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ARBITRATOR’S AWARD
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(a) Was the election of the directors at the June 24, 2009 AGM
conducted contrary to the Peninsula Consumer Services Co-
operative Memorandum of Association?
The Respondent contends that I must not give the Claimant any
relief unless I find that there has been a “serious irregularity,”
affecting the outcome of the election. I agree, except that in my
opinion, once the evidence results in either of issues (a) and (b)
being answered in the affirmative, the burden shifts to the
Respondent to prove that the irregularities did NOT affect the
outcome of the election. In its written argument the Respondent
seeks to emphasize that none of the “irregularities” complained of
is serious, and it says that accordingly, the election should not be
declared void.
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The Respondent takes the position that for any of these issues to
be resolved in favour of the Claimant the burden is upon him to
show a substantial irregularity if he relies on the Leroux
jurisprudence, which he seems to be doing, even though the
Terms of Reference do not explicitly raise the issue of
“irregularity.” I agree with the Respondent’s analysis of that
jurisprudence and draw attention to the decision in Anderson v.
Stewart (1921) 62 D.L.R. 98. where it was held that a combination
of minor irregularities does not by itself add up to a substantial
irregularity: An election will only be declared invalid on the basis of
an irregularity if that irregularity, standing by itself, in isolation from
all other alleged irregularities, is sufficiently serious to invalidate
the election.
PROCEDURE:
Background Facts:
Legal Principles
Terms (a) and (b) of the Terms of Reference raise factual issues
that overlap. I will first review the evidence relating to all three
issues and then relate it to the three Terms of Reference.
This raises the question: why did they bother to come at all to the
premises where the meeting was to take place if they were not
able or willing to wait for the meeting to commence at the stated
time and why was there any delay in the start of the meeting?
The Claimant argues that the Respondent allowed early voting for
the express purpose of enabling those members who favoured the
incumbents to leave early. In my opinion that is mere speculation,
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For the reasons set out below I find on the facts that the provisions
of Rule 66 (retention of ballots after voting) were complied with.
Rule 66 requires the secret ballots to be kept at the registered
office of the Association for at least 3 months after the election and
that during those 3 months the ballots be open to inspection by
any member. Implicit in that requirement is that the ballots be kept
secure and free from tampering so that they may be preserved for
inspection should any member of the Respondent see fit to
challenge the validity of the election within a reasonable time.
One possibility, no doubt foreseen in this Rule, was that, either
mistakenly or improperly, the announced result of the number of
votes cast in an election might be erroneous. A recount may be
necessary.
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I accept this evidence and find that the ballots have in fact not
been destroyed.
Conclusion:
For the reasons set out above the election was conducted contrary
to the Memorandum of Association in several respects, creating
serious irregularities and casting upon the Respondent the burden
of showing that no such irregularity was calculated to affect the
result of the election: Leroux v. Molgat, cited supra. It has failed to
discharge that burden.
The evidence of alleged bad faith that I must consider was the
conduct of the Respondent’s general Manager, in his capacity as
Manager or de facto member of the Board of Directors, as set out
above, and, to the extent that such conduct constituted bad faith,
whether the directors of the Respondent permitted or condoned
his conduct.
Background:
He stated that one of the candidates, David Lawson, had asked for
a copy of the membership list and that he, the Manager, had
refused to give it to him. He wrote: “We are also concerned about
the privacy of members, should Mr. Lawson be given access to the
membership list.” He does not explain why, nor does he say
whether he gave or denied copies of the membership list to Mr.
Lawson’s rivals. That refusal, of course, made it difficult or
impossible for Lawson to solicit the votes of shareholders not
known to him.
The result might have been the same, but that is a matter of
speculation. He clearly hoped to influence members by these
attacks, and it is reasonable to conclude that he was successful, at
least with some of those who voted.
The answer to the second issue submitted for arbitration is that the
election of the directors was conducted in bad faith.
General Conclusion:
6) The said directors are not disqualified from running again for
election by reason of my findings herein, provided they are
otherwise qualified, but they and all other persons are ineligible
for appointment to the Board in accordance with the procedure
provided for in Rule 89(1)(b) of the Memorandum of
Association.
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