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Urgent need to revise the BC Society Act highlighted by BC Court of Appeal decision
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Vancouver, B.C. February 7, 2010.
In what many will view as a technical legal ruling, the BC Court of Appeal decision (January 29, 2010) in Wang v. British Columbia Medical Association (2010 BCCA 43) highlights for the public and members of the BCMA that the BC Society Act is urgently in need of revision.
Fortunately, review of the BC Society Act is currently underway. It was announced on December 17, 2009 and the BC Government is seeking feedback with a deadline of April 1, 2010. Related BC Government documents state the BC Society Act has not been significantly revised since 1977 and "is outdated and in need of revision". http://www.fin.gov.bc.ca/society_act_review.htm
There are over 26,000 societies registered in BC ranging in size from small to large that are engaged in a wide variety of endeavors that touch on the personal and professional lives of many people. They are “increasingly involved in providing social services, including medical services and housing,” and they comprise community groups, such as sports, cultural and professional organizations.
Urgent need to revise the BC Society Act.
Central to the case is the responsibility of Societies to treat members and directors fairly and without oppression; and the rights of members and directors to seek remedy for oppressive or unfairly prejudicial acts.
Should members and directors of a Society who are not seeking to wind-up and dissolve the Society but seeking to improve it through remedy for oppressive or unfairly prejudicial acts be required to also prove the merits of winding-up?
Does such a requirement impose an unduly onerous barrier that should not be necessary? And does such a requirement permit the Society to operate with a lower standard of fairness because of the additional barrier to being held accountable?
The BC Court of Appeal decision, in paragraphs 38 to 56, illustrates the convolutions within the existing BC Society Act and revisions made to the BC Company Act to clarify similar issues.
The existing BC Society Act contains the formality for an application seeking winding-up or dissolving of the Society when seeking an oppression remedy.
Similar requirements have been removed from the Company Act in BC and other jurisdictions because it led to "dissatisfaction with the scope of the court's powers to deal with oppression" and "had a number of limitations, including a requirement that the applicants show that their case merited relief under the winding-up provisions".
The Jenkins Committee report of the Company Law Committee (1962) to the BC legislature “recognized these problems and recommended changes ... to remove the procedural tie to winding-up”. "The Jenkins report considered the requirement that the facts would justify a winding-up order to be unduly onerous and unnecessary." BC legislation has implemented all of the recommendations to the Company Act.
However, similar revisions have not yet been applied to the BC Society Act.
In August 2007, a committee of the British Columbia Law Institute noted, “there is no section in the Society Act that expressly grants a member the right to apply to court for a remedy from oppressive or unfairly prejudicial acts”. They acknowledged a “rather convoluted path to the remedy” and recommended "a new Society Act should contain provisions allowing a member or other person that the court considers appropriate to apply to court for a remedy from oppressive or unfairly prejudicial acts."
Meanwhile courts faced with disputes under the BC Society Act have provided decisions based on their interpretation of the existing legislation.
In a precedent case Buckley v. B.C.T.F. (1992), the “Court held that comparable legislation did not require an applicant who was a member of a society to establish both an entitlement to wind up and an entitlement to an oppression remedy”. It ruled, it was not necessary to establish the merits of winding-up in seeking remedy for oppressive or unfairly prejudicial acts.
Now in contrast, the BC Court of Appeal decision includes, “The Legislature did not provide society members with direct access to the oppression remedies … in my view, it could be an abuse of process to attempt to do so with no foundation for claiming a winding up.” This asserts that applicants must establish the merits for winding-up in seeking remedy for oppressive or unfairly prejudicial acts.
The contrasting views expressed by the courts in these otherwise unrelated decisions must be resolved and this highlights the urgent need for revision of the BC Society Act.
The BC Society Act should be revised to provide access to the remedy for oppressive or unfairly prejudicial acts comparable at least to that found in the Company Act, removing the unduly onerous and unnecessary procedural tie to winding-up.
The opportunity for public participation and input to the review of the BC Society Act is here now. Hopefully the review will result in an improved revised Act without delay.
Z. Essak, MD
Web links:
BC Society Act review,
http://www.fin.gov.bc.ca/society_act_review.htm
BC Court of Appeal decision (2010 BCCA 43),
http://www.courts.gov.bc.ca/jdb-txt/CA/10/00/2010BCCA0043.htm
BC Supreme Court Judgment (2008 BCSC 1559),
http://www.courts.gov.bc.ca/Jdb-txt/SC/08/15/2008BCSC1559.htm
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My input to the BC Society Act review.Public
The following is the input I provided to the BC Society Act review:
Honorable Colin Hansen, Minister of Finance; and
Joann Cain, Executive Director
Financial and Corporate Sector Policy Branch
Ministry of Finance
PO Box 9418 Stn Prov Govt
Victoria BC V8W 9V1
fcsp@gov.bc.ca
Dear Minister and Ministry staff,
Thank you for this opportunity to provide input to the BC Society Act review.
Although, I am a member of societies incorporated under the BC Society Act I am providing this input as a citizen of BC. I am familiar with the current BC Society Act and there are two areas I would like to draw your attention to.
1. The fiduciary duty of directors.
Firstly, I think a significant improvement to the Society Act would be greater clarity on the fiduciary duties of directors. It is my understanding that the fiduciary duty of directors of societies is to the members and thereby accountability is ensured.
Over the past several years I have seen the current act interpreted differently giving rise to difficulties in a prominent professional association incorporated under the BC Society Act, of which I am a member.
One legal opinion asserted restriction of communications between directors and members with the view that the fiduciary duty of directors of a Society is to the Board itself, presenting only majority Board decisions as views of the Board and the Association without voice to minority views for discussion by the membership including minority views on decisions resulting from very close votes?
Meanwhile, another legal opinion asserted that it is not only the right of directors to express dissent from Board-approved decisions including discussing the grounds for that dissent, but on important issues facing the membership generally it is their duty to do just that.
Unlike a corporation a Society is member driven and full communications with the membership are essential. Greater clarity on the fiduciary duties of directors to the members would greater enhance the Society Act and avoid difficulties.
2. Access to remedy for oppressive and unfairly prejudicial acts.
Secondly, the rights of members to ensure societies are responsible and accountable to treat members and directors fairly and without oppression and if necessary to seek remedy for oppressive or unfairly prejudicial acts is convoluted in the current legislature and has given rise to contrastingly different interpretations in the Courts. This is highlighted in a recent BC Court of Appeal decision (2010 BCCA 43) that is in stark contrast to a precedent court case, Buckley v. B.C.T.F (1992).
Similar problems existed in the Company Act before it was amended. The Jenkins Committee report (1962) to the BC legislature recognized these problems and recommended removing the procedural tie to winding-up with the view that “the requirement that the facts would justify a winding-up order to be unduly onerous and unnecessary”. BC legislation implemented the recommendations to the Company Act.
In August 2007, a committee of the BC Law Institute acknowledged a “rather convoluted path to the remedy” in the BC Society Act and recommended changes to the provisions to apply for a remedy from oppressive or unfairly prejudicial acts.
The BC Society Act should be revised to provide access to the remedy for oppressive or unfairly prejudicial acts comparable at least to that found in the Company Act, removing the unduly onerous and unnecessary procedural tie to winding-up.
Greater clarity in this regard may ensure the conduct of societies is to a higher standard without court intervention with the knowledge that members can take steps to improve the society and ensure accountability should the standards of fairness not be met.
Thank you for considering these two suggestions. In light of these concerns I think it is important that the Society Act ensures accountability of directors and that regulatory controls are sufficient, especially for those societies that solicit or manage public funds.
Sincerely,
Z. Essak, MD