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Complainants who may bring Oppression or Derivative Proceedings

Members and other complainants can pursue various remedies under the Canada Not-for-profit Corporations Act, the most important of which are as follows:

● oppression remedy;

● court-ordered liquidation;

● derivative action; and

● compliance and restraining order.

The first three bullet points are, however, not available with respect to disputes on tenets of faith of a religious corporation. But who may seek these remedies?

1. Categories of Complainants

Qualified applicants for such remedies consist of:

● present or former members of the corporation;

● registered or beneficial owners of the debt obligations of the corporation or any of its affiliates;

● present or former directors or officers of the corporation or any of its affiliates;

● the Director appointed under the Act; or

● any other person who, in the discretion of the court, is a proper person to make an application under Part 16 of the Act (which includes the remedies described above).

The last bullet point creates a discretionary category of complainant. The other categories are non-discretionary (also called per se complainants).

There has been limited jurisprudence to date under the Act regarding persons who can seek the statutory remedies; however, there has been extensive jurisprudence under the comparable provisions of federal and provincial business corporation legislation (from which the Act was derived).

2. Discretionary Complainants

(a) Past and Prospective Members

Mowat v. University of Saskatchewan was a case involving a member or former member. The plaintiff was a student of the university at the time of his application to review the results of a student referendum, but had graduated from the university and ceased to be a student by the time the application was heard. Despite this, the Saskatchewan Court of Appeal held that the application had standing. There would be no justice in denying the plaintiff standing only because the process for reviewing the referendum results played out so slowly that he was unable to bring the matter to court before he graduated. The court found that the former member was a proper person to bring an oppression action. It could equally have decided that the former member was a per se complainant.

A non-member was granted status as a complainant in another Saskatchewan case, PCL Industrial Constructors Inc. v. CLR Construction Labour Relations Ass'n. of Saskatchewan. There, the applicant qualified as a member under the legislation governing the province-wide bargaining association for employers. However, because the applicant had a mixed workforce of unionized and non-unionized workers, it was denied status as a member. The Saskatchewan court found that the applicant was a proper person to bring the oppression action.

(b) Creditors

Creditors have also been granted status as discretionary complainants under the oppression remedy.

First, Precision Feeds Ltd. v. Rock Lake Colony Ltd. involved Rock Lake Colony Ltd., a corporation subject to the Manitoba Corporations Act. Rock Lake was owned by a Hutterite community in Manitoba. As a result of a leadership dispute involving rival factions in the community, the corporation's bank had stopped payment on the corporation's cheques.

Precision Feeds was a critical supplier to the debtor corporation. It brought an application under the oppression remedy for the appointment of a receiver-manager in respect of the debtor.

The motion judge, Justice Schulman, appointed Deloitte as the receiver and manager of the debtor corporation unless the parties themselves found suitable financing for, and agreed on a procedure to deal with, the debtor's unpaid invoices. This order was made in the context of arrangements for an expedited hearing on the merits of the leadership dispute. The Manitoba Court of Appeal agreed that the appointment of the receiver-manger was justified in view of the dispute between those purporting to manage the corporation.

Second, in Saskatchewan Housing Corp. v. Gabriel Housing Corp., the applicant provided over 70% of the charitable corporation's operating budget, held security in the corporation's assets and had guaranteed many of the corporation's obligations. The corporation had entered into various agreements providing that it was to be accountable for public monies provided to it. The Saskatchewan court found that the applicant was a proper person to bring an oppression action, there being no other person who was practically able to make the application.

(c) Self-Proclaimed Champions

However, the applicant for an oppression remedy was not granted status as a complainant in the Campaign for the Inclusion of People who are Deaf and Hard of Hearing v. Canadian Hearing Society, the first such case decided under the federal Act. In Canadian Hearing Society, the corporate applicant had never been a member of the society. Nor had the applicant ever applied for membership. The court found, therefore, that the applicant lacked a private right entitling it to assert a claim for oppression and also refused to find that the Campaign was a proper person to advance the oppression claim, for three principal reasons:

● The applicant had no reasonable expectation in its own right that had been frustrated by the actions of the society's board.

● Granting the applicant status as a complainant was unnecessary given that the individual co-applicants were asserting the direct infringement of their personal rights and reasonable expectations as members of the society.

● It was difficult to square the corporate applicant's assertion that it represented the former annual and lifetime members of the society with the evidence. The former annual members had not come forward individually. Only two of the 340 former lifetime members had come forward. There was no evidence that any of these former members objected to the board's decisions (that resulted in the conversion of the society from a large, open membership into a closed corporation) or were truly concerned about the lapse of their memberships.

Accordingly, the court held that the corporate applicant was not a complainant for purposes of the federal Act and, therefore, lacked standing to bring the application.

In short, courts have granted applicants standing where the applicant was a member at the time of the impugned acts (Mowat) or was wrongly excluded as a member of the corporation (PCL Industrial Constructors) or the applicant had a pecuniary interest in the corporation as a creditor (Gabriel Housing) or supplier (Rock Lake Colony). However, the courts denied complainant status where the applicant was never a member, had never applied for membership and was not a creditor, but was merely purporting to champion the rights of former members (Canadian Hearing Society).

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