Windsor lawyer ordered to pay for ‘meritless’ claim

An Ontario lawyer has been ordered to personally pay $45,000 for the “irresponsible” issuance of a meritless third-party claim in a New Brunswick fraud case.

Sandra Dawe, the managing partner at Toronto and Windsor, Ont. firm Shibley Righton LLP, has until noon on Dec. 15 to pay the cash or risk enforcement proceedings.

Dawe is representing auditors being sued by Deer Island Credit Union in New Brunswick. The credit union alleges the auditors were negligent for failing to notice that a former employee at Deer Island had embezzled more than $1.8 million between 1995 and 2007.

The auditors denied the allegations, and in May 2011, issued a third-party claim against 16 directors of the credit union, arguing their negligence contributed to the loss.

On Oct. 7, New Brunswick Court of Queen’s Bench Justice Hugh McLellan struck out the third party claim, calling it “irresponsible and an abuse of the process of the court.” He said Dawe should have known about an Ontario Court of Appeal case, Piedra v. Copper Mesa Mining Corp., which sets a very high bar for actions against directors, and ordered a hearing on costs to send a message that the courts will protect directors from ill-founded litigation.

In his Nov. 30 decision on costs, McLellan said he could not accept Dawe’s claim that she had “acted in honest belief that the auditors claim against the directors had merit.”

He said the claim, which cost the directors $77,000 in legal fees to respond to, had delayed the main action by six months and that it was his duty to rule that Dawe had “acted in disregard of the interests of justice,” and “caused costs to be wasted or incurred improperly.”

Dawe must pay $40,000 to the law firm representing the directors, plus another $5,000 for HST by noon Dec. 15. If she fails, McLellan said he would hear counsel about enforcing the order the following day. If that hearing is needed, he ordered Dawe to attend in person before him in St. John, N.B.

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