COURT FILE NO.: CV-19-2117
DATE: 2020 10 07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
LAKHVIR DHALIWAL
Jonah Waxman, counsel for the Applicant
Applicant
- and -
GURMEET SINGH and NANAKSAR SATSANG SABHA OF ONTARIO
James Macdonald, counsel for the Respondents
Respondents
HEARD: September 28, 2020
REASONS FOR JUDGMENT
Justice Thomas A. Bielby
INTRODUCTION
[1] Nanaksar Satsang Sabha of Ontario (Nanaksar) is non-for-profit company without share capital, incorporated in 1994, and operates a Sikh temple in Brampton.
[2] The applicant had been a member of Nanaksar since its creation. In November 2014, further to the consent order of O’Connor J., the applicant was made a Nanaksar director along with the respondent Gurmeet Singh and Gurmukh Hunjan. Their directorships were affirmed by the members at the Annual General Meeting (AGM), held July 25, 2015.
[3] Mr. Hunjan was initially a respondent in these proceedings but died on March 3, 2020.
[4] The applicant submits that in May 2019, he was wrongfully removed from the membership of Nanaksar, from his officer of Treasurer and from the Board of Directors. The reason for his removal, as alleged by Singh and Hunjan, is that the applicant, had misappropriated donation funds for his personal use. The allegations are denied by the applicant, who alleges that his removal was part of a plan of the two remaining directors, Singh and Hunjan, to take control of Nanaksar.
[5] It is also alleged that in order to maintain control Singh and Hunjan have failed to call an AGM as required by the Corporations Act and the corporate by-laws.
[6] Accordingly, the applicant seeks the court’s intervention to declare his removal as invalid and order the applicant be reinstated as a director and member. The court is further asked to order that an AGM be held as soon as reasonably possible, to allow the members to elect directors.
FACTS
[7] It is alleged by Hunjan and Singh that, in late 2018, they were advised of suspicions that the applicant was misappropriating donations. As a result, an investigation ensued, which included the installation of additional surveillance cameras.
[8] As are most places of worship, Nanaksar is financially maintained by the donations of persons attending. It was the practise to hold a “counting” every other week during which the donations for the previous two weeks would be counted and recorded. As Treasurer of Nanaksar, the applicant would participate in the counting, sometimes alone and others with the assistance of others. From the video surveillance entered as evidence it appears that the donations are placed on the floor in a meeting room at Nanaksar and the funds counted.
[9] It is alleged by the respondents that a review of the surveillance video recordings, entered as evidence, shows that on at least four occasions (January 17, January 31, February 14 and February 28, 2019), the applicant can be observed, at a counting, picking up a bundle of donations which had yet to be counted and place the bundle in his pocket.
[10] In fact, the applicant does not deny the alleged actions but submits he was authorized to do so by the Nanaksar’s president, Mr. Hunjan, who instructed him to remove funds not yet counted and use the money to pay specific debts of Nanaksar. The respondents deny the applicant was ever authorized to pocket monies in such a manner and for such a purpose.
[11] It is submitted by the respondents that the evidence shows the applicant either pocketed monies when he was alone or when other participants in the counting could not observe what he was doing.
[12] Exhibit G to the applicant’s affidavit sworn June 6, 2019, is a letter dated May 12, 2019, addressed to the applicant. The letter is signed by Mr. Hunjan and Mr. Singh, in their capacity as directors. The letter refers to their investigation and the video surveillance and accuses the applicant of stealing from Nanaksar and breaching his fiduciary duty. The letter goes on to say,
“Based on your actions, we, the Directors of Nanaksar, have elected to suspend your membership with a final determination to be made to terminate or continue your membership within 15 days of the date of this letter, pursuant to Section 9.05 of the By-Laws. Should you wish to provide written submissions setting out your position for our review and consideration with respect to the aforementioned, please provide the same no later than May 21, 2019. Should you wish to review the video footage referred to herein, please advise and we will make arrangements for you to review the same.
In the interim, please return all keys, documents and property that you have in your possession belonging to Nanaksar immediately. Your duties with respect to your position as a director and member are suspended pending the final decision in 15 days.”
[13] Exhibit H to the same affidavit is a letter authored by the applicant, dated May 13, 2019, written in response to the May 12th letter. Therein, the applicant denies the allegations, stating,
“All the monies that I took from the Gurudwana was to pay various day to day expenses, as per your direction. Proper accounts have been maintained and can be provided for your review.
You do not have the authority to terminate my membership, nor my appointment as a Treasurer. Therefore, I’ll not be returning the keys or the books, as per your demand.”
[14] Singh and Hunjan took the position that, as a Board of Directors quorum of two, they were authorized to make the decision.
[15] Exhibit N to the affidavit of Gurmeet Singh, sworn July 17, 2020, is a letter, dated May 21, 2019, signed by Hunjan and Singh, and addressed to the applicant, sent in response to the applicant’s letter of May 13th. The letter denies the applicant’s claim that he was authorized to remove funds before they are counted and goes on to say,
“At no time have you provided any of us with an accounting of the funds you removed on your own or advised us of the same. As such your actions cause severe concerns to the board. Please provide us with the records you allege to have maintained for our review and consideration prior to providing you with our final decision with respect to your membership. We require these alleged records you have kept by today at 7:00 pm, if you would like for us to consider the records prior to making a decision with respect to your membership, pursuant to the By-Laws. We are planning on meeting tomorrow with respect to the same.
Once again, we require you to return all of the property, belonging to Nanaksar, in your possession, to the undersigned by today as your officer position has been terminated pursuant to the By-Laws. Failure to abide by the directors’ decision will result in legal recourse against you for which you will be held responsible for all costs incurred. We have enclosed the relevant sections of the By-Law for your ease of reference.”
[16] On May 22, 2019, Mr. Hunjan sent the applicant a text message providing further notice of the meeting, including time and place.
[17] The applicant did not attend the May 27th meeting, nor did he provide any records or accounts.
[18] Exhibit O to the Singh affidavit, sworn July 7, 2020, is the minutes of the May 27th directors meeting. A resolution was passed terminating the applicant’s membership, relying upon the video footage and discussions held with others involved in the counting. It was said,
“It is found that Lakhvir did not follow proper accounting practices when improperly removing these funds nor did he provide an accounting for the funds.”
[19] A second resolution appointed another member as a director because the applicant, no longer a member, was not qualified to be a director. It is submitted that s. 3.02 of the By-law No. 1A, dictates that to be a director, one must be a member.
ARGUMENT
THE APPLICANT
[20] The applicant submits that Hunjan and Singh, illegitimately and wrongfully terminated the applicant’s membership, acted in bad faith and contrary to the principles of natural justice, procedural fairness, and good governance.
[21] It is submitted that the May 27th directors meeting was a secret meeting unbeknownst to any of the members.
[22] The applicant relies on s. 3.05(1)(c) of By-law No. 1A which reads,
“The officer of a Director shall be vacated…immediately, if at a meeting of the Members a resolution is passes by the Members removing the Director before the expiration of the Director’s term of office. No such resolution shall be put before the Members until after the Director in question has been notified in writing of the cause and afforded an opportunity for a hearing before the Members. The Member shall notify any such director of the act which, in their opinion, is improper or detrimental to the Corporation and of the time and place of the meeting of the Members at which the Director will be heard. Such notice shall be given at least two (2) weeks prior to such meeting.”
[23] The applicant also relies on s. 4.04 of the By-law which requires 7 days’ notice of any meeting of directors. It is submitted that the applicant did not get proper notice of the date, time and location of the meeting until he received the May 22nd text message, only five days before the meeting.
[24] The applicant further submits that the actual decision had already been made on May 12, 2019 and represents evidence of bad faith.
[25] The applicant submits that with respect to the debts paid using the monies pocketed, all such payments were recorded and entered onto a Summary Chart he prepared. He relies on the evidence of Satpal Dhaliwal and Rajinder Sahota, confirming his record keeping.
[26] Further, the applicant submits that in regard to the video surveillance evidence the Summary Chart discloses the following details:
(a) January 17, 2019: verbal instructions from Hunjan;
(b) January 31, 2019: text instruction received from Hunjan;
(c) March 14, 2019: verbal instructions received from Hunjan; and
(d) March 28, 2019: instructions received and recorded in Lakhvir’s notebook.
[27] With respect to the issue surrounding the failure of the respondents to call an AGM, the applicant submits that failing to call such a meeting does not allow members to elect directors. The applicant submits that no such meeting has been held since 2015, although there is documentation referencing the results of an AGM in 2017, which the applicant signed.
[28] Regardless, the respondents do not deny the time is long past due to call an AGM.
[29] The applicant also submits, for reasons set out in the material, a concern that a number of members have been wrongly disenfranchised by having voting rights denied.
THE RESPONDENTS
[30] As noted above, it is admitted by the respondents that an AGM has not been held for some time and is long over due. It is said that the meeting will be held when safe to do so having regard to the COVID-19 pandemic. It is also said that an AGM was scheduled to take place in July 2019 but was deferred as a result of this application.
[31] On the issue of the disenfranchised members, it is noted that no such named member is a party to this application.
[32] On the issue of the applicant’s termination, the respondents ask that the application be dismissed for the following reasons:
(a) Questions of membership in religious or voluntary associations are outside the jurisdiction of this Honourable Court;
(b) Nanaksar and its directors acted in accordance with the by-laws and provided procedural fairness to the applicant who was made aware of the issue of membership and was provided an opportunity to make submissions on that topic. As a result, there was no procedural unfairness.
(c) The directors were in a better position than this Court to make decisions in respect to Nanaksar and they acted reasonably in terminating the applicant’s membership.
(d) The termination of the applicant’s membership caused his status as director to be vacated.
(e) The applicant has no standing or interest in requesting that the court take over governance at Nanaksar.
[33] The respondent’s relied on the following sections of Nanaksar’s operating By-law 1A:
Section 3.02
(1)(b) To qualify as a Director, a person at the time of the election or appointment shall be…a member of the Corporation (Nanaksar);
Section 3.05
(1)(b) The office of a Director shall be vacated…immediately, if the Director dies or no longer qualifies to be a Director pursuant to Section 3.02(1) hereof; 6.02: Office held at Board’s Discretion; or
(c) immediately, if at a meeting of the Members a resolution is passed by the Members removing the Director before the expiration of the Director’s term of office…
Section 6.02
Any Officer shall cease to hold officer upon resolution of the Board
Section 9.02
(1)(c) To qualify as a Member, a person at the time of his or her application shall be of good character.
Section 9.04
(b) The membership of any Member shall be terminated when the Member is expelled or his or her membership is otherwise terminated in accordance with the Act or By-Laws.
Section 9.05
(1) Upon 15 days written notice to a Member, the Board may pass a resolution authorizing disciplinary action which may include the termination of membership for violating any provision of the Act, Letters Patent or By-laws.
(2) The notice shall set out the reason for the disciplinary action. The Member receiving the notice shall be entitled to give the Board a written submission opposing the disciplinary action not less than five (5) days before the end of the 15-day period. The Board shall consider the written submission of the Member before making a final decision regarding disciplinary action.
[34] The respondents submit that the video footage speaks for itself. The applicant is seen pocketing money and did so while alone or by shielding the pocketing from the view of others. The respondent did not appear to have advised any person in the counting process of his taking of the money.
[35] The applicant did not produce any ledge or written accounting until disclosing the documents included as exhibit E to his February 5, 2020 affidavit.
GENERAL LEGAL PRINCIPLES AND CASE LAW
[36] I have had regard to the following section of the Corporations Act.
Section 127.2
(1) The members of a corporation may, by resolution passed by the majority of the votes cast at a general meeting, of which notice specifying the intention to pass such resolutions has been given, remove from officer any director, or directors, except person who are directors by virtue of their office.
[37] The applicant relies on this section and s. 3.05(1)(c) of by-law1A, when arguing that Singh and Hunjan did not have the authority to remove the applicant from his office and directorship. I disagree. The section is a vehicle by which members can make a change. The power however, is not exclusive to the members.
[38] Section 129(1) authorizes the directors of a corporation such as Nanaksar to pass by-laws, to regulate the qualifications of membership, and the ability to suspend and terminate memberships. To be a director requires an individual to be a member.
[39] A key decision on the approach the court is to take in regard to such matters, is Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall 2018 SCC 26. The central question to be answered was, when does the court have jurisdiction to review the decision of religious organizations where there are concerns of procedural fairness (para. 1)?
[40] In Highwood, Mr. Wall was disfellowshipped after he admitted in engaged in sinful behaviour. As a result, he brought an application for judicial review.
[41] The Supreme Court of Canada ruled that the decision by the respondent was not procedurally unfair. The court noted that there is no free-standing right to have such decisions reviewed on the basis of procedural fairness (para. 2).
[42] The court had to consider the availability of judicial review and stated,
“Private parties cannot seek judicial review to solve disputes that may arise between them; rather, their claims must be founded on a valid cause of action, for example contract, tort or restitution” (para 13).
[43] I adopt as part of my reasons the following quotes taken from Highwood.
“Even if Mr. Wall had flied a standard action by way of a statement of claim, his mere membership in a religious organization - where no civil or property rights is granted by virtue of such membership - should remain free from court intervention. Indeed, there are no free standing rights to procedural fairness with respect to decisions taken by voluntary associations. Jurisdiction cannot be established on the sole basis that there is an alleged beach of natural justice or that the complainant has exhausted the organization’s internal processes. Jurisdiction depends on the presence of a legal right which a party which a party seeks to have vindicated. Only where this is so can the courts consider an association’s adherence to its own procedures and (in certain circumstances) the fairness of those procedures” (para. 24).
“Moreover, mere membership in a religious organization, where no civil or property right is formally granted by virtue of membership, should remain outside the scope of the Lakeside Colony criteria” (para. 29).
“In the end, religious groups are free to determine their own membership and rules; courts will not intervene in such matters save where it is necessary to resolve underlying legal dispute” (para. 39).
[44] These principles apply regardless if the matter is an application such as before me or an application for judicial review.
[45] Lee v. Lee’s Benevolent Assn. of Ontario 2004 CarswellOnt 8790, is a decision of Nordheimer J. as he then was, in which the applicants alleged irregularities in the conduct of the election of directors which they submitted, invalidates the election. As a result, the applicants brought an application under s. 297 of the Corporations Act for an order declaring null and void the election results.
[46] Nordheimer J. determined there was an election irregularity but did not agree with the applicants that it invalidates the election. It was determined that,
“There is no evidence that the election was adversely affect by this technical failing.” (para. 10).
[47] From paragraph 12, I quote,
“Non-profit organizations such as the Association should not be required to adhere rigorously to all of the technical requirements of corporate procedure for their meetings as long as the process if fair. Nor should the court be too quick to grant relief in such circumstances that may only serve to encourage a disgruntled member of such an organization to seek such relief. 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 loathed to interfere in the internal workings of such groups.”
[48] Decision of Boards, including those of not for profit corporations, should be granted deference and it is recognized that the directors and officers are in a far better position to make decisions affecting their corporations than a court reviewing the matter after the fact (3716724 Canada Inc. v. Carleton Condominium Corporation No. 375 2016 ONCA 650, paras. 47, 48, 50).
[49] Amin-Hussain v. Yousuf 2019 ONSC 6098, is a decision of Fowler Byrne J. The parties were members of a non-share corporation whose main asset was a piece of property. The applicants wanted to sell the property to pay off debts whereas the respondents wanted to keep the property. The applicants brought an application seeking an order compelling the respondents to sell the property.
[50] Fowler Byrne J. was of the opinion that there was no reason to intervene and made reference to a number of options open to the applicants. Reference was made to s. 127 of the Corporations Act and it was said that the applicant could have campaigned for the election of directors who were supportive of a sale. I quote,
“The Corporations Act, at s. 127.2 sets out the procedure to remove a director, by a majority vote, that is not acting in the best interests of the corporation. In the end, if a director cannot convince its membership to vote in a way that he or she believes is in the best interests of the of [the Corporation] they are free to resign their membership.”
[51] Fowler Byrne J. also noted that interference in religious organizations and their decision-making process should be avoided (paras. 23-26).
ANALYSIS AND RULING
[52] I am not about to decide if the applicant was or was not misappropriating donations. The question is were Hunjan and Singh acting within their authority when they terminated the applicant’s membership?
[53] They received information and commenced an investigation which included reviewing video evidence. They concluded that the applicant appeared to be taking monies likely for his personal use and without the authority to do so. They rejected the applicant’s explanation. They spoke to other members involved in the counting. They confronted the applicant, who told them he had kept records of the expenses paid with the monies but did not produce them before the Board of Directors terminated his membership.
[54] On my review of the video surveillance it does appear that when pocketing money, the applicant was shielding his actions with his body when other individuals were in the room during a counting. It defies common sense that monies would be removed from a counting, prior to being counted, to pay expenses. Standard accounting procedure requires a recording of monies received and expenses paid.
[55] The applicant was the Treasurer at the time and as such was under a fiduciary duty to properly account for all the monies donated and all the expenses to be paid. What has been disclosed in the video surveillance, together with the applicant’s explanation, can be said to be a breach of his fiduciary duty. The misappropriation of monies would be a clear breach. Regardless, all of the donations ought to have been included in the counting and recorded prior to the payment of expenses.
[56] Further, even if the removal of funds, prior to counting, was authorized and the expenses paid recorded, there is no evidence that the amount of monies taken, was ever recorded. Isn’t that the purpose of a counting?
[57] All of this leads me to the conclusion that Hunjan and Singh had evidence from which they could reach the conclusion they did.
[58] It can be said that Hunjan and Singh were in a better position to judge than this court and the court should be reluctant to interfere.
[59] As noted, section 9.05 of By-law 1A, provided a mechanism by which the Board could authorize, by resolution, the termination of a member. The section sets out the procedure directors have to employ to terminate a membership. Fifteen days’ notice is required and a member’s written response is to be delivered not less than five days before the end of the fifteen day period. The written submission must be considered before a final decision is reached.
[60] On the facts set out above I find that Hunjan and Singh gave the applicant notice on May 12, 2019 setting the reasons for their concerns and advising the respondent the decision would be made on May 27, 2019, fifteen days later.
[61] The applicant provided his written response on May 13,2019 and was taken into consideration by Hunjan and Singh.
[62] The applicant, while advising he had in his possession the records in relation to the money in issue, failed to produce them by May 27th nor did he attend at the meeting to be held on the 27th.
[63] While it could be argued that the notice lacked formality, the court ought not to interfere in breaches said to be technical in nature. The notice requirements as set out in s. 9.05 were effectively, met.
[64] Hunjan and Singh had the authority to terminate the applicant’s membership. Section 9.2 of By-law 1A, sets out that in order to qualify as a member, the individual must, among other things be of good character. The misappropriation of donations would amount to a lack of good character.
[65] Once the applicant was no longer a member, his appointment as a director was automatically vacated (s. 3.05 of By-law 1A).
[66] I have concluded that the decision of the Board to revoke the applicant’s membership cannot be said to be invalid for any of the reasons argued by counsel for the applicant. There was no denial of natural justice nor was there a lack of procedural fairness.
[67] The applicant, no longer a member of Nanaksar since May 27, 2019, lacks any status to pursue the issues of the failure to call an AGM and the disenfranchising of members. Accordingly, I need not rule on those issues although I will say that an AGM ought to be called as soon as possible, even if it has to be held by means of a video conference.
[68] Apart from my conclusion, even if there was some procedural impropriety, on the strength of the Highwood decision, I ought not to intervene. I am unaware of any valid cause of action on the part of the applicant. It does not appear that he had any legal right which would allow a court to consider procedure.
[69] As a result of all of this the application is dismissed.
[70] If the parties cannot agree on costs, I will accept written submissions of no longer than 3 typed pages, double spaced together with a cost outline, to be served and filed within 15 days of the release of this ruling. A response to the request for costs should be filed 10 days thereafter.
Bielby J.
Released: October 7, 2020
COURT FILE NO.: CV-19-2117
DATE: 2020 10 07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
LAKHVIR DHALIWAL
Applicant
– and –
GURMEET SINGH and NANAKSAR SATSANG SABHA OF ONTARIO
Respondents
REASONS FOR JUDGMENT
Bielby J.
Released: October 7, 2020