The mayor, senior administrative officer (SAO) and former interim SAO of Norman Wells, N.W.T., have formally responded to a defamation suit against them and the town from its previous SAO, Catherine Mallon.
Mallon worked as the town's SAO for about three years ending in October 2018. In 2019, the town filed a lawsuit against her and the town's former mayor Nathan Watson, alleging they conspired to defraud the town of $1.26 million.
In May 2020 Mallon responded with a $2.57 million defamation lawsuit. Her suite alleged that the town used a T4 that included earnings over two calendar years to make it seem like she was overpaid. It also accuses current SAO Cathy Clarke, who is named in the suit alongside Mayor Frank Pope and interim SAO Darren Flynn, of failing to carefully review the town's records before making claims against Mallon.
A recent notice of motion filed by the defendants says they acted with no ill will, with the input of their lawyers, and with a sincere belief that the report they had received from the Northwest Territories' Department of Municipal and Community Affairs (MACA) department was a forensic audit showing a pattern of misbehaviour.
The notice filed in response to Mallon's lawsuit was one of seven documents in court filed on Nov. 18, including affidavits from Pope, Flynn, Clarke, and other people connected to the suit.
A second notice of motion from the town accuses Mallon's team of sloppy legal filing, including vague accusations that amount to a "fishing expedition," and claims of damage that the defendants can't directly defend themselves against.
"A defendant cannot plead in response where, as here, the plaintiff pleads only the alleged effect of the words spoken … and not of the words themselves," the notice states.
When contacted by CBC, Mallon said that based on advice from her lawyer, she would not comment on the new documents filed with the courts.
"I am confident that I will be vindicated and I look forward to a determination of all of the allegations by a judge based on evidence, rather than speculation," Mallon said in an email.
Lawyer told town mayor financial report was 'flawed'
Many of the defendants' affidavits in their two notices of motion speak to the financial report that became the backbone of the town's lawsuit against Mallon, accusing her and Watson of fraud.
An affidavit from interim SAO Darren Flynn said that after receiving a tax form he found unusual, he requested a forensic audit from the territorial department, and sent a copy of his request to his personal email for his own records.
An affidavit from Pope, the mayor, said that after his election, he was told the territory was working on this forensic audit, and when he received an email with a PDF from MACA, he "understood this to be the results of a forensic audit requested."
That PDF was a draft of a financial report on Mallon's spending, from EPR Yellowknife Accounting. According to the profiles of staff at the firm, two employees there specialize in forensic audits. The firm did not immediately reply to a request for comment.
In an emailed statement from a MACA spokesperson, the department confirmed EPR was the successful proponent when the department put out a request for proposals to look at alleged "unusual activities in payroll and corporate credit cards."
But the spokesperson said the department would make no further comment while the case was before the courts.
Pope's affidavit shows that the town got legal advice about how to discuss and share information about its $1.26 million lawsuit against Mallon and Watson, accusing them of fraud.
But the town's lawyer's advice, included alongside the affidavit, also cautions the town to avoid making assumptions based on the document received from the department.
"I would be particularly cautious about relying on the draft audit report," wrote lawyer Chris Buchanan in an email filed by the defendants along with Pope's affidavit. "I think some of the analysis is flawed."
The documents also respond to specific allegations in Mallon's lawsuit against the town for damaging her reputation.
Not defamatory to ask if Mallon and Watson were 'lovers,' defence says
In Mallon's statement of claim, she says that town manager Cathy Clarke asked someone if Mallon and former mayor Nathan Watson were "lovers."
In a notice of motion and an affidavit, Clarke denies asking this. A second notice of motion says that this kind of question is not defamatory and "is simply a question."
Mallon's statement of claim also says that interim SAO Darren Flynn spread rumours about her reputation that made it hard for her to get new work.
Flynn does acknowledge in an affidavit that then-Iqaluit mayor Madeline Redfern called him to ask about Mallon's performance, and he said that her finances were under investigation. He also told an executive search firm about the inquiries being made into her finances, when that firm was being hired to find a new town manager, he said, adding that he considered the information to be important for the city and the headhunter to know.