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The Perils of Boycotting an Election of Directors

In Assn. of Pakistani Canadians of Man. Inc. v. Sheiikh (decided 1987), the Manitoba Court of Queen's Bench declared the victor in a battle for control of a non-share capital corporation by ascertaining which faction had the support of a majority of members.

1. Facts

There were two groups of members in the Association of Pakistani Canadians of Manitoba Inc., a corporation without share capital incorporated under The Manitoba Corporations Act (the "Act"). The Rana group based its claim to govern on the results of an election held on April 27, 1986. The Ashraf group denied the validity of this election and staked its claim on the executive that was in place immediately before the election and continuing in office despite the invalid election.

The board of the association (which then comprised the Ashraf group) had first set the date of the meeting to elect directors on April 27. However, before the meeting, the Ashraf group recognized that they were not going to be re-elected at the meeting. The Ashraf group was maneuvering for time. It caused a letter to be sent, on April 18, to the general membership advising that the election was postponed. However, this letter was countermanded by a letter dated April 21 confirming that the election would be proceeding on April 27, as originally planned.

The Ashraf group boycotted the election. A total of 135 members voted, which was approximately 52% of the eligible voters. The results were that the Rana group was overwhelmingly elected.

2. Rulings

Justice DeGraves of the Manitoba Court of Queen's Bench held that the meeting at which the board purported to postpone the election was invalid, because it had not been properly called and it had passed a resolution that was in contravention of the by-laws.

He further held that the meeting and election of directors held on April 27 were valid. The results of the election represented the majority wishes of the members.

In so ruling, Justice DeGraves affirmed that:

● Courts have a very large discretion in a proper case to call and hold meetings and elections.

● This discretion is, however, not unfettered and should not be used as an unwarranted intrusion into the domestic affairs of an association.

● The procedure created by the articles and by-laws of a corporation should be observed as a matter of respect for its self-government.

● In short, courts should not be too ready to act as a political arbiter to settle the internal struggles of members of an association, even though there have been irregularities, as long as those irregularities do not substantially affect the will of the majority. Stated otherwise, courts are reluctant to become involved in matters affecting the internal management of corporations, especially where what has been done or not done can be ratified by an appropriate majority of the members.

3. Key Observations

In substance, the court found that the will of the majority was to elect the Rana group and that postponing the meeting and election was a stratagem intended by the Ashraf group to cling to their tenuous hold on power. While only 52% of the members cast votes, elections are decided by those who cast votes, not by those who choose not to vote. Therefore, the overwhelming vote of the membership was in favour of the Rana slate, a result that a court is bound to uphold.

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