Evidence was withheld and testimony reversed in an “extremely troubling” hearing – part of a much larger fraud lawsuit initiated by the Town of Norman Wells – a Yellowknife court heard on Wednesday.
Using the terms “sloppy,” “egregious,” and “downright misleading,” Supreme Court Justice Karan Shaner slammed the municipality for convincing a judge to impose a rare type of ruling.
That ruling resulted in severe financial hardship for the community’s ex-mayor, a company owned by him, and the town’s former senior administrative officer.
The court-ordered freeze on the assets of Nathan Watson and Catherine Mallon, which began in May, resulted in “tens of thousands” of dollars in legal fees, the court was told.
“We typically hear about miscarriages of justice in the criminal context. However, they do happen in the civil context [and] this is one of those cases,” a stern Shaner told a Yellowknife courtroom.
“This has cost them a lot of money and left them in a financial hole before the case proper has actually begun.”
Watson was mayor of Norman Wells from October 2015 to November 2017. He was arrested for cocaine possession in October 2017 and subsequently fined $2,000 earlier this year.
In the fall of 2017, the NWT's Department of Municipal and Community Affairs (MACA) stepped in and dissolved the town’s council – placing Norman Wells under municipal administration – after complaints about alleged conflicts of interest, employee workplace problems, and officials ignoring legislation.
After serving the town since November 2015, Mallon held on to her position through the tumult, wrapping up her contract in November 2018.
'There have to be consequences'
Wednesday's courtroom drama started as an application by the three defendants to set aside a court order granted ex parte (meaning a court order that represents or benefits only one side).
Shaner, examining the case, said the judge in May appeared to have been misled.
“It is incumbent upon [a party seeking an ex-parte order] to present a full, balanced, and honest account before the judge … anything else creates danger and that was borne out here,” said Shaner.
“Had the whole picture been put in front of [the judge], I doubt if the order would have been granted.”
The Town of Norman Wells had access to all of the information produced in court on Wednesday, but not all of it was presented to the judge in May, Shaner said, adding some of the evidence presented at the time was “downright misleading.”
Hearing this, a smiling Watson – sitting in the front row – turned toward journalists in the courtroom to make sure all the details were being captured. A visibly emotional Mallon sat quietly in the row behind Watson and kept her head slightly down.
The case presented to the judge in May, as the municipality sought an order to freeze the pair’s assets, largely hinged on information supplied by a senior town official, Shaner said in reading her decision on Wednesday.
The full lawsuit is bolstered by an affidavit sworn by current senior administrator Cathy Clarke, but the court heard she had subsequently changed some of her testimony under cross-examination.
The Town of Norman Wells agreed to drop the freeze on the assets, but argued any financial settlements should be held back until the entire lawsuit is tried and concluded – a process that could take years.
“Litigation is serious business. It is expensive, time-consuming, and stressful. It ties up public and private resources,” said Shaner. “There have to be consequences [for the municipality's actions] … the court has to send a message that this type of sloppy work will not be tolerated.”
Shaner ordered the Town of Norman Wells, now represented by Victoria lawyer Michael Penner, to fully compensate Watson and Mallon for their legal fees. She also ordered the Town to have disclosure requests related to the main lawsuit turned over to the pair by early January.
As previously reported by Cabin Radio, the Town of Norman Wells is alleging Mallon defrauded the community of more than $1.25 million. Watson is also named in the suit as he was Mallon’s supervisor.
In May, the town’s new mayor, Frank Pope, alleged interim senior administrator Darren Flynn had discovered abnormalities with the former administrator's T4 slips, after which mayor and council asked MACA to initiate a forensic audit.
When the current council, elected in October 2018, began reviewing the forensic audit, councillors are said to have uncovered a claim by Mallon for 3,880 hours of overtime – equivalent to more than half a million dollars.
A normal town employment contract allows the senior administrator to earn six weeks of vacation per year, plus an additional two weeks in lieu of any overtime worked, said Pope at the time.
“We paid out vacation leave that was ‘not taken’,” Pope continued. “We know it was taken, but it was still paid out.”