By Ryan M. Prendergast

In the case of Carr v. O’Reilly released on August 8, 2024, Jennifer Carr, the President of the Professional Institute of the Public Service of Canada (“PIPSC”), brought an application under section 253 of the Canada Not-for-profit Corporations Act (“CNCA”) alleging oppression. Ms. Carr was facing ongoing investigations by the Board into several complaints against her at the time of the application.

The Ontario Superior Court of Justice found that the “administrative leave” on which Ms. Carr was placed by the PIPSC’s Board on April 10, 2024 was functionally equivalent to a suspension, which required the procedures set out in the governance documents of the not-for-profit corporation to be followed, including member authorization. The court held that the respondents’ actions were oppressive and unfairly disregarded Ms. Carr’s interests.

After reviewing the PIPSC’s By-laws, Policies, and Ms. Carr’s Service Agreement, the court found that the administrative leave imposed on Ms. Carr was equivalent to a suspension because it excluded her from all her duties and responsibilities as President for an indefinite time period. The suspension did not follow the necessary procedural protections outlined in PIPSC’s governance documents, none of which made any reference to administrative leave. The court concluded that the respondents’ actions were disciplinary in nature, despite being labeled as non-disciplinary, and were inconsistent with the required processes for suspension or removal of the President.

The court then reviewed the legal principles under section 253(1) of the CNCA, which provide the court wide discretion to grant an oppression remedy and are substantially the same as the oppression provision in the Canada Business Corporations Act. In accordance with the 2008 Supreme Court of Canada case, BCE Inc. v. 1976 Debentureholders, the court stated the following:

[36] There is a two-part inquiry for oppression: (i) does the evidence support the reasonable expectation asserted by the claimant; and (ii) 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.

[…]

[39] Oppression connotes conduct that is “coercive and abusive” and “a visible departure from standards of fair dealing”. Unfair prejudice involves conduct that is less offensive that oppression and that may admit of a less culpable state of mind, but that nevertheless results in unfair consequences. Unfair disregard involves “ignoring an interest as being of no importance, contrary to the stakeholders’ reasonable expectations” [Citations omitted]

The court found Ms. Carr’s expectations to be reasonable, which expectations included that the respondents not suspend her without making submissions, providing her with a right of appeal, seeking authorization of members at a Special General Meeting, and conducting the complaints process and any discipline of Ms. Carr’s consistent with PIPSC’s By-laws, Policies and the CNCA.

The respondents invoked the business judgment rule, asserting that their actions were reasonable and justified. In this regard, the court found that the respondents’ decision to place Ms. Carr on administrative leave, which was functionally equivalent to a suspension, was oppressive, unfairly prejudicial, and disregarded her interests as President. The process lacked procedural fairness, failed to follow PIPSC’s governance documents, and deprived members of their right to vote on her suspension. The court concluded that this decision was unreasonable and did not meet the standards of fair dealing.

The court concluded that the appropriate remedy for Ms. Carr was to quash the Board’s motion placing her on administrative leave and to reinstate her immediately as President with all associated duties and rights. The court also prohibited the respondents from excluding her from her position without member authorization at a Special General Meeting, ensuring that any future resolutions adhere to the court’s findings.

This decision emphasizes the importance of adhering to procedural fairness and the governance framework in managing internal disputes within not-for-profits.

​Read the August 2024 Charity & NFP Law Update