Court Rules on Whether Unalterable Provisions in a Constitution can be Amended

31 mars 2015 | Nicole K. D’Aoust, Sarah Fitzpatrick

( Disponible en anglais seulement )

In a judgment rendered by the Supreme Court of British Columbia (the “Court”) on March 12, 2015, entitled Re Vancouver Opera Foundation, the Court held that British Columbia’s Society Act (the “Act”) does not permit societies to amend provisions of their constitutions that are “unalterable.”  This decision means that the Act does not contain any mechanism or procedure that would allow a B.C. society to make changes to a particular provision of its constitution if that provision contains wording to the effect that the provision is “unalterable,” i.e. that it cannot be changed.  In other words, there is no way around those types of provisions under the current Act.  Shortly after this decision was rendered, the BC Legislative Assembly introduced legislative changes designed (among other things) to increase the flexibility available to societies with “unalterable” provisions in their constitutions.

In this case, the Vancouver Opera Foundation (“Foundation”) had applied to the Court for an order amending certain “unalterable” provisions in its constitution pertaining to three trust funds held by the Foundation.  The provisions in question established three restricted funds and dictated how each of the funds could be used.  The Foundation was seeking to amalgamate two of the funds into a general fund. Among other things, the proposed amendments would have allowed the Foundation to encroach on the capital of the general fund.  All of the new provisions, including the provision entitling the Foundation to access the capital of the general fund, would have been alterable.  In the view of the Foundation, the new amendments would have allowed the Foundation more flexibility in the use of grants and donations.

In reviewing whether this was possible under the Act, the Court analyzed the provisions of the Act which allow for the establishment of unalterable provisions in a society’s constitution.  The Court concluded that, as worded, the legislation does not permit the Foundation to amend such unalterable provisions.  The Court also concluded that it did not have jurisdiction to make the requested order under section 85 of the Act, which empowers the Court to make orders rectifying an omission, defect, error, or irregularity in the conduct of the affairs of the society.  The Court held that it did not have inherent jurisdiction to accept the new documents without regard to the wording of the Act.

The Court further held that there was no basis on which it could exercise its cy-pres jurisdiction to amend the terms of the charitable funds.  The Court confirmed that cy-pres jurisdiction refers to the court’s inherent ability to assign new purpose(s) to charitable funds where the old purpose has become impossible or impractical to carry out, with such new purposes being as near as possible to the original purpose.  The Court declined to exercise its cy-pres jurisdiction to amend the unalterable provisions on the basis that while the terms establishing the trust funds may have been inconvenient to the Foundation, they were not impractical or impossible to carry out.  The Court also noted that the cy-pres doctrine applies in situations where the intentions of the donor or settlor of the trust are reasonably clear and the court can thereby exercise its cy-pres jurisdiction to give better effect to those intentions.  In this case, the intentions of donors to the Foundation were not sufficiently clear.

The Court in this case ultimately ruled that if the legislature had intended to permit societies to make any changes to unalterable provisions of their constitutions, the legislature would have made sure that the Act contained explicit language to that effect. 

In the few short weeks since this decision was released, Bill 24, the Societies Act, was introduced in the Legislative Assembly of British Columbia for its first reading.  If passed, the new Societies Act will permit societies to amend unalterable provisions by passing a special resolution.  In addition, if a pre-existing society is designated by regulation as a “government-related society,” the new Societies Act will permit the government to make regulations that would require the society to obtain the consent of a designated minister prior to amending any unalterable provisions.

The Court in Re Vancouver Opera Foundation was likely aware that significant changes to the Act (including changes to unalterable provisions) were intended to come into effect in the near future.  If Bill 24 is passed and enacted as currently proposed, pre-existing societies will be permitted to change unalterable provisions in their constitution once they have transitioned under the new Societies Act.  If Bill 24 is passed in the current session of the Legislative Assembly, which ends in May 2015, it is expected that the new Societies Act will come into force 18 months after receiving royal assent.

The Miller Thomson Charities and Not-for-Profit Newsletter will keep readers apprised as Bill 24 progresses.

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