Polish Association of Toronto Limited v. The Polish Alliance of Canada, 2016 ONSC 7230
CITATION: Polish Association of Toronto Limited v. The Polish Alliance of Canada, 2016 ONSC 7230
COURT FILE NO.: CV-16-577858
DATE: 20161121
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
POLISH ASSOCIATION OF TORONTO LIMITED, MARIAN CELEJ, HELEN CELEJ, ALBERT JOSEPH FLIS, EMILY FLIS, HELENA GRABOWSKI, RYSTYNA KOWALSKA, WLADYSLAWA KUCHARSKA, ADAM MIASIK, ANDRZEJ MIASIK, PIOTR MIASIK, MAREK MIASIK, MARIA MIASIK, RENATA MIASIK, EUGIENIUSZ NEUFF, KSAWERA NEUFF, JUNO PILTZ, JANINA POMORSKA, LUCJAN POMORSKI, VIRGINIA ROSS, TERESA SKIBICKI, CONSTANCE ZBOCH, CECYLIA ZWARA, JAN ARGYRIS, CZESLAWA ERICKSEN, JADWIGA (VICKY) DUNWOODY, HALINA RABCZAK, WLADSYSLAW RABCZAK, and MARIA DREHER, by her Litigation Guardian, ED DREHER
Applicants
– and –
THE POLISH ALLIANCE OF CANADA
Respondents
Bernie Romano and Jordan Nussbaum, for the Applicants
Bogdan A. Kaminski for the Respondent
HEARD: November 16, 2016
REASONS FOR JUDGMENT
F.L. Myers, J.
The Application
[1] The applicants are 100% of the members of Branch 1-7 of the respondent The Polish Alliance of Canada. They seek judgment declaring that are entitled to leave the respondent organization and to take with them the property used by the branch that is held in trust for the members by the applicant Polish Association of Toronto Limited (“PATL”).
[2] PATL is a corporation with share capital that was incorporated in 1927 to hold property for the predecessor of Branch 1-7 of the PAC. It now holds title to the clubhouse of the branch on Lakeshore Blvd. in Toronto. It is estimated that the Lakeshore Property may be worth $50 million or more as a development site on Lake Ontario in Toronto.
[3] For the reasons that follow the application is granted on the terms set out below.
The Prior Proceedings
[4] After a 12 day trial between the PAC, as plaintiff, and several of the applicants, as defendants, BY JUDGMENT DATED May 27, 2014, the court determined that Branch 1-7’s previous effort to leave the PAC was unsuccessful. The court also determined several matters concerning the state of affairs between and among the PAC, the members of Branch 1-7, and PATL. The court’s judgment was upheld with some amendments by the Court of Appeal for Ontario. The resulting final judgment includes the following:
THIS COURT ORDERS that the PAC will recognize as continuing members of Branch 1-7 of the PAC all those who were members as at August 26, 2006 without any requirement to re-apply or to pay arrears from August 26, 2006.
THIS COURT ORDERS that the PAC will accept membership applications for Branch 1-7 of PAC in the ordinary course from anyone who qualifies.
7 THIS COURT ORDERS that, other than the shares referred to in the next sentence, the legal owners of the shares of PATL are the people listed in the minute book of the corporation as updated in the shareholders’ list that is Exhibit 33 subject to any amendments that any shareholder may prove by succession or proper transfer. Legal title to the shares shown in Exhibit 33 as being owned by PAC Branch 1, or PAC-Br.1, or PAC-Br. 1-members and any other branch of the PAC is held by the PAC but that management of that title is delegated to the executive of that branch. All of the shares of PATL are held in trust for the members from time to time of Branch 1-7 of the PAC as properly constituted under the constitution of the PAC and in accordance with this Order.
8 THIS COURT ORDERS that the legal [owner] of the Lakeshore Property…[is]… PATL … The beneficial owners of all of these properties are the members from time to time of Branch 1-7 of the PAC as properly constituted under the constitution of the PAC and in accordance with this Order.
9 THIS COURT ORDERS that Branch 1-7 of the PAC is an independent organization within the constitutional structure of the PAC. While not a legal entity, as between the parties, it is recognized as distinct, can lend and borrow, manage property interests delegated to it, and exercise the rights of a branch under the PAC constitution.
[5] After granting judgment, on motion of the PAC the court appointed a receiver to assist in carrying the judgment into effect. The receiver investigated the identities of the members of the Branch 1-7 referred to in paragraph 1 of the court’s judgment in order to allow a members’ meeting to be held to elect a new executive for Branch 1-7. By order dated September 3, 2014, as amended by order dated September 17, 2014, after hearing the submissions of the parties, the court accepted the receiver’s recommendation and recognized 20 remaining members of Branch 1-7. Thereafter, the PAC accepted membership applications submitted by the branch for a further three members. In addition, the Court of Appeal held that a further five members were to be recognized. The applicants in this proceeding are the (20 + 3 + 5 =) 28 members of Branch 1-7 who are 100% of the membership of the branch as recognized by those court orders.
[6] In its Endorsement dated June 8, 2016, the Court of Appeal upheld the finding that the prior attempt to withdraw Branch 1-7 from the PAC had failed. But the court went on to foreshadow that this court “did not determine that any future attempt would be invalid or ineffective.” The Court of Appeal also noted that in its view, “[t]he PAC should process any membership applications in good faith and reasonably quickly.”
[7] As a result of these decisions, it has been finally determined among the parties to the prior proceeding and their privies that PATL owns the Lakeshore Property in trust for the members of Branch 1-7 from time to time. The shares of PATL are held legally in the names of its registered shareholders. The shares are predominantly registered in the name of Branch 1 of the PAC or a variant of Branch 1’s name. Branch 1-7 was found to be the lawful successor to Branch 1 in the reasons for judgment dated May 27, 2014. Beneficial title to all of the shares of PATL is vested in the members from time to time of Branch 1-7.
[8] PATL is simply a trustee holding the Lakeshore Property for the members from time to time of Branch 1-7. Similarly, the PAC (and a few others) hold the shares of PATL in trust for the members from time to time of Branch 1-7. The equity of PATL and the equity of the Lakeshore Property is owned by the members from time to time of Branch 1-7.
[9] The applicants say that as 100% of the recognized membership of Branch 1-7 at this time, they have held a vote with due formality and unanimously determined to leave the PAC and to take with them the shares of PATL and the Lakeshore Property held in trust for them.
[10] The PAC claims that there are no members of Branch 1-7 remaining. It has declined to accept membership dues from the branch since the trial and failed to respond to over 50 new membership applications all of which were delivered to it with cheques drawn on Mr. Romano’s bank account on behalf of the branch. The PAC takes the position that its constitution requires these payments to be made by the branch from its own bank account directly. On that basis it has stood in the way of the branch re-vitalizing its membership.
[11] Mr. Kaminsky was not able to point to any provision of the current constitution of the PAC that actually says that branch members’ dues cheques or the cheques that accompany new members’ application forms must be drawn on the branch’s bank account and no other. Nor is there any independent legal reason why branch dues cannot be paid by the branch through its lawyer as its agent. The parties have been mired in litigation for the better part of a decade. It is no surprise and generally to be encouraged that communications be confined to counsel in order to maintain a proper and clear record and to maintain a professional tone. Although the PAC committed to the court that it would welcome back the members of Branch 1-7, it has declined to do so under paragraphs 1 and 2 of the judgment above even after the point was emphasized to the PAC by the Court of Appeal.
[12] In any event, it is not open to the PAC to deny the membership of the 28 members that the courts have already recognized by orders that bind the PAC.
[13] The PAC also argues that the applicants are not entitled to take either the shares of PATL or the Lakeshore Property with them when they leave the PAC because both are the property of the PAC under section 8 of its constitution. This argument simply ignores the court’s judgment as upheld by the Court of Appeal in the terms set out above. The PAC, at best, has the barest of legal title to the shares of PATL and even the management of that legal title is delegated to Branch 1-7. Although Mr. Kaminsky tried to re-argue the issue of whether the incorporation of the PAC in 1973 resulted in title to the Lakeshore Property transferring to the PAC, he was unable to explain the formal transfer of the title to the property to PATL by the PAC, as a trustee-to-trustee transfer, shortly after PAC’s incorporation. In any event, the issue of the ownership of the Lakeshore Property has already been determined and it is not open to the PAC to re-litigate that issue either.
[14] Mr. Kaminsky argues that if the shares of PATL and the equity in the Lakeshore Property are held in trust for the members of Branch 1-7 from time to time, the trusts are void because they violated the rule against perpetuities. The transfers of shares, he argues, would have been void from 1927 when they commenced. The common law rule that was then applicable did not have a “wait and see” component. It would have voided the trust immediately because it was intended that the trust would operate in perpetuity. Only a charitable trust can operate in perpetuity. Mr. Kaminsky submits that since more than 21 years have passed since the Lakeshore Property vested in PATL on resulting trust for the members from time to time of Branch 1-7, therefore that trust is also void.
[15] Mr. Kaminsky argues that since the trusts were void, then, under section 16 of the Perpetuities Act, R.S.O. 1990 c. P.9, (which was not in force in 1927), title to the shares and the land would have reverted back to the settlors/funders who donated the money to purchase the PATL shares and the Lakeshore Property. As there is no way to trace those people or their successors, the properties have likely escheated to the Crown under the doctrine of bona vacantia. He then argues that upon the incorporation of the PAC in 1973, title to the shares and the Lakeshore Property vested in the corporation. He had no explanation for how or why the property could be said to have moved from Her Majesty to the PAC other than simply submitting it to be so.
[16] In my view, it is not proper for the PAC to be raising these issues now. Questions of title to the Lakeshore Property and the shares of PATL were directly in issue and were fully canvassed at the trial. Moreover, as Prof. Waters’ text confirms, there is much uncertainty as to when the law will recognize a non-charitable trust for a purpose in Canada. It is by no means clear that simply categorizing a resulting trust as a non-charitable purpose trust necessarily invalidates it. Waters Law of Trusts in Canada, 4th ed. WestlawnextCanada http://www.westlawnextCanada.com/. Moreover, Mr. Romano points out that s. 31 of the Canada Not-for-Profit Corporations Act, S.C. 2009, c. 23 and the corresponding section in Ontario’s unproclaimed not-for-profit corporation statute both allow not-for-profit corporations to hold property in trust for a purpose. It is not at all clear that Mr. Kaminsky’s submission that the resulting trusts declared in the judgment would have or necessarily have failed is correct. I do not know if either side’s position is necessarily unassailable at law. I do know however that the parties had been engaged in litigation for six years prior to the trial. They raised the issues at the trial that they wished to raise. They then went to the Court of Appeal and raised the issues at the Court of Appeal that they wished to raise. The result is a judgment declaring the state of title that is binding upon them. It is inappropriate and unfair to try to revisit the issue now. For example, had the rule against perpetuities been raised at trial, it may well be that the branch members would have taken the position that the transfer of the Lakeshore Property to PATL created a charitable trust in PATL rather than arguing for resulting trusts in the members from time to time. The doctrines of res judicata (cause of action estoppel), issue estoppel, and abuse of process are all offended by the PAC’s efforts to go behind the judgment declaring title to the shares of PATL and the Lakeshore Property.
[17] Finally, the PAC says that the law relating to unincorporated associations and the “clubman’s veto” has no application to the PAC and its branches because the PAC is incorporated under the Corporations Act, R.S.O. 1990 c. C.38. Ahenakew v MacKay, 2004 CarswellOnt 2246 (CA).
[18] The clubman’s veto is a common law rule that provides that members of an unincorporated association must be unanimous to leave the association and to take the property of the association with them. Wawrzyniak v Jagiellicz (1998), 1988 CanLII 4528 (ON SC), 64 O.R. (2d) 81 (H.C.J.) at pp. 88-89. Mr. Kaminsky argues that the Corporations Act has supplanted the clubman’s veto in this case.
[19] The constitution of the PAC does not deal with how a branch can leave the PAC. The PAC argues that to enable a branch to leave would therefore require a constitutional amendment to be approved by two-thirds majority of delegates at a special general meeting of the PAC to create a process for disaffiliation where none exists. In my view, this mischaracterizes what the applicants are seeking. The applicants already own in equity the shares of PATL and the Lakeshore Property. The PAC argues that once the applicants leave the PAC, they will no longer qualify to hold their equitable title because will no longer be “members of Branch 1-7 from time to time.” If that is correct, it is not because of the constitution of the PAC, but due to the wording of the resulting trusts created on the transfers of shares by PATL and its purchase of the Lakeshore Property.
[20] The applicants are not asking the court to alter the PAC’s corporate structure. They are asking the court, in effect, to recognize their entitlement to vary or to end the trusts so that they can enjoy legal and equitable title to their shares and the Lakeshore Property free from the PAC and from the possible interests of future branch members from time to time. The trusts at issue are trusts over the shares of a separate corporation, PATL, and land owned legally by that corporation. I have already ruled in the judgment after trial that nothing in the constitution of the PAC reaches the equity of those properties. Moreover, nothing in the constitution currently prevents the branch members from leaving en masse.[^1]
[21] Given the unanimity of the branch members, the court is quite satisfied that they should be able to manage the legal title to their properties as well as the equitable title that they already own. The only issue is what role, if any, is played by the interests of potential future members of Branch 1-7. At common law, the clubman’s veto allows a branch to disaffiliate and to take their property. This necessarily ends the possibility of future members joining and obtaining a piece of the equitable title. The possibility of future members “from time to time” does not create a current, contingent property interest in anyone or prevent 100% of the current members from deciding to leave. That is the whole point of the clubman’s veto cases. Any one club member can veto a move. But if the members are unanimous, then they can go and take their equity with them. Branch 1-7, as an identifiable, distinct, unincorporated entity within the PAC firmament, has duly engaged the clubman’s veto and obtained a unanimous vote with no vetoing vote cast.
[22] Were the court to consider the positions of future members as if there are identifiable individuals with contingent interests at stake, in my view their interests are aligned with the current members of the branch in any event. Given the PAC’s ongoing refusal to recognize the branch or to approve the addition of members to the branch despite the entreaties of two courts, there appears to be little likelihood of the PAC approving any new members for the branch as long as the applicants control the branch. In addition, in each of their 28 affidavits, 100% of the members of the branch all undertake to convert PATL into a not-for-profit corporation or to transfer its assets to a not-for-profit corporation so as to protect the Lakeshore Property from any risk of falling into private hands. In my view, in light of the enmity between the PAC and the members of Branch 1-7 it is a simple assessment to infer that new members would be more likely to join with such a not-for-profit corporation to take advantage of the clubhouse and the cultural good works of the branch rather than to join the PAC. The PAC is an umbrella organization that does not actually own the branches’ clubhouses or carry on the cultural good works performed by the branches. Had this matter been presented under the Variation Of Trusts Act, R.S.O. 1990, c. V. 1, I would have had no hesitation approving a variation to authorize the members of Branch 1-7 to transfer the shares of PATL and the Lakeshore Property to a not-for-profit corporation and finding that doing so is for the benefit of any future members who will thereby retain the possibility of enjoying the fruits of the branch’s good works.
[23] In my view, the clubman’s veto takes the applicants where they want to be so that resort to other statutes or options is not required. While the clubman’s veto, like any common law principle, can be displaced by a clear statute as was found to be the case for political parties in Ahenakew, there is nothing in the Corporations Act or any regulatory scheme that regulates this situation. This judgment does not involve the property of the PAC. The difficulty being encountered by the applicants is that their equitable title to the shares and the Lakeshore Property is defined with reference to their membership in the unincorporated branch of the PAC from time to time. The clubman’s veto says that at common law if they are unanimous they can disaffiliate from a voluntary association and take their property with them. Nothing in the Corporations Act deals with the problem of how trust beneficiaries whose interests are defined with reference to membership in an unincorporated branch of an incorporated entity can leave with their property. That gap is filled by the common law which the defendants have fulfilled on the uncontested facts of this application.
[24] The applicants ask the court to supervise the process of their transfer of the trust properties to a not-for-profit corporation. It seems to me that the applicants are entitled to the declarations that they seek in paras. 1(a) and (b) of their Notice of Application. The steps that they choose to take in order to effect their transfer are for them to decide.
[25] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), (2004), 71 O.R. (3d) 291, at paras 26, 37.
[26] The applicants seek their costs on a partial indemnity basis in the amount of $27,281.90. This is only slightly above the amount of the costs sought by the PAC on a partial indemnity basis as well. In my view, there is no reason to depart from the normative principle that costs should follow the event. The costs are well within the range of reasonableness that ought to have been anticipated by the PAC in light of its own costs. The hours and rates set out by the applicants’ counsel in their Costs Outline are quite reasonable. Accordingly, the PAC shall pay costs forthwith to the applicants jointly and severally in the amount of $27,281.90 inclusive of disbursements and taxes.
[27] If the parties cannot agree on a form of order tracking paragraphs 1 (a) and (b) of the Notice of Application within seven days, each party shall send their draft forms of order to my assistant by email and the court will settle the formal order.
[28] The counter-application of the respondent was never issued and therefore does not require a formal dismissal order. Had an application been brought by the PAC in the terms of the draft filed, it would have been dismissed for the foregoing reasons.
F.L. Myers
Released: November 21, 2016
CITATION: Polish Association of Toronto Limited v. The Polish Alliance of Canada, 2016 ONSC 7230
COURT FILE NO.: CV-16-577858
DATE: 20161121
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
POLISH ASSOCIATION OF TORONTO LIMITED, MARIAN CELEJ, HELEN CELEJ, ALBERT JOSEPH FLIS, EMILY FLIS, HELENA GRABOWSKI, RYSTYNA KOWALSKA, WLADYSLAWA KUCHARSKA, ADAM MIASIK, ANDRZEJ MIASIK, PIOTR MIASIK, MAREK MIASIK, MARIA MIASIK, RENATA MIASIK, EUGIENIUSZ NEUFF, KSAWERA NEUFF, JUNO PILTZ, JANINA POMORSKA, LUCJAN POMORSKI, VIRGINIA ROSS, TERESA SKIBICKI, CONSTANCE ZBOCH, CECYLIA ZWARA, JAN ARGYRIS, CZESLAWA ERICKSEN, JADWIGA (VICKY) DUNWOODY, HALINA RABCZAK, WLADSYSLAW RABCZAK, and MARIA DREHER, by her Litigation Guardian, ED DREHER
Applicants
– and –
THE POLISH ALLIANCE OF CANADA
Respondents
REASONS FOR JUDGMENT
F.L. Myers, J.
Released: November 21, 2016
[^1]: The 2010 constitution of the PAC added a provision to deal with property of a branch in the event that it is dissolved by the Head Executive Board. The validity of the 2010 constitutional amendments, made without notice to Branch 1-7, is not before the court. In any event, there has been no dissolution of the branch by the Head Executive Board. Moreover, the only property that might be said to be property of the branch is the bare legal title to the shares that it administers. Branch 1-7 holds no equity of any value.