Association mining

Election of the president of the association declared invalid – Litigation, mediation and arbitration

Electoral law is not limited to political elections. Under company law, incorporated companies and voluntary membership associations are generally required to hold elections to choose, among other things, boards of directors. When such elections are held contrary to the constituting documents or by-laws of a corporation or voluntary association, disputes may be settled by a court.

In Hon c. Liao, 2022 ABQB 43, an Alberta court had to determine whether it had jurisdiction to settle a dispute over an election of the Hakka Tsung Tsin Association of Edmonton (the “Association”). This association was registered under the Companies Act.

The Association was described in its statutes as a non-profit organization aimed at promoting friendship, unity and the welfare of members. In addition, the purpose of the Association was to defend the values ​​of peace and democracy and to promote Chinese culture.

In March 2020, an election was held to select the new Executive Members of the Association. However, contrary to the statutes of the Association, rather than electing a new executive, the election was simply held to choose a new president. In addition, all ballots carried the voter’s membership number.

After the election, the chosen president appointed all members of the association’s two separate executive and supervisory boards.

The Executive Office was composed of the positions of President, Vice-President, Secretary, Treasurer and various other positions responsible for organizing the activities of the Association. The supervisory board served as a counterweight. It was in charge of the control of the Executive Office and was composed of a president (who was the president of the Association), a vice-president and an auditor.

Because of the manner in which the election was conducted and the nominations made, the petitioning members argued that they had been oppressed and that the election should be declared invalid.

The Plaintiffs argued that the Association’s Bylaws constituted a contract between the Association and its members and that the Plaintiffs had a justiciable civil right to have the Bylaws enforced by the Court. Alternatively, the plaintiffs argued that the Court could grant an oppression remedy under the Alberta Business Corporations Act.

Plaintiffs demonstrated that the Association was governed by by-laws, that there were three different classes of membership in the Association, that members were required to pay dues and that the Association financed its operation by participating in the Alberta Gaming, Liquor & Cannabis Charity gaming program. As of March 2020, the Association had approximately $100,000 in savings.

The President-elect of the Association and the Association opposed the application on the grounds that there was no justiciable right requiring justification and that the oppression remedy was not available to the plaintiffs. They argued that the Court had no jurisdiction to interfere with the election either at common law or by statute and that, in any event, there was no direct election for the President or that the votes had not been cast in secret.

The Court explained that under the common law, it had the power to review the decisions of a voluntary association.

Based on Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26, for the Court to assume jurisdiction, the plaintiff had to demonstrate that there was an underlying legal right at stake, such as a contractual right. Although the existence of regulations may constitute evidence of a contractual right, their existence alone, as determined by the Supreme Court of Canada in Ethiopian Orthodox Tewahedo Church of Canada St. Mary’s Cathedral c. Aga, 2021 SCC 22, did not automatically give rise to a justiciable right. In Agathe Court stated at point 49:

Joining a voluntary association is not automatically contractual. Even a written constitution is not enough. Membership is contractual only if the conditions for the formation of the contract are met, including an objective intention to create legal relations. Such an intention is more likely to exist where property or employment are at stake. It is less likely to exist in religious contexts, where individuals may intend their obligations to each other to be spiritually but not legally binding. . A voluntary association will be formed by a network of contracts between members only when the conditions for formation of the contract are met.

The respondents relied on this decision and others to defend the election.

However, the Court distinguished Aga and other cases cited by the respondents.

Among the distinguishing features was the fact that the Association was not a religious organization and that members were fully aware of the Association’s statutes when they joined the Association.

Moreover, mandatory membership fees were not paid solely for charitable or religious purposes. Membership fees were revenue for the operation of the Association. In return for this fee, members acquired the right to elect officers and run for the leadership of the Association. In addition, members received specialized activities, education, programming and assistance with “big life events”.

In the circumstances, the Court concluded that the basic elements of a contract were present. There was evidence of an objective intent to establish a legal relationship between the members and the Association, and the dispute had a significant proprietary aspect given that the Association was engaged in significant fundraising efforts.

These factors gave the Court the power to review the election and determine whether the Association’s by-laws had been violated.

Ultimately, the Court rejected the Respondents’ argument that there was no direct election for President. The language of the ballot and the subsequent announcement of the results supported the conclusion that the election was clearly conducted for the purpose of directly electing the President of the Association, which was contrary to the Articles of Association.

The Court also found that the ballots were not cast in secret because they contained information that could identify each voter. A ballot allowing an elector to be identified is not secret.

Consequently, the election was declared invalid and the rights of the petitioning members were found to have been violated.

This case demonstrates that voluntary organizations are not immune to internal conflicts and that, in appropriate circumstances, a court can intervene to remedy them. This will be particularly the case for voluntary associations that are not religious organizations, and where members pay a membership fee to acquire and maintain their status, and receive some value for being part of the organization. Of course, the legal litigation in this case could have been avoided by simply following the Association’s rules, which is always highly recommended. A PDF version is available for download

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.