Colgan v Canada's National Firearms Association, 2016 ABQB 412

Court of Queen’s Bench of Alberta Citation: Colgan v Canada's National Firearms Association, 2016 ABQB 412 Date: 20160720 Docket: 1503 03309 Registry: Edmonton Between: Claude Colgan, Ericka Clarke, Darlene MacKenzie, Kurt Luchia, and Stephen Buddo Applicants / Plaintiffs - and - Canada's National Firearm Association, Sheldon Clare, Blair Hagen, Bill Rantz, and Jerrold Lundgard Respondents / Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice J.E. Topolniski _______________________________________________________ I.

Introduction [ 1 ] Two warring factions are wrestling for control of Canada’s National Firearms Association [the “Club”], a 16,000 member- strong club whose objectives include promoting natural justice for firearms activities. [ 2 ] The applicants [the “Colgan Faction”] are directors of the Club who launched an unsuccessful coup to unseat the Club’s long-term president, the respondent Sheldon Clare. Subsequently, the insurgent Colgan Faction was purged from the Club rolls and the board of directors.

The remaining respondents are Club directors and Sheldon Clare supporters [the “Clare Bloc”]. [ 3 ] The Colgan Faction claims they are casualties of unfair play. They want the Court to order: 1. compliance with the laws of Canada and the Club’s rules;

2. an investigator to oversee an upcoming election; 3. a declaration that bylaws passed by the directors after their removal are invalid; and 4. a declaration that the appointment of directors to replace them is invalid. [ 4 ] The Colgan Faction frames their application as the way for the Club to “simply get back to business”. Their thinly veiled objective is to reengage the Clare Bloc in a duel for control over the Club. [ 5 ] The Clare Bloc concedes that two new bylaws that were passed after the Colgan Faction was purged require membership approval before the board can act upon them.

The new bylaws outlawed proxy voting, and restricted the Club to only “moral” members. The Clare Bloc’s objectives in this action are also thinly camouflaged. They seek to fortify their dominant position, maintain the post- purge status quo , and to pre-empt future incursions of the sort made by the Colgan Faction. [ 6 ] These are the issues: 1. Should the Court intervene in the Club’s internal affairs? If so, what is the extent of that intervention? 2. Has the Club complied with the laws of Canada and its own bylaws? If not, should the Court order compliance? 3.

Is the appointment of the directors replacing the applicants Mr. Colgan, Ms. MacKenzie and Ms. Clarke valid? 4. Should the Court appoint an investigator to conduct and oversee elections? 5. Should the Court order that all persons with lapsed or cancelled memberships are entitled to vote at the next election? 6. Can the Directors Act on the 2015 Bylaw Concerning Membership Without Membership Approval? [ 7 ] To succeed, the Colgan Faction’s first hurdle is to show that the Club is guilty of breaching its rules or the rules of natural justice because it is only then that the Court will intervene in a club’s affairs.

To a degree, they succeed because the new bylaws and replacement directors trigger questions of compliance with the Club’s rules.

Their remaining complaints do not meet the threshold tests for Court intervention. [ 8 ] Parenthetically, I note that this is not the first time a fight to control the Club (then with a different name) brings disgruntled members to the Court to sort out their internal problems: Coombes v National Phoenix 1984 Firearms Information and Communication Association , 2009 ABQB 566 , 488 AR 127. [ 9 ] Some detail about the players and their battle rounds out the story and sets the stage for my legal analysis. II. Background A. The Club [ 10 ] The Club’s governance is straightforward.

It has: a. an elected board of directors composed of eleven members from various regions whose two-year terms are staggered; b. officers (the president, executive vice-president, secretary, treasurer, and any other person chosen by the board of directors); c. an executive committee exercising the powers conferred upon it by the board and appointed by the board of directors; and d. a membership that meets annually to, among other things, vote on who their directors are and what the Club rules will be. [ 11 ] A problematic twist is that at present the board has only ten directors and the rules do not provide a mechanism or veto to break a deadlock. [ 12 ] The rules that govern the Club have two sources: 1. the Club’s articles of association and bylaws, and 2. the Canada Not-For-Profit Corporations Act , SC 2009.

The Club was initially incorporated under the Canada Corporations Act , RSC 1970, c C-32, but is continued under the Canada Not-For- Profit Corporations Act . [ 13 ] As will be seen in the discussion about the call for an investigator to conduct elections, the club has a somewhat laissez-faire approach to some of its rules. The current Bylaws, enacted in 2009, are not a model of clarity. B. The Competitors [ 14 ] The members of the Colgan Faction, Claude Colgan, Ericka Clarke, Darlene MacKenzie, Kurt Luchia, and Steve Buddo, were

elected on December 1, 2014 as first-time directors. In the natural course, their directorships will expire on December 1, 2016. The Colgan Faction does not trust the Clare Bloc. Instead, the Colgan Faction wants to run the Club. Its battle plan to achieve that end was not subtle. [ 15 ] The Clare Bloc are re-elected directors, many of whom were long-serving in that capacity. Their terms of office would have expired on December 1, 2015, however the Clare Bloc obtained a court order that stayed the 2015 annual general meeting pending resolution of this litigation.

Accordingly, the Clare Group retain their directorships until the next AGM. [ 16 ] No surprise, the Clare Bloc’s view mirrors that of the Colgan Faction, who they consider distrustful people set on a mission to thwart the Club’s ability to function smoothly and promote its objectives. C. The Battle for Control [ 17 ] Stated mildly, some of these combatants have exercised poor judgment and succumbed to knee-jerk reactions in their quest for control of the Club. More bluntly, some have simply behaved badly. D.

The Initial Skirmish - the February 24, 2015 (By Invitation Only) Directors’ Meeting [ 18 ] The first volley, which I am satisfied was a deliberately staged ambush, came on February 24, 2015. After receiving notice that a directors’ meeting which had been scheduled for that day was adjourned because of short notice, the Colgan Faction decided to hold the meeting anyway. They chose to avoid giving the Clare Faction what would doubtless have been a troublesome notice.

Fuelled by their ‘good fortune’ of being the only directors at the meeting, the Colgan Faction declared a quorum and subjected their opponents to a barrage of decisions. Mr. Clare was voted out and ousted as president. All of the Clare Bloc’s directorships were vacated. With a final stroke of their figurative pens, they wiped out the Clare Bloc’s signing authority, declared Colgan the new president, and announced his presidency to the staff and membership.

Incredibly, today the Colgan Faction describe the meeting as an event they “incorrectly but honestly believed to be a properly called director’s meeting”. [ 19 ] Counsel for the respondent advises that the first agenda item for the postponed meeting was ‘director training’. This ironic twist illustrates the importance of education. [ 20 ] This bold first strike led to immediate reprisals. Mr. Clare responded to news of these events by publishing a statement that Ms. MacKenzie and Ms. Clarke were no longer directors because of their unethical conduct, but then admitted it was untrue. E.

The Siege Tightens - The Rapid Fire Records Inspection and Lawsuit [ 21 ] The next phase of the assault came three days later at 4:12 p.m. on a Friday afternoon. Then, knowing the Club’s office had closed for the day, Ms. Clarke sent a notice demanding to inspect the Club’s records. When Ms. Clarke arrived at the office at 9:00 a.m. the following Monday demanding to see the records, the office manager explained that she could not honour the request because of the short notice.

Days later on March 6, 2015 the Colgan Faction sued for a declaration the Club had failed to comply with its statutory obligation to produce the records for inspection. [ 22 ] The inspection lawsuit was subsequently abandoned; however the amended action sought the same basket of relief sought today, and a declaration that Mr. Clare and his Bloc were not Club members. F. The Push of Pikes at the Breach - The “Staged Mayhem” Annual General Meeting [ 23 ] The conflict simmered until the next annual general meeting, which was set for May 23-24, 2015. Clare aptly described this event as “staged mayhem”.

I am satisfied that what transpired at the annual general meeting was planned and deliberate. 1. Rallying the Troops - Pre-Meeting Recruitment and Propaganda [ 24 ] Social media was the Colgan Faction’s chosen means to announce its plans for the December 2015 annual general meeting. The first volley was an anonymously prepared and posted “how to” handout for the upcoming meeting. This document sets out motions for appointing an accountant and a committee (composed of Messrs. Buddo, Lucia and another person not a member of, but affiliated with the Colgan Faction) to review the bylaws.

This same committee would also be charged with conducting “a confidential investigation into Clare’s conduct to determine if there was cause to remove him as president; and “investigate rumours regarding Clare’s conduct instigated by Shawn Bevins”. The document also includes a “how to” briefing on how to respond to adverse rulings from the chairperson (Mr. Clare) and motions for Bevin’s reinstatement. [ 25 ] Mr. Bevins is the Club’s former Executive Director whom Mr. Clare terminated for cause and revoked his membership. These actions raised the ire of the Colgan Faction. Mr.

Bevins has sued the club for wrongful dismissal and appears to be a behind-the- scenes player of the Colgan Faction. [ 26 ] The “how to” guide was followed by a social media post by Club member, Pierre Plourde. Plourde wrote on behalf of a group which called itself “The Five”. This second post tells Club members to rally at the annual general meeting to support the strategy of “The Five” and avoid “an unmitigated disaster” if the “other camp” gains a 2/3 majority on certain votes. It also instructs readers to contact the author or any one of “The Five”, who are named as Ms. Clarke, Messrs.

Buddo, Colgan, Lucia, and ‘Scarlet Artemis’ (presumably Ms.

McKenzie). 2. The Duel of Champions - The Annual General Meeting Antics and Their Fallout [27] The annual general meeting was marked with high-drama. In a move to claim his ‘proper place’, Mr. Colgan “seized a livemicrophone and refused to surrender it”. Encouraged by Ms. McKenzie and Clarke, Mr. Colgan announced his chairmanship to theassembled Club and, leader by his own hand, took motions from the floor. Presumably, these included the motions urged in the Plourdesocial media post, but that is speculation. [28] Ultimately, the meeting was wrested from Mr.

Colgan’s hands and the annual general meeting proceeded with Mr. Clareacting as chair. The Court was spared the details of how that was accomplished; however, one suspects that the process was not limitedto procedures found in Robert’s Rules of Order. [29] The Colgan Faction responded on June 4, 2015 with an amended lawsuit seeking the basket of relief sought today. It alsoasked for a declaration that members of the Clare Bloc were neither Club members nor directors, but later abandoned that.

The ClareBloc characterizes the abandoned claim as a “bullying tactic” designed to drag everyone from the Clare Bloc into the fray. [30] The Colgan Faction are also allegedly the source of a social media post with an image of Ms. Clarke bearing the caption“HEY SHELDON WE ARE THE 5%”, inferentially referring to a bylaw that requires a special meeting if 5% of the membership callsfor it. While Ms. Clarke denies knowledge of who authored the caption, the message is clear. This war is not over. G.

The Victor Consolidates His Grip [31] Taking a page from the Colgan Faction’s playbook, the Clare Bloc on June 7, 2015 responded to the Colgan Faction’soperations with a by-invitation-only directors meeting to revoke the Club membership of Mr. Colgan, Ms. Clarke and Ms. MacKenzie’sfor behaviour contravening the membership bylaw. The uninvited Mr. Colgan, Ms. Clarke and Ms. MacKenzie nevertheless got wind ofthe meeting and went anyway. Despite their being “active” members and directors, they were told they had no standing. The seven‘invited’ directors voted to strip Mr. Colgan, Ms. Clarke and Ms.

MacKenzie of their status as members of the Club and, as aconsequence, their director status. The directors acknowledged as having standing then voted to fill the three former directors’ vacancies. [32] To date, none of the three ex-directors has appealed the decision on membership revocation. (There are two versions of thebylaws in issue; the 2009 version and the 2015 version. There is no limitation period for such appeal in the 2009 version.

The 2015version has a 30-day limitation period running from notice of the revocation). [33] With a view to “make the process more democratic” and forestall would-be insurgents from using tactics like those of theColgan Faction, the directors later passed a new set of bylaws. The animosity between the remaining directors from the Colgan Factionand Mr. Clare is evident from a complaint by a member of the former about the adequacy of notice for action items on the agenda, towhich Mr.

Clare responded with “shut your mouth”. [34] Then, acting on the new bylaws, the Clare Bloc revoked the memberships of the Colgan Faction and 15 others, presumablysupporters of the Colgan Faction cause. H. The Present Day [35] The parties now face one another on a different battlefield here in Court. With that rather remarkable backdrop, I turn to thelaw and my conclusions. III. Analysis [36] At the hearing it became apparent that certain issues are not in dispute. For example, the parties acknowledge that the 2009Bylaws are in force. That said, much disagreement remains. A.

Should the Court Intervene in the Club’s Internal Affairs? If so, What Degreeof Intervention is Warranted? [37] A club’s constitution, bylaws, and rules regulate member conduct: Conacher v Rosedale Golf Association Ltd, [2002] OJ No575 (QL), [2002] OTC 113 (Ont Sup Ct J); Kaplan v Canadian Institute of Actuaries, (AB KB), 161 AR 321 at para27, 25 Alta LR (3d) 108 (ABQB), affirmed 1997 ABCA 310 , 151 DLR (4th) 481, 207 AR 268 (ABCA), leave denied [1997]SCCA No 573; Coombes v National Phoenix 1984 Firearms Information and Communication Assn, 2009 ABQB 566 at para 20, 488AR 127.

Courts do not intervene in a club’s affairs unless the club is guilty of breaching its rules or the rules of natural justice, or if thereis bad faith in decision-making. Those are rare scenarios: Street v BC School Sports, 2005 BCSC 958 at para 45, 35 Admin LR (4th)133; Coombes v National Phoenix 1984 Firearms Information and Communication Assn., at para 21. [38] Court intervention is justified on the issues of actions on the new bylaws and composition of the board of directors. This isbecause the allegations are about the purported breach of the Club’s rules.

All other matters fall well short of the threshold and are forthe Club to sort out. Indeed, asking the Court to do that job for the Club borders on an abuse of the Court’s scarce resources. AsSilverman J observed in Street v BC School Sports at para 45: “... The Courts have no interest in the day-to-day activities of voluntaryassociations ...”. That certainly includes internal politics and inter-factional sniping.

[ 39 ] With that I turn to the issues. There is a preliminary item I will respond to in my hopes of better conveying my concern about the abuse of this Court’s scarce resources and attempts to invoke the Court’s authority without valid purpose. B.

Should the Court Direct the Club to Comply with the Laws of Canada and its Own Bylaws? [ 40 ] The Colgan Faction’s bid to have the Court order that the Club and its directors comply with the governing legislation and its bylaws fails. [ 41 ] Asking the Court to order compliance with the governing law is like asking the Court to order Canadians not to traffic in crack cocaine. We presume Canadians to know and obey the laws of the land. It is not for the Court to order them to do so.

Similarly, it is not for the Court to order the Club and its directors to comply with the Club’s Bylaws. (Here, I note that many of the alleged infractions are either cured or minor in nature). If they fail to do that and the grievance meets the threshold, the Court will intervene. Otherwise, it will not. The Court is not in the business of paternalism. C. Is the Appointment of the Directors Replacing the Applicants Mr. Colgan, Ms. MacKenzie and Ms. Clarke Valid? [ 42 ] The Colgan Faction challenges the status of the three replacement directors selected on June 7, 2015 by the remaining board members.

Appointment of these “sham directors” (a term coined by Ms. Clarke in her Affidavit of June 29, 2015) is allegedly improper for several reasons. [ 43 ] At the June 7, 2015 directors meeting Mr. Colgan, Ms. Clarke and Ms. MacKenzie had their membership stripped by a vote by the other seven directors. (The Bylaws use more polite bushido-like language: they were “required to resign”). This command was ordered under Bylaw 7: Any member may be required to resign by a vote of two-thirds (2/3) of the directors voting on the matter at a director’s meeting.

Any member required to resign may file a notice of appeal with the secretary requesting to be re-instated. Allowing an appeal for reinstatement shall be by a 2/3 vote of the membership to be held at the subsequent annual general meeting. The vote of the membership on the matter shall not be subject to further appeal. [ 44 ] As previously noted, Mr. Colgan, Ms. Clarke and Ms. MacKenzie were not invited to this meeting but attended in any case. [ 45 ] Bylaw 18 states that a director resigns “... if he or she ceases to be a member ...”. This means Mr. Colgan, Ms. Clarke and Ms.

MacKenzie ceased to be directors when they were purged from the Club’s membership list. Immediately after the purge the remaining directors voted to fill those vacancies with three new directors. [ 46 ] The Colgan Faction challenges the validity of this last step. 1.

Is the Bylaw Concerning Removal of a Director so Uncertain as to be Unenforceable? [ 47 ] In its written submission, the Colgan Faction argues that the “... [failing to] maintain the ethical standards expected of officers and directors ...” language of Bylaw 18 is “hopelessly uncertain”, saying it begs the question of what conduct qualifies as unethical, and asks who adjudicates and determines what is or is not ethical conduct. Although not stated, I presume they want to me to say this provision is therefore unenforceable. [ 48 ] The argument fails.

This provision deals with the termination of directors, not members. The (director) vacancies came about because of the revocation of Mr. Colgan, Ms. MacKenzie and Ms. Clarke’s memberships. In turn, that triggered Bylaw 18, which created the vacancies. 2. Do the Appointments Offend s 130 of the Canada Not-For-Profit Corporations Act ? [ 49 ] The Colgan Faction argues the “sham directors” appointment offends Canada Not-For-Profit Corporations Act , s 130: 130(1) The members of a corporation may by ordinary resolution at a special meeting remove any director or directors from office.

(2) A director elected by a class or group of members that has an exclusive right to elect the director may only be removed by an ordinary resolution of those members.

(3) A vacancy created by the removal of a director may be filled at the meeting of the members at which the director is removed or, if not so filled, may be filled under

section 132.

(4) If all of the directors have resigned or have been removed without replacement, a person who manages or supervises the management of the activities or affairs of the corporation is deemed to be a director for the purposes of this Act. (5) Subsection (4) does not apply to (

a) an officer who manages the activities or affairs of the corporation under the direction or control of a member or other person; (

b) a lawyer, a notary, an accountant or other professional who participates in the management of the corporation solely by providing professional services; or

(

c) a trustee in bankruptcy, receiver, receiver-manager, sequestrator or secured creditor who participates in the management of the corporation or exercises control over its property solely for the purpose of the realization of security or, in the case of bankruptcy, the administration of a bankrupt’s estate. [ 50 ] This provision interacts with Canada Not-For-Profit Corporations Act , s 132 which addresses how to fill director vacancies: 132(1) Subject to subsections (4) and (5), a quorum of directors may fill a vacancy among the directors, except a vacancy resulting from an increase in the number or the minimum or maximum number of directors provided for in the articles or a failure to elect the number or minimum number of directors provided for in the articles. ...

(4) If any class or group of members has an exclusive right to elect one or more directors and a vacancy occurs among those directors, (

a) subject to subsection (5), the remaining directors elected by the class or group may fill the vacancy, except a vacancy resulting from an increase in the number or the minimum or maximum number of directors provided for in the articles for that class or group or from a failure to elect the number or minimum number of directors provided for in the articles for the class or group; or (

b) if there are no remaining directors, any member of the class or group may call a meeting of the class or group to fill the vacancy.

(5) The by-laws may provide that a vacancy among the directors shall be filled only by a vote of the members, or by a vote of the members of any class or group having an exclusive right to elect one or more directors if the vacancy occurs among the directors elected by that class or group. ... [ 51 ] This argument fails. Section 130(1) requires a vote of the membership to remove directors. Sections 130(3) and 132 speak to filling vacancies of directors. Under s 130(3), the members vote at the meeting where the vacancy is created (by removal of a director).

If they do not do that, s 132 is triggered, and subject to limitations that do not apply in this case, the task falls to the directors. [ 52 ] The motion at the June 7, 2015 meeting was to terminate the memberships of Mr. Colgan, Ms. MacKenzie and Ms. Clarke. Their directorships fell because they were not members as required by Bylaw 18: “The office of a director shall be considered vacated if ... he or she ceases to be a member ...”. Bylaw 7 addresses the termination of memberships, which may be effected by a 2/3 majority vote of the directors. Other than Ms.

Clarke saying in her Affidavit of June 29, 2015 that the vote failed because of a proxy, there is no argument about the purge failing to have the requisite majority for the vote to pass. 3. Did the Vote to Revoke the Memberships Fail Because of Counting a Proxy? [ 53 ] This argument has no merit. Found under the heading “No Alternate Directors”, s 126(3) reads, “No person shall act for an absent director at a meeting of directors”. That is not a ban on proxy votes. 4.

Do the Bylaws Require a By-Election? [ 54 ] The Colgan Faction urges that Bylaw 17 mandates a special election to fill vacancies created by membership revocations. The Bylaw reads: 17. If the office of a director is vacated after April 1 of an election year , the board of directors may, by majority vote, appoint a voting member residing in the same electoral region to complete the term of the vacated directorship .

If the office of a director is vacated before April 1 of an election year , the secretary shall forthwith notify the voting members of that electoral region by surface mail and electronic mail where possible and include with that notification an invitation for nominations for candidates to complete the term of the vacated directorship. At least one month must be allowed for nominators to deliver nominations to the secretary.

The election shall then be conducted as prescribed by bylaw 16, though not necessarily on the same dates, though with the same intervals. [Emphasis added.] [ 55 ] The Colgan Faction’s argument is that the Clare Bloc had no authority to replace the purged board members. [ 56 ] The five members of the Colgan Faction were elected on December 1, 2014. Three members of the Colgan Faction (Mr. Colgan, Ms. Clarke and Ms. MacKenzie) were purged by and replaced at the June 7, 2015 meeting.

However, Bylaw 17 requires that any vacancy that occurs before April 1 “of an election year” cannot be filled by the directors via a majority vote. Instead the replacement must be selected via election by the Club’s members. [ 57 ] New directors are elected on December 1 “of the election year.” The term “election year” is not defined in the bylaw. Its meaning must be derived from a contextual analysis of the bylaws. [ 58 ] The Colgan Faction argues that I should infer the intention of “election year” to mean the year in which the director’s term expires; in this case, 2016.

The logic is that the April 1 cut-off for a by-election only makes sense if the vacancy creates a relatively lengthy void. If it is a short void, the directors can fill the vacancy until the next scheduled election. In the present case, the vacancies arose in June 2015, well before April 1 of the 2016 “election year” and therefore trigger the need for a by-election. [ 59 ] The Clare Bloc urges that the creation of the vacancies in 2015 is the key. Because the three directors terms expire in 2016, that is their “election year”.

Since the vacancies did not arise in an “election year”, the directors could fill the vacancies. The Clare Bloc also urges that the ordering of the bylaw supports its position because the directors’ power, being listed first, is therefore a general rule taking priority over the members’ powers in a by-election. I fail to see the logic. There may be some documents that are so specifically structured that an inference of that kind could be made, but the 2009 Bylaws do not have that attribute.

[ 60 ] A further argument would be that every year is an election year, since half the board members are elected each December 1. If so, then any vacancy that occurs between January 1 and April 1 triggers an election. A vacancy after April 1 of any year authorizes the Board to appoint a replacement. [ 61 ] Another potential confusing aspect of Bylaw 17 is whether the December 1 date ends an “election year”. For example, let us say a director was elected on Dec. 1, 2015, but died one week later, on Dec. 8, 2015. Arguably, this is an election year: the director was elected in 2015.

The director has died after April 1, 2015, so the board may appoint a replacement director. However, after January 1, 2016, a vacancy would trigger a by-election, until either April 1, 2016 or April 1, 2017, depending on which construction one takes for the term “election year”. If so, that is a strange outcome. [ 62 ] Another issue with Bylaw 17 is that a vacancy on April 1 of an election year is simply not addressed at all. [ 63 ] Needless to say, these provisions could have been better drafted. [ 64 ] The term “election year” is critical to distinguishing between these two positions.

Arguably, every year is an “election year” because half of the board of directors is elected every two years, in alternative halves. A simpler way to express the intention of Bylaw 17 would be to say that the directors may appoint a new director by vote if a vacancy appeared in a directorship in one part or another of the director’s term, i.e. from months 17-24 of the director’s term, or within seven months of the end of a director’s term. Otherwise a by- election must be called. However, that is not the language used in the Bylaws. [ 65 ] The unusual “election year” language is explained by Bylaw 16: 16.

Directors shall be elected by surface mail, electronic mail, or secure call-in telephone ballot of voting members for a term of two years, except as noted below: a. An electoral area with 2 directors shall elect one each year, except in the first year in which these bylaws come into effect at which time all directors will be elected. The director, from an area with 2 directors, having the second highest number of votes will serve a one year term and that directorship will be up for election for a two-year term in the subsequent election. In the event of a tie, the matter will be determined by a draw.

The directors for Saskatchewan and Manitoba-Nunavut will likewise be first elected as a one year term so that about half of the board of directors is subject to election every year. b. A candidate for an office of director must reside, when nominated, in the electoral region to be represented by that director and must be nominated by two voting members, who must also reside in that electoral region. Each nomination shall be delivered to the secretary of the association by October 1 of the election year.

The secretary shall provide to each voting member by November 1 of the election year a ballot listing the names of the candidates for his or her electoral region. It shall be a single, transferable, preferential ballot. Voting members shall return their ballots by December 1 of the election year to the accounting firm designated by the board of directors to count the ballots. Each candidate or his or her designated scrutineer may observe the counting of the ballots. The ballots shall be countered on the first business day after December 1, and the directors so elected shall take office forthwith. [ 66 ] Bylaw 16(

a) is clearly structured as a transitional provision, a scheme that is intended to govern the operation of rules as they switch from one mode to another. The normal election cycle described in Bylaw 16(

a) has two year terms. However, one instance of one year terms are provided for in: 1. electoral areas which have two directors; and 2. Saskatchewan and Manitoba-Nunavut. [ 67 ] This explains the “election year” language. For a one year term the next election year is the year that starts after the Dec. 1 election. For a two year term the next election year is the year after the year that follows the Dec. 1 election. [ 68 ] This makes sense.

April 1 “of an election year” marks a dividing line before which a by-election is required, and after which the board may select a short-term interim director to act until the next election cycle.

This minimizes the unnecessary complication and expense of a by-election when a new election cycle is impending. [ 69 ] The one and two year directorships therefore would follow this pattern: One year transitional director duration Dec. 1, year 0 to March 31, year 1: before April 1 of the election year, a by-election is triggered April 1, year 1: not covered by the Bylaw 17 at all April 2, year 1 to Nov. 30, year 1: after April 1 of an election year, board may choose an interim replacement Two year standard director duration Dec. 1, year 0 to March 31, year 2: before April 1 of the election year, a by-election is triggered April 1, year 2: not covered by the Bylaw 17 at all April 2, year 2 to Nov. 30, year 2 after April 1 of the election year, board may choose a replacement [ 70 ] It is helpful to contrast the above scheme from result of the Clare Bloc’s approach.

Dec. 1, year 0 to Dec. 31, year 0: after April 1 of an election year, board may choose a replacement

Jan. 1, year 1 to Dec. 31, year 1: not an election year, board may choose a replacement Jan. 1, year 2 to March 31, year 2: before April 1 of an election year, a by-election is triggered April 1, year 2: not covered by the Bylaw 17 at all April 2, year 2 to Nov. 30, year 2 after April 1 of an election year, board may choose a replacement Obviously, this is a very strange result. By-elections only occur in a narrow three month window. Otherwise, the board fills vacancies that occur both before and after that period. I reject this

interpretation of the Bylaws and their operation. [ 71 ] I therefore conclude that the board of the Club had no authority to appoint new board member at the June 7, 2015 directors meeting. These appointments took place before the critical April 1, 2016 date. That means the appointment of the three new board members; Dwayne Gorniak, Francis Tenta, and Charles Zach are a nullity. [ 72 ] By-elections to fill these three vacancies are obviously now required. D.

Should the Court Appoint an Investigator to Oversee Elections? [ 73 ] The Colgan Faction seeks to have an investigator appointed to oversee elections, such as the ones that will result from my finding that the purged directors’ vacancies were not properly filled. The Colgan Faction argues it has been oppressed, and so oversight is required. [ 74 ] While there are many apt descriptors for the parties’ behaviour (I will not list these - my review of the facts and background of this dispute will lead to many obvious alternatives), oppression is not one of them.

This claim also fails. [ 75 ] To warrant an order appointing an investigator under the Canada Not-For-Profit Corporations Act , s 242 there must be evidence of actions that are “oppressive or unfairly prejudicial to or that unfairly disregards the interests of a member or debt obligations holder.” [ 76 ] The Supreme Court of Canada in BCE Inc v 6796508 Canada Inc , 2008 SCC 69 at paras 68 , 95, [2008] 3 SCR 560 interpreted the almost identical language in the

Canada Business Corporation Act oppression provision, and set out a two-step test to determine if oppression is established: i. determine if the evidence supports the reasonable expectation asserted by the claimant; and ii. determine if the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest? [ 77 ] The expectations asserted by the Colgan Faction are that the Club is unlikely to comply with its 2009 Bylaws by having an accounting firm count the ballots, and the election could be tainted because the Clare Bloc is ‘not above dirty tricks’. [ 78 ] As noted, the Club has a laissez-faire approach to some formalities. (Here, I observe that this may not be too different from some other volunteer organizations).

This includes the complaint of oppression concerning ballot counting. [ 79 ] Although 2009 Bylaw 16 requires an accountant to count election ballots, the Club has never hired an accountant to do the job. While the expectation that will happen may be reasonable, there is no evidence that the rule breach has led to oppression, unfair prejudice, or unfair disregard of a relevant interest. Indeed, the Club appears perfectly content with its decision to save money by honouring the rule in its breach. More importantly, there is absolutely no evidence that anything bad has come of the decision.

Perhaps the provision in Bylaw 16 that “[e]ach candidate or his or her designated scrutineer may observe the counting of the ballots” has some bearing on that. [ 80 ] Suspicion and distrust, not evidence, drive the contention that the Clare Bloc will stoop to using ‘dirty tricks’ to win the next election (presumably by ballot interference). That is not the stuff of a claim for Court intervention and relief. The Club’s own procedures provide a safeguard, even without a formal accounting. E.

Should the Court Order that All Persons with Lapsed or Cancelled Memberships are Entitled to Vote at the Next Election? [ 81 ] Stripped of any niceties, this argument is for all former Club members to vote in an upcoming election whether they want to belong to the Club or not. There was no suggestion what the jurisdiction, authority and rationale for doing that is. This claim is simply unmeritorious. F.

Can the Directors Act on the 2015 Bylaw Concerning Membership Without Membership Approval? [ 82 ] As previously noted, the Clare Bloc concedes that new bylaws requiring membership candidates to be “moral” persons and outlawing proxy voting require member approval. Remaining is whether 2015 Bylaw 3 restricting members to “natural persons” having “legal capacity” requires member approval before action can be taken on it.

[ 83 ] The evidence shows that one director, Kurt Luchia, voted against the motion to pass the 2015 Bylaws. The evidence does not show whether the votes of Messrs. Gorniak, Tenta and Zach were needed for the resolution to pass. If they were, the motion is invalid. If they were not, the directors still do not have authority to act on 2015 Bylaw 3 without member approval. [ 84 ] Section 197(1)(

e) of the Canada-Not-For-Profit Act requires member approval of an amendment if it changes “a condition required for being a member”. This is exactly what 2015 Bylaw 3 does. It eliminates non-voting memberships that were available to corporations and minors under the 2009 Bylaw. It is not a simple ‘tidying up’ to comply with the legislative mandate that bylaws describe “the conditions required for being a member of the corporation, including whether a corporation or other entity may be a member.” IV.

Conclusion [ 85 ] Court intervention is justified on the issues of actions on the new bylaws and composition of the board of directors. [ 86 ] The directors have no authority to act on 2015 Bylaw 3 without member approval. [ 87 ] The June 7, 2015 appointment of Dwayne Gorniak, Francis Tenta, and Charles Zach to the Club’s board of directors is a nullity. I leave it to the Club to discharge its obligations under the 2009 Bylaws and conduct a by-election to fill the three vacancies. Similarly, I leave it to the Club to address the consequence of any director’s resolutions passed in reliance on the votes of Messrs.

Gorniak, Tenta, and Zach. V. Costs [ 88 ] Given the divided success, each party will bear their own costs. Heard on the 16 th day of June, 2016. Additional Written Submissions made on the 24 th and 28 th day of June, 2016. Dated at the City of Edmonton, Alberta this 20 th day of July, 2016. J.E. Topolniski J.C.Q.B.A. Appearances: Benjamin G. Taylor Barr Picard Knisely for the Applicants / Plaintiffs Kenneth G. Heintz Venture Law Group LLP for the Respondents / Defendants