Court File and Parties

COURT FILE NO.: CV-20-638708 DATE: 2020/04/13 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

DIMITRIOUS KARAHALIOS Applicant

• and - CONSERVATIVE PARTY OF CANADA, CONSERVATIVE FUND CANADA, DEREK VANSTONE (as Chief Returning Officer of the Conservative Party of Canada), SAM MAGNUS, VALERIE ASSOULINE, DAVID CONNELLY, AND DON PLETT (as members of the Dispute Resolution Appeals Committee) Defendant

Counsel: Daniel Z. Naymark and James Gibson for the Applicant Peter N. Mantas, Christopher J. Rae and Gabrielle Cyr for the Conservative Party of Canada, Conservative Fund Canada, Sam Magnus, Valerie Assouline, David Connelly, and Don Plett Derek Vanstone, self-represented.

Application under Rule 14.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

HEARD: April 9, 2020

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Applicant, Dimitrious Karahalios, was disqualified as a candidate for the leadership of Conservative Party of Canada in the pending Leadership Contest. He brings an application for declarations and 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.

[2] Mr. Karahalios also seeks an Order directing the Conservative Fund Canada to apply what are known as “Directed Contributions” to pay: (a) his registration fee ($200,000); (b) his compliance deposit ($100,000); and (c) 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, S.C. 2000, c. 9.

[3] The Respondents are the Conservative Party of Canada, the Conservative Fund Canada, Sam Magnus, Valerie Assouline, David Connelly, Don Plett, and Derek Vanstone.

[4] The Respondents (with the exception of Mr. Vanstone, who supports the motion) bring a preliminary motion seeking:

a. an Order dismissing or striking out this application on the grounds that it is not authorized by the terms of subrule 14.05(3) of the Rules of Civil Procedure; b. an Order striking out this application as disclosing no cause of action on the grounds that the decision of the Dispute Resolution Appeal Committee (“DRAC”) was final and binding and not subject to review or challenge in a court of law; and, c. in the alternative, if the application is not struck out, an Order declaring that Mr. Magnus, Ms. Assouline, Mr. Connelly, Mr. Plett, and Mr. Vanstone are not proper parties to this proceeding and, dismissing this application against them.

[5] Mr. Vanstone is a self-represented Respondent, and he supports the other Respondents’ motion.

[6] For the Reasons that follow, I make the following Order:

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 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.

B. Facts

[7] For the purposes of the application, the Respondents do not concede the truth of all of the facts set out in Mr. Karahalios’ Notice of Application and supporting affidavit. They take issue with respect to Mr. Karahalios’ characterization of the events, his protestation of innocence, and his imputation of bad motives and malign intentions.

[8] Nevertheless, solely for the purpose of this motion to strike the application, the Respondents accept the facts set out in the Notice of Application as true.

[9] I too for the purposes of the preliminary motion accept as true the facts in Mr. Karahalios’ affidavit and his Notice of Application.

[10] However, his affidavit and the Notice of Application contains rhetoric, polemic, legal argument, and conclusions about legal matters that are ultimately for the court to decide. For the purposes of this motion, I do not accept conclusory argument as proven facts, and I have not included the rhetoric, polemic, and legal argument in the following account of the background facts.

[11] In the following account of the background facts, I have included excerpts from some of the documents that are referred to in the Notice of Application or in Mr. Karahalios’ affidavit.

1. The Parties

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

[13] Derek Vanstone is the Chief Returning Officer of the Conservative Party.

[14] Sam Magnus, Valerie Assouline, David Connelly, and Don Plett are members of the Dispute Resolution Appeals Committee (“DRAC”) appointed by the Conservative Party’s Leadership Election Organizing Committee (“LEOC”).

[15] The Conservative Fund Canada is a federal corporation governed by the Canada Not-for-profit Corporations Act, S.C. 2009, c. 23. It serves as the Conservative Party’s fundraising arm. It collects donations and issues tax receipts. Pursuant to the Leadership Rules, all leadership candidates must have all contributions to their campaigns sent 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.

[16] Mr. Karahalios is a politician who has been active in politics for 15 years. Mr. Karahalios has served as a president of local riding associations for the Party and for the Progressive Conservative Party of Ontario. He has chaired local nomination contests, and he had leading roles in local and leadership candidate campaigns. He has also been involved in the political campaigns of his wife, Belinda Karahalios, who is the Ontario PC Party MPP for the riding of Cambridge. Mr. Karahalios is a populist, grassroots candidate in the Conservative Party’s Leadership Contest.

[17] Mr. Karahalios has a history of challenging Conservative Party officials and criticizing the established party leadership. There is a history of antagonism between Mr. Karahalios and the establishment of the Conservative Party and the Ontario PC Party, and Mr. Karahalios has political rivals and antagonists among the Conservative Party’s establishment. He has and has had limited support from the Conservative Party’s establishment of party members occupying offices and exercising control over the Conservative Party’s decision-making and day-to-day affairs.

[18] Mr. Karahalios is a candidate in the Conservative Party’s current Leadership Contest, and he has continued his challenge to the Party’s establishment in the course of his campaign.

2. Conservative Party Structure and the 2020 Leadership Contest

[19] The members of the Conservative Party through delegates elect its governing National Council. The members directly elect the Party’s Leader at a Leadership Convention after an election campaign. 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.

[20] In January 2020, the Conservative Party began the Leadership Contest to elect its next Leader. The Conservative Party established an infrastructure to oversee the 2020 Leadership Contest, in accordance with section 10.9 of the Conservative Party’s Constitution.

[21] To oversee the election, The National Council appointed a Leadership Election Organizing Committee (“LEOC”) to oversee the election and to establish the rules and procedures for the Leadership Contest.

[22] The Organizing Committee published the Leadership Rules. The Leadership Rules are contractually binding on Party members, officeholders, and leadership contestants. Under Rule 1.10.1 of the Leadership Rules and under section 6.2 of the Party’s Constitution officeholders are required to maintain neutrality in a leadership contest. A contravention of neutrality triggers removal of the officeholder.

[23] The Leadership Rules provide for the appointment of a Chief Returning Officer (“CRO”) to implement the Leadership Rules and to carry out other responsibilities related to the election. Rule 7.1.3 of the Leadership Rules authorizes the CRO to sanction candidates in specific circumstances. Rule 7.1.3 states:

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.

[24] The Organizing Committee appoints the Dispute Resolution Appeals Committee (“DRAC”). This Committee is responsible for considering appeals of the Chief Returning Officer’s decisions concerning: (a) the eligibility of individuals to vote as Party members; and (b) sanctions of leadership candidates.

[25] The Leadership Rules authorize a sanctioned candidate to appeal to DRAC within 24 hours of the Chief Returning Officer’s ruling.

[26] Section 7.1.5 of the Leadership Rules provides that the decisions of the Chief Returning Officer (subject to an appeal), the Organizing Committee, and of the DRAC are final and binding: Rule 7.15 states:

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.

[27] The Leadership Rules provide for three tiers of entry requirements that candidates must meet to be placed on the ballot. The tiers are:

a. Approved Applicant - Prospective candidates must submit: (a) an application; (b) a $25,000 installment towards the $200,000 registration fee; (c) 1,000 signatures of endorsement from Conservative Party members. b. Authorized Contestant - A candidate who submits: (a) a further $25,000 installment towards the registration fee; (b) a $100,000 compliance deposit; and (c) an additional 1,000 signatures of endorsement. The Chief Returning Officers provides the Authorized Candidate with the Party’s active and historical member and voter lists, and the candidate is authorized to participate in forums and debates. c. Verified Leadership Candidate - A candidate who submits the remaining $150,000 of the registration fee and 3,000 endorsement signatures becomes a Verified Leadership Candidate and is entitled to have his or her name included on the Leadership Ballot.

[28] Pursuant to section 3.1.2 of the Leadership Rules, 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.

[29] Candidates had until March 25, 2020 to qualify for the ballot as Verified Leadership Candidates by submitting: (a) 3,000 signatures of endorsement; (b) a $200,000 registration fee; and (c) a $100,000 compliance deposit.

3. Mr. Karahalios’ Candidacy

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

[31] Mr. Karahalios submitted the fee and the necessary signatures. He was interviewed by the Organizing Committee, and he was accepted as an Approved Applicant on February 26, 2020. He agreed to comply with the Leadership Rules.

[32] 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.

[33] In late February and early March, Mr. Karahalios by mail, email, and by a Facebook announcement distributed campaign material that contained newspaper copy with respect to the views of Walied Soliman, who was the campaign chair of Erin O’Toole, a rival leadership candidate. Mr. Soliman is a prominent establishment figure in the Conservative Party and the Ontario PC Party. There is a history of antagonism between Mr. Soliman and Mr. Karahalios.

[34] Mr. Karahalios’ campaign material commented about what Mr. Soliman had said in the past about Sharia law and Sharia finance. Mr. Karahalios’ campaign material expressed Mr. Karahalios’ own position that there should only be one law in Canada and that if he were Prime Minister, he would stop Shariah Law.

4. The Complaint of the Erin O’Toole Campaign and the Chief Returning Officer’s Ruling

[35] On March 9, 2020, Mr. O’Toole lodged a complaint with the Chief Returning Officer about Mr. Karahalios’ campaign material.

[36] In his complaint to the Chief Returning Officer, Mr. O’Toole alleged that Mr. Karahalios’ campaign communications directed at his campaign manager were libelous against Mr. O’Toole and Mr. Soliman. Mr. O’Toole also alleged that Mr. Karahalios’ campaign material was racist or Islamophobic. Mr. O’Toole alleged that the campaign communications were: (1) libelous at common law and under the Ontario Libel and Slander Act; and (2) violations of sections C.2.iii and D.5 of the Code of Ethics of the Conservative Party of Canada.

[37] Mr. Karahalios pleads 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.

[38] Mr. Karahalios pleads 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.

[39] Mr. Karahalios denies being a bigot. He pleads that he does not discriminate based on race or religion and does not condone such discrimination. His wife and their child are racialized, and he pleads that all of his political campaigns have included individuals from diverse racial, ethnic, and religious backgrounds.

[40] On March 10, 2020, Mr. Vanstone as Chief Returning Officer provided Mr. Karahalios with a copy of Mr. O’Toole’s complaint and requested a response within 72 hours.

[41] On March 13, 2020, Mr. O’Toole sent a campaign email stating that Party members could “stop Shariah Law” by supporting him because he would always fight against Sharia Law as a threat to “the Canadian values of freedom, democracy, and the rule of law.

[42] Also, on March 13, 2020, Mr. Karahalios replied to Mr. O’Toole’ complaint. Mr. Karahalios made a length submission to the Chief Returning Officer that his campaign comments had no bigoted intent. He made lengthy submissions about the authority of the CRO. He also included a letter from his lawyer.

[43] After receiving Mr. O’Toole’s complaint and after speaking to Mr. Karahalios, the Chief Returning Officer refused to advance Mr. Karahalios to the Authorized Contestant stage of the Leadership Contest. The Chief Returning Office also refused to provide Mr. Karahalios with the Conservative Party’s member and voter lists. Further, the Chief Reporting Officer ordered that the investigation of Mr. O’Toole’s complaint be kept confidential.

[44] Although the Leadership Rules require that the Chief Returning Officer consult with the co-chairs of the Organizing Committee, Mr. Vanstone consulted with all of the Committee’s members. Mr. Karahalios pleads that some members of the Committee were not neutral, including one member of the Committee who on social media had supported Mr. O’Toole’s criticisms of Mr. Karahalios’ comments.

[45] The Organizing Committee advised Mr. Vanstone that it would not disqualify Mr. Karahalios.

[46] On March 17, 2020, Mr. Vanstone as Chief Returning Officer issued a Ruling. Without its attachments, which included Mr. O’Toole’s complaint and Mr. Karahalios’ response, the Ruling is a nine-page, single spaced decision. The operative part of the decision was 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.

[47] Mr. Karahalios alleges that the Chief Returning Officer 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. Mr. Karahalios submits that, in effect, he would have to raise an additional $100,000 within a week (by the March 25, 2020 qualification deadline) without the member and voter lists. Mr. Karahalios alleges that the Chief Ruling Officer’s ruling was a disqualification by another name.

5. The Appeal to the Dispute Resolution Appeals Committee (“DRAC”)

[48] On March 18, 2020, Mr. Karahalios appealed the Chief Returning Officer’s decision to the DRAC and comprehensively explained what he submitted were the flaws in the CRO’s ruling.

[49] On March 20, 2020, the DRAC deliberated in a closed meeting in which they heard from the Chief Returning Officer without any notice to Mr. Karahalios and without giving him any opportunity to respond.

[50] On March 20, 2020, the DRAC issued a ruling disqualifying Mr. Karahalios, which was a harsher sanction than that imposed by CRO. DRAC’s ruling, 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.

[51] Mr. Karahalios alleges that the Chief Returning Officer and the DRAC disqualified him because of his political rivalry with the Conservative Party establishment and because he was becoming a threat to their preferred candidates, Mr. O’Toole and Peter MacKay. He alleges that that the Respondents acted in bad faith and for an improper purpose. He submits that the CRO and DRAC contravened the neutrality obligations of the Leadership Rules and that their Rulings violated the Leadership Rules, which did not authorize them to impose any sanction in the circumstances. He submits that disqualification was a sanction reserved to more senior Party officials. Mr. Karahalios alleges that the process was procedurally unfair.

[52] On March 22, 2020, Mr. Karahalios wrote to the National Council requesting that they reverse the decisions of the Chief Returning Officer, the Conservative Fund Canada, and DRAC.

[53] 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.

6. The Directed Contributions

[54] In accordance with the Leadership Rules, Mr. Karahalios had forwarded to the Conservative Fund more than $300,000 in Directed Contributions.

[55] After the disqualification, the Conservative Fund refused to return the Directed Contributions.

[56] The Leadership Rules require the Fund to return Directed Contributions to his campaign on a weekly basis, less appropriate deductions. However, despite Mr. Karahalios’ requests, the funds have not been transferred. Mr. Karahalios needs those funds returned to pay his campaign expenses and to comply with the Canada Elections Act.

[57] If Mr. Karahalios is reinstated as a Verified Leadership Candidate, the appropriate deductions consist of the $200,000 registration fee and $100,000 compliance deposit, and an administrative fee of 10% of the remainder.

[58] Mr. Karahalios submits that if Court finds that his rights were violated but declines to reinstate his candidacy, it should direct the Party to refund the Directed Contributions in full.

[59] Further, Mr. Karahalios submits that if his disqualification was lawful, then the only authorized deductions are $25,000 that Mr. Karahalios directed the Fund to apply to payment of the first instalment of his registration fee, and an administrative fee of 10% of the balance to be paid to his campaign.

C. Procedural Background

[60] On March 15, 2020 the Chief Justice of the Superior Court of Justice released a Notice to the Profession advising that as a result of the global COVID-19 pandemic, the court had adjourned all scheduled civil hearings. The Notice to the Profession allows for the hearing of "urgent and time-sensitive motions...where immediate and significant financial repercussions may result if there is no judicial hearing." It also allows for the hearing of strictly limited number of "other matter[sl that the Court deems necessary and appropriate to hear on an urgent basis."

[61] On March 24, 2020, Mr. Karahalios undertook to commence this application supported by his affidavit dated March 24, 2020, and he requested that the application be heard as an urgent matter pursuant to the Notice to the Profession.

[62] 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. Karahalios v. Conservative Party of Canada, 2020 ONSC 1820.

[63] Arrangements were then made to hear the Respondent’s preliminary motion as a video virtual courtroom hearing which proceeded on April 9, 2020.

D. Discussion and Analysis

1. Introduction

[64] The Respondents submit that there are three issues for the court to determine on this preliminary motion; namely: (1) Is Mr. Karahalios’ application barred by the Leadership Rules? (2) Can this proceeding be prosecuted by application? and (3) Are the Individual Respondents proper parties to the application?

[65] At the hearing of the application, the parties agreed to or came to an understanding that resolved the third issue.

[66] The parties’ understanding made it unnecessary for me to decide a complex legal issue about the legal interrelationships and legal standing of political party members as necessary, proper, or unnecessary parties in litigation. The complex legal issue would have involved determining the legal interrelationships: (a) amongst political parties and their members; (b) between political party members amongst themselves; (c) between political parties and third parties; (d) between officers and officials of political parties and third parties; (e) between officiers and officials of political parties and rank-and-file members of the party; and (f) between rank-and- file political party members and third parties.

[67] The understanding between the parties was that for the purposes of the Respondents’ motion and for the purposes of Mr. Karahalios’ application, the Respondents would be bound by and any Order made by the court about Mr. Karahalios’ candidacy.

[68] Thus, it is not necessary to rule on the legal status of the individual Respondents in this application. Therefore, Mr. Magnus, Ms. Assouline, Mr. Connelly, Mr. Plett, and Mr. Vanstone can and should be removed as parties without prejudice to resolving their legal status in other proceedings.

[69] I am, therefore, dismissing the application as against Mr. Magnus, Ms. Assouline, Mr. Connelly, Mr. Plett, and Mr. Vanstone without costs and without prejudice to any future action or application that Mr. Karahalios may bring against them, if so advised.

[70] To foreshadow the discussion below with respect to the two remaining issues, it should immediately be noted that what remains to be decided are essentially procedural matters that focus on the court’s jurisdiction and that these remaining issues do not resolve the substantive merits of Mr. Karahalios’ application or the Respondents’ substantive defences to it - unless I decide as a procedural matter that it is plain and obvious that Mr. Karahalios has no reasonable cause of action.

[71] In other words, constrained by having to accept as true the facts alleged in Mr. Karahalios’ application, the Respondents are confronted with a very high burden of showing that it is beyond peradventure that Mr. Karahalios’ case has no legal prospect of success. Conversely, to succeed in resisting the motion, Mr. Karahalios has the reciprocally very low burden of showing that it is not plain and obvious and beyond peradventure that he has no cause(s) of action. As I shall explain below, the Respondents do not succeed in demonstrating that Mr. Karahalios cause(s) of action are doomed to fail. Thus, the Respondents fail on the second issue.

[72] To continue the foreshadowing, the conclusion that it is not appropriate to decide the merits of the Respondents’ answer to Mr. Karahalios’ application leads to the next question of how then should the merits of the claim and defence to the claim be determined. As I shall explain below, the answer is that the application should be converted into an action.

[73] The Order that I have set out in the Introduction to these Reasons for Decision to convert this application into an action with a summary judgment motion is at least as efficient and procedurally fair as an application and indeed the Order may better accord with the aspiration of rule 1.04 (1) of the Rules of Civil Procedure that the rules shall be liberally construed to secure the just, most expeditious determination of every civil proceeding on its merits.

2. Jurisdiction on a Rule 21 Motion

[74] Under rule 14.09, a notice of application may be struck out or amended in the same manner as a pleading”. It has been held, however, that Rule 21, the rule that allows a court to dismiss an action on a point of law or for absence of jurisdiction, does not apply to applications. Zavitz Technology Inc. v. 146732 Canada Inc., [1991] O.J. No. 448 (Gen. Div.), which was approved in McLeod v. Castlepoint Development Corp., 31 O.R. (3d) 737 (C.A.), leave to appeal refused [1997] S.C.C.A. No. 191 (S.C.C.). However, this is a mere technicality because the respondent’s challenge can be raised as preliminary objection to the application which is, in effect, what occurred in the immediate case. In these circumstances, the same legal standards that apply to a motion challenging a plaintiff’s Statement of Claim apply to Mr. Karahalios’ Notice of Application. In any event, that is how the parties argued the motion now before the court.

[75] The Respondents’ motion is thus notionally brought pursuant to rule 21.01 (1) (b) of the Rules of Civil Procedure, which states:

WHERE AVAILABLE To any Party on Question of Law 21.01 (1) A party may move before a judge, (a) […] (b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence, and the judge may make an order or grant judgment accordingly. (2) No evidence is admissible on a motion, … (b) under clause (1)(b).

[76] Applying the case law developed for rule 21.01 (1) (b), where a respondent submits that the applicant’s Notice of Application does not disclose a reasonable cause or action, to succeed in having the application dismissed, the respondent must show that it is plain, obvious, and beyond doubt that the applicant cannot succeed in the claim. Dawson v. Rexcraft Storage & Warehouse Inc.; Hunt v. Carey Canada Inc..

[77] Matters of law that are not fully settled should not be disposed of on a motion to strike, and the court's power to strike a claim is exercised only in the clearest cases. Dawson v. Rexcraft Storage & Warehouse Inc.; Temelini v. Ontario Provincial Police (Commissioner). The case law establishes that issues that are novel, complex, and important should normally be decided on a full factual record after trial. McCreight v. Canada (Attorney General), 2013 ONCA 483; Sells v. Manulife Securities Inc., 2014 ONSC 715; Leek v. Vaidyanathan, 2011 ONCA 46, [2011] O.J. No. 200 at para. 3 (C.A.); PDC 3 Limited Partnership v. Bregman + Hamann Architects, [2001] O.J. No. 422 paras. 7-12 (C.A.).

[78] In R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at paras. 17-25, the Supreme Court of Canada noted that although the tool of a motion to strike for failure to disclose a reasonable cause of action must be used with considerable care, it is a valuable tool because it promotes judicial efficiency by removing claims that have no reasonable prospect of success and it promotes correct results by allowing judges to focus their attention on claims with a reasonable chance of success.

[79] On a motion under rule 21.01 (1) (b), the court accepts the pleaded allegations of fact in the statement of claim (or Notice of Application) as proven, unless they are patently ridiculous or incapable of proof. Folland v. Ontario; Nash v. Ontario; Canada v. Operation Dismantle Inc.; A-G. Canada v. Inuit Tapirisat of Canada.

3. Is Mr. Karahalios’ Application Barred by the Leadership Rules?

[80] The Respondents submit that Mr. Karahalios’ application which concerns the governance of unincorporated associations is unavailable as a matter of public law (administrative law) and is barred by the Leadership Rules as a matter of the private law of contract.

[81] The Respondents’ argument begins with the submission that Mr. Karahalios’ application has been cast as a matter of breach of contract. The Respondents understand that the application has been designed in this way because the Supreme Court of Canada in Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26 recalibrated the law with respect to the judicial review of the decisions of non-statutory and private bodies including unincorporated associations.

[82] In a detailed submission, Mr. Karahalios does not agree with the Respondents’ analysis of the authority of Highwood Congregation and its alleged recalibration of the law that governs unincorporated associations, but he does not appear to disagree that he has advanced a breach of contract claim against the Respondents.

[83] The Respondents submit that Mr. Karahalios has designed a breach of contract claim because in the Highwood Congregation decision, the Supreme Court held that judicial review was available only in respect of the actions of persons or bodies exercising powers granted by statute. The Respondents submit that in Highwood Congregation, the Court held that there was no free-standing right to procedural fairness. The Respondents submit that outside the public law context, where judicial review based on the principles of certiorari, prohibition, and mandamus are available, any right to procedural protections must be found in contract.

[84] The Respondents submit that had Mr. Karahalios cast his application in administrative law terms, then it would have failed for the same reasons as the application in Trost v. Conservative Party of Canada, 2018 ONSC 2733, failed. In that case, the Divisional Court held that the Conservative Party of Canada, in conducting a leadership contest, was not exercising any statutory powers. The result was that judicial review was unavailable to challenge the Party’s actions, and the application against the party was struck. The Respondents submit that the same result should occur in the immediate case.

[85] Moving on in their argument, the Respondents do not concede that the Leadership Rules constitute a binding contract amongst Mr. Karahalios and any of the Respondents. However, they submit that if it was a binding contract, then the terms of the contract conclusively preclude Mr. Karahalios application.

[86] That contract law regulates the governance of the Leadership Contest in the immediate case is at the heart of the Respondents’ submission that it is plain and obvious that Mr. Karahalios’ claim is barred by contract. The Respondents submit that if the Leadership Rules conferred any enforceable contractual rights on the Applicant, it also limited those rights. Specifically, they submit that Mr. Karahalios has contractually waived any right to challenge the decisions of the Chief Returning Officer and DRAC.

[87] Alluding to Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, the Respondents acknowledge, however, that contractual clauses ousting the court’s jurisdiction may be found to be invalid on the grounds of public policy. However, it submits that this power may be exercised only in exceptional circumstances, which it submits have not been pled and which do not exist in the immediate case.

[88] In short, the Respondents submit that if the contractual analysis approach is applied in the circumstances of the immediate case, the result would be that the Leadership Rules preclude the application before the court and make the decision of DRAC the last word on Mr. Karahalios leadership candidacy without recourse to judicial review.

[89] Finally, the Respondents submit that this Court cannot and ought not to re-write the contract for the parties. At most, the Court may send the decision back to the responsible decision-making entities identified in the contract for a redetermination. Accordingly, the Respondents submit that that remedies sought by Mr. Karahalios in his Notice of Application are not available to in any event.

[90] The Respondents rely on in Ottawa Humane Society v. Ontario Society for the Prevention of Cruelty to Animals, 2017 ONSC 5409. In that case, the applicant challenged the validity of a provision in a funding agreement under which the applicant had agreed not to initiate any legal action(s) or claims against the Ontario SPCA, its affiliates, board of directors, officers, agents, staff or volunteers. The applicant argued that such a contractual provision, purporting to prevent recourse to the court, was unenforceable as contrary to public policy. In the Ottawa Humane Society case, the court held that the matter should be analyzed in accordance with the law associated with the enforcement of an exclusion of liability clause as established by the Supreme Court of Canada in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4.

[91] Thus, the Respondents submit that as a consequence of the decision in Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26, the analysis in Ottawa Humane Society is now applicable in a case like the present case. While formerly a privative clause like that in Section 7.1.5 of the Leadership Rules would have been analyzed on administrative law principles, that approach is now precluded by Wall. The Respondents submit that section 7.1.5 of the Leadership Rules must now be analyzed and applied like an exclusion of liability clause; it must be given effect unless the Applicant is able to demonstrate some overriding public policy that justifies setting the clause aside. No such overriding public policy having been pleaded in this case and with nothing in the facts pleaded by Mr. Karahalios rising to the level of a public policy issue, Mr. Karahalios should be left with the bargain he agreed to.

[92] Mr. Karahalios has counterarguments at every step and for every premise of the Respondents’ arguments. He has an argument about the scope and influence of Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall decision.

[93] He has an argument about the relevance of cases like Aga v. Ethiopian Orthodox Tewahedo Church of Canada, 2020 ONCA 10; Trost v. Conservative Party of Canada, 2018 ONSC 2733; Arsenault v. Progressive Conservative Party of Ontario, 2018 ONSC 1663; Arriola v. Ryerson Students’ Union, 2018 ONSC 1246; Graff v. New Democratic Party, 2017 ONSC 3578; Knox v. Conservative Party of Canada, 2007 ABCA 295; Street v. B.C. School Sports, 2005 BCSC 958; Ahenakew v. MacKay; and Berry v. Pulley, 2002 SCC 40 in determining the court’s role in regulating the affairs of unincorporated associations, particularly political parties.

[94] Mr. Karahalios has an argument that refutes the Respondents’ interpretation of the Leadership Rules, and he has an argument about the application of Tercon Contractors Ltd. v. British Columbia (Transportation and Highways). He has an argument about the public policy factors that may infuse the discussion of the ambit of the Tercon decision.

[95] For present purposes, I shall not outline Mr. Karahalios’ arguments in detail, which is better left for another day, because whether those arguments are ultimately successful or whether they fail, they at least succeed in demonstrating that it is not plain and obvious that Mr. Karahalios does not have a legally viable cause of action.

[96] And these arguments succeed in demonstrating that it is not appropriate to decide these contentious decisions on the basis of an incomplete evidentiary record that has been assumed to be true as opposed to an evidentiary record that must be proven to be true before the law is applied.

[97] In the immediate case, the burden on Mr. Karahalios in the Respondents’ Rule 21 motion was very-very low because it was immediately apparent based just on the Respondents’ argument on the motion that the law about the regulation of unincorporated association may be in a revolutionary or redevelopment stage and it would be inappropriate to decide these issues based on assumed facts and an incomplete evidentiary record. Thus, I concluded that it would be jurisdictionally unsound and inappropriate for me to rule on the merits of Mr. Karahalios’ claim or what is, in effect, a substantive defence by the Respondents.

[98] The Conservative Party and the Conservative Fund will have an opportunity to advance their defence and any counterclaim, if any, on the level evidentiary and juridical playing field of a motion for summary judgment or at a trial of an action.

[99] I, therefore, conclude that 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.

4. Can this Proceeding be Prosecuted by Application?

[100] This brings the discussion to the last question of whether this proceeding can be prosecuted by application, which is what Mr. Karahalios wishes. The Respondents, however, seek to have the application dismissed on the ground that it is unsuitable and outside the ambit of what rule 14.05 (1)(h) authorizes. They submit that the application therefore should be dismissed outright.

[101] I need not spend a great deal of time answering this question, because of the concessions made on the hearing of the motion. On the hearing of the motion, Mr. Karahalios conceded that the court had the jurisdiction to convert his application into an action, but his position was that the court ought not to exercise that jurisdiction.

[102] On the hearing of the motion, the Respondents conceded that if I was persuaded that the immediate proceeding was inappropriate for an application, then the dismissal of the application should be without prejudice to Mr. Karahalios commencing an action. The Respondents, however, wished the formal dismissal of the application based on the faint hope that Mr. Karahalios would not commence an action. That is actually inconceivable; in other words, there is no reason not to just convert the application into an action if that is the appropriate thing to do. With these concessions, the dispute between the parties became simply whether or not the application should be converted into an action.

[103] The dispute became narrower still when the Respondents assured the court that they were not interested in delay and when Mr. Karahalios revealed that his most pressing concern was to have a decision made as quickly as possible so that he was not prejudiced from his disqualification from the Leadership Contest, while his rivals continue marshalling their resources and continue campaigning.

[104] Mr. Karahalios’ real concern is that there be a efficient and prompt determination of the merits of his cause(s) of action so that if he is successful he achieves a meaningful and not a pyrrhic victory in being restored as a candidate in a continuing Leadership Contest that has put him on the sidelines without being able to compete against his rivals.

[105] With all these concessions, and also having regard to Mr. Karahalios’ submission that it actually was premature to determine whether or not the case was appropriate to proceed by application until the Respondents had responded to the litigation, it became apparent to me that the appropriate way to exercise my discretion was to convert the application into an action and schedule a summary judgment motion, reserving the Respondents’ right to argue that the case was inappropriate for a summary determination or conversely to bring a cross-motion for a summary judgment.

[106] It seemed to me that a summary judgment motion provided a more robust and procedurally fair way to determine the merits of the dispute between Mr. Karahalios and the Defendants who would be litigating on an even juridical playing field in asserting that Mr. Karahalios’ request for court intervention was precluded by the Leadership Rules. The Respondents should have a fair opportunity at a summary judgment motion or at a trial to advance the merits of their case.

[107] I agree with their argument on the second issue that there are serious issues that go outside that forensic territory of an application procedure. Once there is a complete evidentiary record, the judge on the application would have to make some hard findings about the behavior of Mr. Karahalios and of the Conservative Party and the Conservative Fund and that judge will need at least the forensic forces available on a summary judgment motion.

[108] However, I do not agree with the Respondents that the issues in the immediate case must necessarily be resolved by a trial. A summary judgment may be appropriate in the circumstances of the immediate case especially because of the delay and the unavailability of civil trials in the circumstances of the current Covid-19 crisis.

[109] An efficient procedure is available by converting his application into an action, and by using his application material and the response to them as both the pleadings of the action and the material for a summary judgment motion to be scheduled within 31 days.

[110] The details of my conversion Order are set out in the Introductions of these Reasons for Decision.

E. Conclusion

[111] For the above reasons, the Respondents’ motion is granted in part and dismissed in part.

[112] I order that the costs of this motion be costs in the cause.

[113] 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.

[114] 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: April 13, 2020