Unofficial English Translation

Daigle c. Mathieu 2010 QCCA 1612 COURT OF APPEAL

CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL

No.: 500-09-018949-081 (405-17-000292-032)

DATE: September 10, 2010

CORAM: THE HONOURABLE MARC BEAUREGARD J.A. YVES-MARIE MORISSETTE J.A. LORNE GIROUX J.A.

ANDRÉ DAIGLE PROFESSIONAL LIABILITY INSURANCE FUND OF THE BARREAU DU QUÉBEC APPELLANTS - CROSS-RESPONDENTS - Defendants v.

RÉNALD MATHIEU RESPONDENT – Plaintiff and HUGUETTE DESCÔTEAUX RESPONDENT – CROSS-APPELLANT – Plaintiff in continuance of suit

JUDGMENT

[1] THE COURT - On the appeal from a judgement rendered on July 10, 2008, by the Superior Court, district of Drummond (the Honourable Lise Matteau), allowing in part the claim of respondent Rénald Mathieu by ordering the appellants to pay him the amount of $567,384.08. The respondent, in continuance of suit Descôteaux, cross- appeals and faults the judge for not awarding the full amount of the claim, $1,035,754.99; 500-09-018949-081 PAGE: 2

[2] After having examined the file, heard the parties, and on the whole deliberated;

[3] For the reasons of Morissette J.A., with which Beauregard and Giroux JJ.A. concur:

[4] ALLOWS the appeal, with costs.

[5] DISMISSES the action of the respondent, Huguette Descôteaux, with costs;

[6] DISMISSES the cross-appeal, with costs.

MARC BEAUREGARD J.A.

YVES-MARIE MORISSETTE J.A.

LORNE GIROUX J.A.

Mtre Philippe Lelarge GASCO, GOODHUE For the appellants - cross-respondents

Mtre Germain Jutras JUTRAS & ASSOCIATES For the respondent - cross-appellant

Date of hearing: January 26, 2010 500-09-018949-081 PAGE: 1

REASONS OF MORISSETTE J.A.

[7] The appellants appeal from a judgment rendered by Matteau J. of the Superior Court1 allowing in part the claim of respondent Mathieu and ordering them jointly and severally to pay the amount of $567,384.09. In cross-appeal, the respondent and plaintiff in continuance of suit Descôteaux complains that the judgment a quo does not award the full amount of Mathieu's claim, that is, $1,035,754,99.

[8] These appeals essentially raise three issues. The first concerns the professional liability of the appellant Daigle as the attorney for Mathieu in a separate dispute that proceeded before the Superior Court and the Court of Appeal between 1993 and 2002. The second concerns prescription; specifically, when does extinctive prescription start to run on a claim for professional liability against the author of a litigious agreement that is at the centre of a trial between the contracting parties? The third issue, debated in the cross-appeal, concerns the quantum of Mathieu's claim and the evidence offered in support thereof. These issues will be addressed in that order and, depending on the answers, it may prove unnecessary to resolve them all.

I. Background of the file

[9] In paragraphs [6] to [25] of her reasons, the trial judge provided a detailed and complete outline of the basic facts of the case, in keeping with the evidence. It is therefore pointless to state them here in their entirety, especially since a succinct description of the file will be sufficient to situate the issues remaining in dispute in their context. In addressing these issues later, I will revisit some of the specific circumstances of the case.

[10] This case has its distant origins in the sale of a construction equipment company, by Mathieu to Clair, through interposed companies. This transaction gave rise to a first dispute between Mathieu and Clair, which ended in defeat for Mathieu. The latter attributed the responsibility of the defeat to Daigle, his ad litem mandatary for the trial he lost against Clair. Mathieu sued Daigle in professional liability.

[11] The decision in Mathieu's action against Daigle is the judgment a quo.

[12] Mathieu brought suit against Daigle under three distinct heads of professional liability. First, with regard to the initial litigation, Mathieu claimed that Daigle brought an action based on [TRANSLATION] "illogical and contradictory" foundations against the defendant Clair and his companies, the co-contracting parties of Mathieu and his company, Gestion Rénald Mathieu inc. Second, Mathieu faulted Daigle for breaching his

1 2008 QCCS 3021. 500-09-018949-081 PAGE: 2 duty to advise by not immediately informing Mathieu that he could sue not only Clair, but also Gariépy, the notary, and Forcier, the accountant, respectively the author of the agreements and the originator of the legal structure through which Mathieu sold his business to Clair in 1987. This structure (the 1987 agreements) was intended, amongst other things, to allow Mathieu to receive various advantages from the business purchased by Clair such as a salary, bonuses, and profit participation until 1997. Finally, Mathieu faulted Daigle for subsequently letting the potential claim against Gariépy and Forcier expire.

[13] The initial case, where Daigle acted as counsel for Mathieu, ended in an unfavourable judgment rendered on December 6, 1999, by Frappier J. of the Superior Court,2 dismissing Mathieu's claim and allowing Clair's counterclaim. Mathieu appealed the decision, but it was dismissed from the bench on September 12, 2002. 3 Then, on August 11, 2003, in the wake of this first dispute, respondent Mathieu sued Daigle and the Professional Liability Insurance Fund of the Bar of Quebec.

II. Basis of the judgment a quo

[14] With regard to the faults alleged against Daigle, the judgment found him liable with regard to the second and third complaints previously listed in paragraph [12].

[15] In paragraphs [85] to [119] of her reasons, the trial judge began by addressing the issue of prescription. She concluded her review in the following terms, with a few additional clarifications regarding the reasons why she felt this conclusion to be foregone:

[TRANSLATION]

[114] The Court is of the view that Mtre Daigle misconducted himself in failing to bring an action against Forcier and Gariépy in a timely fashion as well as in failing to advise Mathieu in timely fashion to initiate such an action through another attorney, if such recourse was deemed appropriate.

...

[118] ... here, it is clear that the issue of a possible action against Forcier and Gariépy was an important aspect of the file Mathieu had entrusted to Mtre Daigle.

[119] While it is true that Mathieu was following his case very closely, the fact remains that Mtre Daigle had particular knowledge of the matter and that he managed the file. He should have used this knowledge to protect his client, who continued to trust him and to accept the explanations and strategy suggested as his case progressed, even without telling him about the possibility of an action in professional liability against Forcier and Gariépy though his duty to advise required it.

2 Mathieu v. Rénald Mathieu inc., [2000] R.J.Q. 274 (Sup. Ct.). 3 AZ-02019650 (C.A.). 500-09-018949-081 PAGE: 3

[Emphasis in the original.]

Daigle's professional misconduct included two distinct aspects which can be seen as having occurred in the following chronological order: failure in his duty to advise regarding a possible action against Forcier and Gariépy, and then negligence that materialized because Daigle waited too long to act and the delay to bring suit expired.

[16] As the judge pointed out in paragraph [120] of her reasons, this conclusion would have adequately answered the issue of wrongdoing. She deemed it useful, however, to revisit the first complaint ([TRANSLATION] "...concerning only the way Daigle conducted the litigation that opposed him to Clair and the intended companies...") to analyze it and, finally, to discount it. In doing so, the judge relied on the standard of behaviour established by case law in similar situations, which she stated, italicized, in her conclusion:

[TRANSLATION]

[141] Overall, the Court is of the opinion that Mtre Daigle acted like a usually prudent and diligent attorney would if placed in the same circumstances, and that he used every means at his disposal to argue the rights of his client.

[Emphasis from the original text.]

III. Complaints of the parties in appeal

[17] The summary statement of grievances in the principal appeal and the cross- appeal requires some clarification regarding the order in which the parties raised the grounds they intend to argue.

[18] The appellants obviously consider the trial judge's conclusion exonerating Daigle from any liability for his professional services in the action against Clair to be well- founded. In their factum, they attack her judgment from three distinct angles: the action against Forcier and Gariépy was not prescribed at the relevant time, this action would have failed in any event, and the mandate Daigle received from Mathieu did not include filing suit against Forcier and Gariépy.

[19] The cross-appeal does not call into question the trial judge's previously noted holding, stated in paragraph [141] of her reasons. That said, in response to the principal appeal, the respondent develops an argument in her factum that echoes Mathieu's arguments on the issue in the trial court. According to these submissions, Daigle's strategy against Clair was deficient to the point of incurring his professional liability. The cross-appeal concerns the quantum of the claim made by Mathieu and what was or wasn't filed into evidence to support this claim; the cross-appellant therein reiterates the claim for $1,035,754.99 filed in the trial court and asks in her conclusions that she be awarded this amount. 500-09-018949-081 PAGE: 4

[20] It may seem unusual for a respondent to challenge a holding by the trial judge in a factum where she also defends the disposition of the judgment a quo and where she asks the Court, in her own conclusions, to [TRANSLATION] "dismiss the principal appeal". Indeed, in his book on appeals, the Honourable Adjutor Rivard wrote the following on the subject:4

[TRANSLATION]

Only the individual aggrieved by the trial judgment may bring an admissible appeal; the cause of the prejudice must be found in the disposition of the judgment, not only in the reasons thereof.

In this case, the respondent’s cross-appeal addresses only the quantum of the claim, and her statement of cross-appeal does not address the arguments she raises in her factum on the principal appeal. The cross-respondents strongly oppose this way of proceeding, contending in their factum that [TRANSLATION] "the Court of Appeal should simply ignore those submissions" concerning Daigle's professional liability in his conduct of the action against Clair. If, however, the Court agrees to hear the cross- appellant on the merits of paragraph [141] of the reasons from the trial court, the cross- respondents seek permission to argue the point in writing. To this end, they have reproduced extensive excerpts from the written arguments5 filed into the record before the Superior Court in Schedule II of their factum.

[21] In truth, this situation is not so irregular, despite what the cross-respondents may allege. The authors of a monograph on appeals clarify the issue:6

[TRANSLATION]

In their response to a principal appeal, respondents may ask the Court to re-examine aspects of the judgment that are unfavourable to them. Thus, there is no reason to cross-appeal in order to attack those reasons of the judgment with which the respondent disagrees.

This statement relies on two recent judgments by the Court.7 Thus, the respondent was entitled to argue as she did in her factum regarding the inadequacy of the conclusion stated in paragraph [141] of the reasons of the trial judgment; in doing so, in fact, she

4 Adjutor Rivard, Manuel de la Cour d’appel, (Montreal: Variété, 1941) at 283. Also in the same work, see note 114, at 41, as well as the comments of Montgomery J.A in Campisi v. Attorney General (Quebec) [1978] C.A. 520 at 525. 5 Arguments reproduced in their entirety in complementary documentation filed by the appellant a few days before the Court of Appeal hearing. 6 Louise Mailhot & Lysanne Pariseau-Legault, L'appel, 2d ed. (Cowansville: Yvon Blais, 2008) at 64. 7 Citoyens pour une qualité de vie/Citizens for a Quality of Life v. Aéroports de Montréal, [2007] R.J.Q. 2362, 2007 QCCA 1274; Meunerie BL inc. (Trustee of), J.E. 2007-2253, 2007 QCCA 1601. 500-09-018949-081 PAGE: 5 did not call into question the final judgment, but offered an additional reason to confirm its correctness. When such a situation occurs, the appellant might seek permission to enter a memorandum to file to answer the respondent's claims; in this case, that is precisely what the appellants did in Schedule I of their cross-respondent's factum. Each party has had the opportunity to present all their arguments concerning the grounds raised by either side, and in order to get to the bottom of this dispute, we will consider them all. That settles the debate.

IV. Merits of the appeals

[22] Mathieu made three complaints against Daigle that I have already enumerated in paragraph [12]. Although these complaints may appear analytically distinct, in one respect they are linked. From one perspective, the validity of Daigle's strategy in the trial against Clair can be assessed on its own, whether or not the delay to bring an action against Forcier and Gariépy had expired. The trial judge adopted this perspective and clearly distinguished the issues relating to the action against Clair from those relating to the prescription of a possible action against Forcier and Gariépy. Seen from a different perspective, however, the decision to sue Clair and not Forcier and Gariépy constitutes a valid, tenable strategy if the actions are mutually exclusive—which, strictly speaking, they were not—or if the first action seemed to offer clearly superior chances of success than the second at the time it was brought.

[23] In light of the preceding, it seems logical to first consider the respondent's arguments in the principal appeal concerning the strategy adopted by Daigle in the file opposing Mathieu and Clair. This ground directly attacks the conclusion stated by the judge in paragraph [141] of her reasons.

A) Daigle's liability and the proceedings against Clair

[24] A review of certain facts is required.

[25] We must first outline the legal structure set up by the 1987 agreements. Motivated in part by tax considerations, and presenting an unusual degree of complexity for the sale of a business of that size, the structure included the following agreements:

1. A private employment contract between Rénald Mathieu inc. and Mathieu personally, according to which Mathieu was hired for ten years as president of Rénald Mathieu inc. and, in exchange, received the salary provided therein, which was subject to an indexation clause.

2. A private counter letter between Rénald Mathieu inc. and Mathieu personally, according to which Mathieu could not be fired for any reason whatsoever before the end of the employment contract

3. A private agreement between Rénald Mathieu inc., Gestion Rénald Mathieu inc. and Mathieu personally according to which Mathieu would be entitled to an 500-09-018949-081 PAGE: 6

annual bonus and a participation in the profits of Rénald Mathieu inc. in compliance with the stipulated accounting formula.

4. A private agreement between Gestion Yvon Clair inc., Gestion Rénald Mathieu inc., Mathieu personally, and Rénald Mathieu inc., under the guise of a unanimous shareholders agreement for Rénald Mathieu inc.

5. A private agreement between Gestion Yvon Clair inc, Mathieu personally, and Rénald Mathieu inc. according to which Gestion Yvon Clair inc. undertook to purchase from Rénald Mathieu part of the class C shares held by Rénald Mathieu in Rénald Mathieu inc.

6. A private offer from Gestion Rénald Mathieu inc. to Rénald Mathieu inc. concerning postponing the buyback of a block of shares held by Gestion Rénald Mathieu inc. in Rénald Mathieu inc., on condition that Rénald Mathieu inc. supply Gestion Rénald Mathieu inc. with a surety in the form of an obligation guaranteed by trust contract on the assets of Rénald Mathieu inc.

7. A private offer from Mathieu personally to Rénald Mathieu inc. concerning postponing the buyback of a block of shares held by Mathieu in Rénald Mathieu inc., on condition that Rénald Mathieu inc. supply Mathieu with a surety in the form of an obligation guaranteed by a trust contract on the assets of Rénald Mathieu inc.

Two notarized [TRANSLATION] "trust contracts" entered into on September 18, 1987, by Rénald Mathieu inc. and Loan and Income Trust relieved the conditions stated in the previously described private offers ("agreements no. 6 and no. 7").

[26] Less than two years later, Clair put together the necessary financing to liquidate the buyback of both Mathieu and Gestion Rénald Mathieu inc.'s shares in Rénald Mathieu inc. Consequently, on May 19, 1989, in a notarized act, Gestion Yvon Clair inc., Rénald Mathieu inc, Gestion Rénald Mathieu inc., and Mathieu personally agreed to terminate agreements no. 4, 5, 6, and 7 referred to herein above. Section 6 of this notarized act stipulates that:

[TRANSLATION]

6. It is therefore understood and agreed between the parties that, with the exception of the employment contract, the counter letter and the agreement referred to in section 9 of the present, every agreement and every document annexed to the original of the present will become null, for all legal purposes, immediately after Rénald Mathieu inc. remits to Rénald Mathieu the above mentioned irrevocable bank letter of credit issued by the Wickham credit union. 500-09-018949-081 PAGE: 7

Thus, the aforementioned agreements no. 1, 2, and 3 were the only agreements remaining in effect as of that date (agreements "P-1", "P-2", and "P-3" as per their listing before the Superior Court), which on the surface simplified things.

[27] In the meantime, the relationship between Mathieu and Clair had begun to deteriorate. In June of 1989, Mathieu unilaterally decided to stop working for Rénald Mathieu inc. In October of that same year, Clair paid Mathieu the balance of the selling price for the shares in Rénald Mathieu inc. Then, between 1990 and 1994, Rénald Mathieu inc., now controlled by Clair, continued to pay Mathieu the salary stated in P-1, but ceased paying the bonuses Mathieu felt entitled to receive according to P-3.

[28] On December 15, 1993, Daigle, mandated by Mathieu, brought proceedings against Clair and the various companies involved, claiming, amongst other things, the amount of $275,000 in unpaid bonuses. In spite of this, Rénald Mathieu inc. continued to pay Mathieu a salary until the following June 16, at which time, on the advice of its counsel, it ceased making the payments.

[29] The trial before Frappier J., which lasted six days and was preceded by many examinations on discovery, presented a sufficient number of difficulties for the parties to file a "contract of record" into the court record. According to this document, they agreed to separate the proof into two parts and first ask for a judgment on the [TRANSLATION] "parties' respective rights and obligations with regard to the agreements they entered into".

[30] In addressing the various facets of the issue, Frappier J. essentially found that (i) agreement P-1 was indeed an employment contract, as asserted by Mathieu in his examination, (ii) Mathieu ceased working for Rénald Mathieu inc. of his own free will on July 1, 1989, thereby unilaterally cancelling the agreement P-1, (iii) the counter letter P- 2 only addressed real or disguised dismissals and was therefore without effect in this case, (iv) agreement P-3, inseparable from the employment contract P-1, provided for the payment of various benefits to Mathieu only on condition that the latter continue to work for Rénald Mathieu inc., and (v) the salary paid to Mathieu after July 1, 1989, was mistakenly paid and under article 1699 C.C.Q. should be returned to Rénald Mathieu inc. In short, Mathieu lost across the board.

[31] This judgment, as we saw, was appealed and upheld on September 12, 2002. In a brief decision rendered from the bench, the Court of Appeal noted that [TRANSLATION] "the trial judge correctly assessed the evidence and the law in the circumstances"; thus, the trial judgment rendered by Frappier J. has the force of res judicata between the respondent and Clair.

[32] We would not go so far as to claim, however, that this failure, as crushing as it may have seemed at the time, was unforeseeable. It is the nature of the beast that many litigious situations have uncertain outcomes. While this measure of uncertainty can vary greatly from one case to the next, in some cases it may be risky even to 500-09-018949-081 PAGE: 8 predict the results of an upcoming trial. In this case, for many reasons, the dispute between Mathieu and Clair assuredly fits into this last category.

[33] First, the crux of the matter was in the agreements entered into by the parties between August 1987 and May 1989 and especially agreements P-1, P-2, and P-3. Defining the intentional scope and legal effects of these agreements presented a serious problem because of their paradoxical drafting as well as the circumstances in which they were executed. In his defence, Clair unsuccessfully tried to have the agreements cancelled on the grounds that they constituted a [TRANSLATION] "contract of adhesion containing abusive and incomprehensible clauses" when taken as a whole. The judge describes the agreement P-3 in these terms:

[TRANSLATION]

... the agreement P-3 includes clear difficulties of interpretation. The lengthy evidence adduced by the testimonies of the plaintiff and the defendant Yvon Clair has led the Court to conclude that the parties themselves are hard pressed to explain and understand the terms of this agreement and its interpretation.

In truth, we must observe that for tax and legal purposes, which the notary Denis Gariépy and the accountant Denis Forcier tried to explain, the agreement P-3 was not included in the employment contract P-1. It is interesting to point out that they are the architects of the agreements and contracts entered into by the parties; unfortunately, they did not take the time to ensure that Rénald Mathieu and Yvon Clair both understood the meaning and scope of all these contracts and agreements, the contents of which were drafted with tax and legal considerations in mind. The defendant Yvon Clair, who, in actual fact, did not disburse any money to purchase the plaintiff's shares in Rénald Mathieu inc. and who, according to his testimony, never understood the exact meaning of agreement P-3, was, however, quite aware of the fact that he had to pay bonuses and share profits.

The wording of agreement P-3 is highly suspicious and the parties' intent regarding the terms and conditions of payment is not clearly set out. Moreover, the evidence reveals that the parties' intent was nebulous and undetermined with the exception that the parties agree and admit that there was some sharing of bonuses and profits.

Whatever the case, the Court, after considering the terms of agreement P-3, rereading contract P-1 and assessing the vague testimonies of the parties concerning this issue, finds that it is not unreasonable to conclude that agreement P-3 is intimately linked to employment contract P-1 and that together they form an inseparable unit.

Further, on the clauses setting out the terms and conditions of payment for bonuses and profit sharing, the trial judge adds that they [TRANSLATION] "are, for all intents and purposes, incomprehensible to the parties themselves, who were unable during the hearing to clearly explain them". It seems obvious to me that this central component of the file made the outcome of the trial even more unpredictable. 500-09-018949-081 PAGE: 9

[34] Second, this legal and financial structure—requested to some degree by Mathieu, in that Forcier and Gariépy were trying to achieve the objective sought by Mathieu—purported to minimize the tax consequences of selling Rénald Mathieu inc. To achieve this result, it was essential that the salary and related benefits to which Mathieu was entitled truly consisted of remuneration paid in the course of an employment contract that could be deducted as an expense by Rénald Mathieu inc., rather than a non deductible selling price with payments spread over time. Thus characterized, however, the remuneration was necessarily associated with a quid pro quo in the form of Mathieu's services as president of the company, technical adviser or otherwise. Yet, this characterization endangered Mathieu's submissions in his action against Clair as soon as it was established that Mathieu had unilaterally ended the employment contract (allegation that was vigorously disputed by Mathieu who argued that he was indeed dismissed).

[35] Mathieu, perhaps fearing a tax reassessment, appears to have insisted that contract P-1 be characterized as an "employment contract". Examined on discovery on September 23, 2003, in his proceedings against Daigle, he declared the following regarding agreement P-1:

[TRANSLATION]

Q. ... When it was executed, did it correspond to what you had hoped to get out of this transaction?

A. Yes, yes. I wanted, it's not really that I wanted a job, you know, I wanted the thousand bucks ($1, 000) a week.

Q. Uh-hum. No, no, I understand it's because it’s referred to as an employment contract here?

A. Yes, yes, yes.

...

Q. ...did you agree with the contents of this contract?

A. Yes, yes.

Q. Was Mr. Clair... in agreement with this contract?

A. Yes, yes.

And further on, regarding the conversations he had with his advisers at the time, he adds:

[TRANSLATION] 500-09-018949-081 PAGE: 10

Q. But was there any conversation whatsoever with anyone to establish whether you actually had to work?

A. No. With the exception that, one time, Mr. Forcier told me that I could leave for warmer climes in the winter and still get paid.

But, mostly, it is the testimony of Mtre Raymond Clair, who represented Yvon Clair in his defence, that sheds some much needed light on Mathieu's attitude. After reviewing the agreements executed by the parties, and considering the possibility that the amounts due to Mathieu were in fact a "concealed selling price", Mtre Clair decided to find the underlying cause of the characterization issue by examining Mathieu. Here is the description he gave of this examination before defence:

[TRANSLATION]

Q. So, you dove right in and examined Mr. Mathieu

A. Yes. And then, I thought to myself: "I have to clarify this issue". Because, in my opinion, the rest of the file depended on whether or not I was able to characterize the situation from that moment, OK.

So, I prepared my examination. I prepared for a lengthy examination with Mr. Mathieu because when I read through the allegations of the statement of claim, I said to myself: "We're going to be at it for half a day (1/2), maybe even a whole day". And, – but I went right for it, as far as I can remember, quickly in the examination, I went straight for that issue with Mr. Mathieu and I made sure during the examination that Mr. Mathieu understood my questions. I wanted to completely set aside the idea that it could be a concealed selling price that might have been intended by having a counter letter.

...

Finally, Mr. Mathieu answered me, and what I took away from his testimony, well, I was almost dumbstruck. He said to me: "No, it was an employment contract. I had to work for Yvon Clair." Absent an error, it seemed to me that it was ten (10) years and I insisted on saying to him: "You had to work during that time and it wasn't a concealed selling price and you understand what a ‘concealed selling price’ is?" Then, as I recall, in the examination, he said to me: "Yes, I know what a concealed selling price is".

So then, from that moment on I told myself: Well, Mr. Mathieu had to work for Équipements Mathieu,8 which had been 500-09-018949-081 PAGE: 11

purchased in whole by Yvon Clair. Mr. Mathieu stopped working, so then, I examined the circumstances in which he stopped working. In as much as I can recall, in the examination, Mr. Mathieu stated: "One morning, I didn't go in and he didn't call me and I didn't say that I wanted to go back to work, and that's how it stayed".

So, I was surprised, but satisfied, in my opinion, with the examination and I ended it there because in my mind, from that moment, with the view I had of the file, which was enormous, I said: "Well, now, I just scored enough points, I won't go any further in that direction and I'm going to go think about it— about the consequences of all that and I'm going to conduct my case accordingly".

And that's what guided my work in the file, Madam justice, throughout the file.

In sum, Mathieu seems to have wanted to enjoy the benefits of an employment contract and of a staggered selling price without suffering the disadvantages of the first (the obligation to work) or those of the second (a heavier tax burden). But these two options are mutually exclusive, which explains the failed action against Clair. Though the evidence contained important elements likely to help the theory of a staggered selling price prevail—the fact that Rénald Mathieu inc. continued to pay a salary to Mathieu, regardless of his absence, from July 1st, 1989, to June 16, 1994, for example—it was the prerogative of Frappier J. to assess the evidence as he did, as confirmed by the Court of Appeal.

[36] Third, Mathieu's re-amended statement of claim contained a number of allegations on aspects of the dispute that were not at issue in Frappier J.'s judgment, but that must have seemed relevant before the trial. These allegations included the annual return of Rénald Mathieu inc., the reckoning of the bonuses paid to Mathieu, the formation by Clair of a shell company, Équipements Mathieu inc. (which, according to Mathieu, was intended for the commercialization of the products at the expense of Rénald Mathieu inc.), the payment of illegal bonuses to Clair, the bad faith of the latter, and the right for Mathieu to consult the financial statements of the business. In other words, many points remained litigious between the parties, an additional source of complications and variables.

[37] Fourth, the testimony of Clair's attorney is definite about the complexity of the file, which he considered [TRANSLATION] "very difficult" and requiring [TRANSLATION] "much work" from him. It was necessary to identify the conclusive issues from a bunch of facts: [TRANSLATION] "... I tried to ... get my client out of what I considered to be a fix he found himself in and, for me, in which I considered that my client to be at risk, which I had told him right from the start." 8 This is clearly an error. The witness means Rénald Mathieu inc., not Équipements Mathieu inc. 500-09-018949-081 PAGE: 12

[38] Fifth, Frappier J.'s reasons indicate that the evidence at trial was a maze of contradictory and confusing information complicating the fact-finding on which the judgment relies that much more. On four separate occasions in his reasons, regarding important points, Frappier J. used the expression [TRANSLATION] "it would not be unreasonable to find", thereby indicating the extent to which the evidence was conflicting, how uneasy he was with setting the facts straight, and how the judgment rendered based on these facts comes at the end of a comprehensive assessment where a great quantity of diverging data was compared.

[39] This is the backdrop against which the trial judge assessed the professional services of Daigle as ad litem mandatary to Mathieu.

[40] First, a general reminder of the relevant standard of behaviour in such cases according to a well respected textbook:9

[TRANSLATION]

2-135 - Faults in the conduct of the trial - Finally, clients may fault their attorneys for the way they fulfilled their ad litem mandate and their duty of fair representation. This fault is difficult to prove because the attorney retains significant discretion. Indeed, in that situation, the plaintiff must demonstrate that a reasonably apt and capable attorney would not have conducted the trial as the defendant did and that the result would probably have been different, which, practically speaking, is a very difficult burden to discharge. Such would be the case where the attorney omits a promising ground or forgets to request the additional indemnity or interest that would otherwise have been granted.

The case law quoted by these authors to illustrate the types of situations where an attorney might be held liable for omitting to argue a reasonable ground10 have little in common, factually, with the choice of grounds argued by Daigle before Frappier J. These cases discuss choices or strategies that were clearly wrong. It is undeniable here that the case was truly complex and that some of the grounds raised for the plaintiff might have succeeded. What were these grounds and how does the respondent fault them?

[41] Before all else, the respondent faults Daigle for developing, illogically in her view, the theory of a "constructive" dismissal, or a dismissal "by induction", where Clair continued to pay a salary to Mathieu for a few years after the services came to an end. Originally, Daigle claimed the bonuses set out in agreement P-3 and an indexation of the salary provided for in contract P-1. In actual fact, at no time was a dismissal alleged in the re-amended statement of claim; rather, Daigle claimed amounts for Mathieu that

9 Jean-Louis Baudouin & Patrice Deslauriers, La responsabilité civile, 7th ed., vol. 2 (Cowansville: Yvon Blais, 2007) at 134 (footnotes omitted). 10 Lavoie v. West Island Plomberie et chauffage ltée, [1996] R.R.A. 13 (C.A.), Therriault v. Therriault, B.E. 2001BE-1001 (Sup.Ct) and 139916 Canada inc. v. Caisse, [2001] R.R.A. 722 (Sup.Ct.). 500-09-018949-081 PAGE: 13 could constitute a "concealed selling price" in addition to the salary paid by Clair until 1994. Moreover, the theory of an employment contract, referred to in the amended statement of claim, seems to have been the direct result of Mathieu's examination on discovery, which also brought about the end of the salary payments as of June 16, 1994. The situation was sufficiently murky, in fact, for Daigle to argue what he did before the Superior Court, though not without risk: the very apparent deterioration of the relationship between Mathieu and Clair starting in the spring or summertime of 1989 could lead to a different conclusion than the one arrived at by the judge. It is not surprising, in these circumstances, that Daigle would assert in his written submissions before Frappier J.: [TRANSLATION] "The understanding that the plaintiff, at this time, is bound by agreements (exhibits P-1 and P-2) is obviously useful to support his submissions [reference to the examination at trial], but it does not reveal the interpretation that he himself has given them since 1987".

[42] To argue, as the respondent did, that Daigle should have advised Mathieu to go back to work in 1994, when Clair argued in defence that Mathieu had unilaterally stopped working, is unrealistic: it is a convenient reinterpretation of the circumstances of the time, in light of a judgment not yet rendered, but where the harm has already been done between the parties.

[43] As for the argument that [TRANSLATION] "it is incongruous to argue that Clair made an unforgivable error by continuing to pay Mathieu when it is also argued that Clair was obligated to continue paying Mathieu", it does not take into account the fact that this submission was raised alternatively. Indeed, this argument is repeated in textbooks published after the trial presided by Frappier J. took place:11

[TRANSLATION]

562 - Principle - Second, the payment made by the solvens must be the result of an error of law or of fact. If, indeed, the solvens paid where there was no debt, but knowingly and deliberately, the alleged payment must be treated as a gift and recovery must be refused. The error is required on the part of the solvens, but not the accipiens because the Code indirectly provides for the possibility that the former might be in bad faith. Furthermore, case law has adopted the same stance as the legislator in matters involving defects of consent: the inexcusable error that does not open the door to nullifying a contract does not open the door to recovery of a thing not due. It is a consistent interpretation of the Civil Code, conceived as a whole.

In light of Clair's counterclaim, one might think that it was wise to submit this argument, though it was not yet firmly established in positive law.

[44] Finally, the respondent is wrong to argue that Daigle should have raised the resiliation's lack of retroactivity, a characteristic particular to this form of cancellation and

11 Jean-Louis Beaudoin & Pierre-Gabriel Jobin, Les obligations, 6th ed. (Cowansville: Yvon Blais, 2005) at 557 (footnotes omitted). The last sentence of this quote does not appear in the fifth edition (1998) of this book, on p. 425; the case law cited in support of this sentence dates from 2002. 500-09-018949-081 PAGE: 14 embodied in article 1606 C.C.Q., to refute Clair's arguments on the counterclaim. The effects of a resiliation are not as straightforward as the respondent argues, and the absolutely unusual situation that occurred between June 1989 and June 1994 called for a solution adapted specifically to the circumstances of the case. On this subject, the previously quoted authors have the following to say:12

[TRANSLATION]

815 - Retroactive effect - ... The restoration of the parties then occurs through restitution of the benefit received. The parties are put back in the situation they were in prior to entering into the contract. In a contract of successive performance, the effects of the contract usually cease from the day of the judgment and there is no need to proceed with the restoration if no obligation was performed following that date. Sometimes, the cancellation may occur on a date prior to the judgement (if the lease is cancelled because of a wrong on the part of the lessor who considerably lessened the use of the premises, and the court determines that the cancellation is effective retroactively to the date of that wrong, and not from the date of the judgment, for example), there could be some restitution by equivalent of the benefit, at the judge's discretion, for the period between the wrong and the judgment. Finally, we must point out a paradoxical situation that may occur: in a contract of successive performance, if the wrong occurs for all intents and purposes at the same moment as the time of the contract (the non-compliant release of a vehicle leased just minutes before, for example), the cancellation will be retroactive to the day of the time of contract and there will be no difference between a rescission and a cancellation.

In the present case, the payment of what could be qualified as salary for a prolonged period of time during which the employee did not work could justify the remedy granted by Frappier J.; in 2002, the Court of Appeal did not feel that there was anything unusual to this.

[45] Therefore, I find that the trial judge was right to set aside the claim based on the professional services of Daigle as mandatary ad litem for Mathieu.

B) Daigle's liability and the action against Forcier and Gariépy

[46] The facts adduced concerning this ground are already known.

[47] Under this heading, paragraph 114 of the judgment a quo concludes that Daigle committed two faults likely to give rise to professional liability: he was negligent in letting the delay for bringing a possible action against the accountant Forcier and the notary Gariépy expire, and he failed in his duty to advise by not telling Mathieu of this possibility. Because of these faults, the respondent was awarded an amount equivalent to both the salary Mathieu reimbursed to Clair and the salary he would have received between 1994 and 1997, the date on which the contract between himself and Rénald Mathieu inc. would have ended had this contract had the effect that Mathieu assigned.

12 Ibid. at 807 (footnotes omitted). 500-09-018949-081 PAGE: 15

[48] Like the trial judge, I will first consider the issue of prescription.

[49] Pursuant to article 2925 C.C.Q., the action at issue here is subject to a three– year period of extinctive prescription. The second paragraph of article 2880 C.C.Q. provides that "(t)he day on which the right of action arises fixes the beginning of the period of extinctive prescription". The judge rightly quotes from Monopro Ltd. v. Montreal Trust,13 where Deschamps J.A., writing the reasons for a unanimous decision of the Court, points out that [TRANSLATION] "prescription starts to run only once all the elements of liability are present, that is, fault, damage, and the causal link". In paragraph 90 of her reasons, the trial judge goes on to quote article 2926 C.C.Q., which states:

2926. Where the right of action arises from moral, corporal or material damage appearing progressively or tardily, the period runs from the day the damage appears for the first time.

These are, indeed, the main elements of law that can resolve the problem.

[50] The trial judge then states when she believes the extinctive prescription of the action against Forcier and Gariépy began to run:

[TRANSLATION]

[94] As early as 1993, when he consulted Mtre Daigle to enquire about his rights resulting from the agreements at issue in order to claim from Clair and the intended companies the bonuses and profits that he alleged he was entitled to but that had not been paid, but at the latest on June 16, 1994, when Clair ended any form of payments, including the salary that had been paid to Mathieu for several years, at which time Mathieu, and certainly Mtre Daigle, were able to observe the first noticeable or tangible signs of the appearance of damage.

(Emphasis from the original.)

In my opinion, this conclusion is incorrect. The extinctive prescription of the action against those two potential defendants started to run around September 2002, when the Court of Appeal upheld the judgment rendered by Frappier J. in a ruling that was not subject to an application for leave to appeal.

[51] This is because the damage inflicted on Mathieu does not truly appear until it is definite that Mathieu is not entitled to the amounts he thought were due to him under the agreements at issue.

[52] I have already explained herein above why I believe, as did the trial judge, that Daigle's position in the trial against Clair was defensible. This strategy consisted in Mathieu claiming from a co-contracting party the amounts to which he initially seemed

13 J.E. 2000-777 (C.A.) at para. 17. 500-09-018949-081 PAGE: 16 to be entitled under the agreements at issue. This co-contracting party had scrupulously respected the conditions of these same agreements for a few years. Under the circumstances, what could be more natural than to sue the co-contracting party, apparently in default, rather than the originator or the author of the agreements? And what is abnormal in the fact of not concurrently suing, or even thinking of suing, the originator or author of these agreements? Arguing the contrary would be equivalent to alleging that, as soon as there is an ambiguity during the term of a contract giving rise to a dispute between the parties, the possibility of suing the author of the agreement must come to mind. And what would then happen in innumerable truly ambiguous situations that could not be attributed to any person's wrongdoing, and which occurred because, for example, unforeseen circumstances appeared along the way? What about proceedings against parties who simply no longer perform their obligations—is the author of the agreement to blame? I have no doubt that those who originate or draft a set of litigious agreements, as in this case, could be sued for professional liability. There must nonetheless be a serious appearance of professional wrongdoing on their part that implies much more than the simple fact that parties to a contract have ceased to perform the obligations assigned by the other party. Nothing here justifies finding that responsibility for the dispute fell on Forcier and Gariépy as early as 1994. The pique Mathieu may have felt when faced with the failure of his case is not, in itself and retroactively to 1994, constitutive of a cause of action against the advisers he consulted in 1987.

[53] Furthermore, in the present case, the option of suing Forcier and Gariépy back in 1994 seems to contradict the option of suing Clair, which was completely plausible at the time. The first action’s main premise is the improper or inoperative character of some agreements authored by the defendants, whereas the second rests on the premise that these same agreements must be performed by the defendant (the co- contracting party) according to the conditions therein. It would not be impossible to proceed this way, but doing so would create the risk of contradictory judgments and would open the possibility for one of the actions to be decided prematurely, which in my view would have been the case with the action against Forcier and Gariépy rather than the one against Clair.

[54] But beyond practical considerations, even before the Court of Appeal's affirming judgment in 2002, there was a specific legal reason to believe that the extinctive prescription of a possible action against Forcier and Gariépy only started running from the date of that judgment. It can be stated as follows.

[55] This part of the appeal raises a conundrum that has already been considered by authors:14 What is the impact that a judgment rendered in a companion case will have on the starting point of prescription? In D’Anjou v. Thériault,15 the Court was asked to dispose of an appeal in which the only question at issue was establishing the starting

14 On this subject, see Céline Gervais, La prescription, (Cowansville: Yvon Blais, 2009) at 113 and ff. 15 J.E. 2001-1017 (C.A.). 500-09-018949-081 PAGE: 17 point of the extinctive prescription. In 1986, an architectural firm (the appellant) had performed work for a construction company (the contractor), some of which remained unpaid. In 1987, the appellant brought an action on a privilege against the contractor. Shortly thereafter, the latter filed a motion for substitution of guarantee that the Superior Court allowed in June of 1987 under condition that an irrevocable letter of credit for the amount in dispute be provided. As a substitute for the privilege registered in 1987, an irrevocable letter of credit with a one-year term was renewed on a yearly basis by the contractor from 1987 to 1993. In the meantime, being satisfied by the fixed-term letter of guarantee, the registrar of real rights mistakenly struck the appellant's privilege where the June 1987 judgment specified that the substitution would only be valid upon presentation of an irrevocable letter of guarantee, that is, one with no term. On March 23, 1993, the appellant was informed by the contractor, now in financial straights, that the letter of credit would no longer be renewed; indeed, in 1995, the contractor filed a bankruptcy proposal. The appellant then file a claim in the bankruptcy for the amount of debt originally guaranteed by the privilege. For various reasons that we need not explore here, the trustee dismissed the claim. On January 10, 1996, at the appellant's request, the Superior Court reviewed the trustee's decision and declared the appellant's claim to be proved up to a specific amount. Since the liquidation of the bankrupt did not allow the appellant to be reimbursed for its claim, on May 16, 1997, it brought an action in damages against the Attorney General, the representative of the registrar of real rights, and the ex-president of the construction company, personally. Disputed through two motions for dismissal on the grounds of prescription, the action was dismissed by the Superior Court on the grounds that the extinctive prescription of the action had started running on March 23, 1993. For his part, the appellant argued that the starting point of the prescription was January 10, 1996.

[56] In a majority judgment by Brossard and Pelletier JJ.A., Letarte J.A. dissenting, the Court allowed the appeal and decided that January 10, 1996, marked the starting point of the extinctive prescription. It is useful to quote a few paragraphs of the reasons of Brossard J.A., whose opinion is shared with Pelletier J.A on this point:

[TRANSLATION]

[7] In my opinion, the starting point must be situated on the date of the judgment of the Superior Court, sitting in bankruptcy, dated January 10, 1996, in which the Honourable Paul Vézina allowed the appellant's action... .

[8] The key fact in this case that, in my opinion, fundamentally distinguishes it from Tamper Corporation v. Johnson & Higgins Willis Faber Ltd.16 and Bourque v. Hétu,17 is that the defence to the action on a privilege brought by the appellant in 1986, involving the registrar, disputed not only the value of the services rendered, that is, the quantum, but also the very existence of the debt.

16 [1993] R.R.A. 739 (C.A.). 17 [1992] R.J.Q. 960 (C.A.). 500-09-018949-081 PAGE: 18

[9] In other words, the position of Construction canadienne T.J. inc., the contractor, was definite: the appellants have no claim, whether current or contingent, against the contractor. The appellants did not perform the mandate for which they allege to have a claim.

[10] In this context, as long as the existence of the claim was not acknowledged, the damage likely to result from the substitution of guarantee only existed in law, was purely theoretical, and not likely to serve as a basis or foundation for any action in damages whatsoever. In short, if the defence of Construction canadienne had been successful and the Superior Court had declared that the defence had merit, the appellants would have suffered no loss or damage of any kind in consequence of the irregular striking of their privilege.

...

[18] The only other possible or, should I say, imaginable action for the appellants would have been to seek an amendment of the pending action to implead the respondents as co-defendants. But, to succeed in such an application, the Court would have to be convinced that the action being brought against the respondents flowed from the same source as the action pending against Construction canadienne or at least from a related source.

[19] In that case—the only one, in my opinion, that could justify a 1993 starting point for the prescription—the prescription would have been interrupted in any event (article 2224 C.C.L.C) because the action against one of the two joint and several debtors is still pending today. On this subject, I refer to the opinion of my colleague Pelletier J.A.

In my opinion, if we accept, as I already have, that Mathieu's action against Clair had a serious basis and could have succeeded, the situation between Mathieu, Forcier and Gariépy is analogous to that of the appellant and the respondents in D'Anjou. Clair, after all, disputed not only the quantum of the claim alleged by Mathieu, but its very existence. Had Mathieu won against Clair, which was a possible outcome of the dispute, it is unlikely that there would have been any proceedings against Forcier or Gariépy.

[57] Therefore, I find that, under article 2879 C.C.Q., the extinctive prescription of an action against Forcier and Gariépy started running on September 13, 2002.

C) Daigle's liability from the perspective of his duty to advise

[58] In light of the preceding, we need not resolve this issue. Since the possible action against Forcier and Gariépy was not prescribed at the time Mathieu sued Daigle, the chain of causation between the fault, supposing there to be one, and the damage was broken. The situation is identical to the one in 9046-6533 Québec inc. v. Deschamps18 and, therefore, the outcome must also be the same.

18 J.E. 2010-904 (C.A.) at para. 8. 500-09-018949-081 PAGE: 19

[59] I point out, however, that the action against Forcier and Gariépy, had it been disputed, would necessarily have included a rigorous review of the information shared between Mathieu and his advisers, the expectations Mathieu had, and the objectives, including the tax ones, he wished to attain by assigning his business to Clair. In this context, the amalgam of what Mathieu thought he was entitled to in 1993 and what might constitute direct harm resulting from the professional misconduct of his advisers appears disputable to me; perhaps this amalgam had a basis, perhaps not, but it could certainly be the subject of a debate that need not be explored at this time.

V. Conclusion

[60] For the foregoing reasons, I would allow the appeal, with costs, dismiss the respondent's action, with costs, and dismiss the cross-appeal, with costs.

YVES-MARIE MORISSETTE, J.A.