Dr. Francis Ho et al v. Providence Health Care Society et al

2004 BCSC 1417 Dr. Francis Ho et al v. Providence Health Care Society et al IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Dr. Francis Ho et al v. Providence Health Care Society et al, 2004 BCSC 1417 Date: 20041029 Docket: L033606 Registry: Vancouver Between: Dr. Francis Ho, James Carpick, Donald Cha, Helen Chiu, Ron Suh, Garry Wong, Lucy Yip, Larry Yip Petitioners And Providence Health Care Society, Carl Roy, Daniel Fitch, Suzanne Fontaine, Celina Fernandes, John Doe and Jane Doe 1 - 20, Mount Saint Joseph Hospital Foundation, Marie-Vie Chua, Zulie Sachedina, Kip Woodward Respondents - and - Docket: S041590 Registry: Vancouver Between: Carl Roy, Sandra Heath, Douglas Brown, Jacqueline Kelly, tom Murphy, Peter Newbery, Daniel Nocente, Monsignor Bernard Rossi, Gavin Stuart, Sister Margaret Vickers, Kip Woodward Petitioners And Dr. Francis Ho, James Carpick, Donald Cha, Helen Chiu, Ron Shu, Garry Wong, Lucy Yip, Larry Yip Respondents Before: The Honourable Madam Justice Brown Reasons for Judgment Counsel for the Petitioners/Respondents R.D. McGowan Counsel for the Respondents/Petitioners P.F. Lewis Date and Place of Hearing: July 9, 2004 Vancouver, B.C. [1] These petitions are related and were heard together. They arise from a dispute between directors of the Mount Saint Joseph Hospital Foundation and the Providence Health Care Society. [2] There are two issues at the heart of these petitions: 1. Who is entitled to be a member of the foundation? 2. What is the nature and effect of a meeting of the foundation called for December 4, 2003? BACKGROUND [3] Mount Saint Joseph Hospital was founded in 1921 by the Sisters of the Immaculate Conception. In 1960 the Mount Saint Joseph Hospital Society was incorporated and became the owner and operator of the Hospital. The Mount Saint Joseph Hospital Foundation ("Foundation") was incorporated in 1984 and has been raising funds for the hospital since incorporation. In 1994 the Mount Saint Joseph Hospital Society was amalgamated with Saint Vincent's Hospital Society and Youville Residence Health Care Society and became Chara Health Care Society. In 2000 Chara amalgamated with Holy Family Hospital and Sisters of Providence of Saint Vincent de Paul and became the Providence Health Care Society ("Providence"). [4] Providence has clinical operations at seven sites in Vancouver: Saint Paul's Hospital, Mount Saint Joseph Hospital, Saint Vincent's Heather, Saint Vincent's Youville, Saint Vincent's Langara, Holy Family Hospital and Brock Fahrni Pavilion. Four separate foundations raise funds for Providence hospitals: the Foundation, Saint Paul's Hospital Foundation, Saint Vincent's Hospital Foundation and Holy Family Hospital Foundation. [5] By late 2003 tension between Providence and the directors of the Foundation had escalated. Dr. Ho, the chairman of the Foundation board, had made various public statements critical of Providence. One of the issues dividing the Foundation directors and Providence was the question of who was entitled to be a member of the Foundation. The Providence directors took the position that each of them was entitled to be a member of the Foundation. The Foundation took the position that they were not. Each of the groups obtained legal advice, with conflicting opinions on this issue. [6] On November 20, 2003 Daniel Fitch and Suzanne Fontaine, both members of the Foundation, delivered a Notice to Requisition a general meeting of members of the Foundation pursuant to s. 58 of the Society Act, R.S.B.C. 1996, c. 433. One of the issues that the requisitionists wished to have addressed at that meeting was membership in the Foundation: Who was a member? Who was entitled to be a member? [7] Dr. Ho called a meeting for December 4, 2003. The nature of this meeting and the effect of this meeting comprise one of the issues in this litigation. [8] On November 24, 2003, Dr. Ho, as Chairman, sent a memorandum to the Foundation Board of Directors saying: "A meeting has been called at the request of Dan Fitch and Suzanne Fontaine. Attached is a copy for your reference. The meeting will be short, at the most 45 minutes, and only the members of the board will be asked to attend. Please be punctual." He offered a choice of three dates for the meeting: December 2, 3 or 4, 2003. He later sent a memorandum to the Foundation directors advising them that the meeting would take place on December 4, 2003. [9] Ms. Fontaine and Mr. Fitch took the position that the meeting of December 4, 2003 was the requisitioned members' meeting. The directors of Providence and their lawyer attended the meeting of December 4, 2003, as did the directors of the Foundation. Dr. Ho advised the directors of Providence and their lawyer that they were not entitled to attend the meeting. When the directors of Providence refused to leave, Dr. Ho and other directors of the Foundation left the meeting. [10] Those individuals remaining took the position that the Providence directors were members of the Foundation; that there was a quorum sufficient to conduct business at the meeting; that the meeting of December 4, 2003 was the requisitioned meeting of members. They continued with the meeting and passed a resolution confirming that the directors of Providence are members of the Foundation. They passed a special resolution removing the existing directors of the Foundation and electing new directors. [11] A meeting of the new board of directors then took place immediately. The new board of directors "to ensure compliance with the requirement in the by-laws that members be appointed by directors" passed a motion that all of the directors of Providence were appointed members of the Foundation. They also passed a resolution changing the signatories on the bank accounts. The new board of directors resolved to terminate all of the existing staff of the Foundation and to change the locks to the Foundation's offices. The staff of the Foundation was notified on December 5, 2003 of their termination and the locks were changed on that day. [12] It is my understanding that the business of the Foundation has effectively been halted pending hearing of these petitions by the Court. WHO IS ENTITLED TO BE A MEMBER OF THE FOUNDATION? [13] The question of who is entitled to be a member of the Foundation is determined by the by-laws of the Foundation. There are two by-laws which apply. By-law No. 3 provides: The members of the Society are those persons who have been appointed by the directors in accordance with these by-laws, and who have not subsequently ceased to be members. [14] By-law No. 4 provides: The members of the Society shall be composed of those persons who are from time to time members of the board of directors of Mount Saint Joseph Hospital together with the following individuals: (a) One representative from the Ladies' Auxiliary of Mount Saint Joseph Hospital; (b) Three representatives from the medical staff of Mount Saint Joseph Hospital; (c) One representative from the Missionary Sisters of the Immaculate Conception in British Columbia; (d) The executive director of Mount Saint Hospital [sic] or such alternate person as the executive director may designate; (e) Members appointed from the general population of British Columbia who shall be nominated by the board; (f) Such honorary life and sustaining members as may be admitted to membership from time to time by the board in accordance with these by-laws; (g) Three representatives from the non-medical staff of Mount Saint Joseph Hospital. [15] The petitioners in petition L033606, who were directors of the Foundation before December 4, 2003, argue that "the board of directors of Mount Saint Joseph Hospital", in by-law 4, refers to the Mount Saint Joseph Hospital Society; that that society ceased to exist in 1994 and that the current directors of Providence are not entitled to be members of the Foundation. The petitioners in petition S041590, directors of Providence, argue that the board of directors of Mount Saint Joseph Hospital refers to the board of directors of the owner and operator of the hospital as that board is constituted from time to time; that until 1994 the directors of Mount Saint Joseph Hospital Society were the directors of Mount Saint Joseph Hospital; that from 1994 to 2000 the board of directors of Chara were the directors of the Mount Saint Joseph Hospital and that from 2000 the Providence directors are the directors of Mount Saint Joseph Hospital. [16] I am of the view that the reference in by-law 4 to Mount Saint Joseph Hospital is to the hospital itself, not to the Mount Saint Joseph Hospital Society which was then operating the hospital. [17] This is consistent with the balance of by-law No. 4, the reference to the Ladies Auxiliary of Mount Saint Joseph Hospital and to medical staff of Mount Saint Joseph Hospital are clearly references to the hospital itself, not to the Mount Saint Joseph Hospital Society. Mount Saint Joseph Hospital is defined in the by-laws as "the hospital facilities known as Mount Saint Joseph Hospital or such other name as it shall be known from time to time". [18] Given the nature and purpose of the Foundation, it makes sense that those individuals directing the operations of the hospital itself would participate as members in the Foundation. They would have an interest in funding the hospital and knowledge of the needs of the hospital. As long as there is a hospital, there would be directors to sit on the Foundation. By contrast, the Mount Saint Joseph Hospital Society may cease to exist and have no directors to sit on the Foundation, yet the hospital could continue. [19] The question then becomes what is meant by the board of directors of Mount Saint Joseph Hospital? The affidavit material before me indicates that since at least 1985 the operations of the hospital have been governed by the board of its owner. In 1985, this would be the directors of the Mount Saint Joseph Hospital Society, in 1994, the directors of the Chara Health Care Society, and since 2000, by the board of directors of Providence. [20] Accordingly, in my view, when by-law No. 4 refers to "the board of directors of Mount Saint Joseph Hospital", it is referring to those individuals who from time to time direct the operations of the hospital. As those individuals are now the directors of Providence, they are entitled to be members of the Foundation. [21] The Providence directors argue that this must happen automatically, that as soon as one is a director of Providence, one must be a member of the society. They say this is so because the wording of by-law No. 4 is mandatory, "The members ... shall be ... the board of directors of Mount Saint Joseph Hospital." They say that By-Law No.3 (which provides that the members of the society are "those persons who have been appointed by the directors") should be read down, that because the Providence directors must be appointed as members, the requirement for appointment by the Foundation directors should be ignored. They say that the requirement for appointment by the Foundation directors should exist only where there is a choice for the directors to make, for example, from the Ladies' Auxiliary. [22] I am not able to accede to this argument. By-law No. 3 was amended in 1989. Until then, the by-laws did not require appointment by the directors: The members of the society are the applicants for incorporation of the society, and those persons who subsequently have become members, in accordance with these by-laws and, in either case, have not ceased to be members. [23] In 1989 the current by-law No. 3 was introduced, which requires appointment by the board of directors. Had the intention been that the board of directors of the hospital would automatically become members, that could easily have been specified. It is not. [24] It is easy to see that there may be good reasons for appointment, even where the directors of the Foundation have no choice: 1. It provides certainty as to the members list. The board of directors of the hospital will change from time to time, without reference to the Foundation. It would be difficult and time consuming to ascertain who were members in the Foundation and would require reference to, in this case, the Providence board of directors. Thus, requiring appointment enables the Foundation directors to know with certainty the members of the Foundation. 2. The directors of the Foundation may make other appointments, dependent on number and make-up of the mandatory members. For example, the directors have discretion as to whom and how many members of the public will be appointed. Depending on the make up of the board of Providence and the numbers of the board of Providence, the board of the Foundation may choose to appoint particular individuals from the public, or a greater or lesser number of individuals from the public to be members of the Foundation. [25] Therefore, in my view, the requirement for appointment is not superfluous, even for the mandatory members of the society. [26] The Providence directors posit a situation in which the board of the Foundation refuses to or delays in appointing Providence directors as members of the Foundation and argue that such a situation would be ridiculous, therefore appointment of the mandatory members is not necessary. Were the directors of the Foundation to refuse to appoint the mandatory members, the mandatory members would be entitled to seek a declaration from the courts, as they have in this case. This is not a reason for interpreting the by-laws to eliminate the requirement for appointment. [27] In summary, the directors of Providence, being those individuals who are currently directing the operations of Mount Saint Joseph Hospital, are entitled to be appointed as members of the Foundation. Their membership becomes effective upon appointment by the directors of the Foundation. Parenthetically, one would expect the appointment to take place at the meeting of directors of the Foundation immediately following notice of the individual's status as a director of Providence. Delay in appointment following notification would likely be a breach of the by-law. WHAT IS THE EFFECT OF THE MEETING OF DECEMBER 4, 2003? [28] As discussed above, the Providence petitioners take the position that the meeting of December 4, 2003 was the requisitioned general meeting of members. Dr. Ho and the other Foundation petitioners take the position that the meeting of December 4, 2003 was a meeting of the directors of the Foundation and not the requisitioned meeting of members. [29] The initial memorandum distributed by Dr. Ho was somewhat confusing in this regard. It refers to a meeting called at the request of Dan Fitch and Suzanne Fontaine. The meeting requested by Fitch and Fontaine was the requisitioned meeting pursuant to s. 58. Dr. Ho's memo attaches a copy of the letter requisitioning the meeting. It then refers to the meeting at which only the members of the board will be asked to attend. Ms. Fontaine set out her position with respect to the meeting in a letter to Dr. Ho of December 2, 2003: ... Thank you for setting up the requisitioned members meeting as per our request of November 20, 2003. [30] It went on to say: As we noted there is significant confusion as to the names of the persons who are duly authorized by appropriate elections or board resolutions to be members and directors of the Foundation. Due to the complexity of the issues before us, we are repeating our request that Debra Sing of Borden Ladner Gervais be invited to attend in order to explain her opinion memo of October 23, 2003. Our position is that as lay persons, we need the benefit of professional advice to help us arrive at the most reasonable interpretation of these complicated issues. [31] Dr. Ho did not respond to this letter before the meeting of December 4, 2003. [32] Much argument was addressed to this issue. To my mind, the issue is fully addressed by s. 60 of the Society Act. That section provides that a society must give not less than 14 days written notice of a general meeting to those members entitled to receive notice. Those members may waive or reduce the period of notice for a particular meeting by unanimous consent in writing. Notice of the meeting was given on December 2, 2003. The meeting was held on December 4, 2003. The Foundation petitioners, who were members of the Foundation, did not consent in writing to reduced notice. Therefore, the meeting of December 4, 2003 could not be a properly constituted general meeting of members. RECTIFICATION [33] The Providence petitioners say that, in the event that I conclude, as I have, that the meeting of December 4, 2003 was not a properly constituted general meeting of members, I should rectify the consequences of the irregularities, giving effect to the resolutions passed at that meeting. [34] Section 85 of the Society Act allows the court on its own motion, or on the application of an interested person, to rectify the consequences in law of an omission, defect or irregularity in the conduct of affairs of a society. [35] In my view, the actions of the meeting of December 4, 2003 were not an omission, defect, error, or irregularity of the nature contemplated by s. 85. First, assuming that the meeting was a general meeting of members and not a meeting of directors to discuss the requisition, the notice period was significantly deficient. [36] Second, those who remained knew that Dr. Ho and the departing members took the view that they were not entitled to attend the meeting. After Dr. Ho and the other Foundation petitioners left the meeting, the individuals remaining immediately voted to remove them as directors. Those then elected as directors decided to terminate the staff and change the locks on the Foundation premises. They were aware of the conflicting interpretations of the by-laws. They recognized that membership may be dependent on appointment by the board of directors. Indeed, the newly elected directors passed a resolution: ...to ensure compliance with a requirement in the by-laws that members be appointed by directors, a motion that all of the directors of Providence Health Care, along with Suzanne Fontaine, Dan Fitch, Celina Fernandes and Sister Marie-Vie Chua be appointed members of Mount Saint Joseph Hospital.... The new directors were appointing individuals as members who had already purported to vote as members, electing the new directors. Those who remained at the meeting of December 4, 2003 were aware not only of this interpretation of the by-laws, but also of the possibility and prospect of court interpretation of the by-laws. As I adverted to earlier, each of the petitioners' groups had obtained legal advice with respect to the interpretation of the by-laws. The Foundation petitioners had the opinion of Debra Sing to the following effect: It would still be open to the directors of PHC [Providence] to apply to court contesting the Foundation director's refusal to appoint them to membership. If the court did not accept the director's justification for the refusal, the court could instruct the directors to make the appointments. [37] This opinion was provided to the Providence petitioners' solicitor, Mr. Bromley, and commented upon by him in a letter dated November 4, 2003, a copy of which was provided to the Foundation petitioners. Thus, each of the contesting camps was alive to the possibility of obtaining court interpretation of the by-laws and appropriate declarations. [38] Instead, when the Foundation petitioners left the meeting of December 4, 2003, the remaining individuals decided to proceed without the assistance of court interpretation of the by-laws, and in the face of the Foundation petitioners' interpretation of those by-laws. They must be taken to have accepted the consequences of a court finding that their interpretation of the by-laws was incorrect. Their error was not inadvertent or an oversight. [39] Third, a properly requisitioned members meeting may not have led to the same result as the meeting of December 4, 2003. While the camps appear to have their lines firmly drawn, it may be that following a full discussion at a properly requisitioned members meeting, individuals would vote differently than they did at the meeting of December 4, 2003. It may be that on receiving notice of the directors of Providence who were entitled to be appointed as members of the Foundation, the Foundation directors would have appointed additional members, such that the outcome of the requisitioned meeting would be different. [40] Fourth, most of those who remained at the meeting of December 4, 2003 were not yet members. Without these "members", it is doubtful that there was a quorum for the meeting. [41] Dealing specifically with the relief sought by the petitioners in each of their petitions: 1. Petition No. L033606. (a) With respect to paragraph 1, I am not in a position to determine whether the individuals listed are the duly appointed/elected members/directors. This declaration appears to be superfluous in any event, as their membership is not truly in issue in these proceedings; (b) The relief sought at paragraphs 2, 3, 4 and 5 is granted; (c) It is my understanding that after the locks were changed, the staff terminated and the signing authorities on the bank accounts changed, no further steps have been taken to deal with the assets of the Foundation by the respondents. Hence, I am of the view that the injunctions sought in paragraph 6(a) and (b) of the petition are not required. If I am in error, the parties may advise me. The respondents are required to return to the offices of the Foundation any and all records, books or accounts of the Foundation and to provide the petitioners with access to the offices of the Foundation. 2. Petition No. S041590. (a) The petitioners are entitled to be appointed as members of the Mount Saint Joseph Hospital Foundation; (b) In failing to appoint the petitioners as members of the Foundation, the respondents were in breach of the by-laws of the Foundation; (c) The petitioners are to be appointed members of the Foundation forthwith; (d) The respondents are restrained from undertaking any business of the Foundation, apart from appointment of members, until the petitioners are appointed as members. [42] With respect to costs, success has been divided and the petitioners and respondents will bear their own costs of each petition. With respect to indemnification of the Foundation directors, there is no suggestion that the directors were not acting bona fide in their capacity as directors of the Foundation. Their interpretation of the by-laws was different from that of the Providence directors, but there is no suggestion that they interpreted the by-laws in bad faith. They are entitled to be indemnified for each of these proceedings from the Foundation. "B.J. Brown, J." The Honourable Madam Justice B.J. Brown