Nunavut Court of Appeal deals another twist in lawsuit for Ed Horne victims

The Nunavut Court of Appeal has overturned a key ruling in the lawsuit of a group of Ed Horne victims against their former lawyers.

Now stricken third party notice had the potential to 'derail' lawsuit

The Nunavut Court of Appeal did not, however, weigh in on who should be representing the victims, after the third party ruling in 2018 left them without a lawyer. (Nick Murray/CBC)

The Nunavut Court of Appeal has quashed a key ruling in the lawsuit of a group of Ed Horne victims against their former lawyers, as the prolonged and convoluted lawsuit was dealt yet another twist last week.

More than 100 victims are suing their former lawyers who represented them in a multimillion-dollar settlement with the government of the Northwest Territories. They allege Geoffrey Budden and Stuart Morris took too big a share of the settlement, and wrongfully charged HST. They launched the lawsuit in August 2015.

But the lawsuit came to a halt in October 2016 after their new lawyer, Alan Regel, was himself sued over allegations of negligence in recuperating the HST. Budden and Morris's lawyer at the time, James Morton, argued Regel could have got the HST back from the federal government, rather than suing Budden and Morris for it.

Because Regel had become a defendant in the case — known as a third party notice — he couldn't simultaneously represent his clients, because it put him in a conflict of interest.

In June 2018, Justice Paul Bychok ruled the third party notice had merit, effectively leaving the victims without a lawyer.

But last week, the Nunavut Court of Appeal quashed Bychok's decision, throwing yet another curveball into a lawsuit which hasn't seen any progress on the main issue in nearly four years — whether the victims should get some of the settlement money back.

Third party notice risked 'derailing' main lawsuit

In its decision, the Nunavut Court of Appeal made two main points as to why it struck Bychok's third party notice.

The first, it said in following the precedent set by other courts in Canada, was if Budden and Morris were defending themselves against the HST issue, and the plaintiffs could have obtained it by other means, the argument could be taken into consideration as mitigation if damages are awarded at the conclusion of the lawsuit.

In essence, Budden and Morris don't have to sue the victims' lawyers for it, and it could just be deducted in any damages they may have to pay if the courts rule in the victims' favour. Thus, there is no need for a third party notice.

The second, the three-judge panel ruled, was that this is not a lawsuit where issuing a third party notice would be appropriate because it could have the potential to affect the original lawsuit.

"Here, the Third Party Notice runs the risk of derailing the main proceeding. Adding another party to the litigation, to engage one narrow issue, will complicate and delay the entire action," the panel wrote in its decision.

"The HST refunds are only a small part of the overall claim. There is a danger that adding another defendant to address this small issue will undermine or delay the entire action, which can ultimately only prejudice the plaintiffs. It appears that no progress has been made in advancing the main claim since the Third Party Notice was filed on August 29, 2016."

This is the first time in Nunavut's history its rules around third party notices have been interpreted by the Court of Appeal.

The panel also pointed out that a rift has now formed between the plaintiffs and Regel because of the third party notice.

So, what now? And who is representing the victims?

The Court of Appeal, however, did not address the issue of who is now representing the victims.

After the third party notice was issued, Bychok ruled Regel's firm could no longer represent the victims. However the Court of Appeal made a point not to address that question.

A case management meeting between the lawyers and a judge is expected to be scheduled in the future to resolve the issue, before the lawsuit is back in court again. No date has been set for the meeting.