In Lash v Lash Point Association Corp, the Ontario Superior Court of Justice used its broad remedial authority under the Canada Not-for-Profit Corporations Act ("CNCA") to craft a buyout remedy for certain members of Lash Point Association Corporation ("LPAC"), rather than order its wind up. This decision may be of interest to non-profit corporations and their stakeholders, as the Court's analysis helps to shed light on the approach taken by Canadian courts to membership remedies under the CNCA.

The Lash family owns approximately 30 acres of cottage property on Lake Rousseau (the "Property") through LPAC. The purpose of LPAC, as stated in its articles, is "to own and conserve land and its natural features for the enjoyment of its members and guests."

Over time, two competing factions within LPAC emerged. One consisted of members that wanted to realize the fair market value of their interest in the Property (the "Leave Camp"). The other consisted of members that wanted to hold onto the Property (the "Stay Camp"). All members eventually agreed, however, that those who wanted to leave LPAC should be able to do so. But the means of allowing the Leave Camp to realize their interest became a source of strong disagreement between the camps, with neither camp being able to obtain the requisite two-thirds majority of voting members to effect fundamental changes in LPAC. As such, the two camps sought a court supervised solution.

The Leave Camp proposed that the Court use its equitable authority under section 224(1)(b)(i) of the CNCA to wind up LPAC by selling the Property and distributing its proceeds among its members (the "Wind Up Proposal"). Alternatively, the Stay Camp proposed that the Court exercise its broad remedial jurisdiction under sections 224(3), 216(1)(f) and 253(3)(f) of the CNCA and order a buyout of members of LPAC that wanted to leave, which would be accomplished by selling severed parcels of the Property to fund the buyout, and retaining the remainder of the Property for the Stay Camp (the "Buyout Proposal").

After considering the position of each respective camp, the Court determined that the Buyout Proposal was the more appropriate remedy in the given the circumstances. The Court arrived at this conclusion based on, among other things, three main factors:

  • The test was not met for a court ordered wind up. The Court indicated that a wind up order is a remedy of last resort. As such, the required test is an onerous one – and in this case, it was not made out. The Court noted that the CNCA provides the courts with broad jurisdiction to craft nuanced remedies that fit the particular circumstances, and the circumstances of this case warranted a remedy done "with a scalpel not a battle axe."
  • A buyout remedy better aligned with the purpose of LPAC. A wind up order would defeat the corporate purpose of LPAC whereas a buyout option would at least allow a significant number of members of LPAC to enjoy the Property.
  • A complete sale of the Property is not required for the Leave Camp to realize the fair market value of their interest. The Leave Camp took the position that, given the Property's "uniqueness", only a sale of the entire Property would permit members of LPAC to realize the fair market value of their interest. The Court rejected the notion that the Property was that unique, and argued that valuations are done all the time and in far more complex scenarios. As such, the Court was confident that a valuation of the entire Property and sales of the severed parcels would produce a fair outcome for the Leave Camp.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.