Significance of this week’s in-and-out decision

On Monday, the federal court decided in favour of the Conservatives against Elections Canada when the regulator’s chief electoral officer (CEO) Marc Mayrand decided to withhold reimbursements to two candidates because they similar ads used by other candidates with the “tagline” of the ads changed.

Justice Martineau decided that Mayrand was wrong to do so and ordered Elections Canada to reimburse. This litigation only involved two candidates out of dozens because it was a test case for the Conservatives. It was decided Mayrand cannot withhold from all since the judge has decided in favour of the two. Paragraph 178 of the decision explicitly states this,

[178] For the reasons below, having considered the totality of the evidence on record, the Court finds that the claimed advertising expenses were actually incurred by the applicants. That said, the amounts reported by each applicant must be corrected to have the difference between the commercial value of the claimed advertising expenses and the amount actually invoiced by the Fund reported as a non-monetary contribution. Ultimately however, the Court finds that the impugned decisions are unreasonable and must be set aside.

Most significantly, this decision should deflate any investigation by Elections Canada into Conservative Party expenses regarding the in-and-out scheme.

Also significant, Martineau decided how it is that a campaign incurs an expense. The CEO and commissioner were of the opinion that the Conservative Regional Media Buy was a sham. The CEO had argued that it didn’t see a contract for the regional media buy and therefore costs were not incurred by the campaigns. However, as the judge indicated, incurring an expense simply means to take liability upon oneself, therefore no written contract would be required. Paragraphs 121-124 of the decision reflect this. Further, Martineau decided that,

“[124] Accordingly, the Court finds that the respondent, or Elections Canada’s representatives, erred in law in requiring that there be actual written contracts between the candidates or their official agents and the supplier of the advertising services that were provided in December 2005 and January 2006. Payment for these advertising services in January 2006, by the official agents of participating candidates, is proof that these services were duly authorized. Moreover, as illustrated below, the requirement to have actual written contracts appears to be contrary to Elections Canada’s and the CEO’s past practices with regard to RMBs.”

It appears that the CEO has misinterpreted the statute.

Furthermore, the court accepts evidence provided by the party that describes how expenses are incurred in paragraph 151 as it describes the Donald Affidavit,

[151] Moreover, the evidence on record, including the practices of other registered parties as set out in the exhibits to Geoff Donald’s affidavit (a political operations officer with the Conservative Party), illustrates that there is a presumption that a candidate has incurred an advertising expense if said expense has been paid from the candidate’s campaign account.

The Chief Electoral Officer changed the Elections Handbook in 2007 for candidates and official agents. The handbook is the CEO’s interpretation of the Elections Act distilled in a more readable form. Paragraph 142 of the decision describes this concept,

[142] Over the years, the CEO has published various handbooks that articulate his interpretation of the Act. Among these publications is the “Election Handbook for Candidates, their Official Agents and Auditors” (the handbook). While this handbook provides insight as to how the CEO and Elections Canada have understood certain provisions in the Act at various points in time, it is in no way binding on the Court. Nevertheless, from a practical point of view, candidates and their official agents are strongly advised by the CEO to seek independent legal counsel if they wish to depart from the interpretation adopted by the CEO in the handbook.

A key point of contention between the Conservative Party and Elections Canada was that the CEO changed the handbook in 2007 from the 2005-2006 version and applied his interpretation as a regulator of elections despite the fact that the underlying statute had not changed.

In 2005, during the election, advertising regional media buys conformed with the 2005-2006 version of the handbook. Without any change to the statute by parliament, the CEO changed the 2007 version of the handbook with respect to how valid candidate expenses for regional media buys were defined. The Conservative Party argued that the 2007 handbook guidelines were retroactively applied to the 2006 election though the 2005-2006 handbook described expenses differently. Paragraphs 144-147 recognition by the judge that a retroactive application of the “rules” was applied,

[144] Nevertheless, a reading of all the handbooks published by Elections Canada up to, but excluding, the most recent handbook issued in March 2007 (the 2007 handbook), clearly suggests that the CEO will treat as an election expense for the purpose of reimbursement, any cost incurred by a candidate’s campaign for the purchase of an ad that is used to promote both the candidate and its affiliated party.

[145] The fact that the same ad would have been used by the party to promote itself on a different occasion would not be considered a reason for refusing to certify such an expense.

[146] This liberal interpretation of section 407 is reflected in the different versions of the handbook published by Elections Canada over time. For example, the handbook issued in December 2005 (the 2005 handbook) provides:

Election advertising
Election advertising means the transmission to the public by any means during an election period of an advertising message that promotes or opposes a registered party of the election of a candidate, including one that takes a position of an issue with which a registered party or candidate is associated….

Identification of election advertising
All election advertising that promotes or opposes a registered political party or the election of a candidate, including taking position on an issue with which a registered party or candidate is associated, must indicate that it is authorized by the official agent of the candidate.
(Emphasis added.)

[147] Indeed, the handbooks have even provided for the possible situation of a candidate and a party agreeing to share an ad. According to the handbooks, if such a scenario arose, the CEO would review the basis for allocating the cost incurred by each, to verify that it was reasonable. As mentioned in the 2005 handbook:

…The following are examples of transfers:
[404.2(2), 404.2(3)]
…a proportion of expenses incurred to promote or oppose a candidate or a party. Elections Canada will accept the basis of allocation used by the official agent, provided that it is reasonable in the opinion of the Chief Electoral Officer, and provided that the auditor agrees that the allocation is reasonable and in keeping with this handbook.

Again, regarding the handbook, the judge remarks that the CEO’s interpretation of the Elections Act is just plain wrong. The interpretation of statute by the CEO and change in interpretation is not supported by Act passed by Parliament. Paragraphs, 130 and 131 describe this,

[130] The respondent submits in his written memorandum that the object and scheme of the Act require subsection 407(1) to be read disjunctively, resulting in the following definition:

407(1) An election expense includes any costs incurred, or nonmonetary contribution received, by a [ … ] candidate, to the extent that the property or service for which the costs was incurred, or the non-monetary contribution received, is used to directly promote or oppose […] a candidate during an election period.

(Emphasis added.)

[131] According to the respondent therefore, to be an election expense for a candidate, the election expense must be used to directly promote or oppose a candidate, and not a registered party or its leader. The Court does not accept the respondent’s disjunctive interpretation outlined above. A plain reading of subsection 407(1) does not authorize the Court to discard the words used by Parliament in enacting this provision. Rather, a plain reading favours the conjunctive interpretation that was found in material published by the CEO prior to the 2006 election. Namely, an election expense for a candidate can be one that exclusively promotes a candidate, or it can be one that directly promotes both a candidate and a registered party or its leader.

Speaking to party officials close to the issue, what I get from them is that they feel that the CEO is making up the rules as he goes along, interpreting changes to the statute when no such changes have been passed into law by Parliament.

If we look at the recent victory by the Conservative Party against Elections Canada in the GST double dip litigation, we can see a pattern of this behaviour according to my sources. Paragraphs 78 and 79 of the Conservative Party Fund v. Canada (Chief Electoral Officer) decision suggest this,

[78] There is no basis in the statute for finding that, in the circumstances of competing policy concerns that are both directed toward furthering the policy of a “level playing field” among political parties, the interpretation that gives effect to the policy of a “level playing field” in respect of a political party’s maximum expense limit under section 422 must take precedence.

[79] Accordingly, I conclude that there is no basis in the Act, or in the Harper decision, for the CEO’s position that the policy of a “level playing field” for all political parties in Canada mandates the CEO’s interpretation of the Act in the face of the plain wording of the Act and the other considerations set out above.

Two separate court hearings before two different courts have concluded that the Chief Electoral Officer’s interpretation of statute has been flat-out wrong. In fact because of this poor interpretation of statute, the CEO has been making up rules as he goes along. This faulty interpretation of statute has impeded the Conservative Party specifically.

Troubling is the position of Elections Canada in this entire ordeal. Their role as a regulator is to apply statute passed by the will of Parliament. If they were to appeal this decision or proceed with an investigation, the regulator would then enter the arena among the partisans. Elections Canada should be educated by the court’s decision and not move to disagree because it would reflect a divergent view from that defined by statute and clarified by the Federal Court this week.

For reference, here are the two decisions discussed in this post:
Martineau decision, Federal Court – In and Out

Wilton-Siegel decision, Superior Court of Justice – GST double dip

Victory in the in-and-out saga. Federal court rules for CPC.

In a decision that is certain to rattle Marc Mayrand at Elections Canada, the Liberals which prosecuted “trials” of Conservative election financing in Parliamentary committees and media observers that believe the worst about the Conservative Party, the Federal Court decided in the matter of L.G. Callaghan and the Chief Electoral Officer of Canada.

The question before the court was whether or not Elections Canada could legally refuse to certify, for the purposes of reimbursement under s.465 of the Elections Act, the claimed advertising expenses on the ground that it is not satisfied that the expenses have actually been incurred by the candidates themselves.

Here is the decision from the Federal Court:

The court decided that Mayrand inappropriately withheld expenses from Conservative candidates suggesting that these candidates in fact incurred those expenses, rather than the party. This means that the party has come in under the election spending limit (nationally) which is at the heart of this in-and-out debate. If the party has come under the legal limit, what else is there to talk about?

So far, Liberal MP Dominic LeBlanc has not provided comment. Here’s what he said on April 15th, 2008:

Mr. Speaker, the Conservatives are hiding the truth from Canadians. They filed a bogus civil suit against Elections Canada. They know very well that the RCMP never executes search warrants in civil cases. This morning, the RCMP executed a warrant in a quasi-criminal case.

How is it that the government does not know the difference?

I’ll post reaction from key players as it comes in.