The Law for Franchisee Associations - How they are Formed


Societies are generally groups of like-minded people who form a voluntary association for a particular purpose. Societies can be are created for many reasons: a charitable purpose, fostering a sporting or cultural endeavour, or provide a framework for religious groups.

The Society Act creates the legal framework for the incorporation and organization of such groups. Each society has a constitution that defines its purpose and bylaws or rules that govern the conduct of its affairs.

Despite this, these voluntary associations are, more often than not, fairly casual in handling their affairs. The procedural aspects of their bylaws are often vague or incomplete.

Things get done a particular way because "that is the way it has always been done" or because no one has the time to do it properly.

Role of the Courts in Reviewing and Enforcing the By-Laws?

Resort to the proper procedural technicalities usually only comes into play when a divisive issue arises amongst the members. Everyone drags out and tries to enforce their understanding of the rules to advance the position they seek to establish. Not infrequently, the dispute ends up in court.

What role will the court play in figuring out the correct procedural requirements for the society?

Ilustration - Improper Nomination Forms

One recent case illustrates that the courts will look to the unwritten but long standing traditions of a society to help sort out the proper outcome. In this instance, there was a fight over the disqualification of a set of nomination forms shortly after the nomination deadline passed.

The incumbent executive had submitted their slate of nominations in a timely way, though some portions of the forms were incomplete. The challenging slate of candidates submitted their nominations 90 minutes before the deadline to do so.

Shortly after that, the secretary told the challenger slate that their nomination forms were invalid. They had each nominated themselves rather than have two other society members nominate and second their candidacy. As a result, the incumbent slate was elected by acclamation.

The disappointed challengers sought to overturn the election and the disqualification of their nomination forms. They pointed out that neither the society bylaws, nor the Society Act made provision for the content of nomination forms. Similarly, they contained no prohibition on self-nomination. The challengers asserted that the defect in their nomination was a technicality that ought to be remedied by the court.

Court's Jurisdiction and Remedy

The Society Act gives the court authority to oversee and rectify the affairs of a society. In order to do so, the court must first find that there has been an "omission, defect, error or irregularity in the conduct or affairs of the society". This can be a breach of the Society Act, a failure to comply with the constitution or bylaws, or misbehaviour in connection with the directors or members meetings.

The question, therefore, became whether or not the requirement to have two other members nominate candidates was an irregularity that gave the court jurisdiction to intervene.

The court decided it was not. It did so in reliance on the unwritten but long standing traditions of the society. The nomination forms, and the requirement to have two nominees, had been in use by the society for nearly 40 years. This was a long-standing custom that the court considered to have become a rule of the society.

In doing so, the court noted that voluntary associations are meant largely to govern themselves and to do so flexibly. A tradition or custom that is sufficiently well established may be considered to have the status of a rule on the basis that it has become an unexpressed term of the society's constitution.

The fact that the incumbents' nomination forms were incomplete was dismissed as a reason they too should have been rejected. Again, the court turned to the past conduct of the society for support. It had never been the practice or custom of the society to mandate completion of those parts of the nomination forms.

If you are a society member, remember to be mindful of its traditions and customs when dealing with its governance. A consistent course of conduct over a long period of time may result in the society, knowingly or otherwise, adopting an enforceable obligation that may or may not be in the best interests of its members.

In addition, try to get your nomination forms in earlier in case there is a problem with them. You may need some time to remedy them.

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