Saskatchewan WTF Taekwondo Association Inc. et al. v. Taekwondo Canada, 2015 ONSC 2937

COURT FILE NO.: CV-15-526240

DATE: 20150505

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Saskatchewan WTF Taekwondo Association Inc., Taekwondo Manitoba,

Taekwondo NB Inc., Association Taekwondo Du Quebec, WTF Taekwondo

Association of PEI, WTF Taekwondo Federation of British Columbia, and

Alberta Taekwondo Association, Applicants

AND:

Taekwondo Canada, Respondent

BEFORE: Sean F. Dunphy, J.

COUNSEL: Jordan Goldblatt, Louis Century for the Applicants

Ian R. Dick, for the Respondent

HEARD: May 5, 2015

ENDORSEMENT

[1] The applicants appeared before me this morning to request that I exercise my discretion under s. 168(1) of the Canada Not for Profit Corporations Act, S. C. 2009, c. 23 (the “Act”) to call a meeting of members. The applicants are (with one exception) members of the respondent non-profit corporation, Taekwondo Canada. Three of their number claim to have been unjustly frustrated in their attempt to exercise their statutory right to requisition a meeting of members by the existing directors of the corporation.

Background

(a) Overview

[2] It is fair to say that there is a certain level of tension within the membership of Taekwondo Canada. I have no doubts whatsoever that both sides to the dispute have the sincerely held view that they have been acting in the best interests of the sport and of the corporation which is the national expression of that sport. There are some differences of vision and, undoubtedly, some personality clashes.

[3] There has been a history of some litigation and a number of members being expelled or denied voting status. Underlying this has been a clash of philosophy and style between the group of directors currently in control of the respondents and some or all of the applicants.

[4] I have been pointed to a history of litigation between the parties as well as certain arbitrations. Allegations were made about the conduct of the September 2014 Annual General Meeting (or “AGM”) of the corporation where a number of candidates for the position of director were disqualified.

[5] I have heard these allegations but urged upon both parties that the Court is not the place to resolve the policy differences that separate them and that this hearing would not be allowed to descend into an appeal of the outcome of the AGM or of any of the various harassment complaints that were mentioned in the material.

(b) Requisitioned Meeting

[6] On February 15, 2015, three of the applicants (the provincial Taekwondo associations of Quebec, Manitoba and PEI) requested that the directors call a meeting of the members for the purposes set forth in the requisition pursuant to s. 167(1) of the Act.

[7] The requisition contained the text of ten motions to be presented to the members for voting. These included the reinstatement of four suspended provincial section members (BC, Saskatchewan, New Brunswick, Ontario) as voting members and the removal of six named directors from the board with immediate effect.

[8] The directors did comply with the requisition. On March 7, 2015 the corporation delivered a response giving reason for their decision not to comply. In the response, the respondent indicated:

“The Corporation and the directors have determined that the primary purpose of the motions submitted in the requisition is to enforce a personal claim or redress a personal grievance against the Corporation and certain of its directors. This determination has been based on a number of factors, including the ongoing litigation between Taekwondo Manitoba and other plaintiffs, on one hand and the Corporation and certain directors on the other hand. For this reason the Corporation has determined not to call a special meeting as requested in the Requisition.” (emphasis added)

[9] The respondent filed an affidavit of Mr. Tony Nippard, another director whose removal was to be sought at the meeting. I set forth below the reason Mr. Nippard expressed for not calling the meeting:

“TKD Canada refused to call this meeting because it appeared to TKD Canada that the primary purpose of the meeting was to enforce a personal claim or redress a personal grievance against the corporation and its directors – the same personal grievances these individuals have been seeking to enforce through the Court on previous occasions. Indeed, if there are issues with membership status, they can go through the internal appeal process and the Sports Dispute Resolution Centre of Canada if needed. Furthermore, from my perspective, the motivation for the removal of these directors is the personal grievance these governing leaders have with the current board’s not-for-profit perspective and the CEO appointment”.

[10] Faced with the refusal of the directors to call the meeting as requested, the requisitioning members then moved to call the meeting on their own as permitted by s. 167(4) of the Act. In order to do so, however, they needed access to the list of members in order to ensure that the meeting was properly called and notice given as required. A request for the list was duly made pursuant to s. 23 of the Act on March 22, 2015.

[11] The directors decided not to comply with this request as well. Instead, On March 31, 2015 the corporation made application to the Director under the Act for an exemption from the requirement to provide the requested shareholder list pursuant s. 25 of the Act which permits the Director to grant the an exemption from the obligation to produce the list if the Director reasonably believes production of the list would be “detrimental to any member or the corporation”. In requesting the exemption, the respondent indicated that the list was sought in aid of the requisition to call a meeting and that “the primary purpose of the proposal was to enforce a personal claim or redress a personal grievance”. The Director is currently reviewing the application but has not issued the requested exemption.

[12] On April 2, 2015, the applicants attempted to call a meeting on their own under s. 167(4) for April 28, 2015. Unable to gain access to the members register and thus give proper notice to the members, the meeting was adjourned and this application brought to the court.

Discussion

[13] I am satisfied that this is an appropriate case to cut the Gordian knot and direct a meeting be called and held to consider the matters set forth in the April 2 Notice of Meeting. I come to this conclusion on quite narrow grounds. In my view, the applicants have and had a right to requisition a meeting. That right has been rejected without legitimate justification and the applicants have exhausted all reasonable remedies to overcome the obstacles placed before the exercise of their fundamental right.

[14] While s. 167(3)(c) and s. 166(6)(b) of the Act authorize the directors to decline to act upon a requisition where it “clearly” appears that the “primary” purpose of the proposal is to enforce a personal claim, it seems to me that the members of the Board targeted for removal may well have permitted their own personal grievances and disagreements with the requisitioning members to colour their assessment of the requisition.

[15] Under s. 166(6)(b) of the Act, the directors may decline to act on a requisition only if it is “clear” that the requisition has as its primary purpose a personal matter or grievance. Where the meeting is called for the purpose, inter alia, of removing a significant number of the members of the board of directors assessing the matter, the court will be quite naturally attentive to see whether the members of the board have possibly allowed their personal views or their interest in maintaining their incumbency influence their reaction to the requisition.

[16] I am satisfied that there is no clear basis for characterizing the motives of the members who requisitioned the meeting as being in the nature of a personal grievance. There are serious policy differences which, unfortunately, have riven the organization to some degree. The ripple effects have been litigation and acrimony.

[17] The fault line that runs through the organization between the “for profit” sector and the “not for profit sector” is also a significant policy difference and not a personal vendetta or anything of the sort. The application has been joined by a broad coalition of members which belies any sense of it being a narrow-based personal grievance action.

[18] Section 166(6)(b) of the Act uses the word “clearly” for a reason – only requisitions which are clearly personal grievances are to be rejected. Where Parliament uses the word “clearly”, in my view, the tie goes to the runner. The applicants have satisfied me that s. 166(6)(b) has no application here.

[19] While I appreciate that the respondent had the right to make a request for an exemption from the requirement to make its membership register available for inspection from the Director, they did not have the right to act as if the request itself was a form of interlocutory injunction blocking the enforcement by the requisitioning members of their right to call a meeting. The Director is not made arbiter of s. 166(6)(b) or s. 167(1) under the Act. If the meeting was validly requisitioned, the applicants unquestionably have the right to access the list for the purposes of giving effect to their rights under s. 167 and the board cannot frustrate their rights by ignoring them. If there were any question of a legitimate reason for an exemption being sought under s. 25 unrelated to the grounds for calling or requisitioning a meeting and based solely on the criteria established in s. 25, different considerations may possibly apply. That is simply not the case here.

[20] The right to call a special meeting is a substantive one and is not lightly to be interfered with. The mere fact of an AGM coming within a year is not a basis to deny it. I cannot conclude that the motives of the members who requisitioned the meeting were “clearly” of a personal nature. To the contrary, it appears quite clear to me that there are profound policy and direction disagreements of the sort that the membership is best suited to assess and decide.

[21] Both parties have pointed to the Goodwood Inc. v. Cathay Forest Products Corp., 2012 ONSC 3548 where D.M. Brown J. (as he then was) considered the law surrounding the requisitioning of shareholder meetings in great depth. In am in full agreement with Brown J.’s reasons in Goodwood. I accept that the court ought not generally to interfere with the governance of the corporation or to descend too readily into the ring.

[22] In my view the salient facts here are these:

a. The requisition for a meeting was validly made;

b. Section 166(6)(b) of the Act does not “clearly” apply – to the contrary, I am satisfied that it does not apply at all;

c. The directors accordingly had no valid reason for rejecting the requisition;

d. The directors flatly refused to call the meeting on March 7, 2015; and

e. The directors have subsequently acted to frustrate the attempt by the members to exercise their rights under s. 167(4) by denying the shareholder list.

[23] The directors having rejected the requisition outright and then having frustrated the attempt to comply with s. 167(4) of the Act by the applicants have left the court with little choice once a determination that s. 166(6)(b) of the Act is inapplicable (as claimed by the respondent). A meeting if pushed forward despite the obstacles put up by the respondent would have a high likelihood of doing little more than producing a rival board of directors and still more litigation. The “Two China’s” policy did not work well at the United Nations and two competing boards of directors for Taekwondo Canada will not work better here. It seems to me that preventing that foreseeable and undesirable outcome by having a supervised meeting now is the preferable course of action.

[24] The respondents urge that there is no question here of a denying of the right to a meeting since an AGM will be held no later than September. That argument suffers from the following defects:

a. The AGM has not in fact been called and will not be called until after the auditors have delivered their report in July or later;

b. The requisitioned meeting has not been deferred but entirely refused – this is not a contest where the board has called a meeting on a date the dissidents disagree with but one where the right to call a meeting has been utterly frustrated; and

c. The AGM, as and when called, will not have all of the shareholders’ proposals before it (unless they commence a new and different process) given staggered Board terms.

[25] The applicants have patiently attempted to vindicate their right to a meeting for almost 90 days and are no farther ahead. The right to requisition a meeting is a substantive right and the board cannot substitute it with an entirely different right (i.e. the right to attend an AGM six or seven months later as and when called and/or the right to make additional proposals at an AGM when called).

[26] The applicants also point to the risk of harm that may ensue in the interim given an ill-defined “membership review” process that may see some members deprived of a vote at the AGM.

[27] The respondents also argue that I should wait until the Director has decided on their application for an exemption under s. 25 of the Act. I disagree. Section 25 does not create a right to a stay of proceedings merely by applying for an exemption. As well, the only grounds cited for the claimed exemption are not the criteria of s. 25 of the Act but those in s. 166(6)(b) of the Act which pertain to something entirely different.

[28] In my view this is an appropriate case to vindicate the substantive right of the members to have a meeting. The members and the members alone will determine whose path is the right one. There is no suggestion here that the applicants have a history of abusing the power to requisition meetings – should such a problem arise in future, it can be dealt with.

[29] There is no point at this stage to attempting to create a properly called meeting out of the morass which has become the applicants’ attempt to do so. They called a meeting for April 28, 2015 which they have had to adjourn for fear that its legitimacy would be questioned in light of the lack of access to the membership register impeding their ability to give proper notice. I think they were right to adjourn it and to fear that the outcome of such a meeting would simply have been more litigation.

[30] Accordingly, I am ordering the corporation to call a meeting to consider the matters contained in the shareholder Notice of Meeting dated April 2, 2015. I am giving the parties until Wednesday May 13, 2015 to settle the terms of the Notice of Meeting including:

a. Precise wording of the resolutions;

b. Names of any nominees to be proposed to replace directors who may be removed;

c. Date, time and place of the meeting;

d. Manner of giving notice;

e. Record Date;

f. Chair of the Meeting.

[31] My expectation is that the register of members will be the same as it was when the requisition was first filed in February and that the meeting will be called forthwith as soon as the by-laws of the corporation permit and as substantially in accordance with the provisions of those by-laws as can be done in conformity with these reasons.

[32] I want to commend both sets of counsel who did a commendable job of presenting a well-researched position notwithstanding the obvious difficulties their clients have with each other. This is in accordance with the finest traditions of the bar and I trust I can continue to rely upon them to assist their clients in implementing this with a minimum of unnecessary friction.

[33] I direct the parties to appear before me on Wednesday May 13 at 9:30am to finalize the order resulting. A maximum of 40 minutes will be made available. Costs outlines may be presented and spoken to at that time. In the event the parties are able to work out a consent order, I would encourage them to do so and seek an earlier appointment before me if needed.

[34] These reasons were read orally in court this afternoon following argument this morning and have been subjected to minor editorial revisions by me prior to finalization and release.

Sean F. Dunphy, J.

Date: May 5, 2015