Sept 2022 Charity & NFP Law Update
What happens when some members of a society or not-for-profit corporation want the organization to be dissolved while other members do not? This is the question that the Court of Queen’s Bench of Alberta considered in the case of Blood Tribe v Bearspaw Nation when members of the Treaty 7 First Nations Chiefs’ Association (“Association”) brought their dispute to the court after attempts to voluntarily dissolve the Association failed. Ultimately the court decided that despite the tensions between certain member First Nations, there was not enough evidence to establish that it would be just and equitable for the court to dissolve the society.
The Association is comprised of seven member First Nations, with the elected Chiefs of each First Nation acting as directors of the Association. Its primary purpose is to advocate political positions of common interest with the federal and provincial governments, as well as other Indigenous governments and bodies. Three First Nations brought the application for dissolution before the court: the Blood Tribe, the Piikani Nation and the Siksika Nation (collectively, the “Applicants”), submitting that the relationship between them and the other First Nation members of the Association had deteriorated over the years, resulting in a deadlock in decision making. The other four First Nations that comprised the Association (the Bearspaw Nation, the Chiniki Nation, the Wesley Nation and the Tsuut’ina Nation, collectively, the “Respondents”) disagreed and opposed dissolution on the basis that the differences between them and the Applicants did not relate to the core purposes of the Association and that there was value in having the Association continue to advocate for the Treaty 7 First Nations.
The court concluded that its authority to dissolve a society came from section 35 of Alberta’s Societies Act. In deciding which factors it should consider, the court followed the decision of Keho Holdings Ltd v Noble and identified four grounds where it would be just and equitable for the court to exercise its discretion and dissolve a corporation, namely where there is a: (1) deadlock in management, (2) fundamental breakdown in a trust relationship, (3) loss of substratum (i.e. a sustained failure of a society to pursue its core purposes or where those purposes become impossible to carry out), and/or (4) loss of confidence in management. The Applicants relied on all four grounds, though it was only necessary for them to establish one of these grounds to the court.
In considering whether there was a deadlock in management, the court ultimately rejected the Applicants arguments on the grounds that despite areas of disagreement, there was not evidence that the members were unable to agree on matters fundamental to the Association or would be unable to do so in the future. Second, the court did not find that there was a fundamental breakdown in a trust relationship or a deep divide between the Applicants and the Respondents because their disagreements about funding did not pertain to the Association’s core purpose, and represented only a small fraction of the funding received. Third, the court declined to find that there was a loss of substratum. In this instance, the court thought it was premature to conclude that the member First Nations would not be able to come to a common vision for the Association in pursuit of shared political goals, though it was not known to the court when the Association had last put forward a public political decision. Finally, the court was unsatisfied with the Applicant’s arguments regarding the loss of confidence in management, since there was no clear pattern establishing this, and at least one of the allegations against management was not known to the Applicants until after their application was made to the court. Therefore, the court concluded that there was not enough evidence to support a finding that it was just and equitable for the Association to be dissolved, noting that “dissolution is a discretionary remedy not to be granted lightly.”
While the law as it pertains to the dissolution of not-for-profit corporations may vary by province, this case provides an example of factors the courts may consider in Alberta. Additionally, Blood Tribe v Bearspaw Nation highlights how dissolution of a corporation is a discretionary power of the courts, and may not be exercised unless the court is satisfied there is sufficient evidence that it would be just and equitable for the court to intervene.