by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
On September 22, 2017, the Ontario Superior Court of Justice released its decision in Ahmed v Hossain, which involved a governance dispute at the Danforth Community Center (the “Center”), a not-for-profit corporation established under the OCA. The By-law for the Center (the “By-law”) established two separate boards, a “Board of Trustees” and a “Board of Directors” to govern different aspects of the Center. The By-law stated that the Board of Trustees was responsible to hold the property for the Center, monitor usage of the said property, provide accountability over the Board of Directors, and act as the Board of Directors if that board was dissolved, but only until such time that a new Board of Directors had been elected. The By-law stated that the Board of Directors was responsible for the day-to-day operations of the Center, as outlined in greater detail in the By-law.
An emergency meeting of the members was called, at which the Board of Trustees purported to dissolve the Board of Directors and usurp the authority of the Board of Directors. In separate incidents, the Board of Trustees also purported to bar a member indefinitely from entering the Center’s mosque and also bar two of the members (who were also applicants to the above case) from running for any administrative office at the Center for ten years.
The court held that neither the Board of Trustees nor the members had the authority under the Center’s general operating by-law, the OCA, or under the applicable common law to dissolve the Board of Directors, to install the Trustees in place of the Board of Directors, or to suspend the rights of the members as outlined above. As such, the court declared the purported dissolution of the previous Board of Directors and the steps taken by the Board of Trustees to suspend the rights of the applicant members to be unlawful and of no force or effect. The court noted that since proper notice of the emergency membership meeting was not given, even if the By-law did provide authority to carry out the above actions, those decisions would have been invalid due to insufficient notice.
This case confirms that while courts are generally reluctant to intervene in the internal affairs of not-for-profits, where an organization does not comply with its general operating by-law or the applicable corporate statute, the courts may take steps to intervene in those situations. In addition, as a practical suggestion, a single board structure is much simpler to work with from a governance perspective and will help to avoid confusion on the allocation of responsibilities that could otherwise arise where a double-board structure is utilised, as evidenced by this case.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
On October 26, 2017, the Court of Appeal for Ontario (the “Court of Appeal”) released its decision in Teixeira v Markgraf Estate, upholding the trial court’s decision previously reported in the September 2017 Charity & NFP Law Update concerning an unfunded cheque. The trial court had held that a gift by means of a $100,000 cheque from Maria Markgraf (“Markgraf”) to Arlindo Teixeira (“Teixeira”) was unenforceable when the cheque could not be cashed due to insufficient funds in Markgraf’s chequing account, as it could not be properly delivered to the intended recipient, Teixeira. On appeal, Teixeira advanced four separate arguments, two of which included that the gift by cheque was perfected by delivery, and the principle from the English trusts law case Pennington v Waine that “equity will not strive officiously to defeat a gift.”
Concerning the argument that the gift by cheque was perfected by delivery, the Court of Appeal upheld the trial court’s holding that the cheque was an inter vivos gift, and that the three elements of a gift outlined by the trial court were required for the gift to be valid. As the third element of a gift requires a sufficient act of delivery or transfer of the property, the Court of Appeal considered whether the delivery of the cheque into Teixeira’s hands could be a sufficient act of delivery despite insufficient funds in Markgraf’s account.
The Court of Appeal stated that cheques are directions by the drawer to the bank to pay money to a payee and can be revoked by the drawer before the cheque is cashed. As such, it stated that a gift by cheque is not complete until the cheque has been cashed or has cleared. Additionally, it stated that the death of a cheque drawer prior to the cheque being cashed would subsequently revoke the bank’s authority to pay funds to the payee. The Court of Appeal therefore upheld the trial court’s decision that the inter vivos gift failed because it was not delivered before the bank had received notice of Markgraf’s death.
Concerning the principle that equity will not strive officiously to defeat a gift, Teixeira argued that “an imperfect gift, which is not perfected by a transfer of possession to the donee, may nevertheless be effective where the donor retains possession of the gift but makes a declaration evidencing an intention to hold the property in trust for the donee.” However, the Court of Appeal stated that there must be a “clearly ascertainable point in time at which it can be said that the gift was completed, and this point in time must be arrived at on a principled basis.” Given the extensive law concerning delivery of gifts by way of cheque, the Court of Appeal found no basis for the application of this principle.
As all three elements of a gift are required to create a valid gift, this case is a reminder to charities that the receipt of a physical cheque is insufficient to satisfy the delivery element of a gift, and that the cheque must be cashed before the gift is considered to be made. Further, inter vivos gifts given via cheque should be cashed soon after they are received to avoid the loss of a potential gift due to unforeseen circumstances, including cancelled cheques or the death of a donor, as was the case here.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law, Faith-Based Organizations
Nov 2017 Charity & NFP Law Update
The Court of Appeal for Ontario released its decision in ET v Hamilton-Wentworth District School Board on November 22, 2017 (the “Appellate Decision”). This case was an appeal of a 2016 trial court judgement in the application that upheld the Hamilton-Wentworth District School Board’s denial of the appellant’s (“ET”) request for accommodation on religious grounds. While the Court of Appeal’s decision reached the same result as that of the trial court, it held, contrary to the trial court, that ET’s freedom of religion under s. 2(a) of the Charter was not violated and ultimately dismissed the appeal for evidentiary reasons. In its analysis, the Court of Appeal considered issues surrounding parental authority over the education of children, as well as ET’s s. 2(a) freedom of religion under the Charter. This Bulletin focuses on the Appellate Decision only as it concerns freedom of religion in a summary fashion.
For the balance of this Bulletin, please see Church Law Bulletin No. 52.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
On October 30, 2017, the Ontario Superior Court of Justice released its decision in Amir-Afzal Watto v ICC concerning allegations that a not-for-profit’s by-laws were oppressive. Amir-Afzal Watto (the “Applicant”) was a member of the not-for-profit regulatory body, Immigration Consultants of Canada Regulatory Council (the “ICC”). After numerous efforts to oppose and have amendments to the ICC’s by-laws set aside, the Applicant sought an order under s. 253 of the Canada Not-for-profit Corporations Act (“CNCA”) declaring that the amendments were oppressive, unfairly prejudicial and unfairly disregarded his interests as a member.
In the fall of 2013, the Applicant campaigned to become an elected director, and in doing so, published defamatory comments relating to ICC, its directors, officers and staff. He was not voted to the board. Four separate actions were launched between 2013 and 2015 by ICC against the Applicant for his defamatory comments, and by the Applicant against ICC. In the spring of 2014, ICC amended its by-laws to include paragraph 45.1(m) and (n), which provided that no individual member would be eligible to be on the Board of Directors if they institute or have instituted any suit, action or proceeding against ICC or vice versa. These new provisions were passed through a resolution on May 22, 2014 and voted favourably upon by a majority at ICC’s 2014 Annual General Meeting (“AGM”), which the Applicant attended.
Although the Applicant had brought the case more than two years after the by-law amendments, he argued that inter-jurisdictional immunity prevented the provincial Limitations Act from regulating entities that fell within matters exclusively assigned to federal government and, in this case, governed by the CNCA. The court found that the Limitations Act did apply to CNCA corporations, as it does not encroach upon the “core” of a federal undertaking, that being not-for-profit corporations. It noted that the CNCA “is not tied to the regulation of rights and obligation of corporation members” and that the Applicant’s right to pursue a statutory remedy was not an essential part of not-for-profit law. Rather, the purpose of the CNCA is to “allow the incorporation of, or continuance of bodies corporate as, corporations without capital for the purpose of carrying on legal activities throughout Canada.” Having found that the Limitations Act applied to CNCA corporations, the court then noted that the Applicant was presumed to have known that legal action was the appropriate means to remedy his injury at the latest by late 2014 at the AGM. With this, the court held that the Applicant’s cause of action was barred, as it was not commenced within two years of that time.
This case provides a reminder to the members and directors of charities and not-for-profits incorporated under the CNCA that provincial legislation of a general nature will continue to apply to them, and that if they want to challenge, or are concerned about corporate by-laws being subject to challenge, the legal remedies under the CNCA should be pursued on a timely basis. In particular, federal organizations and members contemplating litigation should be aware that they will be subject provincially instituted limitation periods to bring legal claims.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law, Privacy Law & Anti-Spam
Nov 2017 Charity & NFP Law Update
In the case of Vanderveen v Waterbridge Media Inc., released on November 20, 2017, the Ontario Superior Court of Justice Small Claims Court considered a claim under the tort of intrusion upon seclusion when the plaintiff was filmed jogging on a walking trail without her consent. The court awarded the plaintiff the sum of $4000 in damages after her image was used for commercial purposes without her knowledge or consent. This recent decision highlights the increasingly shifting and fluid boundaries between being public and being private and expands the elements of the tort of intrusion upon seclusion recently recognized in Ontario.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 413.
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by Dev User | Nov 30, 2017 | Charity & Not-for-Profit Law
Nov 2017 Charity & NFP Law Update
In October 2017, Imagine Canada submitted its Review of Canada’s Anti-Spam Law (the “Review”) to the House of Commons Standing Committee on Industry, Science and Technology, along with its recommendations concerning the regulations under Canada’s Anti-Spam Law (“CASL”), particularly as they affect registered charities and other not-for-profits.
The Review recommends an exemption for registered charities from the requirements under CASL for consent. While CASL provides a limited exemption for commercial electronic messages (“CEMs”) sent by or on behalf of charities when their primary purpose is to raise funds for the charity, the Review stated that there is currently uncertainty over the existing exemption and the degree to which registered charities must comply with CASL, which has led to compliance costs. These includes costs incurred by charities that do not sent CEMs but that nonetheless believe they must comply with CASL. The Review does not recommend an exemption from the prescribed information requirements of CASL, i.e., including an unsubscribe mechanism or sender identification, where a charity sends a CEM that is not otherwise exempt.
The Review also recommends an exemption for certain other not-for-profits, which it refers to as “public-benefit nonprofits”, as no such exemption currently exists, as some entities that are not registered charities provide the same or similar community services as do charities.
Finally, the Review recommends an exemption to private rights of action against registered charities and other not-for-profits under CASL. Although the coming into force of the provisions in CASL concerning private rights of action has been temporarily suspended, their eventual coming into force may expose charities to the risk of private claims and class actions.
The Review provides insight into some pitfalls of CASL as it pertains to charities and not-for-profits, and into some of the liabilities that these organizations may face. Organizations sending CEMs may be interested in reading the recommendations under the Review to better understand various pitfalls, and should consult with legal counsel to discuss compliance with CASL.
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