Court File and Parties

COURT FILE NO.: CV-19-629929

DATE: 20200826

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

THE COUNCIL OF THE CORPORATION OF THE CITY OF VAUGHAN, Applicant

BEFORE: F.L. Myers J.

COUNSEL: John Mascarin and David S. Reiter, for the applicant, Carmine Scalzi, for the intervener Frank Miele

HEARD: August 25, 2020

Endorsement

[1] Purporting to act on behalf of the ratepayers of Vaughan, Mr. Miele sued eight of the nine members of the municipal council of Vaughan personally for $210 million. He claimed that the eight members voted to misapply specially raised funds in breach of section 424 of the Municipal Act, 2001, S.O. 2001, c. 25. That section imposes personal liability on municipal councillors who violate its terms.

[2] The members of council who were sued were disqualified from participating in the municipality’s handling of the litigation due to the conflict of interest provisions of the Municipal Conflict of Interest Act, R.S.O. 1990, c. M.50.

[3] The quorum of the applicant council is two members. Mr. Miele sued all but one of the members of council. Realizing that he had left the council without a quorum to deal with his litigation, Mr. Miele abandoned his litigation against one of the eight councillors that he had sued. That councillor determined that although the litigation had been discontinued for the present, she remained in conflict of interest due to the allegation that she had acted illegally. She feared that she might again face claims that she too is personally liable either from the plaintiff later or in other proceedings

[4] An existing municipal bylaw delegates the day-to-day management of litigation to municipal staff. However, council is duty-bound to oversee staff. It receives reports about significant municipal matters. Moreover, major decisions in litigation, such as settlement over a prescribed monetary limit, are reserved for council itself.

[5] Believing that they still did not have a quorum despite Mr. Miele discontinuing his litigation against one member, the council brought this proceeding for relief under ss. 7(2) and (3) of the Municipal Conflict of Interest Act:

Application to judge

(2) Where in the circumstances mentioned in subsection (1) [disqualifying conflicts of interest], the remaining number of members who are not disabled from participating in the meeting is less than two, the council or local board may apply to a judge without notice for an order authorizing the council or local board, as the case may be, to give consideration to, discuss and vote on the matter out of which the interest arises.

Power of judge to declare s. 5, 5.1 or 5.2 not to apply

(3) The judge may, on an application brought under subsection (2), by order, declare that section 5, 5.1 or 5.2 does not apply to the council or local board, as the case may be, in respect of the matter in relation to which the application is brought, and the council or local board thereupon may give consideration to, discuss and vote on the matter in the same manner as though none of the members had any interest therein, subject only to such conditions and directions as the judge may consider appropriate and so order.

[6] Mr. Miele intervened in this application to argue that there was a quorum available to council because he had discontinued his litigation against the member discussed above. I granted leave for him to examine the councillor whom he was no longer suing to inquire into the reasons why she continued to assert that she suffered from a disqualifying conflict of interest.

[7] Mr. Miele recently retained new counsel, Mr. Scalzi. I was informed yesterday that Mr. Miele had consented to abandon his intervention and to pay costs of $20,000 to the municipality by December 31, 2020. I granted leave for the late abandonment on consent at the hearing and Mr. Scalzi withdrew.

[8] Subsection 7(2) of the statute authorizes the court to grant an order allowing members with a conflict of interest “to give consideration to, discuss and vote on the matter out of which the interest arises”. The purpose of the section is to ensure that a quorum is available to transact the business of the municipality by allowing members who would otherwise be disqualified to take part in council meetings to deal with the issue in which they are conflicted. In my view, this is a minimalist provision designed to ensure that the government is not paralyzed in dealing with matters properly before it. By allowing members to participate in meetings of council and to vote, the section preserves the legal order and prevents a lacuna. But it does not deal with the question how to address the ongoing conflict of interest.

[9] Subsection 7 (3) allows the court to remove the provisions of the statute that disqualify councillors from voting and to order “such conditions and directions as the judge may consider appropriate”. This broad discretion allows the court to craft terms to try to ameliorate the mischief posed by councillors voting while their judgment is affected by conflicts of interest.

[10] I am not persuaded to remove the application of ss. 5, 5.1 or 5.2 of the statute completely. Doing so is broader than necessary to resolve the current problem. I see no reasons, for example, to authorize conflicted councillors to attempt to influence the voting of others. In my view, councillors need to be authorized to do what the statute says and no more. They may receive reports and consider, discuss, and vote on resolutions affecting the litigation in issue despite the conflict of interest disqualification.

[11] The councillors have to be allowed to vote to so that the municipality can function. But they remain in the grip of serious conflicts of interest. An obvious example of potential mischief would be the economic incentive on conflicted councillors to vote to pay municipal funds to settle the litigation in order to save themselves from jeopardy and potential personal liability. How is the municipal interest to be protected from the conflicting interests of the majority of councillors?

[12] I considered requiring the appointment of a litigation administrator of some public renown with an independent mandate to make recommendations as to the best interest of the municipality on the questions before council. A conflicted councillor could rightly be questioned to explain why he or she would vote contrary to the recommendations of an experienced and impeccably credentialed administrator. A blue-ribbon panel could provide a similar alternative.

[13] Counsel submitted as an alternative that the court impose a requirement for the conflicted councillors to obtain leave a judge prior to agreeing to settle Mr. Miele’s litigation. The Rules of Civil Procedure provide that people who act for parties who are under disability satisfy a judge that a proposed settlement is in the best interest of the party with the disability. There is an analogy available between the municipality and someone whose ability to instruct counsel independently is impaired. The court has experience and established processes for dealing with the determination of whether a proposed settlement is in the best interests of a party under disability. The applicants submit that imposing a similar requirement on them will ensure that they remain transparent and accountable for their decision-making.

[14] I am satisfied that counsel’s proposal is fair, reasonable, and appropriate in the circumstances of this case. I have signed the draft order accordingly.

[15] Finally, I wish to note the court’s appreciation with the efforts of counsel in bringing this matter to a conclusion. There were many case conferences at which aggressive positions were taken by or on behalf of Mr. Miele. Counsel for the applicants remained resolute, but fair and helpful throughout and particularly when Mr. Miele was self-represented. They represented their clients zealously but guided by their obligations to ensure a fair process was available for all parties. Mr. Scalzi arrived very late to the party. Having now read the evidence and the applicable law, it is apparent that he led his client to as good an outcome as he reasonably could have hoped for in the circumstances.

F.L. Myers J.

Date: August 26, 2020