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Corporations - By-laws. Provincial Women’s Softball v. Mississauga Majors [bylaw interpretation]
In Provincial Women’s Softball v. Mississauga Majors (Ont Div Ct, 2025) the Ontario Divisional Court dismissed an appeal [under NFPCA s.192], this brought against a decision that granted a baseball association's relief "under the Ontario Not-for-Profit Corporations Act, 2010" when they sought membership in another association.
Here the court considers the textual interpretation of not-for-profit corporate bylaws, which here turned on the appellate SOR issue of whether they involved extricable issues of law, or mixed fact and law:Standard of Review
[25] The PWSA says that the standard of review ought to be correctness as the central issue on this appeal is the interpretation of the PWSA by-laws. In this respect, the PWSA relies on a decision of the Alberta Court of Appeal which held that the by-laws of condominium boards are “more akin to laws and regulations passed by a legislative body than contractual provisions”: Dunn v. Condominium Corporation No. 042 0105, 2024 ABCA 38, at para. 15 – 18. The Majors argue that the applicable standard of review is palpable and overriding error given that this case involves the application of the PWSA’s by-laws, which are contractual in nature, within a particular factual context.
[26] I am satisfied that the applicable standard of review in this matter is palpable and overriding error. The application judge was required to interpret the Act, the PWSA’s by-laws, and its operating rules and to apply those interpretations to a specific set of facts. I agree with the respondent that on this point the present case is indistinguishable from the decision of this court in Chu v. Scarborough Hospital Corporation (2007), 2007 CanLII 33757 (ON SCDC), 228 O.A.C. 131 (Div. Ct.) where Linhares de Sousa J. wrote as follows (at paras. 5 – 6):[The application judge’s] decision involved a legal interpretation of the Corporations Act as well as the Hospital’s By-Laws and the application of that interpretation to the very specific facts of this case. The questions of law are not readily extricable from the questions of fact and hence the standard of review should be that of palpable and overriding error. [27] The application judge in Scarborough Hospital was required to interpret the by-laws of the hospital and he did so in light of how those by-laws had been interpreted and applied in the past by the hospital board. The ultimate question was whether that interpretation had been reasonable (see paras. 9 – 15). In other words, it was not an exercise of law alone. In the present case, in an effort to support their respective interpretations of the by-laws, both parties relied on evidence of how the PWSA by-laws had been applied in the past. They then applied their view of the meaning of the by-laws to the facts of this case and urged their positions on the application judge. In other words, this too was not an exercise of law alone.
[28] The application of a deferential standard of review is supported by the fact that the by-laws of a not-for-profit corporation are “essentially contractual in nature”: Bhandal v. Khalsa Diwan Society of Victoria, 2014 BCCA 291, at para. 27. See also, Canadian Federation of Students v. Cape Breton University Students’ Union, 2015 ONSC 4093, at para. 115; Re London Humane Society, 2010 ONSC 5775, at para. 16. Their interpretation is therefore subject to the principles which govern the interpretation of contracts: that the by-laws be read as a whole and in context and be applied in a “practical common-sense way”: Canadian Federation of Students, at para. 116. This means that evidence of the “surrounding circumstances” is admissible and may be important to the court’s ultimate conclusion: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at paras. 59 – 61. The inquiry, then, is one of mixed fact and law. Moreover, it is clear that the application judge in the present case engaged in just such a mixed inquiry when interpreting the PWSA’s by-laws.
[29] The PWSA attempts to set this case apart from the authorities and reasoning to which I have referred on the basis that the Majors were applying for membership, had not yet become members, and therefore were not parties to the contract which the by-laws represent. They could not, then, invoke the right to apply the contract, or rely on the principles of contractual analysis.
[30] I cannot accept this argument. First, the appellant’s position on this point leads to the possibility both that a different standard of review might apply depending on whether the moving party was a member or an applicant for membership, and that the interpretation of the by-laws might be different depending on the same distinction given that different principles apply to statutory and contractual interpretation.
[31] More importantly, though, the obligation of the PWSA when it was considering the Majors’ application was to apply the by-laws properly at least in part for the benefit of its existing members, in order to fulfill the aims and objectives of the PWSA as they are described in the by-laws. Some of those members participated in the Majors’ membership hearing and they are parties to the “contract” which the by-laws represent. The application judge’s exercise was similar: to determine whether the by-laws had been applied properly in light of the wording of the by-laws and the surrounding context. In all these circumstances, I agree with the Majors that the fundamental nature of the by-laws, and of the interpretive exercise in this case, was contractual in nature even if the Majors were not members – or parties to the contract – when they applied.
[32] For these reasons, I am of the view that the standard of review to be applied in this case is palpable and overriding error. . Hardick v. College of Chiropractors of Ontario
In Hardick v. College of Chiropractors of Ontario (Div Court, 2023) the Divisional Court considers when by-laws (here, of a professional College) may be impugned by bad faith:[36] Bad faith connotes a lack of candour, frankness and impartiality. It includes arbitrary or unfair conduct and the exercise of power to serve private purposes at the expense of the public interest: Equity Waste Management of Canada Corp v. Halton Hills (Town), 1997 CanLII 2742 (Ont. C.A.), 35 O.R. (3d) 321, at para. 61. Bylaws also may be set aside where they are passed for an improper purpose, including a purpose collateral to the one for which the power to make the bylaw was granted: Hummel Properties Inc. v. Niagara-on-the Lake (Town), 2022 ONCA 737, at para. 26; Markham v. Sandwich South (Township of), 1998 CanLII 5312 (Ont. C.A.), at para. 24.
[37] Dr. Hardick faces a heavy burden in seeking to demonstrate bad faith on the part of the majority of Council members: Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273, 110 O.R. (3d) 1, at para. 79.
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