The Ontario Court of Appeal has restored a civil contempt finding against a Toronto lawyer who transferred money from his trust account despite a Mareva order restricting the funds.
“With respect to the law of civil contempt, I think the decision is quite important,” says Brauti Thorning Zibarras LLP partner Kevin Toyne, who represented the appellant, Judith Laiken.
“For the future, everyone in the bar should know that if there’s a Mareva injunction, you certainly cannot return the money to your client,” says Toronto lawyer James Morton in explaining the appeal court’s message in Sabourin and Sun Group of Companies v. Laiken.
Laiken brought the matter to the appeal court after Superior Court Justice Lois Roberts set aside an earlier finding of contempt against lawyer Peter Carey in 2011. Carey was representing financial adviser Peter Sabourin in his long-running litigation with Laiken. In 2006, she obtained a Mareva order that prevented the sale, disposition, withdrawal, dissipation, assignment, dealing with, transfer, conveyance, conversion, encumbrance or diminishment of Sabourin’s assets and included money held in trust accounts.
A few months later, Sabourin delivered Carey a $500,000 cheque with no instructions that he deposited into his trust account. Sabourin later called Carey and told him to use the funds to settle with another group of creditors. Carey refused, citing the Mareva order. Sabourin then told Carey to settle with Laiken, but the lawyer was unable to do so. He then asked Carey to return the funds, which he did after deducting $60,000 for legal fees.
In response, Laiken brought the contempt motion against Carey. Among other things, Carey argued the Mareva order was unclear and suggested that to retain the money would be to shelter it improperly from creditors since solicitor-client privilege prevented him from revealing the trust funds. Roberts initially found Carey in contempt in October 2011 but set aside her order almost a year later after finding she had the authority to reopen the matter. According to appeal court Justice Robert Sharpe’s reasons in Laiken last week, Roberts by then had reasonable doubt as to whether the terms of the Mareva order were completely clear to Carey and his interpretation of it was wilfully blind.
Last week, Laiken succeeded in her appeal of Roberts’ findings and, as a result, Carey must pay her costs in the contempt proceedings. Among other things, Sharpe found Roberts misinterpreted his earlier comments in a stay application brought by Carey to the Court of Appeal as to whether a judge could revisit and reverse an initial finding of contempt. “What I intended to say was that until a judge has decided both the issue of contempt and the issue of sanction, an appellate court does not have a complete record of the case,” wrote Sharpe.
“Appeals should only come to this court on a complete record and in contempt, as in other areas, we should avoid a fragmented or piece-meal approach to hearing appeals before the first instance court has completed its adjudication of all issues.”
As a result, Sharpe found the procedure followed in the case was flawed and that the court shouldn’t have allowed Carey to reopen the contempt finding.
On the issue of whether Carey was in contempt, Sharpe also found against him. While Carey argued it would be wrong for him to shelter the funds from creditors, Sharpe noted Sabourin had in fact revealed their existence to a receiver in another matter. “I have difficulty accepting Carey’s assertion that there was no way that Laiken or her counsel could learn that he had his client’s money in his trust account in the face of his evidence that his client had already disclosed that fact, albeit to another creditor,” he wrote.
“In my view, Carey committed an act that violated both the letter and the spirit of the Mareva order,” he added.
Sharpe also considered the issue of whether Carey had acted deliberately when he violated the order. On this front, he examined whether it’s necessary to show someone acted intentionally in disobeying the court. On this front, he also found against Carey. “He did not desire or knowingly choose to disobey the order, but the lack of contumacious intent is a mitigating factor and not an essential element of civil contempt,” wrote Sharpe, who also rejected submissions from English case law suggesting a more lenient approach to third parties, such as banks, that unintentionally violate a court order.
“I am not persuaded that as the solicitor acting for Sabourin in relation to the Mareva order, Carey falls into the same category as the third parties discussed in those cases who were strangers to the litigation bound to respect the court order simply because they had knowledge of it. As the solicitor of record and as an officer of the court, Carey must be held to a higher standard. . . . As an officer of the court, a solicitor of record is duty-bound to take scrupulous care to ensure respect for court orders. In my view, as the solicitor of record in the case, Carey should be held to the same standard of compliance as his client who was a party.”
For his part, Carey has maintained he was just doing his duty. “For my clients, the order literally meant that they had to starve to death,” he told the court in 2011 in defending his decision to return the money to Sabourin.
While Morton emphasizes that Carey did nothing “evil or wrong,” he says a lawyer in his position does have options, including going to court to seek directions or interpleading the money into court.
For more, see "Lawyer facing contempt charge just doing his 'duty.'"
“With respect to the law of civil contempt, I think the decision is quite important,” says Brauti Thorning Zibarras LLP partner Kevin Toyne, who represented the appellant, Judith Laiken.
“For the future, everyone in the bar should know that if there’s a Mareva injunction, you certainly cannot return the money to your client,” says Toronto lawyer James Morton in explaining the appeal court’s message in Sabourin and Sun Group of Companies v. Laiken.
Laiken brought the matter to the appeal court after Superior Court Justice Lois Roberts set aside an earlier finding of contempt against lawyer Peter Carey in 2011. Carey was representing financial adviser Peter Sabourin in his long-running litigation with Laiken. In 2006, she obtained a Mareva order that prevented the sale, disposition, withdrawal, dissipation, assignment, dealing with, transfer, conveyance, conversion, encumbrance or diminishment of Sabourin’s assets and included money held in trust accounts.
A few months later, Sabourin delivered Carey a $500,000 cheque with no instructions that he deposited into his trust account. Sabourin later called Carey and told him to use the funds to settle with another group of creditors. Carey refused, citing the Mareva order. Sabourin then told Carey to settle with Laiken, but the lawyer was unable to do so. He then asked Carey to return the funds, which he did after deducting $60,000 for legal fees.
In response, Laiken brought the contempt motion against Carey. Among other things, Carey argued the Mareva order was unclear and suggested that to retain the money would be to shelter it improperly from creditors since solicitor-client privilege prevented him from revealing the trust funds. Roberts initially found Carey in contempt in October 2011 but set aside her order almost a year later after finding she had the authority to reopen the matter. According to appeal court Justice Robert Sharpe’s reasons in Laiken last week, Roberts by then had reasonable doubt as to whether the terms of the Mareva order were completely clear to Carey and his interpretation of it was wilfully blind.
Last week, Laiken succeeded in her appeal of Roberts’ findings and, as a result, Carey must pay her costs in the contempt proceedings. Among other things, Sharpe found Roberts misinterpreted his earlier comments in a stay application brought by Carey to the Court of Appeal as to whether a judge could revisit and reverse an initial finding of contempt. “What I intended to say was that until a judge has decided both the issue of contempt and the issue of sanction, an appellate court does not have a complete record of the case,” wrote Sharpe.
“Appeals should only come to this court on a complete record and in contempt, as in other areas, we should avoid a fragmented or piece-meal approach to hearing appeals before the first instance court has completed its adjudication of all issues.”
As a result, Sharpe found the procedure followed in the case was flawed and that the court shouldn’t have allowed Carey to reopen the contempt finding.
On the issue of whether Carey was in contempt, Sharpe also found against him. While Carey argued it would be wrong for him to shelter the funds from creditors, Sharpe noted Sabourin had in fact revealed their existence to a receiver in another matter. “I have difficulty accepting Carey’s assertion that there was no way that Laiken or her counsel could learn that he had his client’s money in his trust account in the face of his evidence that his client had already disclosed that fact, albeit to another creditor,” he wrote.
“In my view, Carey committed an act that violated both the letter and the spirit of the Mareva order,” he added.
Sharpe also considered the issue of whether Carey had acted deliberately when he violated the order. On this front, he examined whether it’s necessary to show someone acted intentionally in disobeying the court. On this front, he also found against Carey. “He did not desire or knowingly choose to disobey the order, but the lack of contumacious intent is a mitigating factor and not an essential element of civil contempt,” wrote Sharpe, who also rejected submissions from English case law suggesting a more lenient approach to third parties, such as banks, that unintentionally violate a court order.
“I am not persuaded that as the solicitor acting for Sabourin in relation to the Mareva order, Carey falls into the same category as the third parties discussed in those cases who were strangers to the litigation bound to respect the court order simply because they had knowledge of it. As the solicitor of record and as an officer of the court, Carey must be held to a higher standard. . . . As an officer of the court, a solicitor of record is duty-bound to take scrupulous care to ensure respect for court orders. In my view, as the solicitor of record in the case, Carey should be held to the same standard of compliance as his client who was a party.”
For his part, Carey has maintained he was just doing his duty. “For my clients, the order literally meant that they had to starve to death,” he told the court in 2011 in defending his decision to return the money to Sabourin.
While Morton emphasizes that Carey did nothing “evil or wrong,” he says a lawyer in his position does have options, including going to court to seek directions or interpleading the money into court.
For more, see "Lawyer facing contempt charge just doing his 'duty.'"
