By Ryan M. Prendergast

The Court of King’s Bench of Alberta’s recent decision in Edmonton (Hakka Tsung Tsin Association) v Demei (“Demei”) (decided on March 5, 2025), serves as an important case study for charities and not-for-profits, particularly regarding fiduciary duties of directors, and procedural fairness in membership terminations. The case provides a reminder that governance failures can have serious legal consequences and reinforces the responsibilities of those in leadership roles within not-for-profits.

This case regarded a dispute over leadership and governance within the Hakka Tsung Tsin Association of Edmonton, a society governed by Alberta’s Societies Act. The issue arose when the Association’s former president, Liao Demei, was accused of improperly conducting an election in 2020 and subsequently using organizational funds to pay legal fees in defending that election. In that decision, the Court of King’s Bench of Alberta determined that the 2020 election was invalid. Liao retained counsel to defend the Association and herself concurrently, leading to the dispute in Demei.

In Demei, the court found that Liao breached her fiduciary duty by retaining legal counsel on behalf of both herself and the Association, despite a clear conflict of interest. The court noted that Liao’s interests were in preserving her position as president, while the Association’s interests were in ensuring the election was conducted in accordance with its bylaws. By failing to recognize this conflict and using Association funds for her legal defense, Liao placed her own interests above those of the organization, violating her duty of loyalty. As a result, the court held her personally liable for $10,000 in damages.

The case also considered the Alberta Freedom to Care Act, which offers legal protection to volunteers in not-for-profits. Liao argued it shielded her from liability, claiming she acted within her role as president and was not grossly negligent. The court disagreed, finding that breaching fiduciary duty – putting personal interests ahead of the organization’s – is incompatible with acting within one’s responsibilities. Even if she had been acting within her role, the court found her conduct reckless, disqualifying her from protection, and clarified that the Act does not grant blanket immunity to volunteers who neglect their legal and fiduciary duties.

Another significant aspect of Demei was the termination of Liao’s membership in the Association. In April 2022, following the resolution of the 2020 election dispute, the newly elected Executive Board revoked the memberships of Liao and her husband, citing their violations of the organization’s bylaws. However, the court found that this decision lacked procedural fairness, as Liao was not given advance notice that her membership was under review, nor was she afforded an opportunity to respond before the decision was made. The court emphasized that while not-for-profits have the authority to set and enforce membership rules, they must still follow principles of fair process. In this instance, the failure to provide notice and a hearing rendered the termination invalid, leading to Liao’s reinstatement as a member, contingent on her payment of outstanding membership dues.

Demei underscores the importance of ensuring that membership decisions are made transparently and in accordance with both organizational bylaws and common law principles of fairness. While courts generally defer to the internal governance of voluntary associations, they will intervene where procedural fairness is lacking. For charities and not-for-profits, this means that any decision to revoke membership should be made through a documented process that allows for notice, an opportunity to respond, and a clear rationale for the decision.

By proactively addressing these governance issues, charities and not-for-profits can mitigate risks, maintain the integrity of their leadership, and foster greater trust among their members and stakeholders.

​Read the March 2025 Charity & NFP Law Update