Mohamed Bekkari v. Islamic Society of North America (ISNA)

COURT FILE NO.: CV-13-475740

DATE: 20140311

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mohamed Bekkari

Applicant

AND:

Islamic Society of North America (ISNA)

Respondent

BEFORE: The Honourable Justice W. Matheson

COUNSEL: Steven G. Bosnick, for the Applicant

Kimberly A. Mullin, for the Respondent

HEARD: January 27, 2014

ENDORSEMENT

[1] This Application arises from a course of conduct within the Respondent (ISNA Canada) by which it began, but did not successfully conclude, the process of changing its by-law. ISNA Canada operated under the new by-law for a few years before the problem came to light. The problem became apparent in the course of an internal governance dispute.

[2] The Applicant was the subject of a motion purporting to remove him as President of ISNA Canada in December 2012. He disputes the validity of that Board decision for a number of reasons, including because the Board acted under the new by-law, which was invalid.

[3] The Applicant therefore seeks a declaration that the earlier by-law is still in effect and related relief.

Background to application

[4] ISNA Canada is a religious and charitable not-for-profit corporation incorporated under the Canada Corporations Act, R.S.C. 1970, c. 32. That Act requires, among other things, that the corporation’s by-laws include a provision regarding the mode of repealing or amending by-laws. Subsection 155(2) of the Act requires that the corporate by-laws include the following:

(c) mode of repealing or amending by-laws with special provision that the repeal or amendment of by-laws not embodied in the letters patent shall not be enforced or acted upon until the approval of the Minister has been obtained; [Emphasis added.]

[5] Unlike other corporate statutes, the Canada Corporations Act does not include detailed statutory requirements for many aspects of corporate governance. Instead, the Minister deals with many of those matters by imposing requirements as needed when by-laws are submitted for approval.

[6] ISNA Canada successfully implemented amendments to its by-law in 2005. The approval of the Minister was obtained, and the 2005 by-law incorporated a provision requiring Ministerial approval for any future by-law amendments. Among other things, article 2.08 of the 2005 by-law provided as follows:

…the repeal or amendment of such existing by-law shall not be enforced or acted upon until the approval of the Minister of Industry Canada has been obtained.

[7] In 2008, ISNA Canada embarked on an initiative to amend its by-law. At the time, the Applicant was the Vice-President of ISNA Canada, and he participated and supported that process. The approval of the Board (known as the Majlis) was obtained. As a Majlis member, the Applicant voted in favour of the amendments. By ballot by mail, the requisite membership vote was conducted. Among other comments received in that process, the Applicant suggested that the immediate past President no longer sit on the Majlis. That change was also adopted.

[8] The then Secretary General advised the Majlis that legal advice had been obtained that Ministerial approval of the by-law amendments was not required. The Secretary General was not only a Majlis member but was described in the evidence as equivalent to the Chief Executive Officer of ISNA Canada. When the 2005 by-law was implemented, it was the then Secretary General who had taken the steps necessary to obtain Ministerial approval.

[9] The Majlis, including the Applicant, accepted the advice that Ministerial approval was no longer required and proceeded on the basis that no further steps were needed to fully implement the new by-law.

[10] Thus, after the members’ vote was completed, the Secretary General signed the new by-law and ISNA Canada began to operate under it. Elections were held under it in 2009. The Applicant rose to President after the 2009 elections.

[11] There was no issue about the new by-law until the Majlis received a Report from the Committee of Elders in October 2012. That Committee was not specifically charged with any issue regarding validity of the by-law, but in the course of its work the issue came up. The Report raised concerns because the by-law had not been submitted to Industry Canada for approval by the Minister. The Majlis discussed this aspect of the Report at the November 24-25, 2012 meeting and directed follow-up on the issue.

[12] Quite apart from the by-law issue, the Majlis had been taking steps regarding significant governance changes for ISNA Canada in the period leading up to November 2012. ISNA Canada was well into the process of implementing the governance changes when, at the meeting in November 2012, the Majlis changed course and voted to revert to the old governance model. The Applicant suggested a different approach at the meeting but his view was not accepted.

[13] After the meeting, the Applicant communicated again with the Majlis about their change in position on governance reform and his reasons for his concerns. He indicated that he was distancing himself from the Majlis’ decision. An emergency telephone meeting of the Majlis was called for December 13, 2012.

[14] At that meeting, the Applicant was invited to withdraw his concerns. When he did not do so, he was told to leave the conference call. After he left, the remaining members of the Majlis organized a follow-up meeting for December 20, 2012. The Applicant was given notice of that meeting only six days before (rather than the required notice period of seven days). He was not told that the Majlis was going to be considering a motion to remove him as President. He advised that he could not attend the meeting. The Majlis voted to remove him as President at that meeting. The Applicant’s four-year term would otherwise have expired shortly thereafter.

[15] The Applicant submits that in additional to short notice, there was no quorum at that meeting. But most significantly, only the new by-law permitted the Majlis to remove the President. Under the 2005 by-law, only the members could do so. The Applicant therefore submits that the decision to remove him was not valid.

[16] In 2013, the new by-law was submitted to the Minister for (late) approval. It was rejected. Among other problems, it was rejected because of its provision allowing the Majlis to remove a president. The Ministry comments show that the Minister required that the removal power remain with the members.

Validity of new by-law

[17] Although the Applicant raised a concern about the mail ballot process in his factum on this Application, that issue was not pressed at the hearing. The obligation to obtain the approval of the Minister was the focus of the argument.

[18] There is no real issue that the new by-law was not properly put in place. Ministry approval was required and was not obtained. As set out in the Canada Corporations Act and in the 2005 by-law, without that approval the new by-law ought not to have been acted upon. But it was. The real issue is what to do about it now, given that ISNA Canada in good faith but erroneously acted upon the new by-law from early 2009 at least until the issue was drawn to the Majlis’ attention in November of 2012. Elections were held under it. Decisions were made. The Majlis membership was affected by it. The Majlis purported to remove the Applicant from his position as President under the new by-law.

[19] ISNA Canada submits that the Applicant is estopped from attacking the validity of the new by-law under the doctrines of estoppel by convention and estoppel by representation.

[20] Estoppel by convention has the following three elements, as set out in Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53, at para. 59:

(1) the parties’ dealings must have been based on a shared assumption of fact or law;

(2) a party must have acted in reliance on this shared assumption, its actions resulting in a change of its legal position; and,

(3) it must be unjust or unfair to allow one of the parties to resile or depart from the common assumption.

[21] I find that estoppel by convention applies in this case in one important way. For the period from the supposed implementation of the new by-law in 2009 through to it being called into question in November 2012, the Majlis, including the Applicant, were proceeding on a shared assumption that the new by-law was valid. The Majlis, including the Applicant, acted in reliance upon it. It would be unjust for the Majlis, including the Applicant, to now call into question actions taken during that period. That period came to a close upon the issue of validity being raised at the November 2012 board meeting, ending the shared assumption of validity. Thus, the doctrine is not an impediment to the Applicant seeking a declaration of invalidity now. Indeed, I find it puzzling that ISNA Canada would oppose such a declaration, now knowing that the new by-law does not comply with the Canada Corporations Act and is unacceptable to the Minister.

[22] I find that estoppel by representation does not apply: Sekhon v. Aerocar Limousine Services Co-Operative Ltd., [2013] O.J. No. 311 (S.C.J.), at para. 114. I do not regard the fact of acting under the new by-law as a representation by the Applicant that has the effect of precluding this Application. It was the Secretary General who represented that Ministerial approval was not required, not the Applicant.

[23] I therefore find that the new by-law is invalid and that the 2005 by-law is the operative by-law for ISNA Canada.

Appropriate remedy

[24] Each side presents unattractive remedial options should the 2005 by-law be declared the operative by-law, as I have now done. When asked what should happen about all the prior decisions taken under the invalid by-law, Applicant’s counsel indicated that they should each be evaluated based on compliance with the 2005 by-law, and may or may not stand. This would be impractical. However, that issue is largely addressed by my ruling that actions taken before the November 2012 meeting cannot be challenged as a result of estoppel by convention. It remains to address the decision taken thereafter to remove the Applicant as President.

[25] ISNA Canada asks that I leave the status quo in place until it gets a new by-law fully approved. It plans to deal with this along with other steps that are required as a result of a transition that all organizations incorporated under Part II of the Canada Corporations Act must undertake due to legislative change. Those organizations, including ISNA Canada, must transition to the new Not-for-profit Corporations Act by application to Industry Canada due in October of 2014. Obviously, ISNA Canada has no control over how long it might take to complete the process of obtaining Ministerial approval.

[26] I find the status quo proposal problematic because it amounts to a request to allow ISNA Canada to continue to operate under an invalid by-law for the foreseeable future. It would also mean that the Majlis, despite its invalid constitution, would be continuing to make important decisions for ISNA Canada including proposed changes to the by-law.

[27] ISNA Canada further submits that the Applicant should be precluded from any remedy due to the equitable doctrine of clean hands. I disagree. That doctrine is founded on serious misconduct. Here, the Applicant is essentially being criticized for accepting the Secretary General’s advice (as did the other Majlis) that the new by-law was in force and for acting under it, as well for steps he took in bringing this Application. The various characterizations of the Applicant’s conduct, even taken at their highest, do not come close to unclean hands.

[28] I am conscious of the principle that courts should not be too ready to act as political arbiter to settle internal struggles between members of an organization: Dumont v. Manitoba Metis Federation Inc., 2004 MBCA 149, [2005] 5 W.W.R. 284 (Man. C.A.), at para. 65. The key here is to put ISNA Canada in the position to move forward with a properly constituted Majlis making the decisions. That can be accomplished through a fresh election under the 2005 by-law, after which a properly constituted Majlis can proceed with any by-law and other changes that may be properly decided upon.

[29] In that the removal of the Applicant as President was done under the invalid by-law, using a process not permitted under the 2005 by-law, that decision was invalid. However, on the evidence before me the old Majlis cannot now be re-constituted. As well, if the Applicant had remained as President his term would have ended last year under the new by-law, and earlier under the 2005 by-law. It is therefore not constructive to attempt to reinstate the Applicant as President now and re-constitute the Majlis under the 2005 by-law. Nor is it practical to allow him part of the presidential authority (specifically the ability to propose the Election Committee). However, the Applicant can and should have a role in the election process. I conclude that it is appropriate that the Applicant fill the role of immediate past-President under the 2005 by-law, and as such be a member of the Majlis during the period leading up to the election and ending upon the new Majlis being established based upon the election results. Of course, the Applicant is free to run for election if he wishes to do so.

[30] Lastly, the Applicant seeks an order directing that ISNA Canada indemnify him for all costs, charges and expenses incurred in respect of this Application pursuant to Article 8.02 by the 2005 by-law. That article provides for indemnity in certain circumstances where certain classes of persons (including the Applicant) are “made a party” to proceedings. Based upon the wording of the by-law, I conclude that it is intended to address circumstances where the person is sued, not where the person themselves initiates the proceedings. Thus indemnity is not available under that provision. However, the Applicant may still seek costs as the successful party to this Application.

Decision

[31] I therefore declare that the new by-law is invalid and the 2005 by-law is the operative by-law for ISNA Canada. I further declare that the decision to remove the Applicant as President was invalid. I further order the following terms:

(i) the current Majlis shall promptly take the necessary steps to have an election, which shall be conducted using the procedure set out in the 2005 by-law;

(ii) in the period until a new Majlis is formed based upon the election results, the Applicant shall fulfill the role of immediate past-President on the Majlis under the 2005 by-law; and,

(iii) ISNA Canada shall defer any other significant matters, such as amendments to the by-law, until a new Majlis is put in place after the election.

[32] If the parties believe any other orders are required now to conduct the election under the 2005 by-law, they may provide brief written submissions in that regard to be delivered by March 29, 2014.

[33] If the parties are unable to agree on costs, the Applicant shall make his submissions by brief written submissions together with a costs outline to be delivered by March 29, 2014. The Respondent’s brief written response shall be delivered within 20 days after service of the Applicant’s submissions.

W. Matheson J.

Date: March 11, 2014