The coming into force of the new Code of Civil Procedure on January 1, 2016 created some uncertainty for litigation lawyers. One issue was the role of experts in litigation and in particular the emphasis on joint experts and the filing of an expert’s report in lieu of testimony. Other provisions that appear to deal a blow to professional secrecy and the litigation privilege could also affect litigation lawyers and their clients. The second paragraph of article 235 C.C.P., which covers the expert’s duties, as well as the second paragraph of article 238 C.C.P., which covers testimony taken by an expert, read as follows: “235. Experts are required, on request, to “235. Experts are required, on request, to provide the court and the parties with details on their professional qualifications, the progress of the work and the instructions received from a party; they are also required to comply with the time limits given to them. They may, if necessary to carry out their mission, request directives from the court; such a request is notified to the parties.” “238. Any testimony taken by the expert is attached to the report and forms part of the evidence.” The recent Superior Court decision in SNC-Lavalin inc. v. ArcelorMittal Exploitation minière Canada (2017 QCCS 737) sheds some light on the scope of these provisions and the interpretation given to them by the courts. The judgment The Honourable Jean-François Michaud ruled on objections dealing with professional secrecy and the litigation privilege. SNC-Lavalin Inc. (“SNC”) asked for [Translation] “the experts’ letters of undertaking and the instructions given to them regarding the performance of their mandate”. ArcelorMittal Mining Canada and ArcelorMittal Mines Canada Inc. (“Arcelor”) objected, primarily on the ground of professional secrecy. Arcelor could also have raised the litigation privilege. Before 2016, all solicitor-client communications were confidential and the opposing party did not have access to them. For litigation lawyers, it was their secret garden. Justice Michaud nonetheless dismissed Arcelor’s objection and allowed SNC’s request for two reasons. First, the experts described their mandate in their report, which constitutes a waiver of professional secrecy, at least with respect to that description of their mandate. According to the judge, this reasoning also applies to instructions received later which may have changed the scope of the mandate. The judge was also of the opinion that article 235 C.C.P. reduced the extent of professional secrecy and the litigation privilege, which he found to be reasonable given the expert’s [Translation] “impartial role and the search for the truth”. In obiter, the judge states that article 235 C.C.P. applies even though the experts’ reports were prepared before the new Code of Civil Procedure came into force since that article had immediate effect according to the transitional rules. Lastly, the judge held that Arcelor would be required to provide SNC with any subsequent instructions it gave its experts, although only those relating to the scope of the mandate and excluding any other discussions between the experts and Arcelor or their attorneys. In the second part of its application, SNC requested for the documents consulted by Arcelor’s experts [Translation] “on which they based their opinion”. This essentially covered interviews the experts conducted with some of Arcelor’s employees, which were mentioned in their report. Based on jurisprudence which preceded the reform, the court held that SNC had a right to those interviews if they were recorded and/or transcribed, since the experts’ report referred to them. However, if the experts only took notes of the interviews, those notes were protected by professional secrecy and the litigation privilege and Arcelor was under no obligation to provide them to the other party. Justice Michaud also set aside the application of article 238 C.C.P. which, as mentioned, requires that experts attach any testimony taken to their report. His decision was based on the fact that this provision did not exist when the interviews were conducted and article 238 C.C.P. is not retroactive. Without going into detail about transitional law, which is not the subject of this newsletter, it is difficult to see why this article would be treated differently from article 235 C.C.P. The judge concluded that at some point he will order the experts to meet pursuant to article 240 C.C.P. to “identify the points on which they differ”. Conclusion This judgment and the provisions on which it is based certainly result in a big change for litigation lawyers. They and their clients will likely have to adjust to the new rules. As mentioned above, this new approach runs counter to not only professional secrecy and the litigation privilege, but also the principle that each party is master of his own evidence. However, debates among experts often lead to more disputes than they resolve. In future, lawyers must be scrupulously clear as to the mandates and instructions given to experts.
- Québec, 2002
Frédéric Bélanger is a member of the Litigation group. His practice focuses mainly on representation before the courts, including the Court of Québec, the Superior Court, and the Court of Appeal. He thus represents clients throughout Québec and has extensive experience in insurance law, construction law, and civil liability. His reputation as a litigator is well established with judges, particularly in Québec City and eastern Québec.
Mr. Bélanger always prioritizes the interests of his clients, so he takes into account not only legal but also risk and financial considerations. He is known for his dedication and attention to detail.
He always investigates alternative dispute resolution methods that could benefit his clients.
- Represent insurers in subrogatory actions worth hundreds of thousands of dollars following losses incurred by policyholders
- Represent insurers in disputes with policyholders on the basis of non-coverage arguments
- Represent clients and policyholders prosecuted for civil, contractual, and extracontractual liability
- Draft opinions on the interpretation of contractual provisions of insurance policies
- Carry out statutory examinations for insurance companies
- Le nouveau Code de procédure civile en pratique, 2016, January 18, January 25 and June 14 – with Marie-Hélène Riverin, Simon Rainville et Anne-Marie Asselin
- Droit de la construction : développements, tendances et enjeux (Québec) - Un élément à ne pas négliger dans tout projet de construction : l’assurance, 2016, Novembre 24
- LL.B., Université de Sherbrooke, 2001
Facts Bar et spectacles Jules et Jim inc. (hereinafter the “Bar” or “Insured”) sought to renew the insurance coverage for its building, which was then insured for $424,000.2 On the recommendation of its broker, it obtained an appraisal which concluded that the reconstruction cost of the building would be $565,000, meaning that the Bar was underinsured. The Bar’s representative sent the appraisal to the broker, who took no further action and, more specifically, did not forward it to the insurer. The inevitable happened: a fire destroyed the building. The insurer paid the insurance indemnity of $424,000 as per the policy in effect. However, the reconstruction costs were admitted to be $715,000. The Bar therefore brought an action against both the broker and the appraiser alleging that the reconstruction costs, including the demolition, in fact reached $799,000. It therefore claimed the amount of $375,000 representing the difference between this amount and the indemnity received ($424,000). The Bar argued that the broker had neglected to conduct a diligent and rigorous follow-up of the Bar’s request to increase the amount of the insurance on the basis of the appraiser’s report. It also sued the appraiser on the basis that his report contained several errors that caused him to conclude that the reconstruction cost was $565,000, instead of $799,000.3 Trial judgment The trial judge found that the broker had committed several faults, namely in: accumulating delays in the process of renewing the insurance policy; failing to inform his client (the Bar) of the need to consider the demolition costs in the amount of the insurance; delaying the retention of the chartered appraiser; failing to conduct an adequate follow-up of the appraisal; and especially, failing to forward the appraiser’s report to the insurer in a timely manner. In so holding, the judge found the broker was liable to reimburse his client in the amount of $348,000, representing the difference between the indemnity received ($424,000) and the amount of the insurance it should have received ($772,000) had the broker properly fulfilled his professional obligations.4 The fault of the appraiser was admitted, however the Court held that the more significant faults of the broker broke the chain of causation that would be necessary to find the appraiser liable. The broker appealed the judgment, arguing that if he had fulfilled his professional obligations, the policy limits would have been increased from $424,000 to $565,000 in accordance with the appraiser’s report. He therefore admitted his liability for the difference between these two amounts ($141,000). The appraiser obviously relied on the trial judgment, which had held that there was no causal link between the appraiser’s faults and the damage, given that the broker’s faults had broken the chain of causation. As for the Bar, it argued that regardless of the apportionment of liability, it should be awarded the difference between the indemnity it ought to have received ($799,000), if the defendants had properly fulfilled their respective contractual obligations, and the indemnity actually received ($424,000), representing a difference of $375,000. Québec Court of Appeal’s judgment The Court noted that the faults of the broker and appraiser were not at issue on appeal, and the only question was [translation] “their respective liability to the insured”. First, the Court of Appeal reiterated the obligations of insurance brokers, noting that they have an obligation not only to provide information to their clients, but also to advise them. In that respect, the Court refers to section 39 of the Act respecting the distribution of financial products and services: 39. Damage insurance agents and brokers must, when renewing an insurance policy, take the necessary steps to ensure that the coverage provided corresponds to the client’s needs. Since the broker is recognized as a specialist in risk assessment, he must act at all times with prudence and diligence. In some cases, his obligation to advise should lead him to suggest that his client’s property be assessed by a competent appraiser. If he does so, he is generally not responsible for any damages that may result from a poor appraisal. As for appraisers, their obligations are governed by the Code of Ethics of the members of the Ordre des évaluateurs agréés du Québec. In this case, the appraiser committed three main faults: His appraisal of the building was based on the criteria for a residential property although the building was, at least in part, used for commercial purposes; He neglected to include the demolition costs; He neglected to consider the costs of upgrading to new standards in the event of the building’s reconstruction. Had he properly prepared his appraisal, his report would have concluded that the reconstruction value (including demolition) was $799,000, rather than $565,000. Both the appraiser and the broker committed faults of a contractual nature. Everyone acknowledged that the amount of the damages was the difference between the amount of the insurance that ought to have been contracted for ($799,000) and the amount of the existing coverage ($424,000), or $375,000. The Court of Appeal held that the broker’s primary fault was his failure to forward the appraiser’s report to the insurer. If he had done so, based on the conclusions in the appraiser’s report, the amount of the insurance would have been increased by $141,000. Furthermore, once the broker noticed that the appraiser had failed to consider the demolition costs, he ought to have increased the insurance amount to $610,000. This therefore increases the broker’s liability to the total amount of $186,000 ($610,000 — $424,000). As for the appraiser, had he properly carried out his work, his appraisal ought to have been for the amount of $799,000. Therefore, after the indemnity paid by the insurer ($424,000) and the portion of the damages attributable to the broker ($186,000), the balance owed by the appraiser was $189,000. The Court noted that the broker is not liable for the appraisal of the insurance amount where it is done by the insured, whether or not through an appraiser. In conclusion, the broker ought to have been found liable for the amount of $186,000 and the appraiser for the amount of $189,000. What to remember First, it is important for all of the parties involved (insured, broker and appraiser) to pay attention to the amount of insurance. Indeed, buildings can increase in value as renovations and improvements are made. Reconstruction costs can also fluctuate with changes both in building standards and inflation. The primary responsibility for obtaining the correct amount of insurance falls on the insured himself. However, the broker, who has a duty to give advice, should remind his client to verify the amount and suggest that he retain an appraiser, in appropriate circumstances. In addition, where the broker has a mandate to change the amount of the insurance, he must act with due diligence. As for the appraiser, he must comply with industry practice and should include an assessment of the reconstruction costs, demolition costs and costs of upgrading to current standards in his appraisal, since these standards can change over the years. His analysis should also be based on the proper standards, which can vary as opposed for a residential building to a commercial building. If the amount of the insurance is insufficient in the event of a loss, one or more of the insured, broker and appraiser may be at fault and the rules of civil law will apply to determine the apportionment of liability. In this regard, the decision of the Court of Appeal also contains a very interesting analysis (which we can’t review in detail in this bulletin) of various concepts relevant to causation, such as the notions of contributory fault, successive fault, fault that is a determining factor in the occurrence of the damages, and the theory of the break in the chain of causation. Maison Jean-Yves Lemay Assurances inc. c. Bar et spectacles Jules et Jim inc., 2016 QCCA 1494. All amounts are rounded up. This last amount includes the demolition costs. Note that the Court of Appeal found that the trial judge committed an error only in this respect, since the admitted amount of the damages was $799,000 and not $772,000.
On October 27, Frédéric Bélanger and Benjamin Poirier, lawyers in the Litigation and Dispute Resolution group, spoke at an educational event on the topic of recent developments in insurance law organized by the Barreau du Québec and held at the InterContinental Hotel in Montreal. Their presentation, entitled La recherche de la vérité a ses limites [there are limits to the search for truth], addressed the principles of confidentiality in an effort to find a balance between the search for truth and the integrity of the justice system. It also attempted to identify the sometimes elusive structure of the legal framework that governs the privileges of confidentiality for insurance litigation practitioners, as those privileges have evolved in recent decisions. Their presentation was prepared with the close collaboration of Bernard Trang, a student in the Montreal office. They also addressed this topic in Développements récents en droit des assurances 2017, published by the continuing education service of the Barreau du Québec.