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, no 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.