Court File and Parties

COURT FILE NO.: 836/14 DATE: 20160727

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

DOLLY BHADRA Applicant – and – DIPTENDU CHATTERJEE, SAMIRENDRA K. DEY and TRIDIB GHOSH Respondents

Counsel: Suvendu Goswami, for the Applicant David A. Decker and Phi Nguyen, for the Respondents

HEARD: November 23, 2015, January 22, March 7, April 22, May 18 and June 7, 2016

REASONS FOR JUDGMENT

COATS J.

[1] This application arises out of a dispute between minority and majority factions of the board of trustees of a not-for-profit religious organization over the amendment of corporate by-laws.

[2] The Applicant and the three Respondents are trustees of the Toronto Kalibari, a Hindu temple serving the Bengali community. The Kalibari was incorporated as a corporation without share capital under Part II of the Canada Corporations Act, R.S.C. 1970, c. C-2 in 1985. A board of trustees manages the affairs of the corporation.

[3] There are nine trustees in total. They are all volunteers. Dolly Bhadra, the Applicant, represents one of three of the so-called “minority trustees”. I do not use the word “represents” in the legal sense but to convey that her position and views appear to align with two other trustees. The Respondents are three of six “majority trustees”. Again, the position and views of the six appear to be aligned. At the time this Application arose in 2014, the Respondent Samirendra K. Dey was the Chairman, Diptendu Chatterjee was the Secretary, and Tridib Ghosh was the Treasurer.

[4] After the promulgation of the Canada Not-for-profit Corporation Act, S.C. 2009 c. 23 [“Act”] on October 17, 2011, Industry Canada sent correspondence to the Kalibari informing it that the new Act replaced the provisions of Part II of the Canada Corporations Act and that the corporation would have to transition to the new Act by replacing its charter documents, submitting articles of continuance and creating and filing new by-laws.

[5] The dispute in this motion is about the process the board instituted to achieve the transition to the new Act.

[6] The relief sought by the Applicant has significantly changed over the course of the two years this application has been outstanding. Much of the relief originally sought by the Applicant was agreed to by the Respondents.

[7] The Applicant now claims that the Respondents have engaged in irregular and improper behaviour in the drafting of the new proposed by-laws. As will be explained in greater detail below, she asks that the court intervene to restrain the Respondents from calling a meeting of the board to vote on the proposed new by-laws. She asks that the court redraft the Kalibari’s corporate by-laws to include changes proposed by her and her counsel. In the alternative, she asks that she be granted leave to commence a derivative action in the name of the corporation for substantially the same relief.

[8] I have concluded that the majority of the claims advanced by the Applicant shall be dismissed. However, I would allow the application in part, on the basis that I have found that the Respondents did not act in good faith in the manner in which they retained corporate counsel to draft new corporate by-laws and invited corporate counsel to a meeting of the board of trustees without notice to the Applicant or her counsel.

[9] As a result, I have found that the by-laws drafted by Mr. Box are sufficiently clouded by the failures of the Respondents to act in good faith such that the Respondents should not be permitted to put the by-laws forward at a vote of the trustees or the membership of the corporation.

BACKGROUND

a) The Toronto Kalibari

[10] The Toronto Kalibari was incorporated in 1985. In its founding document, the objectives of the corporation are set out:

a) To acquire, establish, construct, operate, maintain and equip a Hindu Temple for the worship of Hindu deities with Goddess Kali as its presiding deity.

b) To promote the religious and spiritual well-being of the Hindu Community and to preserve the tradition of Bengal.

c) To acquire, establish, construct, operate, maintain and equip a Religious Centre as part of the KALIBARI with a view to promoting Educational, Social and Cultural activities of the said Community.

d) To promote harmony, friendship and co-operation among the communities and to create mutual understanding between different faiths.

e) To receive and maintain a fund or funds and to apply from time to time all or part thereof and/or the income therefrom for the attainment of and carrying out of the objects aforesaid.

f) To do all such things as are incidental or conducive to the attainment of the above objectives and in particular, to acquire and to hold, by purchase, lease, contract, donation, legacy, gift, grant, bequest or otherwise, any kind of real or personal property; and to enter into and carry out agreements, contracts and undertakings incidental thereof.

[11] The Kalibari operates a temple located in the City of Mississauga.

b) The 2013 Litigation

[12] The relationships among the trustees have been fractious. In 2012, a member of the Kalibari, who was not a trustee, created and circulated a petition which alleged improprieties in relation to the management of the corporation. Some of the trustees supported the petition. Others did not. The result is that “minority” and “majority” factions have formed within the board of trustees. The Applicant is a member of the “minority”. The Respondents are members of the “majority”.

[13] After the circulation of the petition, members of the “majority” trustees sought to terminate the membership of the “minority” trustees in the corporation. The Applicant and the two other “minority” trustees instituted litigation. In Pal et al v. Chatterjee et al, 2013 ONSC 1329, Gray J. of this court found the respondents in that application tried to remove the “minority” trustees from the board for reasons other than which were provided for in the by-laws. He found that “the actions of the respondents have been taken for an improper and oblique purpose, namely, for the purpose of securing the applicants’ removal as trustees” (at para. 45).

c) This Application

[14] This application was commenced in February 2014.

[15] In 2013, the Kalibari received correspondence from Industry Canada informing it that it would have to transition from Part II of the Canada Corporations Act to the Canada Not-for-profit Corporation Act by October 17, 2014 or the corporation would be deemed to be inactive. The letter noted that the corporation would have to transition to the new Act by replacing its charter documents, submitting articles of continuance and creating and filing new by-laws.

[16] Prior to the commencement of this litigation, the Kalibari most recently amended its by-laws on April 25, 2011. The amendments were approved by Industry Canada by letter on July 25, 2011. Significantly, the 2011 by-laws provide that the by-laws of the corporation may be repealed or amended by by-law enacted by a majority of the trustees and confirmed by an affirmative vote of two thirds of the members of the corporation.

[17] The minutes of the trustees’ meeting of October 27, 2013 indicate that the transition issue was discussed. A special meeting of trustees was convened on November 10, 2013 to specifically deal with the issue. The minutes record that trustees agreed to strike a constitutional amendment subcommittee. The November 24, 2013 minutes record that the trustees decided to strike a committee with four trustee members and three advisory board members. The Applicant deposes that limiting the committee to four trustees was decided by Mr. Chatterjee. A vote occurred to choose the four trustees at the December 15, 2013 trustees’ meeting. Although Mr. Pal, a member of the “minority” trustees, had put his name forward, four other “majority” trustees were voted in. The Applicant states that herself and Mr. Pal were excluded from the amendment committee.

[18] Proposed amendments to the by-laws were circulated in early February 2014. At a trustees’ meeting on February 7, 2014, a majority of the board passed the draft by-laws. In a notice dated February 7, 2014, a special general meeting of the membership was called for February 23, 2014. On February 8, Mr. Goswami, counsel for the Applicant, sent correspondence to the trustees questioning the reason for the proposed amended by-laws. He later forwarded further correspondence to the trustees and correspondence was subsequently exchanged with counsel for the Respondents.

[19] Ultimately, before the February 23 meeting, the Applicant commenced this application for declarations that the procedure instituted to amend the by-laws and convene the meeting for February 23 was unlawful and for an order compelling the trustees to rescind the February 23 meeting. She also sought an order “requiring the Respondents to engage all of the nine (9) Trustees of [Toronto Kalibari] to diligently work and take all reasonable steps/actions” to achieve the transition to the new Act.

[20] The Respondents agreed to postpone the February 23, 2014 meeting and the application, which was brought on an urgent basis, was adjourned to June 2, 2014.

[21] The Respondents served responding material on counsel for the Applicant on May 23, 2014. Mr. Goswami required an adjournment to reply to the material and both parties consented to an adjournment to September 16, 2014.

[22] On June 2, 2014, the parties appeared before Donohue J. of this court. Her endorsement of that date, reads in its entirety, as follows:

Consent adjournment to Sept 16, 2014

Consent that Toronto Kalibari may retain a corporate lawyer to draft by-laws in a time effective way. Subject to review of the [Applicant].

Signed by Donohue J.

Costs of today arguing about terms. I am not satisfied that either party should get costs as the order I made is not part of the motion and technically was [not] even needed to be [ordered] by the Court.

No costs of today.

Signed by Donohue J.

[23] Moreover, the Respondents, via their counsel, indicated that they consented to substantially all of the relief sought in the original application, with the exception of the order “requiring the Respondents to engage all of the nine (9) Trustees of [Toronto Kalibari] to diligently work and take all reasonable steps/actions” to achieve the transition to the new Act.

[24] The disputes now pertinent to the application arose after Justice Donohue’s June 2, 2014 endorsement. The Applicant has substantially amended her application. I have reproduced Donohue J.’s endorsement in its entirety because the Applicant now claims that the Respondents have breached the order.

[25] Mr. Decker argued that the Applicant was precluded from raising the issues she has in relation to the by-laws on this application by operation of s. 147 of the Act. That section provides that a director who is present at a meeting of directors is deemed to have consented to any resolution passed or action taken at the meeting unless the director asks a dissent be entered in the minutes of the meeting or dissents in writing. Mr. Decker says that because the Applicant did not dissent before the first draft by-laws were passed in February 2014, she is deemed to have consented to them and is precluded from now dissenting pursuant to s. 147(2). I will address this argument at this preliminary stage.

[26] While the Applicant may not have dissented in relation to these first by-laws, her counsel forwarded dissenting correspondence the day after the meeting. She quickly brought this application. Crucially, the Respondents ultimately agreed to much of the relief initially sought, and in particular, they agreed not to put the February 2014 by-laws to a vote of the membership. The issues the Applicant now raises pertain to the new by-laws which were subsequently drafted with the acquiescence of the Respondents after Donohue J.’s order. There is no disagreement that the Applicant has clearly put forward her objections, through counsel, to the now pertinent by-laws. There is no indication that the corporation, which is not a party, wants to proceed with the February 2014 by-laws.

[27] In my view, complaints about the process that had taken place for the revision of the by-laws prior to June 2, 2014 are now moot and were when the amended application was argued. The endorsement of June 2, 2014 reflected a fresh procedure to arrive at revised by-laws. It is this process that is central to this dispute.

[28] I will now recount the circumstances giving rise to the amended application.

d) Retainer of Pallett Valo LLP

[29] Prior to June 2, 2014, Mr. Decker, for the Respondents, initially proposed that a lawyer in his firm draft revised by-laws. Later, he proposed the hiring of a corporate lawyer in Toronto (being neither Mr. Goswami nor a lawyer from Mr. Decker’s firm) to draft revised by-laws for the corporation. Mr. Goswami objected to the hiring of a lawyer from Mr. Decker’s firm and initially objected to the hiring of a corporate lawyer altogether, but subsequently changed his position, as is reflected in the consent recorded in Donohue J.’s endorsement.

[30] The Respondent Tridib Ghosh deposes that at a meeting on May 31, 2014, the board of trustees discussed the hiring of a lawyer to draft the new corporate documents. He states that the trustees agreed that their recommendations for lawyers’ names would be provided by email to him and he would advise the board of the outcome. The only record of this discussion appears in the Minutes of the June 29, 2014 meeting, which have been proffered in an affidavit from Mr. Chatterjee dated February 25, 2016.

[31] On June 5, 2014, Mr. Goswami emailed Mr. Decker requesting that he provide three suggested independent corporate lawyers, from which Mr. Goswami would choose one name, or alternatively Mr. Goswami could provide three names and Mr. Decker could choose one. Mr. Decker responded by fax on June 9, 2014, taking the position that the process proposed by Mr. Goswami was not needed and the corporation could hire any lawyer it wanted.

[32] On July 10, 2014, Mr. Ghosh sent an email to the board of trustees, proposing that the corporation hire Pallett Valo LLP to draft amended by-laws. Five of the nine trustees voted by email to hire Pallett Valo. A sixth, Mr. Samir Banerjee, apparently signed a document supporting the choice of Pallett Valo. Mr. Banerjee is a priest at the temple who sits on the Board of Trustees. Together, these six trustees comprised the so-called “majority trustees”.

[33] It appears from the emails exchanged that two of the “minority” trustees, Mr. Pal and Mr. Dutta Ray, voted for another lawyer, though Mr. Ghosh’s emails are inconsistent about Mr. Dutta Ray’s position. The Applicant did not respond to the email.

[34] After the emails amongst the trustees were exchanged, two of the nine trustees, Mr. Ghosh and Mr. Chatterjee, attended at the offices of Pallett Valo to retain the firm. Murray Box, a lawyer there, was engaged. Emails exchanged after Mr. Box prepared draft by-laws reveal the process by which Pallett Valo was retained. In an email sent to Mr. Goswami on September 4, 2014, Mr. Box wrote:

While we are under no obligation to provide you with the nature of the instructions we received, I will advise that we met with Tridib Ghosh and Kiptendu [ sic ] Chatterjee to discuss the existing by-laws and the terms of the new operating by-law. We then amended our standard form of non-profit operating by-law to reflect those discussions, received comments from then on our first draft and made the appropriate changes. The resulting by-law was the one sent to you. [Emphasis added.]

[35] Mr. Goswami responded, suggesting that Mr. Box was not sure of whom his clients were and that they were in breach of Donohue J.’s June 2, 2014 order.

[36] Mr. Box responded, noting in part:

We have been retained by Toronto Kalibari. It is our client.

While you are correct that the only thing that needs to be filed by the October 17th deadline is the Articles of Continuance, it is perfectly appropriate for the Board to also deal with the by-laws now and submit them at the same time as the Articles of Continuance. With respect, that is a decision to be made by a majority of the Board and a majority of the members; not you or your client.

[37] Mr. Goswami replied:

The Board did not make any decision that you alluded to in your below email. Show me Board notices, agendas or minutes in that regard that I requested earlier.

[38] Mr. Box responded:

The Board did not have to. It was within the authority of the President to do so and he did.

[39] Mr. Goswami responded with threats of litigation:

You have your opinion and I have mine. A litigation lawyer will understand these issues better.

You are still not answering several questions that I had raised earlier.

By the way, who is the President of [Toronto Kalibari]? I am curious to know.

Please be advised that all correspondence from you will be part of court record [ sic ] soon!

[40] Mr. Box followed up, noting:

In re-checking my notes, it was Tridib (who is the Treasurer) and Diptendu (who is the Secretary) who retained us on behalf of Toronto Kalibari.

e) The New Draft By-Laws

[41] After the meeting with Mr. Ghosh and Mr. Chatterjee, Mr. Box and another lawyer at the firm, Olivia Gismondi, prepared draft by-laws for the corporation.

[42] Mr. Box did not meet with any of the other members of the board of trustees or attend at a meeting of the board before the draft by-laws were circulated. As noted in his email excerpted above, after the first draft of the by-laws was completed, Mr. Box then received comments from Mr. Ghosh and Mr. Chatterjee and made consequential amendments to the draft by-laws.

[43] After the draft by-laws were completed, Mr. Chatterjee, secretary of the corporation, called a meeting of the trustees for August 20, 2014 to review the by-laws.

[44] On August 18, 2014, Mr. Goswami wrote an email to Mr. Decker:

Your clients are out of control and have proceeded to commit breach [ sic ] of the last Consent Court Order of June 3, 2014 [ sic ].

The amendments to the [Toronto Kalibari] constitution for transition to the NFT, act as drafted by a third party/lawyer, have to undergo review/approval by my client through my offices.

Instead, Mr. Chatterjee has called a Trustee meeting for Thursday, August 20, 2014 for approval of the draft [Toronto Kalibari] constitution, drafted by their chosen Lawyer and pursuant to their instructions alone, in breach of the Court Order.

Please not that If the Trustee meeting is not cancelled through notification sent by email by 5:00 pm today, I will be in court with a walk in motion in the morning of August 20, 2014.

[45] The trustees’ meeting for August 20, 2014 was cancelled.

[46] On August 21, 2014, Mr. Decker advised Mr. Goswami by email that the corporation had retained Pallett Valo and that Ms. Gismondi and Mr. Box had prepared draft by-laws. Mr. Decker took the position that the June 2, 2014 order did not require that the Applicant have a right to veto the choice of solicitors for drafting the changed by-laws. He noted that the court ordered that the Applicant would have the right to review the changes once drafted. He advised that he had been out of the province for two weeks and Mr. Chatterjee called the trustees’ meeting in his absence, and the meeting was canceled in order to avoid an expensive court motion. Copies of the proposed by-laws and articles of continuance were forwarded to Mr. Goswami for his comment.

[47] Mr. Goswami offered his initial comments by way of letter dated September 2, 2014.

[48] On September 3, 2014, Mr. Decker proposed that trustees’ meeting occur on September 10 or 11, 2014.

[49] By reply email, Mr. Goswami requested until September 17, 2014 to comment on the by-laws. He again threatened a walk-in urgent motion to stop any trustees’ meetings about the by-law.

[50] As noted above, Mr. Goswami and Mr. Box exchanged emails on September 4, 2014.

[51] Throughout his emails during this period, Mr. Goswami took the position that there was no rush to prepare new by-laws. All that was required before October 17, 2014 were articles of continuance. On September 5, 2014, Mr. Goswami wrote to Mr. Box and Mr. Decker, where he suggested another breach of the June 2, 2014 order:

The amended By-laws prepared by the Board of Trustees and approved by the members of [Toronto Kalibari] can be filed within a year from the Articles of Continuance. There is no rush to push the draft [Toronto Kalibari] By-laws prepared by Mr. Box in consultation with Mr. Ghosh and Mr. Chatterjee.

I understand that no prior Trustee meeting took place for the preparation and voting on the amendments, additions and deletions to the [Toronto Kalibari] By-laws. This is yet another transgression of law court order of June 2, 2014.

[52] Mr. Goswami proposed discussion between the lawyers to achieve consensus on the by-laws, with the unresolved issues to be resolved at the upcoming return of the application on September 16, 2014. He again threatened to bring an urgent motion if his proposal was not acceded to.

[53] Mr. Decker responded by fax on September 5, 2014. He reiterated his position that the June 2, 2014 order of Donohue J. permitted the Applicant to review the draft documents, but not to veto the choice of counsel. He suggested that it was clear that Ms. Bhadra had now exercised her right of review given Mr. Goswami’s input and that he had been in possession of the draft by-laws since late August. He advised that the trustees would meet on September 18, 2014 and receive any comment from Mr. Goswami forwarded by September 17, 2014.

[54] Mr. Decker stated that his recommendation to the trustees for their September 18 meeting would be to table the by-law drafted by Mr. Box and the comments from Mr. Goswami received by September 17, but to not put them to a final vote. He suggested that a final vote could occur at a subsequent meeting of the trustees.

[55] On September 10, 2014, Mr. Chatterjee circulated a notice of meeting to the trustees for September 18, 2014.

[56] The September 16, 2014 return date of the application was adjourned on consent to February 24, 2015.

[57] Mr. Goswami forwarded further comments on September 17, 2014. Mr. Decker suggested in response, via email that day, that Mr. Goswami’s comments be placed before the trustees at the September 18, 2014 meeting and that there would be no vote on the by-laws. At the next trustees’ meeting thereafter, Mr. Decker proposed that the trustees have two versions of the by-laws placed before them – Mr. Goswami’s version and Mr. Box’s version – and the trustees could vote.

f) The September 18, 2014 Trustees’ Meeting

[58] The trustees of the Toronto Kalibari convened a meeting on September 18, 2014 to discuss the draft by-laws.

[59] Mr. Box and Ms. Gismondi attended at the trustees’ meeting. The Applicant deposes that neither she, Mr. Pal, Mr. Dutta Ray (the “minority” trustees), or Mr. Goswami were informed that the lawyers were going to attend the meeting. Mr. Ghosh deposes that the lawyers were invited to the meeting to explain to all of the trustees the process of filing the articles of continuance and the by-laws and the documents themselves.

[60] Notice that Mr. Box and Ms. Gismondi were to attend the meeting was not included in the notice of meeting circulated to the trustees by Mr. Chatterjee on September 10, 2014. Notice that they would be attending the meeting was not noted in correspondence exchanged amongst counsel in September 2014.

[61] The Applicant, Mr. Pal and Mr. Dutta Ray walked out of the meeting. That evening, Mr. Goswami sent emails complaining about the attendance of the other lawyers. He suggested that Mr. Decker also attended the meeting, which Mr. Ghosh deposes was incorrect and an email from Mr. Decker indicates he was not present. Mr. Goswami sent an email at 7:41 p.m. on the date of the meeting, which reads in part:

Mr. Murray [ sic ] and Mr. Decker,

Who gave you permission to attend the [Toronto Kalibari] Trustees meeting today?

My client along with Mr. Jagannath Pal and Mr. Mrinal Dutta Ray walked out in protest because of your unwanted presence in the meeting there.

I am going to take necessary actions. You will hear from me soon.

[62] Mr. Decker responded at 8:55 p.m.:

Tonight, I was at an Ontario Bar Association Civil Litigation Section Executive meeting in Toronto, not at Toronto Kalibari. Your clients’ information is therefore incorrect, regarding my alleged attendance at the trustees’ meeting.

Mr Box was at the trustees’ meeting. …

There was no need for your clients to leave the meeting. Indeed, it was irresponsible of them to do so. They should have stayed to discuss the items on the agenda and to review the by-laws and your suggestions.

[63] Mr. Box responded the next day, September 19, 2014:

We were retained by Toronto Kalibari to assist with the Articles of Continuance and the new operating by-law. Myself and my associate were invited to attend the meeting to review with the Trustees the Articles of Continuance and the new operating by-law with the Board and to discuss your comments on the new by-law. This was a perfectly normal and reasonable request of the Corporation’s lawyers.

A majority of the Trustees were in favour of us addressing the meeting on these issues and as such our attendance was proper. We do not understand why your client and the other 2 Trustees did not want to hear from the Corporation’s lawyers and walked out in protest, but that was their prerogative, as it was the prerogative of the remaining Trustees to continue with the meeting as a quorum remained.

[64] Mr. Goswami responded:

Dear Mr. Murray [ sic ],

Your claim of quorum is a farce. The Trustees who you allegedly claim represent [Toronto Kalibari] have been sued.

You had no business to be present in the Board meeting behind my back. I will bring a motion in court.

[65] On September 22, 2014, Mr. Box emailed the trustees an updated version of the by-laws incorporating changes approved by the trustees in attendance at the September 18, 2014 meeting. He requested that the trustees offer any comments and noted that he would circulate the draft by-law and the one proposed by Mr. Goswami before the next trustees’ meeting so that the trustees could vote on their preferred by-law.

[66] Mr. Goswami replied to Mr. Box on September 29, 2014, copying all of the trustees and Mr. Decker. Mr. Goswami indicated that if Mr. Box refused to incorporate the changes he suggested, he would take the matter to court. Mr. Goswami further demanded that any trustees’ meeting be held off, “as any attempts to breach the June 2, 2014 court order will be dealt with in court!”

[67] Counsel exchanged further emails on September 29, 2014. Mr. Box sent Mr. Goswami an annotated version of Mr. Goswami’s comments on the by-laws, indicating the majority of the board of trustees’ response to each of the comments. Later the same day, Mr. Goswami sent back a copy of the same document adding his own annotations to those of Mr. Box.

[68] On October 7, 2014, Mr. Decker sent an email to Mr. Goswami, stating that he believed that there was no merit to this application as it was then constituted, which was returnable on February 24, 2015. He said he saw no reason the trustees should not be permitted to vote on the by-laws. He asked that Mr. Goswami respond by the end of that week, or else he would ask the secretary, Mr. Chatterjee, to schedule a meeting to vote on the by-laws.

[69] Mr. Goswami sent an email on the Friday of the same week, indicating that he would reply to Mr. Decker’s email after the long weekend. It does not appear that Mr. Goswami responded.

[70] Approximately one month later, Pallett Valo drafted and Mr. Chatterjee circulated a notice of meeting of the board of trustees calling a meeting for November 23, 2014. Copies of the draft by-laws prepared by Mr. Box and Mr. Goswami were attached to the notice.

[71] When Mr. Goswami was informed about the notice by the Applicant, he wrote to Mr. Decker stating that the version of the by-laws presented as the version prepared by Mr. Box was misleading because it was a version prepared by Mr. Box on the instructions of Mr. Chatterjee and Mr. Ghosh and not the version amended by the board of trustees. Further, Mr. Goswami later advised that the version of by-laws prepared by him included in the notice was an outdated version. Mr. Goswami demanded that the November 23, 2014 meeting be cancelled, or he would bring an urgent motion.

[72] The trustees agreed that the November 23, 2014 meeting would be cancelled.

[73] I have reviewed the two versions of the by-laws attached to the notice of meeting. The first version is the draft by-laws prepared by Mr. Box, incorporating the changes suggested by Mr. Goswami on September 17, 2014 that Mr. Box agreed with. The second version is the draft by-laws incorporating all of Mr. Goswami’s September 17 suggestions. I disagree with Mr. Goswami’s characterization of the draft by-laws attributed to him attached to the notice of meeting as being an outdated version. While they did not include the editorial annotations between Mr. Box and Mr. Goswami after September 17, Mr. Goswami did not make new suggestions for changes in his September 29 letter. He merely stated his disagreement with Mr. Box’s refusal to include Mr. Goswami’s changes in Mr. Box’s version. I would not expect editorial comments to form part of a by-law that was to be ultimately voted on and passed. The version included all of the changes Mr. Goswami wanted at that time.

g) The Amended Application

[74] The parties appeared before me on February 24, 2015. The matter was adjourned to May 15, 2015 to permit Mr. Goswami to deliver and file an amended Notice of Application and for responding materials to be prepared.

[75] After that appearance, Mr. Decker wrote to Mr. Goswami on February 27, 2015 requesting that the latter send a copy of the final draft of the by-laws Mr. Goswami proposed the trustees pass. Mr. Decker suggested that both versions would then be attached to a notice of a trustees’ meeting. He suggested the meeting occur a few days after the May 15, 2015 court date, in particular May 17, 2015.

[76] On March 5, 2015, Mr. Box emailed Mr. Decker a final draft of his version of the by-laws, and attached a copy of what he understood to be Mr. Goswami’s final version.

[77] On March 6, 2015, Mr. Decker again wrote to Mr. Goswami requesting a final draft of his version of the by-laws.

[78] On March 9, 2015, Mr. Decker sent an email to Mr. Goswami, attaching the copy of Mr. Goswami’s by-laws that Mr. Box had forwarded on March 5, 2015. Mr. Decker asked Mr. Goswami to confirm that the by-laws were the correct version and indicated they would be attached to a notice of meeting with the version drafted by Mr. Box for a meeting on May 17, 2015.

[79] On March 11, 2015, Mr. Goswami faxed an objection letter, wherein he commented on various provisions of the draft by-laws, to Mr. Decker.

[80] On March 16, 2015, Mr. Goswami wrote to Mr. Decker requesting the following:

Please advise if a Trustees’ meeting has been called for May 17, 2015 for consideration of [the Toronto Kalibari] By-laws.

If a meeting has been called, please ask Mr. Chatterjee to attach the latest version of the [Toronto Kalibari] By-laws prepared by Mr. Box as counsel/advocate for your clients and my letter dated March 11, 2015 with input from my client, the minority trustees and other prominent members of [Toronto Kalibari].

The foregoing is urgently requested to enable me to properly amend my client’s Application as ordered by the Honourable Madam Justice Coats by her order dated February 23, 2015.

[81] On March 18, 2015, Mr. Chatterjee circulated a notice of meeting for the board of trustees to consider the proposed new by-law and the objections raised by Ms. Goswami on behalf of the Applicant, and to have a vote on the passage of the by-law with or without amendments. A copy of Mr. Box’s proposed by-laws and Mr. Goswami’s March 11, 2015 objection letter were attached. The meeting was set to occur on May 17, 2015. A copy of the notice was forwarded to Mr. Goswami by Mr. Box on the same day.

[82] Mr. Goswami filed an amended Notice of Application on March 20, 2015. The Applicant now seeks a host of new relief. The relief sought is detailed in paragraph 87 below.

[83] Amongst the relief sought, the Applicant asked that the Court order the Respondents take steps to rescind the notice of meeting for May 17, 2015.

[84] It appears that the May 17, 2015 meeting did not occur.

[85] On November 7, 2015, Mr. Chatterjee forwarded a notice of meeting for November 29, 2015 for the same purposes as the proposed May 17, 2015 meeting. However, the Applicant deposes that Mr. Chatterjee attached the wrong version of Mr. Goswami’s proposed by-laws – the one that had been attached to the notice for the November 23, 2014 meeting – rather than Mr. Goswami’s March 11, 2015 objection letter.

[86] It appears that the November 29, 2015 meeting did not occur. It appears that since that day, the trustees have held off on the meeting pending the resolution of this application.

THE ISSUES

[87] The relief sought by the Applicant in her amended application that was not resolved on consent in June 2014 is as follows:

a) An order requiring the Respondents to engage all nine trustees to “diligently work and take all reasonable steps/actions, including repealing, amending, making new By-laws” for the transition of the corporation to the Canada Not-for-profit Corporations Act;

b) A declaration that the Respondents are in breach of Donohue J.’s June 2, 2014 order;

c) A declaration that the procedure used by the Respondents in retaining a corporate lawyer, Murray Box, was “unlawful, irregular, unenforceable, partisan, and of no consequences whatsoever”;

d) A declaration that all corporate acts taken by the Respondents regarding the consideration of new proposed corporate by-laws are null and void;

e) An order requiring the Respondents to rescind a Notice of Meeting of the Board of Trustees for consideration of the proposed new by-law and the objections/proposed amendments of the Applicant;

f) A declaration that the objections/amendments proposed by the Applicant are in the best interests of the corporation;

g) In the alternative, an order requiring the Respondents to incorporate the Applicant’s objections/amendments into the proposed new by-laws and pass them at a meeting of the Board of Trustees;

h) In the further alternative, an order granting the Applicant leave to commence a derivative action to seek the relief outlined in f. and g., above.

[88] The Respondents submit that the application should be dismissed in its entirety. Mr. Decker submits that Mr. Goswami is, in essence, asking the court to suspend or cut off the democratic process by preventing the trustees of the board from having a meeting to vote on the draft by-laws and by preventing the members themselves from having a meeting to vote on any by-laws approved by the board. He says the board of trustees should be permitted to call a meeting for the purposes of a vote of the trustees on the draft by-laws, at which meeting the Applicant’s objections and proposed amendments can be put forward.

[89] The Respondents further submit that the Applicant’s attempt to interfere with the democratic process is magnified by the fact that she could, pursuant to s. 152(6) of the Act make a member’s proposal to amend the bylaws following a procedure set out in s. 163 of the Act.

[90] I note that clause e) in paragraph 87 above is no longer at issue as the trustees called off the May 17, 2015 meeting.

[91] I prefer to deal with the issues in the following manner. There are five issues:

1. Did the Respondents breach Donohue J.’s June 2, 2014 order?
2. Should the Court declare invalid the manner in which a corporate lawyer was retained to draft amended by-laws or declare that all corporate acts taken by the Respondents regarding the new proposed corporate by-laws are null and void?
3. Should the Court impose the draft by-laws proposed by the Applicant on the Corporation?
4. Should leave be granted for the Applicant to commence a derivative action on behalf of Toronto Kalibari?
5. Should the Court order the Respondents to engage all nine trustees to “diligently work and take all reasonable steps/actions, including repealing, amending, making new By-laws” for the transition of the corporation to the Canada Not-for-profit Corporations Act?

[92] Both parties made extensive submissions, each covering several days of court time. I do not propose to recount all of their arguments here. Rather, I will briefly summarize the arguments of each counsel below and address their arguments in the context of each issue.

ANALYSIS

Issue 1 Did the Respondents breach Donohue J.’s June 2, 2014 order?

[93] Mr. Goswami urges the Court to find that the Respondents breached Donohue J.’s June 2, 2014 order. For the following reasons, I find that they did not.

[94] First, Donohue J.’s endorsement is, on its face, plainly permissive. It is not mandatory. She ordered, on consent, that “Toronto Kalibari may retain a corporate lawyer to draft by-laws in a time effective way. Subject to review of the [Applicant].”

[95] It is evident that this order was not necessary. It is clear from the record that Mr. Decker asked for the order as a result of numerous threats of litigation from Mr. Goswami if the corporation was to retain a corporate lawyer before June 2, 2014.

[96] Second, as Donohue J. herself noted, the order did not technically need to be a court order. The corporation was free to retain a lawyer at any time. The Applicant alone, nor her counsel, can stand in the way of the corporation hiring any lawyer it prefers.

[97] Third, the Respondents did exactly what the order permitted. While the process of retaining the lawyer has been impugned and will be addressed below, the Respondents retained a lawyer for the corporation for the purpose of drafting new by-laws. The Applicant, through Mr. Goswami, was ultimately permitted to have input on the draft by-laws.

Issue 2 Should the Court declare invalid the manner in which a corporate lawyer was retained to draft amended by-laws or declare that all corporate acts taken by the Respondents regarding the new proposed corporate by-laws are null and void?

[98] For the reasons that follow, I find that the manner in which the corporate lawyer, Mr. Box, was retained was not done in good faith and should be declared invalid.

[99] Mr. Goswami argued forcefully on behalf of the Applicant that the court has jurisdiction to review the actions of the Respondent trustees.

[100] Mr. Decker for the Respondents argues that the actions of the trustees are part of the democratic corporate governance process. They are governed by basic corporate law, the Canada Not-for-profit Corporation Act and the by-laws of the corporation. He submitted that the only way in which the Court could intervene in the process which the trustees have instituted to pass new by-laws would be as a remedy to oppressive conduct. Oppression has not been pleaded in this case.

[101] In Pankerichan v. Djokic, 2014 ONCA 709, 123 O.R. (3d) 131, Lauwers J.A., wrote the following regarding the proper approach courts should take to disputes within a religious organization:

[53] The invitation to a court to intervene in the internal affairs of a religious organization comes invariably, as it did in this case, at the request of members who feel aggrieved by the actions of the organization.

[54] The application judge accurately observed, at para. 40, that: “Courts are reluctant to exercise jurisdiction over disputes within religious organizations that involve issues of church governance.” He added that while disputes about religious doctrine are not appropriate for judicial determination, “courts have intervened to review the actions of religious bodies when the controversies (typically regarding membership) involve property, contracts or other civil rights.” This was a fair characterization of how Canadian courts generally approach disputes within religious organizations.

[55] There are good reasons for judicial diffidence. Freedom of religion, a fundamental right protected by the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11, can be implicated in such disputes and must be respected. Courts also recognize the real risk of misunderstanding the relevant religious tradition and culture, and that a mistaken decision could saddle the organization with difficult if not unworkable consequences: Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165, at paras. 63-64.

[102] In Scharafanowicz v. Hamilton Regional Indian Centre, 2011 ONSC 6953, Arrell J. wrote the following:

[18] The facts as set out in Bala v. Scarborough Muslim Assn. [2010] O.J. No. 5373 are not dissimilar to the case at bar. In that case it was argued that a new constitution had not been properly approved by the membership. Swinton, J. found the constitution properly passed and quoted with approval Nordheimer, J. in Lee v. Lee’s Benevolent Assn. of Ontario, [2004] O.J. No. 6232 (S.C.J.) who cautioned against judicial intervention in the internal affairs of non-profit organizations, stating at para. 12,

“Absent some demonstrated evidence that any irregularities went to the heart of the electoral process or lead to a result which does not reflect the wishes of the majority, the court should be loathe to interfere in the internal workings of such groups.” (Affirmed , [2005] O.J. No. 194 (Div. Ct.)).

[19] I agree with Swinton, J. and Nordheimer, J. that courts should not interfere in the internal workings of volunteer charitable organizations unless there has been clear evidence that the wishes of the majority are not being observed or there has been an obvious violation of the electoral process. There has been no such evidence presented to this court to even remotely support such a conclusion. In fact the evidence would suggest the exact opposite.

See also Bala v. Scarborough Muslim Association, 2010 ONSC 6834, at paras. 21-22.

[103] In Wang v. Pritchard, the applicants brought a motion for an interlocutory injunction to restrain the Board of Directors from holding a vote to accept new voting members of the church in that case. In dismissing the motion, Himel J. noted, at para. 9:

Courts should be reluctant to become involved and exercise jurisdiction over the question of membership in a voluntary organization, especially a religious one unless some property or civil right is affected: see Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165 at para. 6. The matters raised by the applicants concern membership issues that are clearly within the jurisdiction of the Board and the members to decide under the By-laws. The applicants concede that the meeting has been called with sufficient notice under the By-laws albeit shorter notice and at a different time than has been the case in the past. There is nothing untoward about that and it is within the Board of Director's exercise of discretion to convene a meeting on March 4, 2007. I find that the dispute alleged by the applicants does not mandate the intervention of the court as the matters raised do not concern property or civil rights issues.

[104] In Pal et al v. Chatterjee et al, 2013 ONSC 1329, Gray J. heard an application involving the parties before me and related parties. He ruled as follows:

[30] It is clear from the cases cited by the respondents that the Courts will ordinarily not interfere in the internal affairs of a club or religious organization. However, there are exceptions. In Hofer, supra, Gonthier J. for the majority, at p. 175, quoted with approval the following statement by Stirling J. in Baird v. Wells (1890), 44 Ch. D. 661, at p. 670, as follows:

The only questions which this court can entertain are: first, whether the rules of the club have been observed; secondly, whether anything has been done contrary to natural justice; and, thirdly, whether the decision complained of has been come to bona fide.

[31] It is said that the Court’s ability to interfere, even on these narrow grounds, exists only where there is a property right at stake. However, the term “property right” is to be given a broad meaning. In Hofer, members had the right to live on the colony and be supported by the colony, as well as certain other rights as members. The colony argued that those rights were merely contractual, rather than property rights. At p. 174, Gonthier J. stated: “However, while contractual, the rights in question are of great importance to all concerned, and are susceptible of enforcement by the courts.” At p. 175, he stated:

If the defendants have the right to stay, the question is not so much whether this is a property right or a contractual right, but whether it is of sufficient importance to deserve the intervention of the court and whether the remedy sought is susceptible of enforcement by the court.

[32] The bylaws of the Corporation include the following provision:

All members have the right to vote. Members can be elected to serve in any committees which may exist from time to time. All other privileges such as attending meetings and functions and using facilities provided by the organization shall be available to all members of the organization.

The rights reflected in this provision are of great importance to all members. They include the rights to vote, serve on committees, attend meetings and functions, and use the facilities of the organization. They were obviously considered important by the members themselves, who approved the bylaws. In my view, they are of sufficient importance to deserve the intervention of the Court if one of the grounds mentioned by Stirling J. in Baird v. Wells is made out.

[33] Furthermore, to the extent that the applicants may be deprived of their membership on the Board of Trustees, this is obviously of sufficient importance to deserve the intervention of the Court. A trustee is elected. As such, he or she has the right, indeed the obligation, to represent the members who elected the trustee. To be deprived of that office is of sufficient importance to deserve the intervention of the Court if one of the appropriate grounds is made out.

[34] In this case, it would appear that the rules of the organization, as reflected in the bylaws, are being followed. Membership in the Corporation can be terminated in accordance with certain procedures, which have been initiated in accordance with the bylaws.

[35] However, I have concerns as to natural justice and whether the procedures have been initiated in good faith.

[38] In this case, however, the applicants are purportedly being considered for termination because of their conflict with the six Board members who have a dispute with them. Those six Board members have nominated five members of the committee of seven that will consider their fate. In these circumstances, there is a reasonable apprehension of bias on the part of the five members of the committee that are nominated by the respondents.

[39] However, at p. 197 of Hofer, supra, Gonthier J. stated:

As Forbes observes in “Judicial Review of the Private Decision-Maker: The Domestic Tribunal” (1977), 15 U.W.O.L. Rev. 123, at pp. 139-141, the requirement of an unbiased tribunal in the context of expulsion from a voluntary association raises a number of puzzling issues. There is no doubt that an unbiased tribunal is one of the central requirements of natural justice. However, given the close relationship amongst members of voluntary associations, it seems rather likely that members of the relevant tribunal will have had some previous contact with the issue in question, and given the structure of a voluntary association, it is almost inevitable that the decision-makers will have at least an indirect interest in the question. Furthermore, the procedures set out in the rules of the association may often require that certain persons make certain kinds of decisions without allowing for an alternate procedure in the case of bias.

In view of my conclusion on the question of whether the procedures were initiated in good faith, I need not come to any final determination on the issue of natural justice.

[40] I am not persuaded that the procedures initiated by the respondents were initiated in good faith.

[45] In my view, the actions of the respondents have been taken for an improper and oblique purpose, namely, for the purpose of securing the applicants’ removal as trustees.

[46] One of the hallmarks of bad faith is where a process is put in place, ostensibly for a legitimate purpose, but really for another oblique, illegitimate or collateral purpose: see Pedwell v. Pelham (Town), [2003] O.J. No. 1774 (C.A.), at paras. 64-67; Grosvener v. East Luther Grand Valley (Township) (2007), 2007 ONCA 55, 84 O.R. (3d) 346 (C.A.), at paras. 36-48; and Rosenhek v. Windsor Regional Hospital (2010), 2010 ONCA 13, 257 O.A.C. 283 (C.A.), at para. 32.

[47] In this case, as noted, the bylaws permit only one reason, lack of attendance, as a ground for termination of a trustee. There is no suggestion of that here. The respondents have proceeded against the applicants as members on the ground that they signed the petition. They have taken action against none of the other members who did so. It is clear, in my view, that the respondents are proceeding as they are to secure the applicants’ removal as trustees. They have no right to do so.

[105] I do not take anything from the factual determinations of Justice Gray as they relate to the parties before me in this action. However, I accept, as he did, that the Court has jurisdiction to review the actions of the board of trustees for a failure to comply with the rules of the corporations, the rules of natural justice and whether or not actions were taken in good faith.

[106] While it has been said that Courts will not ordinarily interfere in the internal affairs of a club or religious organization, and even then only in cases where property rights are at stake, I agree with Justice Gray’s analysis that where the rights in question are of great importance to all members, they may be of sufficient importance to deserve the Court’s intervention if one of the grounds set out in Baird v. Wells is made out.

[107] I am satisfied that drafting of the corporation’s operating by-law, which governs the corporations’ relationship with and affects all of its members, and the Respondents’ alleged impropriety in drafting the new by-law, concern rights of great importance to the membership sufficient to warrant the Court’s intervention if one of the grounds is established.

[108] Furthermore, I agree with Justice Gray that the failure to name all of the trustees or the corporation as respondents should not stand in the way of making Orders against the Respondents to remedy impugned corporate processes they instituted. He wrote, at para. 49:

[49] Counsel for the respondents submits that the Corporation should have been a party to this application, and that the order requested cannot issue against the respondents. I disagree. It is the respondents who have put in place the procedures that are objected to, and I see no reason why they cannot be prohibited from continuing those procedures.

[109] In the case before me, the impugned conduct, detailed below, was put in place and carried out by the Respondents. The remedy, also outlined below, is directed at redressing the misconduct of the named Respondents.

[110] In section 148(1), the Canada Not-for-profit Corporation Act sets out the statutory duties of directors and officers of corporations incorporated under its provisions:

148 (1) Every director and officer of a corporation in exercising their powers and discharging their duties shall

(a) act honestly and in good faith with a view to the best interests of the corporation; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

[111] In this case, I have two concerns with respect to whether the trustees actions in retaining Mr. Box were taken in good faith.

[112] In Jennings v. Bernstein, Whitten J. outlined the meaning of good faith. Although Mr. Decker cited this case in relation to the commencement of derivative actions, I find Justice Whitten’s comments about good faith are also helpful outside of that context. He wrote:

38 Black's Law Dictionary defines "good faith" as:

an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, amongst other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage, and an individual's personal good faith is a concept of his own mind and inner spirit and, therefore, may not conclusively be determined by his protestations alone.

39 The concept of good faith is founded on honesty. It is not equivalent to saintliness. It is not devoid of self interest. …

41 Good faith has to have an objectively reasonable component especially in light of the practical objective. To not have such a component would in extreme situations erode the good faith. It is with the objective scrutiny, that the good faith requirement overlaps with the requirement that the derivative action be in the interests of the corporation.

[113] I have reviewed the acts of the Respondents in terms of whether they acted in good faith from an objectively reasonable perceptive.

[114] First, it is clear that Mr. Ghosh and Mr. Chatterjee were solely responsible for establishing the retainer with Mr. Box and Pallett Valo LLP. I accept that Pallett Valo was properly nominated as the law firm to be retained to draft the by-laws pursuant to an agreement at the May 31, 2014 trustees’ meeting to conduct the nomination by email. At least five of the nine trustees sent emails nominating Pallett Valo.

[115] However, when Mr. Ghosh and Mr. Chatterjee went by themselves to discuss the retainer and the work to be done with Mr. Box, they acted in a way that they should have known was unfair to the Applicant and the other “minority” trustees. It was clearly known to all of the trustees that the Applicant and the “minority” were not pleased with the process or result of the internal drafting of revised by-laws to that point. These Respondents should have expected that the “minority” trustees would want an opportunity to liaise with the lawyer before the first draft was prepared.

[116] Not only did Mr. Ghosh and Mr. Chatterjee exclusively meet with Mr. Box prior to his preparation of the first draft, Mr. Ghosh and Mr. Chatterjee had an exclusive opportunity to provide comments prior to any of the other trustees and prior to the minority trustees’ receipt of the draft. This is confirmed in Mr. Box’s email to Mr. Goswami on September 4, 2014:

I will advise that we met with Tridib Ghosh and Kiptendu [ sic ] Chatterjee to discuss the existing by-laws and the terms of the new operating by-law. We then amended our standard form of non-profit operating by-law to reflect those discussions, received comments from then on our first draft and made the appropriate changes.

[117] After the by-laws were completed by Mr. Box and revised based on comments from Mr. Ghosh and Mr. Chatterjee, Mr. Chatterjee called a meeting of the trustees to discuss the by-laws on August 20, 2014. The meeting was called on relatively short notice. The time available for Ms. Bhadra to review the by-laws, as was provided for in Donohue J.’s June 2, 2014 order, was scant. It does not appear that the Respondents provided Mr. Decker a copy of the draft by-laws before the meeting was called. Mr. Goswami was not sent a copy of the draft by-laws by Mr. Decker until August 21, 2014.

[118] The directors of a corporation, and specifically the Respondent trustees of the board in this case, must be transparent in their actions with their fellow board members insofar as they purport to act on behalf of the corporation. This is consistent with the democratic model of corporate governance and the fundamentals of good faith.

[119] In this case, the Respondents Ghosh and Chatterjee did not act in a transparent fashion in instructing Pallett Valo. Though Mr. Ghosh asserts that the Respondents did not “unilaterally” retain Mr. Box and retained him on behalf of the corporation, they went and met with Mr. Box on their own, without consulting the other trustees about what would be discussed. There is nothing in the record to suggest that there was a discussion amongst the trustees about what instructions would be given to the corporate lawyer prior to the formation of the retainer. All that was discussed at the May 31, 2014 trustees’ meeting was the method by which counsel would be selected. The Respondents Ghosh and Chatterjee provided input to Mr. Box on the first draft of the by-laws without calling a meeting to discuss the first draft or soliciting input from the other trustees. They offered their own comments which resulted in amendments to the first draft.

[120] The purpose of retaining Mr. Box was to hire an independent corporate lawyer to draft by-laws that were in the best interests of the corporation. Without any input from the remainder of the board of trustees, the retainer and work done under it is coloured by the partisanship of Mr. Ghosh and Mr. Chatterjee. I find that the manner in which they retained Mr. Box and instructed him was not in good faith. Calling a meeting for August 20, 2014, without providing Ms. Bhadra with much opportunity to review the by-laws or consult with her counsel was also not in good faith. The Respondents took absolutely no steps to ascertain whether the notice given would permit the Applicant an opportunity to properly consult Mr. Goswami.

[121] Mr. Chatterjee and Mr. Ghosh’s conduct is particularly egregious given that in advance of June 2, 2014 court appearance before Donohue J., Mr. Ghosh swore the following, in an affidavit dated May 22, 2014:

Accordingly, our position with respect to this application returnable on June 2, 2014 is that, in order to proceed with this professionally and properly, the Board of Trustees should be at liberty to retain corporate counsel to proceed with the appropriate by-law changes. That counsel should not be Mr. Goswami, nor Beard Winter LLP. The counsel may then proceed to liaise with the Board of Trustees, prepare the necessary corporate changes, and obtain and draft whatever resolutions and notices are required, and file same with Industry Canada. [Emphasis added.]

[122] The corporate lawyer that was retained did not liaise with the Board of Trustees before preparing the by-laws, nor was there a meeting of the board of trustees to discuss the retainer or what instructions were to be given to the lawyer. Mr. Ghosh and Mr. Chatterjee retained the lawyer, instructed him, reviewed a first draft of the by-laws and gave input on changes, all without any input from the rest of the board. In so doing, I find that they acted in bad faith in relation to the Applicant and the work product produced by Pallett Valo is tainted by their partisanship. Moreover, I find that Mr. Ghosh and Mr. Chatterjee were acting without the corporation’s authorization when they entered into the retainer with Mr. Box. The board had not authorized them or delegated them any authority to meet with Mr. Box, to provide him with instructions, or to review the first draft. There does not appear to have been any discussion by the board about who should meet with counsel, what instructions to give, or how the by-law drafting process was to be carried out by counsel.

[123] Second, the invitation of Mr. Box and Ms. Gismondi to attend the September 18, 2014 board meeting without notice to the Applicant or her counsel was also not in good faith. There is no record of the board discussing or voting on Mr. Box and Ms. Gismondi’s attendance at the meeting.

[124] Again, the Respondents were clearly aware of the Applicant and her counsel’s interest in the drafting of the new corporate by-law. It appears that the Respondents invited Mr. Box, who was already corresponding with Mr. Goswami, and Ms. Gismondi to attend the meeting and neglected to inform the Applicant or her counsel that the solicitors would be in attendance. Notice of their attendance was not given in the notice of meeting circulated by Mr. Chatterjee on September 10, 2014, nor in correspondence amongst counsel in September 2014.

[125] Mr. Goswami was permitted to forward comments to be tabled at the meeting. It is clear that whatever comments Mr. Goswami put forward in a letter would be overshadowed by the direct opinion of counsel attending in the room. Though Mr. Box and Ms. Gismondi were retained as corporate solicitors, as noted above, they took their instructions solely from the Respondents and the Respondents favoured the by-laws they drafted.

[126] While the invitation by the Respondents may not contravene statutory or corporate rules, it is clear to me that it was designed to undermine the Applicant and her counsel’s input. While the board ultimately was entitled to vote against the suggestions put forward by Mr. Goswami, the Applicant should have been proffered a fair opportunity to put her views forward. The process employed by the Respondents tilted the power in the room towards the draft by-laws they favoured. The Respondents’ failure to give notice of the solicitors’ attendance was inconsistent with the transparent and democratic process that should be expected. This is so even though the September 18, 2014 meeting was not for a final vote on the bylaws. It was an important meeting for the discussion of Mr. Box’s draft and Mr. Goswami’s comments.

[127] Mr. Box was invited to attend a trustees’ meeting scheduled for the day after Mr. Goswami had delivered his detailed response to the draft by-laws prepared by Mr. Box. Mr. Box had not responded to Mr. Goswami’s detailed comments yet and the Applicant had not had any opportunity to consider Mr. Box’s response or discuss it with Mr. Goswami. This further disadvantaged the Applicant when Mr. Box unexpectedly attended the meeting.

[128] In the result, I am of the view that the by-laws drafted by Mr. Box are sufficiently clouded by the failures of the Respondents to act in good faith to require that they be reversed.

[129] I note that the Respondent Mr. Dey’s conduct has not been specifically impugned in the above paragraphs. However, during the relevant period, he was the Chairman of the corporation. To the extent that he permitted Mr. Ghosh and Mr. Chatterjee to act as they did in relation to the retention of Mr. Box and inviting him and his associate to the September 18, 2014 meeting without notice to the “minority” trustees, he failed to act in good faith.

[130] I will now address the issue of remedy.

[131] Mr. Decker argued that an order prohibiting the trustees from voting on the by-laws prepared by Mr. Box would amount to an injunction prohibiting three trustees (and the entire board, although they are not named) and that the court should apply injunction principles in coming to its decision.

[132] Mr. Decker relies on the decision of Himel J. in Wang. In that case, the applicants brought a motion for an interim and interlocutory injunction to prohibit the respondents from holding a meeting for the purpose of holding a vote to accept new voting members of the church and consider new proposed by-laws. Justice Himel applied the three-part test described by the Supreme Court of Canada in RJR-Macdonald Inc. v. Canada (Attorney-General), [1994] 1 S.C.R. 311.

[133] The Applicant in this case does not seek interlocutory relief. In determining this application, I have made a final decision about the bad faith conduct of the Respondents. Pal makes clear that the Court has jurisdiction to remedy that conduct.

[134] Mr. Decker also maintained that notwithstanding whatever faults there may have been in the process, of which he says there were none, the Applicant and her counsel have had every possible, conceivable opportunity to have input in the by-laws. Mr. Goswami wrote his letter of September 17, 2014, to which Mr. Box responded and then Mr. Goswami further responded to the response. All of this happened by the end of September 2014. Further correspondence was exchanged since that time, including Mr. Goswami’s March 11, 2015 letter that was to be placed before the board but wasn’t because of the intervening litigation. In my view, this does not remedy my findings that the process was not carried out in a good faith manner. The initial draft prepared by Mr. Box and the first amendments were done without any input from the Applicant and without any liaising by Mr. Box with the trustees as a whole. There has still not been an objective set of draft by-laws prepared by an independent counsel, after counsel liaised with the trustees as a whole, and had the benefit of all of their input in advance.

[135] Similarly, Mr. Decker submitted that the Applicant would have had an opportunity to liaise with Mr. Box if she had stayed at the September 18, 2014 meeting. In my view that was too little, too late. The draft had been prepared by Mr. Box on instructions from two of the Respondents without any prior discussion or consideration by the trustees following Donohue J.’s order, and had been commented on by Mr. Ghosh and Mr. Chatterjee and changed to reflect their input.

[136] The corporation is not a party to this proceeding. I can only make orders in relation to the three Respondents. In my view, the appropriate order in this case will be to reverse the effect of their efforts that were not in good faith. Insofar as they acted without the authorization of corporation, it is necessary to reverse the actions of the three personal Respondents by making orders against them.

[137] I declare that the conduct of the Respondents in the manner in which they retained corporate counsel and invited counsel to attend the September 18, 2014 meeting was unlawful, irregular, unenforceable and of no consequence.

[138] I find that the Respondents acted in bad faith and without the authority of the board when they retained Mr. Box and the by-laws drafted by him were drafted on behalf of the Respondents. The Respondents cannot put those by-laws forward to a vote as ostensibly produced on behalf of the corporation.

[139] As I cannot make an order binding the corporation, the appropriate remedy is to return the parties to the position they were in after Donohue J.’s June 2, 2014 order. The process followed after her order has not been carried out in good faith by the Respondents. The corporation may retain independent corporate counsel, being neither Mr. Goswami, Beard Winter LLP, or Pallett Valo LLP, to draft by-laws on behalf of the corporation. The Applicant, and every other trustee, has the right to review any draft by-law and offer her input, preferably at a trustees’ meeting. The democratic process will dictate the procedure to be followed.

[140] If the corporation decides to retain a new lawyer, I would recommend that the terms of the retainer and the instructions to be given to counsel be discussed at a trustees’ meeting and voted on prior to any meetings with a lawyer. I would recommend that the corporation ensure that the independent lawyer meet with all of the trustees and receive all of their input to ensure independence in the drafting process.

[141] Given the delay that this application has occasioned, I would recommend that the board take steps to discuss and decide on the steps necessary to move forward forthwith.

[142] To be clear, the recommendations outlined in the two preceding paragraphs, numbered 140 and 141, are not court orders.

[143] I wish to make clear, at this stage, that despite numerous allegations proffered by Mr. Goswami throughout the record in this case, I do not think Mr. Box, Ms. Gismondi, Mr. Decker, or their respective firms were in any way responsible for the bad faith actions of their clients.

Issue 3 Should the Court impose the draft by-laws proposed by the Applicant on the Corporation?

[144] Mr. Goswami forcefully argued that the Court should impose by-laws on the corporation, particularly the version of the by-laws he has proffered on behalf of his client.

[145] Further, Mr. Goswami asks for a declaration that the objections/amendments proposed by the Applicant are in the best interests of the corporation.

[146] In oral argument, counsel went through the proposed changes in great detail, clause by clause.

[147] These are not appropriate remedies in the circumstances of this case.

[148] The cases cited above clearly establish that courts should be reticent to involve themselves in the affairs of private religious organizations. While I am satisfied that the Court must intervene to condemn the process instituted by the Respondents to retain a corporate lawyer, in asking the Court to impose by-laws upon the corporation, the Applicant seeks a much more significant intrusion on the autonomy and independence of the organization.

[149] Our model of corporate governance is one that presumes the primacy of a democratic process. Directors are elected by the shareholders (or members) of a corporation. They direct the affairs of the corporation by voting on various issues which concern it. I agree with Mr. Decker that if the Court gives effect to Mr. Goswami’s position, the democratic process would be usurped and would impose the will of the minority on the majority. It would undermine and distort the principles of corporate law.

[150] This is not a case like Sandhu v. Siri Guru Nanak Sikh Gurdwara of Alberta, 2015 ABCA 101, 599 A.R. 267, leave to appeal ref’d, [2015] S.C.C.A. No. 184. In that case, the Alberta Court of Appeal affirmed a chambers judge’s decision finding oppression by the leadership of the Gurdwara. The Executive Committee of the Gurdwara was selectively refusing membership to some community members. In lieu of winding up the religious society, the judge ordered a restructuring of the society’s election process and amended its by-laws. The Court of Appeal found that the chambers judge “had statutory authority to restructure the Society’s election process and otherwise amend its bylaws upon finding that it had engaged in acts of oppression of its members” (at para. 36).

[151] In this case, the Applicant has not pleaded oppression. She has not articulated otherwise the statutory or other legal authority for me to impose by-laws on the corporation. Nor am I convinced that the situation in this case is as severe as the circumstances of Sandhu. The misconduct alleged relates the passage of corporate by-laws. There is no suggestion in this application that the Respondents are attempting to exclude members from the corporation.

Issue 4 Should leave be granted for the Applicant to commence a derivative action on behalf of Toronto Kalibari?

[152] I do not grant leave for the Applicant to commence a derivative action on behalf of Toronto Kalibari.

[153] Section 251(2) of the Act sets out the conditions precedent for the granting of leave to commence a derivative action:

(2) The court may not make an order under subsection (1) unless the court is satisfied that

(a) the complainant has given notice to the directors of the corporation or its subsidiary of the complainant’s intention to apply to the court under subsection (1) within the prescribed period before bringing the application, or as otherwise ordered by the court, if the directors of the corporation or its subsidiary do not bring the action, prosecute or defend it diligently or discontinue it;

(b) the complainant is acting in good faith; and

(c) it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued.

[154] In BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, the Supreme Court of Canada held that the requirement of leave to commence a derivative action in the Canada Business Corporations Act, R.S.C. 1985, c. C-44, “serves to prevent frivolous and vexatious actions, and other actions which, while possibly brought in good faith, are not in the interest of the corporation to litigate” (at para. 43).

[155] The Applicant seeks leave to commence an action for:

a) A declaration that the objection/amendments to the proposed new operating By-laws are in the best interests of [Toronto Kalibari] and in conformity with the spirit and intent of the existing [Toronto Kalibari] By-laws and the Order of the Honourable Madam Justice [Donohue] dated June 2, 2014;

b) An Order directing the Respondents directing the Respondents, and in extension the majority Trustees, to incorporate the above objections/amendments in the proposed new operating By-laws of [Toronto Kalibari] with necessary modification and changes;

c) Costs of the derivative action for which leave is sought; and

d) Such further and other relief as this Honourable Court may [deem] just.

[156] First, Mr. Decker has correctly argued that the Applicant failed to give notice to the corporation in accordance with s. 251(2)(a) of the Act.

[157] Second, given my findings in the sections above, I am not convinced that the proposed action has any merit or reasonable chance of success. The relief sought, absent oppression being pled, is not properly within the domain of the Court.

[158] Third, the relief sought is substantially the same as I have adjudicated in this application. A derivative action would be unnecessarily duplicative.

[159] Fourth, in addition to this application, there are numerous related court proceedings outstanding. A further derivative action will result in considerable additional legal costs to the corporation.

[160] Accordingly, I am not satisfied that the proposed derivative action appears to be in the interests of the corporation.

Issue 5 Should the Court order the Respondents to engage all nine trustees to “diligently work and take all reasonable steps/actions, including repealing, amending, making new By-laws” for the transition of the corporation to the [Canada Not-for-profit Corporations Act](https://laws-lois.justice.gc.ca/eng/acts/c-44.5/)?

[161] Mr. Decker argued that under this head of relief, the Applicant was essentially seeking a mandatory injunction requiring the three respondents to ensure that all nine trustees of Toronto Kalibari are in agreement, or at least some form of consensus, with respect to any proposed by-laws before they are passed by the board. I agree with this characterization. A consensus of all trustees is not required.

[162] In my view, this issue does not require the Court’s intervention. The trustees, as the directors of the corporation are vested with statutory and common law obligations to act in the interests of the corporation. Breaches of these duties are actionable. A court order is not required.

CONCLUSION

[163] In the result, I am of the view that the by-laws drafted by Mr. Box are sufficiently clouded by the failures of the Respondents to act in good faith to require that they be reversed.

[164] I declare that the conduct of the Respondents in the manner in which they retained corporate counsel and invited counsel to attend the September 18, 2014 meeting was unlawful, irregular, unenforceable and of no consequence.

[165] I find that the Respondents acted in bad faith and without the authority of the board when they retained Mr. Box and the by-laws drafted by him were drafted on behalf of the Respondents. The Respondents cannot put those by-laws forward to a vote as ostensibly produced on behalf of the corporation.

[166] As I cannot make an order binding the corporation, the appropriate remedy is to return the parties to the position they were in after Donohue J.’s June 2, 2014 order. The process followed after her order has not been carried out in good faith by the Respondents. The corporation may retain independent corporate counsel, being neither Mr. Goswami, Beard Winter LLP, or Pallett Valo LLP, to draft by-laws on behalf of the corporation. The Applicant, and every other trustee, has the right to review any draft by-law and offer her input, preferably at a trustees’ meeting. The democratic process will dictate the procedure to be followed.

[167] The remainder of the application is dismissed.

[168] This application was originally booked on a long motions list. Ultimately, six court days were required for the hearing. The parties have other related litigation that remains outstanding. In the event further litigation in relation to the by-laws is contemplated, I would strongly advise the parties to write to Regional Senior Justice Daley requesting my appointment as a case management judge.

COSTS

[169] Costs will be difficult. While the Applicant was ultimately successful in obtaining some of the relief she sought, most of it has been denied. Moreover, her position shifted significantly as this application evolved.

[170] If the parties are unable to agree on costs, the Applicant may serve and file brief (five pages, double spaced) written costs submissions with a bill of costs attached within 20 days of today; the Respondent may serve and file brief (five pages, double spaced) written response costs submissions within 40 days of today; and the Applicant may serve and file brief (three pages, double spaced) written reply costs submissions within 50 days of today.

Coats J.

Released: July 27, 2016

COURT FILE NO.: 836/14 DATE: 20160727 ONTARIO SUPERIOR COURT OF JUSTICE DOLLY BHADRA Applicant – and – DIPTENDU CHATTERJEE, SAMIRENDRA K. DEY and TRIDIB GHOSH Respondents REASONS FOR JUDGMENT Coats, J. Released: July 27, 2016