) ) Dan McLean Applicant – v. –, 2017 ONSC 520

CITATION : McLean v.

Township of Springwater et al, 2017 ONSC 520 DIVISIONAL COURT FILE NO.: 345/16 DATE: 20170131 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT BETWEEN: ) ) Dan McLean Applicant – and – Township of Springwater Compliance Audit Committee, Grant Thornton LLP, William French and The Corporation of the Township of Springwater Respondents ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Jack Siegel, for the Applicant and Responding Party Harold Elston, for The Corporation of the Township of Springwater and Grant Thornton LLP; for the Respondent and Moving Party Grant Thornton LLP Renatta Austin, for William French, Respondent Jody E.

Johnson for the Township of Springwater Compliance Audit Committee, Respondent ) HEARD at Toronto: January 5, 2017 ENDORSEMENT KITELEY J. [ 1 ] In this motion, the primary relief sought is that the Application for Judicial Review be dismissed as against Grant Thornton LLP. For the reasons that follow, the motion is granted and the Application as against Grant Thornton LLP is dismissed. Background [ 2 ] In the municipal election in 2014, William French was elected Mayor of the Township of Springwater.

On June 24, 2015, the Compliance Audit Committee (CAC) of the Township of Springwater received an application from Mr. McLean requesting a review of the campaign finances of Mr. French pursuant to subsection 81(1) of the Municipal Elections Act (the MEA). On July 21, 2015, the CAC ordered an audit of Mr. French’s financial report and appointed Grant Thornton LLP to conduct the audit. [ 3 ] The audit engagement letter is dated September 2, 2015 and is signed by Melanie Dugard, Principal of Grant Thornton, by the Clerk on behalf of the Township of Springwater and signed by Mr.

French “acknowledged as of the date first set forth above.” [ 4 ] Grant Thornton delivered a Report dated September 25, 2015 which identified five “instances of non-compliance with the Municipal Elections Act” that “impact[ed] the values included on the Statement of Income and Expenses and related information for the reporting period of March 3, 2014 to October 27, 2014”. Those five instances were expenses paid outside of campaign account; contributed services; website expense; contributed goods; and allocation of contributed goods on form 4.

On October 23, 2015, the CAC met to consider the Report. [ 5 ] The transcript of the meeting held October 23, 2015 indicates that the Chair made introductory remarks to the effect that the purpose of the meeting was solely to receive the Report and, under s. 81(4) of the MEA, decide whether the report concluded that the candidate contravened a provision of the MEA and commence legal proceedings against the candidate for the apparent contraventions; or

if the Report concluded that the candidate did not appear to have contravened any provision of the MEA, the CAC could make a finding as to whether there were reasonable grounds for the application for a compliance audit. There were presentations or remarks by the representative of Grant Thornton, the lawyer for Mr. McLean and others. Amongst other things, there was discussion as to the propriety of Mr. French having signed the audit engagement letter and whether the auditor was required to have sought input from others including Mr. McLean.

The minutes of the meeting indicate that the following motion was passed: That an independent audit be obtained and provided to the Compliance Committee pursuant to section 81(7) of the Municipal Elections Act; and The audit shall be a forensic audit of the candidate’s election campaign of finances and all matters to date and any other matters provided to the auditor; and That the Compliance Committee shall have 20 days to appoint a new Auditor and all parties notified. [ 6 ] By Notice of Application for Judicial Review dated November 30, 2015, Mr. French brought proceedings against Mr.

McLean, the CAC and the Township of Springwater. Mr. French has applied for declaratory and other relief, the effect of which would be to prohibit the new independent audit from proceeding and to preclude the CAC from further acting on the original Report. It is alleged that the decisions of October 23, 2015 to refuse the Report and conduct a second compliance audit were ultra vires the CAC and the time during which the CAC could act on the Report had passed. [ 7 ] By Notice of Application for Judicial Review dated July 18, 2016 Mr. McLean brought proceedings against Grant Thornton LLP, Mr.

French, the CAC and the Township of Springwater. Mr. McLean asks for orders as follows: (

a) a declaration that the portion of the decision of the CAC dated July 21, 2015 appointing Grant Thornton to undertake a compliance audit was ultra vires the statutory authority granted to the Committee; (

b) an order requiring the CAC pursuant to s. 81(7) and (8) of the MEA to appoint an auditor licensed under the Public Accounting Act to conduct a compliance audit of the 2014 election campaign finances of Mr. French; (

c) an order quashing the Report as made without jurisdiction, or alternatively on the basis of any or all of the following: (

i) that the conduct of Grant Thornton resulted in the denial of natural justice to Mr. McLean; (ii) that the conduct of Grant Thornton resulted in the denial of procedural fairness to Mr. McLean; or (iii) that the conduct of Grant Thornton was either biased in favour of Mr. French or gave rise to a reasonable apprehension of such bias. Motion to dismiss against Grant Thornton LLP [ 8 ] Mr. Elston acts for the Corporation of the Township of Springwater and Grant Thornton LLP. On behalf of Grant Thornton he has brought this motion which, as subsequently amended, seeks the following relief: (

a) declaration that Grant Thornton was not exercising a statutory power of decision in preparing the Independent Auditor’s Report, and that its involvement in the work of the Township of Springwater’s Compliance Audit Committee is not susceptible to judicial review; (

b) an order dismissing the application for judicial review as against Grant Thornton; (

c) in the alternative, a declaration that Grant Thornton was not exercising a statutory power of decision in preparing the Independent Auditor’s Report and an order that Grant Thornton is not required to file a record of proceedings with the Court. [ 9 ] Mr. Elston did not make separate submissions on behalf of the Township but advised that it supported the motion on behalf of Grant Thornton. On behalf of Mr. French, Ms. Austin supports the motion to dismiss while Mr. Siegal (on behalf of Mr. McLean) and Ms. Johnson (on behalf of CAC) are opposed to the motion. Municipal Elections Act (MEA) [ 10 ] Ms.

Johnson and Mr. Siegel have provided the legislation as it was in force at the time of the 2014 election while Mr. Elston has provided the current version. I have relied on the 2014 version. [ 11 ]

Section 76 establishes the expenses that the candidate is permitted to incur. Sections 78 and 79.1 set out in detail the financial reporting requirements imposed on candidates which includes providing an auditor’s report prepared by an auditor licensed under the Public Accounting Act . Section 92(5) provides that a candidate is guilty of an offence if the candidate files a document under

section 78 or 79.1 that is incorrect or otherwise does not comply with the section; or incurs expenses that exceed what is permitted under

section 76. [ 12 ] The following sections are relevant to this motion: Compliance Audit Application 81(1) An elector who is entitled to vote in an election and believes on reasonable grounds that a candidate has contravened a provision of this Act relating to election campaign finances may apply for a compliance audit of the candidate’s election campaign finances.

(2) An application for a compliance audit shall be made to the clerk of the municipality or the secretary of the local board for which the candidate was nominated for office; and it shall be in writing and shall set out the reasons for the elector’s belief. . .

(4) Within 10 days after receiving the application, the clerk of the municipality or the secretary of the local board, as the case may be, shall forward the application to the compliance audit committee established under

section 81.1 and provide a copy of the application to the council or local board.

(5) Within 30 days after receiving the application, the committee shall consider the application and decide whether it should be granted or rejected. . . Appointment of auditor

(7) If the committee decides under subsection (5) to grant the application, it shall appoint an auditor to conduct a compliance audit of the candidate’s election campaign finances.

(8) Only auditors licensed under the Public Accounting Act, 2004 or prescribed persons are eligible to be appointed under subsection (7). Duty of auditor

(9) The auditor shall promptly conduct an audit of the candidate’s election campaign finances to determine whether he or she has complied with the provisions of this Act relating to election campaign finances and shall prepare a report outlining any apparent contravention by the candidate. . .

(11) Within 10 days after receiving the report, the clerk of the municipality or the secretary of the local board shall forward the report to the compliance audit committee. Powers of auditor

(12) For purpose of the audit, the auditor; (

a) is entitled to have access, at all reasonable hours, to all relevant books, papers, documents or things of the candidate and of the municipality or local board; and (

b) has the powers of a commission under

Part II of the Public Inquiries Act , which Part applies to the audit as if it were an inquiry under that Act. Costs

(13) The municipality or local board shall pay the auditor’s costs of performing the audit. Powers of committee

(14) The committee shall consider the report within 30 days after receiving it and may, (

a) if the report concludes that the candidate appears to have contravened a provision of this Act relating to election campaign finances, commence a legal proceeding against the candidate for the apparent contravention; (

b) if the report concludes that the candidate does not appear to have contravened a provision of this Act relating to election campaign finances, make a finding as to whether there were reasonable grounds for the application. Recovery of costs

(15) If the report indicates that there was no apparent contravention and the committee finds that there were no reasonable grounds for the application, the council or local board is entitled to recover the auditor’s costs from the applicant. Compliance audit committee 81.1(1) A council or local board, shall, before October 1 of an election year, establish a committee for the purposes of

section 81.

(5) The council or local board, as the case may be, shall pay all costs in relation to the committee’s operation and activities. Judicial Review Procedure Act (JRPA) [ 13 ] Subsection 2(1)2 of the JRPA provides that declaratory relief is available “in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.” Pursuant to s. 1 “statutory power” means a power or right conferred by or under a statute, (

a) to make any regulation, rule, by-law or order, or to give any other direction having force as subordinate legislation, (

b) to exercise a statutory power of decision, (

c) to require any person or party to do or to refrain from doing any act or thing that, but for such requirement, such person or

party would not be required by law to do or to refrain from doing, (

d) to do any act or thing that would, but for such power or right, be a breach of the legal rights of any person or party. [ 14 ] And “statutory power of decision” means a power or right conferred by or under a statute to make a decision deciding or prescribing, (

a) the legal rights, powers, privileges, immunities, duties or liabilities of any person or party, or (

b) the eligibility of any person or party to receive, or to the continuation of, a benefit or licence, whether the person or party is legally entitled thereto or not, and includes the powers of an inferior court. Analysis [ 15 ] Counsel agree that this is a question of first instance. For that reason, they have looked both at existing fundamental principles and cases that they consider analogous. [1] [ 16 ] I start with the decision in Jackson v. Vaughan (City ). Linda Jackson was elected Mayor of the city of Vaughan.

Two residents brought an application under ss. 81(1) and (2) of the MEA seeking a compliance audit of her campaign finances. Council deferred consideration of the application on the basis that it wished to wait until the last supplementary filing date had passed for the reporting of election expenses. The complainants appealed to the Ontario Court of Justice under s. 81(3.3) of the MEA. Favret J. of the OCJ allowed the appeal and ordered the city to appoint an auditor to conduct a compliance audit and report the findings to Council.

Council issued a request for proposal for an auditor to conduct a compliance audit. The complainants filed a second application for a compliance audit of Ms. Jackson’s finances within the initial reporting period and during a supplementary reporting period. Council appointed two people to conduct compliance audits of both periods. [ 17 ] Council received the compliance audit report that identified numerous apparent contraventions of the election campaign finances rules under the MEA, ranging from matters such as excess campaign spending to missing postal codes on the addresses of some contributors.

The report contained no conclusions or opinions on whether legal action should be taken against Ms. Jackson in respect of the apparent contraventions. [ 18 ] Council passed a resolution in which it instituted the laying of charges against Ms. Jackson for breaches of the MEA and retained an identified lawyer to conduct the prosecution of those charges. Subsequently a by-law ratified the resolution. [ 19 ] Ms. Jackson brought an application to have the by-law quashed that was not successful and her appeal from that decision was dismissed. [ 20 ] In Jackson v.

Vaughan (City) , the Council had not appointed a Compliance Audit Committee. However, the reasons for decision of the application judge [2] contain his views as to the nature of a compliance audit as follows: What is a Compliance Audit? [ 69 ] The Applicant argues that it not clear what a “compliance audit” is under ss. 81 (1) and 81 (4) of the MEA, noting that it seems to be something different than an audit, but precisely what is not clear, since: “there is no definition of what a compliance audit consists.

An auditor’s duty, under s. 81(6), is to prepare a report outlining any ‘apparent contraventions’ by the candidate but what constitutes an ‘apparent contravention’ is not defined.” On behalf of the Applicant, Mr. Manning asks: “Is an ‘apparent contravention’ a real contravention?” [ 70 ] Taken contextually, in my view the nature of a compliance audit readily emerges from the MEA. Subsection 81 (6) provides:

(6) An auditor appointed under subsection (4) shall promptly conduct an audit of the candidate’s election campaign finances to determine whether he or she has complied with the provisions of this Act relating to election campaign finances and prepare a report outlining any apparent contravention by the candidate. [ 71 ]

Section 81 relates back to the provisions of the MEA concerning election campaign finances, which are set out in ss. 66-79.

These are detailed provisions that give content to the concepts of contributions (s. 66), expenses (s. 67), the election campaign period (s. 68), the duties of a candidate (s. 69), when a candidate may accept contributions (s. 70), maximum limits on contributions (s. 71), restrictions on fund-raising functions (s. 73), borrowing by a candidate (s. 75), filing dates in relation to financial statements (s. 77) and an auditor’s report (s. 78) and the treatment of surpluses and deficits (s. 79). [ 72 ] The term “compliance audit” in s. 81(1) obviously refers to compliance with “a provision of this Act relating to election campaign finances,” set out in the Act and referenced in the prescribed forms for the financial statement and auditor’s report required to be filed under s. 78 of the MEA.

The term is nothing more than a convenient contraction for drafting purposes. It does not denote or connote anything more than an audit leading to a report to municipal council that, like any auditor’s report, identifies “apparent contraventions” as required by s. 81(6) of the Act. I find that there is nothing vague, ambiguous or mysterious in the term “compliance audit”. I find that it is not the auditor’s function to determine whether an apparent contravention is a real contravention.

That is a determination which is ultimately for the judge of the Ontario Court of Justice to make in a prosecution under s. 81 (10), after being filtered through municipal council and a prosecutor. [ 21 ] Bearing that description in mind in considering the MEA, the role of the auditor is to perform an audit that, in general terms, means to verify the revenue and expenditures and compare them against what is permitted. The auditor is a professional with specific training in how to perform that analysis. The Report contains the auditor’s professional opinion as to the candidate’s apparent

compliance with the MEA. [3] The auditor does not decide whether the candidate has contravened the MEA; it is ultimately the decision of the Ontario Court of Justice where the prosecution is conducted and the outcome of that will be a finding of guilty or not guilty. [ 22 ] The Report of the auditor is not determinative. The auditor does not have the power to decide a matter affecting the “legal rights, powers, privileges, immunities, duties or liabilities of any person”. None of the factors referenced in Port Authority apply.

Just because, pursuant to a statute, an auditor may accept an appointment and conduct an audit, does not mean the auditor has a statutory power of decision. Having access to the powers under the Public Inquiries Act (which counsel agree were not exercised in this case) does not change the scope of the appointment from investigatory to decision-making.

The character of the matter for which review is sought (namely the Report) displays no public element; and the public law remedy sought – certiorari – is not suitable. [ 23 ] There is no aspect of the work of the auditor conducting a compliance audit that could be characterized as the exercise of a statutory power of decision.

The Report by the auditor is a threshold requirement for the CAC but is properly characterized as a technical step in the process or an instrument on the way to the CAC making a decision whether to commence a legal proceeding. [ 24 ] All of the decisions are made by the CAC: whether to grant or reject the application for a compliance audit; what auditor to appoint; to consider the report within 30 days and to decide whether to commence a legal proceeding against the candidate; and to decide whether there were reasonable grounds for the application, bearing in mind that Council decides whether to recover the auditor’s costs from the applicant. [ 25 ] An application for judicial review may be quashed or dismissed where it is devoid of merit.

The test on such a motion is the same as the test on a motion to dismiss an action under rule 21.01(1)(

b) of the Rules of Civil Procedure , namely, is it plain and obvious that the application is devoid of merit and cannot succeed. [4] As against Grant Thornton, it is plain and obvious that the application is devoid of merit and cannot succeed. [ 26 ] There are many issues in the McLean (and French) Applications which I need not consider in this motion including how Grant Thornton was chosen and by whom; whether a firm could be engaged for the purpose of preparing a compliance audit report or an individual accountant had to be appointed; how the Grant Thornton engagement letter came to be finalized; the implications, if any, of Mr.

French having acknowledged the engagement letter not in his capacity as Mayor but as person to be audited; whether an engagement letter is required or reasonable when the auditor was appointed pursuant to s. 81(7); whether Grant Thornton had any obligation to reach out to Mr. McLean or others and consider their input before writing the Report. The narrow issue in this motion is whether Grant Thornton was exercising a statutory power of decision when it produced its Report. [ 27 ] As indicated above, the election was in late 2014. Since then, the CAC has taken steps to which both Mr. French and Mr.

McLean object as each has launched a judicial review application. Following receipt of this decision, counsel will resume the appropriate steps which may include cross-examination and ultimately will be addressed in a hearing of the applications which the Associate Chief Justice Marrocco has directed be heard together. All of this is unfolding at likely considerable expense to the parties and to the ratepayers. I encourage all counsel and the parties to consider whether a judicial settlement conference with A.C.J.

Marrocco (who has agreed to make himself available for that purpose) might lead to an earlier and less expensive resolution. Amended Notice of Motion [ 28 ] On the eve of the hearing of this motion, Mr. Elston on behalf of both of his clients delivered a supplementary notice of motion in which he sought procedural relief including setting aside summons to witnesses and an order striking the affidavit of Mr. McLean. All counsel agreed that I need not hear that amended motion because some of the relief sought would naturally follow from the outcome of this motion to dismiss.

If counsel are unable to agree and the motion has to be renewed, I am not seized but will deal with it if available. Costs [ 29 ] Mr. Elston and Mr. Siegel agreed that, as between them, the unsuccessful party would pay costs of $15,000. Ms. Johnson did not seek costs. Ms. Austin did not seek costs from the Township or the CAC but did seek costs of $4,000 from Mr. McLean. Mr. Siegel did not seek costs from Mr. French or the CAC and, while he was opposed to paying costs of $4,000 he did agree to an attendance fee of $1,500. Given the role of Mr.

French and his counsel in this motion, I agree that a modest attendance fee is appropriate. ORDER TO GO AS FOLLOWS: [ 30 ] The motion to dismiss is granted. The Application for Judicial Review as against Grant Thornton LLP is dismissed. [ 31 ] The Applicant shall pay to Grant Thornton LLP costs in the amount of $15,000 and pay to Mr. French costs in the amount of $1,500. _______________________________ Kiteley J. Released: January 31, 2017