CITATION: Karahalios v. Conservative Party of Canada, 2020 ONSC 3145

COURT FILE NO.: CV-20-638708

DATE: 2020/05/20

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN: )

)

DIMITRIOUS KARAHALIOS

Plaintiff

- and -

CONSERVATIVE PARTY OF

CANADA and CONSERVATIVE FUND

CANADA

Defendant

)

)

)

)

)

)

)

)

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)

Daniel Z. Naymark and James Gibson for

the Plaintiff

Peter N. Mantas, Christopher J. Rae, and

Gabrielle Cyr for the Defendants

Application under Rule 14.05 of the Rules

of Civil Procedure, R.R.O. 1990, Reg. 194.

)

)

HEARD: May 15, 2020

PERELL, J.

REASONS FOR DECISION

But if you will not drive out the inhabitants of the land from before you; then it shall come to pass,

that those who which ye let remain of them shall be pricks in your eyes and thorns in your sides,

and shall vex you in the land wherein ye dwell [The Bible: Numbers 33:55]

A. Introduction

[1] The Plaintiff, Dimitris (Jim) Karahalios, was a candidate for the leadership of the

Conservative Party of Canada in its pending Leadership Contest, which is scheduled to be

completed in August 2020. The Defendants are the Conservative Party, a federal political party

and an unincorporated association, and the Conservative Fund Canada, a federal corporation that

serves as the Conservative Party’s fundraising arm.

[2] On March 18, 2020, the Conservative Party disqualified Mr. Karahalios from the

Leadership Contest. The disqualification followed a complaint by Erin O’Toole, another candidate

for the leadership, to the Chief Returning Officer (CRO), Eric Vanstone. In his complaint, Mr.

O’Toole alleged that he and his campaign chair, Walied Soliman, had been defamed by Mr.

Karahalios. Mr. O’Toole alleged that Mr. Karahalios had made racist Islamophobic remarks that

besmirched the expressed principles of the Conservative Party, which are set out in its

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Constitution. The CRO investigated Mr. O’Toole’s complaint, and he consulted with some

members of the Leadership Election Organizing Committee (LEOC). The CRO made a ruling on

March 17, 2020. The CRO imposed a reporting obligation and a financial penalty on Mr.

Karahalios. Mr. Karahalios appealed the CRO’s Ruling to the Dispute Resolution Appeal

Committee (DRAC), and it disqualified Mr. Karahalios altogether from the Leadership Contest.

This litigation followed.

[3] Mr. Karahalios, who strenuous denies being a racist, believes he was a thorn in the side of

the Conservative Party, and that the Conservative Party’s establishment unlawfully took the

opportunity of Mr. O’Toole’s complaint to drive Mr. Karahalios out of the Leadership Contest.

[4] Mr. Karahalios brings a summary judgment motion for mandatory Orders restoring his

candidacy and all the attendant rights to participate in the Leadership Contest in accordance with

the Conservative Party’s Rules and Procedures for the 2020 Leadership (the Leadership Rules).

[5] His summary judgment motion follows the conversion of what had been a proceeding by

Application into an action.1 Mr. Karahalios submits that the CRO’s Ruling and the DRAC

Decision were beyond their authority to make. He submits that he was denied procedural fairness.

He submits that the DRAC Decision was made in bad faith and for the purpose of supporting other

candidates in the Leadership Contest and removing him as a candidate.

[6] Mr. Karahalios seeks the following relief: (a) a declaration that his disqualification was

invalid; (b) a declaration that he is a “Verified Leadership Candidate”; (c) an Order that the

Defendants treat him in good faith as a Verified Leadership Candidate in accordance with the

Leadership Rules and provide him with an extension until July 15 to recruit Conservative Party

memberships; and (d) directing the Conservative Fund Canada to apply his “Directed

Contributions” to pay: (i) his registration fee ($200,000); (ii) his compliance deposit ($100,000);

and (iii) the balance of the Funds less authorized deductions to his campaign in accordance with

Rule 4.4.6 of the Leadership Rules and s. 365 of the Canada Elections Act.2

[7] As I shall explain below, in my opinion, there was no procedural unfairness and there was

no bad faith. There was nothing untoward or unlawful about the CRO’s Ruling, which was to

impose a penalty but not to disqualify Mr. Karahalios. However, under the Leadership Rules, the

DRAC did not have the authority to disqualify Mr. Karahalios. The authority to disqualify is

reserved to the eighteen members of the LEOC, which has never formally or properly considered

the matter of Mr. Karahalios’ status as a candidate.

[8] It follows that the appropriate decision to make on this summary judgment motion is to set

aside the DRAC Decision and to restore the CRO’s Ruling, all without prejudice to the LEOC

considering the matter of Mr. Karahalios’ status as a candidate, if it is inclined to do so.

[9] Thus, for the reasons that follow, I grant Mr. Karahalios summary judgment as follows:

a. I declare that the DRAC Decision of March 18, 2020 to disqualify Mr. Karahalios’

as a candidate for the Conservative Party leadership was invalid, and I set aside the DRAC

Decision.

b. I declare that if Mr. Karahalios complies with the Ruling of the CRO dated March

17, 2020 within fourteen days of the release of these Reasons for Decision, he is a Verified

1 Karahalios v. Conservative Party of Canada, 2020 ONSC 1947. 2 S.C. 2000, c. 9.

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Leadership Candidate in good standing.

c. I Order that within twenty days of the release of these Reasons for Decision, the

Conservative Fund pay what are known as “Directed Contributions” in accordance with

Rule 4.4.6 of the Leadership Rules and s. 365 of the Canada Elections Act.3

d. I Order that the above Declarations and the Orders are without prejudice to the

rights of the LEOC to determine the rules and procedures for the conduct of the leadership

selection process, including the right of LEOC to amend the Rules or issue further rules

or procedures as it deems necessary to conduct an open, fair, and equitable election

Process while respecting the Constitution as passed by the Conservative Party

Membership at the start of the leadership process.

B. The Parties and Principal Actors

[10] The Conservative Fund Canada is a federal corporation governed by the Canada Not-for-

profit Corporations Act.4 It serves as the Conservative Party’s fundraising arm. It collects

donations and issues tax receipts. Under the Leadership Rules, all leadership candidates must send

all campaign contributions to the Fund, which records the contributions, issues tax receipts, and,

at the candidate’s direction, either applies contributions to Leadership Contest fees or pays them

to the candidate’s campaign net of an administrative fee. The Conservative Fund’s role is to ensure

that the Conservative Party complies with the requirements of electoral law, as set out in the

Canada Elections Act.

[11] The Conservative Party is a federal political party. It is an unincorporated association.

Scott Lamb is its President. Jaime Girard is the Executive Director of the Party. The Hon. Andrew

Scherr is the current Leader of the Conservative Party.

[12] On January 11, 2020, the Conservative Party announced the commencement of a

Leadership Contest to replace Mr. Scheer as the leader of the Party. (1) Dan Nowlan, Ontario and

(2) The Hon. Lisa Raitt, Ontario, a former Cabinet Minister, were appointed Co-chairs of the

Leadership Election Organizing Committee (LEOC) for the 2020 Leadership Contest. The other

members of LEOC are: (3) Valerie Assouline, Québec; (4) Shir Barzilay, Ontario; (5) Jai Bhatti,

Ontario; (6) Lois Brown, Ontario; (7) David Connelly, Northwest Territories; (8) Tanya Corbet,

British Columbia; (9) Steven Dollansky, Alberta; (10) The Hon. Diane Finley, MP, Ontario; (11)

Marc-Olivier Fortin, Québec; (12) Senator Linda Frum, Ontario; (13) Marie-Josée Guérette,

Québec; (14) Mr. Lamb (ex officio), British Columbia; (15) Sam Magnus, Alberta; (16) Judy

Manning, Newfoundland and Labrador; (17) Senator Donald Plett, Manitoba; and (18) Kevin

Price, New Brunswick.

[13] Mr. Nowlan whose day job is Vice-Chairman, Equity Capital Markets at the National

Bank, is the Co-Chair of LEOC and a member of its subcommittee, the Leadership Candidate

Nomination Committee (LCNC), which is responsible for reviewing and approving candidate

applications. Mr. Nowlan has been involved with the activities of the Conservative Party both as

a civil servant and as a member of the Party. As a civil servant, he served as Chief of Staff to the

Minister of Finance and was Special Assistant to the Minister of International Trade in a

3 S.C. 2000, c. 9. 4 S.C. 2009, c. 23.

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Conservative Party Government.

[14] Mr. Nowlan was the Conservative Party’s sole witness for this summary judgment motion.

[15] As noted above, Mr. Bhatti, Ms. Brown, Mr. Dollansky, Mr. Fortin, Ms. Guérette, Ms.

Manning, Mr. Nowlan, and Mr. Price are members of LEOC and they were appointed to the

LCNC, which is responsible for reviewing and approving candidate applications. Mr. Fortin is the

chair of that committee.

[16] As noted above, Ms. Assouline, Mr. Connelly, Mr. Magnus, and Mr. Plett are members of

LEOC, and they were appointed to LEOC’s Dispute Resolution Appeals Committee (DRAC),

which is a LEOC subcommittee. Mr. Magnus was appointed Chair of the DRAC.

[17] The LEOC appointed Derek Vanstone to be the Chief Returning Officer (CRO) of the

Conservative Party for the 2020 Leadership Contest. Mr. Vanstone is a prominent figure in the

Conservative Party and in the Progressive Conservative Party of Ontario (“Ontario PC Party”),

which is a separate and independent provincial political party. Mr. Vanstone is a lawyer and is

currently employed as Global Director, Government and Regulatory Affairs, at Hatch, Toronto,

which is an international engineering and consulting firm. Among other things, formerly, Mr.

Vanstone was Deputy Chief of Staff to the Rt. Hon. Stephen Harper, Office of the Prime Minister,

and Chief of Staff to the Hon. Jim Flaherty, Department of Finance.

[18] There is a history of antagonistic political rivalry between Mr. Vanstone and Mr.

Karahalios.

[19] The Hon. Erin O’Toole is a candidate for the leadership of the Conservative Party. He is

the Member of Parliament for the electoral riding of Durham. He previously served as Minister of

Veterans’ Affairs in the Harper Conservative Party Government. In 2017, Mr. O'Toole

unsuccessful ran to replace Mr. Harper as Leader of the Conservative Party. Mr. O’Toole is a

lawyer and a former captain in the Royal Canadian Air Force.

[20] Walied Soliman is Mr. O’Toole’s campaign chair. Mr. Soliman is a political activist but

not an elected politician. Mr. Soliman is a prominent figure in the Conservative Party and in the

Ontario PC Party. In 2014-2015, Mr. Soliman served as Campaign Chair for The Hon. Patrick

Brown, who was then the Leader of the Ontario PC Party. Mr. Soliman is a prominent Muslim

Canadian lawyer who is the global Chair of Norton, Rose Fulbright LLP. He is a member of the

board of directors of Toronto Sick Kids Hospital Foundation.

[21] There is a history of antagonistic political rivalry between Mr. Soliman and Mr. Karahalios.

Mr. Karahalios has an ongoing acrimonious policy debate with Mr. Soliman about the extent to

which Sharia law; that is, Islamic religious law, is compatible with Canadian law.

[22] Mr. Karahalios of Cambridge, Ontario is a lawyer who has been active in politics for 15

years. Mr. Karahalios has served as a president of local riding associations for the federal

Conservative Party and for the provincial Ontario PC Party. Mr. Karahalios has chaired local

nomination contests for both parties, and he has had leading roles in election and leadership

campaigns. He has also been involved in the election campaigns of his wife, Belinda Karahalios,

who is the Ontario PC Party MPP for the riding of Cambridge.

[23] Mr. Karahalios is the organizer of “Axe the Carbon Tax,” which is a non-profit political

national lobbying organization. Axe the Carbon Tax opposes carbon taxes. Mr. Karahalios has had

an acrimonious and litigious relationship with the Ontario PC Party about carbon taxes and about

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the governance of the Party. Mr. Karahalios vigorously opposed Mr. Patrick Brown about carbon

taxes. Because of his policy differences with Mr. Brown, in late 2015, Mr. Karahalios declined an

invitation from Mr. Soliman for Mr. Karahalios to run in the provincial election.

[24] In 2017, on behalf of the Ontario PC Party, Mr. Soliman accused Mr. Karahalios of having

stolen member lists, and the Ontario PC Party sued Mr. Karahalios with respect to his alleged

misuse of voters lists. The lawsuit was dismissed as a SLAPP suit (strategic litigation against

public participation.5 In 2019, Mr. Karahalios commenced his own lawsuit against the Ontario PC

Party over his allegations of voter fraud in his unsuccessful campaign to be elected Ontario PC

Party President. Mr. Vanstone was the organizer of an Ontario PC Party convention that Mr.

Karahalios says was marred by voting and other irregularities.

[25] Mr. Karahalios is a populist, grassroots candidate in the Conservative Party’s Leadership

Contest. Mr. Karahalios deposed that he has had limited support from the Conservative Party’s

establishment of party members who exercise control over the Conservative Party’s decision-

making and day-to-day affairs.

[26] In his campaign for leadership of the Conservative Party, Mr. Karahalios positioned

himself as an outsider anti-establishment candidate. His campaign slogan was “Stop the Red Tory

Coronation.” He criticized the officials in charge of the Leadership Contest. Mr. Karahalios

deposed that he is popular with grassroots conservative voters. He deposed that his campaign for

leadership was gaining substantial momentum when it was interrupted by the events giving rise to

his action against the Defendants. Mr. Karahalios would have it that the Conservative Party

establishment favour Mr. O’Toole and Peter MacKay, another establishment candidate, to be the

successor to Mr. Scherr,

[27] The Verified Candidates for the Leadership Contest are Leslyn Lewis, Mr. MacKay, Mr.

O’Toole, and Derek Sloan.

C. Procedural and Evidentiary Background

[28] The procedural background to this summary judgment motion is itself a substantive

element of the summary judgment motion, and the procedural and evidentiary background is

pertinent to the court’s jurisdiction and to the court’s findings of fact. The procedural background

is also relevant to whether the case is appropriate for a summary judgment. Further, based on the

procedural and evidentiary background, both parties advanced arguments about what weight, if

any, should be given to the rival deponents’ evidence and whether adverse inferences should be

drawn from the absence of witnesses who could give direct evidence of the material facts.

[29] I will, therefore, describe the procedural and evidentiary background to the summary

judgment motion in this section. I will describe the admissibility of the hearsay evidence and

whether the case is appropriate for a summary Judgment in the next sections of my Reasons for

Decision before turning to the facts and the law.

[30] On March 15, 2020, the Chief Justice of the Superior Court of Justice released a Notice to

the Profession advising that because of the global COVID-19 pandemic, the Court had adjourned

all scheduled civil hearings. The Notice to the Profession, which recently was revised, then allowed

hearing of "urgent and time-sensitive motions...where immediate and significant financial

5 Progressive Conservative Party of Ontario v. Karahalios, 2017 ONSC 7696.

6

repercussions may result if there is no judicial hearing." It also allowed for the hearing of strictly

limited number of "other matter[sl that the Court deems necessary and appropriate to hear on an

urgent basis."

[31] On March 24, 2020, which was soon after his disqualification by the DRAC, Mr.

Karahalios undertook to commence an Application supported by his affidavit dated March 24,

2020, and he requested that the Application be heard as an urgent matter pursuant to the then

Notice to the Profession.

[32] Mr. Karahalios filled a 437-page Application Record comprised of a Notice of Application

and his affidavit dated March 24, 2020, to which he appended Exhibits A to RR. He sued the

Conservative Party, the Conservative Fund, and the members of the DRAC.

[33] Justice Myers dealt with Mr. Karahalios’ request for an urgent hearing. Justice Myers ruled

that although the Application did not raise a strictly financial issue, it was time sensitive and had

implications on the national political process in Canada. Justice Myers ruled that it was necessary

and appropriate to hear the Application.6

[34] The then Respondents, now Defendants, sought to bring a preliminary motion to challenge

the court’s jurisdiction for a proceeding by Application. Arrangements were then made to hear the

Respondents’ preliminary motion as a video virtual courtroom hearing.

[35] I heard the preliminary motion on April 9, 2020. On April 13, 2020, I released my Reasons

for Decision7 and I made the following Order, which included the removal of the members of the

DRAC as parties to the proceeding:

(a) The Respondents’ motion to strike the application for not disclosing a reasonable cause of action

is dismissed on the basis that it is not plain and obvious that the terms of the Leadership Rules are a

contract that precludes Mr. Karahalios’ cause(s) of action.

(b) Mr. Magnus, Ms. Assouline, Mr. Connelly, Mr. Plett, and Mr. Vanstone are removed as parties,

and the application is dismissed as against them without costs and without prejudice to any future

action of application that Mr. Karahalios may bring against them, if so advised.

(c) Mr. Karahalios’ application shall be forthwith converted into an action with Mr. Karahalios as

the Plaintiff. His Notice of Application and supporting affidavit shall be deemed to be a Statement

of Claim. The Defendants shall be the Conservative Party of Canada and the Conservative Fund

Canada.

(d) The Notice of Application and supporting affidavit shall also be deemed a Notice of Motion and

supporting affidavit for a summary judgment motion for the relief requested in the Notice of

Application.

(e) I shall remain seized of the action, which shall proceed under case management under the Rules

of Civil Procedure.

(f) The Defendants shall have ten days to deliver their responding motion material to the Plaintiff’s

summary judgment motion. The responding motion affidavits shall be deemed to be the Defendants’

Statement of Defence and Counterclaim, if any, to the Plaintiff’s proceeding by action.

(g) The Plaintiff may have five days to deliver his reply motion material, if any, in his summary

6 Karahalios v. Conservative Party of Canada, 2020 ONSC 1820. 7 Karahalios v. Conservative Party of Canada, 2020 ONSC 1947.

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judgment motion. The reply motion material, if any, shall be deemed to be the Plaintiff’s Reply and

Statement of Defence to the Counterclaim, if any.

(h) With the delivery of the Plaintiff’s reply motion material, the pleadings shall be deemed closed,

and the next step in the action shall be the Plaintiff’s summary judgment motion. The parties shall

have ten days to complete cross-examinations, with the Plaintiff’s witness(es) to be cross-examined

first followed by the cross-examinations of the Defendants’ witness(es).

(i) The transcripts of the cross-examinations are part of the record for the summary judgment motion

and shall be deemed to be examinations for discovery if the action proceeds to a trial.

(j) Pending the determination of the Plaintiff’s summary judgment motion, the parties may not bring

any other motions pending the determination of the summary judgment motion without leave of the

court.

(k) Up until the completion of the hearing of the summary judgment motion, the Defendants, without

notice of motion, may elect to bring a cross-motion for summary judgment.

(l) The direction that there be a summary judgment motion is without prejudice to the right of the

Defendants at the return of the motion to argue that the case is inappropriate for a summary

judgment.

(m) Subject to the right of the parties (by email communication to me) to request a different date,

the hearing of the summary judgment motion is scheduled as a video conference virtual courtroom

hearing on Friday May 15, 2020 in accordance with the April 2, 2020 Notice to the Profession, the

Public and the Media Regarding Civil and Family Proceedings – Update Regarding the Suspension

of Superior Court of Justice Regular Operations.

[36] The parties subsequently came to an agreement about the timetable for the delivery of

factums for a summary judgment motion.

[37] There was a case management conference on April 20, 2020, in which I clarified but did

not change my directions for the summary judgment motion.

[38] On April 23, 2020, the Defendants delivered a 299-page Responding Motion Record,

which was comprised of the affidavit of Mr. Nowlan dated April 23, 2020, to which was appended

Exhibits A to HH.

[39] On April 29, 2020, Mr. Karahalios served a Notice of Examination to cross-examine Mr.

Nowlan. Mr. Nowlan was asked to produce, all documents in the custody, possession or power of

the CRO, the DRAC or the LEOC, in connection with the following items: (a) considerations of

whether to provide voter lists to Mr. Karahalios; (b) LEOC’s consultations and discussions about

whether and how Mr. Karahalios should be sanctioned; (c) the CRO’s Ruling; (d) the DRAC’s

consultations and discussions about whether and how Mr. Karahalios should be sanctioned; (e)

discussions of Mr. Karahalios’ comments critical of the Party’s leadership or of its handling of the

leadership contest; (f) communications with the O’Toole Campaign about its complaint against

Mr. Karahalios; (g) Communications with Jaime Watt (whose op-ed was included in Mr. Nowlan’s

affidavit) or others at his firms Navigator Ltd. or Ensight about Mr. Karahalios; and (h) the

desirability of Mr. Karahalios’ candidacy.

[40] On April 30, 2020, Mr. Karahalios delivered a 196-page Supplementary Motion Record

comprised of his affidavit dated April 30, 2020, to which was appended Exhibits A to T.

[41] On May 5, 2020, the Defendants’ counsel wrote Mr. Karahalios’ counsel and produced the

documents with respect to the DRAC’s consultations and discussions about whether and how Mr.

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Karahalios should be sanctioned (item (d) above) and with respect to the desirability of Mr.

Karahalios’ candidacy (item (h) above).

[42] The Defendants, however, refused to produce the other documents summonsed by Mr.

Karahalios. Mr. Karahalios’ counsel immediate responded that if the balance of the documents

were not produced, then Mr. Karahalios would invite the court to draw an adverse inference.

[43] On May 5, 2020, Mr. Karahalios delivered a 54-page Second Supplementary Motion

Record comprised of his affidavit dated May 5, 2020, to which was appended Exhibits A to E.

[44] On May 6, 2020, the Conservative Party delivered a 36-page Supplementary Responding

Motion Record comprised of the affidavit of Mr. Nowlan dated May 6, 2020, to which was

appended Exhibits A to G.

[45] On May 7, 2020, Mr. Karahalios was cross-examined. Mr. Nowlan was not cross-

examined.

[46] On May 8, 2020, Mr. Karahalios delivered his 67-page Factum.

[47] There was a case management conference on May 9, 2020, in which I made the following

direction.

This is a case conference following my order dated April 13, 2020 and further to my case file

direction dated April 20, 2020. The Defendants requested a case conference to address the delivery

of the factums for the motion. Attached are the Defendants’ and the Plaintiff’s case conference

memorandums. Having heard the parties submissions, I make the following direction:

1. The plaintiff to deliver a supplementary factum dealing with the privilege cause issue by no later

than Monday May 11, 2020, 2:00 p.m.

2. The balance of the timetable is to remain unchanged.

3. Page limits on factums is waived.

[48] On May 11, 2020, Mr. Karahalios delivered his 15-page Supplementary Factum.

[49] On May 12, 2020, the Conservative Party delivered its 111-page Responding Factum.

[50] On May 14, 2020, Mr. Karahalios delivered his 35-page Reply Factum and the

Conservative Party delivered a 132-page Second Supplementary Responding Motion Record

containing the transcript of Mr. Karahalios’ cross-examination and his answers to undertakings.

[51] The summary judgment motion was argued by video conference on May 15, 2020. I

reserved judgment.

D. The Admissibility of the Hearsay Evidence

[52] The facts of a case tell a story, and subject to the law of evidence, it is for the litigants to

decide how the story should be told by calling witnesses.

[53] How the story is told by the litigants affects how the story is told by the court and the

findings of fact that it may make about the truth of the matter. Later in these Reasons for Decision,

I shall make my findings of fact and tell the story of this case. Before I do so, it is necessary to

comment about the admissibility of hearsay evidence and about the admissibility of less than the

best evidence to determine the truth of the competing stories in the immediate case.

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[54] Stories have scenes, events, and actors, some of whom are participants in the story and

some of whom are witnesses or observers of the scenes and events. As may be gathered from the

cast of characters and the procedural background described above, in the immediate case, the

parties each decided to call just one witness to tell their side of the story although many other

persons were directly involved as participants or as witnesses.

[55] Mr. Karahalios was not a witness to some of the major events upon which his case is built.

Mr. Karahalios, who was cross-examined, told his story and provided a great deal of hearsay

evidence, some of which was told to him by persons who Mr. Karahalios wished to keep

confidential to protect their privacy and to prevent retaliation against them. Mr. Karahalios’ case

is largely built upon what happened at telephone conference calls or meetings at which he was not

present. He speculated and relied on circumstantial evidence and adverse inferences to tell his

story of what happened at those events. It appears that he made a strategic or tactical decision not

to cross-examine Mr. Nowlan or to summons any witnesses in aid of his summary judgment

motion.

[56] Mr. Nowlan, who was not cross-examined, told the Defendants’ version of the events. Mr.

Nowlan, however, was an actor in only some of the scenes of the story, and he was not a witness

to some of the most important events, which he described by hearsay evidence from identified

persons who were involved. Thus, about some important events, Mr. Nowlan provided hearsay

evidence of what the other major actors in the story saw, heard, and did.

[57] As noted below, with some qualifications hearsay evidence may be proffered on a summary

judgment motion, but both Mr. Karahalios and the Defendants did not call the actual actors who

participated in some of the major events of the story.

[58] Both sides argued that the evidence of their opponent was hearsay or not credible or not

reliable or not the best evidence or not admissible. Mr. Karahalios made much of the fact that the

Conservative Party did not call as witnesses anybody but Mr. Nowlan and that much of Mr.

Nowlan’s testimony appeared to be hearsay. There was, however, a great deal of the pot calling

the kettle black about the misuse of hearsay evidence on a summary judgment motion.

[59] Mr. Karahalios did not move for a production order when the Conservative Party provided

only some of the documents that he wanted produced. Mr. Karahalios did not cross-examine Mr.

Nowlan on the evidence that he challenged as unreliable. Mr. Karahalios did not move to strike

Mr. Nowlan’s evidence, and, rather, Mr. Karahalios relied on some of Mr. Nowlan’s testimony to

make out Mr. Karahalios’ allegations of procedural improprieties and bad faith and improper

purpose. To the extent that Mr. Nowlan provided exculpatory evidence of what actually was said

and done, Mr. Karahalios argued that his evidence should be given no weight and an adverse

inference should be drawn from the Conservative Party’s failure to call those who were directly

involved in the events.

[60] Because some key actors in the narrative were not called to give evidence, there was an

intense debate about how this absence of testimony affected drawing adverse inferences and about

whether Mr. Karahalios had satisfied the onus of proof in his allegations that the Conservative

Party acted in bad faith and conspired to disqualify Mr. Karahalios from the Leadership Contest.

The Conservative Party disputed Mr. Karahalios’ argument that adverse inferences should be

drawn, and it pointed out that Mr. Karahalios could have but did not cross-examine Mr. Nowlan

and that Mr. Karahalios could have but did not summons any witnesses in aid of its summary

judgment motion. The Conservative Party pointed out that Mr. Karahalios had relied on hearsay

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evidence of his own and had cherry-picked evidence from Mr. Nowlan’s testimony.

[61] With this background, I can say that notwithstanding the fierce arguments of the parties, I

shall be able to make findings of fact and tell the story of this case. In the immediate case both

sides provided ample documentary evidence, and the documents go a long way in telling the story

of the case. Moreover, as will appear from the analysis section of these Reasons for Decision,

much of the case turns on an interpretation of the written Leadership Rules, and there was ample

evidence of the factual nexus for that document to be interpreted.

[62] In the immediate case, I am able to admit much of the impugned evidence because it was

not actually hearsay or because it is admissible pursuant to one of the exceptions to the rule against

hearsay. Much of the evidence said to hearsay was admissible: (a) as an admission against interest;

(b) not for the truth of its contents but as part of the narrative; or (c) not for the proof of its contents

but as proof that the statement was made. Some of the purportedly hearsay evidence was

admissible because it satisfies the necessity and reliability criteria of the hearsay exception or was

confirmed by or was consistent with or corroborated by the documentary evidence.

[63] There was evidence - from both sides - that was inadmissible evidence either because it

was irrelevant or because it was indeed inadmissible hearsay evidence. I shall not admit such

evidence and I shall not include it in my narrative of findings of fact. I am able to draw adverse

inferences when it is appropriate to do.

E. Is the Case Appropriate for a Summary Judgment?

[64] In their factums for different reasons, the parties conceded that the case is appropriate for

a summary judgment. Further, the Defendants submitted that the case is appropriate for a summary

judgment in their favor although they have not brought a formal cross-motion.

[65] Notwithstanding the concessions of the parties, it is nevertheless necessary to set out the

court’s jurisdiction on a summary judgment motion and to address whether the case is appropriate

for a summary judgment for either party.

[66] Rule 20.04(2)(a) of the Rules of Civil Procedure8 provides that the court shall grant

summary judgment if: “the court is satisfied that there is no genuine issue requiring a trial with

respect to a claim or defence.” With amendments to Rule 20 introduced in 2010, the powers of the

court to grant summary judgment have been enhanced. Rule 20.04 (2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the

court shall consider the evidence submitted by the parties and, if the determination is being made

by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the

interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

[67] Hryniak v. Mauldin does not alter the principle that the court will assume that the parties

have placed before it, in some form, all of the evidence that will be available for trial. The court is

8 Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

11

entitled to assume that the parties have advanced their best case and that the record contains all the

evidence that the parties will present at trial.9 Thus, if the moving party meets the evidentiary

burden of producing evidence on which the court could conclude that there is no genuine issue of

material fact requiring a trial, the responding party must either refute or counter the moving party’s

evidence or risk a summary judgment.10

[68] Under rule 20.02(1), the affidavits for a summary judgment motion may be made on

information and belief, but on the hearing of the motion, the court may, if appropriate, draw an

adverse inference from the failure of a party to provide the evidence of any person having personal

knowledge of contested facts.

[69] The principles governing the admissibility of evidence are the same as apply at trial save

for the limited exception of permitting an affidavit made on information and belief.11 Where an

affidavit relied upon in support of a motion for summary judgment does not state the source of the

information and the fact of the deponent’s belief, the court may nevertheless rely upon the

substance of the exhibits to the affidavit in evaluating the merits of the case.12

[70] In Hryniak v. Mauldin13 and Bruno Appliance and Furniture, Inc. v. Hryniak,14 the

Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court

should first determine if there is a genuine issue requiring trial based only on the evidence in the

motion record, without using the fact-finding powers introduced when Rule 20 was amended in

2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing

the factual record and granting a summary judgment if there is sufficient evidence to fairly and

justly adjudicate the dispute and a summary judgment would be a timely, affordable and

proportionate procedure.

[71] If, however, there appears to be a genuine issue requiring a trial, then the court should

determine if the need for a trial can be avoided by using the powers under rules 20.04 (2.1) and

(2.2). As a matter of discretion, the motions judge may use those powers, provided that their use

is not against the interest of justice. Their use will not be against the interest of justice if their use

will lead to a fair and just result and will serve the goals of timeliness, affordability, and

proportionality in light of the litigation as a whole. To grant summary judgment, on a review of

the record, the motions judge must be of the view that sufficient evidence has been presented on

all relevant points to allow him or her to draw the inferences necessary to make dispositive findings

and to fairly and justly adjudicate the issues in the case.15

[72] If a judge is going to decide a matter summarily, then he or she must have confidence that

he or she can reach a fair and just determination without a trial; this will be the case when the

summary judgment process: (a) allows the judge to make the necessary findings of fact; (b) allows

the judge to apply the law to the facts; and (c) is a proportionate, more expeditious and less

9 Canada (Attorney General) v. Lameman, [2008] 1 S.C.R. 372 at para. 11; Dawson v. Rexcraft Storage & Warehouse

Inc., [1998] O.J. No. 3240 (C.A.); Bluestone v. Enroute Restaurants Inc. (1994), 18 O.R. (3d) 481 (C.A.). 10 Toronto-Dominion Bank v. 466888 Ontario Ltd., 2010 ONSC 3798. 11 Sanzone v. Schecter, 2016 ONCA 566 at para. 15; Caithesan v. Amjad, 2016 ONSC 5720 at para. 24. 12 Carevest Capital Inc. v. North Tech Electronics Ltd., 2010 ONSC 1290 at para. 16 (Div. Ct.). 13 2014 SCC 7. 14 2014 SCC 8. 15 Campana v. The City of Mississauga, 2016 ONSC 3421; Ghaeinizadeh (Litigation guardian of) v. Garfinkle

Biderman LLP, 2014 ONSC 4994, leave to appeal to Div. Ct. refused, 2015 ONSC 1953 (Div. Ct.); Lavergne v.

Dominion Citrus Ltd., 2014 ONSC 1836 at para. 38; George Weston Ltd. v. Domtar Inc., 2012 ONSC 5001.

12

expensive means to achieve a just result.16 The motion judge is required to assess whether the

attributes of the trial process are necessary to enable him or her to make a fair and just

determination.17

[73] Turning to the case at bar, notwithstanding the Defendants’ submission that there are no

genuine issues and hence the case was amenable to a summary judgment in the Defendants’ favor,

there are genuine issues, but none of them require a trial to fairly resolve.

[74] There is ample evidence to resolve the issues that need to be resolved, and the issues are

capable of being fairly and proportionately resolved by a motion procedure. It is for the parties to

decide what witnesses to be called, and I can assume that they have put their best evidentiary foot

forward. In the immediate case, I do not need the attributes of a trial process to enable me to make

a fair and just determination. Mr. Karahalios was cross-examined, and there is an ample

documentary record from both parties. There were transcripts and exhibit briefs and the lawyers

delivered comprehensive factual and legal argument (68 authorities from Mr. Karahalios, 74 from

the Defendants). There was an eight-hour video conference hearing.

[75] I agree with the Defendants submission that where the evidence on a summary judgment

motion demonstrates that there are no genuine issues requiring a trial or where there are genuine

issues that can be fairly and justly resolved by way of a summary judgment motion, judgment may

be granted in favor of either the moving party and there is no requirement for a formal cross-

motion to be brought by the responding party.18 In any event, in the immediate case, in my decision

on the Defendants’ preliminary motion, I ordered that the Defendants were at liberty to seek

summary judgment in their favor upon the Plaintiff’s summary judgment motion.

[76] In short, the case is suitable for a summary judgment, and I shall decide it summarily.

[77] With these observations, I can now make my findings of fact and tell the story of the

immediate case.

F. Facts: Conservative Party Structure and the 2020 Leadership Contest

[78] The Conservative Party has a Constitution, which was last amended by the delegates to the

National Convention on August 25, 2018. For present purposes, the following provisions of the

Constitution are pertinent:

Conservative Party of Canada Constitution

NAME

1.1 The name of the Party is the “Conservative Party of Canada”.

2. PRINCIPLES

2.1 The Conservative Party of Canada is founded on and will be guided in its policy formation by

16 Hryniak v. Mauldin, 2014 SCC 7 at paras. 49 and 50. 17 Hryniak v. Mauldin, 2014 SCC 7 at paras. 51-55; Wise v. Abbott Laboratories, Ltd., 2016 ONSC 7275 at paras.

320-336; Drywall Acoustic Lathing and Insulation Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group

Inc., 2016 ONSC 5784 at paras. 122-131. 18 Klein v. Dick, 2016 ONCA 8 at para. 5; Hunter-Rutland Inc. v. Huntsville (Town), 2015 ONCA 353 at para. 5;

Whalen v. Hillier (2001), 53 O.R. (3d) 550 at para. 13 (C.A.).

13

the following principles.

2.1.1 A belief in a balance between fiscal responsibility, compassionate social policy that empowers

the less fortunate by promotion self-reliance and equality of opportunity, and the rights and

responsibilities of individuals, families and free associations.

2.1.2 The goal of building a national coalition of people who share these beliefs and who reflect the

regional, cultural and socio-economic diversity of Canada.

2.1.3 The goal of developing this coalition, embracing our differences and respecting our traditions,

yet honouring a concept of Canada as the greater sum of strong parts.

2.1.4 The Conservative Party of Canada will operate in a manner accountable and responsive to its

members.

2.1.5 A belief in loyalty to a sovereign and united Canada governed in accordance with the

Constitution of Canada, the supremacy of democratic parliamentary institutions and the rule of law.

2.1.6 A belief in the value and dignity of all human life.

2.1.7 A belief in the equality of all Canadians.

2.1.8 A belief in the freedom of the individual, including freedom of speech, worship and assembly.

2.1.9 A belief in our constitutional monarchy, the institutions of Parliament and the democratic

process.

2.1.10 A belief in the federal system of government as the best expression of the diversity of our

country, and in the desirability of strong provincial and territorial governments.

2.1.11 A belief that English and French have equality of status, and equal rights and privileges as to

their use in all institutions of the Parliament and Government of Canada.

2.1.12 A belief that the best guarantors of the prosperity and well-being of the People of Canada

are:

2.1.12.1 the freedom of individual Canadians to pursue their enlightened and legitimate self-interest

within a free competitive economy;

2.1.12.2 the freedom of individual Canadians to enjoy the fruits of their labour to the greatest

possible extent;

2.1.12.3 the right to own property.

2.1.13 A belief that a responsible government must be fiscally prudent and should be limited to

those responsibilities which cannot be discharged reasonably by the individual or others.

2.1.14 A belief that it is the responsibility of individuals to provide for themselves, their families

and their dependents, while recognizing that government must respond to those who require

assistance and compassion.

2.1.15 A belief that the purpose of Canada as a nation state and its government, guided by reflective

and prudent leadership, is to create a climate wherein individual initiative is rewarded, excellence

is pursued, security and privacy of the individual is provided and prosperity is guaranteed by a free

competitive market economy.

2.1.16 A belief that Canada should continue its strong heritage of national defence, supporting a

well-armed military, honouring those who serve, and promoting our history and traditions.

14

2.1.17 A belief that the quality of the environment is a vital part of our heritage to be protected by

each generation for the next.

2.1.18 A belief that Canada should accept its obligations among the nations of the world.

2.1.19 A belief that Canadian Jurisdiction extends beyond the coastline to include the internationally

recognized regions of the Territorial Sea, Exclusive Economic Zone (EEZ) and Continental Shelf.

2.1.20 A belief that good and responsible government is attentive to the people it represents and

consists of members who at all times conduct themselves in an ethical manner and display integrity,

honesty and concern for the best interest of all.

2.1.21 A belief that all Canadians should have reasonable access to quality health care regardless of

their ability to pay.

2.1.22 A belief that the greatest potential for achieving social and economic objectives is under a

global trading regime that is free and fair.

3. DEFINITIONS

[…]

3.7 “Leader” means the leader of the Party.

3.8 “leadership selection process” means the process for selecting a Leader provided for in the

Constitution.

3.9 “member” and “membership” means a member and the membership of the Party respectively,

unless the context otherwise requires.

3.10 “National Council” means the body provided for in Article 8.

[…]

4. MEMBERSHIP

4.1 Membership in the Party is open to every citizen or permanent resident of Canada who:

4.1.1 has attained the minimum age specified by by-law;

4.1.2 actively supports the principles of the Party;

4.1.3 signifies their intention to join the Party;

4.1.4 has personally paid the Party’s national membership fee in the amount specified by

by-law and in the manner specified by National Council which shall set rules and

procedures to provide reasonable assurance that the membership fee was paid by the

member personally; and

4.1.5 is not an individual holding a membership in another federal political party.

[…]

6. GOVERNANCE OBJECTIVES

6.1 The governance of the Party shall adhere to the following objectives:

6.1.1 full representation of the interests and views of members;

15

6.1.2 direct regular communication from National Council, Conservative Fund Canada and

the Leader to electoral district associations and members to ensure accountability;

6.1.3 maintenance of a policy development process which respects and encourages the

participation of all members and which culminates in the adoption of policy resolutions at

national conventions that will become the Party’s Policy Declaration from which the

Party’s election campaign platform will be developed;

6.1.4 fiscally prudent, open and accountable fundraising and financing which are

coordinated with other Party activities and electoral district association fundraising efforts

designed to meet the Party’s overall objectives; and

6.1.5 democratic representation of the membership at national conventions.

6.2 The members of the National Council, the Leadership Election Organization Committee,

Conservative Fund Canada and Party Staff are to remain neutral for all nomination election contests

and leadership elections.

[…]

10. LEADER

10.1 The Leader is the chief public official of the Party, whose authority includes that specified for

the leader of a party pursuant to the Canada Elections Act.

10.2 The Leader shall promote the Party, its principles and policies.

[…]

10.8 In the event of any of the following, National Council shall implement the leadership selection

process at the earliest convenient date thereafter:

10.8.1 the death or retirement of the Leader;

10.8.2 the Leader indicates an intention to resign by submitting notice in writing to the

President of National Council;

10.8.3 more than fifty percent (50%) of the votes cast at a national convention as provided

for in Article 10.7 are in favour of engaging the leadership selection process.

10.9 In the event of the implementation of the leadership selection process, the following shall apply.

[…]

10.9.2 The leadership election organizing committee shall determine the rules and

procedures for the conduct of the leadership selection process, including a dispute

resolution procedure which shall be final and binding. […]

10.9.3 National Council shall appoint the chair and members of the leadership election

organizing committee.

[…]

17. ENFORCEMENT AND INTERPRETATION OF THE CONSTITUTION

17.1 The Constitution is to be interpreted and read subject to the provisions of the Canada Elections

Act. Unless the context otherwise requires, words and phrases used in the Constitution have the

same meaning as in the Canada Elections Act. To the extent that there is any conflict between any

16

provision of this Constitution and the Canada Elections Act or other applicable law, the law shall

prevail.

17.2 National Council shall provide rules and procedures for the giving of any notice required under

the Constitution.

17.3 Subject to Article 17.1, the Constitution shall govern the affairs of the Party and in the event

of any conflict between the Constitution and any other document, the Constitution shall prevail.

[…]

DISPUTE RESOLUTION

19.1 Except for any dispute related to the leadership selection process, any ten (10) members of an

electoral district association or affiliated organization may give notice in writing to National

Council of a dispute as to whether the requirements of the Constitution, a by-law or any rules and

procedures are being met by the electoral district association or affiliated organization or any

committee thereof.

[…]

[79] Under the Conservative Party’s Constitution, the members of the Conservative Party

through delegates elect its governing National Council.

[80] The Conservative Party established an infrastructure to oversee the 2020 Leadership

Contest, in accordance with section 10.9 of the Conservative Party’s Constitution. To oversee the

election, the National Council appointed the LEOC to oversee the election and to establish the

rules and procedures for the Leadership Contest.

[81] The members of the Conservative Party directly elect the Party’s Leader after an election

campaign.

[82] Until it was suspended because of the current Covid-19 pandemic, the voting for the

Leadership Contest was scheduled for a Leadership Convention on June 27, 2020. Members now

have until August 21, 2020 to vote by mailed ballot.

G. Facts: LEOC and the Leadership Rules

[83] LEOC published the Leadership Rules. As shall be discussed further below, the Leadership

Rules are contractually binding on Party members, Party officeholders, and leadership contestants.

[84] For present purposes, the following provisions of the Leadership Rules are pertinent.

1. INTRODUCTION

1.1. Introduction

1.1.1 The Leadership Election Organizing Committee (LEOC) was appointed on December 23,

2019 and pursuant to paragraph 10.9.2 of the Constitution is responsible for conducting the

Leadership Election Process for the Conservative Party of Canada (Party).

1.1.2 Voting will be by single secret ballot on which the member will indicate his or her preferred

Candidates by ranking the choices.

1.1.3 These leadership election rules (Rules) are issued pursuant to paragraph 10.9.2 of the

Constitution, which mandates LEOC to “determine the rules and procedures for the conduct of the

17

leadership selection process.” LEOC may amend these Rules or issue further rules or procedures

from time to time, as it deems necessary to conduct an open, fair, and equitable Election Process

while respecting the Constitution as passed by the Membership at the start of the leadership process.

1.2 Appointment of Officials

1.2.1 LEOC may appoint officials as it determines necessary to conduct the Election Process and

may delegate in writing to him or her or them (collectively and individually “Delegated Decision-

maker”) the authority to apply or interpret these Rules and any other rules, regulations, guidelines

and/or procedures related to this Election Process.

1.2.2 Delegated Decision-makers of LEOC act with the full authority of LEOC and decisions

rendered by Delegated Decision-makers shall have the same force and effect as having been issued

by LEOC.

1.2.3 All authorities set out herein may be delegated by the individual or committee responsible

except for those specifically reserved for subcommittees of LEOC set out in Sections 1.6, 1.7 and

1.8.

1.3 Chief Returning Officer

1.3.1 LEOC shall appoint a Chief Returning Officer (CRO) 1.3.2 The CRO shall:

(a) Be responsible for all matters pertaining to the conduct of the vote other than those

specifically reserved for LEOC, the LCNC or the DRAC herein;

(b) Appoint and oversee training for neutral Electoral District Returning Officers (EDRO)

and other election officers as required;

(c) Recommend to LEOC for its approval Leadership Voting Procedures which shall set

out: […]

[…]

(g) Carry out such other duties as may be determined by LEOC from time to

time.

[…]

1.6 Dispute Resolution Appeals Committee

1.6.1 LEOC shall appoint a Dispute Resolution Appeals Committee (DRAC). The DRAC

Committee will have the power to set its own rules and procedures.

[…]

1.7 Leadership Candidate Nomination Committee

1.7.1 LEOC shall appoint a Leadership Candidate Nomination Committee (LCNC) which may

include any LEOC member not serving on the DRAC and shall include a Chair of LEOC.

[…]

1.10 Neutrality of Election Officials

1.10.1 Members of LEOC, the CRO, each DRO, each EDRO, EDARO and other Delegated

Decision-makers shall sign a neutrality commitment in the form prescribed by LEOC and shall abide

by it. The chair(s) of LEOC shall remove and replace anyone who contravenes the neutrality

18

commitment.

2. MEMBERSHIP

[…]

2.4 National Voters List

2.4.1 The CRO shall have the absolute discretion to take whatever steps necessary to ensure the

accuracy of the National Voters List. Verification programs may be random or as otherwise

determined by the CRO. Verification by the CRO of membership, eligibility to vote and accuracy

of information may take place at any time and there is no obligation to notify any Candidate of

verification efforts.

[…]

2.6 Challenges Related to Membership (Eligibility or otherwise)

2.6.1 This section applies to the determination of membership in the Party and the eligibility of a

member to vote.

2.6.2 A Candidate may challenge the eligibility of any individual entered on the membership list on

the grounds that any such individual is not a member in good standing.

[…]

2.6.8 The onus of proof where a challenge has been submitted is on the candidate who submitted

the challenge.

2.6.9 The CRO shall investigate the challenge, request further information as deemed necessary and

make a determination.

2.6.10 Candidates may appeal the decision of the CRO to the Dispute Resolution Appeals

Committee (DRAC) within 24 hours of the determination of the CRO along with any supporting

documentation. If no appeal is received by the DRAC within 24 hours, the CRO’s decision is final.

2.6.11 DRAC may request further information from the Candidate that has made the challenge, the

member in question, from other Candidates or any other person. However, DRAC is not obliged to

receive representations with respect to any challenge other than the initial submission of the

Candidate making the challenge.

2.6.12 Decisions of the DRAC are final.

2.6.13 In the event that the CRO determines that a challenge pursuant to these sections has been

made frivolously then the LEOC shall be entitled to levy a fine against the compliance deposit of

the challenging Candidate.

2.6.14 DRAC may, in its sole discretion, refuse to allow further eligibility challenges and/or appeals

of CRO determinations on eligibility challenges from a Candidate who has been determined to have

made frivolous challenges.

2.7 Candidates access to the Membership List and National Voters List

2.7.1 Forthwith after confirmed receipt from a candidate of the following,

(a) the first and second instalments of the registration fee of twenty-five thousand ($25,000)

dollars each;

19

(b) the first and second instalments of the endorsement signatures totalling two thousand

(2,000) member signatures;

(c) A maintained compliance deposit balance of one hundred thousand ($100,000) dollars;

and

(d) the Candidate’s acknowledgement that the Membership List and the National Voters

List is confidential and the exclusive property of the Conservative Party of Canada

the CRO shall provide the following information to that Candidate:

(e) The active membership list of the Party at the time.

(f) The historic membership records of the Conservative Party of Canada back to January

1, 2015.

2.7.2 Each time a new Candidate meets the requirements laid out in section 2.7.1, all other

Candidates who are also eligible will receive the most up to date active membership list.

3. CANDIDATES

3.1 Requirements of Candidacy

3.1.1 No person shall be eligible to be a Candidate unless the Candidate:

(a) Unless waived by the LCNC has been a member of the Party for at least six (6) months

prior to filing his or her application;

(b) Supports the founding principles of the Party as set out in the Leadership Contestant

Questionnaire (LCQ).

3.1.2 Candidates may apply to enter the race between January 13, 2020 and February 27, 2020 by

submitting the following (collectively referred to as the “Filing Documents”):

(a) The Leadership Contestant Questionnaire (LCQ) fully and frankly completed in a form

prescribed by the LEOC; which may be obtained on request from the LCNC at

LCNC@conservative.ca.

(b) One thousand (1,000) signatures of endorsement, as laid out in Section 3.2.

(c) The first instalment of the registration fee, twenty-five thousand ($25,000) dollars, as

per Section 3.3.

(d) The contact document as per Section 3.5.1.

[…]

3.1.4 An Applicant may be interviewed by the LCNC within seven (7) days of the completed

Application having been received by the Chair of LEOC.

3.1.5 If a majority of the LCNC believes that there may be cause to reject an Applicant, the Chair

of the LCNC shall immediately inform the LEOC. The LEOC shall render a decision to allow or

disallow an Applicant within four (4) days of receiving notice from the LCNC that there may be

cause to reject said Applicant.

3.1.6 Within 14 days following the receipt of a Candidate Applicant’s submission of the Filing

Documents and provided all prerequisites for certification have been met, the Chair of LEOC shall

send, in writing, a Notice of Certification to the Candidate Applicant confirming that the Candidate

20

Applicant has met all prerequisites for seeking the leadership of the Party.

3.1.7 If the Candidate is disallowed by LEOC, the Co-Chairs of LEOC shall return the Filing

Documents and all submitted fees to the Candidate Applicant with a notice that their candidacy has

been disallowed.

[…]

3.1.9 All decisions of the LEOC are final and are not subject to internal appeal or judicial review.

3.1.10 To become a Verified Leadership Candidate and appear on the ballot, each Certified

Candidate must submit to the Chair of LEOC at Suite 1720, 130 Albert Street Ottawa ON, in

complete and good order no later than 5:00 PM ET on March 25, 2020, the following:

(a) All endorsement signatures as set out in Section 3.2.

(b) The full registration fee as set out in Section 3.3.

(c) The full compliance deposit as set out in Section 3.4.

[…]

3.3 Registration Fee

3.3.1 To help defray the costs of administering the Election Process a registration fee of two-hundred

thousand ($200,000) dollars will be levied.

3.3.2 The first instalment of twenty-five thousand ($25,000) dollars must be tendered either:

[…]

3.3.3 The second instalment of the registration fee of twenty-five thousand ($25,000) dollars is due

prior the candidate being eligible to receive membership lists or participate in candidate forums as

per sections 2.7 and 3.6.2.

3.3.4 The registration fee is non-refundable.

3.3.5 Once the Candidate has been approved by the LCNC and certified by the Co-chairs of LEOC,

they will be able to accept donations as outlined in Section 4.4.

3.3.6 The remaining one hundred and fifty thousand ($150,000) dollars is due no later than 5:00pm

ET on March 25, 2020.

3.4 Compliance Deposit

3.4.1 To ensure compliance with these Rules and good conduct of the Candidates in the Election

Process, a compliance deposit of one hundred thousand ($100,000) dollars will be levied.

[…]

3.4.3 As per Section 2.7.1 and 3.6.2 the full compliance deposit as set out in Section 3.4.1 must be

deposited with the Party before the Candidate may receive any Membership Lists or participate in

any Party sanctioned Leadership Forums.

3.4.4 The compliance deposit shall be held as security for the Candidate’s completion and

submission of all the required financial filings and compliance with these Rules. Following

completion of the Election Process and once LEOC has determined that all required financial filings

have been made and no amounts remain chargeable against the compliance deposit pursuant to these

Rules, the remainder of the compliance deposit which has not been drawn upon will be returned to

21

the Candidate.

3.4.5 A Candidate shall have Seventy-Two (72) hours from the date of receiving notice of any fine

levied by the CRO or by LEOC to replenish the compliance deposit by certified cheque. At any time

that a Candidate’s compliance deposit is less than the amount set out in Section 3.4.1, that Candidate

shall not be entitled to receive any information or lists or participate in the Election Process unless

otherwise determined by LEOC.

3.4.6 If a Candidate’s compliance deposit is less than the amount set out in Section 3.4.1 at 5:00 PM

ET March 25, 2020 then that person’s name shall be struck from the Election Process and their name

shall be removed from the ballot unless otherwise determined by LEOC.

[…]

4. FINANCIAL REGULATIONS

[…]

4.2 Spending Limit

4.2.1 Candidates shall not incur expenses exceeding Five Million ($5,000,000) Dollars.

4.3 Contributions and Expenses Defined

4.3.1 Unless otherwise defined in these Rules, “contribution”, “monetary contribution”, “non-

monetary contribution”, “commercial value”, and “volunteer labour” have the same meaning as in

the Canada Elections Act.

4.3.2 All loans to or guarantees by a Candidate for purposes of his or her campaign are to be reported

as contributions and are subject to levy under Section 4.4.6.b.

4.3.3 All contributions made by a Candidate to his or her campaign are to be reported as

contributions and are subject to the levy under Section 4.4.6.b.

4.3.4 In these Rules, “expenses” includes all costs incurred, or non-monetary contribution used, as

an incidence of the Candidate’s campaign.

[…]

4.4 Directed Donations

4.4.1 Subject to the following, candidates shall have all contributions sent to the Conservative Fund

Canada as a contribution on his or her behalf.

[…]

4.4.3 Any and all donations/contributions are subject to the requirements of the Canada Elections

Act.

[…]

4.4.5 The Conservative Fund Canada shall be responsible for the issuance of tax receipts directly to

the contributors. Accordingly, as all contributions are directed through the Fund, the Conservative

Fund Canada will be able to ensure that individual donors are not over their contribution limits.

4.4.6 The Conservative Fund Canada will issue a cheque or electronic funds transfer on Thursday

for those monies submitted by 4:00 PM ET the preceding Friday, payable to the Candidate’s

campaign for the total of monies submitted less:

22

(a) Any amounts payable or due and owing by the Candidate in accordance with the Rules;

and

(b) An administrative fee of ten (10%) percent of each donation.

4.6 Authority to Audit

4.6.1 The CRO shall be entitled to perform random audits on the accounts of Candidates throughout

the Election Process. The Candidate’s Financial Officer shall provide all books and accounts to the

CRO or any person that the CRO designates forthwith upon request and failure to comply shall

constitute a breach of these Rules.

4.7 Non-Compliance

4.7.1 Without limiting the generality of any of the foregoing provisions, any action by a Candidate

aimed at circumventing or avoiding the application of any section of the Financial Regulations shall

be a violation of these provisions and be subject to sanction by sanction by the CRO as set out in

Section 7.1.

4.7.2 For greater certainty, failure to comply with any contribution or expense filing deadlines will

be considered a violation of these Rules and shall be subject to sanction by the CRO as set out in

Section 7.1.

[…]

7. DISPUTE MECHANISM

7.1 Non-Compliance

7.1.1 Upon request of any Candidate or member or on its own initiative the CRO may inquire into

whether a Candidate has contravened these Rules, any directive or any law of Canada.

7.1.2 The CRO shall notify the Candidate of its inquiry and will provide the Candidate an

opportunity to present a written response that shall be provided within 24 hours. No further

notification is required if the inquiry relates to a matter where a request was already made under

Section 4.6.1.

7.1.3 If the CRO, following consultation with the Co-Chairs of LEOC, determines that a Candidate

has contravened these Rules, any directive or any applicable law, the CRO may do one or more of

the following:

(a) Direct the Candidate to take specified actions to achieve compliance and to remedy any

consequences of the contravention, with which direction the Candidate must immediately

comply;

(b) Levy a fine and charge any such fine against all or part of the Candidate’s deposit;

(c) Issue a warning;

(d) Make public the CRO’s determination and ruling;

(e) Advise the appropriate authorities;

(f) Recommend to LEOC that LEOC disqualify the candidate, remove his or her name from

the ballot; and

(g) Take such other steps that it deems appropriate.

23

7.1.4 The decisions of the CRO are open to appeal by a Candidate to the DRAC […] Any appeals

will follow the timelines and process set out in Sections 2.6.8, 2.6.9 and 2.6.10.

7.1.5 Decisions of the CRO (other than through an appeal to the DRAC as set out in these Rules),

the LEOC and the DRAC are final and binding on the Candidate and on all Party members. Such

decisions are not subject to internal appeal or judicial review.

7.1.6 No failure by the CRO, LEOC, LCNC, DRAC or any neutral election official to meet any of

the deadlines specified in these Rules shall be seen as invalidating the Rules, the Election Process

or any subsequent deadline.

[85] About the Leadership Rules the following should be noted:

a. Under Rule 1.1.1, the LEOC is responsible for conducting the Leadership Contest.

Under Rule 3.1.9, all decisions of the LEOC are final and are not subject to internal appeal

or judicial review.

b. Under Rule 1.1.3, LEOC may amend the Rules or issue further rules or procedures

from time to time, as it deems necessary to conduct an open, fair, and equitable election

process while respecting the Constitution of the Conservative Party.

c. Under Rule 1.10.1 and under section 6.2 of the Conservative Party’s Constitution,

officeholders are required to maintain neutrality in a Leadership Contest. A contravention

of neutrality triggers removal of the officeholder.

d. Under Rule 1.2.2, Delegated Decision-makers of LEOC act with the full authority

of LEOC and decisions rendered by Delegated Decision-makers shall have the same force

and effect as having been issued by LEOC.

e. The LCNC, the CRO, and the DRAC are delegated Decision-makers appointed by

LEOC.

f. Under Rule 3.1.1, to be eligible to be a candidate unless, the person must support

the founding principles of the Conservative Party as set out in the Leadership Contestant

Questionnaire (LCQ). Applicants to participate in the Leadership Contest are required to

disclose any history of conduct that would tend to offend the principles of the

Conservative Party, such as making discriminatory or hateful statements on the basis of

race, religion, or ethnic origin.

g. Under Rule 3.1.2, prospective contestants are required to execute the Application

for National Leadership Contestants to participate in the leadership process. Part IX -

Schedule G of the application includes the following acknowledgement:

I also acknowledge that my sole ability to appeal a decision of the Chief

Returning Officer is with the LEOC’s Dispute Resolution and Appeals

Committee whose decisions shall be final and binding and not further appealed

or challenged.

h. Under Rule 3.1.4, an applicant may be interviewed by the LCNC. Under Rule 3.15,

if a majority of the LCNC believes that there may be cause to reject an Applicant, the

Chair of the LCNC shall immediately inform the LEOC. The LEOC shall render a

decision to allow or disallow an Applicant within four days.

i. The Rules provide for the appointment of a CRO to implement the Leadership

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Rules and to carry out other responsibilities related to the election. If a candidate fails to

pay the registration fee, fraudulently signs up new members, spends over the campaign

expense limit, fails to respect the Rules, it is the CRO’s duty to investigate and impose a

sanction.

j. Under Rule 7.1.1, upon request of any Candidate or member or on its own initiative

the CRO may inquire into whether a Candidate has contravened “these Rules, any

directive or any law of Canada.” Rule 7.1.3 authorizes the CRO to sanction candidates in

specific circumstances.

k. Rule 1.6.1 provides that LEOC shall appoint the DRAC and that the DRAC

Committee will have the power to set its own rules and procedures.

l. Rule 7.1.4 provides that CRO Rulings may be appealed to the DRAC and that the

process is as set out in rules 2.6.8, 2.6.9, and 2.6.10, which is to say that the process is an

investigation with the onus of proof on the candidate who submitted the challenge and

with DRAC having the authority but not the obligation to request further information

from the candidate that has made the challenge, the member in question, from other

candidates or any other person.

m. Rule 7.1.5 provides that the decisions of the CRO, (subject to an appeal), the LEOC

and of the DRAC are final and binding.

H. Facts: Mr. Karahalios’ Candidacy

Mr. Karahalios’ Application to be a Candidate

[86] On January 28, 2020, Mr. Karahalios announced his candidacy in the Leadership Contest.

[87] Mr. Karahalios submitted the fee and the necessary signatures for his candidacy. On

February 20, 2020, he submitted his application to the LCNC. The application contained the

following declaration:

I, Jim Karahalios,

1. Certify that I have read and understand the Leadership Nomination Rules and Procedures. I

acknowledge and agree that the [LEOC] has the authority to disallow my candidacy on any grounds

it sees fit, and which shall be final and binding. I also acknowledge that my sole ability to appeal a

decision of the [CRO] is with the LEOC’s [DRAC] whose decision shall be final and binding and

not further appealed or challenged.

2. Do hereby affirm that I accept, and agree to advance, the policies, principles, goals and objectives

of the Conservative Party of Canada as set out in the Constitution of the Party, the Conservative

Party of Canada Policy Declaration, and elsewhere.

3. Agree to follow and obey all rules, procedures, guidelines and related directives established by

[LEOC] and the National Council of the Conservative Party of Canada with respect to the

Leadership Election Nomination Process …

4. I acknowledge and agree to comply with all applicable laws, rules and regulations with respect to

the Leadership Contest including those of Elections Canada.

[88] Mr. Karahalios was interviewed by the LCNC by a telephone conference meeting. The

members of the LCNC in attendance were Ms. Brown, Mr. Fortin, Ms. Manning, Mr. Nowlan, and

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Mr. Price.

[89] In his application and during his interview, Mr. Karahalios disclosed that he was engaged

in ongoing litigation with the Ontario PC Party. During his interview, Mr. Karahalios disclosed

that his campaign planned to run on a “grassroots,” or “anti-establishment” platform. He

questioned the financial and membership recruitment qualifications for candidacy as being

restrictive and designed to discourage grassroots candidates from participating. The $200,000 non-

refundable entrance fee was the most expensive ever in Canadian politics. It was explained to him

that this was not the design of the qualification prerequisites but rather the qualifications were

designed to test the mettle of the candidate as an organizer, fund raiser, and campaigner.

[90] Mr. Karahalios was accepted as an Approved Applicant on February 26, 2020. I find as a

fact that the LCNC welcomed and encouraged Mr. Karahalios’ so-called grassroots candidacy. I

find as a fact that this was an honest decision made by the LCNC and there was no design to

terminate his candidacy if he proved too formidable an opponent for the so-called establishment

candidates.

[91] As noted above, in his campaign for leadership, Mr. Karahalios positioned himself as an

outsider anti-establishment candidate. His campaign slogan was “Stop the Red Tory Coronation.”

His campaign materials stated:

Why Support Jim?

The party establishment is trying to make the 2020 Conservative Party of Canada Leadership race

a top-down coronation with record high barriers to entry, creating an advantage for the well-

connected establishment candidates - career politicians and those born into politics. We do not need

another career politician, or a politician born into politics, to lead our Conservative Party to yet

another defeat. We need a fighter with courage and conviction, that is willing to confront the

challenges ahead. We need a Conservative leader who will fight for grassroots conservative

principles and ideas. That is why we need Jim as the next leader of the Conservative Party of Canada.

To bring courage and conviction with a record of persevering against the odds and beating the

political establishment. That is the Right Way Forward for our conservative movement, for our

Conservative Party, and for Canada.

[92] On March 8, 2020, Mr. Karahalios satisfied the criterion to become an Authorized

Contestant. By this time, Conservative Party members had made approximately $300,000 in

Directed Contributions to support Mr. Karahalios’ candidacy.

[93] In late February and early March, Mr. Karahalios by mail, email, and by a Facebook

announcement distributed campaign material setting out his policy position that there should only

be one law in Canada and that if he were Prime Minister, he would stop Shariah Law; which is

Islamic religious law. Mr. Karahalios’ campaign material also included newspaper articles and

commentary about Mr. Soliman’s views about Sharia law.

[94] Mr. Karahalios’ campaign material commented about what Mr. Soliman had said in the

past about Sharia law and Sharia finance. In his campaign material, Mr. Karahalios juxtaposed

quotes made by Mr. Soliman with a news columnist’s views. The juxtapositions conflated Islamic

finance law and Shariah-compliant financial products, and other aspects of Shariah Law,

specifically the treatment of women. The juxtaposition of the material connoted that Mr. Soliman

was a fulsome supporter of Sharia law, although his comments were about Sharia finance law for

business transactions.

[95] On March 9, 2020, one of Mr. Karahalios’ campaign staff posted an advertisement poster

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on Facebook depicting Mr. Karahalios amongst a mob of angry, predominantly racialized people.

The mob is brandishing torches and baseball bats. The mob is brandishing signs and tweet

messages criticizing Mr. Karahalios as a bigot for his criticism of Mr. Soliman. The images were

stock photos arranged by Mr. Karahalios’ campaign staff. The arrangement depicts Mr. Karahalios

with his back to the mob standing resolute and courageous. The poster connotes that Mr.

Karahalios is undeterred in his opposition to Sharia law notwithstanding the angry mob of

racialized protesters.

[96] Mr. Karahalios had directed that the poster be made. Within an hour of the material having

been posted, it came to his attention. He realized that it was offensive, and he had the poster

immediately removed from Facebook.

The Complaint of the Erin O’Toole Campaign and the Chief Returning

Officer’s Ruling

[97] On March 9, 2020, Mr. O’Toole lodged a complaint with the CRO about Mr. Karahalios’

campaign material.

[98] In his complaint to the CRO, Mr. O’Toole alleged that Mr. Karahalios’ campaign

communications directed at Mr. Soliman were libelous against Mr. O’Toole and Mr. Soliman at

common law and under the Ontario Libel and Slander Act. Mr. O’Toole also complained that Mr.

Karahalios’ campaign material was racist and Islamophobic. He submitted that the material would

harm the brand and reputation of the Conservative Party. Mr. O’Toole complained that Mr.

Karahalios’ campaign material violated the fundamental principles enshrined in the Party’s

Constitution and in the Conservative Party’s Code of Conduct that would be applicable to

leadership candidates.

[99] Mr. O’Toole sought Mr. Karahalios’ disqualification from the Leadership Race. The

complaint letter asserted that under Rule 7.1.3(f) of the Leadership Rules, the CRO was

empowered, upon consultation with the Co-Chairs of LEOC to recommend Mr. Karahalios’

disqualification. Mr. O’Toole requested that the CRO act to disqualify Mr. Karahalios from the

2020 Leadership Contest.

[100] On March 10, 2020, Mr. Vanstone as CRO provided Mr. Karahalios with a copy of Mr.

O’Toole’s complaint letter. The CRO requested a response within 72 hours. The CRO wrote Mr.

Karahalios the following letter:

Mr. Karahalios:

I am writing to you as the Chief Returning Officer for the 2020 Conservative Party of Canada

Leadership Race. Attached, you will find a letter from the Erin O'Toole campaign along with five

attachments, titled Exhibits "A" through "E". It makes several allegations against you and your

campaign regarding violations of the Constitution of the Conservative Party of Canada, the Code of

Conduct and the Rules of the 2020 Leadership Contest.

I have reviewed the attached and consulted with the co-Chairs of the Leadership Election Organizing

Committee (LEOC) and we have determined that this matter will proceed to an investigation.

Pursuant to Rule 7.1.2 of the Rules governing the Leadership Contest, I would ask for your position

on the allegations in the attached documents. Notwithstanding the provisions of the Rules, I would

ask for your response within 72 hours of the receipt of this email.

27

While this matter is under investigation, I make two Directions, the first of which has also been

shared with Mr. O'Toole and his campaign team:

First, until this matter has been disposed of by a Ruling, I direct that the existence of a

complaint, the nature of the complaint and all communications with the Party or otherwise

about the complaint are to be treated as confidential by Mr. Karahalios, Mr. O'Toole and

their respective campaign teams.

Second, I have directed that Mr. Karahalios will not advance in any stage of the candidate

registration process until such time as a Ruling has been issued in this matter.

At this point in the investigation, neither I nor LEOC have made any findings or decisions.

Notwithstanding the requirement for confidentiality, you are free and may wish to consult counsel

in preparing your response.

Derek Vanstone, Chief Returning Officer

[101] After receiving Mr. O’Toole’s complaint and after speaking to Mr. Karahalios, the CRO

refused to advance Mr. Karahalios to the Authorized Contestant stage of the Leadership Contest.

Mr. Vanstone also refused to provide Mr. Karahalios with the Conservative Party’s member and

voter lists. The CRO ordered that the investigation of Mr. O’Toole’s complaint be kept

confidential.

[102] It also may be observed that in his letter to Mr. Karahalios, the CRO issued a directive that

Mr. Karahalios’ activities in the Leadership Contest be paused pending a determination of the

investigation. Mr. Karahalios relies on all this treatment as an indication that the Conservative

Party was acting in bad faith and for the improper purpose of hobbling and stopping his candidacy.

[103] On March 13, 2020, Mr. Karahalios replied to Mr. O’Toole’ complaint. Mr. Karahalios

made a length submission to the CRO that his campaign materials had no bigoted intent. There

was an accompanying letter from Mr. Karahalios’ lawyer. In his letter to the CRO and in his

lawyer’s letter, Mr. Karahalios made lengthy and detailed submissions about freedom of speech

and about the authority of the CRO in the circumstances.

[104] Mr. Karahalios denies being a bigot. He deposed that he does not discriminate based on

race or religion and does not condone such discrimination. His wife (who is a black woman) and

their child are racialized, and he deposed that all of his political campaigns have included

individuals from diverse racial, ethnic, and religious backgrounds. He deposed that he supports

and values equality, diversity, and inclusion.

[105] Mr. Karahalios deposed that Mr. O’Toole’s complaint was a strategic maneuver by Mr.

O’Toole to thwart Mr. Karahalios’ populist grassroots candidacy, which posed and was

manifesting a significant threat to the candidacy of Mr. O’Toole, who entered the race as a

frontrunner. Mr. Karahalios deposed that Mr. O’Toole made his complaint to gain a personal

political advantage, including depriving Mr. Karahalios from reaching the second tier of candidacy

and accessing the party membership list.

[106] The Leadership Rules require that the CRO consult with the co-chairs of LEOC (Mr.

Nowlan and Ms. Raitt) and Mr. Vanstone did so. Mr. Vanstone also consulted with some other

LEOC members.

[107] However, who and how many LEOC members, Mr. Vanstone spoke to is unclear from the

evidentiary record. The evidence on this point is the hearsay evidence of Mr. Nowlan, which was

28

not precise or comprehensive.

[108] I find as a fact that Mr. Vanstone consulted with some unknown number of members of

LEOC by telephone conference call. The persons he spoke to included Mr. Nowlan, Ms. Raitt and

Mr. Connelly. Save for Mr. Connelly none of the LEOC members who are also members of the

DRAC participated in the telephone call or calls. The Conservative Party admitted that Mr.

Connelly participated in the consultation with LEOC and that he was inclined to have Mr.

Karahalios disqualified.

[109] I find as a fact that there was no consensus amongst those LEOC members who participated

in the telephone call with Mr. Vanstone about whether Mr. Karahalios should be disqualified and

I find that no LEOC decision was made. I find as a fact that there has not been an official meeting

of LEOC. The CRO was left to complete his investigation and to make up his own mind and make

a ruling.

[110] I emphasize that I find as a fact that there never has been a formal and proper meeting of

LEOC with respect to Mr. Karahalios’ candidacy and there has never been a formal decision by

LEOC whether disqualification was merited or not merited.

[111] On March 17, 2020, Mr. Vanstone as CRO issued his Ruling. Without its attachments,

which included Mr. O’Toole’s complaint letter and Mr. Karahalios’ response letters, the CRO’s

Ruling is a nine-page, single spaced decision. The analytical part of the CRO’s Ruling is as

follows:

ANALYSIS

This is a difficult matter- as it requires a distinction to be drawn between legitimate and forceful

debate between leadership contestants and whether there are lines that must be denounced if crossed,

even in our Party whose founding principles include a clear commitment to free speech.

Let me start by making it crystal clear that there must be a line. I disagree with Mr. Karahalios'

assertion that the Rules and the Constitution do not provide the necessary basis to penalize a

leadership contestant for using language which is found to be racist, bigoted, threatening or

harassing. The bar for intervention must be high, but there is a bar.

There are those who will argue that freedom of speech requires us to allow everyone to say what is

on their mind and to argue positions that are unpopular - that the only restrictions should be found

in libel and slander law and those laws which ban hateful speech. This is undoubtedly correct for

individuals who are speaking on their own behalf. However, when you are granted the platform of

an organization such as our Party to broadcast your voice, you also have the obligation to ensure

that you craft your arguments carefully and in a way that can not be used in a manner that is

manifestly unfair to the balance of the members and supporters.

Our constitution (s. 2.1.8) makes our commitment to free speech clear but it is balanced against

several other equally important principles, including: the equality of all Canadians (s. 2.1.7), a desire

to build a coalition of those who reflect all of the regional, cultural and socio-economic diversity of

Canada (s. 2.1.2 and 2.1.3), the freedom to believe and practice faith (s. 2.1.8), and perhaps most

importantly here - that the purpose of the Party is to give Canada good government - which involves

the promotion of members (most importantly including the Leader) who conduct themselves in an

ethical manner and display integrity, honesty and concern for the best interests of all (s. 2.1.20).

The role of the CRO and of LEOC is to ensure that the Leadership Contest is fair, and that the

interests of the members and the Party of a whole are protected. The ability of the CRO and LEOC

to enforce the Constitution is clear. Statements which show a disregard for the Principles of the

Party, which all leadership contestants have indicated they fully support and have pledged to uphold,

29

are matters which can and should trigger consequences in the leadership process.

The issue of libel is another matter. […] I therefore decline to make any finding - one way or the

other - on the allegation of libel. Messrs. O'Toole and Soliman have remedies available to them in

the courts which can address this issue.

[…]

In respect of the emails, letters, and articles, I will first deal with these as a set. Mr. Karahalios

encourages a careful reading of the documents. He notes that many of the statements that are the

subject of this Complaint are quotes from newspaper articles. It is not suggested that there was ever

any action taken over the newspaper articles (libel or otherwise) and no steps taken to correct the

content of the articles or columns.

Mr. Karahalios complains that Mr. O'Toole's complaints are vague. I think this is a fair complaint.

But at the same time, I think that the reason that the complaint is difficult to nail down is that there

is a great degree of artistry employed in Mr. Karahalios' communications that when put together

form something that is greater than the sum of the individual parts.

Mr. Karahalios pulls together a 2007 article about Islamic Finance with two 2019 columns by Mr.

Tarek Fatah that refer to the acquittal of several individuals accused of criminal offences in respect

of the provision of mortgages which were marketed as Shariah-compliant. Mr. Karahalios uses the

terms "Shariah finance", "Islamic finance" and "Shariah law" interchangeably. While this might be

accurate to lump the first two together, to allege that support for Islamic finance - which is well

accepted by many western legal systems as a contractual matter between two consenting individuals

- is the same as a full commitment to the types of Shariah law that have been enforced in some parts

of the world - and which would be clearly illegal under Canadian law and in most other western

nations - is, at best, illogical and, at worst, it could be argued to be intentionally deceptive.

As an example, in the email at exhibit "C", Mr. Karahalios argues that "[Mr.] Soliman responded to

a question of whether Shariah law can be associated with oppressing women and whether it is

intolerant and inflexible by saying ... I have never come across any tenet of the requirements under

Islamic finance that did not adhere to the principals [sic] of Canada's liberal democracy." While the

quote is accurate, it is removed from context-which makes it clear that the answer is limited to

Islamic finance. This makes the quote correct, but unfair and misleading.

It is not a stretch to say that this is a case of race baiting, defined in the Oxford dictionary as "the

unfair use of statements about race to try to influence the actions or attitudes of a particular group

of people."

Mr. Karahalios is a smart person. He is trained as a lawyer and he has a long history of being able

to communicate on challenging and charged subjects such as the imposition of a carbon tax. While

Mr. Karahalios tried to walk a line where he was careful to use specific quotes, I find that the use of

these quotes out of context, the juxtaposition of articles published 11 years apart on very different

topics, the careful smudging of terms which have very precise and different meanings - Shariah law

and Shariah-compliant finance - all combine to a conclusion that it appears that Mr. Karahalios was

trying to do precisely what he says that he was not - using charged and Islamophobic language to

attack a fellow candidate and a campaign volunteer in order to score points.

He denies this absolutely and he notes that "to the extent that such comments were interpreted to be

bigoted or racist, [Mr. Karahalios] wants to be explicitly clear that they were not intended to be so."

I take him at his word. But for someone seeking the highest office in our Party, it is insufficient. The

unfortunate reality is that Mr. Karahalios has published statements that, even in their best possible

light, were made recklessly and he doesn't seem to appreciate this; even in hindsight. Whatever else

might be said about his comments, they are certainly not a thoughtful or careful discussion of the

drawbacks of allowing shariah-compliant finance as part of the Canadian financial ecosystem.

30

But it is the Facebook posting that is most clearly troubling.

Mr. Karahalios points out that his campaign used a stock photo as part of a communications tactic

to show that certain groups were out to attack him for his views. The choice of the photo can only

be described as atrocious. In reviewing the tweets that are quoted around Mr. Karahalios, all of the

individuals are, at least inasmuch as I am aware, not persons of colour. In the photo itself, the vast

majority if not all of the people pictured are racialized. They all appear very angry and they are

pictured holding what appear to be baseball bats and flaming torches.

Even Mr. Karahalios seems to have thought that the Facebook post was a step too far. In his

submissions, he focuses on the language used in the post and only references the photo as a "stock

photo". He goes on to state that the post "was up for a short period of time (more or less an hour)

and taken down, under our own accord without a request from the Party or anyone else, for further

review and consideration ... the post has remained down."

I commend Mr. Karahalios and his campaign for taking the post down. In the circumstances, this

was the right move and shows a degree of contrition that helps mitigate what is an otherwise very

concerning situation.

Taken as a whole, I find that the communications by Mr. Karahalios are inappropriate and show a

disrespect for several principles of the Constitution of our Party. Specifically, I find that Mr.

Karahalios showed a distinct lack of respect for the cultural and religious diversity of Canada and

that his communications show a disservice to our common desire to build a coalition of all

Canadians to form a government that represents all Canadians; and that the communications and his

actions in this matter showed a lack of integrity or concern for the best interests of the Party.

Freedom of speech is also one of the principles of our Party, but it has no special priority over the

other principles, and, in this case, those other principles are directly impacted by Mr. Karahalios'

actions. It is clear that because of our commitment to free speech in our Party, no issue is off the

table for debate. But it is also clear that this isn't a license for anyone seeking to hold a senior

leadership position – let alone become leader of our Party- to engage in a debate on very sensitive

subjects with the lack of care that has been exhibited here.

In addition to the disrespect for our Party's principles, I find that Mr. Karahalios has violated the

Code of Conduct for volunteers of the Party, in that he targeted and harassed an individual Party

member and volunteer (Mr. Soliman) on the basis of his religion. This is unacceptable conduct. I

find that his targeting of an individual campaign volunteer to be a significant aggravating factor.

Mr. Soliman is not seeking a leadership position in the Party and he does not have the platform that

our Party has accorded Mr. Karahalios. I find that Mr. Karahalios has abused the platform that he

has been provided.

[112] The operative part of the CRO’s Ruling is as follows:

Our Party is, compared to the history of our country, relatively new. From the outset, we have

worked hard to earn the respect of all Canadians and to show that we are a big tent Party that

welcomes persons of all backgrounds, faiths and races who share our principles. Actions such as

those by Mr. Karahalios in the communications discussed herein, even if they were made recklessly

and not with intent, set those efforts back. This requires a timely response from the Party as a whole

- it is not purely a matter to be considered by members in the leadership contest in the fullness of

time. Mr. O'Toole asks that Mr. Karahalios be disqualified from the leadership contest as

punishment for his communications in this matter. After careful consideration and consultation with

co-Chairs and the full LEOC (excluding the LEOC members who are on the DRAC), I will decline

to do this for two principal reasons:

First, I believe that it is possible to show our denunciation of Mr. Karahalios' communications and

his lack of judgment outlined in this Ruling without resorting to the most significant punishment

available to us. Depriving the membership of a leadership contestant should only be done in the

31

starkest of circumstances. Although there was a significant debate on the matter, LEOC and I have

concluded that disqualification is not warranted in this case, but we did conclude that a significant

fine was necessary.

Second, I believe Mr. Karahalios should have the opportunity to demonstrate his professed

commitment to the principles of the Party, including the principles of equality, tolerance and our

desire to build a broad coalition of Canadians who share our principles. If he is able to do so, I

believe this can be a credit to the Party - where we proved able to discuss challenging issues in a

responsible way – without infringing the important principle of freedom of speech.

That being said, there is a compelling need to show a significant denunciation of these

communications. To this end, and based on the authority in Rule 7.1.3, I order as follows,

1. The Jim Karahalios campaign is to identify to the CRO one individual on the campaign team who

will receive and archive a copy of all communications sent by the campaign to more that 20 persons

from this point forward in order that the Party would be able to review Mr. Karahalios' future

communications in a timely and accurate manner.

2. The Jim Karahalios campaign is assessed a penalty of $50,000.00 under section 3.4.5 of the Rules

which must be paid by certified cheque or through directed deposits on or before March 25 at 5pm

Eastern.

3. In order to ensure future compliance, the Jim Karahalios campaign shall be required to post a

refundable compliance deposit of $150,000 notwithstanding the provisions of Rule 3.4.1 or 2.7.l(c).

4. The Jim Karahalios campaign will only receive a membership list as set out in Rule 2.7 once it

has satisfied all the requirements of Rule 3.2; 3.3 and 3.4 notwithstanding the normal procedures set

out in Rule 2.7. He can otherwise advance in the candidate registration process normally.

Failure to fully comply with this Ruling can lead to further sanction.

[113] I pause to say and to foreshadow that it is not for the court to say whether the substantive

aspects of the CRO’s Ruling were unreasonable, reasonable, true, or correct. As will become

clearer from the discussion of the law below, the court’s role in reviewing the decisions of

unincorporated is very much circumscribed. The court does not exercise a public law or

administrative law judicial review function. The court does not review the substantive merits of

the decision of an unincorporated association operating in the private sector.

[114] Returning to the narrative, by March 17, 2020, Mr. Karahalios had received the

contributions needed to fulfill the final $300,000 fundraising requirement. Mr. Karahalios alleges

that the CRO knew that given Mr. Karahalios’ rate of fundraising at the time, the newly imposed

fundraising threshold was $30,000 to $75,000 more than Mr. Karahalios could achieve.

[115] Mr. Karahalios submits that, in effect, under the CRO’s Ruling, he would have to raise an

additional $100,000 within a week (by the March 25, 2020 deadline) without the member and voter

lists. Mr. Karahalios deposed that the CRO Ruling was a disqualification by another name. He

submitted that notwithstanding that the CRO had no authority to disqualify him, he had de facto

been disqualified.

[116] I do not agree that the CRO disqualified Mr. Karahalios. I find as a fact that the CRO did

not even recommend that Mr. Karahalios be disqualified.

[117] I find as a fact that the CRO issued a warning, imposed a $50,000 penalty, and directed

Mr. Karahalios to take specified actions to achieve compliance and to remedy the consequences

of his contravention. The specified actions included identifying a Karahalios representative to

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archive a copy of all communications sent by the Karahalios campaign.

[118] Mr. Karahalios was not disqualified. Had he not appealed and had he complied with the

CRO’s Ruling, he would today be a candidate for the leadership of the Conservative Party.

The Appeal to the Dispute Resolution Appeals Committee (“DRAC”)

[119] On March 18, 2020, Mr. Karahalios appealed the CRO’s decision to the DRAC. In a written

15-page single spaced submission, he comprehensively explained what he submitted were the

flaws in the CRO’s Ruling. Some appreciation of the comprehensiveness of Mr. Karahalios’

argument to the DRAC can be garnered from the table of contents of the letter, which stated:

I. Overview

II. Mr. Karahalios’ Values

A. Mr. Karahalios Respects and Promotes Equality, Diversity, and Inclusion

B. Mr. Karahalios’ Position on the Policy Debate Over the Role of Shariah Law in Canada

III. The CRO Ruling Mischaracterizes Mr. Karahalios’ Communications as Racist

A. The Initial Communications

B. The Responding Communications

C. The CRO’s Mischaracterizations of the Communications and Erroneous Findings

IV. CRO Has No Authority to Sanction Candidates for Violations of Broad Party Principles

A. The Role and Powers of the CRO

B. No Power to Disqualify or Sanction Candidates Based on Values

C. CRO Misinterpreted and Misapplied Volunteer Code of Conduct Provisions

V. CRO Inappropriately Consulted with Non-Neutral LEOC Members

VI. The CRO’s Sanction is Inappropriate

A. Functional Disqualification is Too Harsh a Sanction

B. Error in Assessing an Aggravating Factor

C. No Rationale to Increase Deposit or to Continue to Withhold Membership List

VII. Conclusion

[120] In his letter to the DRAC, Mr. Karahalios disputed the findings of the CRO and the sanction

he imposed, which Mr. Karahalios characterized as a “thinly veiled disqualification by another

name” and a deliberate attempt to “eject” him from the Leadership Race. He challenged the

consultation that the CRO had had with LEOC. He said this functional disqualification was

inappropriate and a lesser or no sanction should be imposed.

[121] On March 18, 2020, Ms. Girard, the Conservative Party’s Executive Director,

communicated with the members of the DRAC to arrange a teleconference meeting. Mr. Magnus,

the chair of the DRAC, spoke to Mr. Vanstone and made arrangements for Mr. Vanstone as CRO

to be available for the DRAC meeting.

[122] Unknown, until later, to Mr. Karahalios, Mr. Vanstone filed written submissions in the

appeal. The written submissions stated:

In the matter of Karahalios OO1

Submissions to the Dispute Resolution Appeals Committee of the Chief Returning Officer

1. The appeal is in order and it was received with the 24-hour window provided for in Rule 7.

2. The Karahalios campaign requests that the Ruling be reversed in its entirety.

3. The Ruling speaks for itself. In this document, I will confine myself to matters which are raised

33

for the first time in the Appeal.

4. Mr. Karahalios introduces new facts on page 6 of his Appeal, where he states that “as soon as he

realized that the post contained images of racialized people and might therefore be incorrectly

interpreted as insinuating an unintended race-based message.” He did not state this in his original

materials, and I submit that this is an admission against interest, in effect agreeing with my finding

that the image was bigoted and racist.

5. On page 8, Mr. Karahalios states that I found that Mr. Karahalios did “not intend for his comments

to be interpreted as bigoted or racist.” In the Ruling, I note that Mr. Karahalios took this position

and I state that “I take him as his word.” I go on to note that the test for the comments should be

objective and not its intent.

6. On page 12, Mr. Karahalios suggests that the CRO has no authority to consult with LEOC on

matters that are before him for decision. Mr. Karahalios, without any rational basis, suggest that

LEOC is not a neutral body. As DRAC is well aware, I am required to consult with LEOC in cases

where a disqualification is a potential remedy (Rule 7.1.3 (f)), and I make a practice to consult with

LEOC on all Rulings where time permits, absent of course those members of DRAC who might be

called upon to hear appeals. I ask that DRAC make its position on this practice clear, and I submit

that consultation among all neutral officials is the best way to obtain the most fair result.

7. On page 13, Mr. Karahalios suggests that the CRO and LEOC are in informed in real time about

the status of a candidate’s filings. Although this information is not secret from LEOC, in reality this

is an administrative task prepared by the Party and Party officials notify the CRO and LEOC only

when candidates meet certain thresholds. In the present instance, I issued the directive to the Party

to require them to pause Mr. Karahalios’ status in the race when I received the complaint from Mr.

O’Toole. I did not know the status in the race when I received the complaint from Mr. O’Toole. I

did not know the status of Mr. Karahalios at the time. I have done the same with prior complaints

that could trigger a penalty and intend to do the same going forward.

RECOMMENDATION

8. I recommend that you dismiss Mr. Karahalios’ appeal.

I am at the disposal of DRAC to provide any further information which would be of assistance.

[123] On the evening of Wednesday March 18, 2020, there was a telephone conference meeting

of the DRAC. In attendance were Mr. Magnus (chair), Ms. Assouline, Mr. Connelly, and Mr. Plett.

Ms. Girard was also on the call. According to Mr. Nowlan’s evidence of what he was told by Mr.

Magnus, during the meeting, CRO Vanstone was telephoned and he was asked three questions.

[124] The first question was whether the CRO had any concerns that his authority would be

diminished if the DRAC altered the CRO’s Ruling. Mr. Vanstone said that there was no concern

because the purpose of DRAC was to review decisions of the CRO and alter them if necessary.

The second question was whether DRAC had the authority to disqualify Mr. Karahalios. Mr.

Vanstone replied that LEOC had the authority to quash the CRO’s Ruling, amend the penalties or

issue a disqualification. The third question was whether Mr. Karahalios’ case merited

disqualification. Mr. Vanstone said that was a matter for DRAC to decide and he would not make

any comment.

[125] I find as a fact that Mr. Nowlan’s evidence is true. Mr. Vanstone’s answers are consistent

with the written submissions submitted by Mr. Vanstone to DRAC before the telephone call.

[126] The DRAC then deliberated and later in the evening of March 18, 2020 (or perhaps the

afternoon in Manitoba, Alberta, and the Northwest Territories), Mr. Magnus, Ms. Assouline, and

34

Mr. Plett voted to disqualify Mr. Karahalios. Mr. Connelly recused himself from the vote because

he had participated in the earlier consultation between the CRO and LEOC.

[127] DRAC’s Decision, in its entirety, stated:

After careful consideration of all the evidence and submissions of Mr. Karahalios and the

complainant, and the findings and reasons for decision of the Chief Returning Officer, the Dispute

Resolution Appeals Committee rules that Mr. Karahalios be disqualified as a candidate for Leader

of the Conservative Party of Canada.

[128] The Conservative Party did not immediately post the decision on its Leadership Contest

website. It waited until two days later. On Friday, March 20, 2020, the Conservative Party deleted Mr.

Karahalios’ profile and donation link from its Leadership Contest website and it posted a message

about his disqualification on social media. Mr. Karahalios relies on the delay in disclosing his

disqualification and how it was officially announced on a Friday, (which political operatives apparently

believe is the time in the news cycle when an announcement will draw less attention) as circumstantial

evidence of bad faith and the Conservative Party’s improper purpose of ending his candidacy in support

of other candidates.

[129] Mr. Nowlan’s evidence was that there was nothing nefarious in the delay in formally

announcing the disqualification which required translation into French. He notes that the members of

the DRAC and others administering the Leadership Contest are still just volunteers.

[130] In any event, I see nothing nefarious about how notice was given of Mr. Karahalios’

disqualification, which obviously was going to come to the attention of the Conservative Party

members and to the Canadian media and public.

[131] In any event, Mr. Karahalios himself knew about the disqualification, and on March 22,

2020, he wrote to the National Council requesting that it reverse the decisions of the CRO and the

DRAC. Subsequently, some members of National Council asked that the issue be considered at

the National Council meeting scheduled for March 22, 2020, but the request was ruled out of order

by the President of the Party.

[132] As described above in the procedural action, Mr. Karahalios then commenced this litigation

against the Conservative Party and against the Conservative Fund and the members of the DRAC.

The Directed Contributions

[133] To appear on the final ballot, candidates were required to gather 3,000 signatures from

Party members endorsing their campaign, and to pay a $200,000 non-refundable registration fee

and a $100,000 refundable compliance deposit by no later than 5:00 p.m. on March 25, 2020, to

be eligible.

[134] Candidates could raise funds for their campaign by having contributions sent to the

Conservative Fund, which would ensure that the donations complied with the Canada Elections

Act. Under the Leadership Rules, the Fund would apply these contributions first to the amounts

owing by the candidates under the Rules and any additional amounts received would be remitted

on a weekly basis, minus a 10% administration fee.

[135] Before his disqualification, $296,064.34 had been forwarded to the Conservative Fund.

[136] On March 20, 2020 and March 23, 2020, Mr. Karahalios mailed between $21,000 and

$33,000 more to the Conservative Fund.

35

[137] However, around this time the Government of Ontario declared a province-wide state of

emergency because of the COVID-19 pandemic, and the Conservative Fund, which is not an

essential service, closed its office in Ontario. It placed an automatic hold on all delivery services

from Canada Post. As a result, for a period of time, Canada Post has had Mr. Karahalios’

contributions and the Conservative Fund has not been able to process and deal with them.

[138] At the present time, the Conservative Fund has not deposited any additional funds and is

preserving the Directed Contributions. It has been communicating with Elections Canada about

the proper treatment of the funds.

[139] The Conservative Fund has also been engaging in a dialogue with Mr. Karahalios and there

is a dispute between them about whether or not Mr. Karahalios is properly allocating remitted

funds for permissible expenses. The dispute largely centres on whether Mr. Karahalios can use

contributed funds to pay for his legal expenses in fighting the CRO’s Ruling and his

disqualification by the DRAC.

[140] In its responding material for the summary judgment motion, the Conservative Party has

indicated that it intends to return the contributions to Mr. Karahalios’ supporters in accordance to

guidance received from Elections Canada.

[141] Notwithstanding his disqualification, Mr. Karahalios has continued fundraising. He has

offered to forward the donations to the Fund if the Fund were able and willing to process them,

which it has not been willing to do.

Miscellaneous Additional Facts

[142] There are several additional factual matters that Mr. Karahalios submitted were relevant

to this summary judgment motion, which were as follows:

a. Around the same time as Mr. Karahalios was making his complaint to the CRO,

Mr. O’Toole published campaign material in which he said that he opposed the

introduction of Sharia law into Canadian law. Mr. Karahalios submits that no disciplinary

steps were taken against Mr. O’Toole and that this is evidence of bad faith as against Mr.

Karahalios.

b. During the election campaign, two other candidates, Mr. MacKay and Mr. Sloan,–

made comments that were widely and publicly denounced as homophobic, transphobic

and racist. In the case of Mr. Sloan, Mr. Scheer, publicly denounced that comments as

“unacceptable” and stated explicitly that they were “not the position of Caucus,” but no

other steps were taken to discipline Mr. Mackay or Mr. Sloan. Mr. Karahalios submits

that no disciplinary steps were taken against Mr. MacKay and Mr. Sloan is evidence of

bad faith as against Mr. Karahalios.

c. Although in other instances the Conservative Party has returned contributions to

candidates who were no longer in the race, Mr. Nowlan deposed that LEOC wished in

Mr. Karahalios’ case to return the contributions held directly to donors and the

Conservative Party has not explained the differential treatment. Again, Mr. Karahalios

submits that this is evidence of bad faith.

36

Suspension and Resumption of the Leadership Contest

[143] Because of the Covid-19 pandemic, on March 26, 2020, the Conservative Party suspended

the Leadership Contest until further notice. The convention called for June was cancelled.

[144] On 29 April 2020, the Conservative Party was announced that the Leadership Contest

would proceed by postal ballot with the election itself being rescheduled from June to August. To

be counted, ballots need to be completed and received by 21 August 2020.

I. Mr. Karahalios’ Submissions

[145] Mr. Karahalios submits he should be granted a summary judgment reinstating his

candidacy for four reasons.

[146] First, he submits that the Conservative Party’s appointees who disqualified him; namely

the CRO and the members of the DRAC breached the contract that is the Leadership Rules because

they respectively had no authority to disqualify under the Party’s Leadership Rules. He argues that

power to disqualify is reserved to the LEOC, which has already considered the matter and has

decided not to disqualify Mr. Karahalios.

[147] Second, Mr. Karahalios submits that if contrary to his first argument, the CRO and the

DRAC had the authority to disqualify him, then they breached the contract that is the Leadership

Rules because they exceeded their authority to disqualify. He submits that for the CRO or the

DRAC to impose sanctions, the misconduct must be connected to whether a candidate has

contravened the “Rules, any directive or any law of Canada.” He submits that he did not contravene

any Rule, directive, or any law of Canada, and, therefore, he submits that his disqualification was

unauthorized and a breach of contract.

[148] Third, Mr. Karahalios submits that, in any event, his disqualification was procedurally

unfair and a breach of contract because: (a) the DRAC heard ex parte submissions from the CRO

without notice to him; (b) the DRAC awarded a penalty harsher than the CRO had made without

notice to him; and (c) the DRAC provided no reasons for its decision at the time and has not

explained itself in response to the summary judgment motion. Mr. Karahalios submits that these

three counts of procedural unfairness justify setting aside his disqualification.

[149] Fourth, Mr. Karahalios submits that the DRAC’s Decision to disqualify him was made in

bad faith and made for the improper purpose of eliminating a candidate that has been a persistent

cause of annoyance, frustration, or trouble (a thorn in the side) to the Conservative Party

establishment leadership.

[150] As evidence of bad faith Mr. Karahalios points out the CRO and the DRAC and the

members of LEOC have not denied that they acted for ulterior reasons and the Conservative Party

has refused to produce records of relevant internal discussions to explain how and why they acted

as they did. He relies on absence of documents and the absence of direct evidence from Mr.

Vanstone and from the members of the DRAC about their decisions.

[151] Mr. Karahalios submits that the evidence shows badges of bad faith such as: (a) the ex

parte submissions made by the CRO to DRAC; (b) the lack of notice to Mr. Karahalios that on his

appeal to the DRAC, he was at risk of being disqualified, which was a heavier sanction than

imposed by the CRO; (c) the involvement of Mr. Connelly at the LEOC consultation and at the

DRAC conference call; (d) the lack of written reasons from the DRAC; (e) the delay in the

37

announcement of his disqualification and clandestine posting of his disqualification on social

media; and (f) the evidence of an animus and a fear with respect to Mr. Karahalios, who threatened

the establishment of the Conservative Party, which animus and fear reveals a motive to have the

vexing thorn in its side removed.

[152] Mr. Karahalios alleges that the Conservative Party’s bad faith constitutes a breach of

contract that would justify his reinstatement as a candidate.

[153] To the Defendants’ argument described below that judicial review of the CRO’s Ruling

and the DRAC Decision are precluded by the Leadership Rules, Mr. Karahalios’ counterargument

is that: (a) as a matter of law; (b) as a matter of contract interpretation; and, (c) as a matter of public

policy, the contract provisions of the Leadership Rules do not preclude judicial review of the

DRAC Decision.

[154] Mr. Karahalios submits that he should be granted a summary judgment against the

Conservative Fund because it has refused to pay him his Directed Contributions as required by the

Leadership Rules.

J. The Conservative Party’s Submissions

[155] The Conservative Party submits that the only decision to review is the DRAC Decision.

The Conservative Party disputes that there has been any breach of the Leadership Rules, and it

disputes Mr. Karahalios’ four arguments on both factual and legal grounds.

[156] In addition to denying any breaches, the Conservative Party relies on the provisions of the

Leadership Rules pursuant to which Mr. Karahalios agreed that the dispute resolution process was

to be final and binding and there was to be no judicial review. The Defendants submit that Mr.

Karahalios is barred as a matter of contract from appealing his disqualification to the courts.

[157] Further, the Conservative Party submits that if it were determined that there had been

breaches of contract and that judicial review was not precluded, then reinstatement as a candidate

is not an available remedy for Mr. Karahalios because such an Order would require the court to

find that Mr. Karahalios’ racist and bigoted remarks that offended the principles of the

Conservative Party were acceptable and that he is a suitable leader for the Conservative Party.

[158] The Conservative Party submits that if there has been a breach of contract, the only remedy

available to Mr. Karahalios would be an Order remitting the matter for reconsideration by the

Conservative Party’s designated decision-makers; i.e. the LEOC. However, the Conservative Party

submits that this would be futile gesture because a majority of LEOC members have already found

Mr. Karahalios to be an unsuitable leadership candidate.

[159] As for the Directed Contributions made to the Conservative Fund, the Conservative Party

submits that it is premature to grant any relief until the proper treatment of these funds is resolved

with Canada Elections pursuant to the Canada Elections Act.

K. Introduction to the Discussion and the Analysis

[160] As just outlined, Mr. Karahalios seeks to have his disqualification set aside based on four

mutual exclusive arguments. Those arguments, in turn, are based on the modern law that governs

the court’s jurisdiction to review the decisions of an unincorporated association operating in the

private sector.

38

[161] The Defendants make counterarguments to Mr. Karahalios four arguments and they make

two additional, in-any-event arguments; namely that: (a) in any event, the court does not have the

jurisdiction to review the decisions of the CRO and the DRAC; and, (b) in any event, the only

remedy available to Mr. Karhalolis is the futile gesture of sending Mr. O’Toole’s complaint or Mr.

Karahalios’ disqualification back for reconsideration by the LEOC.

[162] It may be observed that with respect to the first of these additional arguments, if the

Conservative Party is correct that judicial review of the CRO’s Ruling and the DRAC’s decision

are precluded, then that is the end of Mr. Karahalios’ action. I shall, therefore, in the discussion

below first address the matter of the court’s jurisdiction to review the CRO’s Ruling and the DRAC

Decision.

[163] I foreshadow my decision on this first issue to say that I disagree with the Defendants’

argument about the contract provisions of the Leadership Rules barring judicial review. Therefore,

it will be necessary to complete the analysis and consider Mr. Karahalios’ four arguments for

setting aside his disqualification.

[164] In this last regard, I foreshadow to say that in my opinion Mr. Karahalios is correct that

neither the CRO nor the DRAC had the authority to disqualify him. As I interpret the Leadership

Rules, both the CRO and DRAC had the authority to investigate Mr. O’Toole’s complaint and

both the CRO and the DRAC could impose sanctions less than a disqualification on Mr.

Karahalios. As I interpret the Leadership Rules, both the CRO and the DRAC could recommend

disqualification, but the decision to disqualify was exclusively a matter for LEOC. It follows, that

the DRAC Decision to disqualify should be set aside.

[165] I foreshadow that in my opinion there is no other basis to set aside the DRAC Decision.

There is also no basis to set aside the CRO’s Ruling. In my opinion, there was no procedural

unfairness that would justify setting aside DRAC’s decision and Mr. Karahalios has not proven

bad faith or an improper purpose.

[166] I disagree with Mr. Karahalios’ argument that the CRO’s Ruling was a de facto

disqualification. In my opinion, the CRO’s Ruling was a Ruling within his authority to make. It

follows that the appropriate remedial response is to restore the CRO’s Ruling with a fourteen-day

adjustment to allow Mr. Karahalios to comply with the Ruling.

[167] Thus, I disagree with the Conservative Party’s argument that the only remedial response

assuming a breach of contract would be to remit the matter to LEOC which would be a futile

gesture because a majority of LEOC members have already voted for disqualification. As

mentioned above, I find as a fact that there has not been a LEOC determination about Mr.

Karahalios’ status as a candidate.

[168] However, it needs to be said that LEOC is still entitled to consider this matter for the first

time, if it is so advised to do so. In other words, the setting aside of the DRAC Decision and the

restoration of the CRO’s Ruling is without prejudice to LEOC’s rights, which still exist, to

disqualify Mr. Karahalios. Mr. Karahalios would be entitled to an open-minded consideration by

LEOC, but it remains open to LEOC to disqualify Mr. Karahalios. In the penultimate section of

these Reasons for Decision, I will explain why a reconsideration of the matter by LEOC would not

be a futile or a pre-determined matter.

[169] As for the matter of the Directed Contributions, practically speaking, their disposition

depends upon whether Mr. Karahalios satisfies or fails to satisfy the terms of the CRO’s Ruling.

39

Once that status is settled, then the Conservative Fund should dispose of the funds as required by

the Leadership Rules and Elections Canada.

[170] With this foreshadowing and subject to three preliminary analytical or framework

conclusions, I shall analyze the party’s respective arguments under the following headings: (a)

Does the Court have Jurisdiction to Review the Decisions of the Chief Adjudicator? (b) Did the

CRO and the DRAC Respectively Exceed their Authority by Disqualifying Mr. Karahalios? (c)

Was Mr. Karahalios Denied Procedural Fairness? and, (d) Was there Bad Faith in the CRO’s

Ruling and the DRAC Decision? Then, I will consider the appropriate remedial response and end

these Reasons for Decision with a Conclusion.

[171] The first of the analytical or framework conclusions is that I disagree with the Conservative

Party’s where-were-you-standing-when-you killed-your-spouse-submission that if I was to order

Mr. Karahalios’ reinstatement as a candidate, it would require the court to find that Mr. Karahalios’

racist and bigoted conduct was acceptable and that he is a suitable leader for the Conservative

Party.

[172] As the analysis below will reveal. it is not necessary to make a conclusion or even comment

about whether Mr. Karahalios conduct was racist or bigoted. And, it is not for the court to decide

whether he is a suitable leader for the Conservative Party. It is also not necessary to make a

conclusion about whether Mr. O’Toole’s, Mr. Vanstone’s, and the DRAC’s views that Mr.

Karahalios conduct offended the principles of the Conservative Party was right or wrong. As the

analysis below will reveal, the focus of the court’s attention is only on: (a) the interpretation of the

Leadership Rules and whether the CRO and the DRAC acted within their authority; (b) whether

Mr. Karahalios received procedural fairness; and (c) whether there was bad faith and an improper

purpose in disqualifying him from the Leadership Contest.

[173] The second of the analytical or framework conclusions is that I disagree with the

Conservative Party’s argument that only the DRAC Decision is subject to judicial review and that

it would be an abuse of process to reconsider the CRO’s Ruling.

[174] There is no re-litigation or abuse of process in the immediate case, and Mr. Karahalios is

not seeking a second appeal of the CRO’s Ruling. He is suing the Defendants for breach of

contract, a dispute that has never been litigated. If there was a breach of contract in the immediate

case, it involved not just the acts of the DRAC, but it involved the acts of both the CRO and the

DRAC, which acts are closely interrelated.

[175] The third analytical or framework conclusion is that I disagree with the Defendants’

submission that it is relevant that when Mr. Karahalios appealed the CRO’s Ruling to the DRAC,

he implicitly requested a de novo adjudication of Mr. O’Toole’s complaint, which precludes him

from disputing the DRAC’s decision.

[176] However, there was nothing implicit in Mr. Karahalios’ appeal about the nature of the

appeal and the nature of an appeal to the DRAC under the Leadership Rules is a matter to be

determined not by Mr. Karahalios wants or needs or by some sort of phantom estoppel. The nature

of the appeal to DRAC is a matter to be determined by interpreting the Leadership Rules. What

Mr. Karahalios may or may not have implicitly requested as to the nature of the appeal is not

relevant. The nature of an appeal to the DRAC and the DRAC’s role and authority on an appeal

are matters that I shall determine below, and these matters are not to be determined by what the

Conservative Party thought Mr. Karahalios’ was requesting.

40

L. Does the Court Have Jurisdiction to Review the Decisions of the Chief Returning

Officer (CRO) and the Dispute Resolution Appeals Committee (DRAC)?

[177] The Conservative Party is an unincorporated association. Unincorporated associations may

operate in the public sector or the private sector. Where an unincorporated association or group

operates in the public sector, it is because it is a government or public authority or because it is

exercising statutory powers. Where an unincorporated association operates in the public sector,

the unincorporated association may be subject to public law and the judicial review of its

decisions.19 Judicial review, however, is for the review of the exercise of public power and,

therefore, judicial review is not available outside of the public sector sphere.20

[178] Although important to the system of government and although of importance and of interest

to the public, political parties are private sector unincorporated associations, and their public

importance does not bring them within the public law realm.21 Thus, the decisions of the

Conservative Party in the immediate case are subject to private law review not public or

administrative law review.

[179] The court’s jurisdiction to intervene in the affairs of an unincorporated association

operating in the private sector depends on the presence of a legal right founded in tort, contract,

restitution, or a statutory provision; courts only interfere if legal rights are at stake.22 The courts

will not intervene with the affairs of an unincorporated association where no civil or property right

is involved in the activities of the group.23

[180] When the unincorporated association or group has a written constitution and by-laws, then

these instruments constitute a contractual relationship setting out the rights and obligations of the

unincorporated association and its members.24 Unincorporated associations are organized as a

complex of contracts between each and every other member.25 The unincorporated association or

group and its members are bound by the terms of the constitution and by-laws and there is an

obligation on the group’s members to observe its constitution and by-laws.26 The complex of

contracts is of a special nature; there are multiple contracting parties, entering and leaving the

relationship, and being subject to changing contractual obligations as constitutions and bylaws are

19 Highwood Congregation of Jehovah's Witnesses (Judicial Committee) v. Wall, 2018 SCC 26. 20 Bell v. Civil Air Search and Rescue Assn., 2018 MBCA 96; Highwood Congregation of Jehovah's Witnesses

(Judicial Committee) v. Wall, 2018 SCC 26; Adams v. Canada, 2011 ONSC 325 (Div. Ct.); Alaimo v. Di Maoi,

[2008] O.J. No. 3570 (S.C.J.). 21 Trost v. Conservative Party of Canada 2018 ONSC 2733 (Div. Ct.); Olumide v. Conservative Party of Canada,

2015 FCA 218 at para. 8; Longley v. Canada (Attorney General), 2007 ONCA 852; Knox v. Conservative Party of

Canada, 2007 ABCA 295, leave to appeal to S.C.C. ref’d [2007] S.C.C.A. No. 567. 22 Bell v. Civil Air Search and Rescue Assn., 2018 MBCA 96; Highwood Congregation of Jehovah's Witnesses

(Judicial Committee) v. Wall, 2018 SCC 26; Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165. 23 Surrey Knights Junior Hockey v. Pacific Junior Hockey League, 2018 BCSC 1748; Bell v. Civil Air Search and

Rescue Assn., 2018 MBCA 96; Highwood Congregation of Jehovah's Witnesses (Judicial Committee) v. Wall, 2018

SCC 26; 24 Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10; Hellenic Congress of Quebec v.

Canadian Hellenic Congress, 2020 ONSC 2224; Chaudhary v. Canadian Society of Respiratory Therapists, 2007

BCSC 467; Street v. B.C. School Sports, 2005 BCSC 958; Conacher v. Rosedale Golf Association Ltd., [2002] O.J.

NO. 575 (S.C.J.); Senez v. Montreal Real Estate Board, [1980] 2 S.C.R. 555; Lee v. Showmen’s Guild of Great

Britain, [1952] 1 All E.R. 1175 (C.A.). 25 Ahenakew v. MacKay (2004), 71 O.R. (3d) 130 at paras. 20 and 26 (C.A.). 26 Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10 at para. 43.

41

amended from time to time.27

[181] Thus, the court has a jurisdiction to review the decisions and procedures of an

unincorporated association or group operating in the private sector as a matter of contract.28

Members of groups that have constitutions, by-laws, and rules are entitled to private law remedies

to have their agreement enforced in accordance with its proper interpretation.29 The court has the

jurisdiction to enforce the contractual rights between an association and it members and the

contractual rights of the members between or among themselves.30 The court has the jurisdiction

to interpret the contracts that define the rights of the members in respect of the association's

operations.31

[182] However, where the affairs of a group or unincorporated association are governed by

private law, a court has only a limited jurisdiction to review the conduct and decisions of

associations, and the court will only do so if a significant private law right or interest is involved.32

[183] If a significant private law right or interest is involved; for example if a member of the

association has been expelled or lost his or her membership status, been deprived of his or her

membership privileges, or his or her ability to pursue vocations and avocations associated with the

association, the court does not review the merits of the association's conduct or decision but

reviews whether the purported expulsion or loss of membership or of membership privileges was

carried out according to the applicable rules of the association and with the principles of natural

justice (procedural fairness), and without mala fides.33Thus, where there is jurisdiction as a matter

of contract and a significant right or interest is engaged, the court may determine: (a) whether the

voluntary group or unincorporated association acted in accordance with its rules; (b) whether it

acted in accordance with the principles of natural justice; and (c) whether the association’s decision

27 Chaudhary v. Canadian Society of Respiratory Therapists, 2007 BCSC 467 at para. 33; Whittall v. Vancouver

Lawn Tennis and Badminton Club, 2005 BCCA 439. at para. 50. 28 Highwood Congregation of Jehovah's Witnesses (Judicial Committee) v. Wall, 2018 SCC 266; McGee v. Beaver

Valley Ski Club, [2006] O.J. No. 1691 (S.C.J.); Sahaydakivski v. YMCA of Greater Toronto, [2006] O.J. No. 1368

(S.C.J.); Conacher v. Rosedale Golf Association Ltd. [2002] O.J. No. 575 (S.C.J.); Senez v. Montreal Real Estate

Board, [1980] 2 S.C.R. 555; Hofer v. Hofer, [1970] S.C.R. 958; Shergill v. Khaira, [2015] A.C. 359 (S.C.); Lee v.

Showmen’s Guild of Great Britain, [1952] 1 All E.R. 1175 (C.A.). 29 Knox v. Conservative Party of Canada, 2007 ABCA 295, leave to appeal to S.C.C. ref’d, [2007] S.C.C.A. No.

567. 30 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165; Lee v. Showmen's Guild of Great Britain,

[1952] 2 Q.B. 329 (C.A.). 31 Kwantlen University College Student Assn. v. Canadian Federation of Students, 2011 BCCA 133, aff'g 2010

BCSC 1951. 32 Brown v. Hanley, 2018 ONSC 1112, aff’d 2019 ONCA 395; Street v. B.C. School Sports, 2005 BCSC 958; Lee v.

Showmen's Guild of Great Britain, [1952] 2 Q.B. 329 (C.A.). 33 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165 at paras. 10 -11; Hellenic Congress of

Quebec v. Canadian Hellenic Congress, 2020 ONSC 2224; Polish National Union of Canada v. Branch 1 of the

Polish National Union of Canada, 2014 ONSC 3134; Berry v. Pulley, 2002 SCC 40; Arsenault v. Progressive

Conservative Party of Ontario, 2018 ONSC 1663; Arriola v. Ryerson Students' Union, 2018 ONSC 1246; Changoor

v. IBEW, Local 353, 2014 ONSC 4558, aff'd 2015 ONSC 2472 (Div. Ct.); Pal v. Chatterjee, 2013 ONSC 1329;

Association of Part-Time Undergraduate Students of the University of Toronto v University of Toronto Mississauga

Students Union, [2008] O.J. No. 3344 (S.C.J.); Clark v. Gilbert, [1996] O.J. No. 4415 (S.C.J.); Warkenkin v. Sault

Ste. Marie Board of Education (1985), 49 C.P.C. 31 (Ont. Dist. Ct.); Lee v. Showmen's Guild of Great Britain,

[1952] 2 Q.B. 329 (C.A.); Baird v. Wells (1890), 44 Ch. D. 661 at p. 670.

42

was come to bona fide.34

[184] Provisions in the contracts of unincorporated associations that operate in the private sector

that purport to oust the court’s jurisdiction are variously called: domestic clauses, privative clauses,

exclusionary clauses, waiver clauses, on non-justiciable rights clauses. Where the constitution, by-

laws, or rules of the group purport to make the group’s final and binding and without review or

appeal on any grounds, nevertheless, the court retains a limited jurisdiction to review the

procedural integrity of the association's action even if the constitution or rules of the association

purport to oust any jurisdiction in the court.35 This rule reflects the historic principle that a contract

that purports to oust access to the court’s is illegal and unenforceable as being against public

policy.

[185] In Lee v. Showmen's Guild of Great Britain,36 which is regarded as a leading case about

the authority of the court’s to intervene in the affairs of an unincorporated association

notwithstanding that the parties purport to oust the court’s jurisdiction, Lord Denning stated:

Although the jurisdiction of a [unincorporated association] is founded on contract, express or

implied, nevertheless the parties are not free to make any contract they like. There are important

limitations imposed by public policy. … Another limitation arises out of the well-known principle

that parties cannot by contract oust the ordinary courts of their jurisdiction: see Scott v. Avery (14)

(5 H.L. Cas. 845, 846) per Alderson, B., and Lord Cranworth, L.C. They can, of course, agree to

leave questions of law, as well as questions of fact, to the decision of the domestic tribunal. They

can, indeed, make the tribunal the final arbiter on questions of fact, but they cannot make it the final

arbiter on questions of law. They cannot prevent its decisions being examined by the courts. … But

the question still remains: To what extent will the courts intervene? They will, I think, always be

prepared to examine the decision to see that the tribunal have observed the law. …

[186] Lee v. Showmen's Guild of Great Britain has been adopted in many Canadian cases,

including the leading Supreme Court of Canada decision in The Lakeside Colony of Hutterian

Brethren v. Hofer,37 where the Supreme Court held that based on the enforcement of contracts or

property rights, there was a limited jurisdiction for courts to intervene in the affairs of an

unincorporated association.

[187] The law as I have described it is of long standing, but in the immediate case, the

Conservative Party submits that the law has recently been changed and access to the court’s

jurisdiction can be precluded by a privative or exculpatory provision in the contract that comprises

the relationship among the unincorporated association and its members. In this regard, the

Defendants rely on the recent Supreme Court of Canada decision in Highwood Congregation of

Jehovah’s Witness (Judicial Committee v. Wall38 and the Supreme Court of Canada’s decision in

34 Hellenic Congress of Quebec v. Canadian Hellenic Congress, 2020 ONSC 2224; Arsenault v. Progressive

Conservative Party of Ontario, 2018 ONSC 1663; Kwantlen University College Student Assn. v. Canadian

Federation of Students - British Columbia Component, 2011 BCCA 133; Street v. B.C. School Sports, 2005 BCSC

958; North Shore Independent School Society v. B.C. School Sports Society, [1999] B.C.J. No. 143 at para. 37

(S.C.); Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165; Vancouver Hockey Club v. 8 Hockey

Ventures Inc. (1987), 18 B.C.L.R. (2d) 372 (S.C.); Hofer v. Hofer, [1970] S.C.R. 958; Baird v. Wells (1890), 44 Ch.

D. 661, at p. 670. 35 Arriola v. Ryerson Students' Union, 2018 ONSC 1246; Street v. B.C. School Sports, 2005 BCSC 958; Lee v.

Showmen's Guild of Great Britain. 36 [1952] 1 All E.R. 1175 at pp. 1180-81(C.A.). 37 [1992] 3 S.C.R. 165. 38 2018 SCC 26 at paras. 32-39 (S.C.C.)

43

Tercon Contractors Ltd. v. British Columbia (Transportation and Highways),39about the

enforcement of exculpatory provisions to argue that there has been a change in the law.

[188] The Conservative Party’s argument, however, is without merit. While the Highwood

Congregation of Jehovah’s Witness (Judicial Committee v. Wall is a very important decision about

the law that governs unincorporated associations, which makes it crystal clear that public law and

administrative law principles do not apply to review the decisions of an unincorporated association

operating in the private sector, the Highwood Congregation case did not change the law, and it

certainly did not adopt the principles of Tercon Contractors as the measure of when a contract

provision could operate to oust access to justice in the contract between an unincorporated

association and its members.

[189] The Conservative Party’s argument is that before the Highwood Congregation of Jehovah’s

Witness (Judicial Committee v. Wall a finality clause was analyzed on administrative law

principles, but that approach is now precluded by the Highwood Congregation case. The premises

of this argument are not true.

[190] Before and after the Highwood Congregation case, finality clauses are analyzed on

administrative law principles only for unincorporated associations operating in the public sector.

Before and after the Highwood Congregation case, finality clauses are analyzed in accordance

with the private law principles, described above, that the court’s jurisdiction to intervene in the

affairs of an unincorporated association depends on the presence of a legal right founded in tort,

contract, restitution, or a statutory provision. Before and after Highwood Congregation case, where

there is jurisdiction as a matter of contract and a significant right or interest is engaged,

notwithstanding a finality clause, the court may determine: (a) whether the voluntary group or

unincorporated association acted in accordance with its rules; (b) whether it acted in accordance

with the principles of natural justice; and (c) whether the association’s decision was come to bona

fide.

[191] If the Defendants’ argument were correct, it would lead to the absurd conclusion that

unincorporated associations governed by contract are beyond the rule of law and the court’s

normative contract law jurisdiction and access to the courts would be ousted. There is nothing in

Highwood Congregation of Jehovah’s Witness (Judicial Committee v. Wall that supports that

patently unfair and unjust interpretation of a contract or of the law that governs associations

operating in the private sector.

[192] In the circumstances of the immediate case, where the Conservative Party condemns Mr.

Karahalios for contravening the principles of the Conservative Party Constitution, it is perverse

and hypocritical argument for the Conservative Party to even make the argument that it can

contract out of the rule of law. In the immediate case, it is an ironical argument because among the

Conservative Party’s expressed principles and values is that Canada be governed in accordance

with the rule of law.

[193] This is not to say that it was wrong for the Conservative Party to include in the Leadership

Rules a stipulation that the decisions of the CRO, (subject to an appeal), the DRAC and the LEOC

are final and binding and not subject to judicial review. It is simply to say that that stipulation goes

no further than to codify the existing law that the substantive merits of the decisions of a

unincorporated association operating in the private sector are not subject to administrative law

39 2010 SCC 4

44

review and they are not subject to a review of the substantive merits of the decision. It is also not

to say that this provision is written out of the contract; rather, it is to say that this finality stipulation

does not have the unfair, unjust, unprincipled and overreaching scope ascribed to it by the

Conservative Party.

[194] Recently, the Supreme Court of Canada affirmed the importance of the policy against

ousting the court’s supervisory jurisdiction in Douez v. Facebook, Inc.40 In that case, a majority

of the Supreme Court refused to enforce a forum selection clause, based, among other things, the

public interest in adjudication.

[195] Thus, in my opinion, notwithstanding the privative or exculpatory clause in the Leadership

Rules, the Chief Recording Officer’s Ruling and the DRAC Decision are subject to private law

review.

[196] The Conservative Party’s Leadership Rules, passed pursuant to its Constitution, constitute

a contract setting out the rights and obligations of the Conservative Party and Mr. Karahalios. Very

significant private law rights or interest are involved, and the court has the jurisdiction to determine

whether Mr. Karahalios’ disqualification as a leadership candidate was carried out according to

the applicable rules of the Conservative Party and with the procedural fairness and without bad

faith and mala fides.41

M. Did the CRO and the DRAC Respectively Exceed their Authority by Disqualifying Mr.

Karahalios?

[197] As noted above, Mr. Karahalios submits that the Conservative Party breached the contract

that is the Leadership Rules in four ways. In this part of my Reasons for Decision, I shall address

his first two arguments, which concern whether the CRO and the DRAC had the authority to

disqualify Mr. Karahalios. These arguments turn on interpreting the Leadership Rules.

[198] I can narrow the analysis by noting that the Defendants agree with Mr. Karahalios and I

also agree with both parties that the CRO does not have the authority to disqualify a candidate.

[199] This conclusion, however, ultimately does not assist Mr. Karahalios because I disagree

with his assertion that in the immediate case the CRO’s Ruling was an unauthorized

disqualification. Thus, for him to succeed on this branch of his breach of contract claim, it remains

to be determined whether the DRAC had the authority to disqualify him notwithstanding that the

CRO had not done so.

[200] I agree with Mr. Karahalios’ argument that under the Leadership Rules that the CRO did

not have authority to disqualify him as a candidate. Under Rule 7.1.3(f), the express authority of

the CRO is limited to making a disqualification recommendation to LEOC. The CRO has no

authority to unilaterally disqualify a candidate. The CRO’s authority extends to consulting with

40 2017 SCC 33. 41 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165 at paras. 10 -11; Hellenic Congress of

Quebec v. Canadian Hellenic Congress, 2020 ONSC 2224; Berry v. Pulley, 2002 SCC 40; Arsenault v. Progressive

Conservative Party of Ontario, 2018 ONSC 1663; Arriola v. Ryerson Students' Union, 2018 ONSC 1246; Changoor

v. IBEW, Local 353, 2014 ONSC 4558, aff'd 2015 ONSC 2472 (Div. Ct.); Pal v. Chatterjee, 2013 ONSC 1329;

Association of Part-Time Undergraduate Students of the University of Toronto v University of Toronto Mississauga

Students Union, [2008] O.J. No. 3344 (S.C.J.); Clark v. Gilbert, [1996] O.J. No. 4415 (S.C.J.); Warkenkin v. Sault

Ste. Marie Board of Education (1985), 49 C.P.C. 31 (Ont. Dist. Ct.); Baird v. Wells (1890), 44 Ch. D. 661 at p. 670.

45

LEOC and possibly recommending a disqualification.

[201] I do not agree with Mr. Karahalios that in the immediate case the CRO’s Ruling amounted

to a de facto disqualification. The CRO had found a serious violation by Mr. Karahalios in the

conduct of his campaign for which he was responsible, and the CRO had the authority to assess a

penalty and make other directions, which he did. The CRO’s Ruling was not a disqualification. Mr.

Karahalios was given more than a week to comply with the CRO’s Ruling. The quantum of the penalty

and the compliance deposit do not make a penalty and a compliance deposit a disqualification. The

CRO’s remedial order was within his authority to make and it was no disqualification.

[202] Thus, the narrower questions to address are twofold; namely: (a) whether DRAC had the

authority to disqualify; and (b) and, if so, whether it properly exercised its authority within the

parameters of the Leadership Rules.

[203] The answer of whether the DRAC had the authority to disqualify is entirely a matter of

contract interpretation.

[204] The contractual analysis begins by noting that insofar as the CRO is concerned, the

Leadership Rule 7.1.4 provides that the CRO can recommend to LEOC that LEOC disqualify the

candidate and remove his or name from the ballot. This is the first reference in the Leadership

Rules to the disqualification of a candidate, and as a matter of contract interpretation, this reference

makes two points of meaning; namely: (a) that LEOC has the authority to disqualify or remove a

candidate; and (b) that the CRO’s authority is limited to making a disqualification

recommendation, but the CRO does not have the authority to disqualify. These points follow as

matter of common sense, logic, the words used, and the factual nexus which is that the LEOC is

responsible for conducting the Leadership Election Process for the Conservative Party.

[205] These two points, however, beg or do not answer and do not give meaning to whether the

DRAC, which is a subcommittee of the LEOC has the authority to disqualify and remove a

candidate. The Leadership Rules, however, do not provide an express answer to this question.

[206] Rule 1.61 of the Leadership rules states that LEOC shall appoint the DRAC and that the

DRAC will have to power to set its own rules and procedures. The Leadership Rules do not

expressly state that the DRAC may disqualify candidates and the DRAC did not set its own rules

empowering disqualification. Even if the delegation of authority under Rule 1.61 from LEOC,

which does have the authority to disqualify, was adequate to empower the DRAC to set a rule that

allowed it to set disqualification as one of its own Rules, DRAC has not set any rules other than

those found in the Leadership Rules which empower LEOC to disqualify and remove candidates.

In any event, I would not interpret Rule 1.61 as adequate to empower DRAC to unilaterally set a

Rule that usurped the ultimate authority of LEOC to govern the election.

[207] Further, while Rule 2.1 of the Leadership Rules provides that LEOC may appoint

Delegated Decision Makers, like the DRAC, to conduct the Election Process and may delegate in

writing to the Delegated Decision Maker the authority to apply or interpret these Rules and any

other rules, regulations, guidelines and/or procedures related to this Election Process. In the

immediate case, LEOC did not delegate in writing to the DRAC the authority to disqualify a

candidate.

[208] These observations bring the analysis full circle back to the Leadership Rules which do not

expressly indicate that the DRAC has the authority to disqualify a candidate. The Leadership Rules

only state in Rule 7.1.4 that the Decisions of the CRO are open to an appeal to the DRAC and that

46

the appeals will follow the process set out rules 2.6.8, 2.6.9 and 2.6.10, which is to say that the

process is an investigation with the onus of proof on the candidate who submitted the challenge

and with DRAC having the authority but not the obligation to request further information from the

candidate that has made the challenge, the member in question, from other candidates or any other

person. There is nothing here that empowers or delegates to the DRAC the authority to disqualify

a candidate. At most, the DRAC can do on appeal what the CRO could do in the first instance.

[209] In other words, Mr. Vanstone’s advice to the DRAC was correct insofar as the DRAC could

conduct its own investigation and come to its own conclusion. He was correct that the DRAC could

alter the Ruling of the CRO, but he was incorrect in advising that the DRAC had the authority to

disqualify a candidate, which was a power that the CRO himself also did not have. Unless

delegated in writing by LEOC, only LEOC has the authority to disqualify a candidate.

[210] Reading and interpreting the Leadership Rules in their entirety in their contractual nexus

of facts, which is the proper approach to contract interpretation, the scheme of the Leadership

Rules with respect to disqualification is that the super-extraordinarily response of disqualifying a

candidate rested not with a single person, the CRO, or with a four-person committee, the DRAC,

it rested with the eighteen people of the LEOC. The authority of the DRAC was commensurate

with the authority of the CRO, and the DRAC could recommend disqualification but it could not

impose it.

[211] I, therefore, conclude as a matter of contract interpretation, that the DRAC did not have the

authority to disqualify Mr. Karahalios. It follows that the DRAC Decision must be set aside.

[212] At first blush, it might appear that this conclusion makes it unnecessary to analyze whether the

DRAC properly exercised its authority within the parameters of the Leadership Rules because the

DRAC’s Decision must be set aside in any event. However, this analysis is still necessary because it

goes to the issue of whether the CRO’s Ruling, which would allow Mr. Karahalios’ candidacy to

continue if he complies with its terms, should be restored. I, therefore, shall continue the analysis and

address the second question of contract interpretation.

[213] This brings the analysis to the question of whether the CRO did properly and whether the

DRAC could have properly exercised any authority for Mr. Karahalios’ conduct that was the subject

matter of Mr. O’Toole’s complaint. In this regard, Mr. Karahalios submits under the Leadership Rules,

he could not be sanctioned for the conduct that led to Mr. O’Toole’s complaint, and, therefore, the

CRO did not have the authority and the DRAC would also not have had the authority to disqualify

him.

[214] The syllogism of Mr. Karahalios’ argument is that the CRO in the first instance and the

DRAC on an appeal from the CRO, can only impose sanctions for the violations of a Rule, a

directive, or an applicable law, but Mr. Karahalios did not breach any Rule, directive, or applicable

law and, therefore, neither the CRO or the DRAC could sanction him for the conduct impugned

by Mr. O’Toole’s complaint.

[215] The CRO had concluded that Mr. Karahalios had made statements that showed a disregard

for the principles of the Conservative Party, which he as a candidate for leadership had agreed to fully

support and had pledged to uphold.42 This conclusion is not a finding of a breach of a Rule or a law of

42 I observe that although, nothing turns on it, there actually has been no determination about whether Mr.

Karahalios breached any applicable law. The CRO backed away from finding whether Mr. Karahalios had defamed

Mr. O’Toole and Mr. Soliman.

47

Canada, and Mr. Karahalios submits that showing a disregard for the principles of the Conservative

Party is not a “directive.”

[216] Mr. Karahalios submits that a “directive” must be interpreted to mean a rule that imposes a

binding obligation on a candidate. Mr. Karahalios submits that a directive has a compulsory quality

that it consistent with the binding nature of Rules and laws of Canada and also consistent with the

nature of a disciplinary process, which ordinarily reserves punishment for a breach of a clear,

binding rule that gives sufficient notice to an accused of what he can and cannot do.

[217] Mr. Karahalios submitted that the statement of principles in the Conservative Party’s

Constitution are just twenty-two aspirational principles such as “a belief in” the “loyalty to a sovereign

and united Canada”, “the value and dignity of all human life” and “the freedom of the individual” that

the principles provide guidance to the Party but that they do not provide a binding code of conduct that

places behavioral restrictions on individual members or leadership candidates. He says the statement

of principles in the Constitution is “the sermon on the mount, not the ten commandments.”

[218] The sermon on the mount is found in the chapters 5, 6 and 7 of the Gospel of Matthew in the

New Testament. I am no biblical scholar, but I would have thought that the sermon on the mount is

every much a code of conduct as the ten commandments of the Old Testament, and I note that in

Matthew 5:17, Jesus is quoted as saying: “Think not that I come to destroy the law, or the prophets: I

am not come to destroy, but to fulfill.” But more to the immediate point than this exegesis of scripture

and to return to the interpretation of the Leadership Rules, in the immediate case, it is the case that

Leadership Rules did place binding behavior restrictions on leadership candidates who might find

themselves sanctioned. Contracts are legally binding promises, and Mr. Karahalios agreed to be

restrained in how he conducted his leadership campaign. He did bind himself to honor his declared

pledge to affirm that he accepted, and agreed to advance, the policies, principles, goals, and

objectives of the Conservative Party as set out in the Constitution of the Party.

[219] In the immediate case, the word directive is used in the factual context or contractual nexus

of regulating an election for the leader of a political party, and the word is not used, as Mr.

Karahalios would have it, in the factual context of a discipline proceeding where Mr. Karahalios

is an accused. Rather, the word directive is used in the context that while Mr. Karahalios is free to

make statements about the platform and policies of the Conservative Party, he had agreed to not

make statements that show a disregard for the principles of the Conservative Party. This is a

directive that was cooked into the Leadership Rules and into the application to be completed by a

candidate.

[220] I, therefore, conclude that applying the normal principles of contract interpretation and

viewing the Leadership Rules in their entire context, a “directive” does include not making

statements that show a disregard for the principles of the Conservative Party. It follows that the

CRO had the authority and the DRAC would have had the authority to sanction Mr. Karahalios

for the contravention alleged by Mr. O’Toole.

[221] The ultimate result of this analysis is that: (a) the DRAC did not have the authority to

disqualify Mr. Karahalios; and (b) the CRO had the authority to make his operative ruling, which

was not a disqualification. This means that as a matter of enforcing the contract between the

Conservative Party and Mr. Karahalios, the DRAC Decision should be set aside and the CRO’s

Ruling should be restored.

[222] These Orders would place the parties in the position that they expected to be in if the

Leadership Rules were properly performed.

48

N. Was Mr. Karahalios Denied Procedural Fairness?

[223] The next issue to analyze is whether Mr. Karahalios was denied procedural fairness.

Strictly speaking, it may not be necessary to decide this question because the effect of the above

conclusions is that the DRAC Decision is set aside and the CRO’s Ruling is restored and Mr.

Karahalios’ procedural fairness complaint focuses on what happened on his appeal to DRAC.

[224] However, for a variety of reasons, I shall answer this question. The reasons for doing so

include the circumstances that: (a) this question was comprehensively argued by the parties; (b)

answering this question is relevant to Mr. Karahalios’ argument that the Conservative Party was

motivated by an improper purpose and was acting mala fides and in bad faith to drum him out of

the Leadership Contest; (c) answering this question is relevant to the issue of remedies; (d)

answering this question may be important to the LEOC in considering what, if anything, to do with

Mr. Karahalios’ restored candidacy; and (e) answering this question is important to the

development of the law about the governance of unincorporated associations generally.

[225] Was then Mr. Karahalios denied procedural fairness in the circumstances of the immediate

case? To answer this question, it is necessary to begin with an explication of the law of procedural

fairness in the context of unincorporated groups and associations operating in the private sector.

[226] Was Mr. Karahalios denied procedural fairness? While the decisions of groups operating

in the private sector may be subject to private law remedies founded in tort, contract, restitution,

or statute, their decisions are not subject to the public law remedies of certiorari, mandamus,

habeus corpus, prohibition, and quo warranto, which remedies are associated with judicial review,

which is reserved for public sector decisions.43 The circumstance that a group operating in the

private sector is subject to public regulation, even substantial regulation, does not make it a public

body subject to judicial review. There is no free-standing right to procedural fairness with respect

to the decisions of a group operating in the private sector.44

[227] Although the public law remedies of certiorari, mandamus, and prohibition etc. are not

available for the judicial review of the activities of an association, courts use the private law

remedies of injunctions and declarations instead.45 If a member of an association is expelled by

the association in breach of contract, the court will grant a declaration that the associations action

is ultra vires and it will grant an injunction if necessary to protect the contractual, employment, or

proprietary rights of the member.46

[228] For groups operating in the private sector, the courts have the private law remedies

associated with breach of contract, torts, or restitution. Pursuant to s. 97 of the Courts of Justice

Act,47 the court may make binding declarations of right, whether or not any consequential relief is

or could be claimed. Pursuant to s. 98 of the Courts of Justice Act, the court may grant relief against

penalties and forfeitures. Pursuant to s. 99 of the Courts of Justice Act, where a court has the

43 Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10; Highwood Congregation of Jehovah's

Witnesses (Judicial Committee) v. Wall, 2018 SCC 26; Adams v. Canada, 2011 ONSC 325 (Div. Ct.); Knox v.

Conservative Party of Canada, 2007 ABCA 295, leave to appeal to S.C.C. ref’d, [2007] S.C.C.A. No. 567. 44 Highwood Congregation of Jehovah's Witnesses (Judicial Committee) v. Wall, 2018 SCC 26. 45 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165; Lee v. Yeung, 2012 ABQB 40; Knox v.

Conservative Party of Canada, 2007 ABCA 295, leave to appeal to S.C.C. ref’d, [2007] S.C.C.A. No. 567; Street v.

B.C. School Sports, 2005 BCSC 958; Kaplan v. Canadian Institute of Actuaries, [1994] A.J. No. 868 (Q.B.) 46 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165 at paras. 9-11. 47 R.S.O. 1990, c. C.43.

49

jurisdiction to grant an injunction or order specific performance, it may award damages in addition

to or in substitution for the injunction or specific performance. Pursuant to s. 100 of the Courts of

Justice Act, the court may make vesting orders of real or personal property. Pursuant to s. 101 of

the Courts of Justice Act, the court may make interlocutory orders for injunctions and the

appointment of a receiver.

[229] Once it is established that a contract exists between a member of an unincorporated

association or group operating in the private sector, an expectation of procedural fairness may

attach as a way of enforcing the terms of the contract.48 The requirements of procedural fairness

depend on the circumstances, including the nature of the organization and the seriousness of the

consequences of the association’s decision.

[230] The scope of the requirements of natural justice depend on the subject-matter that is being

dealt with, the particular context, the circumstances of the case, the nature of the inquiry, and the

rules under which the decision-maker is acting, and the ultimate question is whether the procedures

adopted were fair in all the circumstances.49 The ultimate question is not whether the group

operating in the private sector failed to follow its own rules or failed to follow perfectly the

principles of natural justice, but whether taking a broad view of the whole process, there was a

fundamentally unfair process.50

[231] The content of the principles of natural justice are flexible and depend on the particular

circumstances of the group, but the minimum requirements are said to be: (a) adequate notice of

what is to be determined and the consequences; (b) an opportunity to make representations; and

(c) an unbiased tribunal.51 The principal of natural justice that there be an unbiased decision-maker

is tempered or contextualized to the circumstances of the organization of the group given the close

relationship amongst members of a group and the inevitability that all the members of the group

will likely have an interest in the dispute.52 In the context of group operating in the private sector,

an unbiased tribunal in accordance with the principles of natural justice is one that has not

prejudged the matter and is opened-minded to being persuaded.53

[232] Courts are reluctant to interfere with the proceedings of a social group,54 where it is

sometimes debatable whether the members even had the intention to form a contract. The group’s

48 Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10 at para. 26; Hellenic Congress of

Quebec v. Canadian Hellenic Congress, 2020 ONSC 2224; Chaudhary v. Canadian Society of Respiratory

Therapists, 2007 BCSC 467; Kaplan v. Canadian Institute of Actuaries, [1994] A.J. No. 868 (Q.B.), aff'd [1997]

A.J. No. 874 (C.A.); Lee v. Showmen’s Guild of Great Britain, [1952] 1 All E.R. 1175 (C.A.). 49 Polish National Union of Canada v. Branch 1 the Polish National Union of Canada, 2014 ONSC 3134; Lakeside

Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165; Syndicat des employés de production du Qué. et de

l'Acadie v. Can. (Can. Human Rights Comm.), [1989] 2 S.C.R. 879 at pp. 895-96; Cardinal v. Kent Institution,

[1985] 2 S.C.R. 643; Martineau v. Matsqui Institution, [1980] 1 S.C.R. 602 at pp. 630-31; Russell v. Duke of

Norfolk, [1949] 1 All E.R. 109 at p. 110 (C.A.). 50 Street v. B.C. School Sports, 2005 BCSC 958. 51 Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10 at para. 26; Lakeside Colony of

Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165; Old St. Boniface Residents Association Inc. v. Winnipeg (City),

[1990] 3 S.C.R. 1170; McLachlan v. Burrard Yacht Club, 2008 BCCA 271; Cohen v. Hazen Avenue Synagogue

(1920), 47 N.B.R. 400 (S.C.); Young v. Ladies' Imperial Club, [1920] 2 K.B. 523 (C.A.) 52 Lakeside Colony of Hutterian Brethren v. Hofer, [1992] 3 S.C.R. 165 at paras. 84-85. 53 Old St. Boniface Residents Association Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170; McLachlan v. Burrard

Yacht Club, 2008 BCCA 271. 54 Surrey Knights Junior Hockey v. Pacific Junior Hockey League, 2018 BCSC 1748; Lee v. Showmen’s Guild of

Great Britain, [1952] 1 All E.R. 1175 (C.A.).

50

obligation to adhere to principles of procedural fairness lies on a spectrum with the proceedings of

a purely social club lie at the one end of the spectrum, where the court’s impose a less rigorous

fair play standard,55 and with groups that affect a member’s livelihood, financial interests or

property at the other end of the spectrum where courts set a higher standard of procedural fairness.

[233] Courts are loath to interfere with the electoral processes of groups operating in the private

sector absent evidence that the irregularities went to the heart of the electoral process or lead to a

result that does not reflect the wishes of the majority.56

[234] Apart from its argument, which I have rejected, that Mr. Karahalios had contractually

precluded himself from having the court review the conduct of the Conservative Party, the

Defendants did not submit that Mr. Karahalios was not entitled to the procedural fairness called

for under the Leadership Rules. The Defendants’ argument rather was that there was no procedural

unfairness in the immediate case.

[235] As noted above, however, Mr. Karahalios submits that the appeal to the DRAC was

procedurally unfair because: (a) the DRAC heard ex parte submissions from the CRO, without

providing any notice to Mr. Karahalios; (d) Mr. Connelly participated in the DRAC deliberations

although he was already inclined to disqualify Mr. Karahalios; (c) the DRAC awarded a harsher

penalty without notice that it was considering doing so; and (c) the DRAC provided no reasons for

its decision.

[236] In my opinion, however, in the circumstances of the immediate case, none of these

submissions is successful. Mr. Karahalios was fairly treated with no denial of procedural fairness.

[237] I begin this analysis by determining what expectation of procedural fairness Mr. Karahalios

was entitled to expect. In this regard, the first matter to note is that the proceeding in which Mr.

Karahalios was not a proceeding of a social group and it was not a discipline proceeding. Rather,

it was a proceeding about the election of a leader of a political party in which the political party

has a much an interest in the fairness of the proceeding and outcome of the election as did Mr.

Karahalios.

[238] In other words, the CRO’s investigation and the DRAC’s investigation were not just about

Mr. Karahalios’ interests, integrity, and reputation; Mr. O’Toole’s complaint to the CRO

implicated not only Mr. Karahalios’ interests but the interests of the collective that is the

Conservative Party.

[239] The second point to note - and this is a very significant matter to note about the nature of

the proceeding in the immediate case - is that the nature of that proceeding was an investigation;

it was an inquiry not an adversarial proceeding like a proceeding under the Rules of Civil

Procedure. The CRO was not playing the role of the adjudicator of a dispute between Mr. O’Toole

and Mr. Karahalios. The CRO and the DRAC on appeal were regulators or investigators of the

propriety and fairness of an election.

[240] In his submissions about the fairness of the proceeding, Mr. Karahalios was insistent on

being entitled to the standard of procedural fairness as if the proceeding was to be governed under

the rules of civil procedure for proceedings and appeals or perhaps the even more rigorous

55 Surrey Knights Junior Hockey v. Pacific Junior Hockey League, 2018 BCSC 1748; Barrie v. Royal Colwood Golf

Club, 2001 BCSC 1181; Labouchere v. Earl of Wharncliffe, [1879] 13 Ch. D. 346. 56 Hellenic Congress of Quebec v. Canadian Hellenic Congress, 2020 ONSC 2224; Lee v. Lee's Benevolent Assn of

Ontario, [2004] O.J. No. 6232 (S.C.J.), aff'd [2005] O.J. No. 194 (Div. Ct.).

51

standards of fairness for an accused in criminal or quasi-criminal disciplinary proceedings. Mr.

Karahalios grossly overstates the standard of procedural fairness required in the immediate case

which focuses on a fair election among all the candidates for Leader and not just Mr. Karahalios’

interests.

[241] The third point to note is that the Leadership Rules were designed for the particular

circumstances of regulating an election of a leader of a political party that has its own identity, its

own principles, and its own ideology that had been established by its Constitution. The rules

regulating that election required the candidates to agree to advance, the policies, principles, goals

and objectives of the Conservative Party of Canada as set out in the Constitution of the Party.

[242] In other words, in the immediate case, the Leadership Rules were designed to be

investigatory and to safeguard the principles of the Conservative Party. The candidates, including

Mr. Karahalios, agree they read and understand the Leadership Nomination Rules and Procedures.

They all acknowledged and agreed that the LEOC had the authority to disallow a candidacy on

any grounds it saw fit. This circumstance takes out the steam of Mr. Karahalios’ submission that

fairness required that decisions about his adherence to the principles of the party were not matters

for the CRO, nor for the DRAC nor even the LEOC but were for the rank and file members to

determine by electing or not electing Mr. Karahalios. It takes the steam out of his argument that

not even the LEOC and only the members of the Conservative Party could decide on his

qualifications to be a Leader of the Conservative Party.

[243] The fourth point is that taking the broad view of the whole process, there was the opposite

of a fundamentally unfair process. In my opinion, the process afforded Mr. Karahalios was

fundamentally fair. He was given notice, and he knew precisely the case he had to meet. He had

all the factual documents associated with his alleged misconduct, and he was given an ample

opportunity - which he seized upon – to answer Mr. O’Toole’s complaint. Mr. Karahalios also

knew that the inquiry would be an investigation and he knew that the CRO would consult with the

LEOC. He knew that he would not be privy to those consultations. He knew from the outset that

he was not entitled to participate in those consultations.

[244] This brings me to the particulars of Mr. Karahalios’ submissions that he was denied

procedural fairness. In this regard, he has no cause for complaint that the DRAC heard so called

ex parte submissions from the CRO. Mr. Karahalios knew or ought to have known that DRAC

could receive submissions from the CRO in response to appeal. The Rules expressly provide that,

in considering appeals coming before it, DRAC may make inquiries and request information, as it

deems necessary, to make a determination of the issues before it.

[245] The DRAC was entitled to consult with the CRO, and while it was wrong in following his

advice that it had the authority to disqualify Mr. Karahalios, it was neither unexpected nor unfair

for the DRAC to receive submissions from the CRO. Moreover, there was little to nothing in the

CRO’s submissions that Mr. Karahalios had not already addressed in his copious submissions to

the DRAC and to the CRO, which submissions were also before the DRAC.

[246] Mr. Karahalios had no cause for complaint that the DRAC imposed the higher penalty of

disqualification than had the CRO. Mr. Karahalios always knew that disqualification was in play.

Mr. O’Toole’s complaint asked that Mr. Karahalios be disqualified. Mr. Karahalios treated the

CRO’s Ruling as akin to or de facto being a disqualification. Disqualification was a possible

recommendation of the CRO to LEOC. There was no procedural unfairness, as such, in the DRAC

coming to a harsher penalty without notice to Mr. Karahalios. Mr. Karahalios knew or ought to

52

have known that the DRAC could revise and intensify the sanctions imposed by the CRO. Where

the DRAC went out of bounds was in thinking that it had the authority to disqualify, which for the

reasons above, it did not have the authority to do; however, it could recommend disqualification.

There was no procedural unfairness per se in the DRAC awarding a harsher penalty without notice.

The DRAC could impose harsher penalties and it could recommend to LEOC the harshest penalty

of disqualification.

[247] Although the point is debatable under the Leadership Rules, I am prepared for the purposes

of the summary judgment motion to agree with Mr. Karahalios that it was wrong for Mr. Connelly

to participate in the DRAC deliberations and that it was not good enough for him to recuse himself

from voting. However, that is not the end of the analysis of whether there was procedural

unfairness. In my opinion, continuing the analysis, in the factual circumstances of the immediate

case, there was no procedural unfairness. I say this for two reasons, First, it must be recalled that

the ultimate question is not whether the group operating in the private sector failed to follow

perfectly the principles of natural justice, but whether taking a broad view of the whole process,

there was a fundamentally unfair process. For the reasons set out above, in my opinion, the process

afforded Mr. Karahalios was very fair to him. Second, if the involvement of a single DRAC judge

had given rise to a reasonable apprehension of bias, no reasonable person informed of the decision-

making process under the Leadership Rules and viewing it realistically could conclude that the

three other DRAC members were biased or tainted.57 And, in this last regard, it should be noted

that during his cross-examination, Mr. Karahalios conceded that he was not suggesting that the

members of DRAC were biased

[248] That the DRAC provided no reasons for its decision is also in the circumstances of the

immediate case not a procedural unfairness. As a matter of freedom of contract, parties are entitled

to contract for something less than the judicial standard of procedural fairness where written

reasons are of critical importance not only for fairness grounds but to allow for appellate review.

[249] In the immediate case, the Constitution of the Conservative Party provided for a dispute

resolution procedure that was to be final and binding. Mr. Karahalios had agreed that the DRAC

Decision was final and binding on him and on all Party members and he had agreed that the

decision was not subject to internal appeal or judicial review. There is no requirement in the

Leadership Rules that on appeal DRAC must deliver written reasons. Moreover, in the immediate

case, in any event, Mr. Karahalios knew precisely why he was being disqualified. It was readily

apparent that the DRAC agreed with the CRO’s Ruling that there had been a contravention as

found by the CRO and the DRAC thought that disqualification was warranted.

[250] What the DRAC did is akin what trial judge’s love to hear from an appellate court; it

essentially stated that for the reasons of the court (the CRO) below, the appeal is dismissed. In the

immediate case, the DRAC reasons for decision were: “After careful consideration of all the

evidence and submissions of Mr. Karahalios and the complainant, and the findings and reasons for

decision of the Chief Returning Officer, the Dispute Resolution Appeals Committee rules that Mr.

Karahalios be disqualified as a candidate for Leader of the Conservative Party of Canada.” These

reasons were more than adequate and there was no denial of procedural fairness.

[251] I, therefore, conclude that there was no procedural unfairness visited upon Mr. Karahalios.

57 Wewaykum Indian Band v. Canada, 2003 SCC 45.

53

O. Was there Bad Faith in the CRO’s Ruling and the DRAC Decision?

[252] The next issue to consider before discussing the issue of the appropriate remedy is was

there bad faith in the CRO’s Ruling and the DRAC Decision.

[253] In Clublink v. Town of Oakville,58 which was a case about a municipality allegedly acting

in bad faith in enacting land planning by-laws, Justice Morgan listed common badges of bad faith

including: (a) questionable timing; (b) decisions made under false pretenses; (b) improper motives;

(c) lack of notice; (d) the usual practices and procedures are set aside; (d) the parties most affected are

kept in the dark; and (e) the singling out of one individual (differential treatment).

[254] This issue of bad faith is essentially a matter of fact and of piecing together circumstantial

evidence. In the immediate case, my findings of fact set out throughout these Reasons for Decision

establish no bad faith and no improper purpose by the Defendants or by their officials whose

reputations and integrity have been maligned by Mr. Karahalios.

[255] The facts reveal that Mr. Karahalios entered the leadership race spoiling for a fight with

what he called the Party Establishment. He was, nevertheless, welcomed, even encouraged by the

the Leadership Candidate Nomination Committee (LCNC) to join the contest. The facts reveal that

nobody interfered with Mr. Karahalios campaign until Mr. O’Toole complained, and the facts

reveal that Mr. O’Toole’s complaint was not spurious or fanciful and it was a complaint that he

was entitled to make.

[256] The facts reveal that nobody lured or entrapped Mr. Karahalios to contravene the directive

that he not to campaign in a way that offended the principles of the Conservative Party’s

Constitution, principles that he had contractually agreed to adhere to. Whether he did or did not

contravene those principles is not for me to say, but I can say that it was at least arguable that he

had contravened those principles by his campaign material, and I can say that Mr. O’Toole was,

at least, entitled to complain and let the CRO and the DRAC decide the matter on its merits.

[257] There was nothing untoward about how the CRO treated Mr. O’Toole’s complaint, and the

CRO’s Ruling is transparent as to why he imposed a penalty on Mr. Karahalios, which penalty

was not a de facto disqualification and was not designed to drive Mr. Karahalios out of the contest.

[258] There was procedural fairness in the process leading to the DRAC Decision, but the DRAC

went too far in disqualifying Mr. Karahalios. The DRAC could and perhaps should have instead

made a recommendation to the LEOC. There is, however, nothing in the evidentiary record of

admissible evidence to support Mr. Karahalios’ submission that there was bad faith and an

improper purpose in the DRAC Decision.

[259] Mr. Karahalios’ badges of bad faith do not survive analysis, including his argument that

adverse inferences should be drawn from the absence of direct evidence from Mr. Vanstone, the

members of DRAC and the other members of the LEOC whose integrity has been impugned by

Mr. Karahalios.

[260] Upon analysis, the spoiling for a fight Mr. Karahalios was baiting his self-declared enemies

to respond so that he could find evidence that there was something more than an investigation of

Mr. O’Toole’s complaint, which complaint had been instigated - by Mr. Karahalios’ - provoking

attack on Mr. Soliman, which Mr. O’Toole took to be a racist dog whistle message. Mr. O’Toole

58 2018 ONSC 7395, rev’d in part 2019 ONCA 827.

54

did not provoke a fight with Mr. Karahalios. It was Mr. Karahalios who dropped the gauntlet, and

Mr. O’Toole picked it up.

[261] Mr. Karahalios dropped the gauntlet again against Ms. Assouline, Mr. Connelly, Mr.

Magnus, Mr. Plett, and Mr. Vanstone, but they were astute enough not to stoop to pick up the

gauntlet and duel with Mr. Karahalios. He accused them of evasiveness, impartiality, and

dishonesty. He was baiting them, and they did not take up the bait.

[262] As noted above, during his cross-examination, Mr. Karahalios conceded that he was not

suggesting that the members of DRAC were biased; however, at the same time, he asserted that

they were partisans for the establishment candidates and were acting in bad faith. Mr. Karahalios’

illogical position demonstrated that he did not have a foundation to accuse Mr. Vanstone or the

DRAC members of impropriety and was floundering to find a foundation. Litigation is not an

MMA match where one calls out his opponent and dares him or her to enter the courtroom. The

Conservative Party was astute to appreciate that Mr. Karahalios had not shown a foundation for

his allegations of impropriety.

[263] I appreciate that conspiracies of bad faith conduct are difficult to prove and conspiracies

take place behind closed doors, but other than an outcome that Mr. Karahalios did not like from

Mr. Vanstone, which outcome, nevertheless, would not have excluded Mr. Karahalios from the

competition, Mr. Karahalios had nothing to call out the establishment of the party, and there has

nothing to support his allegation that the Conservative Party establishment was out to get him. I,

therefore, draw no adverse inference from Ms. Assouline, Mr. Connelly, Mr. Magnus, Mr. Plett,

and Mr. Vanstone not responding with affidavits to contradict Mr. Karahalios’ speculations.

[264] Upon analysis there is nothing to Mr. Karahalios’ complaint about differential treatment of

other candidates. Nobody, not even Mr. Karahalios, had complained to the CRO about what others

had to say about Sharia law or other topics that had a racist or bigoted overtones. Nobody had

complained to the CRO about the manner in which other candidates were discussing those topics.

And in any event, a wrongdoing by another candidate would not excuse Mr. Karahalios’s own

conduct which is what was in issue.

[265] I conclude that there is nothing to Mr. Karahalios’ allegation that there was bad faith by

the Conservative Party or any of its officials.

P. What is the Appropriate Remedial Response?

[266] I have indicated at the outset of these Reasons for Decision that the appropriate remedial

response is to set aside the DRAC Decision and to restore the CRO’s Ruling without prejudice to

the rights of the LEOC to consider Mr. Karahalios’ status as a candidate.

[267] In Lakeside Colony of Hutterian Brethren v. Hofer,59 Mr. Hofer was expelled from a

religious association. The Supreme Court held that his contractual rights had been breached and

dismissed the association’s action to have him expelled. The Supreme Court declared that Mr.

Hofer had not been expelled and that he remained a members of association throughout. I adopt a

similar approach in the immediate case. Mr. Karahalios’ contractual rights have been breached

insofar as the DRAC imposed a penalty beyond its authority to impose. The appropriate remedy

in the immediate case is to nullify the DRAC Decision and to restore the CRO’s Ruling.

59 [1992] 3 S.C.R. 165.

55

[268] I appreciate that neither party wanted the CRO’s Ruling reinstated, but that was because

Mr. Karahalios wanted to avoid any sanction at all, which is a result that he is not entitled to, and

the Conservative Party wanted to preserve the DRAC decision, which is a result that it is not

entitled to. The appropriate result, which is consistent with contract law doctrine, is that the remedy

for a breach of contract is to put the wronged party in the position that he or she would have been

had the contract been performed. In the immediate case, the appropriate result is to restore the

CRO Ruling.

[269] I repeat that it is not the court’s role to determine whether the CRO’s Ruling was

substantively correct nor is it this court’s role to decide for the Conservative Party who has the

status to be a candidate for its leadership, which ultimately is a matter for LEOC.

[270] It would not be a futile gesture or pre-determined matter for the LEOC to consider Mr.

Karahalios’ candidacy. There has not been an official deliberation by the LEOC. Under Rule 1.10.1

of the Leadership Rules and under section 6.2 of the Conservative Party’s Constitution, the

members of LEOC are required to maintain neutrality in a Leadership Contest. A contravention of

neutrality triggers removal of the officeholder. During argument, counsel for the Conservative

Party conceded that the members of LEOC would fulfill their obligations.

[271] I wish to be clear that I am not recommending that LEOC consider the matter of Mr.

Karahalios’ candidacy. That is a matter for the members of the LEOC to decide. I am only saying

that the court will not decide that substantive issue and that the court’s ruling restoring the CRO’s

Ruling is without prejudice to the rights of the LEOC. Mr. Karahalios status is properly left to the

LEOC to adjudicate. That was the contractual arrangement of the candidates with the Conservative

Party. LEOC is in the position to determine if the conduct of the Mr. Karahalios was such that he

should be disqualified as a candidate.

Q. Conclusion

[272] For the above reasons, I grant Mr. Karahalios a summary judgment as set out in the

Introduction to these Reasons for Decision.

[273] This is not an appropriate case for costs. Mr. Karahalios was the successful party on the

summary judgment motion, but he made serious allegations that impugned the integrity and the

reputation of the Defendants and of some distinguished Canadian citizens that he failed to prove.

[274] In the circumstances of the Covid-19 emergency, these Reasons for Decision are deemed

to be an Order of the court that is operative and enforceable without any need for a signed or

entered, formal, typed order.

[275] The parties may submit formal orders for signing and entry once the court re-opens;

however, these Reasons for Decision are an effective and binding Order from the time of release.

Perell, J.

Released: May 20, 2020

CITATION: Karahalios v. Conservative Party of Canada, 2020 ONSC 3145

COURT FILE NO.: CV-20-638708

DATE: 2020/05/20

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

DIMITRIOUS KARAHALIOS

Plaintiff

- and -

CONSERVATIVE PARTY OF CANADA and,

CONSERVATIVE FUND CANADA

Defendants

REASONS FOR DECISION

PERELL J.

Released: May 20, 2020