By Ryan M. Prendergast

Religious organizations can be scrutinized by the courts, even when they have not committed statutory infractions. This is the lesson that the Ontario Superior Court of Justice imparted in Athesivan v. Canada Shri Muththumaari Amman Temple (“Athesivan”).

Athesivan, which was heard on November 16, 2022, concerned a dispute between the leadership of a Hindu temple and its members. The Canada Shri Muththumaari Amman Temple is a Hindu Temple in Toronto which serves the local Tamil community. It was incorporated as a not-for-profit corporation under the Corporations Act (Ontario) (the ““OCA”), and is governed as of October 2021 by the Not-For-Profit Corporations Act, 2010 (the “ONCA”). The ONCA did not apply at the time of the dispute in 2019, and so the Court only considered the implications of the OCA in this decision. As a corporation which exists for charitable or religious purposes, the temple is considered a trust under the Charities Accounting Act, RSO 1990 (though it is not a registered charity). Therefore, directors have a fiduciary duty to ensure that the interests of the trust are properly addressed.

This was an application, in which the applicants sought the court appointment of a monitor over the temple and a freezing of the temple’s assets, based on allegations of breach of trust by the respondents. The respondents were current or former directors and officers of the temple, who argued that they were the legitimate leadership of the organization.

There was no evidence supporting the supposed misappropriation of funds claimed by the applicants, or alleged non-compliance with the governing documents of the corporation. The Court found that almost all the accusations against the respondents were “unsubstantiated”, and had caused the assets of an innocent organization to be frozen during the litigation process.

However, the Court did criticize the board for not properly following the requirements under the OCA, stating that:

In making this decision, I'm not blessing the temple's failure to abide by appropriate corporate governance rules. Though a nonprofit run by volunteers should not be held to the standard of a public company with a professional board, the directors must not forget that our law makes them fiduciaries of the members' trust.

The case serves as a reminder that it is best practice for charities and not-for-profits to be vigilant in their compliance with both their governing documents and incorporating legislation, even when failure to do so does not rise to the level of breach of trust or breaking statutory provisions.

​Read the January 2023 Charity & NFP Law Update