OTTAWA - Three failed Liberal leadership candidates are looking to cook up a deal with Elections Canada over outstanding debts from the 2006 contest.

Martha Hall Findlay, Joe Volpe and Hedy Fry have decided not to appeal the Ontario Superior Court's ruling that tossed out their request for a two-year extension to pay off any remaining expenses.

The trio still owed a combined $294,000 for the leadership contest won by Montreal MP Stephane Dion, according to Elections Canada filings on Dec. 31 - the date they were supposed to be debt-free after two previous extensions.

A fourth candidate, Ken Dryden, is in a similar predicament.

The Canada Elections Act calls for a $1,000 fine or a three-month jail term for unpaid expenses.

Both Findlay and Fry said they've since managed to whittle down the amount they owe - Findlay from $115,000 to less than $45,000 and Fry from $69,000 to $52,000.

"There was the option to work out some kind of a compliance arrangement with Elections Canada," Findlay said. "And we've begun those discussions, we expect them to continue fairly soon."

But Findlay said she doesn't know what may eventually be worked out with the agency.

Neither does Fry.

"I don't know what they'll do, the point is we're raising money anyway," Fry said, noting their lawyers have been in touch with the commissioner of Elections Canada and are awaiting a response.

"Apparently the commissioner is very busy with a whole bunch of other stuff at the moment," she said.

Elections Canada spokesman John Enright said he couldn't provide more details on any deal the agency might cut with the failed candidates until Tuesday, after the appeal deadline has passed.

Elections Canada hasn't replied to previous requests from QMI Agency on how it would enforce Elections Act rules as they concern the former Liberal leadership candidates.

The candidates say they were hampered in their fundraising efforts by a new rule in leadership contests that limits donations to a lifetime maximum of $1,100 per person.

That limit could change as early as this fall. The Political Loans Accountability Act was introduced in November and would allow for an annual contribution maximum - instead of a lifetime contribution maximum - of $1,100.