Business partner of twice-disbarred B.C. lawyer liable for negligent misrepresentations to investors

B.C. Supreme Court in Vancouver is seen in this undated image. (Shutterstock)

A B.C. woman who was the business partner of a disgraced former lawyer has been ordered to pay more than $200,000 to a group of investors who provided funds for the law firm's ill-fated expansion plans.

Sylvia Murr is a part-owner of several companies founded and owned by Peter Darren Steven Hart, a former lawyer who has been disbarred twice for misconduct including grossly overcharging a client and misappropriating funds that were supposed to be held in trust for clients. 

The disbarments occurred in 2021 and 2022, well after Hart and Murr's efforts to secure additional investment in their companies.

It was those efforts that led to B.C. Supreme Court Justice J. Miriam Gropper's ruling against Murr on Friday. 

The plaintiffs – Alistair Vigier and his company, The Wealthy Franchise Consultants Inc., as well as his fiancée Jova Xu and his father Etienne Vigier – initially brought their lawsuit against Hart, Murr and their companies, but the action was stayed against Hart and some of the companies after he was petitioned into bankruptcy by a former client.

The allegations against Hart were later settled, leaving only the allegations against Murr and one company – as well as her counterclaim against the plaintiffs and a former bookkeeper – to be resolved in the trial.

The plaintiffs alleged fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, breach of fiduciary duty, breach of contract and conspiracy, but Gropper found only the negligent misrepresentation claim had been proven.

For a variety of reasons, the judge dismissed the other claims, as well as Murr's counterclaims.

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The misrepresentations

Alistair and Hart met at a networking event in Victoria in 2015, according to the decision. They began working together on Hart's plan to open additional offices across Canada and in California, initially under a franchise model, with The Wealthy Franchise helping to find investors.

The decision indicates this plan later morphed into an agreement between Hart and Alistair directly, without the involvement of The Wealthy Franchise.

During a trip to California in September 2015, Hart and Murr prepared financial information for Alistair to use in recruiting investors, according to Gropper's decision.

"That financial information depicted profits when there were none and excluded firm and personal debts and liabilities," the decision reads.

"Thus, they were false financial statements, in that they did not represent the true financial picture of Hart Legal or Hart Management. There were no profits: the firm’s liabilities exceeded its assets. Alistair believed that the financial information that he received was an accurate reflection of the financial circumstances of Hart Legal and Hart Management. He provided this false financial information to potential investors in the expansion plan, as Mr. Hart and Ms. Murr had directed him."

Gropper found that Alistair acted as an "agent" of Hart, Murr and the companies in his efforts to find investors.

In the lawsuit, Alistair and the other plaintiffs identified four specific misrepresentations they were given and relied upon when making their investments in Hart's companies. According to the decision, those misrepresentations included:

• That Hart was a successful businessman and lawyer;
• That his companies – Hart Legal and Hart Management – were profitable and could duplicate that success if an investor paid to open a new office in a new location;
• That investors' funds would only be used for their specific expansion office and no other purpose;
• And that the plaintiffs would receive a percentage of the net profits from the particular office they invested in.

While Gropper agreed that these representations were false, she concluded that Murr did not make them to Alistair or other investors knowingly.

"While Mr. Hart and Ms. Murr appeared to be a united team to the plaintiffs, and Ms. Murr was an officer, director and shareholder of the related companies, I accept her evidence that she took direction from Mr. Hart," the decision reads. "She may have had 'key input' into the decisions that were made by them, but she inevitably followed his directions."

The judge found Murr – who invested $450,000 of her own money into the companies, and lost it – to be "financially naïve" like the plaintiffs.

"There is no evidence that Ms. Murr consulted any professional investment advisor or anyone before she made these substantial investments. She relied entirely on Mr. Hart’s advice and direction," the decision reads.

"Ms. Murr continues to believe in the expansion plan, even to the present. She insists that it was a five-year plan and that it would have been successful after five years."

Having concluded that Murr did not knowingly make false representations to the plaintiffs, Gropper found that fraudulent misrepresentation had not been proven. The judge noted that if Hart had not settled the case against him, it's possible that she would have concluded he knowingly misrepresented his companies' finances.

Hart's 'incredible' testimony

Hart testified at the trial, providing evidence that Gropper's decision describes as "incredible."

He maintained that he was a very successful lawyer, and joked that his only problem was that he made "too much money." According to the decision, he made this joke in response to questions about CRA judgments against him that resulted in a garnishing order.

"Mr. Hart would say whatever he considered would support his position at any particular time, contradictory or not," the decision reads.

"Mr. Hart refused to agree, in spite of the multiple legal decisions made against him and his law firm, that using client trust funds and the events that involved his former client, Ms. Quaggin, were improper. Even after losing the taxation hearings and being disbarred twice by the LSBC after multiple hearings, he seemed to carry the view that this was all unfair to him."

The decision indicates Murr held a similar view, blaming the plaintiffs, rather than Hart, for the enterprise's financial troubles.

Negligence

Though Murr followed Hart's lead and believed she had provided accurate representations of the companies' finances to Alistair, Gropper concluded she had access to all the information that would have been necessary to determine the truth of the situation.

"I find that Ms. Murr knew or ought to have known the representations were untrue, inaccurate or misleading," the decision reads. "She had access to all of the information, including the financial information. I have found that instead, she followed the directions that Mr. Hart gave her. That was negligent."

Alistair became aware of the companies' cash flow issues in November 2016, according to the decision. At that time, he asked Jova to provide a short-term loan to Hart Management to resolve the issue, and she did so, providing $200,000 that had been given to her by her parents to help her purchase property.

When Jova asked for the loan to be repaid in February 2017, Hart made promises to repay it, but did not do so, according to the decision.

Gropper concluded that by May 2017, Alistair was aware of the extent of the financial issues facing Hart's companies.

"All of the plaintiffs invested in the expansion plan based upon negligent misrepresentations," the decision reads. "They are entitled to compensation up to May 2017. Beyond that, Alistair knew of the debt situation and had access to all of the financial information but continued to invest and encouraged Jova and Etienne to do the same."

The judge awarded compensation of C$112,500 plus US$50,000 for Alastair, US$50,000 for Jova and C$37,688.19 for Etienne.

Other claims and counterclaims

Gropper dismissed the remaining claims from the plaintiffs, as well as counterclaims from Murr alleging defamation, "unlawful interference with economic relations" and abuse of process.

Regarding the plaintiffs' allegations of unjust enrichment against Murr, the judge concluded that Murr had been enriched, but that her enrichment had not resulted in the plaintiffs' deprivation "except by the most circuitous route."

Gropper dismissed the plaintiffs' claims of breach of fiduciary duty because she found the plaintiffs were not "vulnerable," and therefore neither Hart nor Murr owed them such a duty. It was their responsibility to investigate their investments and ensure they were sound.

On the allegation of breach of contract, the judge noted that the contracts that existed were between the plaintiffs as individuals and one of Hart's companies. Because they settled their case against Hart and his companies – and because Murr did not engage in fraudulent misrepresentation on behalf of the company – Gropper declined to "pierce the corporate veil" and hold Murr liable for the company's alleged breach of contract.

Similarly, because the claim of conspiracy requires multiple participants, Gropper dismissed the plaintiffs' allegation that Murr and Hart conspired against them, reasoning that the plaintiffs' settlement precluded such a finding.

"The plaintiffs settled their claims against Mr. Hart and Hart Management (and others)," the decision reads.

"As a result, I cannot find that Mr. Hart was involved in a conspiracy. A conspiracy requires an agreement between two parties. If Mr. Hart cannot be found to have participated in a conspiracy, neither can Ms. Murr."

Regarding Murr's counterclaims, Gropper found that all of the alleged defamatory statements were either true or fair comment, the "unlawful interference" allegation did not include any actual unlawful conduct, and that the plaintiffs had not abused the court's process.

Accordingly, the judge dismissed all of the counterclaims.