In Varjacic v. Radoja (decided March 2018), Justice J.A. Ramsay of the Ontario Superior Court of Justice held that a corporation specifically incorporated to initiate litigation against the members of a unincorporated association had no standing to bring proceedings.
The Royal Yugoslav Army Combatants Association in Canada was an unincorporated association. In 2010, Mr. Radoja, the president of the association, expelled several members from the association and, with the approval of the remaining members, transferred title to the association's building and lands into his own name. He then sought permission from the court to sell the property and receive the proceeds in trust for the unincorporated association.
Several of the expelled members formed a not-for-profit corporation to challenge the sale and the expulsions and to carry on the work of the unincorporated association. As part of the challenge, the corporation brought a court application. The unincorporated association also brought a separate motion to challenge the property transfers.
The former president brought a motion that the corporation's application be dismissed for lack of standing and that the unincorporated association's application be dismissed for inability to sue.
In short reasons, Ramsay, J. quickly dispatched both applications:
● The unincorporated association was not a legal entity and could neither sue nor be sued.
● If a member of the unincorporated association has not decided to join the litigation as a party, no one else can sue for her.
● The corporation was a legal entity but had no interest in the litigation. It had no connection to the property transferred to Radoja. It was incorporated as a result of the dispute and at least in part for the purpose of protecting the complaining member from exposure to costs. While members of the corporation may have an interest in the litigation as members of the unincorporated association, the interest is theirs, not that of the corporation.
For different reasons, therefore, the applications of both the unincorporated association and the corporation were dismissed.
3. Key Observations
An unincorporated association has no separate legal personality and cannot sue or be sued in its own name. Instead, the members of the association can sue in a representative capacity. For example, in this case a member such as Natasha Varjacic could have sued on her own behalf and on behalf of all the other members of the unincorporated association. However, had she done so, she would have exposed herself to an adverse costs award should her application be dismissed.
A corporation has a separate legal personality, which includes the right to sue and be sued. However, the flip side of a corporation's separate legal personality is that it can only sue for wrongs (such as breach of contract or a violation of property rights) done to it. A corporation cannot sue to vindicate the rights of others, including its own members in their personal capacities.