Pruner v. Ottawa Hunt and Golf Club, Limited

[Indexed as: Pruner v. Ottawa Hunt and Golf Club, Ltd.]

Ontario Reports

Court of Appeal for Ontario,

Simmons, G.J. Epstein and Pardu JJ.A. (sitting as Divisional Court)

September 14, 2015

127 O.R. (3d) 337 | 2015 ONCA 609

Case Summary

Corporations — Shareholders — Golf club incorporated as share capital social club under Corporations Act — By-laws providing for issuance of Class B voting share to permanent golfing members — Board of directors adopting policy of requiring members who wished to transfer from permanent golfing category to social category to resign (thereby [page338] cancelling their Class B share) and reapply for membership in new category — Policy adopted in order to restrict voting shares to members with greatest stake in club — Policy not imposing variation, condition or restriction on Class B shares so as to trigger s. 34(4) of Corporations Act — Policy reasonable — Corporations Act, R.S.O. 1990, c. C.38, s. 34(4).

Courts — Jurisdiction — Divisional Court — Golf club incorporated as share capital social club under Corporations Act — By-laws providing for issuance of Class B voting share to permanent golfing members — Board of directors adopting policy of requiring members who wished to transfer from permanent golfing category to social category to resign (thereby cancelling their Class B share) and reapply for membership in new category — Applicant applying under Rule 14 of Rules of Civil Procedure for order requiring club to accept his application for transfer from permanent golfing category to social category without cancellation of his Class B share — Application judge finding that policy did not impose variation, condition or restriction on Class B shares so as to trigger s. 34(4) of Corporations Act — Order "made under" Corporations Act for purposes of s. 329 of Act — Appeal lying to Divisional Court — Corporations Act, R.S.O. 1990, c. C.38, ss. 34(4), 329 — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 14.

The respondent golf club was incorporated under the predecessor to the Corporations Act. It was a share capital social club. Its by-laws provided for the issuance of one Class B voting share to certain categories of members, including permanent golfing members. The board of directors adopted a policy requiring members who wished to transfer from the permanent golfing category to the social category to resign (thereby cancelling their Class B share) and reapply for membership in the new category. The policy was adopted in order to restrict voting shares to members with the greatest stake in the club. The applicant wished to transfer from the permanent golfing category to the social category without resigning and losing his Class B share. He brought an application under Rule 14 of the Rules of Civil Procedure for an order requiring the board to accept his transfer application. He argued that the new policy amounted to a variation or restriction of the rights attached to his Class B share, and that accordingly the board could not impose such a change unilaterally, and instead had to apply to the Lieutenant Governor for the issue of supplementary letters patent following a shareholder vote, in accordance with the Corporations Act. The application judge found that the policy was within the board's jurisdiction and that it was reasonable. The applicant appealed.

Held, the appeal should be dismissed.

The application judge did not err in finding that the policy did not amount to a variation or restriction of the rights attached to the applicant's Class B share and that s. 34(4) of the Act was therefore not applicable. The applicant was entitled to keep his share, exercise the voting rights associated with it, and golf as much or as little as he wished. The policy was within the board's lawful authority to make. The application judge also did not err in finding that it was reasonable for the board to adopt a policy that would prevent members with the least at stake in the affairs of the club from making decisions affecting the club's future.

Under s. 329 of the Corporations Act, an appeal lies to the Divisional Court "from any order made by a court under this Act". While the application was brought under Rule 14 of the Rules of Civil Procedure, the order appealed from was an order made under the Corporations Act. The fundamental premise of the [page339] application was that the Corporations Act prevented the board from unilaterally changing the rights associated with the applicant's Class B share. The Act was the lynchpin of his argument and was cited in his notice of application as one of the "grounds for the application". The applicability of s. 329 was raised by the court after the appeal was argued. The panel therefore sought and obtained the permission of the chief justice of the Superior Court of Justice to designate itself as a panel of the Divisional Court.

Amaranth L.L.C. v. Counsel Corp. (2004), 2004 10897 (ON CA), 71 O.R. (3d) 258, [2004] O.J. No. 2091, 186 O.A.C. 395, 131 A.C.W.S. (3d) 578 (C.A.); Kelvin Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, [1992] S.C.J. No. 88, 97 D.L.R. (4th) 616, 143 N.R. 191, J.E. 92-1625, 51 Q.A.C. 49, 36 A.C.W.S. (3d) 362; Ontario Securities Commission v. McLaughlin, [2009] O.J. No. 1336, 2009 ONCA 280, 75 C.P.C. (6th) 26, 248 O.A.C. 54, 176 A.C.W.S. (3d) 580, consd

Other cases referred to

Lawrence v. Toronto Humane Society, [2006] O.J. No. 2410, 271 D.L.R. (4th) 329, 212 O.A.C. 263, 18 B.L.R. (4th) 204, 148 A.C.W.S. (3d) 907, 2006 20224 (C.A.); Rexdale Singh Sabha Religious Centre v. Chattha, [2006] O.J. No. 4698, 153 A.C.W.S. (3d) 104, 2006 39456 (C.A.); Smith v. Toronto Police Assn., [2008] O.J. No. 27, 2008 ONCA 5, 234 O.A.C. 1, 39 B.L.R. (4th) 188, 163 A.C.W.S. (3d) 569; Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 2001 7060 (ON CA), 54 O.R. (3d) 76, [2001] O.J. No. 1605, 144 O.A.C. 136, 104 A.C.W.S. (3d) 1005 (C.A.)

Statutes referred to

Business Corporations Act, R.S.O. 1990, c. B.16, ss. 2(3)(a), 248, 255

Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 249 [as am.], (1)

Code of Civil Procedure, C.Q.L.R., c. C-25

Co-operative Corporations Act, R.S.O. 1990, c. C.35 [as am.]

Corporations Act, R.S.O. 1990, c. C.38, ss. 34(4), 329, 332

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 18(2) [as am.]

Not-for-Profit Corporations Act, 2010, S.O. 2010, c. 15

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14, 26.01

Authorities referred to

Carter, Terrance S., and Theresa L.M. Man, "Share Capital Social Clubs as NPOs: Issues to Consider" (Paper delivered at the Ontario Bar Association Charitable and Not-For-Profit conference, October 27, 2004), online: Carters <http:// www.carters.ca/pub/article/charity/2004/tlmtsc1027.pdf>

APPEAL from the order of Beaudoin J., [2014] O.J. No. 5163, 2014 ONSC 6272 (S.C.J.).

The judgment of the court was delivered by

[1] PARDU J.A.: -- Joseph Pruner is a member of the Ottawa Hunt and Golf Club. He wants to transfer from a "fully privileged [page340] golfing" member to "senior social" member. At the same time, he wants to keep the Class B voting share the club allocated to him when he became a fully privileged golfing member 31 years ago. The board of directors of the club has refused the transfer request. Instead, it has adopted a policy requiring members, like Mr. Pruner, who want to switch from a permanent golfing category to a social category, to resign -- thereby cancelling their Class B voting share -- and reapply for membership in the new category. The board's rationale is to keep voting rights in the exclusive hands of the members with the most at stake -- the permanent golfing members who pay the lion's share of club dues.

[2] Mr. Pruner brought an application in Superior Court seeking an order requiring the board to accept his transfer application. He argued that the board's newly adopted policy amounts to a variation or restriction of the rights attached to his Class B share, and that, as such, the board cannot impose such a change unilaterally. Instead, he argued that the club must apply to the Lieutenant Governor for the issue of supplementary letters patent following a shareholder vote, in accordance with the Corporations Act, R.S.O. 1990, c. C.38.

[3] The application judge did not accept this argument, found that the policy was within the board's jurisdiction and dismissed the application. Mr. Pruner renews his position on appeal.

[4] I would dismiss the appeal. As I will explain, the board's policy cannot be fairly construed as a variation or restriction of the rights associated with Mr. Pruner's Class B share. He is entitled to keep that share, exercise the voting rights associated with it, and golf as much or as little as he wishes.

[5] After the appeal hearing, the court sought submissions from counsel on whether s. 329 of the Corporations Act applies to this appeal. That section provides that an appeal lies to the Divisional Court from "any order made by a court under" that Act. As I will explain later, in my view s. 329 applies and, accordingly, the panel sought and obtained the permission of the chief justice of the Superior Court of Justice to designate itself as a panel of the Divisional Court and has reconstituted itself as a panel of the Divisional Court for purposes of this decision.

A. Background

(1) The Corporations Act

[6] As a starting point, it is helpful to understand the history of the Corporations Act. This background informs both the substantive issue under appeal and, as I will discuss, the jurisdictional [page341] question of whether the appeal properly lies to this court or to the Divisional Court.

[7] The Corporations Act is the antecedent to the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA"). Prior to the enactment of the OBCA, all corporate entities, whether capital or non-share capital, were incorporated by letters patent under the Corporations Act or its predecessor legislation.

[8] With the introduction of the OBCA in 1971, all corporations that had been incorporated under the Corporations Act came under the jurisdiction of the new legislation. Only a handful of corporations were exempted from the OBCA and continued to be governed by the Corporations Act. One of those exceptions was "a company within the meaning of the Corporations Act" (i.e., a corporation with share capital) which has "objects in whole or in part of a social nature": s. 2.2(a) of the 1970 OBCA; s. 2(3)(a) of the current OBCA.[^1]

(2) Share capital social clubs

[9] Historically, social organizations such as country, ski and golf clubs chose to incorporate as share capital corporations under the Corporations Act as a way to raise money. Since social clubs did not carry out purely charitable objects, they could not fundraise by seeking donations. Instead, social clubs would sell shares to prospective members, which, in addition to initiation fees and annual dues, would cover capital and operating costs.[^2]

(3) The Ottawa Hunt and Golf Club

[10] The Ottawa Hunt and Golf Club was incorporated in or about 1920 by letters patent under the predecessor to the Corporations Act. It is a share capital social club, as evidenced by the supplementary letters patent,[^3] issued in 1999, which increased [page342] the authorized capital of the club from $151,000 to $500,000, divided into

— 44,900 Class A non-voting shares;

— 5,000 Class B voting shares; and

— 100 common shares.

Each category of share has a par value of $10.

(4) The allocation of Class B shares

[11] Section 32 of the club's by-laws deals with the allotment of shares. Section 32(a)(i) provides:

The Board shall allot and issue one (1) Class B share to each Fully Privileged Golfing Member, each Senior Golfing 55+ Member and each Associate Intermediate Member when that Member has paid his or her Initiation Fee, and, for the purposes thereof, payment of the Initiation Fee by way of cash and promissory notes in such amount or amounts as may be prescribed from time to time by the Board of Directors shall entitle each Fully Privileged Golfing Member, each Senior Golfing 55+ Member, and each Associate Intermediate Member to one (1) Class B Share.

(Emphasis added)

[12] Section 32(c) [of the by-laws] provides that each new fully privileged golfing member ("FPG") is also entitled to five Class A shares:

Five (5) Class "A" shares, neither more nor less, shall be offered by the Club to each new Class "B" Shareholder at a price of ten ($10.00) dollars each. This offer shall be made to each new Class "B" Shareholder when he or she has fully paid the Initiation Fee as a Fully Privileged Golfing Member.

[13] There is no other provision in the by-laws for the allocation of shares, either Class A or Class B.

[14] The club has a total of 32 membership categories: 15 golfing categories, seven curling categories, four social categories, three temporary categories and three honorary categories (by-laws, ss. 34(a)-(e)). Only three of those categories -- FPG, senior golfing 55+ member and associate intermediate member -- entitle their members to an ownership stake in the club through the issue of a Class B voting share and the option to purchase five Class A non-voting shares. The clear intent is to link shareholding with membership in one of the three permanent golfing categories.

[15] Not coincidentally, the record suggests that these three categories are among those with the highest annual dues. For example, in 2014, an FPG paid $5,260 in dues plus a $110 golf [page343] course levy. By contrast, in the same year a senior social member paid $560 in dues and no golf course levy.

(5) Mr. Pruner's membership in the club

[16] Mr. Pruner became a member of the club in 1981 and was admitted in 1984 as an FPG. He was issued one Class B share and five Class A shares. In 2012, Mr. Pruner's health prevented him from continuing to play golf, so he requested a permanent transfer to the senior social category. That is when the club informed him of its new policy that if Mr. Pruner wanted to become a senior social member, he had to resign from the club and reapply.

[17] The club's general manager sent Mr. Pruner a letter advising him:

The Board of Directors has instituted a policy that no longer permits transfer from a Golf category to a Social or Curling Category.

In order for you to become a Senior Social Member you would be required to resign from the Club and request to rejoin as a Senior Social Member. Upon resignation your Class B share would be cancelled.

Once your Class B share is cancelled you will no longer have any voting rights, and a return to a golfing category in the future would be subject to conditions established by the Board of Directors at that time.

[18] The policy requiring a member to resign from the club in order to cancel his or her voting share is based on s. 32(a) (iii) of the by-laws, which provides: "When a Class aeB' Shareholder ceases to be a Member of the Club, the Club shall cancel the Class aeB' share of that Member, including the voting rights attached thereto."

[19] The policy reflects a concern identified by the club's strategic planning committee that if Class B shareholders are permitted to transfer out of permanent golfing categories while retaining their voting rights, they could have an influence on the future of the club that would be disproportionate to their financial contribution.

B. The Application Judge's Decision

[20] The application judge held, at para. 40, that, "absent any express limitation to its power, the Club's Board is entitled to make policies respecting the management of the Club so long as these policies are in the aebest interests of the Corporation'". At para. 40, the application judge indicated his reliance on the "business judgment rule", which accords deference to a business decision, so long as it lies within a range of reasonable alternatives. The application judge concluded that the club's policy [page344] reflected a "genuine concern" that non-golfing members who pay a significantly lower portion of the overall costs of the club could affect its future direction.

[21] In dismissing Mr. Pruner's application, the application judge held, at para. 41: "I accept the Club's argument that the Board was taking into account the long-term interests of the Corporation as a whole while balancing the interests of various stakeholders and that its policy lies within a range of reasonable alternatives available to it."

C. The Parties' Positions on Appeal

[22] Mr. Pruner submits that the application judge erred by relying on the business judgment rule to uphold the board's policy. He argues that the business judgment rule does not arise unless and until it has been determined that the directors had the lawful authority to make the decision they made.

[23] Mr. Pruner argues the policy is ultra vires the board because it amounts to a variation of the rights attaching to his Class B share, thus triggering s. 34(4) of the Corporations Act. That section provides that an application for supplementary letters patent to "vary a preference, right, condition, restriction, limitation or prohibition" attaching to a class of preference shares may be made to the Lieutenant Governor following a shareholder vote:

34(4) If the application is to delete or vary a preference, right, condition, restriction, limitation or prohibition attaching to a class of preference shares or to create preference shares ranking in priority to or on a parity with an existing class of preference shares, then, subject to subsection (5) and, in addition to the authorization required by subsection (2), the application shall not be made until the application has been authorized in writing,

(a) by 100 per cent of the holders of the shares of such class or classes of shares; or

(b) by at least 95 per cent of the holders of the shares of such class or classes of shares holding at least 95 per cent of the issued shares of such class or classes,

but, in the case of authorization under clause (b), the application shall not be made until twenty-one days notice of the application has been given by sending the notice to each of the holders of shares of such class or classes to the holder's last address as shown on the books of the company and only if at the expiration of twenty-one days none of the holders of such class or classes has dissented in writing to the company.

[24] The club agrees that it would be an error of law to invoke the business judgment rule to assess the scope of the board's authority to enact the policy. However, the club submits that the application judge did not use the business judgment rule in this [page345] way. Rather, it submits that the application judge properly found that the board had the lawful authority to enact the policy, and only then assessed the reasonableness of the policy in accordance with the business judgment rule.

[25] The club maintains that the policy does not affect Class B share rights, and therefore s. 34(4) of the Corporations Act is irrelevant and inapplicable. Rather, it argues, the policy is a valid exercise of the board's power pursuant to the club's by-laws.

[26] The appeal therefore turns on whether the policy amounts to a variation of Mr. Pruner's Class B share rights.

D. Analysis: The Policy Does Not Affect Class B Rights

[27] In my view, the board's policy cannot fairly be described as imposing a variation, condition or restriction on Class B shares. As I have just explained, the by-laws make it clear that Class B shares are inextricably linked to membership in one of three permanent golfing -- i.e., high dues-paying -- categories. The wording of s. 32(a)(i) is clear: "Payment of the Initiation Fee . . . shall entitle each Fully Privileged Golfing Member, each Senior Golfing 55+ Member, and each Associate Intermediate Member to one (1) Class B Share." No one in the club's myriad other membership categories is so entitled.

[28] In his factum, at para. 57, Mr. Pruner states that the policy "forces" him to resign his membership "against his will". In oral argument, his counsel described this as a "Hobson's choice". Neither statement is accurate.

[29] As the club has pointed out, Mr. Pruner is entitled to keep his Class B share, and to continue to exercise the voting rights associated with it. He can do this even if he never plays another round of golf. The board is not "forcing" him to do anything. It is not saying, for example, that a person has to golf a minimum number of times per year to remain a permanent golfing member. It is simply insisting that if Mr. Pruner wishes to keep his Class B voting share, he remain a dues-paying member of a category to which that share attaches.

[30] Having concluded that the board's policy does not affect Mr. Pruner's rights as a shareholder, it follows that the policy was indisputably a valid exercise of the board's power based on the following by-laws:

Section 3, which provides that the board has the authority to "do all . . . things which it may deem necessary for the proper operation, government and management of the Club"; [page346]

Section 22, which provides that the board shall be "generally responsible to direct the affairs of the Club, and to that end, to prudently set the policies of the Club";

Section 23, which provides that the board is responsible for considering and approving "strategies and plans for the improvement, future direction and management of the Club";

Section 25, which provides that the strategic planning committee "shall advise and make recommendations to the Board on policy matters referred to it by the Board for the future betterment and improvement of the Club";

Section 34, which provides that the board "may prescribe from time to time, based on the capacity of the Club's facilities, the existing demographics of the Club's Membership and on the desired number and type of Members in each Category, a quota or cap in numbers in respect of any one or more of the Membership Categories"; and

Section 42(c), which provides that "[a]ll applications for transfers from one Category to another Category of membership require the approval of the Board, acting on the recommendation of the Membership Committee".

[31] Having concluded that the policy was within the board's lawful authority to make, like the application judge, I am satisfied that it was reasonable for the board to adopt a policy that would prevent members with the least at stake in the affairs of the club from making decisions affecting the club's future.

[32] In the alternative, Mr. Pruner argues that he has a binding contract with the club to accept his transfer to the senior social category because it cashed his cheque. The application judge rejected this argument, holding, at para. 33:

This is not a classic case of "offer and acceptance". The Applicant's own letter enclosing the cheque asked the Club "to confirm" its acceptance of his request. No such confirmation was ever received. From his past experience of transferring in an out of golfing categories [between 2006 and 2012, when Mr. Pruner's health fluctuated], he knew that acceptance of any such request was conditional and subject to approval by the Board.

[33] I see no error in this conclusion.

E. Jurisdiction

[34] Section 329 of the Corporations Act provides that "[a]n appeal lies to the Divisional Court from any order made by a court under this Act". [page347]

[35] Following the appeal hearing, the court sought counsel's submissions on the applicability of this section. In their joint written submissions, counsel argued that the application judge's order was not made under the Corporations Act. They said:

The appellant's application was brought under Rule 14 of the Rules of Civil Procedure and [the application judge's] order was made pursuant to and in exercise of the powers given to him under Rule 14. Applying the reasoning in [Kelvin Energy Ltd. v. Lee], 1992 38 (SCC), [1992] 3 S.C.R. 235, [the application judge's] decision would only be appealable under s. 329 of the Corporations Act if the order was made pursuant to a power expressly conferred by the Corporations Act. While the provisions of the Corporations Act were relevant in interpreting the Letters Patent and Bylaws issue in this case, the legislative origin of the power from which [the application judge's] judgment is derived are the Rules of Civil Procedure.

(Pinpoint references omitted)

[36] I disagree with this analysis. There are three reasons why.

[37] First, the parties present an overly narrow reading of Kelvin, one that is not consistent with subsequent jurisprudence from this court.

[38] In Kelvin [Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, [1992] S.C.J. No. 88], the parties negotiated a settlement that had to be approved by a court under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 ("CBCA"). The director under the CBCA was concerned about the settlement and obtained a court order under the Quebec Code of Civil Procedure, C.Q.L.R., c. C-25 to examine certain witnesses. The order for discovery was appealed and the director moved to quash the appeal on the ground that the order was not appealable as of right.

[39] Section 249(1) of the CBCA provides that an appeal lies to the court of appeal of a province from any final order made by a court of that province "under this Act". The question for the Supreme Court was whether the order for discovery was an "order made by a court . . . under this Act". L'Heureux-Dubé J. held that it was not. She explained, at p. 258 S.C.R., that the scope of s. 249 was limited "to those judgments arising from a power specifically conferred by the Canada Business Corporations Act, to the exclusion of the variety of interlocutory decisions made under the Code of Civil Procedure".

[40] In Amaranth L.L.C. v. Counsel Corp. (2004), 2004 10897 (ON CA), 71 O.R. (3d) 258, [2004] O.J. No. 2091 (C.A.), at para. 10, Laskin J.A. explained that the result in Kelvin was driven by an important policy consideration: the CBCA's primary objective of giving a fast and effective remedy to shareholders vulnerable to oppression would be defeated if interlocutory orders such as the one in issue were appealable as of right. [page348]

[41] Laskin J.A. went on to hold that, in the case before him, an order declaring that the appellant lacked standing to bring an oppression claim under s. 248 of the OBCA was an order "made under" that Act and was therefore appealable to the Divisional Court pursuant to s. 255 of that Act. He rejected the appellant's argument that the order was not an exercise of power under the OBCA but was rather a general question of contract interpretation. Laskin J.A. explained, at para. 12:

[The application judge's] interpretation of the trust indenture and his ruling on standing were fundamental to his disposition of the application. His determination of Amaranth's standing to sue was not an interlocutory order made under a different statute along the way to dealing with the application for oppression, as was the case in Kelvin. Indeed, it would be an anomalous result if the issue of standing were to be hived off and appealable only to this court, while the underlying merits of s. 248 proceedings were appealable to the Divisional Court. The legislature could not have intended this result. As I view it, Kelvin does not assist Amaranth.

[42] Similarly, in Ontario Securities Commission v. McLaughlin, [2009] O.J. No. 1336, 2009 ONCA 280, 248 O.A.C. 54, O'Connor A.C.J.O. held that an order dismissing a motion to amend a statement of defence in an oppression action was properly appealable to the Divisional Court as an order "made under" the OBCA.

[43] In an argument that mirrors the one on this appeal, the appellant in McLaughlin argued that the motion to amend was brought pursuant to rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and the resulting order was therefore not "made under" the OBCA.

[44] O'Connor A.C.J.O. rejected this argument. He noted at the outset of his analysis that the OBCA does not contain its own procedural code. "Like other civil actions", he explained, at para. 11, "claims brought pursuant to the OBCA are subject to the Rules of Civil Procedure". He went on, at para. 16:

Unlike Kelvin, the order in this case was not an interlocutory order but a final order disposing of potential defences in an oppression action. In my view, the relationship between the power exercised by the motion judge was sufficiently "close" to a legislative source under the OBCA, namely, the power to adjudicate on oppression claims under s. 248. Implicit in that power is the authority to allow or deny certain claims and defences. When a court allows or dismisses an application under s. 248 after the completion of the proceedings, it is making an order under the OBCA which is appealable to the Divisional Court under s. 255. In my view, when a court exercises what is, in effect, the same power by allowing or dismissing a claim or a defence brought under s. 248 at an early stage of the proceeding, it is equally making an order "under this Act". The relationship between the power in fact exercised -- dismissing a defence to the claim -- is sufficiently "close" to the source of the legislative power under s. 248. [page349]

[45] In the case at bar, the fundamental premise of Mr. Pruner's application was that the Corporations Act -- and s. 34(4) in particular -- prevents the board from unilaterally changing the rights associated with his Class B share. The Corporations Act is the lynchpin of his argument and is cited in his notice of application as one of the "grounds for the application".

[46] The notion that the Corporations Act was central to the application is reinforced in the application judge's reasons. He explained, at para. 32, that his decision "ultimately turns on an interpretation of the Board's power to implement the new policy in accordance with the Corporations Act, the common law, the Club's Supplementary Letters Patent and governing By-Laws" (emphasis added).

[47] Like its successor legislation, the OBCA, the Corporations Act does not contain its own procedural code, but rather is subject to the Rules of Civil Procedure. In McLaughlin, O'Connor A.C.J.O. rejected the suggestion that the order under appeal was "made under" rule 26.01 rather than under the OBCA. In my view, the same reasoning applies here. Accordingly, I reject the parties' submission that the order under appeal was "made under" Rule 14 rather than under the Corporations Act.

[48] The second reason I would hold that the order was "made under" the Corporations Act is that, although the parties did not advert to it, s. 332 of that Act expressly provides for a remedy for an aggrieved shareholder such as Mr. Pruner who is of the view that a corporation has failed to perform a duty:

332. Where a shareholder or member or creditor of a corporation is aggrieved by the failure of the corporation or a director, officer or employee of the corporation to perform any duty imposed by this Act, the shareholder, member or creditor, despite the imposition of any penalty and in addition to any other rights that he, she or it may have, may apply to the court for an order directing the corporation, director, officer or employee, as the case may be, to perform such duty, and upon such application the court may make such order or such other order as the court thinks fit.

[49] Mr. Pruner's objection to the club's policy could legitimately be framed as imposing a positive duty on the board to accept his application for a transfer to a senior social member and to refrain from imposing a condition that he surrender his voting share.

[50] Third, as I explained earlier, the Corporations Act is the antecedent to the OBCA. As Amaranth and McLaughlin illustrate, this court has taken an expansive view of what constitutes an order "made under" the OBCA in order to give effect to the appeal provision in s. 255 of that statute. The wording of s. 255 of the OBCA and s. 329 of the Corporations Act is the same: [page350] "An appeal lies to the Divisional Court from any order made by [the Superior Court of Justice] under this Act." Given the shared history of the two Acts, the court should adopt the same generous approach to jurisdictional issues arising under the Corporations Act.

[51] I acknowledge that this court has heard appeals under the Corporations Act, including appeals from applications under s. 332, as of right with no mention of jurisdiction. See, e.g., Rexdale Singh Sabha Religious Centre v. Chattha, [2006] O.J. No. 4698, 2006 39456 (C.A.); Lawrence v. Toronto Humane Society, [2006] O.J. No. 2410, 2006 20224 (C.A.); and Smith v. Toronto Police Assn., [2008] O.J. No. 27, 2008 ONCA 5, 234 O.A.C. 1. I can do no better than to quote from Laskin J.A., who faced a similar problem in Amaranth, at paras. 13-15:

Admittedly, in a few cases, this court has heard and decided appeals in connection with proceedings under the OBCA.

The case most directly on point is Casurina, also an application under the oppression provisions of the OBCA. Like Ground J., the application judge in that case, Spence J., held that the appellant, a debenture-holder, had no standing to sue under the governing trust indenture. He therefore dismissed the application for relief under s. 248 of the OBCA. He then went on, in obiter observations, to address some of the merits of the s. 248 application. Feldman J.A. wrote for the panel dismissing the appeal. She made no comment on this court's jurisdiction to hear the appeal.

I do not view Casurina or the other cases cited by Amaranth to be helpful in resolving this motion to quash. Whether for tactical or other reasons, in none of these cases did counsel raise the question of this court's jurisdiction, and therefore in none of them did this court consider whether it had jurisdiction.

(Citations omitted)

[52] I conclude for these reasons that the application judge's order dismissing Mr. Pruner's application was an order made under the Corporations Act, and that the appeal should have been brought to the Divisional Court.

[53] The jurisdiction issue was not detected until after hearing. Because the parties had fully argued the merits of the appeal, this court sought a designation by the chief justice of the Superior Court of Justice to constitute the judges of the Court of Appeal in this matter as justices of the Divisional Court pursuant to s. 18(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43. As Rosenberg J.A. observed in Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 2001 7060 (ON CA), 54 O.R. (3d) 76, [2001] O.J. No. 1605 (C.A.), at para. 12, this court is rarely reconstituted as Divisional Court: "It is an option that is generally only resorted to where the jurisdictional issue is noticed after the appeal has [page351] been argued and is done to save the parties the expense and inconvenience of having to reargue the appeal."

[54] Having received that designation, the panel is reconstituted as the Divisional Court.

F. Disposition

[55] For the reasons given, I would dismiss the appeal, with costs to the club fixed at $24,000, inclusive of disbursements and applicable taxes.

Craig M. Bater, for appellant.

R. Aaron Rubinoff and Emily S.S. Rahn, for respondent.

Appeal dismissed.

Notes

[^1] Terrance S. Carter and Theresa L.M. Man, "Share Capital Social Clubs as NPOs: Issues to Consider" (Paper delivered at the Ontario Bar Association Charitable and Not-For-Profit conference, October 27, 2004), online: Carters <http:// www.carters.ca/pub/article/charity/2004/tlmtsc1027.pdf>, at p. 2.

[^2] Ibid., at p. 3. Upon proclamation of the Not-for-Profit Corporations Act, 2010, S.O. 2010, c. 15, share capital social clubs will continue to be governed by the Corporations Act for a five-year transition period. After that time, each club must choose to reorganize as either (a) a non-share capital corporation under the Not-for-Profit Corporations Act; (b) a co-operative corporation under the Co-operative Corporations Act, R.S.O. 1990, c. C.35; or (c) a share capital corporation under the OBCA.

[^3] Counsel have been unable to locate the original letters patent.

End of Document