Former Torys LLP lawyers Beth DeMerchant and Darren Sukonick are suing the Law Society of Upper Canada for damages totalling $22-million, alleging the regulatory body was malicious in its prosecution of them over alleged errors in their work for Hollinger Inc. more than 15 years ago.
Ms. DeMerchant and Mr. Sukonick faced a lengthy Law Society hearing between 2010 and 2012, but were vindicated in a 2013 ruling that dismissed six counts of alleged conflict of interest against them. They were accused of acting in a conflict of interest while advising Conrad Black's Hollinger group on the sale of newspaper properties between 2000 and 2003.
The Law Society appealed the decision to the Law Society Tribunal Appeal Division, which dismissed the appeal in 2015. In January, 2017, the appeal division increased the costs awarded to the two lawyers from a total of $500,000 to $1.3-million to cover their legal fees.
The lawyers, both of whom have since retired, filed a lawsuit this week against the Law Society, seeking general and special damages of $21-million and further aggravated and punitive damages of $1-million.
The suit alleges the Law Society knew it didn't have sufficient evidence to prosecute the pair after conducting an investigation, but pushed ahead in part because of public criticism that the organization hadn't disciplined any lawyers over controversial Hollinger business transactions.
The lawyers also allege there was "no reliable evidence on issues critical to a conflict-of-interest prosecution" presented at their hearing, and that the Law Society "simply had no evidence of its conflict-of-interest allegations."
It also complains that a statement issued by the Law Society after its loss in the case in 2013 was defamatory because it implied they were, in fact, guilty and that the tribunal ruling was wrong. In the statement, the regulator said it was disappointed by the decision and it had initiated the proceedings after "a thorough investigation" into concerns about a breach of the rules of professional conduct.
Law Society spokeswoman Susan Tonkin said the organization only received the lawsuit on Tuesday and is currently reviewing it. It has not yet filed its defence in the case.
Both the initial ruling and the appeal ruling in the case concluded the prosecution was initially warranted, but the case should have been reassessed and shut down early after the lawyers' expert witnesses gave evidence that the Law Society could not contradict.
Courts have typically ruled that defendants in legal proceedings cannot sue regulatory bodies and tribunals for prosecuting them in good faith, even if the prosecution does not succeed and the accused are cleared. But some cases have succeeded when there is evidence of negligence or wrongdoing by prosecutors.
The Supreme Court of Canada ruled in 2004, for example, that the Barreau du Québec, which regulates lawyers in that province, failed to act appropriately in a disciplinary case for years despite many complaints about a lawyer. The top court said the "virtually complete absence of the diligence called for in the situation" amounted to "gross carelessness and serious negligence."