FARRISH V DELTA HOSPICE SOCIETY: COURT PROVIDES GUIDANCE IN MEMBERSHIP DISPUTE
On June 12, 2020, the Supreme Court of British Columbia heard arguments and gave an oral decision in Farrish v Delta Hospice Society. The Court recently published the decision, which can be read here: https://www.bccourts.ca/jdb-txt/sc/20/09/2020BCSC0968.htm. The decision is a reminder to societies of the importance of complying with their bylaws and the Societies Act (the “Act”) and having clear membership criteria in their bylaws.
The Delta Hospice Society (the “Society”) was established in 1991 to provide hospice and palliative care and related supportive care services.
In 2019, a debate arose within the Society regarding whether the Society should offer medical assistance in dying (“MAID”). In November 2019, the Society held its annual general meeting, which involved a contested election for the board of directors. Several new directors were elected, and the new board took the position that the Society would not offer MAID. As a result of the board’s position, Fraser Health Authority, the Society’s primary funder, gave notice to the Society in February 2020 that it would terminate the Society’s funding in February 2021.
In May 2020, the Society gave notice to its members of an extraordinary general meeting to be held on June 15, 2020, at which the members would be asked to vote on alterations to the Society’s constitution and bylaws. The proposed alterations would have substantially reworded the Society’s constitution and bylaws to affirm the board’s anti-MAID position. The notice referred to voting by mail and enclosed a ballot.
Prior to the scheduled meeting, both those in favour of and those against the Society offering MAID held various membership drives. The Society’s bylaws allowed a person to become a member by applying to the board for membership and paying the applicable membership fees. Around the time it sent out notice of the meeting, the board rejected 310 membership applications from individuals supportive of the Society offering MAID. The Society accepted hundreds of membership applications from individuals opposed to the Society offering MAID.
The petitioners, three members of the Society, asked the Court to cancel or postpone the meeting and to provide other relief related to the rejected membership applications.
The Court made it clear that it was not addressing the MAID dispute or the appropriateness of the proposed constitution and bylaw alterations, focusing its decision on the procedural issues around the vote and membership process.
The Court ordered that the meeting be cancelled and that notice of the meeting be set aside on the basis that the notice of the meeting contravened the Society’s bylaws and the Act.
The Act states that a society’s bylaws may authorize voting by mail. The Society’s bylaws, however, were silent on voting by mail. The Society argued that the Society’s bylaws did not prohibit voting by mail, but the Court rejected this argument, finding that any authority exercised by the board in that respect must be found in the bylaws or the Act. The Court also concluded that the Province’s recent Ministerial Order No. M116, which allows societies to hold meetings by telephone or other communications medium, does not permit voting by mail. It was, therefore, not open to the board to decide to proceed with voting by mail. On that basis alone, the Court ordered the meeting be cancelled.
The Court also ordered the Society to rectify the Society’s register of members to include the names of all the applicants whose membership applications were rejected. In making the order, the Court found that the board contravened the Society’s bylaws and the Act in the following ways:
- Unless membership criteria are set out in the bylaws, directors of a society do not have the discretion to deny membership on some other basis that the directors determine themselves. In this case, the Society’s bylaws did not set out any membership criteria, stating only that “[a] person may apply to the directors for membership in the society and on acceptance by the directors is a member.”
- The board could not screen applicants for an “anticipatory breach” of the bylaws. The Society’s bylaws required that “[e]very member must uphold the constitution”. The board argued that, based on their interpretation of the constitution, supporting the Society offering MAID would have been a failure to uphold the constitution, so applicants supportive of the Society offering MAID could not be accepted as members.
The Court also referred to the Society’s historical practice of simply requiring that an individual send in an application form and the fee as being the sole criteria on which a membership decision was made.
The Court went a step further and found that the board acted with an improper purpose and did not act in good faith in considering membership applications. There was a clear inference that the board attempted to manipulate the membership for voting purposes at the meeting. The proposed changes were significant and required adherence to the proper process.
The Society is appealing the decision.
The Court’s decision in Farrish v Delta Hospice Society is a reminder to societies of the importance of complying with their bylaws and the Societies Act and having clear membership criteria in their bylaws.
Societies must be careful that they comply with the requirements of their bylaws and the Societies Act when calling meetings. The Act provides a great deal of flexibility with respect to how meetings can be held; however, some of these options are only available if a society’s bylaws allow for them. It is not open to a society’s directors to act in a manner inconsistent with the society’s bylaws or the Act, even where circumstances seem to warrant it.
The decision also reaffirms past decisions that, when considering membership applications, directors can only reject applicants based on criteria that are set out in the society’s bylaws or the Act. Societies that only require applicants to fill out a form and pay a fee leave themselves open to the risk of a hostile takeover. To mitigate the risk of membership disputes, societies should carefully consider who their ideal members are and set out appropriate criteria in their bylaws. If a society’s directors are to have any discretion in membership decisions, this should also be set out in the bylaws.
Disclaimer: The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained. If your organization needs assistance with assessing your bylaws or with any other specific legal advice regarding membership criteria or disputes, please contact us. Our lawyers are ready to assist.