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.