Link: Case Summary Document
Citation:  ONSC 3145
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
Whether the court had the jurisdiction to intervene in the internal affairs of an unincorporated association
The plaintiff, Dimitris (Jim) Karahalios, was a candidate for the leadership of the Conservative Party of Canada in its leadership contest scheduled to be completed in August 2020. The defendants were the Conservative Party, a federal political party and an unincorporated association, and the Conservative Fund Canada, a federal corporation that serves as the Conservative Party’s fundraising arm.
On 18 March 2020, the Conservative Party disqualified Mr Karahalios from the leadership contest for allegedly making racist islamophobic remarks that were contrary to the expressed principles of the Conservative Party, as set out in its Constitution. The Chief Returning Officer (CRO) investigated the complaint, which had been made by another candidate for the leadership. The CRO’s subsequent ruling imposed a reporting obligation and a financial penalty on Mr Karahalios. Mr Karahalios appealed the CRO’s Ruling to the Dispute Resolution Appeal Committee (DRAC) of the Conservative Party, which disqualified Mr Karahalios altogether from the leadership contest. This litigation followed.
The court held that there was no procedural unfairness and no bad faith. There was nothing untoward or unlawful about the CRO’s Ruling, which was to impose a penalty but not to disqualify Mr Karahalios. However, under the relevant Leadership Rules, the DRAC did not have the authority to disqualify Mr Karahalios. The authority to disqualify was reserved to the eighteen members of the Leadership Election Organizing Committee (LEOC), which never formally or properly considered the matter of Mr Karahalios’ status as a candidate. Therefore, the court restored the decision of the CRO without prejudice to the LEOC subsequently considering the matter of Mr Karahalios’ status as a candidate.
Of most interest in this case was that the Conservative Party of Canada is an unincorporated association. Mr Karahalios’ submissions were based on the fact that the modern law of Canada gives jurisdiction to the courts to review the decisions of an unincorporated association operating in the private sector.
The court’s jurisdiction to intervene in the affairs of an unincorporated association operating in the private sector depends on the presence of a legal right founded in tort, contract, restitution, or a statutory provision. Courts can only intervene if legal rights are at stake. The courts will not intervene with the affairs of an unincorporated association where no civil or property right is involved in the activities of the group.
When the unincorporated association or group has a written constitution and by-laws, as in this case, then these instruments constitute a contractual relationship setting out the rights and obligations of the unincorporated association and its members. Thus, the court has a jurisdiction to review the decisions and procedures of an unincorporated association or group operating in the private sector as a matter of contract. However, where the affairs of a group or unincorporated association are governed by private law, a court has only a limited jurisdiction to review the conduct and decisions of associations, and the court will only do so if a significant private law right or interest is involved. Expulsion or exclusion from membership was such a right.
The Conservative Party submitted that this long-established law had changed, and that a privative or finality clauses excluding the court’s jurisdiction could operate to prevent recourse to the courts. They relied on Highwood Congregation of Jehovah’s Witness (Judicial Committee) v. Wall 2018 SCC 26. The court disagreed, saying that finality clauses are analysed on administrative law principles for unincorporated associations operating in the public sector only (i.e. government bodies subject to judicial review). Political parties that are unincorporated associations operate as private sector bodies. The court said that both before and after the Highwood Congregation case, finality clauses of private unincorporated associations were analysed in accordance with private law principles, and that the court’s jurisdiction to intervene in the affairs of an unincorporated association depended, as it always had, on the presence of a legal right founded in tort, contract, restitution, or a statutory provision.
The court described the Conservative Party’s contention as ‘perverse and hypocritical’, leading to the ‘absurd conclusion’ that unincorporated associations governed by contract are beyond the rule of law and the court’s normative contract law jurisdiction. Access to the courts would be ousted in such a situation. Very significant private law rights or interests were involved, and the court had the jurisdiction to determine whether Mr Karahalios’ disqualification as a leadership candidate was carried out according to the applicable rules of the Conservative Party and with the procedural fairness and without bad faith.
Implications of the Case:
Readers may wish to compare this decision with that in the Australian case John Setka v Noah Carroll & Ors  VSC 571, where the ability of a court to intervene in expulsion of a member of an unincorporated political association was considered. In short, the judge found that he was bound by the High Court’s decision in Cameron v Hogan  HCA 24; 51 CLR 358 and had no jurisdiction.
The Australian High Court case of Cameron v Hogan confirmed that under Australian law associations which are ‘social, sporting, political, scientific, religious, artistic or humanitarian in character’, and not formed ‘for private gain or material advantage’, are usually formed on the basis of mutual consent. Unless there is some clear, positive indication that the members wish to relate to each other in a legal fashion, the rules of the association will not be treated as an enforceable contract in contrast to the rules of incorporated bodies such as companies. Since Cameron v Hogan, a significant number of cases have distinguished or otherwise declined to follow this precedent of the Australian High Court. A trenchant criticism is found in McKinnon v Grogan  1 NSWLR 295, 298 where Wootten J said that ‘citizens are entitled to look to the courts for the same assistance in resolving disputes about the conduct of sporting, political and social organisations as they can expect in relation to commercial institutions’. According to Wootten J at 298, if disputes are not settled by the courts, this would create a ‘legal-no-man’s land, in which disputes are settled not in accordance with justice and the fulfilment of deliberately undertaken obligations, but by deceit, craftiness, and an arrogant disregard of rights’.
The case may be viewed at: