Over the summer we have seen the media headlines reporting on the unsuccessful negotiations of a new Physician Services Agreement (“PSA”) between the Ontario Medical Association (“OMA”) and the Ministry of Health and Long Term Care (“MOHLTC”). The PSA sets out the fee schedule for medical services provided to patients in Ontario. On August 14, 2016, at a general meeting of members of the OMA, doctors in Ontario rejected a tentative four-year fee agreement reached with the province’s Liberal government. The failed vote is perhaps not a surprise given the governance and political dispute between the OMA and a group of its members that preceded and lead up to the August 14th general meeting of members.
Prior to the meeting, a group of OMA members brought a court application requesting, among other things, that the proxy form circulated by the OMA be voided and a new proxy form be sent out. The Superior Court judge ruled that the OMA’s Executive Committee abused the authority provided to it by the Corporations Act of Ontario and that the form of proxy used foreshadowed a meeting that could not be conducted fairly. The Court declared that the form of proxy was void and directed the OMA to deliver a new proxy form that revises the void form.
The Court took issue with the fact that the proxy form contained one restriction that would compel the proxy holder to vote for or against the resolution to ratify the 2016 PSA and contained a highlighted recommendation to vote “For” that resolution. Yet, the motion to approve the 2016 PSA was not the only matter being presented for debate and approval by the membership. Furthermore, the proxy form contained the following note: “This proxy will be voted as directed by the member, however, if such a direction is not made in respect of any matter and you have not appointed a person other than the persons whose names are printed herein, this proxy will be voted as recommended by OMA Management.” [emphasis added] In his reasons, Justice Perell uses tough language that impugns the OMA’s motives. In reference to those features of the proxy form, the judge states: “…it seems unfair and confusing if not somewhat sneaky for the OMA to make no recommendation about the other matters and to leave it to the member to make instructions about these matters.”
In the judge’s opinion:
…far fairer would have been to either: (a) provide no instructions and no recommendations for the three resolutions to be debated at the general meeting; or (b) to provide instructions and no recommendations for the three resolutions to be debated at the general meeting. The current proxy is all of unhelpful, unclear, unbalanced, and unfair. It is a catalyst for a governance meltdown at the upcoming general meeting.
The Court ordered that all recommendations be removed from the proxy form and that instructions for “For” or “Against” votes be provided not only for the one resolution contained in the proxy form but for the other two resolutions also.
The OMA argued that the Court did not have the authority to invalidate the form of proxy and vary its language. In rejecting that argument, Justice Perell stated that the meeting had been called with a proxy form that “presupposes” and “presages” a meeting that cannot be fairly conducted. That, according to the judge, entitled him to rely on remedial provisions of the Corporations Act (Ontario), which allows the court to order that a meeting be held and conducted in such manner as the court thinks fit if for any reason it is impracticable to call a meeting of members, to order a corporation to perform its duties under the Act, or to make such other order as the court thinks fit
The principle of meetings being conducted fairly is reiterated frequently in the judge’s reasons. In citing other case law on point, the Court reminds us that the relationship between a proxy holder and a member is one of agency that facilitates a member’s participation in the corporate decision-making process. The right to appoint a proxy holder and to define the mandate of that agent is a fundamental right of the member. Not-for-profit organizations and charities should be mindful of those principles when drafting a proxy form to be circulated to its members. The creation of a biased or unclear proxy will not only compromise the fair conduct of the meeting, but can also lead to a finding of abuse of authority and foster further conflict and dissention among members, particularly where controversial and contentious issues are being considered and voted on by the members.