In Barrie & District Association of Realtors v. Information Technology Systems Ontario[1], Justice Sunil S. Mathai of the Ontario Superior Court addressed a dispute at the intersection of association governance and competition in the real estate data ecosystem. The decision provides critical guidance on how not-for-profit corporations governed by the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”) can amend membership criteria and the limits of judicial intervention when those changes threaten existing members.
Background and Facts
The Barrie & District Association of Realtors (“BDAR”) was one of several local associations that pooled MLS data through Information Technology Systems Ontario (“ITSO”), a not-for-profit entity formed to compete with the Toronto Regional Real Estate Board (“TRREB”).
When BDAR announced an “integration” with TRREB, creating a special membership structure that gave TRREB disproportionate voting control. ITSO’s board viewed it as a threat to the one-member-one-vote principle.
In response, ITSO amended its by-laws to require members to “maintain the same corporate structure and control as when the Member Association first became a Member,” unless ITSO’s board approved a change. BDAR challenged the amendment, arguing it was a retroactive breach of contract, impermissibly vague, inconsistent with ONCA, and made in bad faith to target BDAR.
Issues
(i) Does the amendment amount to a retroactive breach of ITSO’s contractual obligations to BDAR?;
(ii) Is the amendment impermissibly vague and inconsistent with s. 48 of ONCA?; and
(iii) Was the amendment initiated in bad faith to target BDAR?
The Court’s Decision
Justice Mathai dismissed BDAR’s application. The court held that:
- No retroactive breach of contract: Membership in a not-for-profit association is contractual, but that contract is inherently subject to amendment under its by-laws. ITSO’s by-laws explicitly allowed amendments to “any section,” including membership criteria. The court distinguished Bector v. Vedic Hindu Cultural Society[2], noting that BDAR had no “lifetime” entitlement to fixed terms.
- No vagueness or conflict with ONCA: The court rejected BDAR’s argument that the amendment was impermissibly vague. The phrase “corporate structure and control” was clear when read in context; control meant “more than 50% of the votes” within a member association. Nor did ONCA require ITSO to list every factor the board might consider in approving structural changes.
- No bad faith: In the context of not-for-profit corporations, “bad faith” has been interpreted as acting in the absence of good faith or acting with an oblique, illegitimate or collateral purpose. In Pal v. Chatterjee[3], Gray J. described the “hallmarks” of bad faith as follows in para 46:
One of the hallmarks of bad faith is where a process is put in place, ostensibly for a legitimate purpose, but really for another oblique, illegitimate or collateral purpose.
The court found that ITSO acted in good faith to protect its independence and ensure competitors like TRREB could not exercise indirect control through member associations. The amendment pursued a legitimate corporate purpose consistent with the board’s duty to act in ITSO’s best interests. - Judicial deference to governance decisions: Citing Lakeside Colony of Hutterian Brethren v. Hofer[4] and Pal[5], Justice Mathai reiterated that courts should not micromanage voluntary associations. Intervention is justified only when organizations breach their own rules, act in bad faith, or violate natural justice. ITSO had complied with its by-laws and acted transparently.
Prominent Legal Issues and Case Comparisons
Justice Mathai differentiated the facts from prior jurisprudence. Unlike Bector v. Vedic Hindu Cultural Society[6], where lifetime membership terms were breached, ITSO’s by-laws always allowed for amendments. The court also referenced Mississauga Majors v. Provincial Women’s Softball Association[7] to distinguish cases where organizations improperly imposed discretionary membership criteria not contained in their by-laws. Here, ITSO’s discretion was expressly authorized by member ratification.
The court further discussed decisions including Dillon v. Carp Agricultural Society[8] and Pal[9], affirming that judicial review of not-for-profits should be narrow and deferential, focusing only on violations of law, bad faith, or procedural unfairness.
Impact and Implications
This decision has implications beyond real estate governance.
For not-for-profits and professional associations: Boards can revise membership eligibility to reflect changing strategic realities such as market competition or consolidation, so long as they follow proper procedures and act in good faith.
For MLS and real estate governance: ITSO’s victory signals that regional MLS entities can protect themselves from indirect control by larger market players. The decision may embolden associations to tighten membership criteria to preserve governance integrity, even if that risks market fragmentation.
For courts and counsel: Barrie & District underscores that ONCA provides broad latitude to amend governance frameworks. However, boards must document their rationale carefully to withstand scrutiny under the “good faith” and procedural fairness standards.
Conclusion
Justice Mathai’s judgment balances flexibility and accountability in not-for-profit governance. It recognizes that organizations like ITSO must evolve to remain competitive while ensuring their decisions reflect procedural fairness and bona fide corporate purpose.
For Ontario’s associations, the case reaffirms that courts will generally respect democratic, procedurally sound amendments even when they have disruptive consequences for incumbent members.
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