Court Finds a Contract and Adjudicates Voluntary Association’s Dispute
Jan 2022 Charity & NFP Law Update
Published on January 27 2022

By Jacqueline M. Demczur
   
 

An Alberta voluntary association’s election in March 2020 was challenged on the basis of numerous irregularities, with the court ultimately finding that it had the jurisdiction to set aside the election and require a new election be held. In Hon v Liao, decided on January 13, 2022, the Alberta Court of Queen’s Bench provided a further example of how the Supreme Court of Canada’s decision in Ethiopian Orthodox Tewahedo Church of Canada St Mary Cathedral v Aga (“Aga”) should be applied, particularly in the context of non-religious voluntary associations.

Two applicants, Mr. Ly and Mr. Hon (the “Applicants”) brought a claim against the Hakka Tsung Tsin Association of Edmonton (the “Association”) and Ms. Liao, president of the Association at the time that the election was held. The Applicants claimed that the election was not held according to the Association’s by-laws and further that Ms. Liao’s conduct amounted to oppression of the Association’s members. The election had originally been scheduled for March 29, 2020, from 10am – 4pm with ballots to be cast in-person for positions on the Association’s two boards, though the notice of election indicated that members would be voting for the Association’s president, rather than board members. On March 17, 2020, the Government of Alberta began to implement public health measures to combat the spread of COVID-19, and limited the number of persons who could gather together to less than 50. In response, Ms. Liao amended the voting procedures so that members could vote from March 22 until March 29 at 1pm, but did not publicly announce this change. To ensure that members did not vote more than once, their membership number was included at the bottom of their voting ballot. When the results of the election were announced, Ms. Liao had been re-elected president. In addition, five individuals who were not included on the ballot were listed as appointed to the boards. At the same time, six individuals who had been on the ballot did not receive a position.

Courts do not always have jurisdiction in all cases to adjudicate the disputes of voluntary associations. Rather, there must be “an underlying legal right at stake, such as a contractual right”. As set out in Aga, “courts cannot rely on the existence of bylaws or a constitution alone to find that membership in an association is contractual”. In order for the court to decide whether a contract exists, “general contract principles (offer, acceptance, consideration), and objective intention to enter into legal relations” must be present. However, the court in this decision also recognized that the Aga analysis is fact-driven and that there were “multiple factors” to distinguish this case both from Aga and from the court’s analysis in Chinook Park, above.

The Association was not a church or religious organization, which was important for the court to consider because “it can be more difficult to show an objective intent to enter legal relations in the case of religious organizations”. Also, there was evidence that the Applicants and a large portion of the membership were aware of the by-laws at the time they became members, suggesting that “knowledge of and a promise to adhere to the bylaws was a condition of membership for at least some of the members of the Association”. Finally, the Association’s by-laws explicitly stated that membership fees were revenue for the operation of the Association. All of these facts led the court to conclude that “[t]he basic elements of a contract are present in this case”. There was an offer of membership, consideration in the form of a membership fee, and acceptance upon the approval of membership by the Executive Board. Members agreed to be bound by the by-laws and their membership could be terminated for failure to follow by-laws which the court concluded amounted to “evidence of objective intention to enter into legal relations”.

Not only did the court find that members had contractual rights, it also acknowledged that the Association’s bank account (which held approximately $100,000) gave members a proprietary right for the courts to adjudicate.

With regard to the election, the court found that it was not carried out according to the Association’s own by-laws. The election was improperly communicated as a presidential election, rather than one to elect members of the board, whereas the by-laws provided that the duly elected board members were to select a president. In addition, the by-laws set out that voting was to be done by secret ballot, which was frustrated by the inclusion of membership numbers at the bottom of each ballot. As a result, the court found the election invalid and required that a new, by-law-compliant election be held.

The court’s interpretation of Aga in this decision is one to note, as it demonstrates how the fact-driven analysis in Aga may result in a court having the authority to intervene in the affairs of a voluntary association where the circumstance adequately demonstrate that a legal right has been affected.

   
 

Read the January 2022 Charity & NFP Law Update