Jan 2018 Charity & NFP Law Update
On January 5, 2018, the Court of Queen’s Bench of Alberta released its decision in Chinese Benevolent Association of Edmonton v Chinatown Multilevel Care Foundation. In this case, the plaintiffs sought a declaration that the general operating by-law adopted by the Chinatown Multilevel Care Foundation (the “Foundation”) in June 2009, was invalid and that the governing bylaws were those adopted in 1985 (the “1985 Bylaw”). The plaintiffs also sought a determination concerning who the members of the Foundation were, together with a court order on other corporate matters.
The plaintiffs included Mei Hung and Frank Gee (who were members of the Foundation), as well as the Chinese Benevolent Association (the “Association”) and directors of the Association. On the issue of who had valid standing to bring the application, the court found that only Ms. Hung and Mr. Gee had standing given their capacity as members of the Foundation. The court stated “There is no evidence to suggest that the [Association] or its Directors have any material interest in the [Foundation] and therefore any direct stake in the [Foundation]’s affairs such as to justify granting them standing….” The court also stated, “I agree with the Defendants that merely applying for membership in the [Foundation] is not sufficient to grant standing and that the board of directors was entitled to employ Selection Criteria in making membership decisions for the [Foundation] as a private society.”
The Foundation was incorporated under the Alberta Societies Act and had registered its bylaw in 1985 under that Act. At a meeting held on June 16, 2009, (the “June 2009 Meeting”) members of the Foundation passed a special resolution replacing the 1985 Bylaw with a new bylaw (the “2009 Bylaw”) which introduced a number of changes, including limitations on the maximum number of members to ten and limitations on the term of office for directors. The special resolution approving the 2009 Bylaw was signed by nine of the Foundation’s members who were also directors of the board at the time.
Based on the evidence, including the individuals listed by name on the 2009 Bylaw filed with the Alberta corporate registry, the court found that the members of the Foundation were the same as the directors at the time of the June 2009 Meeting. Accordingly, the court found that only those ten individuals (who were directors and members of the Foundation) were entitled to receive notice of and vote on the 2009 Bylaws.
The court also found that those ten members received adequate notice of the June 2009 Meeting. In that regard, the court stated:
While notice of the meeting was given by email or telephone, there is no evidence that any of the members/directors in attendance at the meeting objected to the adoption of the 2009 Bylaws or to the sufficiency of the notice given in relation to that meeting until six years later in the case of the Plaintiffs, Mr. Gee and Ms. Hung. The evidence establishes that the board was considering new bylaws, a subcommittee had been appointed to review the bylaws, and at no time was there any indication, certainly not from Mr. Gee and Ms. Hung, that the members/directors did not understand the bylaws or the purpose of the June 2009 Meeting.
As such, given the court’s finding that the Foundation had ten members/directors who had received sufficient notice, it found that the threshold 75% required for a special resolution under the Alberta Societies Act was met and that the 2009 By-laws were therefore validly implemented. On this basis, the court dismissed the Appellant’s claim.
This decision, in addition to confirming that simply applying for membership is not sufficient to grant standing as members in a court proceeding, more importantly clarifies that directors and/or members who wish to raise objections to the validity of a bylaw must do so on a timely basis and ensure that such objections are properly documented.