Court Refuses to Preserve Non-Compliant By-Law
Jan 2022 Charity & NFP Law Update
Published on January 27 2022

By Jennifer M. Leddy
   
 

In a decision delivered on November 17, 2021, the British Columbia Court of Appeal found that a not-for-profit corporation with by-laws contrary to its governing legislation could not obtain a court order to temporarily preserve the invalid by-law for one court-ordered meeting. In Delta Patriots Cricket Club v. West Coast Cricket Organization the court affirmed the chambers judge’s decision to refuse to allow some members to cast multiple votes because this was contrary to subsection 84(2) of the British Columbia Societies Act (the “Act”).

While the context of the appeal arose out of a membership dispute between Delta Patriots Cricket Club (“DPCC”) and another cricket association, the focus of the case shifted to consider the membership and weighted voting rights set out in the by-laws of the West Coast Cricket Organization (“Cricket BC”), the appellant in the case. Cricket BC is the official governing body for the sport of cricket in British Columbia and is a not-for-profit society, originally formed under the 1996 British Columbia Society Act (the “Act”).

The chambers judge found two problems with Cricket BC’s by-laws. First, the by-laws allowed “any cricket league” and “any cricket club” that had paid its membership fee to be eligible for admission as a full member of the Society in good standing (“emphasis added”). This was contrary to the definition of “member” in the Act which required that a member be “a person”. “Person” is defined in section 29 of the British Columbia Interpretation Act, to mean “a corporation, partnership or party, and the personal or other legal representatives of a person to whom the context can apply according to law”. Notably, an unincorporated cricket club or cricket league is not included in the definition of person. Therefore, Cricket BC’s by-laws, which had admitted at least two unincorporated groups as “members”, were not compliant with the Act. Secondly, Cricket BC’s bylaws allowed any club in good standing to have one vote per team that it had registered with a League, contrary to subsection 84(2) of the Act which provides that “[a] voting member of a society has only one vote”. These by-law provisions had likely existed since Cricket BC’s incorporation “meaning that its bylaws have been non-compliant with the societies legislation since 2004”.

In the lower court decision, Cricket BC acknowledged the apparent conflict between its by-laws and the Act yet contended that the chambers judge should direct that a general meeting be held and that the voting members (inferred to be those members recognized by the existing by-laws) “remediate” the conflict. The chambers judge, however, found that section 105 of the Act – a provision that grants the court jurisdiction to correct, negative or modify the consequences in law of a defect or irregularity – did not allow a court to rewrite the bylaws of a society and that “a cautious approach should be taken to correct irregularities”. As a result, the chambers judge read down Cricket BC’s by-laws so that they allowed any member in good standing to have one vote at a meeting of the members. The chambers judge also deleted a portion of the by-laws in its entirety for failing to conform to the requirements of the Act. Further, he ordered a new annual general meeting be held, providing time for clubs that did not have legal status as “members” under the definition in the Act to take steps to achieve legal status.

On appeal, Cricket BC claimed that the chambers judge gave insufficient weight to the past practices of Cricket BC, namely “the importance of maintaining the Balance of Power chosen by Cricket BC members as a way of governing their society voting arrangements”. In considering this claim, the Court of Appeal was “not persuaded that a court of law should devise an order that has as its objective the continued dominance of a society’s affairs by one group over others in the face of the one member/one vote rule embedded in the Act”. Because there was nothing in the Act that would have permitted the chambers judge to bypass the one member / one vote rule or anything to suggest that an entity other than a “person” may vote, the Court of Appeal found “it was not … open to the chambers judge to preserve the ‘irregularity’ or contravention of the Act” even if this was only for one court-ordered meeting. Therefore, since the court was not persuaded that the chambers judge made any error, it dismissed the appeal.

This case serves as a reminder about the importance of keeping by-laws up-to-date and compliant with governing legislation. Legally compliant by-laws may protect the organization from further issues that could arise in a dispute, especially with regard to important matters such as membership and voting privileges.

   
 

Read the January 2022 Charity & NFP Law Update