Receiver-Manager Appointed where Non-Profit Housing Corp. Loses its Way

In Saskatchewan Housing Corp. v. Gabriel Housing Corp. (decided 1998), the Saskatchewan Court of Queen's Bench appointed a receiver-manager to restore proper administration to a publicly funded non-profit housing corporation that had utterly lost its way.

1. Facts

Gabriel Housing Corporation ("GHC") was a non-profit corporation incorporated under the Saskatchewan Non-profit Corporations Act, 1995 (the "Act"), specifically to administer publicly-funded housing to Metis and Non-Status persons in financial need in Regina.

Saskatchewan Housing Corporation ("SHC") was a provincial Crown corporation whose principal responsibility was to assist in the provision of housing to Saskatchewan residents in need. SHC provided, from public funds, approximately 71% of GHC's annual operating revenue (which was approximately $2.3 million a year). The remaining 29% came from rent paid by tenants occupying subsidized housing. SHC also guaranteed many of GHC's obligations.

Following a regular review of GHC's operations, SHC became aware of several improprieties and irregularities in respect of GHC's operation, management and direction. As a result, SHC applied under the Act for the temporary appointment of a receiver-manager and the removal of certain directors and officers from further involvement in the management of GHC.

2. Rulings

(a) Status of SHC as a Complainant

Only a "complainant" has standing to bring oppression proceedings under the Act. The definition of "complainant" includes "any other person who, in the discretion of the court, is a proper person to make an application [under the oppression section]". Justice Smith of the Saskatchewan Court of Queen's Bench had no hesitation in exercising her discretion to hold that SHC was a proper person to bring an oppression action. SHC funded more than 70% of GHC's annual operating budget and guaranteed many of GHC's obligations. Various agreements between SHC and GHC contained provisions requiring GHC to be accountable to SHC.

Also, the grounds for relief relate to the public interest because of the substantial expenditure of public funding and the substantial public interest in the proper and fair administration of the subsidized housing program for the benefit of persons in need. SHC is the vehicle used to provide this public funding and to monitor GHCs delivery of this program. No other person is able to speak for these public interests.

(b) Has There Been Unfairly Prejudicial Conduct?

The grounds for finding that there was conduct that unfairly disregarded the interests of the public included:

● Significant political favouritism in the allocation of scarce, publicly subsidized housing. This included the preferential allocation of housing to directors and their relatives while others in need remained on the waiting list, and the unreported occupation of housing allocated to others by directors, with no adjustment in rent;

● Creation of a wholly-owned subsidiary to generate profits for purposes other than housing for persons in need. The subsidiary diverted some of the public funding to other purposes. It undermined the tendering process required for obtaining maintenance services at the lowest possible price and violated the public interest in full accountability in relation to public funding; and

● General misadministration in relation to determining the needs of applicants, determination of the rent payable based on the needs of individual tenants, collection of arrears of rent and eviction practice. Units were generally allocated based on length of time on the waiting list, rather than degree of financial need.

(c) Appropriate Remedy

Justice Smith concluded that the appointment of a receiver-manager was required for an initial period of six months because of:

● the degree of systemic mismanagement of the housing program; and

● the need to establish appropriate policies and procedures to ensure that:

● the available housing goes to those most in need;

● proper rentals are set and collected; and

● an appropriate tendering procedure for maintenance work is reestablished.

However, Justice Smith was also concerned that the appointment must be such as will facilitate the reestablishment of Metis operation of the program as soon as possible. The receiver must consult with the board of directors of GHC and should put in place, at the earliest opportunity, a program of orientation for the new board to familiarize it with the principles applicable to the operation of the housing program in light of basic principles of public administration and GHC's by-laws and contractual obligations.

However, she found it unnecessary, and an unwarranted interference in future democratic Metis control, to prohibit the various individuals from all future involvement in the management of GHC. A one-year restriction from re-involvement was sufficient.

3. Key Observations

In an impressively balanced decision, Gabriel Housing demonstrates creative use of the court's powers to appoint a receiver-manger on a temporary basis to ensure that:

● In the immediate short-term, public funds are properly applied to subsidized housing for those Metis and Non-Status persons most in need.

● The new board and staff receive proper training in the administration of a subsidized housing program.

● As soon as possible, management of GHC and the housing program is restored to Metis control and there is minimal interference with Metis democratic processes.