Ontario Court Considers Oppression in Tragic Ukraine Airlines Flight PS752 Case
Jan 2025 Charity & NFP Law Update
Published on January 30, 2025
The Ontario Superior Court of Justice considered an application for an oppression remedy under subsection 253(3) of the Canada Not-for-Profit Corporations Act (“CNCA”) in Zarei v Association of Families of Flight PS752, released on December 3, 2024. The plaintiff’s son had died on the tragic Ukraine Airlines Flight PS752, which was shot down by the Islamic Republic of Iran in January 2020. Following the incident, Zarei and other surviving family members established the respondent Association of Families of Flight PS752 (the “Association”). As well, Mr. Zarei was the lead plaintiff in the Zarei v Iran et al case related to Flight PS752, in which the Ontario Superior Court of Justice had ruled in favour of five plaintiffs and awarded $107 million in damages, though the Association was not involved in that case. The plaintiff had an ongoing dispute with the Association over whether it conducted itself in accordance with its constating documents, and brought the matter to court, claiming that the Association had acted oppressively by not providing “direct financial support to the members and that it should also fund his efforts to enforce the judgment he received against the Islamic Republic of Iran.” Further to this, he sought full financial disclosure, production of directors’ and members’ meeting minutes, a member list, and an order to hold a members’ meeting to discuss the Association’s objectives. In the alternative, he also requested various court orders, including a representation order, an injunction freezing the Association’s expenditures, and the appointment of a public accountant. In considering the plaintiff’s oppression claim, the court reviewed subsection 253(1) of the CNCA, which provides that: on the application of a complainant, a court may make an order if it is satisfied that, in respect of a corporation or any of its affiliates, any of the following is oppressive or unfairly prejudicial to or unfairly disregards the interests of any [member], or causes such a result: (a) any act or omission of the corporation or any of its affiliates. (b) the conduct of the activities or affairs of the corporation […]; or (c) the exercise of the powers of the directors or officers of the corporation […]. The court therefore considered whether Mr. Zarei’s claim had satisfied a two-part test which included (1) providing the claimant had reasonable expectation regarding a right in their favour that was infringed, and (2) demonstrating that this expectation was violated by oppressive or unfairly prejudicial conduct. In evaluating the plaintiff’s complaints, the court reviewed the Association’s constating documents and its actual activities, and found that the Association’s purpose as set out in its Articles of Incorporation were: (a) Creating a community for collaboration and support of the families of victims of Flight PS752. (b) Seeking truth and justice for the victims. (c) Keeping the memories of the victims alive through memorials and related activities. While the plaintiff interpreted the first purpose as requiring the Association to provide financial support, the Association board interpreted it as meaning “the community is established for collaboration and support, not that the Association was created to provide financial support.” The board, on the other hand, had decided that it would fulfil its purposes not through financial support, but by carrying out certain activities, such as campaigning, holding annual memorial events, and holding rallies. Siding with the board and finding that their interpretation of the Association’s purposes fell within the business judgment rule, the court further noted that “providing direct financial support to members could risk the Association’s status as a tax-exempt Not-For-Profit corporation.” The court then considered the plaintiff’s specific allegations, including that board members had acted in a politically partisan manner, the Association failed to disclose all books and records and the member’s register to him, and misused funds, among others. However, the court found a lack of evidence in support of these allegations, and that where such evidence existed, the board’s actions did not amount to oppression. Finally, the court considered whether the plaintiff had taken reasonable steps to address his concern. It found that Mr. Zarei failed to attend annual general meetings, submit proposals to discuss issues of concern at such meetings, or use other democratic processes available under the CNCA to address his concerns, such as exercising his right to call a meeting under section 167 or seeking to become a director. The court therefore dismissed the plaintiff’s application, holding that the Association’s actions were neither oppressive nor unfairly prejudicial to Mr. Zarei. This case provides another glimpse into the court’s interpretation and approach to oppression claims under the CNCA, and is a helpful reminder that “not every unmet expectation, even if reasonably held, constitutes oppression”, as stated by the court. As well, this case is a lesson for charities and not-for-profits to ensure that their purposes are drafted with clear and specific language, which may help avoid potential disputes such as this one over the interpretation of their purposes. |