The executive director's voice carries a weight that silences the usual pre-meeting small talk. She has called an emergency session of the board, and as members settle into their chairs around the conference table in the community services agency's administrative wing, they notice the thick folder she places before her. Outside, early November rain streaks the windows, and somewhere down the hall, the maintenance team has positioned another bucket beneath one of the ceiling tiles that has begun to sag with moisture. This is the fourth such bucket this month. The executive director opens by telling the board that she met yesterday with the agency's lawyer, and that the lawyer's advice is clear: the agency has grounds to pursue the general contractor who completed the facility renovation three years ago, but the window to do so may be narrowing in ways no one fully anticipated. She explains that the structural deficiencies they have been managing with temporary fixes are not temporary problems. The foundation work that was subcontracted out has failed in ways that are compromising the building's integrity, and the water infiltration they first noticed eighteen months ago has caused damage that extends far beyond what the patched drywall and replaced ceiling tiles suggest. The question she is putting to the board tonight is whether the agency should authorize legal action against the contractor, understanding that this decision will commit the organization to a process that could last years, cost significant resources, and carry outcomes none of them can guarantee. What she does not say, but what the board members around the table need to understand, is that how they make this decision—not just what they decide, but how they deliberate, what they consider, and what they document—will determine their own exposure as directors if the litigation does not go well or if the decision to pursue it is later questioned.
The decision to initiate litigation is unlike most decisions a non-profit board makes in the ordinary course of governance. Approving an annual budget, adopting a policy, or selecting a new executive director are all significant acts, but they operate within established frameworks and carry predictable contours even when the outcomes remain uncertain. Litigation is different. When a board authorizes the organization to sue a contractor—or any other party—it is committing the organization to an adversarial process governed by rules and timelines the organization does not control. It is exposing the organization's internal records, communications, and decision-making to discovery. It is betting organizational resources on an outcome that depends on evidence the organization may or may not possess, on legal arguments that may or may not succeed, and on the conduct of parties who have every incentive to defend themselves vigorously. The board that treats litigation authorization as a routine matter, deferring entirely to the executive director's judgment or the lawyer's recommendation without engaging substantively with the decision, is not fulfilling its fiduciary obligations. Worse, it is creating a record that suggests the board was either not paying attention or not capable of providing meaningful oversight over a decision of significant organizational consequence.
Under Alberta's Societies Act, which governs most non-profit societies in the province, directors owe fiduciary duties to the organization that include the duty of loyalty, the duty of care, and the duty to act in good faith and in the best interests of the society. These duties are not diminished because the directors are volunteers, nor are they suspended when the decision before the board involves technical legal matters that directors may feel unqualified to evaluate. The standard of care expected of directors requires them to exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances. This does not mean directors must become litigation experts, but it does mean they must engage meaningfully with the decision, ask appropriate questions, seek sufficient information to understand the risks and potential outcomes, and exercise independent judgment rather than simply accepting management's recommendation without scrutiny. The board member who sits silently through a discussion of major litigation, never asking a question or expressing a view, is not protected by that silence. If anything, the silence may later be interpreted as evidence of disengagement or abdication of responsibility.
The scenario facing this community services agency illustrates how quickly a construction deficiency problem can become a governance problem. The board authorized the renovation project several years ago. Different directors may have served at that time—volunteer boards experience turnover, and it is entirely possible that some current directors were not on the board when the contractor was selected, the contract was signed, or the work was completed. This does not insulate them from responsibility for how the organization handles the consequences of that project. The current board owns the current decision. If the board decides to pursue litigation, the board must satisfy itself that the decision is sound, that the organization has the resources to see it through, that the risks have been identified and weighed, and that the strategic and operational implications have been considered. If the board decides not to pursue litigation, it must satisfy itself that this decision is also defensible—that walking away from a potential legal claim is in the organization's best interests given the circumstances, the costs, the likelihood of success, and the alternative uses of the resources that litigation would consume.
The executive director has brought the matter to the board, which is precisely what governance best practices require. The executive director is not authorized to commit the organization to major litigation on her own initiative; this is a board-level decision. But the fact that she has brought it to the board does not mean the board's role is simply to ratify whatever she recommends. The board must engage with the substance. What are the deficiencies, exactly? What is the evidence that they result from the contractor's work rather than other causes? The contractor has already signaled that it will blame the subcontractor who handled the foundation work—what does that mean for the agency's claim? Will the agency need to sue both the contractor and the subcontractor, or can the contractor be held liable for the subcontractor's work under the terms of the original contract? What documentation does the agency have from the time of the renovation? The executive director has acknowledged that project documentation was not handled well at the time. What does this mean for the agency's ability to prove its case? The lawyer has said there are grounds to pursue the contractor, but what are the weaknesses in the agency's position, and how significant are they?
The limitation period question is one that the board must understand even if they cannot resolve it themselves. Under Alberta law, the Limitations Act establishes the time periods within which legal claims must be brought. The general rule is that a claimant has two years from the date they knew or ought to have known that they had a claim to commence legal proceedings. For construction-related claims, there is also an ultimate limitation period that runs from the date the work was substantially completed, regardless of when the deficiencies were discovered. The board needs to understand where the agency stands in relation to these periods. The water infiltration was first noticed eighteen months ago—does that mean the limitation period began running eighteen months ago? Or did it begin running only when the agency learned that the infiltration was caused by deficient construction work rather than some other cause? The executive director's reference to the limitation period being "more complicated than it looks" suggests there may be uncertainty about when the clock started. This uncertainty has strategic implications. If the limitation period is about to expire, the board may need to authorize litigation quickly even if they would prefer more time to evaluate the decision. If there is more time available, the board may have the luxury of conducting further investigation before committing to legal action.
The government funder that contributed capital toward the renovation introduces another layer of complexity. Funders who provide capital grants for construction projects often include conditions in their funding agreements about how the organization must maintain the funded asset, how deficiencies must be addressed, and how the funder's interests are protected if something goes wrong. The board needs to understand what the agency's obligations are to the funder and whether pursuing litigation against the contractor is consistent with those obligations or required by them. Has the funder been notified of the deficiencies? What are the funder's expectations about how the agency will pursue recovery? If the agency incurs legal costs in pursuing the contractor, can those costs be covered by the funder, or do they come entirely from the agency's own resources? If the agency recovers money from the contractor, does any portion of that recovery belong to the funder, or does the agency retain it entirely? These questions have financial and relational implications that the board must consider as part of its deliberations.
Directors and officers liability insurance—commonly called D&O insurance—exists precisely because boards face exposure when they make significant decisions on behalf of the organizations they govern. D&O insurance protects individual directors and officers against personal liability arising from claims that they breached their duties in the course of their board service. Most well-governed non-profits carry D&O insurance, and the board should confirm that the agency's coverage is current and adequate. But the existence of insurance does not eliminate the board's responsibility to make careful decisions. Insurance policies contain exclusions that may apply if the board acted in bad faith, failed to exercise reasonable care, or committed acts that fall outside the scope of their duties. The board cannot treat insurance as a substitute for diligent governance. More practically, no director wants to be named in a lawsuit claiming breach of fiduciary duty, even if insurance ultimately covers the defense costs and any resulting liability. The process itself is stressful, time-consuming, and damaging to reputation. The board that governs carefully, documents its deliberations, and makes decisions based on reasonable information and good faith judgment is far less likely to face such claims than the board that rubber-stamps management recommendations without meaningful engagement.
How the board documents its deliberations matters enormously. The minutes of the meeting at which the board discusses and decides on litigation should reflect that the board understood the nature of the decision before it, considered relevant information, asked appropriate questions, and reached its decision through a reasonable process. Minutes do not need to capture every word spoken at a meeting, but they should capture the substance of the discussion in a way that demonstrates governance engagement. If the board received a memo from the executive director summarizing the lawyer's advice, the minutes should note that the memo was provided and reviewed. If the board asked questions about the limitation period, the strength of the evidence, the expected costs of litigation, or the potential outcomes, the minutes should reflect that these topics were discussed. If the board considered alternatives to litigation—settlement discussions, mediation, or simply absorbing the loss and moving on—the minutes should reflect that these alternatives were considered and why the board concluded that litigation was the appropriate course. Years later, if anyone questions whether the board fulfilled its oversight obligations, the minutes will be the primary evidence of what the board did and how it did it. Minutes that consist of nothing more than "the board authorized the executive director to proceed with litigation against the contractor" tell a story of board passivity that may or may not be accurate but will certainly not inspire confidence.
The board's role does not end when it authorizes litigation. If the decision to sue is a board decision, then the conduct of the litigation requires ongoing board oversight. This does not mean the board directs trial strategy or reviews every document filed in court—that would be both impractical and inappropriate. The lawyer serves as the agency's legal counsel, and the executive director serves as the board's delegate in managing the day-to-day relationship with counsel. But the board retains responsibility for the major strategic decisions that arise as litigation proceeds. Should the agency accept a settlement offer? Should the agency authorize an appeal if the initial decision goes against it? Should the agency discontinue the litigation if circumstances change—if costs escalate beyond projections, if key evidence turns out to be weaker than expected, or if the contractor becomes insolvent and any judgment would be uncollectible? These are not decisions the executive director should make alone. They are board decisions, and the board must be kept sufficiently informed throughout the litigation to make them intelligently.
The relationship between the board, the executive director, and legal counsel in the context of litigation requires careful calibration. The board is the governing body, but it is not well-suited to direct involvement in legal proceedings. The executive director is the operational leader, but she is not a lawyer and cannot evaluate legal strategy on purely technical grounds. Legal counsel provides expertise, but counsel serves the organization—not the executive director personally and not the board personally. The organization is the client, and the board speaks for the organization at the governance level. This means the board must have access to legal advice when it needs it. If the board has questions that the executive director cannot answer, the board should hear directly from counsel. Some boards find it useful to designate a board member or a small committee to serve as the primary liaison with counsel on major litigation, receiving regular updates and bringing significant matters to the full board for decision. This approach can work well as long as the designated member or committee understands that it is acting on behalf of the full board and does not usurp board authority by making decisions that belong to the board as a whole.
The challenge of board turnover during litigation deserves explicit attention. Litigation can take years to resolve. The directors who authorize the commencement of a lawsuit may not be the directors who are serving when the matter finally concludes. New directors must be educated about the ongoing litigation when they join the board. They must understand the history of the matter, the current status, the expected timeline, and the board's role in major decisions going forward. If a new director joins the board with no knowledge of a pending lawsuit, that director cannot fulfill oversight obligations with respect to it. The board chair and the executive director share responsibility for ensuring that new directors are brought up to speed on all significant ongoing matters, including litigation. The orientation process for new directors should include a summary of any pending legal proceedings and an explanation of how the board is managing its oversight responsibilities.
The scenario also raises questions about what went wrong at the time of the original renovation and whether the current board has any responsibility to examine those questions. If the project was poorly documented, as the executive director has acknowledged, why was that? Did the board at the time provide adequate oversight of the capital project, or did it delegate everything to staff without meaningful engagement? Were there warning signs during construction that should have been caught? Did anyone raise concerns that were ignored? These questions may be uncomfortable, particularly if current board members were also serving at the time of the project, but they are relevant to the litigation and may become relevant to the board's own accountability. If the agency's case against the contractor is weakened by the agency's own failure to document the project properly, that failure has consequences. If the failure resulted from inadequate board oversight of a major capital project, the board must grapple with what that means. This is not about assigning blame but about understanding how governance failures contribute to organizational problems and how the board can prevent similar failures in the future.
The financial implications of litigation extend beyond legal fees. Pursuing the contractor will require staff time—the executive director and others will need to gather documents, coordinate with counsel, attend examinations for discovery, and potentially testify at trial. This is time they will not spend on program delivery, fundraising, or other organizational priorities. The board must consider whether the agency has the operational capacity to sustain a multi-year legal proceeding without compromising its core mission. The building itself may require repairs that cannot wait for litigation to conclude. If the foundation problems are causing ongoing damage, the agency may need to spend money to fix them regardless of whether the contractor ultimately pays. Can the agency afford to do that while also funding litigation? If the agency wins and recovers damages, how will those funds be used? Will they cover the repair costs, or will they go toward something else? The board must think through these scenarios and ensure that pursuing litigation makes sense within the broader context of the agency's financial position and strategic priorities.
The fact that the agency is a landlord and that the building houses programs serving vulnerable populations adds urgency and complexity. The board has responsibilities not only to the organization but to the people the organization serves. If the building is unsafe or if program operations are being disrupted by construction deficiencies, the board must ensure that the organization is taking appropriate steps to protect clients and maintain service delivery. This may mean making interim repairs, relocating programs, or communicating with clients about what is happening. The board must balance its interest in preserving the organization's legal position—which might counsel against making certain repairs until liability is established—against its obligation to provide safe, effective programs. Counsel can advise on how to navigate this tension, but the board must understand that the tension exists and must make decisions that reflect the organization's values and obligations.
The board member who concludes that litigation is too complicated and simply defers to the executive director's judgment is not fulfilling governance responsibilities. The board member who asks no questions because they trust the lawyer's recommendation is not fulfilling governance responsibilities. The board member who votes yes because everyone else is voting yes and they do not want to be the outlier is not fulfilling governance responsibilities. Governance requires engagement. It requires asking questions even when the questions feel basic. It requires expressing concerns even when the concerns might slow things down. It requires voting based on one's own judgment after considering the available information, not based on social pressure or excessive deference to expertise. The board as a whole must reach a decision, and that decision should reflect the collective judgment of engaged directors who have grappled with the matter before them.
The rain has continued throughout the meeting. The bucket down the hall has been emptied once already. The executive director has answered questions for over an hour, and legal counsel has joined by telephone to address the board's questions about limitation periods, the strength of the evidence, and the expected cost of pursuing the claim. The board has discussed alternatives to litigation and has considered the implications for the government funder, for program operations, and for the organization's reputation in the community. The chair has ensured that every director has had the opportunity to speak and that dissenting views have been heard and considered. When the vote is finally called, it is not unanimous—one director votes against proceeding, citing concerns about the financial burden and the uncertainty of outcome—but the majority authorizes the executive director to instruct counsel to commence legal action against the general contractor, with the understanding that the board will receive quarterly updates and will be consulted before any settlement discussions or other major strategic decisions. The secretary has taken careful notes throughout, and the minutes will reflect the substance of the deliberation, the questions that were asked, the information that was considered, and the basis for the board's decision. This is what governance looks like when a contractor dispute turns into litigation. It is demanding, time-consuming, and uncomfortable, but it is what the board's fiduciary duties require.