1997 S. AM. NO. 3027 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: FRED HAINES and TOWN OF AMHERST DECISION HEARD: at Amherst, Nova Scotia before The Honourable Justice John M. Davison, December 1‑3, 1998 DECISION: December 29, 1998 COUNSEL: Ms. Cindy Ann Bourgeois, Solicitor for the Plaintiff Mr. C. Peter McLellan, Q.C. Ms. Tara Erskine, Solicitors for the Defendant DAVISON, J.: Between 1981 and January 1996 the plaintiff was an employee of the defendant and over the substantial portion of that employment he acted as Town Clerk and Chief Administrative Officer. In this proceeding, he seeks indemnity for money he paid for legal expenses incurred as a result of charges he faced for alleged violation of s. 368 of the Criminal Code of Canada and s. 27 of the Municipal Affairs Act. He also seeks to recover fine he paid following his plea of guilty to the charge under the Municipal Affairs Act. The defendant counterclaims for an amount of $11,717.94, which were legal fees remitted to the plaintiff and paid by employees of the defendant under an alleged mistake of fact that the plaintiff was acting in the course of his duties when the event which gave rise to the legal fees occurred. For period of time the defendant was interested in developing commercial complex in downtown Amherst for the purpose of revitalizing the business area:‑ The Amherst Business Improvement Development Commission (B.I.D.C.) is comprised of volunteers and members of the council of the defendant. In the spring of 1992, B.I.D.C. approached the defendant with the proposal to continue with the construction of buildings which was an atrium in the Town Centre. The project was known as the Atrium Project. On April 2, 1992, David Dunnett, who was the executive director of B.I.D.C. and person with legal training made presentation to the defendant's Committee of the Whole. Involved in the Atrium Project would be B.I.D.C., the defendant and Adsheen Properties Limited which was the contractor and the owner of the lands on which it was to construct the Atrium Project. On April 6, 1992, an agreement was tabled which was signed on April 7, 1992. The plaintiff was present at the meeting of the Committee of the Whole on April 2, 1992 and the plaintiff in his testimony referred to notes of the events which took place during the meeting. The defendant was to advance to the project, in the form of grant, the sum of $164,000. Notes of the meeting were introduced into evidence and the complete notes are as follows: Notes of C/W held at 5:00 p.m., Town Hall, April 2, 1992. Present: Mayor Purdy, D/Mayor Reid, Councillors Bishop, Rodrigues, Paris and Fox, David Dunnet, Rhonda Kelly, Brian Creighton, Fred Haines, Ron Patterson, and Linda Smith. Absent: Councillor Gouchie Brian Creighton noted that he had met with David Dunnet re: the concerns that Council had on the Atrium Project, especially with regards to security for the Town. David Dunnet discussed the project and outlined the funding: ATRIUM COSTS $675,000. Town of Amherst 164,000. BIDC 50,000. Prov. of N.S. 126,000. CDA 75,000. Community Initiatives 160,000. $575,000. Adsheen 100,000. Adsheen Apartment Complex $600,000. Retail 225,000. 825,000. BIDC will hold the mortgage for $100,000 which will be paid to the Town. The lawsuit has been released pending signing of contract. Brian Creighton advised Council that he had no trouble with the presentation made by David. Signing officers will include of the following with one having to be Councillor. Mr. Husain Councillor Fox Councillor Bishop Rhonda Kelly Brian advised Council to have motion to sign the letter of contract and this will be done Monday night. Mr. Haines will redo the agenda for Monday night to add this item. It should be noted that Brian Creighton was present and he was the Town's solicitor. The lawsuit referred to arose out of an earlier attempt to construct the Atrium Project, and it was one of the conditions of the 1992 attempt at construction to have the lawsuit dismissed. The plaintiff testified about the details of the Atrium Project. The defendant provided funding partly as result of library to be included in the buildings. The grant of $164,000 had no repayment provisions. The contribution of B.I.D.C. of $50,000 was as result of loan from the defendant to B.I.D.C. to be repaid in five years. Mr. Haines said the $100,000 from Adsheen would come to Adsheen from B.I.D.C. which received it from the defendant. It was to be repaid in six installments. It was the evidence of Mr. Haines the $100,000 loan was to be used by Adsheen to pay $90,000 balance outstanding for taxes on the lands on which the Atrium Project was to be built. The money to be advanced by the defendant came from its Special Reserve Fund which was created pursuant to s. 24 of the Municipal Affairs Act and which reads as follows: Special reserve fund 24 (1) The council of city, town or rural municipality may create, continue or provide for special reserve fund consisting of (a) capital‑reserve section into which shall be paid (I) any surplus remaining from the sale of debentures where the surplus is not required for the purpose for which the debentures were issued, (ii) any surplus remaining in sinking fund where the debentures in respect of which the sinking fund was established are repaid, (iii) the residual capital grant paid under the Municipal Grants Act where it is not expended in the fiscal year in which the grant was paid, (iv) any insurance or sale proceeds received pursuant to Section 26, (v) any proceeds received by the municipality from the termination or winding up of municipal enterprise as defined in the Municipal Finance Corporation Act, (vi) all or any part of any surplus of the municipality which the council by resolution determines is to be transferred to the capital‑reserve section of the special reserve fund pending its expenditure for the capital purpose for which it is reserved, and (vii) such amounts as the council may appropriate to the capital‑reserve section of the special reserve fund pursuant to its charter, the Municipal Act or the Towns Act; (b) an equipment‑reserve section into which (I) may be paid such amounts as the council deems proper to provide for the purchase and replacement of motor vehicles, machinery and office or other equipment of any kind, and (ii) shall be paid the proceeds from the sale or disposition of anything referred to in subclause (I); and (c) an operating‑reserve section into which shall be paid such amounts as the council may appropriate to this section of the special reserve fund pursuant to its charter, the Towns Act or the Municipal Act. Withdrawal from capital‑reserve section (2) The sums of money in the capital‑reserve section of the special reserve fund may only be withdrawn from the fund with the consent in writing of the Minister and may only be used for (a) capital expenditures for which the municipality has authority to borrow pursuant to this Act; (b) repayment of the principal portion of outstanding capital debt of the municipality where the original borrowing was approved by the Minister. Withdrawal from equipment‑reserve section (3) The sums of money in the equipment‑reserve section of the special reserve fund may only be withdrawn upon resolution of the council and may only be used for the purchase of motor vehicles, machinery and office or other equipment of any kind. Withdrawal from operating‑reserve section (4) The sums of money in the operating‑reserve section of the special reserve fund may only be withdrawn upon resolution of the council and may be used for any purpose for which the council has authority to expend money. The Municipal Affairs Act, s. 27 is an offence section and it reads: 27 Any councillor who moves, seconds or votes for any resolution to divert any money in special reserve fund to any purpose other than that authorized by Section 24, and any treasurer or official who makes any transfer or signs any cheque or instrument to divert any money from any such fund to purpose not so authorized is liable on conviction to penalty not exceeding five hundred dollars and, in default of payment, to imprisonment for period not exceeding sixty days. In his evidence, Mr. Haines referred to B.I.D.C. and Adsheen as partners in the development of the Atrium Project and this description gains some support from the minutes of the meeting of Amherst Town Council held on April 6, 1992 which states those two parties agreed to "jointly develop" the complex. At this meeting Council authorized the signing of an agreement with B.I.D.C. One councillor voted against the agreement out of fear of the extensive amount of funding the defendant was to make. The councillor was also concerned precedent would be set in "lending $100,000 to private developer". That was the sum the plaintiff says was to be used to pay the outstanding real property taxes on Adsheen's lands. Normally borrowing resolutions which involved borrowing from the Special Reserve Fund are drafted by the Department of Municipal Affairs. But the plaintiff prepared the borrowing resolution in this case as the construction season had started. There is no question he had authority from the defendant to do this. The resolution was passed by the defendant's council at meeting on April 21, 1992. The resolution was to borrow the $100,000 from the Special Reserve Fund and these were the funds the plaintiff said were eventually to go to Adsheen. The borrowing resolution was signed by the mayor and the plaintiff on April 22, 1992, and it reads as follows: TOWN OF AMHERST BORROWING FROM SPECIAL RESERVE FUND $100,000 File SR 92‑01 (Atrium) WHEREAS Section 24(2) of the Municipal Affairs Act provides that no money shall be withdrawn from the Capital Reserve section of the Special Reserve Fund except with the consent in writing of the Minister of Municipal Affairs, and for the purposes identified in that Section; AND WHEREAS the Council of the Town of Amherst deems it necessary to borrow sum not exceeding One Hundred Thousand Dollars ($100,000) for the purpose of the acquisition, erection, alteration, addition to, improvement, furnishing and equipping of buildings and structures for any municipal purpose;, namely an atrium; BE IT THEREFORE RESOLVED THAT the Council of the Town of Amherst borrow from Special Reserve Fund sum not exceeding One Hundred Thousand Dollars ($100,000) for the purpose set out above; AND the amount so borrowed shall be repaid in six (6) equal instalments of $16,667 each, without interest, the first instalment to be paid on or before one year from the date on which this resolution shall have been approved by the Minister of Municipal Affairs and the remaining instalments to be paid in each year thereafter until the entire principal sum is repaid. THIS IS TO CERTIFY the foregoing is true copy of resolution duly passed at duly called meeting of the Council of the Town of Amherst held on the 21st day of April 1992. GIVEN under the hands of the Mayor and Clerk and under the seal of the Town this 22nd day of April, 1992. Clerk The plaintiff, on April 30, 1992 executed cheque for $100,000 on the defendant's Special Reserve Fund. David Dunnett, chairperson of B.I.D.C. who did not testify, asked the plaintiff to make the cheque payable to Adsheen Properties Limited and the plaintiff complied with this request without questioning Dunnett as to why the payee should not be the B.I.D.C. in accordance with the agreement. The plaintiff testified that after the cheque cleared the bank, he thought it should have been made payable to B.I.D.C. so he added B.I.D.C. to the cancelled cheque and then realized that should not have been done. He scratched B.I.D.C. from the cheque, initialled the cheque and filed it. The plaintiff was asked if he brought this to the attention of the defendant's council and said he did not because he did not think it was an important matter. In January 1994 the Atrium Project failed. Adsheen Properties Ltd. ran out of money and its principal officer left the province. During that same month, the plaintiff was charged with serious criminal offence. The information reads in part that he, between April 1, 1992 and May 15, 1992: ...did knowingly cause officials of the Department of Municipal Affairs for the Province of Nova Scotia to act upon forged document to wit: borrowing resolution from the Special Reserve Fund for one hundred thousand dollars ($100,000), as if it were genuine contrary to section 368(1)(6) of the Criminal Code. The charge upset the plaintiff. There was no indication the borrowing resolution, signed by the mayor and town clerk of the defendant, was forged. The defendant's council suspended the plaintiff with pay and he sought legal advice. He retained Warren Zimmer with respect to the criminal charge and Ronald Mitton with respect to his employment difficulties arising initially because he was suspended with pay when the charge was laid. The preliminary inquiry as to the charge under section 368(1)(b) was scheduled for August 24, 1994, and on that day, the Crown withdrew the charge but the plaintiff pleaded guilty to an offence which was contrary to section 27 of the Municipal Affairs Act. The information with respect to that charge stated that between the first day of April 1992 and May 30, 1992 he: ...being an official of the Town of Amherst, did sign cheque which diverted money from the Special Reserve Fund for purpose not authorized by section 24 of the Municipal Affairs Act, contrary to section 27 of the Municipal Affairs Act, R.S. c. 296. The plaintiff, on the advice of counsel, pleaded guilty to this charge. He states he was advised there would be three‑day preliminary inquiry and conviction of fraud, no matter how remote, would result in criminal record. The plaintiff paid fine of $500.00. The defendant paid the sum of $5,351.44 to Franklin Burke, which is the firm where Ronald Milton practises law, and paid an amount of $6,366.50 to Warren Zimmer. Both cheques are dated May 6, 1994 and the defendant seeks recovery on the ground the amounts were paid under mistake of fact and should be reimbursed to the defendant under the principle of unjust enrichment. The mistake of fact was, according to the defendant, the persons who wrote the cheques believed the plaintiff was acting in the course of his duties as employee of the defendant when the legal services were required. The two cheques were signed by Ronald Patterson, the Town Engineer and Linda Smith who, at this time, was Director of Finance for the defendant. Both testified at trial. Ronald Patterson spoke about the Atrium Project and how B.I.D.C. took "lead role in partnership with the developer" and brought the proposal to the defendant. Patterson said he asked the plaintiff to bring in his legal bills and they were sent to the defendant's insurer. Patterson said he told the Town Council on May 4, 1994 that he was attempting to have the insurer pay the legal bills and that he received no response from the Council at that time. The insurer refused to pay the legal accounts, but Patterson still did not receive any instructions from the Town Council. Accordingly, the legal accounts were paid by the cheques signed by Mr. Patterson and Ms. Smith. Mr. Patterson stated he was aware the defendant paid legal fees of employees in the past, although he had no recollection they paid legal fees for an employee who had been charged with criminal offence. He was not advised by any person not to pay the legal account. He said he believed the plaintiff was acting in the course of his duties. Linda Smith was an employee of the defendant from 1968 until December 1995. Over the last five years she was Director of Finance and assumed the role of Town Clerk to replace the plaintiff, at the request of the defendant. The plaintiff advised her that his legal accounts were increasing and she suggested he send them to the defendant. He did not ask her to pay the accounts. During the course of her evidence, Ms. Smith did comment on the concern over Adsheen Properties Ltd. unpaid tax bill. She said the taxes were discussed and no moneys toward the project were to be paid until its taxes were paid. In March 1994 there was special meeting of the Town Council held in camera to discuss resolution to dismiss the plaintiff from his employment with the defendant. The plaintiff and his counsel attended the meeting and the reasons for the dismissal were described in the Resolution as follows: 1. That he did not properly protect the interests of the Town of Amherst in the manner in which he authorized payment of $100,000.00 out of the Special Reserve Fund of the Town of Amherst with the result that cheque from this fund dated April 30, 1992 was payable solely to Adsheen Properties Limited. 2. That he did alter in material way the said cheque after it cleared the Town's bank account. 3. That he did not fulfil his duty of frankness and full disclosure in his subsequent discussions with the Town Council of the Town of Amherst concerning the said cheque and the alteration of the said cheque. The Resolution was signed by two persons, Milu Rodriques and Cyril Reid, who were Town Councillors and the only witnesses for the defendant in this proceeding. The motion for dismissal was not passed by the meeting. The plaintiff's suspension with pay expired when he went back to work in September 1994. His employment with the defendant ceased in January 1996. The first witness for the defence was Cyril Reid, who was Town Councillor from 1982 to 1994. It was his view that staff of the defendant did not have authority to pay legal bills incurred by employees unless staff received authority from the Town Council or committee of Council. It was also the view of Mr. Reid that when the Town Council discussed the letter of agreement at the April 6th meeting, there was no connection between the $100,000.00 the defendants would make available and the unpaid realty taxes of Adsheen Properties Limited. It was said to be the expectation of Mr. Reid that when the resolution, prepared by the plaintiff, came back from the Department of Municipal Affairs, monies would go to B.I.D.C. When he saw the cheque, Adsheen and B.I.D.C. were designated as payees. The name of B.I.D.C. was scratched out. He confronted the plaintiff and it was the evidence of Mr. Reid that the plaintiff said he was approached by Mr. Dunnett and "in moment of weakness" he scratched out the name of B.I.D.C. Mr. Reid testified that members of Town Council thought the cheque had originally been made out to two parties and the Town's solicitor was requested to approach the bank. Later the plaintiff said "he was doodling" and that is how both names appeared on the cheque. Mr. Reid was shown minutes of meeting of Town Council held October 3, 1994, where it was resolved not to pay the plaintiffs legal accounts and that the plaintiff be required to pay the town for the amounts submitted to legal counsel by the cheques signed by Mr. Patterson and Ms. Smith. Mr. Reid was asked why should the defendant not pay the plaintiff for the legal fees, and he replied that the defendant's counsel understood the plaintiff was guilty of "a lesser charge", so he was not acting for the defendant. Mr. Reid said the plaintiff was suspended because of "tampering with the cheque" and the various stories he related. Mr. Reid admitted on cross examination he did not look at the documents setting out charges against the plaintiff and that he believed the plaintiff was charged under the Criminal Code with respect to the cheque he executed. Mr. Reid said he knew the charge under the Criminal Code was withdrawn and that the decisions reached by the Town Council were based on the plaintiffs guilty plea to the charge under the Municipal Affairs Act. The final witness for the defence was Milu Rodriguez who was Town Councillor from 1991 to 1994. He also stated when he first saw the cheque executed by the plaintiff, he thought that both B.I.D.C. and Adsheen Properties Ltd. were payees. The plaintiff told Mr. Rodriguez he was acting under instructions of Mr. Dunnett, but that he should not have written the cheque in that manner. Mr. Rodriguez wanted to pursue the bank because the cheque only contained initials of one person. When he found out the plaintiff "doodled" and put the name on the cheque after it was cashed, Mr. Rodriguez thought the plaintiff should be dismissed. He said that was serious offence and reason for dismissal. Mr. Rodriguez spoke about the criminal charge to which the plaintiff pleaded guilty and said the defendant did not pay the legal bills because he was not acting on the part of the defendant. On cross examination Mr. Rodriguez admitted he was not aware of the charge the plaintiff faced. In fact, he thought the charge related to the changing of the cheque. He did agree the borrowing resolution was not forged document. FINDINGS OF FACT accept the evidence of the plaintiff. He was forthright and, in my view, truthful witness. During cross examination he admitted without question the truth of facts which could be adverse to his interests. For example, he freely admitted he was aware of limitations placed on borrowings from the Special Reserve Fund, that it was up to him to‑decide what were capital expenditures, that all the money should have gone only to B.I.D.C. and that they were not to go to Adsheen and that it was his responsibility to see the funds were so directed. His evidence took on this type of directness. There is no question, and I so find, that any improper or unauthorized or unlawful act of the plaintiff was not done for his own personal gain. This was common ground between the parties. The plaintiff said he listened to Mr. Dunnett and he drafted the cheque in favour of the developer. The plaintiff said he made mistake, and agree with that characterization. find that the plaintiff did not intend any criminal act. The plaintiff said he broke the law and by that he meant he violated s. 27 of the Municipal Affairs Act. He said he inade this mistake while performing his duties as an employee of the defendant. What he did was not authorized by law, but he maintains he did not do an act which was not authorized by the defendant. Making the cheque was authorized but his wrong was making it payable to Adsheen Properties Ltd. There was no evidence before me to explain why he was charged with an offence under Section 368(1)(b) of the Criminal Code which reads: (1) Every one who, knowing that document is forged, (a) ... (b) causes or attempts to cause any person to use, deal with, or act on it, as if the document were genuine, (c) is guilty of an indictable offence, and liable to imprisonment for term not exceeding ten years; The information maintains the forged docuinent was the borrowing resolution. There is no reference to the cheque. Everyone agrees the borrowing resolution was not forged document. The Crown withdrew this charge at the preliminary inquiry. The defendant takes the position that this was plea bargaining, and as part of that process he was charged with the offence under the Municipal Affairs Act. On the evidence there was absolutely no basis for the Criminal Code charge. It is difficult to understand why it was laid. further find the councillors who testified for the defendant had, at the relevant time, little knowledge of the charges against the plaintiff. Mr. Reid said the plaintiff was suspended because of cheque tampering, and he thought that the cheque was why he was charged under the Criminal Code. Similar evidence came from Mr. Rodriguez who felt the plaintiff should be disinissed for "tampering" with the cheque, and he believed that the charge related to the cheque. fmd these two councillors did little to determine the facts before they voted for dismissal of the plaintiff. POSITION OF THE PARTIES It is the plaintiffs position the writing of the cheque had nothing to do with the charges levied against him. It is argued the charge, to which he pleaded guilty, relates to the purpose for which the cheque was issued in that the purpose was not authorized under s.24 of the Municipal Affairs Act. With respect to the charge under the Municipal Affairs Act, the Special Reserve Fund is to be used only for the capital expenditures. The land on which Atrium Projects was to be constructed was not owned by the defendant. It is argued the Town Council knew they were dealing with project which was not capital asset of the defendant. It is said the plaintiff was following directions of his einployer who knew funds were not going for capital expenditure. It is the position of the defendant that the question of law that is in issue is that an employee cannot seek indeinnity for expenses from his employer which arose when the employee broke the law. Performing tasks outside the law says the defendant is outside the scope of duty. It is fundainental to the case, defendant counsel argues, that if the employee breaks the law "he is on his own". DISPOSITION The common law doctrine of respondeat superior recognizes an employee acting within the scope of his duties is an instrument of his einployer's will. Employees are to be reimbursed for losses, liabilities or expenses incurred in the course of employment. This right to indemnification has limitations as expressed in Halsbury's Laws of England, 4th edition Volume 16 at para. 35. Implied duty to indemnify employee. An employer is under an implied duty to indemnify or to reimburse the employee, as the case may be, against all liabilities and losses and in respect of all expenses incurred by the employee either in consequence of obedience to his orders, or incurred by him in the execution of his authority, or in the reasonable perforinance of the duties of his employment. Notwithstanding the fact that an employee was acting in the course of his employment, he may, however, lose his right of indemnity or reimbursement where the liabilities or expenses did not arise out of the nature of the transaction which he was einployed to carry out, but were solely attributable to his own default or breach of duty, or where, by reason of his conduct, he has forfeited his right to receive any remuneration for his services. There are also limitations which attach to indemnifications due to an agent from principal as expressed in Halsbury, supra. Volume 1(2) at para. 125. Liabilities to which right does not extend. An agent is not entitled to reimbursement or indeinnity in respect of expenses or liabilities incurred in consequence of his own default or breach of duty, or transactions which are outside the scope of his authority and have not been ratified by is principal. There is no right of indemnity in respect of the consequences of transactions involving breach of the criininal law where the party performing them knows that they are unlawful, or where, being ignorant of theft illegality, he knows the circumstances which render them unlawful, or where the transaction is contrary to public policy. Consequently an agent who makes contract which is prohibited by statute, or makes payments which it is criminally illegal for him to make, is not only debarred from recovering any reinuneration but is not entitled to any indeinnity against his expenses in such transaction. Where the agent's conduct amounts to tort, but not crime, he is at common law entitled to be indemnified against expenses and liabilities if the transaction was not manifestly tortious or tortious to his knowledge. It is the position of the defendant the plaintiff performed criminal act by issuing cheque to Adsheen Properties Limited for funds to be withdrawn from the Special Reserve Fund for purpose which was contrary to the purpose of the borrowing resolution to borrow for capital expenditure. To appreciate the position of an employer who has an employee who commits an act which is criminal in nature refer to The Duty and Liability of Employers (Fourth Edition) by Roberts, Wallace and Graham at p. 121 et seq: Where the servant has been guilty of criminal offence, it inay be that the act is of such character as to induce the jury to say that it could not have been done in furtherance of his master's business or interests, but the mere fact that the servant's act amounts to criminal offence is not sufficient to take the case out of the general rule. master is, therefore liable to an action for‑ dainages even in respect to criminal act committed by his servant when done by him in the course of his employment and in the master's interest. But he is not responsible if the servant inerely avails himself of the facilities afforded him in his position as servant to commit criminal act for his own purposes. It is general principal of law that in order to constitute criminal offence there must be, as an essential ingredient, that which is commonly described as mens rea, or, in other words, malice, inattention, or guilty knowledge, according to the nature of the particular offence concerned. It is also principle of law that servant's condition of mind is not to be imputed to his master. Consequently, master is not, as rule, liable criminally for the act of his servant, unless he has expressly authorized or assented to its being done, or the act itself is one which, from its very nature, must be presumed to be the act of the master. To this rule, however, there are exceptions. Thus proceedings which are criminal, at any rate in point of form, may be taken against master with respect to any of the following acts when done by his servant in the course of his employment, though without the knowledge of the master, or even against his express orders. First, acts which, in the interest of the public, are by statute prohibited absolutely. Where, however, it is contended that it was the intention of the legislature to punish without requiring proof of moral guilt, such an intention must be very clearly established. For, until the contrary is shown, the general principle with regard to mens rea is applicable to statutory as well as to common law offences. ... In other words, it is necessary to look at the object of each Act that is under consideration in order to see whether, and, if so, how far, knowledge is of the essence of the offence created. The purpose of the sections on special reserve funds in the Municipal Affairs Act was to protect the public by establishing and regulating fund which restricts the use for which tax dollars can be used. There are situations where penal restrictions are legislated to protect the public such as the Weights and Measures Act, R.S.C. 1927, c. 212 which is the Statute considered in R. v. Piggly Wiggly Canadian Ltd., 1933 CanLII 294 (MB CA), [1933] D.L.R. 491 (Man.C.A.) The employer was found liable for acts of his employee in the weighing of sugar and Chief Justice Prendergast states at p. 493: The term "quasi‑criminal" generally applied to such infractions is thus not appropriate, the fact being that the legislating body, faced with the duty of protecting certain interests, finds itself at times unable to do so, otherwise than by enacting prohibitions so broad that they may occasionally strike at dealings altogether innocent of wrongful intent or even neglect. It was found the statute indicated mens rea was not an eleinent of the offence. Under the charge pursuant to s. 27 of the Municipal Affairs Act the plaintiff signed cheque to divert money from the Special Reserve Fund for purpose not authorized by s. 24 of the Act. The plaintiff admits he committed an error. have found the error was not committed for any purpose which was of benefit to the plaintiff. Nor are there facts which permit me to draw the inference he wrote the cheque in manner to render more probable payment by the developer of the realty tax, which incidentally, would be to the benefit of the defendant. His evidence is he wrote the cheque with the knowledge the money was to go to B.I.D.C. and with the knowledge moneys would not be going to capital expenditure if used for payment of taxes or other uses by the developer not connected with capital expenditures. The legislation clearly invoked protection for the public and the tax dollars of the public by providing for conviction and fines of individuals in their personal capacity. There need not be proof of mens rea. Although there was no criminal intention, the plaintiff knew of the statutory limitations and, find, knew the purpose of those limitations. It is not relevant whether he wrote the cheque in that manner because of inattention or guilty knowledge, it was an act which has to be deemed to be outside his einployinent. In iny view, the breach of this statute by the plaintiff and the consequences of the breach does not permit indemnification from the defendant for the fine or expenses arising out of the charge under s. 27. The breach arose solely out of his own default. cannot accept the subinission of Ms. Bourgeois, counsel for the plaintiff that the defendant was not the owner of the property on which the project was to be constructed and that the councillors of the defendant knew money was not to be used for capital expenditure because the property was not owned by the defendant. Therefore, it is argued, the resolution to advance money for the project was flawed and the substance of the charge should not be the writing of the cheque but should be the inherent nature of the resolution. Even if cheque had not been written, it is said there was an infringeinent of s. 27 by all councillors who voted for the resolution. The defendants had the advice of chartered accountants and its solicitor. The solicitor, according to the notes of the April 2nd, 1992 meeting, "had no trouble" with the presentation by B.I.D.C. Most of the councillors, approved of the funds coming from the Special Reserve Fund. The arguinent of counsel for the plaintiff is that all were instrumental in violation of s. 27. Counsel for the defendant points out the Act does not define capital expenditures as being money spent on property owned by the defendant. Section 24(2)(a) restricts withdrawal from the fund to use for "capital expenditures for which the municipality has authority to borrow pursuant to this Act." There was no evidence as to the capital expenditures for which the defendant has authority to borrow. There was no evidence before the court to find there were violations of s. 27 of the Act other than the writing of the cheque by the plaintiff. The court has reached the conclusion the defendant should not reimburse the plaintiff for expenses arising from the plea of guilty to s. 27 of the Municipal Affairs Act. But a different conclusion is reached by the court with respect to the expenses relating to the charge under s. 368(1)(b) of the Criminal Code. Reference is made to the position of public officer in relation to his municipal einployer in The Law of Canadian Municipal Corporations (2nd edition) by Ian MacF. Rogers Q.C. At p. 214.8 of that text there appears the following: 37.5 Costs of Proceedings When the conduct of public officer has been sustained as legal, he has just claim for reimbursement of any charges he has been put to in upholding the legality of his actions including legal costs, but when his actions violate the law he has no right to be reimbursed in the absence of express statutory authority(a). Thus is [sic] seems that municipality has the power to indemnify its officers or councillors against liability incurred by reason of any done in bona fide discharge of official duties(b). Members of local authority defending themselves against groundless action have been held entitled to reimburse themselves for their costs(c). In this proceeding the plaintiff drafted borrowing resolution. In doing so he was performing his duties in the course of his employment. The document was not forged. It was entirely legal document. The actions of the plaintiff as they related to that document and as they related to the Department of Municipal Affairs with respect to that document were authorized and legal and performed in the course of his employment. review of the account of Warren Zimmer points out that realistically all of his services related to the criminal code charge except entering the plea of guilty to the charge under the Municipal Affairs Act. It is practical to consider all of Mr. Zimmer's charges relate to the s. 368(1)(b) charge for which the plaintiff is entitled to indemnification from his employer. On the evidence, the conduct of the plaintiff was legal and by withdrawing the charge the Crown acknowledges the lack of guilt connected with the federal charge. Why did the defendant not pay the fees not only for the apparent reasons, but also because of the resolution in the meeting of Town Council on June 13th, 1994, which stated: "Council agreed the town should not pay any more of Fred's legal bills unless he is found not guilty"? Possibly the reason stems from the fact, as is apparent from the evidence of Councillors Reid and Rodriguez, the Council was ill‑informed about the nature of the charges. It is the argument of Mr. McLellan, for the defendant, that the plaintiff did something wrong as evidenced by his guilty plea to the charge under the Municipal Affairs Act. It is said the actions of the plaintiff which gave rise to the plea, the issuing of the cheque, aroused suspicions. Pursuant to the resolution, the approval was for the money to go to B.I.D.C. The plaintiff changed that and by the "execution" of the resolution the defendants say that created the problem. He broke the law and even if he was "overcharged" the two charges come from the same facts. With respect, cannot accept this argument. There is no relationship between the breach of s. 27 with the essential ingredients of the charge under the Criminal Code where the Crown must prove the resolution was forged. It must have been false document as defined by s. 321 of the Criminal Code as document: (a) the whole or material part of which purports to be made by or on behalf of person (I) who did not make it or authorize it to be made, or (ii) who did not in fact exist, (b) that is made by or on behalf of the person who purports to make it but is false in some material particular, (c) that is made in the name of an existing person, by him or under his authority, with fraudulent intention that it should pass as being made by person, real or fictitious, other than the person who makes it or under whose authority it is made; The Crown would have to prove the plaintiff knew the document was false and that he intended it be used or acted upon as genuine to the prejudice of another. There is absolutely no evidence of existence of these ingredients not of any of the inclusions of making false document as set out in s. 366(2) of the Code. On the evidence, find the Crown had no choice but to withdraw the charge of violation of s. 368 (1)(b) of the Criminal Code regardless of the charge under s. 27 of the Municipal Affairs Act. The defendant should reimburse the plaintiff for fees paid by the plaintiff to Warren Zimmer. The plaintiff was executing his authority from his employer and performing the duties of his employment. There were no circumstances from the evidence at trial which would permit the defendant not to perform its implied duty to indemnify for expenses arising from this very serious criminal charge. The defendant is not responsible for the fees paid to Ronald Mitton. The reasons for the difficulties that arose with respect to the employment contract relate to the issuing of the cheque and the allegation the plaintiff was not forthright in his role with respect to the cheque. He pleaded guilty to the charge under the Municipal Affairs Act which would warrant discussions on his employment. He is not entitled to reimbursement for expenses arising from his own default. Ronald Mitton's firm submitted two accounts relating to legal work in connection with the plaintiffs employment difficulties with the defendant. The sum of the two accounts was $5,351.44 and the defendant paid this amount to the law firm by cheque, dated May 6th, 1994. It seems Warren Zimmer sent two accounts with respect to legal services involving the charge under s. 368(1)(6). The first account is dated March 8th, 1994 and is in the amount of $6,366.50. It was paid by the defendant by another cheque dated May 6th, 1994. The plaintiff paid further account from Mr. Zimmer dated September 6th, 1994. This was in the amount of $13,020.10. The plaintiff also claims expenses of $482.84 for expenses related to the Criminal Code charge. In summary, the plaintiff is entitled to recover from the defendant an amount of $13,502.94 and pre judgment interest. The defendant is entitled to recover from the plaintiff the sum of $5,351.44 and pre judgment interest. set the rate of pre‑judgment interest at 6%. The plaintiff is not entitled to be reimbursed for his fine. The defendant is not entitled to receive payment from the plaintiff monies paid by the defendant to Warren Zimmer. Costs are in the discretion of the court and should follow the event. It has been determined in this province that the costs of counterclaim should be limited to the extent the counterclaim increased the cost of the proceeding. The substantial portion of this proceeding involved the plaintiff's attempt to recover his legal fees from the defendant. It seems appropriate to assess the amount involved at the approximate difference between the amounts recovered $8,000.00. The defendant shall pay costs to the plaintiff in the amount of $1,550.00.
The plaintiff was for 15 years the Town Clerk of the defendant municipality. He sought indemnity for legal expenses he incurred as a result of charges he faced for violation of s. 368 of the Criminal Code and s. 27 of the Municipal Affairs Act. The criminal charge was dropped when he plead guilty to Municipal Affairs Act charge, of diverting money from the special reserve fund for an unauthorized purpose. The defendant counterclaimed for monies it had already paid to the plaintiff. Awarding the defendant $13,502, and the defendant $5,351 on the counterclaim, that the defendant should not reimburse the plaintiff for expenses arising out of the plea of guilty on the Municipal Affairs Act charge, as the plaintiff admitted to his mistake. They should reimburse the plaintiff for expenses arising out of the criminal charge, however. In committing his mistake, which was honest and not done for personal gain, he was performing his employment duties.