Aug 2019 Charity & NFP Law Update
In a decision released on August 9, 2019, the Court of Queen’s Bench of Alberta considered whether a separate legal entity could have standing to enforce the bylaws of another Alberta society. In Metis Nation of Alberta Association Local Council #63 v Alberta (Corporate Registry) (“Metis Nation of Alberta”), the court considered whether or not a cross-application filed by the Metis Nation of Alberta Association (“MNAA”) (“Cross-Application”) to dismiss an originating application filed by the Metis Nation of Alberta Association Local Council #63 (“Local 63”) and three individual applicants who were the directors of Local 63 (“Individual Applicants”) (“Originating Application”) would be allowed or dismissed. While the Alberta Registrar of Corporations (“Registrar”) was a named respondent, it took no position.
The Originating Application, which sought declaratory relief regarding dissolution of the Local 63 under the Alberta Societies Act, was adjourned so that the Cross-Application could be heard first. The court in the Metis Nation of Alberta case dismissed the Cross-Application and directed the parties to arrive at a litigation plan to proceed without the Originating Application in order to clarify the issues under dispute. The court’s reasoning, together with a brief summary of some of the key background facts are outlined below.
Local 63 was incorporated on July 5, 2002 under the Alberta Societies Act. The governance structure of Local 63 is set out in the Local 63 by-laws filed on July 5, 2002 (“By-law”). There were a number of references to the MNAA in the Local 63 By-law, as noted below.
In November 2018, Local 63 held a membership meeting to approve a special resolution to dissolve Local 63 (“Special Resolution”). Six of the nine members of Local 63 attended the membership meeting and they voted unanimously to dissolve Local 63. One of the Local 63 directors then wrote to the MNAA advising of Local 63’s Special Resolution to dissolve. Local 63 filed articles of dissolution with the Registrar, but the MNAA later wrote to the Registrar disputing the validity of the Special Resolution on the basis it was contrary to the By-law. The Registrar took the position that due to the conflicting information, Local 63 would be suspended until a court order has clarified who is authorized to file the articles to dissolve Local 63, and also confirmed that Local 63 had met all necessary requirements to dissolve.
In April 2019, the Individual Applicants filed the Original Application seeking a declaration that the Individual Applicants are authorized to file the articles of dissolution with the Registrar and that all requirements to dissolve Local 63 have been met. In response, the MNAA filed the Cross-Application in May 2019 seeking an order striking the Originating Application in its entirety, as well as other relief.
In the Metis Nation of Alberta case, the applicants argued that the MNAA had no standing to bring the Cross-Application on the basis that the MNAA is a third party and a separate legal entity from Local 63, and therefore lacks legal standing to enforce Local 63’s By-law. The applicants relied on Chinese Benevolent Association of Edmonton v China Town Multilevel Care Foundation (“Chinese Benevolent”), reported in the January 2018 Charity & NFP Law Update in which members of the Chinese Benevolent Association of Edmonton were found to have no standing to bring a court application regarding the validity of a foundation’s by-laws, since they were not, and had never been, members of the foundation. However, in finding that the MNAA had standing to bring the Cross-Application, the court distinguished this case from Chinese Benevolent on the basis that Local 63’s By-laws demonstrated “a clear and close relationship between Local 63 and MNAA.” The court cited several articles in the By-law that referenced the MNAA, including a By-law provision which stated one of the objects of Local 63 was to further the objects of the MNAA, a requirement that the By-law was to be consistent with the MNAA by-laws, and that any special resolution approved at a meeting of Local 63 members needed to be ratified by a special resolution of MNAA members.
The court distinguished Chinese Benevolent, as there was no evidence that the Chinese Benevolent Association or its directors had any material interest in the foundation, nor any direct stake in the foundation’s affairs, which was not the case in the Metis Nation of Alberta case. In this regard, the court found the MNAA had standing to bring the Cross-Application since the MNAA does have a material interest in Local 63 and its affairs.
This decision confirms that a separate legal entity can be found to have standing to enforce the by-law of a different corporation in court, where (1) the bylaw of the corporation reflects clear provisions regarding the interests and authority of the entity and (2) where the entity is found to have a material interest and a direct stake in the affairs of the corporation.