Roberge v. Bolduc

Roberge v. Bolduc
Collection
Supreme Court Judgments
Date
1991-02-28
Report
[1991] 1 SCR 374
Case number
20943
Judges
Lamer, Antonio; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret
On appeal from
Quebec
Subjects
Action
Appeal
Civil procedure
Evidence
Torts
Notes
SCC Case Information: 20943
Decision Content
Roberge v. Bolduc, [1991] 1 S.C.R. 374
Richard Dorion Appellant
v.
Jacques Roberge and
Johanne Beaupré Respondents
and
Jean‑Pierre Bolduc Mis en cause
Indexed as: Roberge v. Bolduc
File No.: 20943.
1990: October 4; 1991: February 28.
Present: Lamer C.J. and L'Heureux‑Dubé, Sopinka, Gonthier and Cory JJ.
on appeal from the court of appeal for quebec
Appeal ‑‑ Jurisdiction of Supreme Court of Canada ‑‑ Court of Appeal refusing leave to appeal Superior Court judgment ‑‑ Whether leave to appeal to Supreme Court of Canada may be granted ‑‑ Supreme Court Act, R.S.C., 1985, c. S‑26, s. 40(1) .
Civil responsibility ‑‑ Professional liability ‑‑ Notaries ‑‑ Title searches ‑‑ Incidence of res judicata in the context of title searches ‑‑ Buyers not purchasing property following notary's opinion that defect in title not cured by subsequent judgment ‑‑ Notary acting in accordance with common notarial practice ‑‑ Whether notary failed to properly assess effect of judgment on vendor's title ‑‑ If so, whether error of law constitutes a fault entailing notary's liability ‑‑ Distinction between common professional practice and fault -- Civil Code of Lower Canada, art. 1241.
Judgments and orders ‑‑ Res judicata ‑‑ Conditions ‑‑ Incidence of res judicata in the context of title searches ‑‑ Civil Code of Lower Canada, art. 1241.
Evidence ‑‑ Expert evidence ‑‑ Professional liability ‑‑ Role of expert testimony.
Costs ‑‑ Costs on solicitor and client basis ‑‑ Leave to appeal to Supreme Court of Canada granted on condition that appellant notary assume costs of appeal ‑‑ Respondents requesting costs on solicitor and client basis in factum and at hearing ‑‑ Decision important to notarial profession only ‑‑ Costs awarded on solicitor and client basis ‑‑ Supreme Court Act, R.S.C., 1985, c. S‑26, s. 47 .
In 1987, upon acceptance of their offer to purchase the immoveable property of the mis en cause, the respondents instructed the appellant notary to examine the vendor's title to assure them that he held good and valid title to the property and, if so, to prepare the deed of sale. In examining the chain of title, the appellant discovered that in 1977 one P.L. had obtained a loan from a caisse populaire (the "Caisse") guaranteed by a hypothec and by a giving in payment clause. The deed of loan was registered against the property in issue even though P.L. was not the owner, the property being registered at the time in the name of P.L. Inc. Both P.L. and P.L. Inc. later made assignments in bankruptcy and the same trustee was appointed for both bankrupt estates. The trustee registered a notice of the bankruptcy of P.L. against the property but did not register a notice on behalf of P.L. Inc. The Caisse, upon the default of P.L. on his loan and pursuant to the giving in payment clause in the deed of loan, took proceedings against the trustee of the bankrupt estate of P.L. and against P.L. Inc. The proceedings were served on the trustee of the bankrupt estate of P.L., on P.L. personally and on P.L. Inc. As none of the defendants appeared to defend the action, the Caisse obtained a default judgment granting it title to the property. This judgment was duly registered against the property. In 1981, the Caisse sold the property to the wife of the prospective vendor who, in 1984, purchased the property from his wife.
Following the title search, the appellant informed the respondents that, in his opinion, the judgment obtained by the Caisse did not cure the defect in the vendor's title. The hypothec, granted by a person other than the registered owner, was null and void and the judgment could not give more than the hypothec was worth. The vendor's attorney replied that the judgment registered had perfected the title, and had acquired the authority of res judicata. Faced with these opposite views, the respondents consulted a second notary who confirmed the appellant's opinion. The respondents then notified the vendor that, in the circumstances, they would not purchase the property and instructed their attorney to take action against him. The vendor counterclaimed for damage allegedly suffered on account of the respondents' refusal to purchase the property. In answer to the counterclaim, the respondents exercised a recourse in warranty against the appellant on the basis that it was on his advice that they refused to purchase the property.
The Superior Court dismissed the respondents' action and allowed both the vendor's counterclaim and the respondents' recourse in warranty against the appellant. The trial judge held that the judgment in favor of the Caisse had the authority of res judicata and conferred good and valid title on the Caisse despite the fact that the hypothec was granted by a person other than the registered owner. The trial judge found that the appellant committed an error of law and that the respondents were not justified in refusing to sign the deed of sale. He concluded that the appellant's error constituted a fault and was the causa causans of the damage suffered by the respondents. The Court of Appeal refused to grant leave to appeal from the judgment of the Superior Court. This appeal is to determine whether the appellant erred in law in ignoring the authority of res judicata as regards the Caisse's judgment and its effect on the vendor's title; and, if so, whether such an error constitutes a fault entailing appellant's liability. However, before answering the main issues, this Court must determine if it has jurisdiction to entertain the present appeal.
Held: The appeal should be dismissed.
(1) Supreme Court's Jurisdiction
This Court has jurisdiction pursuant to s. 40(1) of the Supreme Court Act to review the Court of Appeal's decision not to grant leave to appeal from a judgment at trial. Under s. 40(1), this Court retains the discretionary power to hear an appeal from any final or other judgment of the intermediate appellate courts which raises an issue of public importance. While a certain amount of deference to the undoubted competence of intermediate appellate courts to control their own leave‑granting process is called for, it is equally evident that this Court's jurisdiction to exercise its own discretion in intervening in such decisions is not statutorily confined. Moreover, in the present case, leave to appeal was granted from both the Superior Court and the Court of Appeal judgment.
(2) Res Judicata
Appellant's contention that the vendor's title could be challenged by an action contesting the validity of the hypothec must be rejected. The judgment granting ownership of the immoveable property to the Caisse acquired the authority of res judicata since it met all the conditions set out in art. 1241 C.C.L.C. The judgment was rendered by a civil court in Quebec which had jurisdiction in the matter; the Caisse's action on the giving in payment clause was contentious in nature and the judgment "definitive", even though rendered by default, since the proceedings were served on the parties. Further, there was identity of parties, object and cause. In the context of res judicata, juridical identity of the parties is all that is required. The prospective vendor was a successor by particular title to the property and thus a "party" to any judgments rendered in regard thereto. The trustee was a party to the action on the giving in payment clause and represented the creditors of P.L. Inc. When someone is represented by a party to an action, he cannot later challenge the judgment. The object of the judgment obtained by the Caisse was the ownership of the immoveable property, precisely the same object which an attack on the validity of the hypothec would pursue. Finally, the essence of the legal characterization of the facts alleged is identical and relates to the contract of loan. The inexecution of the obligation undertaken in that contract is the "concrete" cause of action.
Even if the creditors of P.L. Inc. were not "represented" by the trustee, they would still be bound by the judgment granting ownership of the property to the Caisse. The chirographic creditors cannot claim more rights than those of their debtor. If that debtor loses some of his patrimony, then these creditors simply have a decreased patrimony to share. They cannot challenge the validity of the judgment unless they prove that such judgment constituted an attempt to defraud the creditors. An oblique action, however, is taken by a creditor, not in a personal capacity, but as a representative of the debtor, and thus would raise the same issues of representation and res judicata. A Paulian action, on the other hand, must allege fraud and is taken in the name of the individual creditor exercising personal rights. Such action, although a possibility even after a judgment in giving in payment, is prescribed after one year of knowledge of the alleged fraud.
The trustee himself could not contest the judgment even if he was not properly served in his capacity as trustee in bankruptcy of P.L. Inc. P.L. Inc. was properly served, given the absence of notice of bankruptcy in the index of immoveables, and the trustee, who failed to register such notice on the debtor's property at the time of the bankruptcy, could not benefit from his own omission. In any event, the trustee had actual knowledge of the proceedings, and if he sought to attack the judgment, he would have had to act within a reasonable time.
As for third parties, if they were aware of the judgment rendered in favour of the Caisse they should have acted with diligence to retract the judgment. Since the judgment was registered against the property years earlier, it would be difficult, if not impossible, for the creditors to claim absence of notice. The time elapsed since the registered judgment obtained by the Caisse would also serve as a bar to third‑party opposition. The remote possibility that third parties, unaware of the judgment, could later contest the validity of the hypothec and, as a consequence, the validity of the vendor's title is pure speculation. There is no indication that any other party might have had an interest in the validity of the hypothec and/or the ownership of the property.
The appellant, therefore, made an error of law in ignoring the authority of res judicata as regards the judgment obtained by the Caisse and its effect on the vendor's title to the property. The judgment conferred good and valid title on the Caisse, despite the fact that there was a defect in the hypothec, since it was not appealed from and, on the facts of this case, could not have been the object of further proceedings. The appellant failed to distinguish between the hypothec's defect, which existed, and the defect in the title, which did not exist, having been cured by the judgment granting ownership to the Caisse.
(3) Expert Evidence
Expert witnesses testified at trial that the appellant's opinion was in conformity with the norms of practice of a prudent and cautious notary in the same circumstances. The expert evidence, although not relevant in the determination of whether the judgment rendered on the giving in payment action had the authority of res judicata, was relevant in the assessment of notarial practice and was properly admitted by the trial judge. The trial judge, however, is the final arbiter and is not bound by expert testimony. This is particularly so in matters of professional liability, where an expert's evidence is not binding regarding the precise question of law which the judge is called upon to decide. This is the domain of the judge.
(4) Professional Liability
The trial judge was correct in concluding that the appellant's error constituted a fault entailing his liability. The fact that a professional followed the common professional practice at the relevant time is not sufficient to avoid liability. Such practice must be demonstrably reasonable. Accordingly, when a professional adheres to a common professional practice which does not accord with the general standards of liability, i.e., that one must act in a reasonable and diligent manner, he can be found liable, depending on the facts of each case. The common notarial practice followed by the appellant led to the conclusion that there was a defect in the vendor's title and that such defect was not cured by the judgment granting ownership to the Caisse. Given the clear state of the law at the time, the notarial practice as regards title searches cannot be characterized as reasonable and diligent, nor can the casual way in which the issue of res judicata was dealt with be condoned. The issue of res judicata is not a controversial one in the legal field and its application to this case did not present particular difficulties. The appellant's main contractual obligation toward the respondents was to give a legal opinion as to the vendor's title. This obligation was one of means only but one that he had a duty to fulfill in a prudent and diligent manner. Appellant's error of law was unreasonable and constituted a fault in the circumstances of this case. Further, the necessity to advise clients of the legal consequences of their actions is clearly an aspect of the notarial duty to counsel. Appellant's failure to inform the respondents of the likelihood of legal action by the vendor constituted a breach of his obligations toward the respondents.
The appellant is liable for the damage suffered by the respondents. The appellant's opinion was the direct, immediate, and logical cause of the respondents' decision not to purchase the property. The fact that the respondents sought the opinion of a second notary, which confirmed that of the appellant, did not affect the causal link between the appellant's fault and the damage suffered by the respondents. Had the appellant given proper legal advice, they would never have needed to seek a second opinion. Further, the opinion of the second notary did not constitute a novus actus interveniens. The respondents' decision to seek a second opinion was completely dependent upon the appellant's erroneous conclusion that the title was defective.
Cases Cited
Applied: MacDonald v. City of Montreal, [1986] 1 S.C.R. 460; referred to: Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; X. v. Mellen, [1957] Que. Q.B. 389; Hôpital général de la région de l'amiante Inc. v. Perron, [1979] C.A. 567; Legault v. Thiffault, [1976] C.A. 729; Plante v. Lafleur, [1990] R.R.A. 290; Côté v. Drolet, [1986] R.L. 236; Tremblay v. D'Amours, [1972] C.S. 144; Markel Insurance Co. of Canada v. Travelers du Canada, [1986] R.D.J. 516; Irony v. Rosenberg, [1974] C.A. 515; Van Finance Ltd. v. Sogelong Inc., [1989] R.D.J. 233; Buchanan v. Commission des accidents du travail, [1981] C.A. 325; Pesant v. Langevin (1926), 41 Que. K.B. 412; Air Canada v. McDonnell Douglas Corp., [1989] 1 S.C.R. 1554; Wabasso Ltd. v. National Drying Machinery Co., [1981] 1 S.C.R. 578; Rocois Construction Inc. v. Québec Ready Mix Inc., [1990] 2 S.C.R. 440; Cargill Grain Co. v. Foundation Co. of Canada, [1965] S.C.R. 594; In re Reed: Caisse populaire Desjardins de Côte St‑Paul v. Diamond Co., [1981] C.S. 944; Mercure v. A. Marquette & Fils Inc., [1977] 1 S.C.R. 547; Riberdy v. Laroche, [1986] R.D.J. 510; Darveau v. Tessier, [1986] R.J.Q. 2770; Bédard v. Lavoie, [1987] R.R.A. 83; Vail v. MacDonald, [1976] 2 S.C.R. 825; Hôtel‑Dieu de Québec v. Bois, [1977] C.A. 563; Caisse populaire St‑Étienne de La Malbaie v. Tremblay, [1986] R.D.I. 554 (Sup. Ct.), rev'd [1990] R.D.I. 483 (C.A.); Fournier & Papillon Ltée v. Simard, [1987] R.R.A. 566; Villemure v. Hôpital Notre‑Dame, [1973] S.C.R. 716; G. v. C., [1960] Que. Q.B. 161; Coronation Credit Corp. v. Giasson, J.E. 79‑546 (C.S.), aff'd C.A. Québec, No. 200‑09‑000363‑793, July 12, 1982; Attorney General of Quebec v. Labrecque, [1980] 2 S.C.R. 1057; Janiak v. Ippolito, [1985] 1 S.C.R. 146; Lanificio Fratelli Bettazzi S.N.C. v. Tissus Ranchar Inc., S.C.C., No. 21373, October 3, 1990; Sous‑ministre du revenu du Québec v. Goyer, Bulletin of Proceedings of the Supreme Court of Canada, October 12, 1987, p. 1612; Attorney General of Quebec v. Carrières Ste‑Thérèse Ltée, [1985] 1 S.C.R. 831; Palachik v. Kiss, [1983] 1 S.C.R. 623.
Statutes and Regulations Cited
Civil Code of Lower Canada, arts. 1040, 1040a [en. 1964, c. 67, s. 1; am. 1980, c. 11, s. 4; am. 1981, c. 14, s. 1], 1053, 1078.1 [en. 1982, c. 32, s. 59; am. idem, c. 58, s. 1], 1241, 2037.
Code of Civil Procedure, R.S.Q., c. C‑25, arts. 26(4) [repl. 1979, c. 37, s. 6], 32, 155, 179, 180.
Code Napoléon, art. 1351.
Supreme Court Act, R.S.C., 1985, c. S‑26, s. 47 .
Authors Cited
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APPEAL from a refusal of the Quebec Court of Appeal[1] to grant leave to appeal from a judgment of the Superior Court[2]. Appeal dismissed.
François Aquin and Marie‑Claude Provost, for the appellant.
Serge Barma, for the respondents and the mis en cause.
//L'Heureux-Dubé J.//
The judgment of the Court was delivered by
L'Heureux-Dubé J. -- The issue in this appeal concerns professional liability, in this instance that of the appellant, a notary practising in Quebec City, as a result of his professional advice to the respondents, the prospective purchasers of an immoveable which was the property of the mis en cause Bolduc.
Facts
On April 7, 1987, the respondents signed an offer to purchase the immoveable property of the mis en cause, Jean‑Pierre Bolduc. The property in question is located at 1939, des Épinettes Rouges Street, Lac St‑Charles, being lot 1324‑52 in the parish of St‑Ambroise de la Jeune Lorette in the district of Quebec. The vendor, here mis en cause, was to provide the respondents with a valid title, free of all charges and encumbrances except for those specifically provided for in the offer. The deed of sale was to be executed before the appellant notary. On April 8, upon written acceptance of their offer, the respondents mandated the appellant notary to prepare the deed of sale. The respondents also obtained approval of a loan for part of the purchase price from the National Bank of Canada. That loan, however, was conditional upon a title search to be undertaken by the appellant notary, in order to ensure that the hypothec to be registered against the property, as a guarantee for the loan, would be [translation] "a good and valid first hypothec".
Upon examining the titles, the appellant discovered that, on September 21, 1962, Paul Leclerc had acquired part of unsubdivided lot 1324. That deed was registered against the property on September 26, 1962. On February 14, 1964, the property was sold by Paul Leclerc to Paul Leclerc Inc., by a deed of sale registered on February 28, 1964. In July 1970, pursuant to a subdivision of the property, lot 1324‑52, the specific property at issue, was registered in the name of Paul Leclerc Inc. On May 31, 1977, Paul Leclerc personally borrowed $30,000 from the Caisse populaire St‑François d'Assise de Québec (the "Caisse"). This loan was guaranteed by a hypothec and by a giving in payment clause in case of default by the debtor. The deed of loan was registered against the property on June 1, 1977.
On January 22, 1980, both Paul Leclerc and Paul Leclerc Inc. made assignments in bankruptcy. Grégoire Bellavance, C.A., was named trustee of both bankrupt estates. While the trustee registered a notice of the bankruptcy of Paul Leclerc against lot 1324‑52 on February 2, 1980, he did not do so on behalf of Paul Leclerc Inc. The Caisse, upon the default of Paul Leclerc on his loan and pursuant to the giving in payment clause in the deed of loan, commenced forfeiture proceedings in Quebec Superior Court on April 29, 1980. Said proceedings were taken both against Grégoire Bellavance in his capacity as trustee of the bankrupt estate of Paul Leclerc and against Paul Leclerc Inc. On May 1, 1980, the proceedings were served on the trustee of the bankrupt estate of Paul Leclerc, and on May 5, 1980 on Paul Leclerc personally at his place of residence as well as on Paul Leclerc Inc. at its business office. The writ was issued against:
[translation] GRÉGOIRE BELLAVANCE, in his capacity as trustee in the bankruptcy of Paul Leclerc, practising at 425 Charest Boulevard East, Québec, Que. G1K 3H9 -and- PAUL LECLERC INC., domiciled and residing at 25 Place Champéry, Notre-Dame des Laurentides, Que. G0A 2S0 Defendants -and- REGISTRAR OF QUEBEC REGISTRATION DIVISION, Québec Registry Office, 116 St-Pierre, Québec, Que. G1K 4A7
As none of the defendants appeared to defend the action, the Caisse obtained judgment in its favour by default before the special prothonotary on July 17, 1980, granting it title to the property and ordering Paul Leclerc and Paul Leclerc Inc. to vacate the premises within eight days. The judgment concluded as follows:
[translation] DECLARES the plaintiff [the Caisse] to be absolute owner of the immoveable property so described, retroactive to June 1, 1977. . .
DECLARES that neither the defendants nor the mis en cause nor any third party has any right in or against this immoveable property...
ORDERS the mis en cause Registrar to receive and register this judgment to be a good and valid title to the above-described immoveable property in favour of the plaintiff, and to strike out any hypothecs, privileges, notices or other charges registered against the above-described immoveable property after the plaintiff's hypothecary deed P-1 of June 1, 1977;
This judgment was duly registered against the property on August 20, 1980. On June 18, 1981, the Caisse sold the property to the wife of the mis en cause and, on February 17, 1984, the mis en cause purchased the property from his wife.
The mis en cause later offered the property for sale and, as earlier stated, the respondents signed an offer to purchase said property on April 7, 1987. In order to obtain their loan from the bank to finance the purchase, the matter was referred to the appellant for a title search. The notary's mandate was threefold: first, to assure the parties that the vendor held proper title to the property; second, to assure the bank that its loan would be guaranteed by [translation] "a good and valid first hypothec" on the property; and finally, if all was in order, to prepare the deed of sale.
The notary discovered that, at the time Paul Leclerc borrowed from the Caisse and entered into a contract of loan with a giving in payment clause, he was not the registered owner of the property: Paul Leclerc Inc. was. In addition, the notary realized that, while a notice of the bankruptcy of Paul Leclerc had been registered by the trustee against the property in question, no notice of the bankruptcy of Paul Leclerc Inc. was registered. However, a 60-day notice, under art. 1040a C.C.L.C., had been given to both Paul Leclerc and Paul Leclerc Inc. by the Caisse before it exercised its rights under the giving in payment clause. The notary gave an opinion to his clients to the effect that the judgment obtained by the Caisse did not go so far as to cure the defect he had detected in the vendor's title to the property. He did so by telephone, on or around April 30, 1987. Pursuant to that advice, the respondents' broker wrote to the mis en cause asking him to correct, if possible, the title defect noted by the appellant. On May 13, 1987, the mise en cause's attorney answered that the judgment registered August 20, 1980 had perfected the title, and had acquired the authority of res judicata. The respondents then sought a second opinion and, on May 19, consulted another notary, Me Giroux, who expressed the same concerns as the appellant. In his opinion, the title was vitiated and no bank would grant a loan secured by such title since the hypothec granted by Paul Leclerc to the Caisse was granted by a person who was not the owner of the property at the time.
On May 22, 1987, the appellant notary gave a written opinion to Courtier Royal, the respondents' broker. The letter read as follows:
[translation] Further to your letter of May 21 last, I confirm that I cannot recommend to my clients Mr. Jacques Roberge and Mrs. Johanne Beaupré that they pass title as arranged, since I consider that the titles of Mr. Jean-Pierre Bolduc, the promissor-vendor, are imperfect.
There is a defect in the chain of title relating to the judgment to declare ownership rendered by the Superior Court in favour of the Caisse populaire de St-François d'Assise de Québec and registered at Québec as No. 992725. This judgment declared the said Caisse owner under the giving in payment clause included in the hypothecary deed registered at Québec as No. 874806. As the hypothecary deed in question was granted by a person other than the registered owner, this hypothec was null and void and the judgment could not give more than the hypothec was worth.
Finally, I similarly could not recommend that the lender in the matter, namely the National Bank of Canada, or any other lender, make a hypothecary loan, for the reasons stated above.
It would accordingly be advisable for the promissor-vendor to perfect his title as the latter has undertaken to do in the promise of purchase made in this matter, in paragraph "3.1". . . [M]y clients will have to decide what their position will be. [Emphasis added.]
The next day, the respondents notified the mis en cause that, under the circumstances, they would not purchase the property. They instructed their attorney to take action against the mis en cause. On June 17, the mis en cause was put in default and, on July 6, the respondents instituted proceedings in Provincial Court against the mis en cause claiming damages in the amount of $4,910. On August 17, the mis en cause successfully moved for the case to be evoked to the Superior Court since the title to an immoveable was challenged by the contestation (arts. 32 and 155 of the Code of Civil Procedure, R.S.Q., c. C-25). In his subsequent defence to the action before the Superior Court, the mis en cause counterclaimed for damages of $15,100, allegedly suffered on account of the respondents' refusal to purchase the property. In answer to the counterclaim, the respondents exercised a recourse in warranty against the appellant on the basis that it was on his advice that they refused to purchase the property.
Judgments
Superior Court (Mignault J.)
The Superior Court dismissed the respondents' action and allowed both the mis en cause's counterclaim and the respondents' recourse in warranty against the appellant.
At trial, both the appellant and notary Giroux testified as to their respective concurring opinions regarding the defect in the title to the property. In addition, Me Yves Demers, a well‑known notary in practice for 28 years and a professor at the Faculty of Law, Laval University, was called by the appellant as an expert in the field, a qualification which the trial judge recognized on the issue of notarial practice. Me Demers also agreed that the appellant notary acted in a reasonable and prudent manner in the circumstances of the case. The respondents called no evidence on that particular aspect of the case.
The trial judge rejected the appellant's view on the basis that it disregarded the authority of res judicata and held that:
[translation] The effect of the contentious judgment of July 17, 1980 was therefore definitive; it had the authority of res judicata, conferring good and valid title on the Caisse populaire St-François d'Assise, despite the fact that the hypothec granted pursuant to the deed of obligation of May 31, 1977 was granted by Paul Leclerc and the owner at that time was Paul Leclerc Inc.
Having found that the mis en cause's title was valid, the trial judge expressed the view that the appellant committed an error of law and that the respondents were not justified in refusing to sign the deed of sale. The trial judge then determined whether the appellant's error of law was the causa causans of the damages suffered by the respondents:
[translation] It is true that the decision regarding purchase of the property was exclusively a matter for the plaintiffs [respondents]. In this connection it should be pointed out that the latter, who had no expert knowledge in the area, had no alternative but to follow the recommendation of the notary whose professional services they had retained. As the title of the defendant [mis en cause] was for the reasons we gave earlier good and valid, the defendant in warranty [the appellant] was not justified in making the recommendation to them that he did.
Regarding the issue of fault, the trial judge concluded:
[translation] . . . the defendant in warranty [the appellant] concluded that the hypothec granted by Paul Leclerc was null and void, and that accordingly the judgment was as well, since in reality he gave the judgment no more value than the hypothec, which was a mistaken conclusion of law in the circumstances. Mr. Dorion could not be unaware of the provisions of the first paragraph of art. 1241 C.C.[L.C.]. In performing his duty as legal counsel for the plaintiffs [the respondents], he should have taken his research further and considered whether the judgment of July 17, 1980 had any effect in law, rather than simply concluding that the judgment was vitiated merely by the fact that the hypothec granted by Paul Leclerc to the Caisse populaire was null and void.
He made the following comments as regards common notarial practice:
[translation] . . . we cannot share the opinion of the notary Demers when he says that the notary Dorion "acted properly, prudently and in the best possible way in the circumstances".
Mignault J. thus dismissed the respondents' action, allowed the mis en cause's counterclaim and ordered the respondents to pay the mis en cause $3,500 in damages, the amount agreed upon by the parties, with interest, the additional indemnity provided for in art. 1078.1 C.C.L.C. and costs of a fourth class action. The recourse in warranty was allowed with costs and the appellant, defendant in warranty, was ordered to indemnify respondents in the amount of their condemnation in the mis en cause's counterclaim.
Court of Appeal
The appellant sought leave to appeal to the Quebec Court of Appeal. Leave was refused under art. 26(4) C.C.P. for the following reason:
[translation] WHEREAS the appellant has not shown that the point at issue was one which should be submitted to the Court of Appeal;
Leave to appeal to this Court was granted on February 2, 1989, [1989] 1 S.C.R. viii, on condition that appellant assume the costs of the appeal in any event.
Issues and Arguments
In considering the issue of professional liability, there are several questions which arise in the context of this case. Was the appellant notary in error? If so, did such error constitute a fault engaging his liability? The examination of these questions will entail a discussion of the nature of professional liability, the notion of res judicata and its incidence in the context of title searches, the distinction between error and fault, the significance of expert testimony as it relates to legal questions, causation, and finally, the question of costs. On each of these issues the parties submitted arguments.
The appellant maintains that he committed no error of law. In his view, the hypothec was void ab initio according to art. 2037 C.C.L.C. and the nullity was absolute. Consequently, the hypothecary obligation was null and the judgment on the giving in payment clause did not confer ownership on the Caisse. There was no res judicata on the right of ownership of the Caisse since there was neither identity of object nor identity of cause, the judgment not bearing upon the validity of the hypothec. Furthermore, the trustee in bankruptcy of Paul Leclerc Inc. was not called in the proceedings, and thus could later, acting on behalf of the creditors of the bankrupt estate, contest the validity of the Caisse's ownership.
The appellant argues that the judgment of the Superior Court ignores the issue of fault completely. By failing to consider the behaviour of the prudent and reasonable notary in similar circumstances, the trial judge confused the notions of fault and error of law, transforming an obligation of diligence into an obligation of result. The burden of proof was on the respondents to establish the fault of the appellant, and they brought no evidence to support this claim.
As to the role of expert testimony, while, according to the appellant, the judge must decide questions of law, where professional liability is in issue, experts can assist the court in determining how a reasonable professional would have acted in a given situation. In the appellant's view, the trial judge did not assess the expert evidence regarding "reasonable" notarial practice, but instead rejected it on the ground that he disagreed with the expert's opinion on the question of law. The appellant relies on Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, claiming that expert testimony was considered in the determination of a lawyer's negligence, and thus argues that courts should allow expert testimony in matters of notarial liability.
The respondents, for their part, submit that there was no defect of title. Consequently, the advice of the appellant notary to the contrary was erroneous. They plead in substance the following.
First, the respondents say that the presumption of res judicata, as set forth in art. 1241 C.C.L.C., is irrebuttable. Jurisprudence, doctrine, as well as the codal provision itself all recognize the final and definite effect of a judgment rendered in contentious matters by a civil tribunal. The Superior Court's judgment of July 17, 1980, registered against the property in question on August 20, 1980, acquired the authority of res judicata, as the judgment was not appealed. The mis en cause therefore acquired perfect title when he became the owner of the said property.
In the action on the giving in payment clause, the respondents maintain that all the interested parties were called into the proceedings, because the owner of the property, Paul Leclerc Inc., was designated as a party and the action was served on the company. The trustee of both bankrupt estates was served and made a party to the suit, albeit as a trustee to the personal bankruptcy of Paul Leclerc. The conclusions of the Superior Court on the action in giving in payment were, in the respondents' view, clear and unambiguous, declaring the Caisse sole owner of the property and radiating all charges against the immoveable property retroactively to the date of the deed of loan. The failure of the parties to the proceedings to raise the matter of ownership of the property at that time precluded them from subsequent