Law Society of Ontario v. Marusic and Martini

LAW SOCIETY TRIBUNAL

HEARING DIVISION

Citation: Law Society of Ontario v. Marusic and Martini, 2022 ONLSTH 55

Date: May 11, 2022

Tribunal File No.: 17H-153; 19H-084; 20H-042

BETWEEN:

Law Society of Ontario

Applicant

- and -

Maria Frances Marusic and Claudio Martini

Respondents

Before: Margaret Leighton (chair), Eric Whist, Alexander Wilkes

Heard: March 22-26, April 5 and 9, September 7-8, December 8 and 13-17, 2021, and

February 17-18, 2022, by videoconference

Appearances:

Guy Pratte, Caitlin Sainsbury, and Veronica Soljin, for the applicant

Brian Greenspan and Naomi Lutes, for the respondent Ms. Marusic

Gavin Tighe and Scott Gfeller, for the respondent Mr. Martini

3.

Summary:

MARUSIC – Failing to Assist in Preventing the Unauthorised Practise of Law – Failing

to Act with Integrity – In 2015, after hearing how the Lawyer’s relationship with Martini

had ended, the Tribunal imposed restrictions on the Lawyer’s licence – The panel

found that the Lawyer had misled the Tribunal about the nature of her relationship with

Martini and thus failed to act with integrity – She also failed to assist in preventing

Martini’s unauthorised practise of law and provision of legal services – The Lawyer

associated with and used the services of Mr. Martini without the requisite express

approval of the Hearing Division – The panel directed that dates are to be set for a

hearing on penalty.

MARTINI – Misappropriation of Funds – Providing Legal Services While Suspended –

Motion to Stay Based on Delay – The Lawyer was suspended as of April 22, 2015 –

The Lawyer admitted to repeatedly breaching escrow but denied misappropriation on

the basis that the action had been assigned to him – The panel found that the Lawyer

had misappropriated funds – The Lawyer also continued to provide legal services while

suspended – The panel concluded due to the nature of the proceedings and the

Lawyer’s own contribution to the delay, the delay here did not rise to the level of

inordinate – The motion to stay was dismissed and the panel directed that dates are to

be set for a hearing on penalty.

REASONS FOR DECISION ON FINDINGS

[1]

[2]

[3]

Margaret Leighton (for the panel):– Claudio Martini was called to the bar in

1989. He had a highly successful and extremely busy litigation practice. Maria

Marusic was called in 1993. She also was an accomplished and busy litigator.

Mr. Martini and Ms. Marusic began working together in 1993. In 2000 they

became law partners. In 2001 they became romantic partners. In 2010 they

established Shulgan Martini Marusic LLP (SMM) together with Myron Shulgan.

In late 2021, while this hearing was ongoing, they married.

On November 26, 2012, both Mr. Martini and Ms. Marusic participated in the

mediation of a longstanding contractual dispute involving Client A and his

company, Company B. The mediation was very successful. On November 30,

2012, settlement funds of $2,746,342.41 were deposited into SMM’s trust

account. The minutes of settlement required the funds to be held in escrow

pending delivery of performance bonds, which were the subject of the litigation,

to opposing counsel.

On November 30, 2012, $925,128.87 was withdrawn from the SMM trust

account by cheque payable to SMM. Mr. Martini signed the cheque and Ms.

Marusic co-signed it. The Law Society alleges this began a series of 19

misappropriations from trust such that, by November 2014, just over $50,000 of

the original $2.7 million settlement remained. The bonds were never delivered.

2

[4]

[5]

Mr. Martini responds that Client A assigned the action to him in December 2006.

He admits repeatedly breaching escrow but denies any misappropriation on the

basis that all the money belonged to him.

The parties agree Ms. Marusic co-signed two more cheques transferring funds

subject to escrow from trust to the SMM general account in February 2013. The

Law Society alleges that by co-signing the November 2012 and February 2013

cheques, Ms. Marusic misappropriated or knowingly assisted in the

misappropriation of approximately $1.2 million from trust. Ms. Marusic denies

any knowledge of Mr. Martini’s escrow breach and any misappropriation.

[6]

[7]

Mr. Martini left his SMM office on December 12, 2014 after being advised the

Law Society was investigating the Client A matter. He did not return. On

January 5, 2015, the Tribunal suspended his licence on an interim interlocutory

basis. An interlocutory suspension was ordered effective April 22, 2015: Law

Society of Upper Canada v. Martini, 2015 ONLSTH 68.

In March 2015 the Law Society asked to suspend Ms. Marusic’s licence based

on the alleged misappropriation. At the hearing in April 2015 Ms. Marusic told

the Tribunal her relationship with Mr. Martini had ended in late March. This was

a factor in the Tribunal’s decision to impose restrictions on Ms. Marusic’s

licence rather than order her suspended: Law Society of Upper Canada v.

Marusic, 2015 ONLSTH 81.

[8]

The Law Society alleges Mr. Martini engaged in the unauthorized practice of law

while suspended by assisting in the preparation for and the trial of a malicious

prosecution action brought by Client B against the RCMP and the federal

government. The matter settled mid-trial for several million dollars. Client B was

represented by Ms. Marusic at the trial. Mr. Martini met with Ms. Marusic and

Client B and prepared an authorization to settle and direction for payment of

legal fees. Mr. Martini is also alleged to have engaged in unauthorized practice

in respect of nine other clients or ongoing legal matters.

[9]

The Law Society alleges Ms. Marusic failed to prevent Mr. Martini’s

unauthorized practice, associated with him, and used his services without the

express approval of the Tribunal. The respondents deny these allegations and

take the position Mr. Martini’s involvement in client matters was limited to

transferring his files to Ms. Marusic.

[10]

The Law Society also alleges Ms. Marusic failed to act with integrity in the

manner in which she handled the settlement of the Client B litigation. Ms.

Marusic denies this allegation.

3

[11]

[12]

Finally, the Law Society alleges Ms. Marusic misled the Tribunal about the

nature of her relationship with Mr. Martini between March and August 2015. Ms.

Marusic denies this allegation.

For the reasons that follow we find:

Mr. Martini misappropriated funds held in trust as a result of the Client A/

Company B litigation.

Mr. Martini continued to provide legal services while suspended, contrary to

Rule 7.6-1.2 of the Rules of Professional Conduct.

Ms. Marusic failed to assist in preventing Mr. Martini’s unauthorised

practise of law and provision of legal services, contrary to Rule 7.6-1 of the

Rules of Professional Conduct. Further, she associated with and used the

services of Mr. Martini without the express approval of a panel of the

Hearing Division of the Law Society Tribunal, contrary to Rule 7.6-1.1.

Ms. Marusic failed to act with integrity in the settlement of Client B’s matter

contrary to Rule 2.1-1 of the Rules of Professional Conduct.

Ms. Marusic misled the Law Society Tribunal about the nature of her

relationship with Mr. Martini between March and August 2015 and by doing

so failed to act with integrity contrary to Rule 2.1-1 of the Rules of

Professional Conduct.

[13]

However, we are not satisfied the Law Society met its onus to prove, on a

balance of probabilities, Ms. Marusic knowingly assisted in the misappropriation

of funds held in trust as the result of the Client A/Company B litigation. Those

allegations are dismissed.

BACKGROUND AND PROCEDURAL HISTORY

[14]

[15]

In October 2014, Mr. Martini admitted to having engaged in a sophisticated and

elaborate scheme to deceive his clients. The Hearing Division ordered his

licence suspended for seven months. Law Society of Upper Canada v. Martini,

2014 ONLSTH 192. His appeal of that penalty was pending when the Law

Society commenced its investigation of the Client A matter in December 2014.

Law Society of Upper Canada v. Martini, 2014 ONLSTA 51.

On December 18, 2014, the Law Society obtained an order from the Superior

Court freezing SMM’s accounts. Sometime in January 2015, the three partners

dissolved SMM. Ms. Marusic started her own firm, Marusic Law LLP, and took

on approximately 70% of Mr. Martini’s files. She also assumed responsibility for

SMM’s debts.

4

Martini suspended

[16] The Law Society’s motion for an interlocutory suspension was scheduled for

January 5, 2015. That hearing was adjourned to January 23 and the Tribunal

ordered an interim interlocutory suspension effective that day: Law Society of

Upper Canada v. Martini, 2015 ONLSTH 31. After another adjournment,

Mr. Martini consented to an interlocutory suspension effective April 22, 2015:

Law Society of Upper Canada v. Martini, 2015 ONLSTH 68.

Marusic practice restrictions and suspension

[17]

The Law Society sought an interlocutory suspension of Ms. Marusic’s licence

based on her alleged involvement in the misappropriation of the Client A funds.

In her sworn affidavit in March 2015 and oral evidence responding to the Law

Society’s motion for an interlocutory suspension, Ms. Marusic stated that her

relationship with Mr. Martini had ended. After considering the circumstances the

panel found a restriction on Ms. Marusic’s ability to operate her trust account

was sufficient to protect the public.

[18]

In December 2015, the Law Society moved to vary the Tribunal’s June order on

the basis of a material change in circumstances arising out of Mr. Martini’s

involvement in the Client B litigation and fresh evidence Ms. Marusic had

associated with and/or facilitated Mr. Martini’s practice of law. At that time Ms.

Marusic admitted her romantic relationship with Mr. Martini had resumed in

August 2015. While the hearing panel agreed the resumption of the romantic

relationship was a material change, the majority did not order a suspension:

Law Society of Upper Canada v. Marusic, 2016 ONLSTH 67. The Law Society

appealed.

[19]

The Appeal Division found the majority of the hearing panel misapprehended

the significance of Mr. Martini’s involvement in negotiating fees with Client B,

which raised concerns about Mr. Martini’s influence on Ms. Marusic and about

her independent judgment. It ordered a suspension: Law Society of Upper

Canada v. Marusic, 2016 ONLSTA 22. The Divisional Court upheld that

decision: Marusic v. Law Society of Upper Canada, 2017 ONSC 663. Ms.

Marusic’s licence was suspended effective February 2017.

[20]

In July 2017, Ms. Marusic brought a motion to lift the interlocutory suspension

on the basis, among other reasons, that the conduct application had not yet

been commenced. The panel refused her request but ordered the suspension

would be lifted if a conduct application had not been commenced by November

30, 2017: Law Society of Upper Canada v. Marusic, 2017 ONLSTH 197.

5

Marusic applications

[21]

The application in file 17H-153 was issued on November 29, 2017 (the first

Marusic application). The first application alleged Ms. Marusic misappropriated

or assisted in the misappropriation of approximately $1.265 million held in trust

for Client A, failed to assist in preventing Mr. Martini’s practice of law in relation

to the Client B litigation, and failed to act with integrity in the settlement of the

Client B litigation.

[22]

[23]

The Tribunal refused Ms. Marusic’s request to either dismiss the first application

as an abuse of process or to stay the Tribunal’s hearing pending resolution of

civil proceedings between the respondents and Client A: Law Society of Ontario

v. Marusic, 2018 ONLSTH 118.

The application in file 19H-084 was issued on July 12, 2019 (the second

Marusic application). It alleged Ms. Marusic failed to assist in preventing

Mr. Martini’s practice of law in relation to several other clients and that between

March and August 2015 Ms. Marusic misled the Law Society and/or the Law

Society Tribunal about the nature of her relationship with Mr. Martini and in

doing so failed to conduct herself with integrity.

[24]

The Law Society’s motion to join both applications was granted: Law Society of

Ontario v. Marusic, 2019 ONLSTH 127.

Privileged documents issue

[25]

Between April and June 2018, Law Society discipline counsel became aware

that search results of data collected from the digital search of Ms. Marusic’s

computers and servers may have included solicitor-client privileged information.

In December 2018, Borden Ladner Gervais (BLG) was retained and took

carriage of the file for the Law Society. Between January and March 2019

counsel for both parties worked on, and ultimately achieved, a protocol to

address the possible privilege issues.

Preliminary motions

[26]

In December 2019, the Tribunal heard three motions. Ms. Marusic asked the

Tribunal to exclude evidence allegedly taken from her computers in violation of

the Charter of Rights and Freedoms and to remove BLG as counsel for the Law

Society on the basis of a conflict of interest. The Law Society sought an order

permitting Client A to testify remotely.

[27]

Ms. Marusic’s motion to exclude evidence was successful in part. Her personal

e-mails were excluded but case-related e-mails not limited to her work on the

Client B matter were admitted. The motion to remove BLG was denied. The Law

6

Society’s motion to permit Client A to testify remotely was granted: Law Society

of Ontario v. Marusic, 2020 ONLSTH 18.

Marusic hearing begins

[28]

The hearing of the merits began on February 10, 2020. The Tribunal heard four

witnesses on behalf of the Law Society: Client B; his advisor Leighton Roslyn;

Allane Andrusko, the Law Society’s forensic auditor; and Myron Shulgan, the

respondents’ former partner at SMM. Continuation dates were scheduled in

April, May and June 2020.

Covid

[29]

The April hearing dates were vacated on March 16 due to the COVID-19

lockdown. The May and June dates were vacated for the same reason. The

hearing was scheduled to resume remotely for eight days in September and

October 2020.

Martini application

[30] The application in file 20H-042 was issued April 2, 2020 (the Martini

application). It contained 13 allegations against Mr. Martini. Particulars 5 and 13

concerned Client A and Client B (referred to by other initials in the Martini

NOA):

5.

Between November 2012 and November 2014, having received

a settlement of $2,746,342.41 in trust on behalf of Client [A] Mr. Martini

made unauthorized withdrawals from trust, misappropriating and/or

misapplying $2,194,383.49, more or less, of the funds held in trust on

behalf of Client [A].

(…)

13.

In or about June 2015, in connection with the trial and settlement

of an action Mr. Martini had commenced on behalf of Client [B],

Mr. Martini continued to practice law while suspended when he actively

assisted Client [B] and Client [B]’s counsel during the trial preparation

and/or settlement of the action.

Martini and Marusic applications joined

[31]

On September 7, 2020, Mr. Martini moved to have the Client A and Client B

allegations in the Martini application heard together with the two Marusic

applications.

[32]

The Tribunal granted Mr. Martini’s motion on September 15. The Tribunal found

that the considerations favouring joinder, avoiding a multiplicity of proceedings

and the risk of inconsistent findings, outweighed the factors against it, most

7

particularly the need to restart the Marusic hearing. The other 11 allegations in

the Martini application would proceed separately: Law Society of Ontario

v. Martini, 2020 ONLSTH 116.

[33]

As a consequence of the joinder decision, the September and October Marusic

hearing dates were vacated. Further, the chair of the Marusic panel advised he

was leaving the Tribunal and, given the number of hearing dates required to

complete the three applications, was unable to continue to hear the matters.

The remaining members did not consider it appropriate to continue as a two-

person panel. A new hearing panel was required.

Martini’s stay motion

[34] By notice of motion filed March 12, 2021, Mr. Martini sought a stay of the

proceedings against him in respect of Clients A and B on the basis that the Law

Society’s delay in prosecuting these matters was inordinate, breached natural

justice and procedural fairness and was an abuse of process. Counsel agreed

to argue the delay motion at the completion of the hearing on the merits.

Marusic/Martini hearing

[35]

The parties agreed the transcripts of evidence given before the original Marusic

hearing panel would be relied on in the joined Marusic/Martini hearing. The

parties relied on the agreed statement of facts (ASF) filed earlier in the Marusic

applications and filed a second ASF in relation to the Martini allegations.

[36]

The Law Society was permitted to recall Ms. Andrusko and Mr. Shulgan to

testify about the Martini allegations. The parties also agreed Client A could

provide his evidence in chief by affidavit and that a licensed paralegal,

acceptable to the parties, would be present while Client A testified, given Client

A’s unfamiliarity with Zoom proceedings and technology in general. The same

paralegal commissioned Client A’s affidavit.

[37]

The hearing resumed for two weeks on March 22, 2021. We heard from Ms.

Andrusko and Mr. Shulgan and Client A began his testimony on March 25.

Unfortunately, and despite being expressly instructed not to discuss his

evidence or the hearing with anyone, Client A spoke to the paralegal about his

cross-examination and requested Law Society counsel’s assistance. The

paralegal then telephoned and e-mailed Law Society counsel in an attempt to

communicate Client A’s concerns. Law Society counsel properly refused to

respond or engage. Respondents’ counsel were informed and provided with the

e-mail and voicemail recording. The paralegal’s services were terminated.

[38]

The remaining March hearing days were adjourned to permit the Law Society to

find another individual to assist Client A. Due to the pandemic lockdown and

social distancing requirements, it was impossible to retain anyone for this

8

purpose or to have them safely attend in Client A’s home until lockdown

restrictions were relaxed in early summer 2021.

[39]

[40]

On September 7 and 8, 2021, Client A resumed his testimony. Court reporters

retained by the Law Society and acceptable to the respondents assisted Client

A to manage the hearing technology.

The hearing reconvened on December 8 for two weeks to hear the respondents’

evidence. Gino Morga provided evidence on behalf of Ms. Marusic. Ms. Marusic

elected not to testify. Mr. Martini testified and was cross-examined. The hearing

of evidence was completed on December 21, 2021.

[41]

[42]

The parties filed a joint brief of Ms. Marusic’s “read-ins” taken from affidavits

and testimony she provided in her interlocutory suspension proceedings as well

as the transcript of her interview by the Law Society investigators. The parties

identified portions of those materials the panel could accept for the truth of their

contents as well as portions the panel could consider as context for the

read-ins.

Two days, February 17 and 18, 2022, were set to hear final submissions and

the argument of the stay. The day before reconvening, Mr. Martini’s counsel

delivered his written submissions which raised, for the first time and without

formal notice, serious allegations of prosecutorial misconduct against the Law

Society and its counsel, principally in connection with Client A’s testimony and

affidavit as well the conduct of the Law Society’s original investigator, Michael

Spagnuolo. The LSO asked us to disregard these submissions but, if we felt

unable to do so, required an adjournment in order to respond properly.

[43]

After some clarifying discussion in which the Law Society acknowledged the

frailties of Client A’s evidence but declined to withdraw his affidavit, counsel for

Mr. Martini confirmed his primary concern was with the Law Society’s

characterization of and reliance on Client A’s evidence and he was not alleging

prosecutorial misconduct.

THE ALLEGED MISAPPROPRIATIONS

[44]

Mr. Martini provided extensive, detailed evidence about his business

relationship with Client A. We were provided with six volumes containing

documents relating to Mr. Martini’s involvement with Company B/Client A over

almost two decades. We have no difficulty accepting Mr. Martini spent a great

deal of time and effort representing Client A’s interests. We also accept that his

efforts were remarkably successful – twice saving Client A’s projects from

failure. It is unnecessary to review this evidence in detail.

[45]

Similarly, we heard considerable evidence about SMM’s finances from Ms.

Andrusko. She carefully and precisely reviewed the SMM trust ledger, billing fee

9

journals, dockets, and invoices. We also heard from Mr. Martini about his

docketing habits and from both Mr. Martini and Mr. Shulgan about SMM’s

business culture and practices. In the end, given Mr. Martini’s admission of his

repeated escrow breaches, it is also unnecessary to examine this evidence in

great detail.

Client A not a reliable witness

[46]

Client A proved to be a very difficult witness. He was at times combative and

sarcastic and at other times charming and complimentary. He claimed memory

issues which, given his age and that critical incidents occurred well in the past,

were understandable. However, it appeared to us that frequently his memory

issues arose when confronted with a fact he did not want to accept.

[47]

Client A’s testimony was inconsistent with or repudiated statements he made

under oath on various examinations for discovery in his civil litigation. He

repeatedly denied or asserted facts in direct and inexplicable contradiction with

objective evidence. For example, he denied signatures on cheques or contracts

were his. When he did acknowledge his signature on documents, he would

claim he had not known what he was signing. At one point he even suggested

Mr. Martini had made him sign a document in the dark. He disagreed that

meetings where his presence was objectively documented had occurred. He

emphatically denied knowing the lawyer representing him in his ongoing civil

action against the respondents. He repeatedly denied having testified, sworn

affidavits, been deposed, or even been involved in Company B’s lengthy

litigation. Despite being shown his cancelled cheque, which he provided to the

Law Society’s investigator, he denied ever paying Mr. Martini for legal services.

He also denied receiving $500,000 from Mr. Martini in 2014 although this is

clearly documented on the client trust ledger and Client A had admitted this to

the Law Society’s investigator. No portion or aspect of Client A’s testimony was

unaffected by these problems.

[48]

The most troubling exchange occurred when he was asked about the affidavit

sworn only two weeks earlier adopted as his evidence in chief.

Q. I’m asking about this document. That marking that’s on the document

above the name Client ‘A’, you don’t remember putting that on the

paper? My understanding, sir, is Mr. Nicholson [paralegal assisting

Client A] met with you and you signed this document; remember that?

A. I never seen that. I got a hard time to recognize my signature, but I

never make this sworn before me, City of Windsor, Province of Ontario.

Never meet this guy, commissioner, never.

Q. Never met Mr. Nicholson?

A. No.

10

Q. Isn’t he in the room with you right now?

A. No, I never met him. I don’t know how he look.

Q. You never met him.

A. No.

Q. How did his and your signature come to be on the same document, if

you’ve never met him?

A. Cannot say how.

[49]

[50]

We considered whether there was an issue of competence but were satisfied

Client A was competent to testify. In our view Client A was fully engaged, alert

and, frankly, frequently appeared to be enjoying his interactions with counsel.

We agree with respondents’ counsel that Client A’s testimony before us

concerning his involvement with Mr. Martini in respect of the retirement home

construction, the litigation with AXA, the assignment of the claim and the

settlement of that litigation, discussed below, was unreliable. We are not

satisfied Client A was able to observe, recall and recount those events

accurately and thus his evidence failed to meet the test for reliability: R. v. G.F.,

2021 SCC 20 at para. 82. Therefore, we cannot, and do not, rely on it.

Client A’s involvement with Martini

[51]

Company B built and ran retirement homes. Client A’s first project (Kingsville)

was beset with financing issues and the subject of multiple construction liens. In

1991, Client A retained Mr. Martini, who took steps needed to prevent

foreclosure on the property and the loss of Kingsville.

2002 Leamington project

[52]

In 2002, Client A asked Mr. Martini to review a contract between Company B

and CGC Enterprises Design Manage Construct Inc. for the construction of

another retirement home (Leamington). The contract required CGC to obtain a

100% labour and material payment bond and a 100% performance bond.

[53]

On September 3, 2002, CGC obtained the bonds from AXA Pacific Insurance

(AXA). These were the bonds which became the subject of the subsequent

litigation between AXA and Company B.

2004: Leamington in financial trouble

[54]

In March 2004 Leamington was in serious financial difficulty. AXA took the

position Company B had materially misrepresented the amount of work

completed on the project and refused to accept liability under the bonds.

Mr. Martini again came to Client A’s assistance and, as counsel for Company B,

11

successfully negotiated a mitigation agreement with AXA to secure additional

funding. This allowed Company B to complete Leamington in mid-2006. The

dispute about liability on the bonds would be addressed at a later date.

[55]

[56]

In addition to the mitigation agreement, Mr. Martini re-tendered the bidding to

different contractors to finish the work, obtained an additional $700,000 to

address deficiencies and convinced AXA to postpone its second-position

mortgage because of the additional security that needed to take priority ahead

of AXA.

Mr. Martini did not have a retainer with Client A for this work. Mr. Martini

testified he undertook the work for Client A because he “felt badly for him” and

because Client A “stood to lose everything.”

Invoices to Company B

[57]

On March 22, 2005, Mr. Martini issued an account to Company B for $55,000 in

fees, plus disbursements and GST, for a total of $60,961.81.

[58]

On January 26, 2006, Mr. Martini issued a second account to Company B for

$45,000 in fees, plus disbursements and GST, for a total of $48,150. This

account notes the $60,961.81 owing from March 2005 remains outstanding for a

total of $109,111.81.

[59]

Mr. Martini testified he issued the invoices to “clear out some of the money in

the file” but had absolutely no hope Client A would be able to pay. Despite

completing Leamington, Client A remained short of funds. He had yet to pay the

January 2006 invoice. Mr. Martini testified that Client A’s financial situation was

so dire that he lent Client A $6,000 in October 2006 so his spouse could fly

overseas to visit her sick mother.

[60]

[61]

Mr. Martini testified that in November 2006, Client A told him that he wanted to

“put an end” to things with AXA for $250,000. Mr. Martini prepared a draft

direction for AXA to pay Client A $250,000 personally “as damages for mental

distress” to settle the dispute over the bonds. The damages were characterized

in this way on Client A's instructions to avoid paying any tax.

AXA was interested and made a counterproposal in December that, to

Mr. Martini, seemed better than what he had proposed. However, AXA’s

response reserved its rights to pursue a claim against Leamington’s architect.

When they met to discuss the proposal on December 11, 2006, Mr. Martini

testified that Client A was adamant he did not want the architect to have any

exposure to AXA and refused the offer.

12

Sale of the retirement homes

[62]

Unbeknownst to Mr. Martini, Client A had agreed in late 2006 to sell Leamington

and Kingsville for $37 million. However, the lawyer he had retained for the

closing was unable to discharge AXA’s collateral mortgages on the properties.

Client A was afraid that he was going to lose his deal. He sought Mr. Martini’s

help again.

[63]

Mr. Martini testified he was “furious” with Client A. He believed Client A had not

involved him in the sale because he wanted to avoid paying him for his work

but, once again, agreed to help. He concluded that issuing a claim against AXA

might provide the necessary leverage to get some kind of agreement in place to

discharge the mortgages from title and allow the sale transaction to close at the

end of the month. It might also, he thought, put money in Client A’s pocket and

allow Mr. Martini to be paid for the work and effort he had put in since 2004.

[64]

[65]

On December 12, 2006, Mr. Martini issued a claim on behalf of Company B

against AXA for over $5 million. Mr. Martini testified he was unaware AXA had

already issued a claim against Company B and the architect in July. AXA

sought recovery of the $2 million provided pursuant to the 2004 mitigation

agreement plus $350,000 in related costs. Mr. Martini testified he received

AXA’s claim on December 18, 2006.

Mr. Martini subsequently negotiated an escrow agreement with AXA’s counsel.

$2.5 million from the closing funds on the sale of the homes would be held in

trust pending resolution of the AXA litigation. This allowed AXA’s collateral

mortgages to be “bonded” off and ultimately permitted the sale of the retirement

homes to close at the end of December.

The assignment agreement

[66]

Mr. Martini met with Client A on December 18, 2006, to discuss his outstanding

fees. Mr. Martini testified that he explained how unfair he felt Client A was being

and that his accounts, which remained unpaid, did not reflect the time and work

he had performed. He testified Client A was unmoved and was going to leave

the country to avoid paying taxes on his windfall. “[Client A] was going to take

his money and – and he was going to go, and he didn’t want nothing to do with any

ongoing issues.”

[67]

Mr. Martini proposed the following:

I said to him, look, I’ve issued the claim, I want to proceed with it, then.

And then I said – I said, I want to negotiate an agreement on settling up

some of the monies owed, but I’ll take over the claim, you assign the

claim to me, what I get, I get to keep. And he was perfectly fine with that

because his view was I’m done with it.

13

But my concern was I needed his help. I didn't know how far I'd have to

push this, so I was – I was hedging my bets that I’d get some money out

of AXA. But if I had to push it to a discovery, I needed his help. So I said

to him, I'll pay you a fair amount of money if you help me, you'll have to

come to a discovery, I may need information from you, I’ll run it, you

assign it to me, I'll take it over, whatever I get, I’ll keep.

But I also wanted to be paid some money upfront for the efforts. And –

and I – I remember saying to him, I think I billed you a hundred grand.

He said, I'm not paying a $100,000. And this is a guy, he was about to

have $35 million in the bank. And to and fro, and to and fro. By the end of

the day, he said, fine, you can have the lawsuit, whatever you get, you can

keep, but I'm only going to pay you towards the legal fees so far 50 grand.

[68]

[69]

Mr. Martini told us he believed he could settle the litigation with AXA and

recover up to $300,000 but never expected AXA to defend so aggressively or, in

the end, to give up so completely and settle for over $2.5 million. He agreed his

other option was to sue Client A but explained that would be difficult and

perhaps pointless if Client A and his money left Canada as intended.

Despite no longer trusting Client A, Mr. Martini explained:

I made the best deal I could, thinking that – understanding it would be a

while. I thought I’d at least buy myself some time while he’s around. I

could push AXA’s hand, get him, if I needed to, to do a quick discovery.

Never did I imagine I’d – I’d be paying an associate for two years to fight

over productions. So I just – the file took on, like everything seemed to

with Client A, a life of its own.

[70]

Mr. Martini’s dockets do not record a meeting with Client A on December 18. He

explains the absence as an example of his being a “terrible docketer.”

The December 19 assignment letter

[71]

The only document supporting the existence of the assignment is an unsigned,

file copy of a letter, not on letterhead, addressed to Client A and dated

December 19, 2006, that states:

I confirm our meeting of yesterday in regards to the above noted matter.

The Leamington Project was completed by monies advanced from AXA

pursuant to a Funding Agreement. On the closing of the sale of your

retirement homes two million five hundred ($2,500,000.00) dollars was

paid to AXA's solicitors in trust pursuant to that agreement and a

collateral mortgage.

14

AXA has commenced a claim against those monies. We have also

commenced a claim on behalf of [Company B] for those monies.

We have expended significant efforts in this matter since 2004 which

resulted in completion of the retirement home and the ultimate sale of

the same for in excess of thirty-five million ($35,000,000.00) dollars. We

understand your position that you do not wish to dispute AXA's

entitlement to this money and you are content at this time to walk away.

However, we are still owed substantial funds for our work. We also

disagree that you should walk away from your claim to these monies.

On that basis I confirm our agreement that you will assign to me and the

Firm the cause of action as against AXA in satisfaction of the value of

the work completed for you to date and the work we will undertake in

regards to that claim. You have agreed to participate by testifying and

assisting and in fairness we will agree on fair compensation for that. The

Firm will be responsible for all costs and expenses in proceeding with

the litigation and any cost order which may result. On that basis there

will be no exposure to you moving forward or any obligation for you to

pay any monies.

[72]

[73]

Mr. Martini testified the December 19 letter was not on letterhead because at

that time the original was printed on stock letterhead with a file copy printed on

blank paper. The file copy would be unsigned and placed on the

correspondence brad.

Asked how we could know the December 19 letter was delivered to Client A or

accepted by him, Mr. Martini explained he did not mail documents to Client A.

Client A’s practice was to drop into the office, usually once a week, and pick up

anything from the front desk. He stated he knew the letter had been received

because Client A chided him about it the following week.

[74]

In 2014 Client A told the Law Society’s investigator he never had a retainer

agreement with Mr. Martini and believed he was entitled to the entire

settlement. Client A denied agreeing to an assignment.

AXA litigation settles

[75]

The AXA litigation was protracted and expensive. The six years of litigation

involved several days of discoveries, motions for undertakings and productions

and appeals from those decisions.

[76]

Mr. Martini, Ms. Marusic and Client A attended a mediation on November 26,

2012. Pursuant to minutes of settlement signed by Client A on behalf of

Company B, $2,746,342.41 was deposited into the SMM trust account on

November 30, 2012.

15

Minutes of Settlement

[77] The minutes of settlement provide (emphasis is ours):

The parties hereto agree to settle this action on the following basis:

a. The amount of $2,500,000 plus accrued interest less any unpaid fees

(the "Trust Funds") currently being held in trust by [AXA counsel]

pursuant to the Agreement as between [Company B], AXA and Borden

Ladner Gervais LLP dated December 22, 2006 shall be released to the

benefit and credit of the Plaintiff, [Company B]. Said Trust Funds are

hereby directed to be paid to the Plaintiff's solicitors, Shulgan Martini

Marusic, LLP, in trust. Said Trust Funds shall be delivered to Shulgan

Martini Marusic, LLP, in trust within five (5) days from the date of these

Minutes of Settlement or as soon as reasonably possible thereafter.

These funds shall be held in trust by Shulgan Martini Marusic, LLP

pending completion of all other matters set out within the Minutes

of Settlement.

b. In addition to the monies specified in paragraph 1 herein, [AXA] shall

pay to the Plaintiff[Company B], the additional sum of $150,000.

[Company B] hereby directs payment of those funds to its solcitiors (sic),

Shulgan Martini Marusic, LLP in trust. It is agreed that Shulgan Martini

Marusic, LLP shall hold those funds in trust pending completion of

the other matters provided for within these Minutes of Settlement.

c. All parties to these proceedings shall exchange Full and Final Mutual

Releases in respect to all claims arising from these actions.

d. [Company B] shall also provide a Full and Final Release to [AXA

counsel] releasing [AXA counsel] from any and all obligations arising

from the Agreement dated December 22, 2006 and the Trust Funds.

e. [Company B] hereby agrees to deliver up for cancellation to

[AXA] the original Performance Bond No. 7500557 dated September

3, 2002 and Labour and Material Payment Bond No. 7500557 also

dated September 3, 2002.

f. Upon completion of all matters set out in these Minutes of

Settlement, all parties shal (sic), consent to an Order dismissing both

actions without costs.

[78]

Client A executed a full and final release on behalf of Company B. Mr. Martini

witnessed Client A’s signature. The release, states, in part (emphasis ours):

AND FOR THE SAID CONSIDERATION the Releasor covenants and

warrants that: it has not assigned to any persons, partnerships,

corporations or other entities any of the matters released herein or

16

for which they have agreed herein not to make or continue any further

claims; and (ii) that it has the full right and authority to release the

matters released herein.

[79]

On November 30, 2012, AXA counsel wrote to Mr. Martini enclosing the

settlement cheque. The letter explicitly notes (emphasis ours):

[p]ursuant to the Minutes of Settlement dated November 26, 2012, these

funds are to be held in trust pending the finalization of the balance

of the steps in the settlement including but not limited to the

delivery up for cancellation of the bonds (...).

[80]

The minutes of settlement and the November 30 letter tell us three critical

things:

1. At the time of settlement, AXA and its counsel believed Company B was the

beneficiary of the settlement. This is clear from the identification of the

parties in the minutes and confirmed by the explicit warranty in the release

that the claim has not been assigned.

2. The minutes of settlement expressly required that settlement funds be held

in trust pending completion of the other matters, including delivery of the

bonds, provided for in the agreement. That requirement is stated twice.

3. Company B was required to deliver the bonds to AXA for cancellation. Until

that happened all settlement funds were to be held in trust.

[81]

The bonds were never located or delivered to AXA. On August 10, 2016, nearly

18 months after the majority of the settlement funds had been disbursed, AXA

waived the condition that the bonds be delivered.

Martini breaches escrow

[82] The parties agree the settlement funds were taken from SMM’s trust account

between November 30, 2012 and November 2014 as follows:

November 30, 2012: $925,128.87 was withdrawn from SMM’s trust account

by cheque made payable to the firm and signed by Mr. Martini and Ms.

Marusic. An invoice for this amount was issued to Company B on the same

day. The invoice is identified as a final account.

January 18, 2013: $226,000 was withdrawn from SMM’s trust account and

deposited into the general account by cheque made payable to the firm and

signed by Mr. Martini and his associate, Vincenzo Mastrogiacomo.

February 4, 2013: $113,000 was withdrawn from SMM's trust account and

deposited into the firm’s general account by cheque made payable to the

firm and signed by Mr. Martini and Ms. Marusic.

17

February 27, 2013: $226,000 was withdrawn from the SMM trust account

and deposited into the firm’s general account by cheque made payable to

the firm. This cheque was signed by Mr. Martini and Ms. Marusic.

April 8, 2013: $172,956 was withdrawn from the trust account by cheque

payable to two other SMM clients. The cheque was signed by Mr. Martini

and Mr. Mastrogiacomo. The same day another $100,000 was withdrawn

from the trust account and paid to the same clients. The cheque was signed

by Mr. Martini and Mr. Mastrogiacomo.

April 30, 2013: a cheque was signed by Mr. Martini and Ms. Marusic in the

amount of $4,030 payable to another law firm.

June 6, 2013: Mr. Martini transferred funds from the account to the Lee

County Tax Collector.

June 17, 2013: $84,750 was withdrawn from SMM’s trust account by

cheque payable to the firm. The cheque was signed by Mr. Martini and Mr.

Mastrogiacomo.

July 18, 2013: $250,000 was withdrawn from the SMM trust account by

cheque payable to the firm and signed by Mr. Martini and Mr.

Mastrogiacomo. This was paid to Client A.

August 23, 2013: $22,500 was transferred from SMM’s trust account to the

firm. The cheque was signed by Mr. Martini and Mr. Mastrogiacomo.

July 28, 2014: $500,000 was issued from the Company B trust account by

cheque payable to Company B. The cheque was signed by Mr.

Mastrogiacomo and Mr. Martini.

November 19, 2014: Mr. Martini transferred $50,000 from the Company B

trust account to the firm. There is no co-signer.

[83]

Mr. Martini admitted:

All of the transfers were inappropriate because they were in breach of

the escrow. All the transfers – like, not a dollar should have left the

account, and that’s exactly what I’m saying. Any inappropriate transfers

were directed – and they were. I’m the one that authorized the accounts

be done. I’m the one that authorized payment for the property. I did that.

But they were all wrongful because the money wasn’t supposed to leave

until the escrow condition was satisfied, and – and neither [Shulgan] nor

[Marusic] had any knowledge of that.

18

Three invoices, a final account and other transfers

[84]

Tracking the disbursement of the settlement funds was confusing and the Law

Society’s investigators quite properly flagged the transfers from trust as

requiring close scrutiny.

[85]

On receiving the settlement funds, Mr. Martini directed an account be prepared.

He explained that, while the funds were his, he needed to transfer the money

into the firm. This required the preparation of an account. Yet we note

subsequent transfers were unaccompanied by invoices or accounts.

Mr. Martini’s explanation for this was that he had the ability to dictate what part

of the money came to him personally and what part of the money would be

billed for the firm. That explanation fails to address the inconsistency in his use

of an invoice to support the transfer in November and not in others.

[86]

[87]

[88]

SMM staff prepared three invoices for differing amounts on November 29, 2012.

Only one, for $925,128.87, appears in the trust ledger. The three invoices

appear to have been drafts. Ms. Andrusko agreed the three documents were

not three bills but one bill which was modified three times.

Mr. Martini agreed he did not know whether the invoice for $925,128.87 was

sent to Client A. There is nothing in the file disclosure to confirm this and Client

A denied receiving any invoices when interviewed by the Law Society’s

investigator.

Asked why or on what basis he had arrived at the $925,128.87 amount billed,

Mr. Martini explained he did not want to bill the entire amount and “create a

huge tax issue.” He deflected a question as to why the account is described as

final, in contrast with the accounts sent to Client A in 2005 and 2006 which were

identified as interim, saying that staff draft the accounts and none of the staff

knew “what my deal was.”

[89]

Mr. Martini explained:

Look, at the end of the day, I transferred money to the firm by way of

accounts. We – we were – listen, it was all about – the firm was large.

We were carrying over $3 million in unbilled disbursements. Cash flow is

a concern for every firm. And, yes, I transferred the money into the firm,

quite frankly, to assist the firm with cash flow that – that would be

generated from billings. We had worked on this file a long time. I had

been paid $50,000. It was completely wrong.

I didn’t transfer the money so I could transfer money to the firm and take

it personally. The money stayed in the firm. They were operating funds

the firm needed.

19

ANALYSIS

[90]

Mr. Martini argues the settlement funds were his pursuant to his assignment

with Client A and he cannot misappropriate his own money. He described his

conduct as both a “horrible mistake” and a “technical breach” because he

considered the bonds to be valueless.

[91]

Whether Mr. Martini’s taking of settlement funds in breach of the escrow

obligation amounts to professional misconduct turns on whether we accept

Mr. Martini honestly believed he was entitled to take or pay out the settlement

funds without satisfying the escrow condition: Law Society of Ontario v.

Thompson, 2020 ONLSTH 42 at para. 11.

[92]

We must answer the following questions:

Were the funds assigned to Mr. Martini? If not, Mr. Martini knew he had had

no right to the funds and he misappropriated.

If the funds were assigned, did Mr. Martini have an honest belief in his right

to the funds such that his taking in breach of escrow does not rise to

knowing misappropriation?

Was Company B’s claim assigned to Martini?

[93]

The credibility of Mr. Martini’s evidence about the existence of the assignment

and the authenticity of the December 19 letter requires close scrutiny. In his

interviews with the Law Society, Client A disputed any such agreement existed.

Mr. Martini’s subsequent correspondence with Client A does not refer to or

address the assignment.

[94]

Mr. Martini never prepared a formal assignment of the claim in accordance with

Rule 11 of the Rules of Civil Procedure. The December 19 letter was not on

letterhead, is unsigned and Mr. Martini conceded there is nothing, other than his

testimony, confirming its delivery to or acceptance by Client A. Despite multiple

opportunities after 2006, Mr. Martini never formalized the agreement with

Client A. He did not provide any explanation for his lackadaisical approach.

[95]

[96]

This failure to protect his position and interests cannot easily be reconciled with

Mr. Martini’s testimony he was furious with Client A and had concluded Client A

was attempting to “screw him.”

Moreover, Mr. Martini continued to docket his time on the Company B file and

rendered what was titled a “final account” to Company B in November 2012

when the settlement funds were received. These acts are also inconsistent with

an assignment.

20

[97]

[98]

All these facts weigh against finding there was an assignment. However, for the

following reasons, we accept Mr. Martini’s evidence on this point.

We find the December 19 letter is genuine. We accept Mr. Martini’s evidence

that retaining unsigned file copies of correspondence, not on letterhead, on the

correspondence brad was the way things were done at the firm in 2006. There

was no evidence to refute this. The Law Society’s investigation did not flag the

December 19 letter as remarkable or inconsistent with other documents

reviewed during the course of its investigations. The Law Society does not

suggest the letter was found misfiled or filed out of chronological sequence. The

Law Society does not dispute Mr. Martini’s evidence the Client A files were sent

to storage in 2012 after the settlement was reached and we understand the Law

Society retrieved those files directly from storage. We agree with Mr. Martini

that creating a letter in anticipation of a future dispute about the funds, and then

placing it in the right place on the correspondence brad once settlement was

achieved in 2012, is neither plausible nor probable.

[99]

We are also satisfied Client A agreed to the assignment. In 2006 Client A was

about to become a very wealthy man. There is evidence that he planned to

leave the country to avoid the tax consequences of his windfall, including the

fact that SMM provided Client A with advice about tax havens and a possible

real estate purchase in Panama. We accept Client A wanted to settle the

dispute with AXA. The fact he had Mr. Martini make a formal proposal to AXA

supports this. In these circumstances we find it more likely than not Mr. Martini’s

assignment offer satisfied Client A’s desire to be done with the AXA issue

without any financial consequences. He was prepared to have Mr. Martini take

over the litigation in return for a significant discounting of over $100,000 in fees

already billed and further compensation for him as noted in the assignment

letter if and when the matter resolved successfully. We accept Client A (and

indeed Mr. Martini) had no reason to expect the issue with AXA would settle as

it did, with AXA handing over all the disputed funds.

[100] Moreover, Client A was present when the settlement was reached in November

2012. He was aware Mr. Martini was searching for the bonds and, it appears

from his interview with the Law Society investigator, he understood he could not

receive any money until the bonds were delivered. There is no evidence

Client A did anything about the money he claimed was owed to him until mid-

2014. The evidence shows him to be a hard-nosed and canny businessperson.

Given that, we find it implausible he would not pursue the full amount of the

settlement funds soon after November 2012 much less wait until 2014 to do so.

[101] Mr. Martini testified that in early summer 2014 Client A became aware of his

earlier discipline proceedings. This triggered Client A to pressure Mr. Martini for

his compensation for participating in the claim against AXA. On July 28, 2014,

Mr. Martini transferred $500,000 to Company B which, he explained, reflected

21

Client A’s share based on his agreement to assist in the litigation. When

Client A came in to pick up the cheque, he demanded more money. Mr. Martini

agreed he would give him the $150,000 in settlement funds owed by the other

party in the litigation which had not been paid into escrow in November 2012.

Mr. Martini says that was satisfactory and Client A made no further demands.

Client A did not initiate the Law Society’s investigation and only filed his

complaint in January 2015 after being contacted by the investigator the month

before. This is, in our view, further support that Client A agreed to the

assignment and was prepared to live with that deal until the opportunity of

getting out of it and getting access to the unanticipated settlement windfall

presented itself.

[102] When interviewed, Client A told the Law Society’s investigator his deal with Mr.

Martini was that he would get the entire $2.5 million, and Mr. Martini would be

paid 50% of anything above that amount. If true it would mean Client A would

pay nothing in legal fees unless Mr. Martini was successful in recovering more

than the entire amount held in escrow by BLG. In 2006 this seemed utterly

unlikely given the considerable evidence AXA would be successful in its claims

against him. But even if, by some unanticipated miracle, this did happen, Mr.

Martini would then only be entitled to a percentage of any additional recovery as

fees. That deal is simply implausible. Mr. Martini was adamant he would not

have agreed to work for nothing or a percentage of potentially nothing on the

file. We accept his evidence on this point as credible.

[103] Mr. Martini explained he continued to docket his time on the Company B matter

because it was his practice and consistent with his work on all files, including

contingency files. Documenting work in progress on files was necessary to

satisfy the firm’s credit union. We are prepared to accept this explanation. The

Law Society did not suggest the practice of docketing on contingency fee files

was unusual. Moreover, Mr. Martini invoiced Client A in January 2006 for work

done to that date. If his further dockets were for the purposes of collecting fees

for his ongoing work, one could reasonably expect to have seen further periodic

invoices. There were none until the November 2014 invoice.

[104] Looking at these facts from the perspective of a practical and informed person,

we find, on a balance of probabilities, Client A agreed to assign the AXA action

to Mr. Martini on December 18, 2006. We find the assignment letter of

December 19, 2006 is genuine. We find Mr. Martini’s later payments to Client A,

and Client A’s acceptance of these payments, conditions that are also set out in

the assignment letter, support the existence of the assignment.

Did Martini have an honest belief he was entitled to the settlement funds?

[105] Although we find the Client A assignment genuine, we are not satisfied

Mr. Martini held an honest belief he was entitled to the settlement funds when

22

he took them from escrow. Rather, the evidence shows Mr. Martini engaged in a

sophisticated and elaborate scheme of dishonesty and deception. In the end we

conclude his conduct is inconsistent with an honest belief in his entitlement to

the funds.

Circumstances surrounding the absence of honest belief

[106] The circumstances surrounding Mr. Martini’s handling of the settlement funds,

while not determinative of the issue of his honest belief, provide a context for

understanding his conduct.

[107] Mr. Martini never told AXA the action was assigned to him. He testified that

disclosure of this information would have hindered settlement and he needed

AXA to believe Client A “still had skin in the game.” He intentionally misled AXA

and its counsel to advance his own interests. Mr. Martini allowed Client A to

sign the release warranting there was no assignment and witnessed Client A’s

false statement.

[108] The settlement funds were paid into SMM’s client trust account. Although the

Law Society does not include this in its allegations, we note that placing funds

not belonging to a client into trust is contrary to By-Law 9, s.8 (2).1. Mr. Martini

knew the funds did not belong to his client but nonetheless allowed them to

remain in trust while he disbursed them.

[109] Mr. Martini took advantage of the payment into his client trust account to

stagger his earnings over two years. He testified he did this to obtain tax

advantages for himself.

[110] On December 9, 2013, more than a year after the settlement, Mr. Martini wrote

AXA’s counsel to advise he had been unable to locate the original bonds for the

purpose of satisfying the escrow conditions. The letter then goes on to state

that “[n]o funds have been released to [Company B] in accordance with the

terms of the Minutes of Settlement.” This statement is intentionally misleading.

It maintains his deception as to the beneficiary of the settlement and

intentionally misleads AXA’s counsel. At the time he wrote the letter more than

half the settlement funds had been taken.

[111] When Client A began to pressure Mr. Martini for his share of the settlement

funds, Mr. Martini assured him in his June 26, 2014 letter that the settlement

funds remained in trust pending delivery of the bonds. He told Client A that AXA

counsel was “taking a very difficult position” about delivery of the bonds. In his

September 19, 2014 letter to Client A, he says he intends to obtain an order in

the next month to void the bonds.

23

BREACH OF ESCROW IN THESE CIRCUMSTANCES IS MISAPPROPRIATION

[112] The minutes of settlement and the November 30, 2012 and December 9, 2013

letters make clear AXA required delivery of the bonds and did not intend to

waive that condition. By taking settlement funds when he knew their release

was not authorised, either by delivery of the bonds or waiver of that condition,

Mr. Martini knowingly took funds to which he knew was not entitled. This was

dishonest. The existence of the assignment does not remedy his dishonesty.

Analysis

[113] In Law Society of Ontario v. Wilkins, 2021 ONLSTA 15, the Appeal Division

defined misappropriation as follows (paras. 82 and 103-104):

For the reasons that follow, we define misappropriation as knowing

unauthorized use of client property by a lawyer or paralegal for their own

purposes, on the basis that knowledge may be actual knowledge, willful

blindness or recklessness.

This definition limits application of the term misappropriation to cases of

dishonesty and thus to cases where presumptive revocation is

appropriate.

More importantly it is consistent with the principles and values set out in

the jurisprudence on dishonest conduct from the Appeal Division,

Divisional Court and the Court of Appeal. And although that

jurisprudence has been developed in the context of lawyer participation

in mortgage fraud, the principles apply equally to misappropriation when

defined, as we propose, to require comparable dishonesty, a

fundamental breach of the solicitor-client trust relationship, and a loss or

risk of loss of client property.

[114] We have found the settlement funds were subject to an assignment and were

not Client A’s property, although Client A had an interest in a portion of the

funds. Given the assignment, Mr. Martini says the money was his; his taking did

not breach a solicitor-client relationship or risk client property, and therefore,

applying Wilkins, there can be no finding of misappropriation. Ms. Marusic

agrees with that analysis and argues the conduct is analogous to pre-taking.

[115] Both arguments ignore a crucial reality. Until the bonds were delivered and the

terms of the minutes of settlement fully achieved, AXA retained an interest in

the settlement funds through the escrow condition. That condition was never

satisfied. This is where the context described above is most important.

Mr. Martini held the settlement funds in his client trust account. He actively led

AXA to believe they were his client’s property and were being held in trust for

him and subject to a solicitor-client relationship.

24

[116] In Thompson, the Tribunal set out the test for assessing whether breach of

escrow amounts to misappropriation at paras. 11-12:

(…) The only issue before us in determining whether Mr. Thompson

engaged in professional misconduct is whether he honestly believed he

was authorized to pay out the escrow funds. Counsel for Mr. Thompson

framed the question as being whether Mr. Thompson had an honest

belief that the release of funds was authorized. Both parties agree that

knowledge includes willful blindness or recklessness.

Guidance on the knowledge element comes from the jurisprudence on

knowing participation in dishonest or illegal activity that has been

developed in the context of mortgage fraud cases. It requires that the

lawyer subjectively know there is dishonesty, that he or she suspected

dishonesty and chose not to inquire (willful blindness), or that he was

aware of the risks of dishonesty but chose to carry on nonetheless

(recklessness).

[117] Wilkins limits misappropriation to cases of dishonesty. Misappropriation does

not include negligent or inadvertent taking. There must be a mental element

amounting to wrongdoing.

[118] Thus, as in Thompson, the issue before us is whether Mr. Martini knowingly or

honestly believed he was authorized to pay out the settlement funds held in

escrow. We find Mr. Martini knew he was not authorised to pay the settlement

funds out of escrow because, as he admitted repeatedly, he knew the term

authorising their paying out had not been met or waived. This was not

negligence or inadvertence. He did not pay out the settlement funds on a

mistaken belief the escrow condition had been satisfied. His argument that the

bonds had no value and could not be enforced in 2012 does not assist.

Pursuant to the settlement, the funds could not be released from escrow unless

the bonds were returned or the condition waived by agreement or order.

[119] We also disagree the conduct can be characterised as a pre-taking. The rules

about pre-taking focus on the duty to protect a client’s interest and issue

invoices before accessing trust funds. Neither is a consideration here where Mr.

Martini says the funds were his from the outset, and therefore should never

have been in trust, and no invoice or accounting was owed to AXA other than

the delivery of the bonds.

Conclusion

[120] In releasing funds he knew were subject to escrow in the circumstances we

have described, Mr. Martini engaged in misappropriation. Mr. Martini misled the

parties to the litigation and their counsel about his interest in the litigation and

the settlement. He lied repeatedly to the parties and to his client about his

25

takings from the settlement funds. His lies and deception support finding

Mr. Martini did not have an honest belief he was authorized to release the funds

to himself, his firm or anyone else.

MARUSIC’S ROLE IN THE MISAPPROPRIATION

[121] The Law Society alleges Ms. Marusic assisted in Mr. Martini’s misappropriation

by co-signing cheques that disbursed funds being held in trust. Mr. Martini

agreed SMM required two signatures on trust cheques. This was required by its

bank although Mr. Shulgan suggested it was also a firm policy. We were not

provided with any firm policy documents to support this. There was credible

evidence from both Mr. Martini and Mr. Shulgan that assistants preparing trust

cheques sought the nearest available co-signer. There is no evidence Mr.

Martini directed Ms. Marusic to co-sign the three cheques. As Ms. Marusic’s

counsel notes, another member of the firm co-signed the remaining transfer

cheques.

[122] Ms. Marusic signed four trust cheques disbursing funds held in trust for Client A

and Company B. The fourth cheque in the amount of $4,030 is excluded from

the Notice of Application.

[123] In doing so, $1,265,104.01 from settlement funds was transferred from trust to

SMM’s general account. The transfers reduced SMM’s line of credit.

Ms. Marusic individually benefited from the transfers in the form of fee credits

for her work on the Client A/Company B matter.

[124] The first cheque Ms. Marusic co-signed constituted a significant portion of

SMM’s 2012 income. The Law Society argues this alone ought to have caused

Ms. Marusic to inquire further.

What did Marusic know about the bonds?

[125] Ms. Marusic prepared the mediation brief for the November 2012 mediation. Her

docket for November 26 records 6 hours spent on the Company B file. The

entry notes “Mediation, draft Minutes, Releases etc.” Mr. Shulgan testified an

assistant told him Ms. Marusic drafted the minutes of settlement. Mr. Martini

recalled counsel for AXA prepared them.

[126] At her suspension hearing Ms. Marusic testified she was aware minutes of

settlement had been prepared, she may have seen them on the day of

mediation, and she knew that one of the conditions in the minutes of settlement

was the delivery of the bonds. In March 2015, Ms. Marusic testified she

understood the bonds were in SMM’s safe. The Law Society argues that, given

her presence at the mediation, Ms. Marusic would have been aware the bonds

were not handed over then.

26

[127] Mr. Martini testified he did not ask Ms. Marusic where the bonds were. He

consistently and emphatically denied ever telling Ms. Marusic about his inability

to locate the bonds. Given their romantic relationship then and now we are not

prepared to give Mr. Martini's evidence on this point much, if any, weight.

[128] That said, there is no evidence before us to indicate Ms. Marusic had actual

knowledge that the escrow conditions had not been met. The Law Society

argues that given her involvement in the mediation and knowledge of Mr.

Martini’s prior disciplinary history, Ms. Marusic ought to have been alive to the

escrow issue and exercised some due diligence or “heightened vigilance” to

confirm the bonds had been delivered before co-signing cheques. We disagree.

Mr. Martini’s prior discipline, not yet determined in 2012-2013, related to

misleading clients as part of a scheme to cover up his failures to serve. There

were no allegations of misappropriation or misuse of trust funds. We are not

satisfied there was an established or an equivalent history of misconduct that

would trigger heightened scrutiny from his partner.

[129] Nor are we satisfied that mere knowledge that delivery of the bonds was a term

of the settlement triggered an obligation on Ms. Marusic to inquire whether that

term of the agreement had been satisfied. Still, we find Ms. Marusic’s conduct in

signing the two cheques in February 2013 troubling. At that point, she knew

settlement had been achieved three months before and had co-signed a

significant cheque transfer accompanied by an invoice, a final invoice, made out

to Company B.

[130] Neither the February 4 cheque for $226,000 for fees or the February 27 cheque

for $113,000 for fees was accompanied by an invoice or an account for the fees

claimed. The serial payments of undocumented fees where a final account had

already been rendered ought to have caused Ms. Marusic to ask questions,

particularly when she testified on the motion to vary that her practice was to

“final bill” matters on their completion.

[131] However, we do not see how these concerns could or would have triggered

actual knowledge the escrow condition had not been satisfied. Nor can we

conclude the evidence establishes Ms. Marusic was wilfully blind or reckless as

to compliance with that condition.

Conclusion

[132] For these reasons we are not satisfied the Law Society has met its burden to

prove Ms. Marusic misappropriated or knowingly assisted in the

misappropriation of settlement funds when she co-signed three cheques

transferring funds held in SMM’s trust.

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PRACTISING WHILE SUSPENDED AND FAILING TO PREVENT UNAUTHORIZED

PRACTICE

[133] The Law Society alleges Mr. Martini continued to practise law while suspended

when he actively assisted Client B and Ms. Marusic during the Client B matter

and assisted clients and Ms. Marusic on nine other matters. This conduct is

contrary to Rule 7.6-1.2 of the Rules of Professional Conduct.

[134] The Law Society alleged Ms. Marusic failed to assist in preventing the practice

of law and/or provision of legal services by Mr. Martini contrary to Rule 7.6-1 of

the Rules of Professional Conduct and associated with and/or used the services

of Mr. Martini without the express approval of a panel of the Hearing Division of

the Law Society Tribunal contrary to Rule 7.6-1.1.

Law Society Act

[135] Section 26.1(1) of the Law Society Act, RSO 1990, c. L.8 as amended (the Act),

prohibits the practice of law or provision of legal services in Ontario by anyone

other than a licensee whose licence is not suspended. There are certain

exceptions to this prohibition for non-licensees but none for a licensee whose

licence is subject to suspension.

Legal services defined

[136] Section 1 of the Act provides a very broad definition of legal services. The

relevant portions are set out below:

(5)

For the purposes of this Act, a person provides legal services if

the person engages in conduct that involves the application of legal

principles and legal judgment with regard to the circumstances or

objectives of a person.

(6)

Without limiting the generality of subsection (5), a person

provides legal services if the person does any of the following:

1. Gives a person advice with respect to the legal interests, rights

or responsibilities of the person or of another person.

2. Selects, drafts, completes or revises, on behalf of a person,

i. a document that affects a person’s interests in or rights to or

in real or personal property,

(…)

vi. a document that affects the legal interests, rights or

responsibilities of a person, other than the legal interests,

rights or responsibilities referred to in subparagraphs i to v, or

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vii. a document for use in a proceeding before an adjudicative

body.

3. Represents a person in a proceeding before an adjudicative

body.

4. Negotiates the legal interests, rights or responsibilities of a

person.

(7)

Without limiting the generality of paragraph 3 of subsection (6),

doing any of the following shall be considered to be representing a

person in a proceeding:

1. Determining what documents to serve or file in relation to the

proceeding, determining on or with whom to serve or file a

document, or determining when, where or how to serve or file a

document.

(…)

3. Engaging in any other conduct necessary to the conduct of the

proceeding.

Rules of Professional Conduct and Guidelines for Suspended Lawyers

[137] A lawyer whose licence has been suspended must comply with the

requirements of the by-laws and “shall not (a) practise law”: Rule 7.6-1.2.

[138] The Guidelines for Lawyers Who are Suspended or Have Given an Undertaking

not to Practise list the permitted and prohibited activities. The relevant portions

follow:

Permitted Activities

2. (1) During the term of the suspension or undertaking not to practise,

the suspended lawyer may only:

(a) See clients only for the limited purpose of assisting them in

transferring their past or present legal work to another lawyer;

(b) If requested by the client, suggest a referral to a particular

lawyer to continue work on the client’s file. The ultimate choice of

who is retained rests with the client and not with the suspended

lawyer;

(c) Collect accounts receivable;

(d) Render accounts for work completed on or before the

effective date of the suspended lawyer’s suspension or

undertaking not to practise; and

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(e) Arrange with the lawyer whom the suspended lawyer has

retained to complete outstanding reporting letters and

undertakings for his or her remuneration.

…

Prohibited Activities

4. (1) Effective from the date of suspension or undertaking not to

practise, the suspended lawyer shall not:

…

(d) Report to clients, other than to:

i) inform them of the suspension or the undertaking not to

practise; and

ii) deliver an account for services rendered prior to the

suspension or undertaking not to practise;

…

(g) Provide services to a lawyer or paralegal in relation to that

lawyer’s practise of law or paralegal’s provision of legal services

in contravention of Subrule 7.6-1.1 of the Rules of Professional

Conduct.

[139] Rule 7.6-1 of the Rules of Professional Conduct places a positive obligation on

a lawyer to “assist in preventing the unauthorized practice of law and the

unauthorized provision of legal services.” The commentary to the Rule explains

this obligation is necessary because unauthorised persons are not subject to

regulation or discipline.

[140] The current Rule 7.6-1.1 provides that:

Without the express approval of a panel of the Hearing Division of the

Law Society Tribunal, a lawyer shall not retain, occupy office space with,

use the services of, partner or associate with, or employ in any capacity

having to do with the practice of law or provision of legal services any

person who, in Ontario or elsewhere, (…) has been suspended, has had

their licence to practise law or to provide legal services suspended (…)

and has not had their licence restored.

[141] We understand that, at the relevant times, the Rules provided that a committee

of Convocation was required to approve such a request.

The Client B matter

[142] Client B, a former lawyer, commenced a claim against the RCMP for malicious

prosecution in 1984. In 2007, the Attorney General of Canada was added as a

30

defendant. Client B retained SMM on a contingency fee basis in October 2010

after his previous counsel withdrew.

[143] Ms. Marusic’s involvement in the Client B matter began in 2011. She prepared

the affidavit of documents and responded, successfully, to the Attorney

General’s April 2012 motion to dismiss for failure to comply with production

orders. The matter was set for a six-week trial beginning May 2015 in Ottawa.

Mr. Martini and Mr. Shulgan were to have been co-counsel at trial.

[144] The written contingency fee agreement between SMM and Client B was signed

by Client B and Mr. Martini and witnessed by Ms. Marusic in October 2011. The

agreement provided that if the amount recovered was less than $10 million, the

fees would be 30% of the amount recovered. Client B was also responsible for

HST and disbursements.

[145] Mr. Martini agreed that, had SMM not broken up and had he continued to

represent Client B, subject to his impending suspension in the prior discipline,

the terms of the fee agreement would have governed fees at the time of the July

2015 settlement. SSM would have received 30% of any settlement that was

reached.

[146] In December 2014, when Mr. Martini left SMM, the Client B matter was

expected to settle and, given the number suggested to the parties during an

October 2014 mediation, for several million dollars. It was a valuable file. Mr.

Shulgan wanted to keep it. Mr. Martini wanted Ms. Marusic to take it on. Mr.

Martini and Ms. Marusic shared a significant financial interest in retaining the

file and its success at trial. To use Mr. Martini’s language, they both had “skin in

the game.” It was very important not to lose the trial date as another might not

be available for over a year and important witnesses were elderly.

[147] On December 17, 2014, Client B agreed to transfer his file to Ms. Marusic and

Marusic Law. On January 7, 2015, Client B e-mailed Mr. Shulgan confirming his

decision to transfer the file to Ms. Marusic. Client B agreed the SMM retainer

was not transferred to Marusic Law. There was no formal retainer or

contingency fee agreement with Marusic Law. Any discussions with Client B

about Ms. Marusic’s fees and disbursements were not documented.

[148] Prior to Mr. Martini’s suspension and the dissolution of SMM, Mr. Martini

intended to act as lead counsel with Mr. Shulgan primarily responsible for

arguing damages. In January 2015, Mr. Morga was brought on to assist Ms.

Marusic. He would ultimately step into Mr. Shulgan’s role handling the damages

aspect of the file.

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[149] Settlement hopes were dashed when early in 2015 the defendants offered

$200,000, substantially less than expected, after the October 2014 mediation.

Client B made a formal offer to settle for $7,500,000, plus interest and costs.

[150] Preparation for trial began in earnest and the trial commenced on May 11,

2015. During Ms. Marusic’s cross-examination of the defendants’ first witness, it

became clear the the defendant had failed to disclose documents, in breach of

court orders. There was a significant possibility of a mistrial. The time was ripe

to settle.

[151] A settlement conference, described as an in-trial pre-trial, was held on July 14,

2015. Mr. Martini flew to Ottawa to be present for an expected discussion on

fees. The defendants offered to settle at a number very much closer to

Client B’s $7.5 million offer. That day, during a brief meeting with Mr. Martini

and Ms. Marusic, Client B executed an authorization offering to settle (the

specific amount is subject to a publication ban) and a direction that $3,500,000

inclusive of HST and disbursements of that amount be paid as legal fees to Ms.

Marusic and Marusic Law LLP.

Martini’s Involvement in the Client B Litigation

[152] Mr. Martini was suspended January 5, 2015. Between January and July 2015

Mr. Martini and Ms. Marusic were in frequent communication about the Client B

matter. In January he met with Client B, Ms. Marusic and Mr. Morga in Toronto.

In April Mr. Martini met with Ms. Marusic and Client B twice for full-day trial

preparation sessions. Mr. Martini was present in Ottawa on the first day of trial.

Mr. Martini was present in Ottawa again on July 14 and met with Ms. Marusic

and Client B to discuss the settlement and fees.

[153] Looking only at their over 50 e-mails from this period the following stand out:

February 9: Mr. Martini drafted an e-mail for Ms. Marusic that she sends,

unrevised, to Client B and his advisor Leighton Roslyn.

March 1, March 28, April 2, April 8 and April 13: Ms. Marusic and Mr.

Martini exchanged multiple e-mails about expert evidence. In the March 1

e-mail he directed Ms. Marusic to “get it out to (the expert) asap.” Mr.

Martini provided numerous substantive suggestions and revisions on draft

expert reports.

April 15: Mr. Martini e-mailed Ms. Marusic asking her to provide a document

in Word “so I can correct without having to bother you.”

April 17: Ms. Marusic forwarded her e-mail to Client B setting out a plan for

April 18 trial preparation meeting to Mr. Martini.

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April 18: Mr. Martini e-mailed an updated draft outline of Client B’s

examination-in-chief to Ms. Marusic.

May 4: Mr. Martini e-mailed his “to do” list and draft witness list to Ms.

Marusic.

May 11: Mr. Martini advised Ms. Marusic against sharing her opening

statement with DOJ counsel.

May 16: Mr. Martini e-mailed Ms. Marusic his notes of issues and further

witnesses to consider.

May 25: Mr. Martini e-mailed Ms. Marusic’s assistant asking that documents

be sent to a witness, copied to Ms. Marusic and blind copied to him.

May 25, 26, 27, 28: Mr. Martini and Ms. Marusic exchanged multiple e-mails

about witness preparation and Mr. Martini’s meetings with witnesses. Mr.

Martini provides outlines for examination of witnesses Zito, Sterling and

Straub. He advised Ms. Marusic about the contents of witness Cedillot’s

transcript of previous testimony. He made suggestions about additional

witnesses and the order of witnesses.

June 12 and 28: Ms. Marusic forwarded e-mails from DOJ to Mr. Martini.

July 9: Mr. Martini e-mailed Ms. Marusic advising her to “read between the

lines” of DOJ’s position.

July 13: Mr. Martini e-mailed a detailed settlement and costs analysis to Ms.

Marusic’s assistant and asked that it be typed up for Ms. Marusic. He

directs the assistant to keep it “between you and I.” On July 14 Ms. Marusic

and Mr. Martini exchanged several emails about the in-trial pre-trial.

[154] Mr. Morga was not copied on the e-mails, even those that relate to the issue of

damages, which was his area of responsibility at trial.

What the e-mails tell us

[155] The e-mails disclose Mr. Martini’s involvement in the following activities, all of

which we find come within the broad definition of legal services set out in s. 1(5)

of the Act and the practice of law.

Preparing witnesses

[156] Preparing witnesses and outlines of examination is work lawyers preparing for

trial and assisting trial counsel must do regularly. This lands solidly within the

definition of legal services and the practice of law. It is work that requires the

application of legal principles and legal judgment with regard to the

circumstances or objectives of Client B (s. 1(5) of the Act), and necessary to the

representation and conduct of the Client B litigation (s. 1(7).3 of the Act).

33

[157] Mr. Martini spoke to and possibly met with two witnesses to prepare them. He

prepared outlines of examinations-in-chief for Client B and three other

witnesses. He advised Ms. Marusic on her review of a fourth witness’s

testimony. He provided suggestions about other witnesses. Multiple detailed

e-mails addressed the expert witness’s report and evidence.

[158] We reject Mr. Martini’s argument that, because this is work that might be

assigned to a law clerk, it does not come within the rubric of legal services.

Moreover, a law clerk or assistant works under the direction of a lawyer and the

lawyer is responsible for their work. Under R. 7.6-1.1, that was not possible in

Mr. Martini’s case.

Trial strategy

[159] Mr. Martini’s advice about trial strategy also required the application of legal

principles and legal judgment with regard to the circumstances or objectives of

Client B and was necessary to the representation and conduct of the Client B

litigation. Mr. Martini was fully engaged in advising Ms. Marusic on trial strategy.

As examples, he told her not to share her opening with DOJ counsel, identified

other witnesses for particular issues, gave notes on research, and suggested

how Ms. Marusic might get DOJ to agree to the in-trial pre-trial. He warned Ms.

Marusic to “read between the lines” when assessing DOJ counsel’s position. He

drafted a detailed costs and damages proposal in preparation for the pre-trial.

Involvement with Client B

[160] The Guidelines are clear that a suspended lawyer may see “clients only for the

limited purpose of assisting them in transferring their past or present legal work

to another lawyer.” Mr. Martini’s contact with Client B went well beyond this.

[161] While Mr. Martini testified that he did not “sit down and advise the client,”

Client B testified Mr. Martini spoke to him more than once on his cell phone

during the trial. Mr. Martini attended two lengthy meetings with Client B in April.

In his July 9 e-mail to Ms. Marusic, Mr. Martini indicated he intended to give

Client B “a piece of my mind.” Mr. Martini’s communications with Client B

eventually triggered a request to Ms. Marusic that she “kindly make sure there

are no further communications from Claudio. As much as I appreciate what he

has done for me, I will not tolerate any further ranting from him.”

Negotiating Fees

[162] In its decision granting the Law Society’s appeal of the decision on the motion

to vary Ms. Marusic’s suspension, the Appeal Division commented on

Mr. Martini’s involvement in the fee negotiation with Client B. While not

technically binding on us, we find the appeal panel’s concerns a useful starting

point for our analysis:

34

Negotiating fees with clients is not for “…the limited purpose of assisting

them in transferring their past or present legal work…” (s. 2(1)(a)). Nor is

it a matter of rendering accounts under s. 2(1)(d), or otherwise

permissible under the Guidelines. Unlike the permissible activities,

negotiating a fee in the midst of a settlement negotiation is a very

sensitive matter: the client’s interests and his lawyer’s interests are in

conflict.

Law Society of Upper Canada v. Marusic, 2016 ONLSTA 22 at para. 52.

[163] Mr. Martini met with Ms. Marusic and Client B on July 14 after receiving the

DOJ’s offer to settle. At that brief meeting, Mr. Martini prepared the direction

and authorization confirming the amount of the settlement and portion to be

paid in fees. Mr. Martini testified Ms. Marusic dictated terms and he wrote them

as her handwriting is messy.

[164] We do not accept Mr. Martini’s evidence he was merely Ms. Marusic’s scribe in

this meeting. We find it more likely than not he led the meeting that resulted in

the direction and authorization. First, we reject the messy handwriting

explanation. The record contains documents in Ms. Marusic’s handwriting

which, while not perfect penmanship, are completely legible.

[165] Further, the evidence supports finding Mr. Martini was the driver on the fee

issue. He agreed he flew to Ottawa that morning, to Mr. Morga’s surprise,

expressly to be present for discussion of fees. That was significant travel simply

to be an observer. Moreover, as his July 13 e-mail to Ms. Marusic reveals,

Mr. Martini had prepared a detailed settlement and cost analysis for

Ms. Marusic the day before – directing her assistant to keep that information

between them. We find he crafted the respondents’ mutual position on fees.

[166] Ms. Marusic wanted and needed Mr. Martini in the discussion with Client B

about fees. She e-mailed just before 5 PM, “… I am going to bring back so you

can talk to him.” The use of the pronoun is important. She does not say does

not say so “we” can talk to him. Although Ms. Marusic had an equal interest in

collecting outstanding fees on behalf of SMM, she wanted Mr. Martini involved

in making the deal and he would be doing the talking.

[167] Finally, Mr. Martini’s role in leading the discussions with Client B on July 14 is

revealed most clearly in his July 28 e-mail responding to Ms. Marusic’s

concerns if the fees were not resolved. Mr. Martini told her:

(…) That was my idea to extort [Client B]. he did what I asked. Just

leave it sit. I created this. I will fix it. I don’t need you getting sick. Don’t

know where you are. Love me. (emphasis ours)

35

Other than describing his use of the word extort was “horrible,” Mr. Martini did

not explain or take issue with what it suggests of his role or his intention. As is

clear from this email Mr. Martini was the person doing the “asking.”

[168] We find Mr. Martini was involved in both advising Client B about the offer to

settle and negotiating fees. Mr. Martini drafted the authorisation and direction

for Client B’s signature. This engaged the application of legal principles and

legal judgment with regard to Client B’s circumstances and objectives and was

incompatible with his status as a suspended lawyer.

Covering up Martini’s involvement

[169] Mr. Morga appeared shaken during his testimony when taken through the

documents showing the extent of Mr. Martini’s involvement in Client B’s trial

preparation and during the trial. He had testified in-chief that he believed the

witness preparation work was “all Maria.” He believed Mr. Martini was only

involved in the two April meetings. He admitted candidly he was unaware of the

e-mails or the extent of Mr. Martini’s involvement. Asked whether Mr. Martini

was assisting Ms. Marusic with the trial he conceded, “it certainly appears that

way.”

[170] Mr. Martini conceded the record showed his communications with Ms. Marusic

were almost never shared with Mr. Morga. He testified he did not know why

Mr. Morga was not copied on certain e-mails but had never questioned

Ms. Marusic about this. He offered no explanation why he had not copied his

e-mails to Ms. Marusic to Mr. Morga, or why he had requested Ms. Marusic’s

assistant to keep the summary he prepared for the July 14 in-trial pre-trial

“between you and I.”

[171] We find both Mr. Martini and Ms. Marusic intended to hide Mr. Martini’s

involvement in the trial from Mr. Morga. It happened too often over the course of

too long a period to accept Mr. Morga was omitted through inadvertence or

accident. This was a deliberate decision intended to disguise their misconduct.

Martini’s involvement in nine other matters

[172] The record also shows that, in addition to the Client B matter, Mr. Martini

provided legal services after being suspended and Ms. Marusic failed to prevent

him from doing so and associated with him without permission in at least nine

more files that had been transferred from Mr. Martini to Ms. Marusic.

[173] Mr. Martini justified his conduct on the basis of having limited time to transfer a

large number of his files, the urgency of the files and his view of the duty he

owed to the clients.

36

I did what I could to help the individual lawyer who had the file

understand what the file was about, the status of the file, and – and any

other assistance they may need. I didn’t have the luxury of sitting down

and preparing transfer memos. I mean, there were 700 files, so, you

know, what I did after December 12th and after January 5th was

undertake whatever efforts I could to help contextualize the files,

understand the facts of the files, understand the issues of the files. I

didn’t get paid a penny for any of it. I didn’t want a penny. I didn’t ask for

a penny. But there were clients who had serious imminent issues that

needed to be addressed, whether it was Ms. Marusic addressing them or

some other lawyer. So that’s what I did.

[174] The work done on the specific files in 2015 included:

PA v. PE: In January Ms. Marusic and Mr. Martini forwarded e-mails to each

other on this file. Mr. Martini could not explain why Ms. Marusic’s January 6

e-mail to the client is blind copied to him. On January 26, Mr. Martini

e-mailed the client directly with advice about litigation strategy, copying

Ms. Marusic.

WGH Arbitration: On January 14, Mr. Martini provided detailed comments

on draft submissions to Ms. Marusic. On January 28, Ms. Marusic blind

copies Mr. Martini on her e-mail to the client.

AC Arbitration: On January 11, Mr. Martini wrote directly to the clients,

copying Ms. Marusic, commenting on strategy and with plans to meet for

witness preparation. In a second e-mail sent to the clients later that day,

also copied to Ms. Marusic, Mr. Martini commented on an evidence issue.

The following day Mr. Martini e-mailed Ms. Marusic suggesting he meet

with clients alone to save her time. Mr. Martini then e-mailed the clients

saying he had reviewed the file with Ms. Marusic over the weekend, the

planned meeting would proceed without her and he would keep Ms.

Marusic up to date.

Client X: On January 12, Mr. Martini e-mailed Ms. Marusic’s assistant,

copying Ms. Marusic, asking her to prepare a letter he revised and

indicating he would be meeting the client that afternoon. Mr. Martini agreed

his revisions to the letter included specific statutory references and the

letter was a legal submission on behalf of a client.

JB: On January 22, Mr. Martini e-mailed Ms. Marusic’s assistant with

instructions that a letter to the client be sent to him and Ms. Marusic for

approval. Mr. Martini acknowledged he assisted on this matter.

L v. SC: On February 11 Mr. Martini e-mailed Ms. Marusic directing her to

send him a motion and affidavit to him for revision “before you spend any

time on it.”

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JM v. S: On March 7 Mr. Martini forwarded his e-mails responding directly

to a client’s complaint about mediation delay to Ms. Marusic.

AP: Mr. Martini e-mailed Ms. Marusic on April 14 with a draft e-mail to be

sent to the client summarising facts and providing the client with advice

about the argument to be made.

MP: On May 18 a client e-mailed both respondents complaining he had not

received a response to an earlier inquiry. Mr. Martini responded directly and

offered a meeting. On June 24 Ms. Marusic forwarded the client’s email

complaining he cannot reach Mr. Martini to him. Mr. Martini responded

“sorry forgot to email him. Will do now.”

Findings

Martini provided legal services on Client B matter and nine other files

[175] Mr. Martini agreed that drafting factual outlines, strategizing about trial and

making decisions about witnesses were all a key part of trial preparation and

work he would have done and billed for as a lawyer. However, he argued that

he did no more than make suggestions and offer ideas which Ms. Marusic could

consider and accept or reject as she wished. He explained his intention was

simply to provide assistance.

[176] We have no testimony from Ms. Marusic explaining her understanding of Mr.

Martini’s intentions or his many suggestions, corrections, ideas, revisions,

directions and proposals. Nonetheless, we reject Mr. Martini’s argument.

[177] In Law Society of Upper Canada v. Eversley, 2015 ONLSTH 136 at para. 49,

the Tribunal confirmed that “the definition of legal services is much broader than

formally representing someone in court, on the record.” As the Tribunal made

clear in Law Society of Upper Canada v. Spiegel, 2017 ONLSTH 188 at para.

83, it does not matter how an individual licensee characterises the provision of

services. What matters is what the licensee is actually doing.

[178] We acknowledge some of Mr. Martini’s e-mails begin with “this is for your

consideration” or “use as you see fit” language. In our view that does not

change the nature of the legal services Mr. Martini was providing. We see those

comments as standard, respectful communication between professionals.

[179] We also understand Ms. Marusic was an experienced litigator and, as the

person appearing in court, ultimately decided what to say and how to say it. It

may be that some of Mr. Martini’s advice was ignored. At least once, on May 11,

Ms. Marusic appears to express impatience with one of his suggestions. But

when he replies, “ok I will stay out of it,” Ms. Marusic almost immediately

responds, “What do you mean? I want you in it.”

38

[180] In Law Society of Ontario v. Collins, 2021 ONLSTH 177, the suspended lawyer

performed factual and legal research, clerical work, filing, provided information

on a file gained from before Collins’s involvement, drafting and filing court

documents, liaising with the registrar and trial coordinator, occasionally

corresponded with the court and opposing counsel and was granted permission

by the presiding justice to sit ungowned at the counsel table during a trial. The

Tribunal considered all these acts to be the provision of legal services.

Mr. Martini similarly provided factual and legal research, drafted and revised

legal documents and provided information on the files gained prior to

Ms. Marusic’s involvement. There is no basis to distinguish Mr. Martini’s

conduct in performing similar functions from the conduct in Collins.

[181] We are satisfied on a balance of probabilities Mr. Martini applied legal principles

and legal judgement when he prepared and provided advice, thoughts,

suggestions, directions, ideas and outlines to advance the interests of his

former clients with full knowledge of their circumstances and objectives. In

doing so, we are satisfied Mr. Martini provided legal services within the meaning

of s. 1(5) of the Act.

Legal services went beyond transfer or transition

[182] The respondents both argue that, if legal services were provided, they were

properly part of the transfer or transition of client files from Mr. Martini to Ms.

Marusic and came within the scope of activities permitted by 2(1)a of the

Guideline. That was how Mr. Morga had understood Mr. Martini’s role and was

shocked when presented with the evidence showing the extent of Mr. Martini’s

involvement.

[183] Mr. Martini relies on Law Society of Upper Canada v. Houlahan, 2017 ONLSTH

38, in support of his argument that providing legal services incidental to the

transfer of a file to a new lawyer in the case of a suspension does not constitute

the practice of law.

[184] That proposition, with respect, is taken completely out of context. The question

for the Tribunal in Houlahan was whether to grant the lawyer’s request for

nearly five months to transfer his files before he commenced an interlocutory

suspension. The Tribunal refused and, instead, permitted the lawyer two weeks

to complete his transfers. To the extent Houlahan applies to the facts before us,

it supports interpreting the permission to see clients for the purposes of

assisting in the transfer of a file as both time limited and of a very short duration

prior to commencing the period of suspension.

[185] In response to Ms. Marusic’s argument that Mr. Martini’s work was similar to

general discussions about the law or an interesting legal issue with a retired

licensee, we find Mr. Martini’s involvement went well beyond disinterested

39

advice or discussions. He had an interest in the result, particularly on the

Client B matter, and had ongoing access to and involvement with the client.

Mr. Martini was not merely opining on a legal question, he was integrally

involved in providing advice, devising strategy and preparing legal materials.

[186] Mr. Martini repeatedly argued he provided his services to uphold his fiduciary

obligations to clients. We reject that argument. Mr. Martini’s professional and

fiduciary obligations are governed by the Rules of Professional Conduct. Those

Rules restrict the conduct of suspended lawyers and place a positive obligation

on lawyers to prevent unauthorised practice unless permission is obtained.

Those were the professional obligations which both respondents chose to

ignore.

[187] We also disagree with Mr. Martini’s suggestion his duty to clients was

analogous to obligations placed on lawyers who withdraw their services. A

lawyer who withdraws services remains subject to the control, regulation and

discipline of the Law Society. A lawyer who withdraws services has not been

found to pose a significant risk of harm to members of the public or to the public

interest in the administration of justice: Crawford v. Law Society of Upper

Canada, 2017 ONLSTH 218 at para. 13. Neither circumstance applies to

Mr. Martini.

Marusic failed to prevent

[188] There is no evidence Ms. Marusic ever resisted or attempted to dissuade

Mr. Martini from assisting her or remaining involved in matters while suspended.

To the contrary, she continued to keep Mr. Martini informed about matters and

to actively seek his assistance managing client demands. She assisted and

facilitated his unauthorised practice of law. She took his legal work (draft

e-mails, witness preparation, witness outlines) and allowed Mr. Morga to believe

it was her own. She allowed Mr. Martini to interact directly with her clients.

Mr. Martini stayed “in it” and Ms. Marusic never told him to stay out.

No request for approval

[189] Rule 7.6-1.1 provides that a lawyer may request permission from the Tribunal

to, among other things, associate with a suspended lawyer. No such request

was ever made to the Tribunal. Ms. Marusic did not request the Tribunal’s

permission to allow Mr. Martini to associate with and assist in the Client B trial

or on the other nine matters.

Conclusion

[190] We find Mr. Martini provided legal services and engaged in the practice of law

while his licence was suspended.

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[191] We find Ms. Marusic failed to prevent Mr. Martini’s unauthorised practice of law

and associated with and used Mr. Martini’s services without the express

approval of a panel of the Hearing Division of the Law Society Tribunal.

Therefore, we are satisfied Ms. Marusic failed to assist in preventing

Mr. Martini’s unauthorised practice of law and provision of legal services,

contrary to Rule 7.6-1 of the Rules of Professional Conduct. Further, she

associated with and used the services of Mr. Martini without approval, contrary

to Rule 7.6-1.1.

THE CLIENT B SETTLEMENT AND MARUSIC’S INTEGRITY

[192] At the July 14 meeting, Client B provided his authorisation to settle the litigation

and a direction that a significant portion, exceeding the 30% agreed to in the

SMM retainer, be paid to Ms. Marusic and her firm as fees, disbursements and

HST. The amount of the settlement is subject to a publication ban and for that

reason we have been careful not to provide information about the amount of

fees which might disclose the settlement amount.

[193] At the time the Client B matter settled, Ms. Marusic and Mr. Martini owed their

bank approximately $2,532,598 plus accrued interest. Ms. Marusic was

primarily responsible for paying off this debt because “Mr. Shulgan left and

Mr. Martini [could not] practice.”

[194] In its final submissions the Law Society articulated Ms. Marusic breached

Rule 2.1-1 of the Rules of Professional Conduct and failed to act with integrity in

negotiating the settlement of the Client B litigation when she failed to ensure the

terms of her and Mr. Morga’s retainer were clear and understood by Client B;

failed to detail for Client B what fees were outstanding and provide support for

those fees; when she corresponded with Mr. Martini regarding the settlement

conference; when she invited or permitted Mr. Martini to meet with Client B to

“extort” him; and when she preferred her own fees over Client B’s interests in

respect of the authorization.

No new fee agreement with Client B

[195] There is no dispute Client B had a contingency fee agreement with SMM but no

formal fee agreement with Ms. Marusic and Marusic Law or Mr. Morga. The

SMM agreement provided that, if the amount recovered was less than $10

million, the fees would be 30% of the amount recovered. Client B was

responsible for paying HST and disbursements in addition to this fee.

[196] No one, not Ms. Marusic, not Mr. Morga, not Client B, nor Mr. Roslyn (Client B’s

friend and long-standing advisor) clarified or confirmed what and how fees

would be calculated for the work done by Ms. Marusic or Mr. Morga. Client B

testified Mr. Martini agreed to assign the SMM retainer to Ms. Marusic but this

41

was never done. Mr. Roslyn recalled some discussion about a transfer but

agreed nothing had been done. Mr. Morga agreed there was no fee agreement

was in place subsequent to the SMM retainer. Mr. Martini was unable to recall.

In-trial pre-trial

[197] Ms. Marusic understood there was a “strong possibility” the matter would settle.

This was a significant achievement given the DOJ’s Rule 49 offer prior to the

trial had been $200,000. After decades of litigating, Client B agreed he was

keen to settle although disinclined to engage in mediation or settlement

discussions if they were likely to be fruitless. When Ms. Marusic advised the in-

trial pre-trial was set and that it appeared the defendants had a genuine interest

in settling, Client B responded, "Music to my ears.”

[198] At the in-trial pre-trial, the DOJ proposed a multi-million dollar settlement. The

DOJ required authorisation to make an offer but believed it could be obtained.

Client B testified he recalled that when the pre-trial judge communicated the

DOJ’s proposal and warning Client B “Don’t come back for more.” Despite this

Client B instructed Ms. Marusic to make a counter-proposal for another

$500,000. She did so. This proposal was rejected.

[199] Mr. Morga described Client B as “elated” and “walking on air” following the

DOJ’s proposal. He insisted on pulling the cart with the litigation boxes during

the walk back to the condo where they were all staying.

[200] Both Ms. Marusic and Mr. Morga agreed fees had not been discussed with

Client B at the in-trial pre-trial or before they returned from court on July 14.

July 14 meeting with Martini

[201] Following the in-trial pre-trial Ms. Marusic and Mr. Martini met with Client B in

his condo. The meeting was brief. Mr. Morga thought no more than 15 minutes.

At the meeting Client B signed a Direction and Authorisation to settle the claim

for several million dollars and that fees, disbursements and HST inclusive

amounting to just over half the settlement, would be paid to Marusic Law. Ms.

Marusic explained on the motion to vary it was her practice to resolve fees

before putting an offer to the opposing party.

[202] Mr. Martini testified he did not remember bringing any documents to support his

work on the file. Mr. Morga confirmed that he did not have work-in-progress or

dockets with him and did not believe any dockets or bills were provided to Client

B before the July 14 meeting. The only evidence we have of Ms. Marusic’s fees

is a pre-bill dated October 14, 2015 recording fees of $997,650.

[203] Mr. Martini agreed that the fees set out in the authorization were more than the

percentage Client B had agreed to in his fee agreement with SMM. Mr. Morga

42

described the fees in the authorization as on the high end of the range that he

had suggested to the respondents prior to the July 14 meeting with Client B.

[204] We are satisfied Client B was aware that significant disbursements were being

incurred and that Ms. Marusic and Mr. Morga were expending an enormous

amount of time on his file. Client B told the Law Society’s investigator he had

paid approximately $700,000 of approximately $1.5 million owed as

disbursements. He waffled when asked about those statements on cross-

examination but did not revise them when given that opportunity. He went on to

concede that, at the time of preparing for trial, he had run out of money and that

Ms. Marusic was covering all his litigation expenses as well as his travel costs,

including the cost of his hotel when he travelled to Windsor in April for the

preparation meetings and his condo while in Ottawa.

[205] Client B testified he was exhausted following court and felt pressured by

Ms. Marusic and Mr. Martini to sign the authorization.

[206] Mr. Roslyn testified he spoke with Client B on July 14 just before everyone went

out to dinner. Client B told him about the settlement offer and the fee

agreement. He was “shocked” by Client B’s “very flat, very depressed affect”

and “was upset.” Client B handed the phone to Mr. Martini. Mr. Roslyn

described their discussion as “heated” and agreed he suggested to Mr. Martini

the fees would be assessed.

Subsequent events

[207] The parties were able to formally settle two days later, after further negotiations

and another attendance before the in-trial pre-trial judge.

[208] Despite claiming to be very upset and concerned about the fee agreement on

July 14, Mr. Roslyn did not raise or document those concerns with Ms. Marusic

until 10 days later and only after the DOJ had obtained formal approval to

settle.

[209] On July 19 Client B e-mailed Ms. Marusic asking for a copy of the direction and

a detailed breakdown of her fees and disbursements. The e-mail is friendly.

Client B raises no issues and expresses no concerns about the fee agreement

or the July 14 meeting.

[210] Client B’s July 22 e-mail to Ms. Marusic and Mr. Morga is equally friendly and

appreciative. It is only at this point, over a week later, that he asks that Mr.

Roslyn be included in their communications.

[211] The DOJ sent Ms. Marusic the settlement documents on July 22 and she

forwarded them to Client B and Mr. Roslyn the same day.

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[212] Client B’s July 23 e-mail to Ms. Marusic included a bad joke and pressed Ms.

Marusic to push DOJ to pay out the settlement funds quickly in response to an

inquiry from the expert about his outstanding account.

[213] On July 31 Ms. Marusic and DOJ counsel were served with a notice of change

of lawyers sent on Client B’s behalf.

Analysis

[214] Ms. Marusic’s practice was to resolve fees before presenting an offer to the

opposing party. Mr. Roslyn agreed that this was his practice as well. The Law

Society does not appear to take issue with this general practice but, as we

understand it, with its application in the particular circumstances of this case

where there was no agreement about fees incurred by Ms. Marusic or Mr.

Morga.

[215] The settlement discussions arose mid-trial. If the matter did not settle following

the in-trial pre-trial, there was potential for a mistrial. Client B agreed this would

not be in his interest given costs and certainty of further delay.

[216] Dockets were in Windsor and the parties were in Ottawa. We are satisfied

Client B, as a lawyer and businessperson, would know he could ask to review

dockets and disbursements. In fact, he did so nearly a week later. But he also

knew that would take time, and on July 14, time was of the essence. Client B

never asked for time to review disbursements and never asked for dockets at

the meeting. He conceded he never asked to speak with Mr. Roslyn and agreed

he would have been free to seek Mr. Roslyn’s advice about settlement and

never suggested he did not want to proceed with the settlement or the fees

without Mr. Roslyn’s advice.

[217] We are also satisfied Client B would have been aware both Ms. Marusic and

Mr. Morga had expended a huge amount of time on the file. The fees negotiated

took into consideration the very outstanding disbursements, which were

significant – somewhere in the range of $800,000.

[218] In our view the pressure to get an agreement on July 14 was driven by

settlement, not counsel. Client B was legally trained, had practised law and had

decades of business experience. He was not an unsophisticated or vulnerable

individual. Had Client B lacked the knowledge or background to understand

terms such as “all inclusive” and “net after fees, disbursements and HST” there

might be reason to pause. But this was not the case. He was not under a

disability nor is there any evidence to support finding Ms. Marusic ought to have

been concerned about his capacity.

[219] In these circumstances, we do not accept Client B’s testimony that he was

pressured to agree to the proposal. We find the brief duration of the meeting

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also supports this conclusion. Mr. Morga had not finished packing before

Mr. Martini and Ms. Marusic returned with the signed authorization. We

conclude Client B needed no information or explanation before agreeing.

[220] We also do not accept Mr. Roslyn’s evidence that Client B was too mentally or

physically exhausted after the in-trial pre-trial to agree. The in-trial pre-trial

began at 2 and was over by 5. Client B was not testifying or leading the

negotiations. We prefer Mr. Morga’s evidence of Client B’s condition, based on

direct observation, to Mr. Roslyn’s impression based on his phone conversation.

[221] In this connection we note that Client B had dinner with Mr. Martini and Ms.

Marusic the evening of July 14 and gave Ms. Marusic a necklace. He e-mailed

Mr. Morga later asking him what sorts of wine he preferred, behaviour that does

not suggest Client B felt taken advantage of.

[222] Since that January, Mr. Roslyn had been only marginally involved with

Ms. Marusic and the trial. In those circumstances, we reject the Law Society’s

suggestion Ms. Marusic was obliged to suggest Client B review the July 14

agreement with Mr. Roslyn before he signed. Similarly, we reject the argument

Client B ought to have been provided with independent legal advice before

signing the agreement. The Law Society offered no support for either position.

Conclusion

[223] Much of the argument on this issue focussed on the amount of the fees agreed

to by Client B. However, when considering integrity, it is not our task to assess

the lawyer’s account or, in this case, the dollar amount of the fees as agreed on

July 14. Rather, we must look at how the agreement was reached and whether

those circumstances constitute professional misconduct.

[224] We are satisfied that in the circumstances of a very generous mid-trial

settlement offer where there could be real consequences, including the

likelihood of a mistrial if agreement were delayed, negotiating fees as part of the

settlement offer did not breach Ms. Marusic’s Rule 2.1 obligations. Where

preparation for a lengthy trial was conducted under a very tight timeline and

where the client was a sophisticated litigant, the absence of a formal retainer

did not breach Ms. Marusic’s Rule 2.1 obligations.

[225] Similarly, where Client B was well aware of mounting and significant

disbursements; the time expended by both counsel; and that the agreement

occurred mid-trial and in a location where counsel did not have immediate

administrative support, the failure to prepare and provide formal dockets in

support of fees being negotiated does not breach Rule 2.1. We are also

satisfied the size of the account would not have come as a shock to Client B.

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[226] In addition, although a breach of Rule 3.6-1 is not alleged in the notice of

application, we are satisfied the fees themselves were not so objectively

unreasonable or inappropriate as to amount to professional misconduct. Given

the DOJ had offered $200,000 less than a year before following a mediation

where the mediator had assessed damages in the millions, the fees cannot be

characterised as disproportionate to the result. Nor can we find the result does

not reflect the work, complexity and skill required to achieve it: Law Society of

Ontario v. Chijindu, 2019 ONLSTH 147 at paras. 67-68.

[227] However, that analysis does not resolve this issue. The discussion of fees with

Client B was far from typical because it involved and, as we have found earlier,

was led by Mr. Martini, a suspended lawyer.

[228] There was no need for Mr. Martini’s presence at the July 14 meeting. Although

not originally counsel on the file, as a partner of the firm Ms. Marusic was

equally well placed to address SMM’s interests. Mr. Martini had been

suspended for alleged misappropriation. Less than six months earlier

Ms. Marusic had described him as a liar and fraudster and herself as a victim of

his deceitful ways. And yet he was actively involved in both advising Client B

about the offer to settle and negotiating feesin a context where his interests and

the client’s were in conflict. He planned to “extort” Client B and, as we have

found, Ms. Marusic invited him to access her client.

[229] It is these circumstances, not the amount of fees negotiated,which call

Ms. Marusic’s integrity into question. We find Ms. Marusic’s decision to invite

the involvement of a suspended lawyer, about whom Ms. Marusic herself has

expressed profound doubts as to his honesty and integrity, into sensitive mid-

trial negotiations of fees, would and did undermine Client B’s confidence in her

trustworthiness, her usefulness to Client B and her reputation within the

profession. This conduct in these particular, and perhaps unique, circumstances

would undermine public confidence in the administration of justice and the legal

profession. We therefore find Ms. Marusic failed to act with integrity in respect

of the Client B settlement.

MISLEADING THE LAW SOCIETY TRIBUNAL

[230] The Law Society alleges Ms. Marusic misled the Law Society and/or the Law

Society Tribunal about the nature of her relationship with Mr. Martini between

March 2015 to August 2015 contrary to Rule 2.1-1 of the Rules of Professional

Conduct and, in doing so, she failed to conduct herself with integrity.

What Marusic told the Tribunal

[231] In March 2015, Ms. Marusic swore an affidavit responding to the Law Society’s

application for an interlocutory suspension of her licence. In her affidavit,

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Ms. Marusic disclosed her personal relationship with Mr. Martini for the first time

and made clear it had ended.

I was involved in a personal relationship with Mr. Martini for many years.

During that time I believed much of what he told me. I believed that

although legally married, he had been separated from his wife for a

number of years. Unfortunately, I now know that he repeatedly lied to

me. Our personal relationship is now over.

[232] In an emotional cross-examination on April 1, 2015, Ms. Marusic confirmed the

relationship had ended sometime between March 13 and 23. Asked to explain

why the relationship ended at that time, Ms. Marusic testified that, “in the last

months,” she discovered Mr. Martini had told her numerous lies about his wife’s

health. Her evidence before the first hearing panel was moving and convincing.

She testified their relationship was over.

[233] Ms. Marusic argued that the fact Mr. Martini was under suspension, and she

had ended her personal relationship with him, weighed against imposing a

suspension on her.

What the Tribunal decided

[234] The panel found Ms. Marusic was “shocked and appalled’ by Mr. Martini’s

misconduct and considered herself a “victim” of his “deceitful ways.” The panel

noted that Ms. Marusic and the Law Society both took the position Mr. Martini

was a “liar and a fraudster.” Law Society of Upper Canada v. Marusic, 2015

ONLSTH 81 at paras 37 and 60.

[235] The panel found Ms. Marusic’s personal romantic relationship with Mr. Martini

relevant to their analysis of risk to the public and public confidence in the

profession because their lives, business and personal, were intertwined to a

considerable extent: Law Society of Upper Canada v. Marusic, 2015 ONLSTH

81 at para. 53.

[236] Ms. Marusic’s argument against a suspension was successful. The panel was

satisfied practice restrictions would adequately protect the public and declined

to order a suspension.

Motion to Vary

[237] Ms. Marusic’s January 18, 2016 affidavit, sworn in response to the Law

Society’s motion to vary the earlier order, states:

I was not involved in a romantic relationship with Mr. Martini during the

Client B trial. Indeed, I had not even seen Mr. Martini from late March,

2015 until on or about April 17th, 2015 when I met with him to transition

47

Client B’s file. I did not discuss my relationship with Mr. Martini with

Client B.

[238] In cross-examination on the motion to vary, Ms. Marusic denied being in a

romantic relationship with Mr. Martini during the Client B trial and expressly

denied that there had been any such relationship on July 14 when the

settlement discussions happened. She explained their romantic relationship

resumed in August 2015 and their intimate relationship resumed three months

later.

The Martini/Marusic relationship between January and August 2015

[239] The e-mail communications between Ms. Marusic and Mr. Martini concerning

the Client B file and other files establish they were in close, frequent e-mail

communication between January and August 2015. Their e-mails between

March and April 17 concerning the expert report for Client B do not demonstrate

any strain or difference in tone suggestive of a rift in the relationship. While they

may not have seen each other between the end of March and the April trial

preparation meetings with Client B, their e-mail communications show no

change from e-mails sent prior to Ms. Marusic’s discovery of Mr. Martini’s lies.

[240] When Mr. Martini tells Ms. Marusic in their May 11 e-mail exchange, “ok I will

stay out of it,” Ms. Marusic almost immediately responds “What do you mean? I

want you in it.” She clearly wants his support on the Client B litigation and her

response cannot be squared with the description she gave less than two

months earlier of Mr. Martini as a liar and a fraudster who had victimised her

with his deceitful ways.

[241] Their e-mails also contain phrases and statements out of keeping with

professional communication. Both Mr. Martini and Ms. Marusic end e-mails with

endearments such as: “love me”, “love you”, and “babes.” For example, their

e-mail exchange sent May 26 begins with a discussion of witness preparation

and then moves on to an intimate exchange as follows:

CM: The defendant production 837 contains a transcript of Cedilot

interview.........I have read it. It doesn't say much about [Client B] at all.

The RCMP suggest that [Client B] should have done more and been

aware of the inflated prices but Cedilot does not agree.

I attach the pages that deal with [Client B] ...............to make it easier for

you to review.........

MM: OK baby love. Love you

CM: Love you.......trying to be happy and normal.

MM: We are happy but never normal. Love you

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CM: ): Really miss you a lot. Especially at night. Sorry.

[242] In an exchange on May 4 about accommodations in Ottawa, Mr. Martini said,

“There is a Delta I have stayed at……….i was going to have Muffie see what

she could find. Do you really want to stay in a room with Gino? What about if

there are nights I can’t be there?”

[243] Ms. Marusic responded, “I’m not planning that there be nights when you can’t

stay. Have Muffie look at the Delta. We will compare. I just think that will cost a

fortune.”

[244] This was a clear invitation from Ms. Marusic to Mr. Martini to plan to stay the

night with her while they are in Ottawa. We need not speculate whether that

was an invitation to sleep together in the same bed or to sleep in the same

room. It leaves no doubt Ms. Marusic wanted Mr. Martini close to her at night

while they were in Ottawa. That desire is consistent with a renewed romantic

relationship.

[245] Mr. Martini was unable to explain the May 4 exchange about Ottawa

accommodations. He explained the endearments in their e-mails as still loving

each other although their relationship had ended. He testified more than once

that, while Ms. Marusic “hated” him, he did not doubt she loved him.

Stormy is probably the biggest understatement of this entire weeks of

evidence. It was a tsunami and she wanted – she wanted – she hated

me, Mr. Pratte, okay? And I desperately tried to stay in her life. But did I

doubt that she loved me? I don't doubt that. I doubt that she wanted to

be with me? I don't know that I doubted that. But she – she was so angry

with me, she broke it off.

[246] Mr. Martini stayed overnight in the Ottawa condo being used by Ms. Marusic

and Mr. Morga at least once. The condo had a pullout couch in the living area.

Client B testified that when he asked where Mr. Martini stayed when in Ottawa,

that Mr. Morga pointed to Ms. Marusic’s bedroom. Mr. Morga denied this and

explained he believed Mr. Martini slept on the pullout couch, although he

agreed he was not aware where Mr. Martini slept and that Mr. Martini was gone

by the time he got up in the morning.

[247] We do not have clear evidence whether Mr. Martini shared a bedroom with Ms.

Marusic while they were in Ottawa. Client B’s testimony is contradicted by

Mr. Morga’s, although Mr. Morga’s evidence on this point was qualified. He

believed that Mr. Martini slept on the couch but agreed he would go to his

bedroom when Mr. Martini was present and did not discuss or inquire into the

respondents’ relationship. Mr. Morga did not, or more likely chose not to, have

any direct knowledge of the respondents’ sleeping arrangement.

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[248] At the end of June, the respondents had the following e-mail exchange:

(MM) Hump I want to be with you. You don’t realise how much you

criticize me all the time. You are always questioning. Do what you want. I

have no emotional reserves left. I am raw. I have tried my best for

everyone. I am sorry that I routinely fail. Love me

(CM) Really. I have missed two mortgage payments. Claudio bar

payment. I am 6099 overdrawn and they took Claudio savings to cover it.

I cant pay Erica tuition. And I have a woman who lives me (sic) but could

care less where I hit a house or move to because it will just solve her

issue of not wanting to live with me. So I am great. Just great.

(MM) Hump. I will not take this on. I have offered help and you have

refused. I have no interest in living in lighthouse coverbut (sic) we can’t

live together now and you are unhappy. I love you the best I can. If it’s

not enough then you make a decision. Is Randy refinancing? Perhaps he

can offer some help. I am trying to deal with Client B. I can give you

$3000 if that would help. I love you.

(CM) I am done. We will never live together. Ever. You live your life as

you want. I am done and want no help

Analysis

[249] We do not judge Ms. Marusic on her choice to resume a relationship with

Mr. Martini. The issue before us is whether the evidence establishes on a

balance of probabilities Ms. Marusic misled the Tribunal about the nature of that

relationship between March and August 2015.

[250] The issue for the 2015 panel was the existence of a “personal romantic”

relationship in which Ms. Marusic’s business and personal life was “intertwined”

with Mr. Martini’s “to a considerable extent.” That is the context in which Ms.

Marusic’s 2016 statements described above distinguishing romantic and

intimate aspects of the relationship from the personal must be understood. The

breakup, even on the respondents’ evidence, was very brief in the context of a

longstanding relationship which began in 2001.

[251] The evidence is clear that by early April 2015 Ms. Marusic had resumed working

closely and directly with Mr. Martini on expert evidence in the Client B file.

There is an obvious ease and familiarity to their communications. By May and

the beginning of the Client B trial they were in frequent communication.

[252] Ms. Marusic’s conduct of the Client B litigation and the other matters

establishes her trust in Mr. Martini as a professional never really wavered

despite her March/April 2015 statements. Ms. Marusic chose not to testify

before us, to explain when or why she ceased considering herself a victim of

50

Mr. Martini’s “deceitful ways” or if she no longer considered Mr. Martini a liar

and fraudster. Nor did she attend to offer any explanation of the email

communications between them.

[253] We find the respondents’ denials that they resumed a romantic relationship

before August 2015 are not credible. They do not meet the test of harmony with

the preponderance of the probabilities that a practical and informed person

would readily recognize as reasonable in that place and in those conditions:

Farnya v. Chorny, 1951 252 (BCCA).

[254] The e-mails containing endearments and intimacies, the sleeping arrangement

discussions, and the exchange about living together easily lead to the

conclusion Ms. Marusic and Mr. Martini were once again much more than

professional partners to each other.

[255] In the documents, the respondents repeatedly express endearments to each

other and use pet names. If that had been all, we might accept Mr. Martini’s

explanation the words used were no more than a habit of a formerly close and

intimate relationship. But it was not.

[256] The May e-mails discussing where Ms. Marusic wanted Mr. Martini to stay when

in Ottawa and missing Mr. Martini at night are clearly not business or

professional conversations. They are communications which a practical and

informed person would conclude took place between persons in a romantic

relationship.

[257] In the June e-mails above, Ms. Marusic told Mr. Martini she wanted to be with

him, wanted him to love her and that she loved him. These are not simply

salutations or endearments but affirmative, romantic statements.

[258] She also told Mr. Martini she “cannot live with him now.” That they would even

discuss living together supports finding their relationship had moved well

beyond the professional and returned to the romantic. Further, Ms. Marusic did

not say she would never live with Mr. Martini or that she did not wish to live with

him. She says that she cannot live with him at that moment. This is a

conversation which a practical and informed person would find only to occur

between romantic, possibly intimate, partners.

[259] Ms. Marusic distinguished intimate from romantic. There is much to suggest

intimacy had resumed but no affirmative evidence. It is unnecessary to address

Ms. Marusic’s distinction because we are satisfied the romantic relationship had

resumed at least by May 2015.

[260] Ms. Marusic’s evidence before the Tribunal in 2016 was not forthcoming and

transparent. She utterly failed to acknowledge that, at some point well before

the conclusion of the Client B trial, the close, trusting personal relationship she

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led the Tribunal to believe was sundered by Mr. Martini’s lies and deceitful ways

had resumed. That in itself was misleading. But her explicit lie about the timing

of the resumption of her romantic relationship with Mr. Martini is even more

concerning. By lying under oath and misleading the Tribunal Ms. Marusic

violated her fundamental duty to the profession and to the public to act honestly

and with integrity. LSUC v. Chin, 2015 ONLSTH 91.

MOTION FOR STAY

[261] Mr. Martini asks us to stay the Client A and Client B allegations in the Martini

application on the basis that the Law Society’s delay in prosecuting those

allegations was inordinate and a breach of natural justice which resulted in

procedural unfairness and significant prejudice to Mr. Martini, all of which

constitutes an abuse of process.

[262] Mr. Martini argues the Law Society could have issued an application against

him concerning the Client A and Client B allegations in 2017 when it

commenced its proceeding against Ms. Marusic. Instead, the Martini application

was issued more than two years later. Mr. Martini says the decision to stagger

the Marusic and Martini applications was an attempt to give the Law Society

“two kicks at the can” at the expense of procedural fairness to Mr. Martini.

[263] While counsel also raised concerns about the manner in which the Law

Society’s investigator, Mr. Spagnuolo, conducted his investigation, we

understand Mr. Martini’s abuse of process/natural justice concerns relate

entirely to investigative and prosecutorial delay rather than misconduct.

The Blencoe Test

[264] Blencoe v. British Columbia (Human Rights Commission), 2000 SCC 44,

established the test for a stay on the basis of delay in the administrative law

context. It is a high test, applicable in only the clearest of cases. Few delays will

meet the threshold of an abuse of process: Law Society of Upper Canada v.

Savone, 2015 ONLSTA 26.

[265] The Blencoe test has two branches:

The first is where inordinate delay may impugn the validity of the

proceedings and causes unfairness such that it impairs a party’s ability to

answer the complaint against them, for example where memories have

faded, essential witnesses are unavailable or evidence has been lost, that

brings the administrative process into disrepute: Blencoe at para. 102.

The second branch is serious personal prejudice where there is inordinate

or clearly unacceptable delay which, while not resulting in hearing

unfairness, directly causes significant psychological harm or stigma to a

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person’s reputation, which would bring the administrative system into

disrepute: Blencoe at para. 115.

[266] Even where there is significant prejudice directly caused by inordinate delay

that meets the test described above, it does not necessarily follow that the

proceeding will be stayed. A stay is not available if the damage to the public

interest in a stay would exceed the damage to the public interest if the

proceeding was allowed to continue: Law Society of Ontario v. Stanislawski,

2021 ONLSTH 102 at para. 257.

[267] Mr. Martini has not satisfied either branch of the test for a stay. Given the

context of the proceeding, we do not agree the delay in investigating and

prosecuting these allegations was inordinate or impugned the fairness of the

proceeding, including Mr. Martini’s ability to make full answer and defence.

Further, we find Mr. Martini failed to meet his burden to establish that the delay

caused him serious personal prejudice.

Delay in Context

[268] We agree with Mr. Martini that the length of time between the Law Society

commencing its investigation of the Client A complaints on December 12, 2014

and January 5, 2015, and commencing its investigation of the Client B

complaint on October 7, 2015, and issuing the notice of application dated April

3, 2020 was, on its face, significant. But prejudice is not inferred based on delay

alone: Savone at para. 14.

[269] To be found inordinate, delay must be assessed having regard to the nature of

the case and its complexity, the facts and issues, the purpose and nature of the

proceedings, whether Mr. Martini contributed to the delay or waived the delay

and any other circumstances: Blencoe at para. 122.

[270] Ken Doering is the team manager in the Investigation Services Department of

the Law Society and Mr. Spagnuolo’s supervisor since February 2017. He

reviewed the investigation files concerning the Martini and Marusic

investigations. Given the privileged documents issue, Mr. Doering rather than

Mr. Spagnuolo provided an affidavit in response to Mr. Martini’s motion to stay.

[271] As described in Mr. Doering’s affidavit, between 2014 and January 2017 the

Law Society began 31 investigations into Mr. Martini’s conduct and 10 into Ms.

Marusic’s conduct. Twenty-two investigations were assigned to Mr. Spagnuolo

and the rest to another investigator. Eight investigations were fully investigated

by Mr. Spagnuolo and submitted to the Proceedings Authorization Committee

(PAC). The remainder were closed because there was insufficient evidence of a

breach or were discontinued/closed when it was determined that the Law

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Society had a core number of serious files to submit to the PAC for

consideration and any additional ones would not further the public interest.

Communications with Martini

[272] On December 12, 2014, in the course of investigating complaints filed earlier in

the year, Mr. Spagnuolo spoke with Mr. Martini. Based on that conversation, in

which Mr. Martini admitted his escrow breach, the Law Society began its

investigation. On January 5, 2015, the Law Society began its investigation of

the Client A complaint. On January 13, 2015, Mr. Spagnuolo wrote to Mr.

Martini, notifying him of the investigation and requesting information and

documents.

[273] On October 1, 2015, Mr. Martini responded to that request for documents as

well as requests for information and documents with respect to 11 other

investigations, through his former counsel.

[274] On November 2, 2015, Mr. Spagnuolo wrote outlining the outstanding

information, including information and documents required on the Client A

matter, and setting November 27, 2015 as a deadline for response. Mr. Martini’s

counsel requested a three-week extension. On December 18, 2015, counsel

requested a two-month extension due to Mr. Martini’s ongoing health issues.

[275] On January 7, 2016, Mr. Martini’s counsel wrote to Mr. Spagnuolo enclosing a

brief letter from Mr. Martini’s physician which advised:

I have been the treating physician for Mr. Martini since November 2013.

On my last appointment with him, I found him to be suffering from a

depression with all the associated symptoms. During that appointment,

he communicated that the Law Society has been requesting further

information regarding the issue that has been at hand. It is my

professional opinion that, although certainly necessary, Mr. Martini

cannot presently function adequately, due to his depression, to fairly

address the Society’s concerns and requests. Hence, I would kindly ask

the Society to postpone it’s request of matters for Mr. Martini. It is my

opinion, that his medical status would be put at further risk should a

postponement not occur.

[276] Mr. Spagnuolo requested a more detailed medical note. None was provided.

Following a telephone conversation with Mr. Martini’s counsel, on May 13, 2016,

Mr. Spagnuolo wrote with respect to outstanding requests for information and

materials on 21 complaints, including the Client A matter, and to reiterate his

request for better medical information. Mr. Martini’s counsel responded four

days later to advise that his firm no longer acted for Mr. Martini and all

communications should be directed to Mr. Martini.

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[277] On June 9, 2016, Mr. Martini e-mailed Mr. Spagnuolo in response to his phone

call of the same day to advise he was retaining new counsel and directing him

to communicate only in writing.

[278] Mr. Martini explained that his ability to respond to the Law Society’s subsequent

requests was compromised by the fact that he did not have access to his files or

firm records as well as the impact the investigation was having on his health.

[279] In February 2017, Mr. Spagnuolo wrote to Ms. Marusic seeking her assistance

in obtaining documents relevant to nine investigations, including the Client A

and Client B matters. Mr. Martini did not make any further response to the Law

Society until late 2019.

[280] The investigation of the Client A and Client B allegations, along with multiple

other allegations against Mr. Martini, continued from 2016 to 2018. Between

November 2017 and May 2018, Mr. Spagnuolo reviewed the evidence and

prepared the investigation report. Given the multiple investigations, this required

time. The investigation report was completed on May 28, 2018 and approved on

June 29, 2018.

[281] In addition to conducting the investigations, Mr. Spagnuolo was required to

assist Law Society counsel to prepare for various proceedings against Mr.

Martini and Ms. Marusic.

Between December 18, 2014 and January 30, 2015, Mr. Spagnuolo swore

three affidavits in support of the Law Society’s motion for an interlocutory

suspension against Mr. Martini.

On February 24, 2015, Mr. Spagnuolo swore an affidavit in support of the

Law Society’s application for a trusteeship order in Superior Court based on

review of SMM accounts.

On March 11, 2015, Mr. Spagnuolo swore an affidavit in support of the

motion for an interlocutory suspension against Ms. Marusic.

On January 12, 2016, Mr. Spagnuolo swore further affidavits in support of

the Law Society’s motion to vary the Tribunal’s June 2015 order.

On July 21, 2017, Mr. Spagnuolo swore an affidavit in response to Ms.

Marusic’s motion to lift the interlocutory suspension on the basis a conduct

application had not yet been commenced. The Tribunal refused her request

but ordered the suspension would be lifted if a conduct application had not

been commenced by November 30, 2017. Law Society of Upper Canada v.

Marusic, 2017 ONLSTH 197.

Mr. Spagnuolo also assisted Law Society counsel in responding to Ms.

Marusic’s 2018 motion to stay the 2017 application.

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Privileged documents issue

[282] Between April and June 2018, the Law Society realised that the digital search of

Ms. Marusic’s computers and servers may have included solicitor-client

privileged information that should not have been made available for review. The

Law Society retained external counsel to advise it on this issue. It was unclear

whether the ongoing Martini investigations were affected.

[283] In December 2018, BLG was retained to represent the Law Society in resolving

the privileged documents issue. BLG worked with Ms. Marusic’s counsel to

develop a protocol for managing the privileged documents. Ultimately, through

the execution of the protocol, BLG and the Law Society determined that the

breach did not impact the investigations regarding Mr. Martini.

[284] The Law Society concedes there was a period of inactivity on Mr. Martini’s

investigations from the fall of 2018 to the summer of 2019 while BLG was

addressing the privilege breach.

BLG retained

[285] On September 27, 2018, BLG counsel wrote to Mr. Martini to advise she would

be reviewing the evidence collected during the investigation and preparing a

memorandum for consideration by PAC.

[286] Between May and December 2019, BLG was engaged in preparing the second

conduct application against Ms. Marusic, its motion to join those applications,

and responding to Ms. Marusic’s motions argued in December 2019.

[287] In June 2019, BLG received approximately 38 boxes of materials relating to the

investigation into Mr. Martini. Between August and October 2019, BLG reviewed

the materials in preparation of the memorandum to be submitted to PAC. BLG

wrote to Mr. Martini’s new counsel on September 25, 2019, advising that it was

preparing the matter for PAC.

[288] PAC authorized the conduct application against Mr. Martini on November 14,

2019, and he was notified of the authorization on December 27, 2019.

[289] Mr. Martini’s counsel wrote to BLG on November 20, 2019, noting that, in light

of the concurrent civil litigation in relation to Client A, “it is entirely premature for

the LSO to proceed with any disciplinary action against our client.” The Tribunal

had dismissed Ms. Marusic’s attempt to seek a stay on the same basis more

than a year earlier.

[290] BLG responded on December 27 advising that the LSO would not agree to a

stay and attached the Tribunal’s 2018 decision dismissing Ms. Marusic’s stay

motion on the same ground. In his January 8, 2020 letter, Mr. Martini’s counsel

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agreed to accept service of the notice of application by e-mail but reiterated the

objection to proceeding while a civil action is outstanding. The notice of

application was served on counsel on March 30, 2020.

[291] On May 15, 2020, the investigation report and key evidence brief was disclosed

although full disclosure was delayed due to the pandemic and provincial

lockdown. Disclosure of over 8,000 documents was completed in August. Mr.

Martini’s counsel advised in mid-August that he intended to bring a motion to

join the Client A and Client B allegations with the Marusic hearing which had

already begun. The motion was served on September 7 and granted September

15, 2020. The eight Marusic hearing dates were vacated and, because the chair

could not continue to hear the matter, this panel was constituted.

[292] On October 5, 2020, a proceeding management conference was held at which

the joined Martini/Marusic hearing was scheduled to commence on March 22,

2021 for three weeks.

Was the delay inordinate and did it cause unfairness?

Context

[293] The preceding description establishes both the size and the complexity of the

investigations, which involved two licencees and over 40 complaints, which took

place during the period 2015 to 2018. There were over 8,000 pages of

disclosure. Multiple complaints revealed allegations of misuse of trust funds.

They could not be processed and investigated in isolation as the transactions all

relate to the same accounts, books and records maintained by SMM. We agree

the LSO properly took a holistic approach to its investigations and that this is

the context in which we must evaluate the alleged delay.

[294] Mr. Martini chose not to respond to the Law Society’s requests for information

and documents sent beginning mid-2014 until October 1, 2015. He provided no

further documents or information despite the Law Society’s repeated requests

and requests for a better medical note. We have found Mr. Martini was actively

working on client matters well into 2015 and had ready access through Ms.

Marusic to his files. We do not accept Mr. Martini’s ability to respond to the Law

Society throughout the investigation period was hampered by an inability to

access his files and documents. He therefore bears some responsibility for the

time in which it took to complete the investigation of the many complaints

against him.

[295] The Law Society contributed to the delay by focusing its investigative resources

on issuing the first Marusic application before the expiry of the time limit set in

response to her stay application and as a result of the privileged documents

issue which required reassigning the investigation to another investigator and

retaining outside counsel. Having said that, we agree with the Law Society that

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it made good sense to have the same investigator assigned to both the Martini

and Marusic investigations given the shared books and records and overlap in

complaints.

[296] We also agree with Mr. Martini that the approximately five months between

when PAC authorized the conduct application, and the service of the notice of

application on his counsel on March 30, 2020, is unexplained.

[297] Scheduling hearing dates for the conduct hearings in the joined Martini/Marusic

hearing was difficult. All counsel had extremely busy calendars such that finding

mutually available hearing days was challenging. The consequences of losing

eight hearing days in September and October contributed to the time required to

complete the hearing.

[298] We also cannot ignore the effect of the pandemic, repeated lockdowns and

transitioning to entirely electronic documents. This slowed the Law Society’s

disclosure process and contributed to the difficulty in resuming Client A’s

testimony. Neither party bears responsibility for these delays.

[299] Given his position on the degree of overlap with the Marusic applications and

what he knew of the Client A and Client B allegations against him, Mr. Martini’s

decision to wait from March to September 2020 to ask the Tribunal to join the

applications is not explained. Had he moved soon after receiving the notice of

application, it might have been possible to salvage some, if not all, of the eight

hearing days set in September and October 2020 and retain the original hearing

panel. We also find Mr. Martini’s objections to proceeding before Client A’s civil

suit was determined undermines the sincerity of his delay argument. His

objections may well have led the Law Society to believe Mr. Martini was not

concerned about moving forward.

[300] Mr. Martini argues that the Tribunal’s decision on his joinder motion affirms his

position the applications ought to have been joined in 2017. We have read

those reasons carefully and can find nothing to support that interpretation. It is

clear from the reasons the question of whether to join required a very difficult

and careful balancing of the advantages and disadvantages for both parties and

for the Tribunal’s process. Moreover, in reasons refusing to award costs on that

motion, Mr. Wright specifically warns against such second-guessing of

prosecutorial decisions of PAC: Law Society of Ontario v. Martini, 2020

ONLSTH 150 at para. 3. Mr. Martini speculates about an improper prosecutorial

motive but has offered no evidence to support that assertion. Exercise of

prosecutorial discretion is “a cornerstone of the administration of justice,” and

Tribunal interference with this discretion must not be undertaken lightly: Law

Society of Ontario v. Diamond, 2021 ONLSTH 14.

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[301] Mr. Martini argues the Law Society’s November 2016 decision to seek an order

in the trusteeship application for the distribution of the funds showed the trust

account analysis was complete. That argument cannot succeed. The Law

Society knew where the funds subject to trusteeship proceedings were located.

That did not address questions about funds no longer in the trust account at the

time it was seized. Those aspects of the investigations remained ongoing into

2018 when Mr. Spagnuolo began preparing his investigation report.

[302] There is no period of total Law Society inactivity comparable to the three years

in Law Society of Upper Canada v. Totera, 2013 ONLSHP 9, or in Law Society

of Upper Canada v. Savone, 2014 ONLSHP 22, which were found to be

inordinate delay. Further, the total time between commencing the investigation

to commencing the hearing is less than the seven years in issue in Law Society

of Upper Canada v. Abbott, 2014 ONLSTH 194.

[303] Both parties bear responsibility for some of the delay. Mr. Martini initially failed

to provide a formal response and information in respect of the Client A matter

for nearly a year. He never responded to requests for information on the Client

B matter and the Law Society was required to ask Ms. Marusic for her

assistance in accessing information on Client B and other matters. He never

provided the requested follow-up information or a more detailed medical report

before the investigation was completed in mid May 2018.

[304] The Law Society concedes a little over one year of inactivity occurred between

2018 and 2019 while the privileged documents issue was investigated and

resolved. We also agree the five months between PAC authorising the

application in 2019 and the Law Society serving it on Mr. Martini in 2020 is

unexplained.

[305] Mr. Martini’s decision to wait from April until September until he had received

disclosure on the entire application before bringing his joinder motion caused

the September hearing dates to be vacated and triggered the need to assign a

new panel.

Conclusion

[306] Given the purpose and nature of the proceedings and Mr. Martini’s contribution

to the delay, we are not satisfied the delays experienced here, considered in

context, rise to the level of inordinate. This was a complicated and complex

matter given the multiple allegations of misappropriation and the voluminous

documentary record. In this context, just over three years of multiple

investigations and just over 18 months between completion of the investigation

report and service of the application on Mr. Martini was not inordinate. Similarly,

given the challenges of Covid restrictions and the consequences of Mr. Martini’s

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decision to wait until all disclosure was complete before bringing his joinder

motion, the hearing itself proceeded in a reasonably expeditious manner.

[307] We also find the delay experienced did not affect the fairness of the hearing. Mr.

Martini was able to cross-examine Client A on his evidence. He did not lose that

opportunity, and, in fact, Mr. Martini was able to successfully advance his

defence concerning the assignment.

Was delay unacceptable and did it directly cause significant prejudice

[308] If we are wrong in our finding there was no inordinate delay, we have

considered whether the evidence supports a finding Mr. Martini experienced

significant prejudice caused directly by the delay.

[309] Mr. Martini describes the prejudice attributable to the Law Society’s delay as

follows:

the unfounded allegations have completely overturned my life, destroyed

my personal and professional reputation and forced me out of the practice

of law; and

unresolved allegations by the Law Society against me, all of which have

been highly publicized in the media since early 2015, have caused me to

suffer from depression, stress and severe anxiety to the extent that it has

adversely impacted the quality of my life.

[310] Mr. Martini repeatedly stated his breach of escrow was a horrible mistake and

that he knew it had ended his career. He told us more than once that he left this

office on December 12, 2014 knowing he would not return. This supports finding

Mr. Martini understood that the reputational or emotional harm he would

experience is essentially attributable to his own dishonest actions.

[311] After leaving his legal practice, Mr. Martini quickly moved on to his current

employer where he has risen to the position of executive vice-president. Any

media attention or stigma he experienced has not prevented him from earning a

livelihood or rising within his new workplace.

[312] Mr. Martini has never provided a current or complete medical report to support

and directly connect the alleged prejudice to the delay. We have a very brief

and very dated medical note. We have Mr. Martini’s testimony about his feelings

of stress, anxiety and depression. There is no reliable medical evidence to

confirm these symptoms or to provide a direct connect between them symptoms

and the delay in proceeding with the application. It is equally reasonable to

connect these symptoms to the earlier finding of misconduct, the breakdown of

his first marriage, the brief breakdown of relationship with Ms. Marusic, and the

stress of building a new career with his current employer.

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[313] Having concluded that there was no inordinate delay in this case nor any

prejudice other that attributable to Mr. Martini’s own dishonesty, we do not need

to consider whether a stay of proceedings is an appropriate remedy.

[314] The motion is dismissed.

NEXT STEPS

[315] The Tribunal Office will canvas dates for a hearing on penalty. If either

respondent wishes to sever the applications for purposes of the penalty hearing,

they may bring a motion in accordance with the Tribunal’s Rules.

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