgonie Saskatchewan, and owned and operated by Balgonie Early Learning Centre Inc., a non-profit corporation incorporated under the Saskatchewan Non-profit Corporations Act, 1995 (Saskatchewan Act). They also became members of the corporation and Mr. Keck became a director.

The parents and the corporation entered into a written agreement for child care services. The agreement contemplated that, in exchange for $550 a month, the infant, then aged 1.5 years, would be provided with daycare services for 10.5 hours a day for five days a week.

The agreement could be terminated by either party on one month's written notice. The parties also agreed to comply with the child care facility policies and the Saskatchewan Child Care Regulations. The child care facility policies were set out in the parent manual, which included a code of conduct. The code of conduct prohibited, among other things: obscene or demeaning language or behaviour; aggressive or overly loud voice tones; threats, intimidation or physical force; inappropriate conversations; and inappropriate demands or expectations that conflict with the corporation's policies or programs.

After he joined the board, several incidents arose involving the unruly behaviour of Mr. Keck. These incidents included:

● swearing at a member of the fundraising committee and using aggressive behaviour, including door-slamming;

● after receiving a letter in respect of the first incident, he attempted to stop members on their way into and out of the daycare facility in an effort to an persuade them that a $100 monthly fee increase recommended by the board was ill-advised and that parents should not sign a new agreement with the corporation, resulting in some parents seeking to schedule a pick-up without having to be confronted by him; and

● yelling and using obscene and threatening language before another parent.

After these further incidents, the board held a special meeting and concluded that it would terminate the child care contract with Mr. and Ms. Keck. The corporation immediately sent a letter to the Kecks notifying them that their contract was terminated effective immediately, citing breach of the code of conduct, including use of obscene or demeaning language, intimidation and inappropriate conversations.

Eventually, the memberships of the Kecks were cancelled and Mr. Keck's directorship was terminated. However, these terminations were not at issue before the court.

2. Rulings

Judge Demong of the Saskatchewan Provincial Court held that he had no jurisdiction, as a provincial court judge, to make any award either terminating a membership interest or disciplining a member. Only the Saskatchewan Court of Queen's Bench, which is the court of unlimited monetary jurisdiction in Saskatchewan, has jurisdiction to hear matters involving relief under the Saskatchewan Act.

However, he did have jurisdiction over a simple breach of contract claim. Under the circumstances, however, he found that compliance with the code of conduct was an essential term of the contract for child care services and that the Kecks had breached the contract, justifying termination by the corporation.

3. Key Observations

As with the Saskatchewan Act, the Canada Not-for-profit Corporations Act gives exclusive original jurisdiction to hear matters under the CNCA to the highest level of trial court in each respective province or territory. In this respect, the CNCA follows the path long established under the Canada Business Corporations Act for relief involving federal for-profit corporations.

The question worth asking is: Should the CNCA continue to slavishly follow the CBCA in giving exclusive jurisdiction to the highest level of trial court in each province and territory? Or rather, should the jurisdiction be divided between the superior court and the provincial court?

The difference is material. Generally, litigation in the superior courts takes much longer and costs much more than litigation before provincial courts. Partly this is a function of the difference in amounts at stake and the substantially more streamlined pre-trial discovery process in provincial courts than in superior courts.

By any financial measure (revenues, net income or assets), most not-for-profit corporations tend to be smaller than most for-profit corporations. Not-for-profit corporations ordinarily do not have much money to spend on litigation.

As Keck v. Balgonie Early Learning Centre shows, allowing not-for-profit corporations and their members access to provincial courts rather than superior courts may enhance access to justice for an overwhelming proportion of these corporations and their members. Currently, the cost of seeking justice in the superior courts may be a level of justice that is so expensive as to deny justice for all but a few.

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