A continuing legal action brought by Royal Bank of Canada against the owner of a popular downtown Toronto bar has come to an end.
The bank and Rachel Conduit have settled a dispute in which RBC obtained a court order that she repay over $70,000 that stemmed from the personal debts of her former business partner and not the bar they operated.
"I am thankful it is over," said Ms. Conduit about the agreement which was finalized late last week. While she cannot disclose the financial details of the settlement, she said "it is an amount that is manageable."
A tentative deal between the bank and the owner of Handlebar, which is located in the Kensington Market neighbourhood of Toronto, was reached after a story about the legal proceeding was published in The Globe and Mail earlier this month.
Ms. Conduit noted that soon after the article came out, the bank accepted an offer made by her lawyer and there was no further negotiation.
"It was agreed by both parties that continuing with court proceedings would be cumbersome and costly, so we were pleased to have reached a settlement agreement with Ms. Conduit and Handlebar," said RBC spokesman A.J. Goodman. "Throughout this process, we did not seek more money than we might be entitled to in accordance with the rules of the court," he added.
The legal case faced by Ms. Conduit was a popular topic for social media users who frequent Kensington Market bars and shops. It also highlighted the fact that in Ontario, owners of small businesses that are not incorporated may be liable for the personal debts of their partners, even if they are not related to the finances of their establishment.
It was almost exactly a year ago when Ms. Conduit discovered tax debts owed by Handlebar, a bar she ran with business partner Bruce Dawson. A lawyer for Ms. Conduit drafted a letter that was sent to Mr. Dawson, stating he had been ousted from the partnership. Ms. Conduit then incorporated the business along with her husband. (Her legal last name is Reynolds, but she is widely known by her middle name, Conduit).
What she did not know at this time was that RBC had obtained a notice of garnishment against the business partnership as part of its efforts to recoup personal debt incurred by Mr. Dawson. Ms. Conduit was unaware of this notice, and when the bank did not receive a response, it went to Ontario Superior Court, taking legal action against Handlebar.
Superior Court Justice Robert Reid issued an order last March for Handlebar to pay $71,000 to the bank. Ms. Conduit was not made aware of the court proceeding.
The bar owner retained lawyer Gosia Bawolska, who was successful in reopening the matter before Justice Robert Nightingale. If the bank collected the full amount set out in his colleague's order then "it would recover far more than what it was entitled to on the merits," noted the judge in his ruling issued on Jan. 23.
He set aside the earlier order and required Ms. Conduit to comply with certain conditions, such as paying $10,000 into the court to cover any money that RBC may be owed from funds withdrawn by Mr. Dawson after there was a notice of garnishment.
Small businesses may be hesitant to incur legal fees as they start up operations, noted Ms. Bawolska. "While it is not always necessary, speaking with a lawyer at the outset of a new business adventure can go a long way to protect against other people's financial shenanigans," she stated.
Mr. Dawson told The Globe last month he is trying to repay his debts to RBC and believes he was unfairly removed from the operations of Handlebar.
Special to The Globe and Mail