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Associations II

. Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga

In Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga (SCC, 2021) the Supreme Court of Canada considers the contractual nature of an unincorporated association and when it's members have standing to seek court remedies:
[27] Courts have jurisdiction to intervene in decisions of voluntary associations only where a legal right is affected. This proposition is not new. In Dunnet v. Forneri (1877), 25 Gr. 199, the Ontario Court of Chancery held that religious bodies are “considered as voluntary associations; the law recognizes their existence, and protects them in their enjoyment of property, but unless civil rights are in question it does not interfere with their organization”: p. 206 (emphasis added). In Ukrainian Greek Orthodox Church of Canada v. Trustees of the Ukrainian Greek Orthodox Cathedral of St. Mary the Protectress, 1940 CanLII 59 (SCC), [1940] S.C.R. 586, at p. 591, Crocket J. wrote that “unless some property or civil right is affected thereby, the civil courts of this country will not allow their process to be used for the enforcement of a purely ecclesiastical decree or order”. The point was reiterated in Lakeside Colony of Hutterian Brethren v. Hofer, 1992 CanLII 37 (SCC), [1992] 3 S.C.R. 165, at p. 174, and most recently in Wall, at para. 24, where this Court held that “[j]urisdiction depends on the presence of a legal right which a party seeks to have vindicated”.

[28] Thus, while purely theological issues are not justiciable (Wall, at paras. 12 and 36), where a legal right is at issue, courts may need to consider questions that have a religious aspect in vindicating the legal right. As this Court explained in Bruker v. Marcovitz, 2007 SCC 54, [2007] 3 S.C.R. 607, at para. 41, “[t]he fact that a dispute has a religious aspect does not by itself make it non‑justiciable”. Rather, as the trial judge in that case correctly held, “a claim for damages based on a breach of a civil obligation, even one with religious aspects, remains within the domain of the civil courts”: Bruker, at para. 32. For example, courts adjudicating disputes over church property may need to consider adherence to the church’s internal rules, even where those rules are meant to give effect to religious commitments: Wall, at para. 38.

[29] The legal rights which can ground jurisdiction include private rights ⸺ rights in property, contract, tort or unjust enrichment ⸺ and statutory causes of action: Wall, at paras. 13 and 25. This is borne out by the cases in which courts have intervened in voluntary associations. In Lakeside, this Court provided relief to members of a religiously‑based agricultural colony who had been expelled and thus deprived of their right to live in the colony and to be supported by it. Gonthier J. noted, at p. 174, that these rights had both proprietary and contractual aspects. Similar rights were at stake in Hofer v. Hofer, 1970 CanLII 161 (SCC), [1970] S.C.R. 958, as well as a claim for a division of the colony’s assets. Courts also have the jurisdiction to determine whether the deprivation of a person’s ability to earn their livelihood was a breach of contract, as in McCaw v. United Church of Canada (1991), 1991 CanLII 7048 (ON CA), 4 O.R. (3d) 481 (C.A.), and to decide between competing claims to property, as in Polish Alliance of Association of Toronto Ltd. v. The Polish Alliance of Canada, 2017 ONCA 574, 32 E.T.R. (4th) 64. By contrast, in Wall, because there was no legal right attached to the plaintiff’s membership in his religious congregation, the courts had no jurisdiction to determine whether he was properly expelled.

[30] It follows that, as this Court held in Wall, at para. 24, “there is no free‑standing right to procedural fairness with respect to decisions taken by voluntary associations”. In other words, natural justice is not a source of jurisdiction. Rather, where there is a legal right at issue, natural justice may be relevant to whether that legal right was violated. In Lakeside, the plaintiffs’ contractual rights to remain in the colony were at issue; the colony’s failure to provide natural justice was a basis for finding that those contracts had been breached. Similarly, in Senez, the plaintiff stood in a contractual relationship with the corporation of which he was a member. As a result, the corporation’s failure to adhere to the terms of this contract in expelling him ⸺ which included an obligation to observe natural justice ⸺ constituted a breach. While Senez concerned a corporation, not a voluntary association, the role of natural justice in the contract is nonetheless instructive.

[31] Of course, many voluntary associations will exercise some legal rights, for example, owning property or contracting for services. The question to be answered in a given case is not whether the voluntary association exercises legal rights in general, but whether the particular relief sought by the plaintiff is the vindication of a legal right. If not, then there is simply no cause of action (Wall, at para. 13) and no basis for relief.

....

(1) The Conditions of Contract Formation

[34] As this Court held in Wall, at para. 29, “Where one party alleges that a contract exists, they would have to show that there was an intention to form contractual relations. While this may be more difficult to show in the religious context, the general principles of contract law would apply” (emphasis added). These principles are decisive of the present appeal.

[35] A contract is formed where there is “an offer by one party accepted by the other with the intention of creating a legal relationship, and supported by consideration”: Scotsburn Co‑operative Services Ltd. v. W. T. Goodwin Ltd., 1985 CanLII 57 (SCC), [1985] 1 S.C.R. 54, at p. 63. The common law holds to an objective theory of contract formation. This means that, in determining whether the parties’ conduct met the conditions for contract formation, the court is to examine “how each party’s conduct would appear to a reasonable person in the position of the other party”: Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, at para. 33.

[36] For present purposes, it will suffice to focus on the requirement of intention to create legal relations. As G. H. L. Fridman explains, “the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”: The Law of Contract in Canada (6th ed. 2011), at p. 15; see also S. M. Waddams, The Law of Contracts (7th ed. 2017), at p. 105. This requirement can be understood as an aspect of valid offer and acceptance, in the sense that a valid offer and acceptance must objectively manifest an intention to be legally bound: Crystal Square, at paras. 49‑50.

[37] The test for an intention to create legal relations is objective. The question is not what the parties subjectively had in mind but whether their conduct was such that a reasonable person would conclude that they intended to be bound: Kernwood Ltd. v. Renegade Capital Corp. (1997), 1997 CanLII 846 (ON CA), 97 O.A.C. 3; Smith v. Hughes (1871), L.R. 6 Q.B. 597, at p. 607. In answering this question, courts are not limited to the four corners of the purported agreement, but may consider the surrounding circumstances: Leemhuis v. Kardash Plumbing Ltd., 2020 BCCA 99, 34 B.C.L.R. (6th) 248, at para. 17; Crystal Square, at para. 37.

[38] Under the objective test, the nature of the relationship among the parties and the interests at stake may be relevant to the existence of an intention to create legal relations. For example, courts will often assume that such an intention is absent from an informal agreement among spouses or friends: Balfour v. Balfour, [1919] 2 K.B. 571 (C.A.); Eng v. Evans (1991), 1991 CanLII 5926 (AB QB), 83 Alta. L.R. (2d) 107 (Q.B.). The question in every case is what intention is objectively manifest in the parties’ conduct.

[39] These principles apply directly to whether a given voluntary association is constituted by contract. As Stephen Aylward writes in The Law of Unincorporated Associations in Canada (2020), at §1.32, “[t]he key to the formation of the association is an intention to form contractual relations on the part of its members. This is the critical distinction between informal social activities and an association of legal significance.” The local stamp club or bridge night might have rules, but without more, nobody would suppose that the members intend them to be legally enforceable. Now, while the circumstances that may give rise to such an intention will vary from case to case, it is possible to make two general observations that bear on the present matter.

[40] First, where property or employment is at stake, an objective intention to create legal relations is more likely to exist: J. R. S. Forbes, The Law of Domestic or Private Tribunals (1982), at pp. 20‑21. When parties make an agreement that governs their right to remain in their home, or their ability to make a living, a reasonable observer would likely understand that the parties intended such an agreement to be enforceable. Thus, in Hofer and Lakeside, where the parties’ agreement provided both for their right to live in the colony and for their right to be supported by it, this supported a finding that the parties had meant for the agreement to be legally binding. This was also the case in McCaw, where the parties’ agreement determined whether the minister could earn his livelihood within the church, and in Foran v. Kottmeier, 1973 CanLII 726 (ON CA), [1973] 3 O.R. 1002 (C.A.), where a nurses’ registry distributed assignments of work to its members.

[41] Second, and conversely, the existence of an objective intention to create legal relations may be “more difficult to show in the religious context”: Wall, at para. 29. In Pinke v. Bornhold (1904), 8 O.L.R. 575 (H.C.J.), the plaintiff had been expelled, without notice, from membership in a church to which he had made donations. In dismissing his claim for relief, the court held, at p. 578, that “[t]he plaintiff’s subscriptions to the church and parsonage were voluntary. His civil rights were, therefore, not affected by the resolution of the trustees expelling him from membership.” More recently, the Court of Appeal of Alberta considered a claim from individuals who had been expelled from a congregation of Jehovah’s Witnesses. The court rejected the claim, holding that “whatever labour and other contributions were given by the appellants, were purely voluntary and would not provide the appellants with a property interest”: Zebroski v. Jehovah’s Witnesses (1988), 1988 ABCA 256 (CanLII), 87 A.R. 229 (C.A.), at para. 21. In the religious context, even the use of concepts such as authority and duty need not reflect an intention to create legal relations: the parties may be speaking of religious obligations rather than legal ones. While an objective intention to enter into legal relations is possible in a religious context — for example, a contract of employment between a minister of religion and their church — each case must be judged on its own particular facts: E. v. English Province of Our Lady of Charity, [2012] EWCA Civ 938, [2013] Q.B. 722, at para. 29; Percy v. Board of National Mission of the Church of Scotland, [2005] UKHL 73, [2006] 2 A.C. 28.

[42] The upshot is this. Courts must have jurisdiction to give effect to legal rights ⸺ including legal rights held by members of religious associations and impermissibly affected in the operation of such associations (as the intervener Egale Canada Human Rights Trust observed). However, courts should not be too quick to characterize religious commitments as legally binding in the first place (as the intervener the Association for Reformed Political Action (ARPA) Canada observed).

(2) Web of Contracts Cases

[43] I pause here to say a few words about the so called “web of contracts” cases, and clarify how such cases should be understood and applied. As explained above, contracts exist in voluntary associations only where the conditions of contract formation are met. As a result, not all voluntary associations are constituted by contract. However, the Court of Appeal appeared to take a different view. Referring to Senez and Ahenakew, it held that membership in a voluntary association that has a written constitution and bylaws itself constitutes a contract. This theory “would effectively eliminate any requirement for a future court to justify intervention in disputes in religious organizations”: M. H. Ogilvie, “Case Comments: Lakeside Colony of Hutterian Brethren v. Hofer” (1993), 72 Can. Bar Rev. 238, at p. 248. If mere membership in a voluntary organization with written rules created a “legal right” of the kind referred to in Wall, then court intervention would be automatic and all‑pervasive. The requirement of a legal right would be meaningless: Wall, at para. 29. As I will explain, the case law does not support this view.

[44] In Senez, a member of an incorporated real estate board was expelled and sued the board for damages. His employment depended on remaining a member, and he was legally obliged to pay dues to the board. There was, therefore, no question that the constitution and bylaws of the board were legally binding as between the board and the member. The question for this Court was whether an expulsion in breach of the corporation’s bylaws was a delict (subject to a short limitation period under the applicable law) or a breach of contract (subject to a longer limitation period). It is in this context that Beetz J. held, at p. 567, that “the obligation of the corporation to provide the agreed services and to observe its own by‑laws, with respect to the expulsion of a member as in other respects, is . . . of a contractual nature”. In short, Senez was about characterizing the legally binding rules of a corporation. It was not about whether the rules of an unincorporated association are legally binding in the first place.

[45] It is true that, at pp. 570‑71, Beetz J. referred to cases about voluntary associations, such as labour unions constituted by contract. These cases turn on the fact that voluntary associations lack legal personality, except where the legislature has expressly or by implication conferred it on them: Berry v. Pulley, 2002 SCC 40, [2002] 2 S.C.R. 493, at para. 46; Aylward, at §1.3. A member who has been wronged by such an association cannot bring an action directly against the association, unless this has been provided for by statute. To fill this legal void, the common law developed the theory that some voluntary associations are constituted by a web of contracts between each member and every other: The Satanita, [1895] P. 248 (C.A.), aff’d Clarke v. Earl of Dunraven, [1897] A.C. 59 (H.L.).

[46] In cases such as Lakeside and Hofer, the existence of a web of contracts can be understood as founded on an objective interpretation of what the parties intended. Offer, acceptance, and consideration are all required, but under general contract law principles, these may often follow where an objective intention is present. Where it is shown that the members of the association objectively intended to form contractual relations, offer, acceptance, and consideration between each and every member can often be implied from the circumstances. An example of such a case is The Satanita, where participants in a yacht race were held to have formed contracts with each other in the following way:
A certain number of gentlemen formed themselves into a committee and proposed to give prizes for matches sailed between yachts at a certain place on a certain day, and they promulgated certain rules, and said: “If you want to sail in any of our matches for our prize, you cannot do so unless you submit yourselves to the conditions which we have thus laid down. And one of the conditions is, that if you do sail for one of such prizes you must enter into an obligation with the owners of the yachts who are competing, which they at the same time enter into similarly with you, that if by a breach of any of our rules you do damage or injury to the owner of a competing yacht, you shall be liable to make good the damage which you have so done.” If that is so, then when they do sail, and not till then, that relation is immediately formed between the yacht owners.

(The Satanita, at p. 255, per Lord Esher M.R.)
[47] By contrast, an objective intention to form legal relations may not give rise to a web of contracts between each member and every other where legal personality has been conferred on an association by statute. In Orchard v. Tunney, 1957 CanLII 57 (SCC), [1957] S.C.R. 436, this Court held that unions were constituted by a web of contracts among their members. This structure was necessary at the time to provide some recourse to aggrieved union members, but was overtaken by subsequent statutory reform: Berry, at paras. 37-39. Following Taff Vale Railway Co. v. Amalgamated Society of Railway Servants, [1901] A.C. 426 (H.L.), this Court held in Berry that by conferring significant rights and obligations on trade unions under statute, legislatures had implicitly intended to give them legal personality. A member who joins a union could therefore form a contract with the union itself. To maintain that each member had a contract with every other had become a legal fiction that was “no longer necessary”: Berry, at para. 54. In Ahenakew, at para. 32, the Court of Appeal for Ontario held that the legislature had implicitly granted legal personality to political parties in the same way. The extent to which this reasoning applies to other kinds of unincorporated associations will depend on the statutory scheme in question, and if there is an applicable statutory regime at all: Berry, at para. 51; Polish Alliance, at para. 21.

[48] All of these cases are about the legal structure of associations whose rules are manifestly meant to be legally binding. This is true both of cases where these rules constitute a web of contracts among the members and of cases where the legislature has displaced the web of contracts by giving the association legal personality. None of these cases hold that an association’s rules ⸺ whether written or not ⸺ always constitute a contract, regardless of the intentions of the members. Like any other contract, the existence of a web of contracts requires an intention to create legal relations.


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