Grounds for an Oppression Remedy Against an NFP Corporation

The Canada Not-for-profit Corporations Act authorizes a complainant to apply to court for relief against:

● oppressive or unfairly prejudicial acts, omissions or conduct detrimental to the interests of a member or others; or

● conduct that unfairly disregards the interests of members or others.

However, a court cannot make an order under the oppression remedy if the court is satisfied that:

● the corporation is a religious corporation;

● the impugned decision of the directors is based on a tenet of faith held by the members of the corporation; and

● it was reasonable to base the board's decision on this tenet of faith having regard to the activities of the corporation.

Thus, a court is prevented from adjudicating on the merits of religious doctrines. But it would not be prevented from granting an order to recover church monies or other property wrongfully taken by those in control of the church.

1. Conduct Found to be Oppressive

Examples of conduct found to be oppressive or unfairly prejudicial in the case of a not-for-profit corporation include:

● the allocation by the directors of publicly available housing on the basis of political favouritism rather than on a fair and equitable basis to provide the housing for persons in need;

● the refusal by a discipline committee to grant a stay to suspend a discipline hearing where the activity giving rise to the suspension did not involve the safety or well-being of young athletes, officials or other persons;

● the exclusion of one of the largest unionized employers from membership and participation in a province-wide representative employers' organization; and

● the decision of a student union to override the decision of the elections board.

Also, a court-ordered buyout of some of the members may be ordered instead of a court-ordered liquidation. A finding of oppression is not required where there are grounds for a court-ordered liquidation.

2. Conduct Found Not to be Oppressive

Examples of conduct found not to be oppressive or unfairly prejudicial include:

● the views of a member being contrary to the will of the majority;

● a failure of the corporation to hold a hearing that was not required by the legislation nor by the rules of the corporation;

● a refusal to override the corporation's internal appeal process that was stated to be final and binding on all parties; and

● the mere failure to adhere to technical formalities in running the corporation, without more.

3. Test for Finding Grounds for Oppression

The courts use a two-pronged test in determining whether there is oppression or unfair prejudice. Does the evidence:

● support the reasonable expectations asserted by the complainant; and

● establish that the reasonable expectations of the complainant were violated by conduct falling within oppression or unfair prejudice?

Whether an act, omission or conduct satisfies this test is intensely fact-specific. It is impossible to exhaustively catalogue all acts, omissions or conduct that may be oppressive or unfairly prejudicial.

4. Practical Factors in the Application of the Oppression Remedy in the Context of an NFP Corporation

It may be observed that, in most cases involving NFP corporations (and all cases involving soliciting corporations), members have no direct economic or financial stakes in the corporation. Therefore, litigation involving claims of oppression characteristically does not involve the assertion of a direct financial interest in the corporation. For example, NFP corporations cannot pay dividends, and soliciting corporations can only pay out residual assets, after satisfying the claims of creditors, to qualified donees (such as government or another charity) and not to members as such.

As well, NFP corporations usually have no one controlling member, and no one individual generally controls the board. In most cases, boards are populated by several directors who are independent of each other. These factors mean that there may be a diversity of opinion at the board and membership levels. Courts ordinarily respect the will of an independent majority, exercised democratically.