Côté v. Rancourt, 2004 SCC 58, [2004] 3 SCR 248

Côté v. Rancourt, [2004] 3 S.C.R. 248, 2004 SCC 58

Rita Côté and Les Entreprises générales Rimo Inc.                                    Appellants

v.

Jean‑Pierre Rancourt and Fonds d’assurance‑responsabilité

professionnelle du Barreau du Québec                                                      Respondents

Indexed as:  Côté v. Rancourt

Neutral Citation:  2004 SCC 58.

File No.:  29939.

Hearing and judgment:  June 11, 2004.

Reasons delivered:  September 30, 2004.

Present:  McLachlin C.J. and Binnie, LeBel, Deschamps and Fish JJ.

on appeal from the court of appeal for quebec

Barristers and solicitors — Duty to advise — Duty of loyalty — Conflict of interest — Client alleging that lawyer who represented her in criminal trial failed to advise her regarding civil aspect of case and allowed his partner to represent co-accused whose interests were adverse to hers — Whether lawyer violated duty to advise and duty of loyalty.

R represented the appellant C on three criminal charges in connection with a fire at a place of business owned by the appellant Les Entreprises générales Rimo Inc., of which C was the directing mind.  F, who was also charged and was represented by R’s nominal partner, gave a statement in which he said that he had set fire to the building at C’s request.  C was found guilty after a jury trial.  She appealed and R ceased representing her.  The Court of Appeal ordered a new trial, at the conclusion of which C was acquitted.  In the meantime, the action against the insurer had become prescribed.  The appellants brought an action against R claiming that he had violated his duty to advise and his duty of loyalty.  They alleged that R had failed to advise them regarding the effect of the passage of time on the action against the insurer.  They also alleged that he had violated his obligation to provide C with representation free of conflict of interest, by allowing his partner to represent F, a co‑accused whose interests were adverse to his client’s.  The appellants sought to recover the professional fees paid to R.  The Superior Court dismissed the action and the Court of Appeal affirmed that decision.

Held:  The appeal should be dismissed.

The obligational content of the lawyer-client relationship is not necessarily circumscribed by the object of the mandate.  There are obligations that arise out of the general duty to advise.  The boundaries of that duty will depend on the circumstances and expectations will be higher when a lawyer holds himself or herself out as an expert in a given field.  In this case, C cannot argue breach of the general duty to advise.  The object of the mandate given to R was the three criminal charges.  R met his duty to advise when he acknowledged the limitations of his competence and recommended that C consult a specialist in civil law.  This is consistent with the spirit of s. 3.02.03 of the Code of ethics of advocates.

Not every breach of the duty of loyalty will automatically entitle the aggrieved party to annulment of the contract, to a refund of the professional fees or to damages.  We must analyse the nature of the conflict in order to characterize the violation and to decide what remedy, if any, should be applied. In this case, while the allegations against C arose out of F’s testimony and F’s interests were plainly adverse, the partner was not involved in preparing F for C’s trial.  In addition, R had told C that he was willing to ask his partner to withdraw from the case.  Although the situation should have been avoided, there is nothing in the record to indicate that R was not able to represent C effectively.  No interest higher than the interests of the parties was at stake.  This was not a conflict of interest such as would render the contract for services between them absolutely null.  Moreover, whether this case was one of relative nullity or of contractual fault, C cannot be granted a refund of the fees and could not have claimed damages.  Having benefited from the professional services provided by R, C cannot restore the prestations she received and cannot claim a refund.  C also sustained no injury on which to base an action in contractual liability.  C has shown no palpable error on the questions of fact considered by the trial judge.

Cases Cited

Referred to:  R. v. Neil, [2002] 3 S.C.R. 631, 2002 SCC 70; Labrie v. Tremblay, [2000] R.R.A. 5; Fortin v. Chrétien, [2001] 2 S.C.R. 500, 2001 SCC 45; MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235.

Statutes and Regulations Cited

Act respecting the Barreau du Québec, R.S.Q., c. B‑1.

Civil Code of Québec, S.Q. 1991, c. 64, arts. 1417, 1418, 1419, 1420, 1423.

Code of ethics of advocates, R.R.Q. 1981, c. B‑1, r. 1, arts. 3.01.01, 3.02.03, 3.02.04, 3.06.08.

Authors Cited

Proulx, Michel, and David Layton.  Ethics and Canadian Criminal Law.  Toronto:  Irwin Law, 2001.

APPEAL from a judgment of the Quebec Court of Appeal, [2003] R.R.A. 760, [2003] Q.J. No. 8450 (QL), affirming a decision of the Superior Court.  Appeal dismissed.

Martin Gauthier, for the appellants.

Bernard Faribault and Patricia Timmons, for the respondents.

English version of the judgment of the Court delivered by

1                                   Deschamps J. — The issue in this appeal is the extent of a lawyer’s duty to advise and duty of loyalty.  At the conclusion of the hearing, the Court dismissed the appeal.  These are the reasons for that decision.

2                                   In February 1990, three criminal charges were laid against the appellant  Rita Côté.  She consulted the respondent Jean-Pierre Rancourt, a lawyer, who agreed to represent her.  The charges were in connection with a fire at a place of business owned by the appellant Les Entreprises générales Rimo Inc. (“Rimo”), of which the appellant Côté was the directing mind.  One of Rimo’s employees, Claude Fortin, gave a statement in which he said that he had set fire to the building at Côté’s request.  Fortin was also charged and was represented by Jean Leblanc, Rancourt’s nominal partner.  Côté was found guilty after a jury trial.  She appealed that verdict.  Rancourt ceased representing Côté.  The Quebec Court of Appeal ordered a new trial, at the conclusion of which Côté was acquitted.

3                                   In the meantime, the action against the insurer had become prescribed.  Côté and Rimo brought an action against Rancourt.  They claimed that Rancourt had violated his duty to advise and his duty of loyalty.  They alleged that Rancourt had failed to advise them regarding the effect of the passage of time on the action against the insurer.  They also alleged that he had violated his obligation to provide Côté with representation free of conflict of interest, because he had allowed his partner to represent a co-accused whose interests were adverse to Côté’s.  Côté and Rimo sought to recover the professional fees paid to Rancourt.

4                                   The Superior Court dismissed the action: Sup. Ct. Saint-François, n^o 450‑05‑001065‑966, November 25, 1999.  On the issue of the duty to advise, the trial judge accepted the testimony of Rancourt, who said he had declined to give an opinion on the action against the insurer when the question was raised.  The judge noted that Rancourt [translation] “professed his ignorance in that area, adding that he then recommended that Ms. [Côté] consult a lawyer specializing in civil law” (p. 21).  The judge took into consideration the fact that [translation] “at that stage, the deadline for filing the claim was still far off, and Rimo’s accountant and the insurance company’s [representative] were still exchanging financial information directly, without in any way informing Rancourt” (p. 22).  On the subject of the conflict of interest, the trial judge related the discussions between Rancourt and Côté during which Côté had raised the issue.  The judge noted, however, that Leblanc, Rancourt’s partner, had not been involved in preparing Fortin’s testimony for Côté’s trial.  In the judge’s opinion, Rancourt had not placed himself in a conflict of interest.  Moreover, since Fortin had pleaded guilty and been sentenced after Côté was found guilty, in the judge’s opinion, [translation] “[n]o adverse or conflicting interests were ever present at the same time” (p. 26).  The judge criticized Côté for the delay in raising the conflict issue, implying that she had acted out of opportunism at the point when she appealed.  In his view, she had acquiesced in the situation while Rancourt was representing her.  The judge concluded that Côté had not suffered any prejudice.

5                                   The Court of Appeal dismissed the appeal: [2003] R.R.A. 760.  The court said that it was bound by the trial judge’s findings of fact regarding the credibility of the witnesses.  The Court of Appeal concluded that Rancourt had not breached his duty to advise, because he had recommended that Côté consult a lawyer specializing in civil law regarding questions that he did not feel qualified to answer.  On the issue of conflict of interest, the Court of Appeal was of the view that the facts did not require that a general rule concerning conflicts of interest between lawyers in a nominal partnership be laid down.  In this case, there was not merely an appearance of a conflict, but an actual conflict.  However, relying on R. v. Neil, [2002] 3 S.C.R. 631, 2002 SCC 70, the Court of Appeal concluded that a breach of the duty of loyalty did not necessarily mean that the contract for services should be set aside and that the fees received should have to be refunded.  The Court of Appeal reviewed the evidence and concluded that Côté had no valid ground for claiming a refund of the money paid for the services.

I.  Duty to Advise

6                                   The Court of Appeal was correct in saying that the obligational content of the lawyer-client relationship is not necessarily circumscribed by the object of the mandate.  There are obligations that arise out of the general duty to advise.  While lawyers plainly must not undertake a mandate for which they are not sufficiently prepared (Code of ethics of advocates, R.R.Q. 1981, c.  B-1, r. 1 (“Code of ethics”), s. 3.01.01), they must still set out for their clients the nature and implications of the problem that, in their opinion, arises from the set of facts brought to their attention (s. 3.02.04 of the Code of ethics; see also Labrie v. Tremblay, [2000] R.R.A. 5 (C.A.)).  The boundaries of the duty to advise will depend on the circumstances, and expectations will be higher when a lawyer holds himself or herself out as an expert in a given field.  The duty to advise may be met, however, when the lawyer acknowledges the limitations of his or her competence and recommends that a client consult a specialist regarding a matter in respect of which the lawyer feels less qualified.  This approach is consistent with the spirit of s. 3.02.03 of the Code of ethics, which requires that lawyers avoid any misrepresentation with respect to their level of competence.

7                                   In this case, Côté retained Rancourt’s services to defend her  in connection with three criminal charges.  This was the object of the mandate.  According to the findings of fact made by the judge of the Superior Court, when Rancourt was questioned by Côté about the civil aspect of the problem, he declined to give any advice because he did not feel qualified in that area.  He advised Côté to consult a lawyer specializing in civil law.  Côté therefore cannot argue breach of the general duty to advise.

II.  Duty of Loyalty

8                                   Côté argued that the contract for services was void owing to absolute nullity because Rancourt had violated the Act respecting the Barreau du Québec, R.S.Q., c. B‑1, by allowing his partner to represent a co-accused whose interests were adverse to her own.  She also contended that Rancourt had misled her regarding the conflict of interest and that she cannot have consented to it.

9                                   The law governing conflicts of interest calls for a more nuanced analysis.  The interests in conflict may involve either general public order or protective public order.  The nature of the interest at stake will have an impact on the relief that may be ordered by a court.  Not every breach of the duty of loyalty will automatically entitle the aggrieved party to annulment of the contract, to a refund of the professional fees or to damages.

10                               Clearly, the statutory provisions governing the organization of professional corporations and the exclusive right to practice those professions are, in principle, matters of general political public order (Fortin v. Chrétien, [2001] 2 S.C.R. 500, 2001 CSC 45, at paras. 20-21).  An aggrieved party will have a civil action for a violation of those provisions, based on the absolute nullity of the contract that is vitiated by that violation.  However, not all regulatory provisions made under the laws governing professions are of equal importance, and the sanctions for violating them must be tailored to fit the prohibition on which that party relies and the circumstances of each case.

11                               In the case of the prohibition against conflicts of interest, we must analyse the nature of the conflict in order to characterize the violation.  In some situations, the integrity of the judicial system is at stake, while in others the only interests in play are those of the parties (M. Proulx and D. Layton, Ethics and Canadian Criminal Law (2001), at p. 287).  Thus when a lawyer simultaneously represents two co-accused who are facing related criminal charges and whose interests are adverse, he or she cannot provide both clients with the assistance to which they are constitutionally entitled.  The reliability of the verdict takes on an importance that prevails over the private interests of the clients.  Respect for the integrity of the criminal justice system derives, first and foremost, from the reliability of verdicts.  The protection of the integrity of the justice system is necessarily a part of general public order.  A contract that violates general public order is absolutely null (art. 1417 of the Civil Code of Québec, L.Q. 1991, c. 64 (“C.C.Q.”)) and may not be confirmed (art. 1418 C.C.Q.).

12                               However, not all conflicts of interest call higher interests into question.  Some cases involve merely private interests, and some of those conflicts vitiate the contract and are matters of protective public order (art. 1419 C.C.Q.).  While those contracts may be annulled, they may also be confirmed (art. 1420 C.C.Q.).  Other conflicts arise during the performance of the contract.  They instead raise a problem involving contractual  liability.

13                               In MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, this Court developed rules allowing a firm of professionals to continue representing a client despite the existence of a conflict of interest.  There is an infinite variety of possible conflicts.  It will sometimes be possible to reconcile the various interests in play, including the right to retain counsel of one’s choice.  Mere disclosure, followed by waiver (s. 3.06.08 of the Code of ethics) or confirmation (art. 1423 C.C.Q.), may sometimes be sufficient when only the interests of the parties are at stake.  Where the facts giving rise to the conflict have not been discussed and the case is one in which confirmation is possible, the judge must analyse the conflict in order to determine its nature and decide what remedy, if any, should be applied.

14                               The Court of Appeal was therefore correct to follow Neil, supra, in which this Court laid down principles on the issue of conflicts of interest that are valid not only in the common law provinces.  In that case, this Court held, inter alia, that a breach of an ethical rule does not necessarily give rise to a malpractice action.  That principle, when applied to an action in nullity, allows all of the circumstances in which the services were rendered to be taken into consideration.

15                               In this case, Rancourt and Leblanc shared the same offices, the same receptionist, the same secretary and the same area of practice.  Moreover, except in unusual cases in which he worked together with one of his partners, Rancourt did not share his files with them.  As he put it, [TRANSLATION] “[he did not] mess with their cases and they [did not] mess with [his]” (A.R., at p. 212).  While the allegations against Côté arose out of Fortin’s testimony and Fortin’s interests were plainly adverse, Leblanc was not involved in preparing Fortin for Côté’s trial.  In addition, Rancourt had told Côté that he was willing to ask Leblanc to withdraw from the case.  Although the situation should have been avoided, there is nothing in the record to indicate that Rancourt was not able to represent Côté effectively (s. 3.02.03 of the Code of ethics).

16                               Based on these facts, we must conclude that no interest higher than the interests of the parties themselves was at stake.  This is not a conflict of interest such as would render the contract for services between Côté and Rancourt absolutely null.  The only possibilities are that the contract was relatively null at the time it was formed or there was contractual fault in its performance.

17                               According to the record, the contract between Rancourt and Côté was entered into before the contract between Fortin and Leblanc.  This therefore cannot be a case in which the contract was null at the time of its initial formation.  On the other hand, given that the services were provided by Rancourt over a period of more than a year, the legal relationship with his client may be characterized as a contract of successive performance.  However, the circumstances of the case do not justify examining all of the detailed considerations related to restitution of prestations in the case of the relative nullity of a contract of successive performance or the possibility that this is a case of contractual fault.  As a matter of fact, whether this case was one of relative nullity or of contractual fault, Côté cannot be granted a refund of the fees and could not have claimed damages.

18                               Having regard to the findings of fact made by the Superior Court, it is not necessary for this Court to formally characterize the conflict.  The Superior Court concluded that Côté had benefited from the professional services provided by Rancourt.  Since Côté cannot restore the prestations she received, she is not entitled to a refund of the fees.  Furthermore, in the opinion of the judge of the Superior Court, there was no injury on which to base an action in contractual liability.  Côté has shown no palpable error in respect of these questions of fact.

19                               For these reasons, the appeal is dismissed with costs.

Appeal dismissed with costs.

Solicitors for the appellants:  Martel, Brassard, Doyon, Sherbrooke.

Solicitors for the respondents:  Faribault & Associés, Montréal.