{"id":1860,"date":"2015-05-06T00:00:00","date_gmt":"2015-05-06T00:00:00","guid":{"rendered":"https:\/\/perlaw.ca\/2015\/05\/06\/supreme-court-of-canada-finds-lawyer-guilty-of-civil\/"},"modified":"2019-07-22T20:46:41","modified_gmt":"2019-07-22T20:46:41","slug":"supreme-court-of-canada-finds-lawyer-guilty-of-civil","status":"publish","type":"post","link":"https:\/\/perlaw.ca\/fr\/2015\/05\/06\/supreme-court-of-canada-finds-lawyer-guilty-of-civil\/","title":{"rendered":"Supreme Court of Canada Finds Lawyer Guilty of Civil Contempt for Returning Funds to Client"},"content":{"rendered":"

In a case that should be regarded carefully by all lawyers and other professionals who handle client funds, the Supreme Court of Canada found in Carey v. Laken<\/em>, 2015 SCC 17 that a lawyer was guilty of civil contempt when the lawyer returned money to a client from his trust account in the face of a Mareva<\/em> injunction.<\/p>\n

Background<\/strong><\/p>\n

The lawyer represented a client who was being sued by an investor for loss of investment funds.\u00a0 In the course of the litigation, a Superior Court judge issued a Mareva<\/em> injunction on very broad terms.\u00a0 The injunction prohibited any person from \u201cdisposing of, or otherwise dealing with\u201d any of the client\u2019s assets and specifically mentioned \u201ctrust accounts\u201d.\u00a0 The client transferred $500,000.00 to the lawyer, and the money was deposited into the lawyer\u2019s trust account in compliance with the by-laws of the Law Society of Upper Canada.\u00a0 Later, the client instructed the lawyer to use the trust money to settle the claims of another creditor.\u00a0 However, the lawyer informed the client that he could not do so because of the prohibitions in the Mareva<\/em> injunction.\u00a0 When negotiations failed to settle the lawsuit, the client instructed the lawyer to return the funds to him.\u00a0 The lawyer did so, deducting a certain amount of money to cover legal fees.<\/p>\n

Contempt proceedings<\/strong><\/p>\n

The investor was eventually awarded a judgment of over $1 million against the client.\u00a0 However, the client and all his assets had disappeared from the jurisdiction.\u00a0 The investor applied to have the lawyer found in contempt for returning the funds in breach of the Mareva<\/em> injunction.<\/p>\n

A judge found the lawyer in civil contempt of court.\u00a0 The judge was satisfied beyond a reasonable doubt that the Mareva<\/em> injunction was clear, and that the lawyer \u201cknowingly and deliberately\u201d breached the injunction by transferring the funds back to the client. However, at a second hearing, the judge accepted evidence provided by the lawyer indicating that his action in returning the money was consistent with the practice of counsel generally.\u00a0 The lawyer also provided testimony about his perception of his professional duties and the reasons that he returned the money.\u00a0 At this hearing, the judge set aside her previous findings of contempt.<\/p>\n

The second decision was overturned by the Court of Appeal, which held that it was not necessary for a person in civil contempt to have desired or knowingly chosen to disobey the order.\u00a0 Furthermore, it was inappropriate for the trial judge her set aside the initial finding of contempt.\u00a0<\/strong><\/p>\n

Supreme Court of Canada\u2019s review<\/strong><\/p>\n

The Supreme Court of Canada found that the three elements of civil contempt are well-established in Canadian law.\u00a0 The first element is that the order \u201cmust state clearly and unequivocally\u201d what should and should not be done.\u00a0 The second element is that the party must have had actual knowledge of the order, or had knowledge imputed on the principle of the wilful blindness doctrine.\u00a0 The third element is that the party must have \u201cintentionally done the act that the order prohibits or intentionally failed to do the act that the order compels\u201d.<\/p>\n

A hotly contested issue at the Supreme Court of Canada is whether there was a necessity in civil contempt for the contemnor to have a contumacious intent.\u00a0 The lawyer argued that it was necessary that the contemnor must have intended to interfere with the administration of justice.\u00a0 The Supreme Court of Canada held that the case law was clear that it was only necessary that the person intentionally committed the act that was forbidden or refused to perform the act that was required.\u00a0 Furthermore, the Supreme Court of Canada rejected the argument that there should be a special intent required for third parties or lawyers.\u00a0 The Supreme Court of Canada rejected the suggestion by the lawyer that because he had professional obligations to his client, he should be treated differently than a contemnor who was not in a solicitor-client relationship.<\/p>\n

The Supreme Court of Canada also held that it was wrong for the trial judge to have set aside the contempt order at the second hearing.\u00a0 The Court acknowledged that a civil contempt matter is generally bifurcated, with the first hearing addressing whether or not contempt had occurred and the second hearing addressing the appropriate punishment.\u00a0 However, a judge could overturn the finding of contempt after a final order had been made only where the contemnor subsequently purged the contempt or, in exceptional circumstances, where new evidence is provided that was not available at the original hearing.<\/p>\n

This decision provides a cautionary reminder to lawyers and others who handle money for clients that they are bound to obey court orders, despite any duties owed to clients.<\/p>\n

\n

Margaret Truesdale, Research Director is a lawyer in the firm\u2019s Litigation Law Group.\u00a0 She can be reached at<\/em>\u00a0<\/em>mtruesdale@perlaw.ca<\/a><\/em>\u00a0<\/em>or 613.566.2820.\u00a0<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In a case that should be regarded carefully by all lawyers and other professionals who handle client funds, the Supreme Court of Canada found in Carey v. Laken, 2015 SCC 17 that a lawyer was guilty of civil contempt when the lawyer returned money to a client from his trust account in the face of […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"wds_primary_category":0,"wds_primary_expertise_area":0,"footnotes":""},"categories":[161],"tags":[],"class_list":["post-1860","post","type-post","status-publish","format-standard","hentry","category-publications","expertise_area-litige"],"acf":[],"_links":{"self":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/comments?post=1860"}],"version-history":[{"count":2,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1860\/revisions"}],"predecessor-version":[{"id":2734,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/posts\/1860\/revisions\/2734"}],"wp:attachment":[{"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/media?parent=1860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/categories?post=1860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/perlaw.ca\/fr\/wp-json\/wp\/v2\/tags?post=1860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}