Law Times

Page 4 June 10, 2013 Law Times • NEWS Master overstepped jurisdiction in criticizing lawyer: judge BY YAMRI TADDESE Law Times A Superior Court master had no jurisdiction to make a finding that a Toronto lawyer was guilty of professional misconduct, according to a judge who granted the embattled counsel leave to appeal an endorsement accusing him of sharp practice. The comments came in Superior Court Justice Edward Morgan's assessment of Master Ronald Dash's findings against lawyer Murray Teitel in Haider Humza Inc. v. Mohammed Rafiq. "In my view, Master Dash's venture into an area that is not in the master's jurisdiction needs to be revisited by an appellate court given its centrality to his assessment of costs against Mr. Teitel," wrote Morgan on May 30. In an earlier endorsement dated Oct. 30, 2012, Dash found Teitel had engaged in sharp practice when he failed to notify the opposing counsel about a payment arrangement he made following a previous cost order. In Haider Humza, Dash had made a cost order payable to both Rafiq and his lawyer, Aswani Datt. But Teitel, who didn't read the master's decision entirely because he was "so upset" by what it contained, arranged to have the money payable only to Rafiq's creditor, the Ministry of Revenue. In his endorsement, the master said Teitel was "lulling Mr. Datt into a false sense of security." His actions amount to sharp practice, the master found as he ordered Teitel to pay $3,000. But in his decision last month, Morgan said the master had overstepped his juris- diction in making the finding in relation to the Rules of Professional Conduct. The authority to make such rulings lies exclusively with the Law Society of Upper Canada, Morgan said. "It is one thing to use a phrase such as 'sharp practice' in the legitimate way it was used by Wilson J. in Garten — i.e. as shorthand for an aggressive tactic that is disapproved by the courts," wrote Morgan. "It is another thing for a master, sitting in motions court and writing an endorsement on a question of costs, to cite a specific provision of the Rules of Professional Conduct, to analyze a solicitor's conduct in reference to the terms of that rule, and to make a specific finding that the solicitor has breached the rule." Davis LLP partner Gavin MacKenzie, author of Lawyers and Ethics: Professional Responsibility and Discipline, calls Morgan's ruling "a welcome decision." "I think the importance of it is that it reinforces the exclusive jurisdiction of the law society to make findings of breaches of the Rules of Professional Conduct," he says. "I think that's important as far as the selfgovernance of the profession is concerned and I think it's also partly a matter of fairness." In his decision, Morgan noted the court offered Teitel neither the time nor the defence he would have put into the matter had the complaint been before the law society. "In the context of an argument over costs, Mr. Rafiq and Mr. Datt did not prove their case against Mr. Teitel with viva voce evidence and witnesses subject to crossexamination the way that discipline counsel would be required to do at a law society Critics silenced Continued from page 1 privilege to cases where these communications were reported in the media or otherwise." The bill also encourages the courts to use their discretion not to award costs against defendants even if the case proceeds to trial. Where the court finds the plaintiffs to have brought a meritless claim for the purpose of intimidation, it can also award punitive damages. While Canadians already have the right to free expression, existing laws fall short of protecting them from SLAPPs, adds Crawley. "On paper, the law provides a number of remedies for questionable claims. There are provisions that allow the courts to dismiss such suits in the common law as well as in the Courts of Justice Act and in the Rules of Civil Procedure. However, these remedies are rarely exercised in practice. The courts prefer to hear full evidence at a trial before deciding on the merits of a proceeding. This preference was recently reaffirmed by the Court of Appeal." In Ontario, the environmental law field has seen more than its fair share of plaintiffs using the threat of litigation to mute controversies surrounding development and resource projects. "Most ordinary people can't afford a lawsuit even if they ultimately win," says Dianne Saxe, a lawyer and public affairs liaison for the Ontario Bar Association's environmental law section. "It just costs too much in time and effort and misery. It's not practical for people to defend themselves, so if they're told, 'Listen, shut up about my development or I'll sue you,' well, most people at that point — no matter how good a cause they think it is — they're going to think first about their family and their bills." When individuals or citizen groups facing a SLAPP shy away from the issue, enforcement of environmental laws suffers since the government typically allocates resources to areas that receive public attention, says Saxe. However, the bill doesn't give slander rights to venomous activists, says Moran, who adds the courts are good at distinguishing between legitimate claims and spurious ones. LT hearing," wrote Morgan. "Certainly, Mr. Teitel did not muster the kind of defence that would have been available to him at a law society discipline hearing. Indeed, the fact that a relatively small amount of money was at stake in the costs award adds to the sense that it was not defended by Mr. Teitel in the way that a charge of professional misconduct by the law society doubtless would be defended." Morgan also said Dash's conclusion about sharp practice shouldn't arise in any subsequent law society proceedings in a way that might prejudice Teitel, something MacKenzie, a former law society treasurer, was happy to see. "I agree with him entirely about that. There have been cases in which law society hearing panels relied on findings made by judges in parallel pleadings as either conclusive or prima facie proof and that makes [Morgan's comment] particularly important." Law society hearing panels should rely on such findings "only when the findings are justified and Justice Morgan found here they weren't," MacKenzie adds. For Teitel, who declined to comment for this story, the trouble with the master's decision was more about errors and inconsistency than jurisdiction. He argued Dash had at one point accepted his submission when he said he was genuinely unaware that the cost order was for both Rafiq and Datt but then went on to make a decision contrary to that acknowledgment. "In argument before me, Mr. Teitel put the point rather philosophically," wrote Morgan. "As he explained it, the master 'cannot say that he [i.e. Mr. Teitel] was unaware of the mistake and that he took advantage of the mistake. This violates Aristotle's law of the mistaken middle.' It is a narrative that cannot hold together as a logical whole." According to Morgan's decision, Teitel had stopped reading Dash's April 23, 2012, endorsement, which was "very critical" of him, midway through it. He read only the conclusion that didn't say the costs were payable to both Datt and Rafiq. When Teitel explained this to Dash, the master said, "I can totally accept that," according to court transcripts. He reiterated the same understanding when he told Teitel on the same day, "I thoroughly believe that you had absolutely no knowledge that Mr. Datt was seeking costs for himself." Yet according to Datt, the fact that Teitel didn't read the documents fully and therefore didn't know who the costs were payable to wasn't the only problem. He points to a paragraph in Dash's decision where the master takes issue with Teitel's handling of the payment arrangement. Datt says he was under the impression his client would receive the payment instead of his creditors. "It's the orchestrating this whole elaborate scheme of paying this garnishment . . . and not only that, telling me in writing that he's going to pay it," says Datt. "If you read the decision, he wrote to the master twice telling him the cost will be paid. Once the garnishment is issued, my client has no recourse. He can't negotiate with the ministry; he can't bring a motion to seek direction. Once it's issued, the payee has to pay the garnishment," adds Datt, who notes his client will appeal Morgan's decision. LT Estonia ruling 'well-reasoned' Continued from page 1 He added: "Demonstrating an intention that the shareholders' agreement was intended to bind others beyond the signing parties would be a necessary ingredient to any claim that Bombardier might put forward based on that agreement. "Generally, a third party must not only be a contemplated beneficiary of the contract it seeks to rely upon; it must invoke the contract as a shield rather than a sword, and may not advance claims that would take the actual contracting parties by surprise." Jonathan Lisus, one of the lawyers who represented the defendants, says the decision provides much-needed clarification. "I think it's very significant from a number of perspectives, particularly given the current climate in which large Canadian and international companies are doing an increased volume of business with state-owned enterprises," says Lisus of Lax O'Sullivan Scott Lisus LLP. "The court's clarification that mere shareholding is not going to be sufficient to meet the commercial activity exception and that a state, even if it takes active steps to protect its shareholding . . . that's not necessarily going to constitute an exception of sovereign immunity," he adds. Canadian companies involved in business dealings with foreign state-owned enterprises must know that those sovereign nations "aren't going to be brought into Canadian courts to have to justify their shareholding," says Lisus. The other clarification the court made was a more procedural one, according to Lisus, who notes that the onus of proof weighs heavily on the plaintiff's side. "It's not enough to just allege things in the pleading. When a sovereign nation comes forward with an evidentiary record and says, 'This was the extent of our involvement,' there's a strong burden to respond to," notes Lisus. The plaintiff, he adds, "has a positive evidentiary burden to discharge. Otherwise, you can bring any sovereign nation before the Canadian court and put them through a long trial process on the basis of an allegation in the pleading and that clearly isn't the www.lawtimesnews.com way the statute is supposed to work." In his decision, Morgan also noted the lack of an evidentiary record showing the Estonian government had a hand in the negotiation that never panned out. "Bombardier itself appears to have known that the decision to purchase Embraer was made by the airline's management alone," wrote Morgan. "Immediately after being informed of Estonian Air's decision, Mr. Baseggio, Bombardier's negotiator, wrote to deputy minister Kunnigas complaining about Estonian Air's 'exceedingly stupid decision' and urged the government to 'tell the supervisory council to wake up and do the right thing,'" the judge added. Morgan's decision is consistent with the jurisprudence in common law jurisdictions such as Canada, the United States, and Australia, says Lawrence Herman, an international trade lawyer at Cassels Brock & Blackwell LLP. "The decision was based on the fact that the Estonian government was merely a passive shareholder in a state enterprise and the state itself was not the commercial player. It's the airline and company that was," says Herman, who calls the ruling "a well-reasoned and thoroughly analyzed decision." "This decision helps to make the line clear in cases where a state, or a government of a state, enters into the commercial world as an active participant and cases where the state is simply a shareholder that directs the activity of a state-owned enterprise." At first blush, according to Morgan, it may appear that an airline is an inherently commercial enterprise and that an investment in it is a commercial activity. "However, in the hands of a national government, what looks like commercial investment may well be a form of regulatory regime or policy vehicle," he wrote. The Estonian government had claimed its investment in the airline was merely a result of its interest in strengthening the national economy through direct-flight connections. Douglas Harrison, Bombardier's counsel, didn't respond to a Law Times request for comment. LT

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