Court documents show Calgary mayoral candidate Bill Smith was sued in 2010 for what the company that employed him alleged was the failure to "exercise the care and skill to be expected of a reasonably competent solicitor."

The lawsuit, filed in Court of Queen's Bench, involved a private, $2.3-million mortgage through Sterling Bridge Mortgage Corp. for renovations to a property in the high-end Eagle Ridge neighbourhood in southwest Calgary.

Smith was hired as the lawyer on that deal, and others, and was allegedly paid to ensure all documents were in order before funds were released, something the company claimed did not happen.

The case, which sought $2.2 million in damages from Smith, was settled out of court, the details of which are protected by a confidentiality agreement.

Smith said he is prevented from discussing the case due to that confidentiality agreement, but did say the Alberta Lawyers Insurance Association represented him in arbitration.

"What I would say is that as soon as something like this arises in the course of a practice, then ALIA will assess whether it's covered under your errors and omissions insurance, and if it is, then they provide you with representation," he said.

The association did not respond to multiple requests for comment, even on the basic question of whether it publicly discusses claims.

Missing documentation

In the statement of claim filed on Nov. 5, 2010, Sterling Bridge alleged Smith started releasing funds to the owners of the property without securing a guarantee against the loan. In other words, there was nothing to prevent the mortgagors from walking away with the funds, something they eventually did, according to the statement of claim.

"Smith failed to exercise the care and skill to be expected of a reasonably competent solicitor in drafting and obtaining the documentation necessary to secure the Eagle Ridge Loan Facility and protect his client's interests in the transaction," it reads.

Sterling Bridge further alleged that Smith, upon realizing his error, then failed to advise the company of the issue until almost one year after the deal was first signed. It also alleged that Smith imposed "conditions" on the money without the company's knowledge after realizing the guarantee was not secured.

Sterling alleged funds continued to be given to the mortgagors for payment to trades workers despite the lack of that guarantee, which Sterling alleged was based on Smith's opinion that the loan security "was nonetheless valid, binding and enforceable."

Smith, and therefore Sterling, were unable to get the needed guarantee once it was known to be missing, according to the court documents, and the individuals who took out the mortgage refused to pay back the sum. They "instead took the position that there was no guarantee and thus no obligation to pay," according to the statement of claim.

Sterling and the mortgagors ended up in the courts, but Sterling lost the case and was ordered to pay legal costs to the mortgagors of $95,486.02 in addition to losing its loan money.

The company did not respond to a request for comment on the case.

Dispute 'resolved'

Smith's statement of defence denies the allegations laid out in the statement of claim, particularly that Sterling demanded the specified guarantee. Smith claimed that was never stipulated as a requirement of the deal.

Speaking to CBC News, Smith read a statement in response to a request for an interview from the lawyer who represented him for the lawsuit.

"I think your talking point is that this was a commercial dispute that was resolved to the satisfaction of all parties who agreed to confidentiality."

When it comes to Smith's opinion that the agreement was still valid despite the lack of a guarantee, Smith's defence was that the "opinion was neither a warranty nor a guarantee that the security was valid, binding and enforceable" and that he fulfilled his duties as a "reasonably competent solicitor."

CBC News asked Smith about that defence and why voters should trust him in light of that statement.

"You dictate your defence based on what the statement of claim says, so, you know, in this type of a case, you go with your lawyer's advice on how to do that," said Smith.

"You've got to remember, at this stage of the game, I'm not acting as the lawyer, I'm acting as the client."

Less than four months after Smith filed his statement of defence, the matter was settled.

"I would suggest to you that I've done literally hundreds of millions of dollars of transactions and that on this one there was a dispute as to the work that was done."

None of the allegations against Smith has been proven in court.

Smith is considered one of the front-runners among the 10 candidates vying to be mayor in Calgary's Oct. 16 election.