Is this unjust enrichment of MV lawyers a gift that will keep on giving?


Last August the Association of Municipalities Ontario (AMO) published a report on the cost of municipal insurance. It said, “Rising municipal insurance costs continue to be a major concern for AMO members. Many municipalities in Ontario are reporting increases of more than 20 percent. These costs are being driven by a hard insurance market, climate change, increased litigation, and other factors.” If what has happened in Madawaska Valley over the past few years is not unique, then one of the other “factors” may well be the improper funding and indemnification of legal claims based on wilful and malicious conduct of elected representatives.

This refers to MV’s insurer writing cheques under the Township’s Public Entities Casualty Policy in favour of the Township’s lawyers to the extent of approximately $400,000 for their unsuccessful attempts, including appealing to the Ontario Court of Appeal, to have our lawsuit thrown out of Court. As a point of reference, that amount is approximately eight hundred times the amount of the charitable contribution that we asked them to pay along with an apology and a retraction before one cent had ever been paid for legal fees. It is also four times the limit of damages that could be awarded by the Court.

Previous to this the insurer also funded the defence of the editor’s Human Rights Tribunal claim against former Councillor Ernie Peplinski who also played a leading role in the latest attack in August 2019. Prior to the Tribunal being called upon to rule on the matter, the Township, as it was required to do, commissioned an independent investigation by a highly regarded specialist human rights investigator. To hardly anybody’s surprise she determined that Peplinski had contravened the Human Rights Act through public comments he made about two employees of the Township, the editor and Paul Nopper, former Recreation and Community Development Coordinator (who was subsequently fired “without cause” — but that is another story). This, it is believed, was politically and ethnically motivated as being related to his on-going attack on the activities being carried out at the Railway Station at the time. It was also alleged that once he had been advised of the appointment of an investigator, he then resorted to an act of reprisal.

The independent investigator’s decision, which cost the Township ratepayers in excess of $8,000, under the HRTO’s guidelines should have been where the matter ended. Yet, Council decided to intervene and voted to reject that decision at a closed meeting where apparently Peplinski did not recuse himself, thus leaving no alternative, particularly because of the risk of further reprisal, for a claim to be made to the Tribunal. It must be presumed that the Township’s insurer was made aware of this background, including an invitation to participate in mediation which had been rejected by Peplinski, yet it nonetheless proceeded to allow the matter to be vigorously defended using two law firms over the ensuing eighteen months at a cost of approximately $100,000 in combined legal fees.

It gets worse. On the day set for the final hearing in Ottawa, Peplinski finally agreed to participate in mediation. After several hours of settlement attempts, much of which was spent on agreeing the wording of his public apology (which he subsequently refused to make public himself), agreement was reached with the assistance of a mediator on the amount of compensation to be paid as well as a requirement that Township employees undergo human rights training. The mediator then prepared the document for the parties to sign confirming the settlement reached only then to be met with the request by Peplinski that the compensation to be paid must be described in it as “legal costs” so that it would be “paid by the insurer.” This saved him from having to use his own resources to pay for his misconduct. A representative of the insurer was present throughout the mediation and presumably must have agreed to this misdescription, bearing in mind that the Ontario Human Rights Tribunal did not, in any event, have the power itself to make an order for legal costs in such proceedings.

Another disturbing feature of both proceedings was the rejection of several invitations “in the interests of saving potential legal costs” to participate in mediation including, in the recent case, when the lawsuit was proceeding in Ottawa where mediation is mandatory. Surveys on the success rate of mediation have indicated that it lies somewhere in the area of 80 percent, thus in the majority of cases saving the expenditures of countless thousands of dollars in legal fees. Is it likely that if any of the Defendants had been required to self-fund their defences, would they not have jumped at the chance to bring an end to their financial commitments? Perhaps more importantly, on the basis that the insurer must also have been advised of these invitations and was paying the bills, why did it not jump at the chance? That same argument applies to the unwillingness of the Defendants to pay the charitable donation requested at the beginning.

As The Current has reported, it, as well as its owners in their capacity as ratepayers who pay the premiums, has attempted to seek explanations from the insurer, including from its own ombudsman, for what on the face of it appears to be improper use of the Township’s municipal policy. We have not only been ignored but also threatened with legal proceedings if we continued with our investigative reporting. This has left us with no alternative but to refer the matter to the Financial Services Regulatory Authority which regulates the conduct of insurers in the Province and it is currently under investigation.

Finally, it will not surprise you to hear that we were pleased that Peplinski and his enabler, former Mayor Love (who did not seek re-election), no longer sit at the Council table. We hope this signals the end of such egregious self-serving conduct and also that the new Council will pay much more than lip service to its statutory obligations of accountability, transparency and integrity.

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