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Page 4 March 19, 2018 • Law TiMes www.lawtimesnews.com NEWS NEWS NEWS of Appeal to convene a five- member panel as her client was asking the court to reconsider its 2017 decision in Mariner Foods Ltd. v. Leo-Progress En- terprises Inc. In that decision, the Court of Appeal found that "a subrogated claim brought by an insurer is not caught by a bankruptcy." Pressman noted that the Mariner Foods decision relied upon the Divisional Court's finding in Douglas, while the appeal in that matter was still pending. Juntunen says it is not typical for the court to convene such a panel, but it does this when there is an existing decision by a three- judge panel that may need to get overturned. "The court might also con- vene a five-judge panel if it isn't sure whether the case needs to be overturned but there is some discussion of it," she says. The court would not be able to overrule itself without taking that step, she says. In the case, Wendy Douglas had no ownership interest in the property, as she had been discharged from a bankruptcy subject to a stipulation that her interest remained vested in her trustee, who remained on title to the property along with her husband. Art Douglas, however, also filed an assignment in bank- ruptcy in 2009 and was also re- placed on title by the trustee. The trustee then sold the re- mediated property in the fall of 2009. State Farm started its ac- tion in the name of the Doug- lases in 2010, before Art Douglas was discharged from bankrupt- cy later that year. After State Farm brought its claim, the defendants brought a motion to summarily dismiss it, arguing it was a nullity because the Douglases were not on the title due to bankruptcy proceed- ings, but the motion judge and Divisional Court let the action proceed. The Court of Appeal found that a subrogation clause in Douglas' homeowners' policy did not permit State Farm to start the action in his name as his cause of action was vested in the trustee. Juntunen says the decision will likely cause lawyers or in- surers to consider their claim resolution processes to ensure that whenever a claim is paid there is also an assignment en- tered into to solidify any recov- ery rights they may have. She adds the decision only affects a subset of insurance re- covery matters, in which the in- sured makes an assignment into bankruptcy and the insurer has not obtained an assignment first. "It makes it particularly im- portant to know exactly what the status of an insured is at any given time," she says. "And in the event there is a bankruptcy that is declared and an assignment into bankruptcy, that means the insurer and the insurer's counsel are in a posi- tion where they may want to take steps to preserve their recovery rights lest they lose those." In a dissent, Justices Paul Rouleau and Lois Roberts agreed with the conclusion that the dismissal of the defendant's motion should be set side, but they said the matter should be remitted back to the Superior Court. The justices found that State Farm should be allowed to pur- sue the issue of whether its sub- rogated action could be brought by substituting the trustee as plaintiff. "In our view, the effective issue for determination at the original motion was the name in which the claim ought to be brought," they wrote. Pressman says this was a very narrow dissent and that all five judges agreed on the law and al- lowed the appeal. "The dissent would have per- mitted a further motion, but [it] did not guarantee the success of that further motion," says Press- man, a partner with DLA Piper (Canada) LLP. "The majority thoroughly explained why a further motion would be inappropriate in the circumstances." Lawyer Matt Gervan, who represented the respondents, was not available for an inter- view. LT Continued from page 1 Decision could cause issues for some recovery claims in which a violation of a court order does not amount to pro- fessional misconduct. "What I think the hearing panel and then the appeal panel said is one has to look at all the circumstances, and here, there were very compelling circum- stances that made this conduct not professional misconduct," he says. Carey, a former partner at Fo- gler Rubinoff LLP who is now at Loopstra Nixon LLP, was found in contempt after returning a sum of money to a client from their trust account despite an injunction freezing those funds. He had deposited $500,000 into the client's trust account, and when the client then tried to get Carey to pay a creditor with those funds, the lawyer refused because of the injunction. But Carey then returned the rest of the sum, minus legal fees, to the client after being instructed to do so. The client disappeared with the money and a creditor sued Carey. In that litigation, the credi- tor brought a motion requesting an order that the lawyer was in contempt of court for breach- ing the freezing injunction. A motion judge found the lawyer was in contempt, but the judge later reversed the finding and dismissed the creditor's applica- tion after hearing further sub- missions. The Court of Appeal rein- stated the contempt finding, but it also agreed with the motion judge that the lawyer had not in- tended to breach the injunction or to undermine the adminis- tration of justice. When the Su- preme Court affirmed that rul- ing, the law society started disci- pline proceedings against Carey. A hearing panel dismissed the law society's application after a two-day hearing. The panel considered an affi- davit from Alan Lenczner, a law- yer with experience in freezing injunctions, which said Carey's actions were standard litigation practice at the time. Lenczner also said that had Carey sought his advice, he would have told the lawyer to do exactly as he did. Jennifer Trehearne, one of the lawyers who represented Carey before the hearing panel, says the case reinforces that it is important for lawyers who find themselves in a situation where their ethical obligations are un- clear to consult senior counsel and to document those efforts. If there are ever any subse- quent questions about whether the lawyer has breached obliga- tions, they will then be able to demonstrate that they did their best to fulfil them, she says. "An error in judgement is not enough to ground a finding of professional misconduct," she says. "There has to be some serious or significant departure from professional standards, and I think that probably comes as some relief to all lawyers be- cause I think there aren't any of us who have not committed a mistake in the course of our practice." In the law society's appeal of the hearing panel's finding, counsel for the regulator argued that Carey should be repri- manded and that the panel had erred by finding facts that were different from those found by the Supreme Court. The law so- ciety also claimed that the hear- ing panel's decision was unrea- sonable. The appeal tribunal, however, found the facts in the hearing panel's ruling did not deter from those of the Supreme Court. Some lawyers are question- ing why the law society may have pursued the matter to the length it did, considering what the facts were in the case. "It seems like it would be a hopeless case to take to appeal on the basis of the evidence and the basis of the law," says lawyer Matthew Wilton, who was not involved in the case but repre- sents lawyers in LSO discipline matters. A spokeswoman for the law society says no decision has been made with respect to a possible appeal to Divisional Court. 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