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B.C. Supreme Court Rules Societies' Bylaw Must Authorize Voting Methods The decision in Farrish v Delta Hospice Society was an oral ruling regarding a petition brought pursuant to the Society Act in B.C. seeking relief with respect to a proposed meeting of the Delta Hospice Society (“Society”), a not-for-profit operating under the Societies Act (B.C.) (the “Act”). The Society operated a hospice and carried out related charitable programs involving the provision of care and support for individuals in the last stages of life. The petitioners had brought the hearing of the petition forward on an urgent basis, as they were seeking relief with respect to a proposed meeting of the members of the Society scheduled for three (3) days after the hearing. The court recognized that differing views on euthanasia and medical assistance in dying (“MAiD”), legalized in Canada in 2016, were at the core of the disagreement at the Society, although the court stated “it is not [the court’s] role on this application to resolve that debate.” The Board of Directors of the Society (“Board”) had sent out notice of a membership meeting to be held on June 15, 2020 (“2020 AGM”) and directed that a membership vote on amendments to the Society’s constitution and bylaw would take place by mail-in ballot. The Society’s then-current governing documents did not reflect a position for or against MAiD. As such, the Board (of whom a majority did not support MAiD) called the 2020 AGM to obtain membership approval over significant changes to the constitution and bylaw prohibiting MAiD. The proposed changes also allowed the Board, in its sole discretion, to refuse new membership applications (“Proposed Amendments”). In anticipation of the 2020 AGM, both factions (for and against MAiD) encouraged membership applications at the Society to increase the number of members to vote in favour of their respective positions on the Proposed Amendments. The petitioners sought to challenge the Board’s actions leading up to the scheduling of the 2020 AGM on two grounds. Firstly, the petitioners sought a declaration that the mail-in ballot voting process set out in the Notice of the 2020 AGM was not allowed. Secondly, the petitioners argued that the Board had wrongly refused membership to many applicants (who did not support the Board’s position), while granting membership to other applicants (who supported the Board’s position) in breach of the Society’s bylaw and the Act. On the first issue, the court noted that while section 84(5) of the Act provides that the bylaw of a society “may” authorize “voting by mail”, the Society chose not to authorize this in its bylaw. As such, the optional method of voting by mail was not authorized under the Society’s bylaw. With reference to B.C.’s Ministerial Order No. MO116 that was issued due to the COVID-19 pandemic (“MO116”), the Society’s counsel argued that since MO116 provided membership meetings to be held by telephone and electronic means, but was silent on the method of voting, “mail‑in ballot” should be allowed under MO116. The court held that since MO116 does not explicitly authorize the use of mail-in ballots, the Society’s bylaw (which does not permit mail-in ballots either) would apply. On the second issue, the Society’s bylaw merely contained generic wording stating that “…on acceptance by the directors [a person] is a member.” As such, on the issue of the Board’s rejection of membership applications that were not in support of its position, the court found that, “unless the criteria for membership are set out in the bylaw, the directors do not have the discretion to deny membership on some other basis that they themselves determine.” The court found that membership had historically been dealt with on an open basis, such that anyone who applied and paid the application fee was granted membership, and that it was only after the 2020 AGM, that “this practice changed to address the various applications that arose from the competing membership campaigns.” Interestingly, the court held that the Board’s open basis approach to membership was binding on the Board’s admission and rejection of members in the period of time leading up to the 2020 AGM. The court therefore ordered the Society to cancel the 2020 AGM; to provide the petitioners with a list of all persons whose membership applications had been rejected since the 2019 AGM; and to include all of those rejected persons in the register of members within 14 days. It also ordered that the Society seek the court’s direction before giving notice to the Society’s members of any future meeting. The Society appealed to the Court of Appeal for British Columbia and on June 25, 2020 the Society’s appeal was allowed, with a stay granted on the lower court’s order to include rejected applicants as members of the Society. The appeal court also ordered that, as a condition of the stay, the Society was prohibited from accepting any new members until the hearing of the appeal. The appeal was set for August 17, 2020, but was not available as of the date of publication. While the appeal court’s comments will be binding in B.C. and of great interest, the comments made by the lower court in this case to date underscore the importance of including membership qualification requirements within the bylaw for a not-for-profit. While it is often the case for not-for-profits to adopt generic boilerplate by-laws that may often not reflect their governance needs (as the Society did) it is important that by-laws reflect the legal requirements, as well as the unique operational needs and practices of each not-for-profit. |
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