Under the new Societies Act, members may bring a claim against a society for unfairly prejudicial or oppressive conduct on the part of the society, its directors, or its members. I’ve often been asked whether you can contract out of this right by having members waive it in advance or in restricting it in your bylaws, or whether an automatic termination provision can be used to expel a member who brings such legal proceedings.
WAIVER OF OPPRESSION IN BYLAWS
The clear objective of the oppression remedy is to supplement the rights to which a member is entitled and to protect them against risks lying outside what may reasonable be expected at the time they became a member, to paraphrase Kevin McGuinness, Canadian Business Corporations Law, (Markham: LexisNexis, 2007) at pp. 1261-1262.
To allow a member to contract out of this right before oppressive or unfairly prejudicial conduct occurs would defeat the purpose of giving members this remedy. Though the bylaws form a contract with the membership, it is likely offensive to public policy for a society to adopt such a provision in a bylaw. Based on corporate oppression case law and secondary sources in the area, it would appear that a court would be reluctant to allow the waiver of this right before it even arises.
However, once a right to bring an oppression claim occurs, it can be waived as with any other accrued right (subject to exceptions). If defending a society, it is important the waiver of this right be in writing and for valuable consideration, so if necessary, the waiver can be relied on in court.
AUTOMATIC “TERMINATION” OF MEMBERSHIP
Bylaws that purport to “terminate” or “suspend” a member for bringing legal action against a society are invalid. They offend the procedural fairness right set out in the new Act (s. 57), and are severed from the rest of the bylaws (s.11(3)). This requires any proposed sanction be presented to the member in question, along with a chance to make submissions, which must be considered.
Even if permissible, it is an undesirable clause: in practice, a member may need to bring legal action in either their own name or the name of the society for non-adversarial purposes (e.g. to collect a debt; to correct an error, omission, or irregularity in the conduct of the society).
SUMMARY
It is likely offensive to the Societies Act to attempt to block oppression actions before they arise, or to expel members for bringing legal proceedings.
Photo by Chris Higgins used under a Creative Commons license. No changes were made to this image.
