Conrad Black’s ex-lawyers to face appeal in conflict-of-interest case

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A tangled, eight-year conflict-of-interest case against two Bay Street lawyers who once worked for Conrad Black is not over yet, as the Law Society of Upper Canada now says it is appealing a professional disciplinary ruling that exonerated the pair.

The Law Society is challenging an October ruling that concluded there was no evidence Torys LLP lawyers Beth DeMerchant and Darren Sukonick violated their profession's conflict-of-interest rules when they worked on the massive deals to sell Hollinger newspaper assets to CanWest Global Communications Corp. and Osprey Media Holdings Inc. more than a decade ago.

The allegations have hung over the two lawyers and their careers since the probe was launched in 2006.

But despite the October ruling's total rejection of the case against them, it emerged on Friday in a report on the Legal Feeds blog of The Law Times that the Law Society quietly filed a notice of appeal in November.

The two-page document includes says the panel "failed to appreciate material evidence" of the alleged conflict of interest and misinterpreted the profession's conflict-of-interest rules.

The appeal was filed after lawyers for Mr. Sukonick and Ms. DeMerchant filed a scathing 69-page submission demanding $3.4-million in legal costs from the Law Society.

Their submission blames the Law Society for launching an "unwarranted" proceeding, which followed a "flawed and incomplete investigation" that included a "failure to interview witnesses with actual knowledge of the facts" and was conducted despite "the complete absence of evidence of wrongdoing" by the two lawyers.

In a case management hearing this week held to discuss scheduling, the Law Society lost a bid to be given until July 1, and perhaps longer, to prepare its appeal. It must be ready by May 14, and the Law Society must file a more detailed notice of appeal by Jan. 20, with a hearing scheduled for August.

The two lawyers at the centre of the case issued statements by e-mail expressing dismay that the Law Society is continuing to fight.

"The appeal will continue to handicap me professionally for most of 2014, which is crushing," said Ms. DeMerchant, who has retired as a partner with Torys LLP. "The personal toll is immense. It is hard for me to understand the public interest imperative in the appeal."

Mr. Sukonick, who was in his early career when he worked on the Hollinger deals, condemned the filing of the appeal: "Through this ill-conceived appeal, the Law Society will have sidelined my career for almost as many years as I spent practising law. I cannot imagine how the Law Society's prosecutors think this is fair."

The conflict-of-interest allegations centred on the fact that the pair were acting both for Hollinger International Inc., and for Mr. Black and certain Hollinger directors and executives when the group received $80-million in controversial "non-compete payments" from the sale of newspaper assets that began in 2000.

But the October discipline decision cleared them, saying it was "unfortunate" that the Law Society did not call a single witness involved with any of the transactions in question. The discipline was also critical of the one witness the Law Society did call, an accounting expert who "was asked to suggest conclusions when not all of the facts were known by him."

The Law Society has changed lawyers on the case, bringing in veteran litigator Paul Pape for the appeal, replacing Paul Stern, who handled the lengthy disciplinary hearing that began in 2010. This move was behind its request for more time to prepare the appeal.

According to a transcript of the scheduling hearing this week, Mr. Pape cited the two lawyers' costs submission and said the Law Society's appeal raises important public interest issues about whether Law Society can properly regulate the profession.

"If the Law Society brings a case that runs for 120 days and runs up a cost bill of $3.4-million, the question is fairly asked: Do they know what they're doing? And my friends will speak to that, but it doesn't take a genius to see that, in the context of this case, this is significant," Mr. Pape said.

"This goes to the heart of how they practice law. This goes to the heart of whether or not the Law Society is able to police and to govern the profession at the higher end."

He also dismissed assertions of the personal toll the allegations had taken on the two lawyers' careers as a "minor matter," saying that Ms. DeMerchant had retired and that Mr. Sukonick had stepped away from his corporate law duties at Torys LLP in the wake of the other "massive litigation" that swirled around Hollinger.

A spokesman for the Law Society, Roy Thomas, said the regulator had no comment on its appeal.

Editor's note: An earlier version of this story incorrectly stated the disciplinary hearing began in 2012. In fact it began in 2010. This version has been corrected.