IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Dalpadado v. North Bend Land Society, |
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2018 BCSC 835 |
Date: 20180515
Docket: S178237
Registry: Vancouver
Between:
Tami Dalpadado and Anil Dalpadado
Petitioners
And
North Bend Land Society
Respondent
Before: The Honourable Mr. Justice Brundrett
Oral Reasons for Judgment
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Counsel for the Petitioners: |
G. Allen |
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Counsel for the Respondent: |
D. Buchanan |
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Place and Date of Hearing: |
Vancouver, B.C. April 23, 2018 |
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Place and Date of Judgment: |
Vancouver, B.C. May 15, 2018 |
[1] This proceeding involves both an assertion of property rights over neighbouring lands and a claim of oppression made by two members of a non-profit society known as the North Bend Land Society (the “NBLS”). The NBLS is a non-profit organization incorporated in 1994 for the purpose of purchasing lands in North Bend, British Columbia, which is a small unincorporated community in the Fraser Canyon along the Fraser River just north of Boston Bar. The NBLS was formed within this peaceful community with the intention of subdividing NBLS land into fee simple estates for each of its leasehold members, though that plan has been long delayed by the need for proper assessment of the risk from debris flow in nearby creeks and additional funds to finance the subdivision. In recent years, the petitioners have raised complaints over the admittedly imperfect way the NBLS has been run.
[2] The dispute has reached the point where the petitioners now claim that the NBLS has failed to abide by its own bylaws and has acted in a manner that is oppressive and unfairly prejudicial to the petitioners’ interests. They ask for relief under s. 102 of the Societies Act, S.B.C. 2015, c. 18, a recently expanded provision which allows this Court to grant relief to a member from unfairly prejudicial or oppressive conduct on the part of a society, its directors or its members. The petitioners also submit that this Court should make a declaration that they have a right to exclusive use and occupation over the neighbouring lots beside theirs, based on proprietary estoppel.
[3] The respondent NBLS resists the petitioners’ claims. It asks that the Court clarify some of the unfortunate confusion over the NBLS’ bylaws, and to reject what it says is a “land grab” by the petitioners.
[4] For the reasons that follow, I would dismiss most of the petitioner’s claims, provide a means for the NBLS to correct certain irregularities, and make some directions to provide future guidance.
Background
[5] A little history provides some insight into the petitioners’ complaints over the management of the NBLS and their claim of an exclusive right to use the lot bordering theirs.
[6] The origins of this modest, picturesque community are associated with the Canadian Pacific Railway (the “CPR”), which many decades ago built a number of homes for management members of the CPR on the land in issue.
[7] In the 1990s, the NBLS was formed when various citizens wanted to take ownership of the lands over from Marathon Realty, the realty arm of the CPR. Marathon Realty had divided the lands into various clearly defined parcels sometime in the early 1900s. Prior to the formation of the NBLS, the citizens of North Bend leased their respective units from Marathon Realty. The leases of the units were subject to termination upon 30 days’ notice. This caused concern for the original leaseholders.
[8] The NBLS was incorporated on August 19, 1994, for the purpose of allowing members to eventually acquire exclusive use and occupation of their leasehold properties. At the time, the NBLS’ Constitution contemplated that in short order the members’ interests would transition into estates in fee simple equivalent to their interest in their individual leasehold units. Funding, and assessment of the geohazard risks from nearby creeks, have since delayed that process.
[9] Upon incorporation, the NBLS membership included 17 members, which in turn included 12 single family dwellings, the North Bend School, a CBC radio tower, a catering business, and a family business run by Lloyd and Lillian Forman, who were also members of the NBLS in their personal capacities. Mr. Forman is the current president of the NBLS. His wife, Lillian, has been the treasurer since 2000. Both are in their 80s.
[10] In 1995, the Fraser Cheam Regional District (now the Fraser Valley Regional District) briefly purchased ownership of the NBLS lands, then sold ownership of the lands to the NBLS. On November 15, 1995, the NBLS confirmed that the individual lot lines would be defined by the pre-existing Marathon Realty lines.
[11] The plan to transition the leasehold parcels into fee simple units has not yet come about. Instead, each voting member of the NBLS continues to enjoy exclusive use of a particular plot of land from the NBLS as part of his or her membership. The NBLS derives its limited resources from memberships purchased for the use of its lands. Members of the NBLS generally consisted of elderly persons with modest means many of whom cannot afford to live elsewhere.
[12] Three of the 20 lots which make up the NBLS holdings are known as the Highline Lots.
[13] From incorporation until 2016, no new voting members were added to the NBLS. However, several existing memberships have changed hands through sales of existing memberships and improvements on the land similar to the petitioners’ purchase.
[14] In 2006, the petitioners Tami Dalpadado and Anil Dalpadado became members of the NBLS when they purchased the interest of an existing NBLS member in one of the Highline Lots (Highline 1) upon which a trailer was located. As a result of their purchase of Highline 1, Mr. Dapladado became a voting member in the NBLS.
[15] It appears one source of concern began in 2009 when the petitioners made a request, which the NBLS approved, to clear and use the lot or lots (the “Additional Lots”) next to theirs as a place where “children” could play and use their ATVs. The petitioners later erected a fence around the Additional Lots and asserted an exclusive right to use the property for their benefit. In 2017, the petitioners built a gazebo on the Additional Lots.
[16] Since that time, the NBLS has unsuccessfully attempted to persuade the petitioners to take down its structures. An attempt to charge the petitioners rent was resisted by the petitioners, though they did at one point offer to pay property tax in relation to the Additional Lots. Concurrently with the NBLS’ objections to their actions, the petitioners have become vocal about the way in which the NBLS is run.
[17] The parties have agreed that the following issues are to be determined in this petition:
1. Have the affairs of the NBLS been conducted in a way that is oppressive or unfairly prejudicial to the reasonable expectations of the petitioners?
2. Can new voting members be added to the NBLS under the existing NBLS Constitution and bylaws?
a. If so, can the lots presently used by the petitioners, referred to as lots 2 and 3 on the Marathon Realty map, be allotted to new members?
b. If not, what is the status of resolutions that have been voted on by the purported new members to date?
3. Is the NBLS permitted to remove fencing, materials, or structures from Lots 2 and 3?
4. Are the petitioners, as members of the NBLS, entitled to the exclusive use of Lot 1 only, or Lots 1–3 as identified on the Marathon Realty map?
5. Should the transfer of the North Bend School be set aside?
6. Costs of the petition.
[18] It is apparent that the third and fourth issues related to the petitioner’s neighboring land use were important events that helped give rise to this proceeding. Hence, I will deal with those issues first.
[19] As noted, in 2009 the petitioners sought the NBLS’ approval to use the Additional Lots next door to their Highline 1 lot.
[20] On December 13, 2009, the NBLS members approved the petitioners’ request to clear the remaining lots next to the petitioners’ lot as a place where children could play. These Additional Lots are referred to as Lots 2 and 3 (or Highline Lots 2 and 3) on the Marathon Realty maps filed in the materials before me.
[21] There are obvious divergent views between the petitioners and the NBLS respecting the Additional Lots. First, Mr. Dalpadado deposes in his affidavit that he requested to use the Additional Lots until such time as the subdivision occurred. Yet, the minutes of the NBLS December 13, 2009 annual meeting refer only Mr. Dalpadado asking “…if there was any objection to him clearing and using the lot next to his trailer”. I find that the difference is less significant because it is the response, and not necessarily the request, which is of primary importance.
[22] Second, the petitioners formed the opinion that they “…received approval from the NBLS to clear those lots for our own use until such time as the NBLS obtained approval for subdivision.” [Emphasis added] Mr. Dalpadado attests that “[w]e cleared the lots at our cost so that our children could play on them, and erected fencing for safety purposes.” [Emphasis added] They maintain the fencing of the lots was a natural consequence of the purposes to which they intended to put the lots; namely, as a space for their children to play.
[23] The NBLS disputes that it ever granted exclusive use to the petitioners. The minutes of the December 13, 2009 NBLS meeting indicate as follows:
Anil Dalpadado asked if there was any objection to him clearing and using the lot next to his trailer. He was thinking about a place where the children could use their ATV,s. [sic] We agreed he could use it temporarily, but it did not mean he would be able to buy it as that whole section was an uncertainty for what we would use it for.
[Emphasis added]
[24] Soon after securing approval, which I find was only in relation to temporary use of the Additional Lots, the petitioners erected a fence around the Additional Lots to the exclusion of other NBLS members in early 2010.
[25] This drew the consternation of the NBLS executive, who wrote inter alia as follows to the petitioners on July 22, 2010:
Dear Anil,
The executive of the North Bend Land Society have been approached by several members of our Society in regards to the extra land you are using.
It was generally understood at the annual meeting that you were going to clear it and use it for the children until such time as we could get it sub-divided.
We thought you were clearing it for the young people to ride their bikes on, and it would be open to community use.
We are concerned that you have put so much money into the development of this lot and that you have now fenced it, which we did not give you permission to do so. [sic]
…
[26] The letter did not secure the cooperation of the petitioners, who continued to view the disputed land as their own. The petitioners accused the NBLS of attempting to resile from representations made to them in 2009 and 2010.
[27] The NBLS minutes record that on May 29, 2011, a special meeting of the NBLS was held to discuss the petitioners’ use of the neighbouring land. The letter to Mr. Dalpadado, dated July 22, 2010, was read. The minutes provide in part as follows:
We all agreed that our understanding was Mr. Dalpadado was going to use it for recreation for all the children of the Community. The lot has now been fenced and concern has been brought forth by several members of the Society.
After much discussion it was decided to charge Mr. Dalpadado a rental fee of $25.00 per month for use of these lots, effective June 1, 2011.
A letter will be sent advising him of this meeting.
… [Emphasis added]
[28] By letter dated March 6, 2012, the petitioners wrote to the NBLS executive regarding payment of property tax in lieu of a rental fee. They indicated they would consider paying their appropriate share of property tax in lieu of rent which was commensurate with their use and occupation of the Additional Lots.
[29] The NBLS replied by letter of March 24, 2012. The NBLS advised the petitioners that:
…
Your request does not fit any of the bylaws of the Constitution or criteria of the North Bend Land Society so it is not granted.
We hereby request you remove your fence from the two lots adjacent to yours and from the lane at the back as soon as possible but no later than May 1st, 2012.
…
[30] Thereafter, no rents were paid in relation to the Additional Lots. The petitioners’ fence around, and claim to, exclusive use over the Additional Lots remained unresolved.
[31] As of December 10, 2015, there were four empty lots in the NBLS including the Additional Lots which were the two Highline lots beside the petitioners’ lot which comprise the area fenced by the petitioners. The NBLS executive passed a motion to sell additional memberships (carrying use of the empty lots) for $8,000 each with the money going to fee simple subdivision.
[32] One existing lessor was given a first option to buy the lot beside his. The petitioners were not. The petitioners are critical of this difference in treatment. The February 29, 2016 NBLS minutes record that both the petitioners and another individual had fences around lots that were not part of their original lots. A motion passed for the NBLS to write to both to remove their fences.
[33] By letter to the petitioners dated March 4, 2016, the NBLS indicated that the directors had determined unanimously at their February 29th meeting that the sale of memberships for $8,000 each was necessary to utilize four lots of NBLS land to help the NBLS with expenses in the future. The directors asked again that the petitioners remove their fence enclosing two of the NBLS lots within the next fourteen days so that they could put the pieces together that would allow them to subdivide. The directors indicated that some NBLS members were prepared to assist by removing the fence.
[34] Sometime in 2016, the Boons family purchased an NBLS membership and became members in accordance with NBLS tradition. Their membership included the use of the lot beside the petitioners (known as “Highline 2”).
[35] Mr. Dalpadado attests that in or around May of 2017 he and his wife constructed a gazebo “on our land that is subject to the NBLS”. [Emphasis added] The gazebo is located entirely on Highline 2, the lot the Boons obtained the use of through their purchase of a membership in the NBLS.
[36] On June 28, 2017, the petitioners received a letter from the NBLS advising that another member of the NBLS objected and would be removing the gazebo and fencing off “his land space”. Mr. Dalpadado attested that “[i]t is our understanding that the gazebo is entirely on our leased land, and Mr. Boons’ proposed fence would entrench on our land”.
[37] In the materials filed before me, there is an allegation of a conflict between the Boons and the petitioners on July 1, 2017, regarding the petitioners’ children riding ATVs through the vacant lands when the Boons grandchildren were at play.
[38] The truth of that matter has not been proven in evidence before me, but it appears to have given rise to additional concern because on July 23, 2017, the NBLS held a meeting to give the petitioners an opportunity to share their side of the story respecting NBLS property lines. The meeting addressed two issues: members abiding by the lot lines set out by Marathon Realty, and the motion passed in 2016 to sell new memberships on pre-existing lots to help cover the cost of subdivision.
[39] The members in attendance at the meeting unanimously passed a motion (with the petitioners abstaining) to reaffirm the 1995 decision to use Marathon administration lines as the members’ personal boundaries and the 2016 decision to sell memberships for formerly occupied lots to raise money for subdivision. The petitioners say they abstained from voting because they did not have copies of the maps in question and did not agree that the NBLS was permitted to create new voting memberships.
[40] The petitioners, citing Cowper-Smith v. Morgan, 2017 SCC 61, submit that they were granted exclusive property rights over the Additional Lots when the NBLS represented on multiple occasions that the petitioners were permitted to use and occupy that land until subdivision, that the NBLS seeks to resile from this promise, and that this is a “textbook” example of a situation where it should be estopped from doing so. The petitioners argue that they have expended their own resources on the Additional Lots in reliance on NBLS’ promise, and that they have been treated unfairly, in part because they claim another NBLS member fenced a vacant lot next to his NBLS land and was offered a right of first purchase over that lot.
[41] The petitioners argue that they have been asked to remove the fencing on the Additional Lots because the NBLS has now sold memberships to new members. They take the position that any addition of new members to the NBLS is contrary to its bylaws and constitution.
[42] The NBLS submits the petitioners have the right to the exclusive use and enjoyment of Highline 1 only, and that they could not have reasonably expected otherwise. The NBLS points out that it is the registered owner of all the lots including the Highline Lots. It argues that any potential right the petitioners might have to use the Highline Lots must arise by virtue of their membership in the NBLS, or by agreement with the NBLS, and that this has not occurred other than in relation to Highline 1. The NBLS submits that the petitioners have failed to make out a claim for proprietary estoppel because the petitioners have failed to prove what their expectations were, that such expectations were reasonable, or that the NBLS breached those expectations.
[43] Proprietary estoppel avoids the unfairness or injustice that would result to one party if the other were permitted to break his or her word and insist on his or her strict legal rights: Cowper-Smith at para. 16. The Supreme Court of Canada affirmed the requirements for proprietary estoppel in Cowper-Smith as follows:
15 An equity arises when (1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word [citations omitted] …
[44] The Court in Cowper-Smith held that proprietary estoppel can be express or implied, and that it can arise even when the promisor does not own an interest in the property at the time of the claimant’s reliance: paras. 3, 15, 22.
[45] I find that the petitioners’ claim for proprietary estoppel fails on all three requirements.
[46] First, I find that the NBLS never represented to the petitioners that they had the right to exclusively use and occupy the Additional Lots until the subdivision occurs. The minutes of the December 2009 meeting clearly indicate only that the Dalpadados could “use” the land “temporarily”. There is no reference in the 2009 or 2010 minutes to exclusive use, or to allowing the petitioners to put up a fence. Moreover, such a substantial concession to give up use of one of a limited number of the NBLS’ parcels (to the disadvantage of other present and future NBLS members) until subdivision eventually took place, when the NBLS had an interest in selling the vacant lots to raise much-needed funds, makes little sense.
[47] The 2009 minutes indicate the NBLS was concerned about reserving the future use of the property because of uncertainty as to “…what we [the NBLS] would use it for” [Emphasis added]. I can find no support for the petitioners’ expectation that they could exclusively use the Additional Lots until subdivision, and I reject their argument that the NBLS ever agreed to such.
[48] As to the second requirement for reasonable reliance, given the limited nature of NBLS’ concession as to temporary and non-exclusive use of the neighbouring property, the petitioners’ reliance on the NBLS’ representation to the extent of building a fence and a gazebo on neighbouring property was not reasonable. The petitioners simply took matters too far after receiving a gift from the NBLS in the form of the temporary non-exclusive use of the Additional Lots.
[49] On the third aspect, a detriment leading to an unfair or unjust result if the promising party goes back on its word, I find that the petitioners have exceeded and long overstayed the limited right of use they received in relation to the Additional Lots. The petitioners’ loss of the costs they put into building the fence and gazebo do not amount to an unjust result in the circumstances.
[50] The allegation of differential treatment with another member (Mr. Ferguson) is not established on the scant material before me which speaks to this issue. Moreover, there is no evidence that this other individual is similarly claiming a right of exclusive use of a neighbouring lot, even if he did fence it. And the fact that Mr. Ferguson may have asked for and received a right of first purchase over same, means that he is apparently eschewing any proprietary interest in the neighbouring lot in his case. In my view, given that the petitioners for years enjoyed the non-consensual use of the Additional Lots at no cost, and that their actions have interfered with the ability of the NBLS to sell the vacant Highline lots, the petitioners cannot complain of unfair treatment as compared to Mr. Ferguson.
[51] Having overstepped the temporary, limited use the NBLS granted them in 2009, and without consent to use the Additional Lots through agreement, the petitioners’ ongoing use of the Additional Lots amounts to a trespass against NBLS’ property. The petitioners’ claim to the exclusive use of the Additional Lots through proprietary estoppel is rejected, and the NBLS is free to remove the structures from the Additional Lots and deal with the Additional Lots in its discretion.
[52] One of the petitioners’ complaints relates to the addition of new members by the NBLS in addition to the closed set of original voting memberships that were created upon incorporation of the NBLS. This would seemingly impact the attempt by the NBLS to grant membership to the Boons, the petitioners’ neighbour of late on one of the Additional Lots.
[53] From incorporation until 2016, the NBLS admitted no new members though some existing memberships changed hands. After the NBLS approved selling new memberships in December of 2015 to raise additional funds, the NBLS purported to add new members. In 2016, the NBLS purported to add four new voting members.
[54] In November 2017, the petitioners received notice of an NBLS general meeting which was convened for the purpose of passing proposed changes to the NBLS constitution. At that time, and still currently, the “new” voting members (which the petitioners challenge) are attending NBLS general meetings and voting on resolutions.
[55] The petitioners are concerned that the NBLS sought to make changes to its Constitution when the question of who was a proper voting member was in dispute in this litigation and had not yet been resolved. The NBLS eventually agreed, at the petitioners’ request, not to move forward with any constitutional changes while this proceeding was outstanding.
[56] In March of 2018, the petitioners received a notice of a special general meeting of the NBLS. The proposed agenda included a resolution to admit five individuals as new voting members of the NBLS, and to grant certain of the purported new voting members with the right to exclusively use and occupy the Additional Lots.
[57] The NBLS initially refused the petitioners’ request to postpone any resolutions dealing with Additional Lots and/or adding new voting members. However, after the petitioners brought an injunction application, the NBLS relented.
[58] As part of their oppression claim, the petitioners challenge the ability of NBLS to legally add new members, and the procedure for adding new members, as they submit the Constitution and bylaws of the NBLS do not allow for the addition of new memberships nor the ability of new members to vote at NBLS meetings. If the petitioners’ position is sustained, it brings into question the status of lots used by new members and the legality of resolutions voted on by new members to date.
[59] The Constitution of the NBLS provides as follows in Article 2 as to the purposes of the NBLS:
The purposes of the North Bend Land Society (the “Society”) are to:
(1) Purchase portions of certain real property located in North Bend, British Columbia and commonly known as the “Marathon Lands” (the “Lands”) from the Regional District of Fraser-Cheam;
(2) Effect the subdivision of the Lands in order that Society Members may acquire and obtain an estate in fee simple absolute equivalent to the leasehold interests currently held by individual Society Members….
…
(10) Repay the society’s debts to the Regional District of Fraser-Cheam with the revenue generated from the sale of lots, contributions in kind, grants, donations and/or other activities of the Society in accordance with Article 4;
(11) Carry out, or cause to be carried out, the property management functions associated with the existing leases on the Lands in accordance with the Residential Tenancy Act, R.S.B.C. 1984, c. 15.;
(12) Immediately redirect the payment of rents payable pursuant to Article 2(11) into trust for the sole purpose of applying the rent monies towards the purchase of lots created at the time of subdivision of the lands;
…
(15) Do any and all such things which are incidental, necessary and conducive to the attainment of the above-stated purposes.
[Emphasis in original]
[60] While the petitioners point to the words “[c]arry out, or cause to be carried out, the property management functions associated with the existing leases” in Article 2(11) of the Constitution, I find that this language is not exhaustive of the authority of the NBLS. Neither this nor any other provision of the Constitution expressly prohibits the NBLS from selling new memberships.
[61] Article 3 of the Constitution forbids the NBLS from selling or disposing of any of its developed or undeveloped lands except in accordance with the Constitution and Bylaws. As all the lots continue to be held by the NBLS in fee simple, I find that this provision does not prevent the addition of new members pursuant to the bylaws.
[62] The petitioners also point to the various aspects of the NBLS bylaws as failing to provide for the addition of new members. I disagree.
[63] The bylaws are appended to the Constitution and were passed pursuant to the Society Act, R.S.B.C. 1979, c. 390 (the “1979 Society Act”), which provided in s. 6(1)(a) (now replaced by a similarly worded provision in s. 11(1)(a)(i) of the Societies Act) that the bylaws of a society incorporated under that Act must contain provisions for the admission of members:
Bylaw items
6(1) The bylaws of a society incorporated under this Act shall contain provisions in respect of
(a) admission of members, their rights and obligations and when they cease to be in good standing;
(b) conditions under which membership ceases and the manner, if any, in which a member may be expelled;
…
[64] The bylaws must be interpreted reasonably and in such a way as to avoid an absurd result: Badesha v. Guru Nanak Sikh Temple Society (1986), 39 A.C.W.S. (2d) 105 (B.C.S.C. [In Chambers]) per Houghton L.J.S.C. Without the addition of new members and the ability to transfer existing memberships to others, the fixed membership in the NBLS that the petitioners suggest would cease to exist over time as existing members lost their membership through death, resignation, failure to make lease payments, expulsion, or other means.
[65] As well, the petitioners’ interpretation is not supported by a closer reading of the bylaws. The NBLS bylaws provide in part as follows:
Part 1 – Interpretation
1. These bylaws shall be strictly construed in accordance with the Society Act, R.S.B.C. 1979, c. 390.
2. In these bylaws, unless the context otherwise requires,
…
(d) “Members” includes voting and non-voting members;
…
Part 2 – Membership
5. The members of the society are the applicants for incorporation of the society and those persons who subsequently become voting and non-voting members in accordance with these bylaws and, in any case, have not ceased to be members.
6. A person may apply to the directors for voting membership in the society and on acceptance by the society shall become a voting member. Non-voting members shall be accepted into membership in accordance with these bylaws.
…
19. With the exception of the non-voting members authorized under Bylaw 18 [the Secretary or his designate and Electoral Area Director for Electoral Area “A” of the Regional District of Fraser-Cheam or his designate], non-voting members shall be accepted into membership by ordinary resolution.
…
[Emphasis in original]
58. The directors may exercise all powers and do all acts and things that the society may exercise and do, which are not by these bylaws or by statute or otherwise lawfully directed or required to be exercised by the society in a general meeting, but subject nevertheless to:
(a) all laws affecting the society;
(b) these bylaws; and
(c) rules, not being inconsistent with these bylaws, which are made from time to time by the society in a general meeting.
[66] In my view, Bylaws 5 and 6 clearly contemplate and allow for the addition of new members. It is clear from Bylaw 6 that a person may apply to the directors for voting membership in the society and on acceptance by the society become a voting member.
[67] Although it is not necessary to go outside the bylaws to support an interpretation allowing for new members, this reading is reinforced by minutes of an April 22, 1994 meeting of certain founding members who expressed that “…we feel this society can be expanded with other members to deal with other portions of Marathon Lands, without again spending monies to form another society.”
[68] Bylaw 19 with respect to non-voting members is similar to Bylaw 6 respecting voting members. Both contemplate that members will be accepted into the NBLS upon approval by the society.
[69] Also relevant is Bylaw 58 setting out the authority of the directors of the NBLS. Importantly, it allows the directors to exercise powers in place of the society, which are not required to be exercised by the society in a general meeting.
[70] Bylaw 6 is phrased rather cumbersomely. The same holds true for Bylaw 58. However, I read Bylaws 5, 6, 19, and 58 as providing for the following procedures and authority with respect to the admission of new members:
a) the directors of the NBLS may receive an application for voting or non-voting membership;
b) acceptance into membership of the NBLS is a matter for final determination by the members of the society as a whole; and
c) on acceptance or ratification by the members of the society as a whole, an applicant becomes a voting or non-voting member as the case may be. If the proposed member is not accepted by a vote of the members of the society as a whole, the applicant ceases to be a member of the NBLS.
[71] It appears any authority the directors have to act on behalf of the NBLS in admitting new members is displaced by the bylaws which make membership a matter of ratification by the society. However, I see nothing in the bylaws preventing the directors from treating an applicant as a provisional non-voting member who may receive notices, attend meetings, and receive the other benefits of NBLS membership until formal ratification by the society as a whole.
[72] The petitioners also point to Bylaw 7 as supporting their interpretation that the NBLS membership pool is limited to original members. Bylaw 7 reads as follows:
7. As of the date these bylaws become effective, voting members shall be limited to:
(a) Lease holders or sublessees or occupiers of the Lands who have signed a “Letter of Intent to Purchase” a lot created at the time of subdivision of the Lands; and
(b) Lease holders or sublessees or occupiers of the Eastern Lands who have signed a “Letter of Intent to Purchase” a lot to be created at the time of subdivision of the Lands, within three (3) months from the date the Lands are registered in the Land Title Office in the name of the Society.
[73] Again, I reject the petitioners’ interpretation. Bylaw 7 only speaks to voting members “[a]s of the date these bylaws become effective” (i.e., the date of incorporation of the NBLS, being August 19, 1994) and does not address the addition of new members.
[74] Next, the petitioners point to the bylaws with respect to down payments on the purchase of a lot as supporting their interpretation:
10. Unless waived by the Society by ordinary resolution, a good faith down payment in the amount of two thousand dollars ($2,000.00 CDN) per lot, or such other amount as determined by the Society, shall be made by each Voting Member and shall be applied towards the purchase of a lot(s) created at the time of subdivision of the Lands.
11. Unless waived by the Society by ordinary resolution, the good faith down payment set forth in Bylaw 10, shall be paid within three (3) months from the date of incorporation of the Society.
[75] Bylaw 10 provides for a down payment of $2,000 to be paid by each voting member, which shall be applied towards the purchase of a lot(s) created at the time of the subdivision of NBLS lands.
[76] Bylaw 11 mandates that the deposit referred to in Bylaw 10 shall be paid within three months of the date of incorporation of the NBLS, which was in 1994. The petitioners point to this provision as being designed to create a closed set of memberships defined by eligibility around or shortly after incorporation.
[77] Although it might be possible to read Bylaw 11 this way, the provision must be read in harmony with the overall scheme of the bylaws, the Constitution, and s. 6 of the 1979 Society Act which was operative at the time. Thus understood, in my view it is simply a poorly worded provision which does not detract from the earlier language in Bylaws 5, 6, and 19 which contemplate that new members can become members of the society. Bylaw 11 only speaks to the deadline for down payment by the original members at the time of incorporation. It does not address, and in my view does not impose, a deadline for payment of a deposit made by a new member after incorporation.
[78] Bylaw 12 prohibits the transfer of the interest of a voting member “in the society” except when improvements on an existing leasehold are also purchased outright or otherwise transferred or disposed of by a voting member:
12. The interest of a voting member in the society is not transferable, except when improvements on an existing leasehold are purchased outright or otherwise transferred or disposed of by a voting member.
[79] This bylaw relates to s. 9 of the 1979 Society Act (now s. 67(4) of the current Societies Act) which provides that except as provided in the bylaws, the interest of a member in a society is not transferable.
[80] It appears that a restriction on transfer of membership is generally intended to reflect the fact that for many societies becoming a member is a personal commitment that cannot be readily transferred: Report No. 51, Report on Proposals for a New Society Act, (Vancouver: BC Law Institute, 2008) at 185. For some societies, a restriction on membership transfer would ensure a role for the society in approving the potential transfer of an original member’s interest and allow the society to have some say in the approval of the new member.
[81] The context is slightly different here in that the NBLS assigns voting members an allotment of land for exclusive use along with their membership. Bylaw 12 contains a wide exception which applies where improvements on an existing leasehold are purchased outright or otherwise transferred or disposed of by a voting member.
[82] The effect of Bylaw 12 is that the interest of a voting member in the NBLS is not transferrable except when improvements on the land such as a manufactured home or other structure on the land held by the member are also purchased, transferred, or disposed of. The voting interest is not severable. The provision ensures that a buyer or transferee who purchases the member’s leasehold interest (with improvements) becomes a voting member of the NBLS. Bylaws 14(g) and (h) then serve to extinguish the seller’s or transferor’s status as a voting member.
[83] Any improvements upon the land would normally be sold along with the leaseholder’s interest. For instance, in the petitioners’ case, I am advised that they purchased a manufactured home as part of their purchase of an original member’s leasehold interest. As such, in this context, I would construe Bylaw 12 restrictively as not preventing the transfer of a voting member’s interest so long as improvements are included with the transfer or sale, or are disposed of by the voting member.
[84] As with the petitioners, who themselves became members by virtue of Bylaw 12, any new members added by the NBLS in the past would be legitimate members so long as any “improvements” for the lot in issue were encompassed by the transfer or sale, or were disposed of by the previous voting member. The membership in the NBLS itself cannot be sold on its own from one voting member to another person. But nothing in the language of Bylaw 12 prevents the sale or transfer of a member’s improvements on their land, which in turn carries the voting membership along with it to the buyer or transferee in the transaction. Thus, new members can be added pursuant to the Bylaw 12 procedure, in addition to the procedure under Bylaws 5, 6, and 19.
[85] The NBLS also asks for the Court’s guidance as to whether new members can be permitted to occupy the Additional Lots, pending subdivision, including the Highline Lots.
[86] I have held that the Constitution does not restrict the admission of new members, and that the bylaws allow for the addition of new voting members. The voting members have leasehold interests carrying exclusive use over one parcel of land. The basis for voting membership, and indeed the NBLS itself, is to govern the use of land within the NBLS’ purview.
[87] I agree with the respondent NBLS that the addition of new members, and the permitting of new members to use vacant land, accords with the NBLS’ Constitution and bylaws. It follows that new members may be permitted to occupy vacant lots, or lots received through transfer from existing members.
[88] While the petitioners’ challenge to NBLS’ conduct of its affairs appears motivated to some extent by the land dispute, I would set the land issue aside and look at the conduct of NBLS affairs as regards the petitioner in isolation from the land issue. The obligation of a society to act fairly and without oppression arises independently of how any dispute with a member came about. There is no requirement for a finding of bad faith or improper motive in order to establish oppressive or unfairly prejudicial conduct: what is at issue is the effect of the conduct or acts complained of: Low v. Ascot Jockey Club Ltd. (1986), 1 B.C.L.R. (2d) 123 at 129 (S.C.); Starcom International Optics v. Macdonald (1994), 46 A.C.W.S. (3d) 430 at para. 36 (S.C.) (WL); Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1 B.C.L.R. 36 at 45–46 (S.C.) (WL); Paley v. Leduc, 2002 BCSC 1757 at para. 30.
[89] The petitioners take issue with the way the society has been run and seek application of the oppression remedy in the Societies Act. The petitioners argue they formed reasonable expectations that the NBLS would follow its own constitution and bylaws, respond to reasonable requests from the petitioners, and honour its commitment to the petitioners that they could use and occupy the Additional Lots until subdivision.
[90] The petitioners say the NBLS breached these reasonable expectations and acted in an oppressive and unfairly prejudicial manner. In particular, the petitioners submit that each of the following acts of the NBLS and/or its directors ought to form the basis for the granting of an oppression remedy:
a) Failure to appoint an auditor and failure to complete an annual audit as required by the NBLS bylaws;
b) Failure to give the petitioners proper, or any, notice of NBLS members meetings and directors meetings;
c) Failure or refusal to respond to reasonable documentary requests from the petitioners;
d) Purported transfer of the North Bend School without proper process and to a party that is owned and/or controlled by certain NBLS members and directors;
e) Attempts to resile from the NBLS’s commitment that the petitioners could use and occupy the Additional Lots until subdivision;
f) Attempts to strip the petitioners of their voting membership in the NBLS on the basis that the petitioners had not used a particular form of proof to establish that they had paid their yearly tax bill;
g) Attempts to add new voting members to the NBLS in violation of the NBLS constitution and bylaws;
h) Attempts to expel the petitioners as members of the NBLS without abiding by the process for expelling members under the NBLS bylaws.
i) Attempts to change the constitution of the NBLS while the issue of who is properly an NBLS voting member is still in dispute; and
j) Attempts to vote again on the inclusion of new voting members while the issue of whether new voting members can be added to the NBLS is still in dispute.
[91] The respondent NBLS submits the petitioners’ claim for relief must be rejected because the petitioners have not proven that their reasonable expectations have been breached by oppressive or unfairly prejudicial conduct on the part of the NBLS. The NBLS submits the petitioners did not and do not hold the expectations that they now say they do, and that in any case those expectations are not reasonable. The NBLS concedes that its organization is not particularly well run. It says the NBLS is a small organization that has been run for 24 years by the residents themselves. It acknowledges that its membership is relatively unsophisticated in such matters. The NBLS concedes that notices to members have probably been missed in the past, and that the NBLS never hired an auditor to prepare audited financial statements. The NBLS submits that the issue here is whether the society has been run in an oppressive or unfairly prejudicial manner, and that despite flaws in its operation, matters have not progressed to a level where the Court needs to intervene.
[92] Section 102 of the Societies Act allows a member of a society to apply to the Court to remedy oppressive or unfairly prejudicial conduct. The new Societies Act, which came into force in November of 2016, offers a more expansive oppression remedy than previously available to society members under the Society Act, R.S.B.C. 1996, c. 433, repealed by the Societies Act (the “1996 Society Act”). The new form of remedy is similar to that which has traditionally been available to shareholders in the corporate context.
[93] Section 102 of the Societies Act reads as follows:
102 (1) A member of a society may apply to the court for an order under this section on the grounds that
(a) the activities or internal affairs of the society are being or were conducted, or the powers of the directors are being or were exercised, in a manner oppressive to the member or to the member and one or more other members, or
(b) an act of the society was done or is threatened, or a resolution of the members or directors was passed or is proposed, that is unfairly prejudicial to the member or to the member and one or more other members.
…
[94] If the requirements in s. 102(1) are made out, the Court has wide remedies available to it under s. 102(2), including the directing or prohibiting of any act, regulating the conduct of the society’s activities or internal affairs, varying or setting aside a transaction or resolution, directing a society to compensate an aggrieved person, among others.
[95] Section 102 was briefly considered in Basra v. Shri Guru Ravidass Sabha (Vancouver), 2017 BCSC 1696, where the Court conducted a reasonable expectation analysis in determining whether to grant a remedy under s. 102.
[96] While s. 102 in its new form has yet to attract more judicial scrutiny, the courts previously applied the jurisprudence related to the oppression remedy in the corporate context to the oppression remedy under the 1996 Society Act: see Lee v. Lee’s Benevolent Association of Canada, 2007 BCSC 794, at paras. 13–15, aff’d 2008 BCCA 121. I note as well that the 2008 BC Law Institute report suggested at p. 208 that the oppression remedy available under the Societies Act is meant to be harmonized with the equivalent provision in the B.C. Business Corporations Act, S.B.C. 2002, c. 57.
[97] Overall then, I am satisfied that the wording of the s. 102 remedy is sufficiently similar to the corporate context that the jurisprudence related to the corporate version of the oppression remedy ought to continue to inform the interpretation of s. 102 of the Societies Act, with appropriate regard being paid to the situation at hand.
[98] The leading case on the application of the oppression remedy is BCE Inc. v. 1976 Debentureholders, 2008 SCC 69. That decision dealt with the oppression remedy under s. 241 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44. The Court held that the oppression remedy gives a court broad jurisdiction to enforce not just what is legal but what is fair. The oppression inquiry is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and with regard to the relationships at play: paras. 45, 58-59.
[99] The Court in BCE at para. 68 held that the two related inquiries in a claim for oppression are:
(1) Does the evidence support the reasonable expectation asserted by the claimant? and
(2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest?
[100] The Court explained the rationale behind the reasonable expectations aspect of the two-part test as follows:
[56] In our view, the best approach to the interpretation of s. 241(2) is one that combines the two approaches developed in the cases. One should look first to the principles underlying the oppression remedy, and in particular the concept of reasonable expectations. If a breach of a reasonable expectation is established, one must go on to consider whether the conduct complained of amounts to "oppression", "unfair prejudice" or "unfair disregard" as set out in s. 241(2) of the CBCA.
...
[58] First, oppression is an equitable remedy. It seeks to ensure fairness — what is "just and equitable". It gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair: Wright v. Donald S. Montgomery Holdings Ltd. (1998), 39 B.L.R. (2d) 266 (Ont. Ct. (Gen. Div.)), at p. 273; Re Keho Holdings Ltd. and Noble (1987), 38 D.L.R. (4th) 368 (Alta. C.A.), at p. 374; see, more generally, Koehnen, at pp. 78-79. It follows that courts considering claims for oppression should look at business realities, not merely narrow legalities: Scottish Co-operative Wholesale Society at p. 343.
[59] Second, like many equitable remedies, oppression is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another.
…
[61] Lord Wilberforce spoke of the equitable remedy in terms of the "rights, expectations and obligations" of individuals. "Rights" and "obligations" connote interests enforceable at law without recourse to special remedies, for example, through a contractual suit or a derivative action under s. 239 of the CBCA. It is left for the oppression remedy to deal with the "expectations" of affected stakeholders. The reasonable expectations of these stakeholders is the cornerstone of the oppression remedy.
[62] As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.
...
[72] Factors that emerge from the case law that are useful in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders.
[101] As quoted above, the BCE decision sets out a list of useful factors at para. 72 in assessing whether a shareholder holds a reasonable expectation that has been breached. Those factors include general commercial practice, the nature of the corporation, the relationship between the parties, past practice, preventative steps, representations and agreements, and fair resolution of conflicting interests. Keeping in mind the context of this case, I will apply those factors here when assessing the petitioners’ complaints.
[102] As to the second branch of the test, the Court in BCE at para. 67 held as follows:
[67] Having discussed the concept of reasonable expectations that underlies the oppression remedy, we arrive at the second prong of the s. 241 oppression remedy. Even if reasonable, not every unmet expectation gives rise to claim under s. 241. The section requires that the conduct complained of amount to “oppression”, “unfair prejudice” or “unfair disregard” of relevant interests. “Oppression” carries the sense of conduct that is coercive and abusive, and suggests bad faith. “Unfair prejudice” may admit of a less culpable state of mind, that nevertheless has unfair consequences.
[103] The Court further explained its reasoning as follows:
[89] Thus far we have discussed how a claimant establishes the first element of an action for oppression — a reasonable expectation that he or she would be treated in a certain way. However, to complete a claim for oppression, the claimant must show that the failure to meet this expectation involved unfair conduct and prejudicial consequences within s. 241 of the CBCA. Not every failure to meet a reasonable expectation will give rise to the equitable considerations that ground actions for oppression. The court must be satisfied that the conduct falls within the concepts of "oppression", "unfair prejudice" or "unfair disregard" of the claimant's interest, within the meaning of s. 241 of the CBCA. Viewed in this way, the reasonable expectations analysis that is the theoretical foundation of the oppression remedy, and the particular types of conduct described in s. 241, may be seen as complementary, rather than representing alternative approaches to the oppression remedy, as has sometimes been supposed. Together, they offer a complete picture of conduct that is unjust and inequitable, to return to the language of Ebrahimi.
…
[93] The CBCA has added "unfair prejudice" and "unfair disregard" of interests to the original common law concept, making it clear that wrongs falling short of the harsh and abusive conduct connoted by "oppression" may fall within s. 241. "Unfair prejudice" is generally seen as involving conduct less offensive than "oppression". Examples include squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a "poison pill" to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors' fees higher than the industry norm: see Koehnen, at pp. 82-83.
[104] The Court in BCE referred to “unfair disregard” of interests, which was a basis for the oppression remedy under the statute at issue in BCE but which does not appear in the Societies Act. Hence, as with the remedy under s. 227 of the BC Business Corporations Act, the two relevant bases for oppression under the Societies Act are oppression in s. 102(1)(a) and unfair prejudice in s. 102(1)(b). The threshold for unfairly prejudicial conduct is more easily satisfied than that for oppression: BCE at para. 93; Paley at para. 31; Elliott v. Opticom Technologies Inc., 2005 BCSC 529.
[105] The BCE decision was affirmed in Mennillo v. Intramodal Inc., 2016 SCC 51, where the Supreme Court dealt with a small road transportation company which was run informally without adherence to the technical requirements of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”). The two shareholders (M and R) almost never put anything in writing and had neither a partnership nor a shareholders’ agreement. One of the shareholders, M, subsequently resigned as an officer and director, and contended that the corporation wrongly stripped him of his status as a shareholder. His oppression claim was dismissed at trial, and the dismissal was upheld on appeal. After affirming the two elements of an oppression claim from BCE, the Supreme Court held that the fact that the corporation had failed to comply with the requirements of the CBCA in transferring M’s shares did not on its own constitute oppression. Rather, the remedy is instead triggered by conduct that frustrates reasonable expectations.
[106] In order to maintain an action for oppression, the petitioner must establish harm to his or her peculiar interests, and that harm must be distinct from the interests of others: Jaguar Financial Corp. v. Alternative Earth Resources Inc., 2016 BCCA 193 at para. 179. Moreover, the contractual force of conduct permitted by a company’s (or here, a society’s) founding articles cannot be ignored when determining whether conduct is oppressive or unfairly prejudicial: Walker v. Betts, 2006 BCSC 128 at para. 81.
[107] The omission in the Societies Act of a residual ability to grant an oppression remedy where it is just and equitable to do so, means that the broader or more liberal approach to assessing conduct that may have impacted a shareholder’s rights is missing in this context. Thus, the inquiry must concern itself with whether oppression or a harmful effect upon a member’s legal or proprietary rights has been established: Walker at paras. 80-90.
[108] In addition to s. 102, s. 105 of the Societies Act grants the Court wide powers to correct an omission, defect, error, or irregularity in the conduct of the activities or internal affairs of a society: Gill v. Kalgidhar Darbar Sahib Society, 2017 BCSC 1423 at paras. 33–34. The courts have adopted a cautious approach or “healthy reluctance” in relation to the applicability of the irregularity provision: Bector v. Vedic Hindu Cultural Society, 2014 BCSC 230 at para. 8; Gill at para. 33(d).
[109] I will address each of the petitioners’ complaints in order. In relation to each, and the complaints collectively, I must first address the contention by the petitioners that they had reasonable expectations that the NBLS would be run in an orderly manner in accordance with its own Constitution and bylaws.
[110] The petitioners bear the burden of establishing that the NBLS has failed to meet the petitioners’ reasonable expectations and, on an objective basis, that this failure involved oppressive conduct or prejudicial consequences: Societies Act at s. 102; BCE at para. 165; Alleluia v. Wilson, 2011 BCSC 666 at para. 29.
[111] I am cognizant that the size, nature, and structure of the society is relevant in assessing reasonable expectations: BCE at para. 74. Here, I am assessing the actions of a small group of self-governing lease-holding members of a society without significant resources who have historically operated in an informal, sometimes procedurally flawed, and cost-conscious manner. The courts may accord more latitude to the directors of a small corporation (or here, a small society) than to those of a larger public company: BCE at para. 74. As in Mennillo, the mere failure to adhere to technical formalities in the running of a society does not, without more, in the context of the relatively small, land use-focussed society at issue here, amount to improper conduct justifying the imposition of an oppression remedy.
[112] On the second branch of the test, I note that some of the petitioners’ complaints do not focus on their peculiar interests as opposed to the interests of other members: Walker at para. 81; Jaguar Financial Corp. at para. 179. This is the case with matters such as the failure to appoint an auditor, the transfer of the North Bend School, attempts to change the Constitution, etc. A good deal of the petitioners’ complaints relate to the orderly running of the NBLS rather than harm to their peculiar interests.
[113] The NBLS concedes that it is supposed to have an auditor but has never had one: Bylaws 95 and 96. The treasurer, Ms. Forman, attests that one of the original members, Cora Dunlop, was appointed as treasurer in 1995 but was never qualified as an auditor. Prior to the year 2000, the treasurer obtained financial statements from the bank and prepared annual statements to members. Subsequently, after Mr. Dalpadado complained about the lack of an audited financial report in 2011, Ms. Dunlop completed a reconciliation of NBLS financial books from 1995 to 2011.
[114] Ms. Forman attests that her health issues have prevented her from updating the NBLS’ financial statements in recent years and that none of the other members were willing to accept the responsibility. However, in 2017, after Ms. Forman recovered from major surgery, she was able to provide all (unaudited) financial statements required of her as treasurer of the NBLS. Ms. Forman claims the NBLS could not afford the $5,000 per year, or the $100,000 cost for audits for the years 1995–2017, that an auditor was quoted to cost. I accept that the NBLS has over the years prepared unaudited financial statements, but the statements have never been formally prepared by an auditor as required by the bylaws.
[115] The NBLS argues with some merit that in reality it should have been clear to the petitioners’ upon admission into the NBLS in 2006 that the NBLS has never appointed a qualified auditor, and has never provided an auditor’s report relating to its financial statements.
[116] Nevertheless, while the underperforming past practice and less formal manner in which the NBLS has conducted its business over the years are relevant in assessing the reasonableness of the petitioners’ expectations, the appointment of an auditor to prepare an annual audit is clearly required by the bylaws. Section 111 of the Societies Act provides that a society must have an auditor if required under the society’s bylaws, and may have an auditor in any other case. The wording of the bylaws currently allows no discretion in the appointment of an auditor.
[117] In Discovery Enterprises Inc. v. I.S.E. Research Ltd., 2002 BCSC 1624, Lowry J. (as he then was) held at para. 6 that the receipt of audited financial statements when required is a clear and mandatory right vested in a minority shareholder and it is not necessary that the shareholder advance any reason for exercising this right. It follows that the shareholder’s motive is not relevant; see also Labatt Brewing Co. v. Trilon Holdings Inc. (1998), 41 O.R. (3d) 384 (Gen. Div.) at 387–88. The omission is not excused by pointing to the financial circumstances of the NBLS: Discovery Enterprises at para. 7. So long as the bylaw remains in force, there is a basis for members’ reasonable expectations that audited financial statements should be prepared.
[118] In many commercial cases, the failure to provide financial records or audited statements, unless waived by the shareholders, may amount to oppression: 1043325 Ontario Inc. v. Jeck, 2014 BCSC 1197 at para. 109, rev’d on other grounds 2016 BCCA 258, leave to appeal ref’d [2016] S.C.C.A. No. 383. However, I must look beyond the narrow legal question of whether there has been a breach of a statute or the founding articles of a company or society, and consider questions of fairness and equity: BCE at para. 58; Mennillo at paras. 8 and 11; Mahood v. High Country Holdings, 2000 BCSC 1755 at para. 198; O’Neill v. Dunsmuir Holdings (New Westminster) Ltd. (1980), 2 A.C.W.S. (2d) 127 at para. 3 (QL) (S.C.)).
[119] As noted, the NBLS is a self-governing society consisting of mostly elderly persons who cooperate to manage their neighbouring plots of land. Though subdivision has been delayed due to various factors, the purpose of the NBLS remains a limited one; namely, to effect the subdivision of NBLS lands in order that NBLS members may acquire an estate in fee simple equivalent to the leasehold interests currently held by individual NBLS members: Article 2(2) of the NBLS Constitution.
[120] As further noted, audited financial statements have never been prepared, but the petitioners and other members of the NBLS have long had access to unaudited financial statements and bank records prepared at little or no cost to the NBLS. There has been no allegation of financial impropriety in the records disclosed to date and there are no suspicious transactions highlighted by the petitioners. I cannot attribute any malevolent motive to the NBLS in failing to hire an auditor, and it appears the voting members have long acquiesced to the failure of the NBLS to observe this formality. It is also apparent that the NBLS may soon be finally taking concrete steps toward subdivision of its lots into fee simple units and the winding up of the society.
[121] Having regard also to the nature, history, and status of the NBLS, the relationships of the parties, and the other factors identified in BCE, I cannot find oppressive or unfairly prejudicial conduct toward the petitioners in the failure of the NBLS to hire an auditor or prepare audited financial statements. To quote the Supreme Court in BCE, whether there has been oppression is judged according to “business realities” and not merely “narrow legalities”: BCE at para. 58.
[122] While this would normally be the end of the matter, here I am concerned that the requirement for an auditor in the bylaws has the force of the Societies Act behind it. Therefore, I find it appropriate to turn to my authority to correct irregularities.
[123] As noted, s. 105 of the Societies Act provides me with authority to remedy an omission, defect, error or irregularity in the conduct of the activities or internal affairs of a society, and to make orders in relation any such matter: Gill at paras. 32-34.
[124] I accept that the failure to hire an auditor to prepare financial statements amounts to an omission or error in the conduct of the activities or internal affairs of the NBLS, and that this omission is contrary to s. 95 of the bylaws of the NBLS.
[125] With the requisite cautionary approach to correcting irregularities in mind, I am of a view that an order should be made to move the NBLS toward addressing its ongoing failure to meet the requirement for audited financial statements. The order will also provide some assurance that the issue of ongoing financial statements is addressed should the NBLS’ reiterated hope of winding up not materialize. In deciding whether to remedy this defect, I have considered the potential effect upon the NBLS, its directors, officers, members and potential creditors.
[126] I see no benefit to the parties or the NBLS membership in requiring the NBLS at this point to fulfill its past obligations to retain an auditor. Given the context, which I regard as unique to some degree, the remedy will be a limited one to move the NBLS toward addressing compliance. Accordingly, I will structure my order in the following manner:
a) At the next annual or special meeting of the NBLS, the voting membership will address by way of special resolution whether the NBLS wishes to remove the requirement for an auditor in order to prepare audited financial statements;
b) If the voting membership decides that the retention of an auditor and the preparation of audited financial statements are not desired by the membership, it will address the need for an amendment to the NBLS bylaws;
c) If an amendment to NBLS bylaws 95 and 96 is not passed at the next annual or special meeting, the NBLS will as soon as practicable retain an auditor to prepare an audited financial statement for the most recent NBLS business year following retention of the auditor; and
d) The above steps do not apply if the NBLS has passed a vote to dissolve the NBLS.
[127] With respect to the failure to give the petitioners proper notice of members’ and directors’ meetings, the NBLS admits that this probably occurred from time to time. I cannot find that the NBLS ever deliberately failed to provide the petitioners’ notice of meetings or matters of importance to them. However, proper notice of meetings is a condition precedent to the effective participation of members in societal affairs. I agree with the petitioners that this was a reasonable expectation on their part.
[128] Similarly, with respect to the NBLS’ failure to respond to requests for information, there appears to have been some delay in the NBLS responding to the petitioners’ requests for information. The petitioners made multiple requests for information after 2016. Some of their requests were not responded to initially, or the responses were delayed. In the case of requested financial statements, the petitioners obtained a registrar’s order requiring the NBLS to provide the petitioners with financial statements for 2012–2016, which were then provided. Ms. Forman attests that all of the petitioners’ requests have now been dealt with, though her health condition had initially prevented her from updating financial information in 2016. Nevertheless, even allowing for the present context, the petitioners had a reasonable expectation that their requests for information would be responded to.
[129] I would not, however, impose any remedy in relation to these complaints. The petitioners’ requests were complied with, though compliance was delayed in the past. Mr. Dalpadado has attended all the annual meetings since 2009 (with the exception of 2015 when he was traveling) including the June 27, 2016 emergency meeting where some of the petitioners’ complaints (proof of tax receipt, personal occupation of common ground, financial statements, etc.) were discussed and the July 23, 2017 meeting where the Marathon lot boundary lines were affirmed.
[130] Some tolerance of procedural irregularities is in order given the informal nature of the NBLS. As well, NBLS Bylaw 26 indicates that the accidental or unintentional failure to give notice of a meeting to a member, or the non-receipt of a notice by a member, does not invalidate the proceedings at that meeting. In all the circumstances, the petitioners have failed to establish that any lapses in the provision of notices or the failures of the NBLS to respond to requests for information in a timely manner resulted in unfairly prejudicial consequences to them or amounted to burdensome, harsh or wrongful conduct requiring a remedy.
[131] I deal with this matter separately below.
[132] I have rejected the petitioners’ claim on this point.
[133] With respect to proof of tax filing required by the NBLS, there is very little evidence on this point, but it seems to have revolved around the request by the NBLS to the petitioners for a stamped copy of their tax bill showing that it had been paid when in fact the petitioners claim they paid their taxes online. Bylaw 13 provides that a member must be in good standing to vote.
[134] Mr. Forman attests that starting in 2011, the petitioners refused to turn in their receipt for payment of taxes. The NBLS wrote to the petitioners on June 6, 2016 as follows:
Since 2011 you have not given the Society a copy of your annual tax bill … with a paid stamp on it from the government. Each year you have been given written notice and several times Tami has been given verbal notice.
…
By not complying with this you are in violation of Bylaw #13 and #14 (e). When you fulfil this mandatory requirement for all the years from 2011 to 2015 inclusive, (and 2016 is almost due) [sic] you will be reinstated as a voting member in good standing.
[135] The minutes of the June 27, 2016 NBLS meeting indicate that the secretary has had to remind members each year to provide proof of payment for their improvement taxes by September 30th or they will not be allowed to vote. The minutes further state “This date or motion has not been enforced in past years but will be this year.” [Emphasis added]
[136] The minutes from the July 23, 2017 meeting indicate that the petitioners abstained from voting, signifying that there was no bar to their voting on that occasion.
[137] The petitioners have not established that they were not or are not eligible to vote as a result of the dispute. I am told that the NBLS does not currently take the position that the petitioners are ineligible to vote.
[138] Even if the petitioners were at one point denied the right to vote due to a failure to provide appropriate proof of tax payment, in my view it would not be contrary to reasonable expectations for the NBLS to take the position that the members must furnish proper proof of tax payment in order to maintain their good standing. I find that the evidence here does not establish the basis for the imposition of a remedy under s. 102 of the Societies Act.
[139] Again, I have rejected the petitioners’ claim on this point.
[140] The petitioners allege that attempts have been made to improperly expel them from the NBLS. I note that expulsion is expressly permitted under the NBLS bylaws: see Bylaw 15. No special resolution has been put to vote with respect to the petitioners’ membership. I view this complaint as premature and not supporting a violation of the petitioners’ reasonable expectations as to the running of the NBLS.
[141] I have rejected the petitioners’ position that the NBLS cannot admit new members. The NBLS has agreed not to table any resolutions regarding new voting members or the use and occupation of the Additional Lots until these proceedings are heard and determined. I do not view the petitioners’ complaint on this issue as potentially supporting a remedy under s. 102 of the Societies Act.
[142] Like many equitable remedies, oppression is fact-specific. What is just and equitable must be judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play: Boffo Family Holdings Ltd. v. Garden Construction Ltd., 2011 BCSC 1246 at para. 109.
[143] The petitioners’ complaints engage certain basic rights such as notice of meetings, membership, voting, and the disclosure of proper financial statements which are necessary to their ability to effectively participate in NBLS affairs. However, having examined the petitioners’ complaints individually, and having weighed the whole of their complaints cumulatively in all the circumstances, I agree with the NBLS that the petitioners have not made out a case for oppressive or unfairly prejudicial conduct on the part of the NBLS. In relation to the audited financial statements issue, I have made directions to bring the NBLS into compliance with its bylaws.
[144] I take from Mennillo and similar cases dealing with small family-run companies where tolerance of irregularities is higher, the proposition that actions of a society will not necessarily amount to oppression or unfair prejudice merely because they fell afoul of applicable legal formalities: para. 11. More is required. The additional element of inequity or unfairness, which sometimes involves an abuse of power or serious breach of duty toward the petitioners in the case of oppression, or actions which are unfairly prejudicial to the petitioners, is not made out here. As the NBLS conceded, its affairs have not always been well-run in the past, but this does not mean the NBLS has been run in an oppressive or unfairly prejudicial manner.
[145] One of the 20 units the NBLS inherited at inauguration is home to a thrift shop and the North Bend School. Mr. Forman attests that when subdivision ultimately occurs, every NBLS asset not subject to an intent to purchase upon subdivision will become the property of the FVRD.
[146] To avoid losing the school during subdivision, the NBLS asked all of its members to pay $50 toward the legal fees required to form a holding company to enter into an agreement with the NBLS to purchase the school. Some of the NBLS members, including the petitioners, declined this proposal. In order to avoid the North Bend School going to the FVRD upon subdivision, the remaining NBLS members formed the Hallecks Community Building Group Ltd. (the “HCBG”). The sole purpose of the HCBG is to prevent the School from passing to the FVRD upon subdivision so that it can remain in the North Bend community under local control after subdivision.
[147] On December 23, 2016, the HCBG entered into a Lease Purchase Agreement with the NBLS for the North Bend School thus making the HCBG a voting member of the NBLS. The HCBG provides volunteer staff and has maintained and run the North Bend School on a non-profit basis as a museum.
[148] I have found that the NBLS may admit new members. It follows that the HCBG, which has entered into the Lease Purchase Agreement with NBLS for the North Bend School, can be admitted as a new member if there is no impediment in the Constitution or bylaws.
[149] There is however an irregularity in relation to the purchase agreement for the school. The directors of the HCBG include two directors and voting members of the NBLS. While the transaction may have been undertaken with well-meaning intentions, the scheme would see the North Bend School transferred to a corporation controlled by two of the directors of the NBLS. This is contrary to the bylaws of the NBLS: Bylaws 67 and 68.
[150] Counsel for the NBLS does not dispute the conflict. It says the NBLS does not take a strong position with respect to the school transfer and will likely look at other options such as finding a new transferee if the current plan is not viable.
[151] While a society such as the NBLS is not to be held to a standard of perfection, it is certainly reasonable for a member of the NBLS to expect that the directors would abide by their bylaws with respect to conflicts of interest. However, the transfer of the North Bend School does not directly engage the petitioners’ interests. Further, I cannot find that the potential transfer constitutes conduct that rises to the level of oppression or unfair prejudice to the interests of the petitioners.
[152] I have found that there has been a defect or error in the conduct of the NBLS’ affairs in relation to the school transfer, and that the transfer constituted a breach of the society’s bylaws. As with the auditor issue, the school transfer may pose a difficulty going forward.
[153] In particular, I am concerned with the effect of the transfer in that the membership of the NBLS may not have had a chance to have input on the manner in which the North Bend School was sought to be preserved for the benefit of the NBLS. Again, I turn to the Court’s authority to address irregularities under s. 105 of the Societies Act in order to provide a means of dealing with the issue.
[154] In order to address the irregularity, I would make the following orders:
a) At the next annual or special meeting of the NBLS, the transfer of the North Bend School will be put to the membership for approval by way of a special resolution under the Societies Act.
b) Prior to the vote, the NBLS shall make disclosure to its members of any conflict of interest of its directors in relation to the school transfer in accordance with Bylaw 67.
c) If the voting members approve the school transfer, the transfer is hereby affirmed and the transfer and membership of the HCBG are declared to be valid.
d) If the voting members do not approve the school transfer, the transfer is set aside and the transaction will be unwound so that the ownership of the school will revert to its pre-transfer status as an NBLS asset. If necessary, the parties may apply to the Court for further directions.
[155] As with the issue of retention of an auditor, I have set the threshold for approval at that of a special resolution (2/3rds of voting members) to reflect the level of voting member support that would have been required in the first place to pass an amendment to the NBLS bylaws to approve the matter.
[156] Therefore, I would answer the questions posed by the litigants as follows:
1. Have the affairs of the NBLS been conducted in a way that is oppressive or unfairly prejudicial to the reasonable expectations of the petitioners?
Answer: No
With respect to the correction of irregularities in relation to audited financial statements, I make the following orders:
i. At the next annual or special meeting of the NBLS, the voting membership will address by way of special resolution under the Societies Act whether the NBLS wishes to remove the requirement for an auditor in order to prepare audited financial statements;
ii. If the voting membership decides that an auditor and audited financial statements are not desired by the membership, it will address the need for an amendment to the NBLS bylaws;
iii. If an amendment to NBLS bylaws 95 and 96 is not passed at the next annual or special meeting, the NBLS will as soon as practicable retain an auditor to prepare an audited financial statement for the most recent NBLS business year following retention of the auditor; and
iv. The above steps do not apply if the NBLS has passed a vote to dissolve the NBLS.
2. Can new voting members be added to the NBLS under the existing NBLS constitution and bylaws?
Answer: Yes
a. If so, can the lots presently used by the petitioners, referred to as lots 2 and 3 on the Marathon Realty map, be allotted to new members?
Answer: Yes
b. If not, what is the status of resolutions that have been voted on by the purported new members to date?
N/A
With regard to the procedures for the addition of new members to the NBLS, I make the following declarations:
i. the directors of the NBLS may receive an application for voting or non-voting membership;
ii. acceptance into membership of the NBLS is a matter for final determination by the members of the society as a whole;
iii. on acceptance or ratification by the members of the society as a whole, an applicant becomes a voting or non-voting member as the case may be. If the proposed member is not accepted by a vote of the members of the society as a whole, the applicant ceases to be a member of the NBLS; and
iv. the interest of a voting member in the NBLS is transferrable to a new voting member pursuant Bylaw 12 when improvements on the land held by the member are purchased, transferred, or disposed of.
3. Is the NBLS permitted to remove fencing, materials, or structures from Lots 2 and 3?
Answer: Yes
4. Are the petitioners, as members of the NBLS, entitled to the exclusive use of Lot 1 only, or Lots 1-3 as identified on the Marathon Realty map?
Answer: The petitioners are entitled to the exclusive use of Lot 1 only
5. Should the transfer of the North Bend School be set aside?
Answer: Not at this time
With respect to the correction of irregularities in relation to the North Bend School, I make the following orders:
i. At the next annual or special meeting of the NBLS, the transfer of the North Bend School will be put to the membership for approval by way of a special resolution under the Societies Act.
ii. Prior to the vote, the NBLS shall make disclosure to its members of any conflict of interest of its directors in relation to the school transfer in accordance with Bylaw 67.
iii. If the voting members approve the school transfer, the transfer is hereby affirmed and the transfer and membership of the HCBG are declared to be valid.
iv. If the voting members do not approve the school transfer, the transfer is set aside and the transaction will be unwound so that the ownership of the school will revert to its pre-transfer status as an NBLS asset. If necessary, the parties may apply to the Court for further directions.
[157] The NBLS has been substantially successful on many of these issues. However, the petitioners have brought irregularities to the Court’s attention, the NBLS has seized upon this proceeding as an opportunity to correct certain confusion, and those matters have been addressed and clarified where appropriate.
[158] I would therefore order that each party bear their own costs.
“The Honourable Mr. Justice Brundrett”