Sep 2019 Charity & NFP Law Update
In a decision released on September 16, 2019, the Court of Appeal of Alberta dismissed an appeal by the Chinese Benevolent Association of Edmonton (“Association”) in Chinese Benevolent Association of Edmonton v Chinatown Multilevel Care Foundation (“Chinese Benevolent”). In this case, the court dealt with an appeal of a lower court decision in which the Association and various individual appellants (the “Appellants”) had sought an order declaring that by-laws adopted in 2009 (“2009 By-laws”) by the Chinatown Multilevel Care Foundation (“Foundation”) were invalid, a determination of who the members of the Foundation were, and a court order on other corporate matters, as discussed in the January 2018 Charity & NFP Law Update.
By way of background, the Foundation was incorporated under the Alberta Societies Act in 1985 and registered by-laws at that time (“1985 By-laws”). The 2009 By-laws limited the maximum number of members to ten and limited the term of office for directors. At the trial level, the chambers judge found that only two of the individual applicants, Mr. Gee and Ms. Hung, had standing to bring the application, given their status as members of the Foundation (none of the other individual applicants were members or directors of the Foundation nor had any material interest in the Foundation), since the Association and the Foundation were independent corporations. Further, the chambers judge held that the relief sought was remedial and was barred under the Limitations Act. Finally, the chambers judge found that the 2009 By-laws had been properly enacted.
On appeal, the court considered whether the chambers judge erred in finding that only Mr. Gee and Ms. Hung had standing to bring the application. The remaining Appellants had argued that they had standing because they had conducted fundraising and volunteer efforts for the Foundation, and the remaining Appellants requested the court to exercise its “inherent jurisdiction to direct and control the administration of charities.” The court took the position that its inherent power was limited to “where charitable trusts are not being properly administered, where funds are being mismanaged or where the trustees of the funds are breaching their fiduciary obligations,” which did not apply in this case.
Further, the remaining Appellants relied on Ontario (Public Guardian & Trustee) v AIDS Society for Children (Ontario) (“AIDS Society”) and argued that there was a fiduciary relationship between the Foundation and the public, which allowed them as interested parties to enforce the Foundation’s own governance rules against it. However, the court indicated that the AIDS Society case involved a clear breach of the society’s fiduciary obligations through the “misapplication of charitable funds or failure to follow charitable objects.” In the Chinese Benevolent case, the court found no such breach. Further, the court indicated that the AIDS Society case was brought by the Ontario Public Guardian and Trustee under the Ontario Charities Accounting Act, which provides statutory remedies that were not included in the Alberta Societies Act.
In finding that the only Appellants who had standing were Mr. Gee and Ms. Hung, the court also relied on Sandhu v Siri Guru Nanak Sikh Gurdwara of Alberta (“Sandhu”), discussed in the March 2015 Charity Law Update, and held that the Association did not have a material interest in the Foundation. In both the Sandhu case and the Chinese Benevolent case, the court found the non-member appellants had “no civil or property interest, contractual or otherwise, at issue on the application,” and that they therefore had no standing.
This decision is a reminder that anyone, including corporations, directors and members, objecting to the validity of a charity or not-for-profit’s by-laws will need to take into consideration whether they have proper standing to do so, and that mere involvement with the organization, such as volunteering or fundraising for it, will not likely be sufficient to grant standing. In addition, where anyone wishes to raise objections regarding the by-laws, this should be done in a timely fashion to ensure that the objections are not statute-barred.