A Stark Warning to Candidates for Municipal Office When Filing Their Campaign Election Statements

INTRODUCTION

The Ontario Court of Appeal made headlines recently when it released its decision in Karygiannis v. Toronto (City), 2020 ONCA 411, removing Toronto City Councillor Jim Karygiannis from office for the second time this term.

While most of the focus has been on its political implications, the decision provides important clarification of the campaign financing laws set out in the Municipal Elections Act, 1996 (the “MEA”). The decision should serve as a cautionary tale to candidates for municipal office. Those who do not correctly file financial statements can and will be removed from office with no chance for judicial intervention.

BACKGROUND

Mr. Karygiannis was re-elected to office on October 22, 2018. When he first submitted his campaign spending report, he disclosed expenditures within the general spending limit of $61,207.80, and the limit on expressions of gratitude of $6,120.78 (being 10% of the total spending limited). However, following an audit, he submitted a revised spending financial report which included expenses for a dinner and a victory party as expressions of gratitude, putting him nearly $26,000 over the limit. Mr. Karygiannis’s financial statements were prepared by a professional accountant, but the councillor himself signed and filed them.

Subsection 88.23(2) of the MEA provides that if a candidate for municipal office submits a financial statement that shows, on its face, that he or she spent more than the allowable limit, the candidate automatically forfeits the office and cannot run again until after the next general election. Section 92 of the MEA makes it an offence to spend more than the prescribed limit. However, if there is a prosecution under section 92 of the Act, the presiding judge can provide relief from the penalties found in both sections 88.23 and 92.

THE DECISION

The application judge had determined that the MEA created an absurdity. He reasoned that the Legislature could not have intended to provide for an automatic removal from office in one section, but for possible leniency if a member was actually convicted of an offence in another section. The application judge granted Mr. Karygiannis relief from forfeiture of office under subsection 92(2) of the Act.

The decision was appealed. The Court of Appeal dealt with two possible grounds of relief: subsection 92(2) of the MEA, and section 98 of the Courts of Justice Act, which gives judges broad powers to grant relief against penalties and forfeitures.

Unusually, all parties (including Mr. Karygiannis) conceded that the application judge erred in granting relief pursuant to section 92(2) of the Act.

The Court applied a textbook example of statutory interpretation by applying the “modern approach” and reading the text of the provision in its plain and ordinary meaning in light of the object and purpose of the legislation. The unanimous panel determined that the plain and ordinary meaning of subsection 88.23(2) meant that there was no possibility of judicial intervention.

The Court delved into the judicial history of section 88.23, which formerly had a relief mechanism built into it which would allow for a good faith exception. However, this was removed by the Legislature because it had created long and costly proceedings to try to remove an individual from office. In many cases, the proceedings took longer than the individual’s term, rendering the whole process redundant. Accordingly, the good faith provision was deliberately removed from section 88.23. It was the clear intention of the Legislature that no relief could be granted unless proceedings were initiated under section 92.

The focus of the appeal was on section 98 of the Courts of Justice Act, which allows a court to grant relief from forfeiture or penalties. However, the Court of Appeal had previously held that no relief is available “in cases involving a true statutory penalty, or when the statutory regime expressly or by necessary implication precludes relief.” The question for the Court to consider was whether section 88.23 of the MEA constituted a “true statutory penalty.”

Relying on the ruling in Poplar Point First Nation Development Corporation v. Thunder Bay (City), 2016 ONCA 934, the Court held that section 88.23 is not a mere administrative provision, but rather a true statutory penalty. The section prohibits certain actions and provides a clear consequence for those actions. To provide relief from these consequences on the basis of section 98 of the Courts of Justice Act would be to undermine the Legislature’s intention in creating them.

ANALYSIS

The result of this decision should not be overlooked by potential candidates for municipal office. Candidates who submit financial statements that indicate expenses over the permitted limit will be removed from office under section 88.23, regardless of their intentions. As noted, Mr. Karygiannis had argued that this created an absurdity, as candidates who face more serious prosecution under section 92 of the MEA can avoid being removed from office on the basis of good faith.

The Court acknowledged that this was the precise situation created by the legislation, but that it was deliberately intended to provide for an automatic removal. Accordingly, there was no basis for the Court to interfere. This is certainly a counterintuitive legislative regime, but the Court suggested that the goal of the Legislature was to reduce administrative delays. This decision achieves that, although it does so in a particularly harsh manner.

Mr. Karygiannis has limited options and he has already foreclosed the very basis upon which he was restored to office the first time. He can seek leave to appeal to the Supreme Court of Canada, which does not often decide to hear civil matters unanimously decided by an appellate court. Until then, however, any candidate seeking to run for municipal office should make sure to double check their accountant’s audited financial statements.