Judge sidelines lawyer representing Ed Horne victims in lawsuit against former lawyers
Case delayed by at least 6 months by new allegations of lawyer negligence
It was a twist that surprised even the most experienced lawyers in the Nunavut Court of Justice on Friday: a judge telling a lawyer that he can't represent his clients anymore, at least temporarily.
The revelation thickened the plot in the lawsuit between a group of victims of convicted pedophile Ed Horne, and the lawyers who represented them in a multimillion-dollar settlement with the Government of the Northwest Territories.
The group of some 100 plaintiffs, represented by Edmonton-based lawyer Alan Regel, allege lawyers Geoffrey Budden and Stuart Morris took more than their fair share of the settlement. Part of the allegations include Budden and Morris wrongfully charged them HST, or harmonized sales tax.
But on Aug. 29, Budden's lawyer James Morton filed a third party notice with the court, alleging Regel is actually responsible for part of the damages now being sought by his clients in their suit against Budden. The subsequent lawsuit essentially alleged that if Budden is responsible for paying back the HST to the victims, than Regel should be on the hook to pay some of it back, too.
Because, Morton argued, Regel should have applied to the government to get the HST back — which he didn't — so that makes Regel just as negligent as Budden.
Regel hasn't yet defended the allegations against him.
Complicating the case is that since Regel himself is being sued, he can't represent someone in that same lawsuit, according to a lawyer's professional responsibility obligations. So now Regel is in a conflict of interest.
Regel and his firm hired their own lawyer, Jon Rossall, to fight the third party notice. They plan to argue that the third party notice is unfair and Regel shouldn't be a defendant in the case.
But fast forwarding to Friday, Justice Paul Bychok ruled that until the arguments of the third party notice are resolved, Regel and his firm can't continue to represent the plaintiffs (the victims of Ed Horne).
"Because of the conflict of interest issue, Mr. Regel and his law firm should not continue to represent the [plaintiffs] until the third party notice is decided," Bychok said.
"If Mr. Rossall does not tell me that Mr. Regel and his law firm will cease to act until this issue is settled, then I propose to remove them myself."
Regel agreed to step away from the file, leaving the plaintiffs without a lawyer in their lawsuit, while Rossall agreed to handle the responsibility of notifying them of what's happened.
Everyone agreed not to proceed with the central lawsuit over withheld funds until the third party notice is resolved, which could potentially take upwards of six months.
"This is a very strange situation. I can say in my career I've never come across a situation where a law firm has been third partied into an action," Rossall told Justice Bychok. "So I struggle a little bit with how to deal with certain issues."
Getting the word out to plaintiffs
Bychok then turned his attention to ensuring all the plaintiffs know exactly what's going on, and held off on hearing arguments on the third party notice until all the plaintiffs are brought up to date.
Bychok also wants to give the plaintiffs time to speak to an independent lawyer on the third party issue, to let them know that they can have a new lawyer act for them, and to let them to know they have a right to be heard before Bychok rules.
Bychok said the plaintiffs have the right to seek a new lawyer for the third party notice until the issue is decided. If it is dismissed, Regel can continue to represent them.
The court will prepare a statement, in English and Inuktitut, to distribute to the communities, as the plaintiffs are spread across the territory, Bychok said.
The case will be back in court on March 17, 2017.