by Dev User | Sep 26, 2019 | Uncategorized
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.
Read the September 2019 Charity & NFP Law Update
by Dev User | Sep 26, 2019 | Uncategorized
Sep 2019 Charity & NFP Law Update
On July 30, 2019, the Federal Court released its decision (along with supplementary reasons on August 20, 2019) in Watto v Immigration Consultants of Canada Regulatory Council (“Watto”), being one of numerous court proceedings initiated by a disaffected member of the Immigration Consultants of Canada Regulatory Council (“ICCRC”), a federal not-for-profit corporation governed by the Canada Not-for-profit Corporations Act (“CNCA”). In Watto, the Federal Court held that section 158 of the CNCA does not restrict the power to discipline a member or to terminate their membership to only “the directors, the members or any committee of directors or members of a corporation”.
The ICCRC is the self-governing body for individuals who represent or advise paying clients with regard to immigration matters, as designated by the Minister of Citizenship and Immigration pursuant to the Immigration and Refugee Protection Act. As part of its mandate, the ICCRC establishes entry-to-practice requirements, receives, investigates and adjudicates complaints against members and administers a disciplinary process through the ICCRC’s Discipline Committee (the “Committee”), which is composed of a three-member panel, at least one of whom must be a public member.
In December 2015, the applicant was the subject of a complaint to the ICCRC and the matter was referred to the Committee. One of the objections raised by the applicant was with respect to the composition of the panel on the basis that one of its members was not a member of the ICCRC, contrary to section 158 of the CNCA. Section 158 provides as follows:
The articles or by-laws may provide that the directors, the members or any committee of directors or members of a corporation have power to discipline a member or to terminate their membership. If the articles or by-laws provide for such a power, they shall set out the circumstances and the manner in which that power may be exercised.
The Committee found that, although a narrow interpretation of section 158 was possible, a contextual interpretation of the CNCA would suggest that this section was not intended to exhaustively limit a corporation’s ability to make by-laws to create a discipline committee composed of only directors or members. The Committee reasoned that the language of section 158 was different from that of section 194(1) of the CNCA, which requires a specific composition “of not less than three directors, a majority of whom are not officers or employees” for an audit committee. The Committee also relied on section 152 of the CNCA, which provides that directors have a broad power to regulate the “activities or affairs” of the corporation through by-laws. As such, the Committee concluded that section 158 was intended to confirm that corporations incorporated under the CNCA have the authority to discipline members and was not intended to circumscribe the manner in which a corporation might choose to exercise that authority.
After canvassing similar provisions in provincial corporate statutes and finding no other authoritative sources with respect to the intended meaning of section 158, including no other reported decisions dealing with these provisions, the Federal Court agreed with the Committee’s broader interpretation as being consistent with the CNCA as a whole. Further, the Federal Court agreed with the panel that if Parliament had intended to limit the power to discipline members or circumscribe the class of persons who may exercise this power it would have done so expressly.
The Federal Court concluded that “[t]he reference to directors, members or committees of directors or members in section 158 of the [CNCA] doubtless reflects the fact that for most bodies incorporated under this Act, there would be no reason for anyone else to be involved in disciplining members. Of course, the articles or by-laws of a corporation that provide for a discipline power could limit its exercise to directors, members or committees of members or directors. However, section 158 of the [CNCA] does not require the corporation to limit the class of those who may exercise this power in this way. As long as a corporation that chooses to adopt articles or by-laws providing for a power to discipline members sets out in those by-laws ‘the circumstances and the manner in which that power may be exercised,’ section 158 of the [CNCA] is complied with.”
Read the September 2019 Charity & NFP Law Update
