By Esther S.J. Oh

After a lengthy and complicated dispute between members of the Hamilton branch of the Royal Yugoslav Army Combatants’ Association in Canada-Draza Mihailovic (the “RYACA”), the Ontario Superior Court of Justice released its September 1, 2021 decision concerning membership and decision-making rights concerning property owned by RYACA in Varjacic et al. v Radoja et al. The dispute largely centered around who had the right to determine RYACA’s future, as well as the future of its main asset, a large parcel of land in Stoney Creek, Ontario (the “Property”). RYACA is an unincorporated association which is a member of The Royal Yugoslav Army Combatants Association “Draza Mihailovic” (the “Association”); the rights and obligations of RYACA members are governed by the Association’s constitution (the “Constitution”).

A dispute arose at RYACA’s 2010 annual general meeting (“AGM”). RYACA’s then-president, Dragan Varjacic (“Danny”), had attempted to recruit new members in response to RYACA’s dwindling membership and collected membership fees, but failed to properly account for and provide receipts for those fees. Further, questions concerning the validity of the new members were raised. Nonetheless, it was “assume[d] that the people present had paid and were members”, and an executive board was elected (the “2010 Board”).

After its election, the 2010 Board called a meeting for April 9, 2011 (the “2011 Meeting”), but did not provide notice to all who considered themselves to be members, including Danny. However, Danny (and other alleged members) heard about the 2011 Meeting and attempted to attend the meeting. Upon their arrival, Danny was advised that he and others were not welcome, and Danny was handed a termination letter explaining that he was not considered a member for failure to pay his membership dues. The 2010 Board purported to revoke the membership of a number of individuals, without documentation to support their decision.

With regard to the Property, in 2013, various members of the 2010 Board had attempted to sell the Property unsuccessfully. Subsequently, in 2015, the plaintiffs discovered that the Property had been transferred to one of the defendants as sole owner, raising concerns that the Property could be sold without membership approval. Following this, a court order was issued in 2016 directing that title be reconveyed to RYACA.

The plaintiffs commenced a court application, broadly seeking (1) to restrain the defendants from exercising authority as RYACA executive members, which included dealing with the Property; (2) a declaration that the 2011 Meeting was invalid; and (3) a declaration that the 2010 Board’s termination of approximately 30 members was invalid. They also sought orders to allow for new members to be recruited and for an AGM to be called, at which current members could elect a new executive board and vote on the future of RYACA and the Property. A number of the parties to the action were self-represented and did not follow the applicable rules of civil procedure. Several aging individuals who had helped to establish and operate the RYACA passed away or became incapacitated and unable to attend the hearings in person due to poor health.

The court first reviewed whether it had jurisdiction over the matter, citing the Supreme Court of Canada’s (“SCC”) decision in Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v Aga (“Aga”), discussed in Charity & NFP Law Bulletin No 494. In that case, the SCC confirmed its ruling in Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v Wall, stating that courts have jurisdiction to intervene in voluntary associations’ decisions where a legal right, including a property or contractual right, is affected by a decision. Reviewing the evidence, the court found that the actions taken by the 2010 Board to oust members and transfer the Property had left one individual “with sole control over the RYACA’s largest and most valuable asset, the Property”. The court further found that “the parties whose memberships were purportedly terminated had contributed years of time, labour, and money, toward the betterment and preservation of the Property”. The court therefore found that the 2010 Board’s actions had deprived the members and interfered with their legal and contractual right to enjoy the use of the Property and to share in decision-making concerning its future use. Given that contractual and property rights of the members were at stake, the court found that it had jurisdiction to decide on the matter.

The court then found that, pursuant to the Constitution, all memberships expired after two years of non-payment of membership dues. As no one had paid dues since 2011, the court held that RYACA had no current members. It also found that RYACA had no valid executive board, as the 2010 Board had been inactive since the 2011 Meeting, had failed to call a new election, and all but one member had resigned. Given that neither the members nor the 2010 Board voted to authorize the sale or transfer of the Property, and that the Association had no authority to manage or oversee the matters at hand, the court found that the solution lay with the members of RYACA. It dismissed most of the relief sought by the various parties, and instead ordered that those individuals who sought to become full and valid members or who had their valid membership restored be granted membership upon the payment of members’ dues. It further ordered that an annual general meeting be held for those members to elect a new executive board, and for the Property to be held by RYACA until after election of the new board, that could then determine whether to retain or sell the Property.

This case follows previous case law in confirming the courts’ jurisdiction over the affairs of voluntary associations where property and contractual rights are affected. Further, it serves to underscore the importance of following an organization’s governing documents, as well as maintaining complete and accurate records of an organization’s financial and corporate activities. The case also serves as an example of why not-for-profits should endeavor to work co-operatively in order to avoid the time consuming and expensive process of attempting to resolve internal disputes through the courts.

Read the September 2021 Charity & NFP Law Update