December 19, 2018

Defending the indefensible will come back to haunt you

In Babin c. Gérin, the Superior Court weighed in on several issues concerning the professional liability of notaries. In this context, it also criticized the defence put forward by the insurer of the members of the professional order and ordered the Quebec order of notaries’ professional liability insurance fund (the “Fund”) to pay $50,000 in punitive damages.

The facts of this case are unique and relatively complicated. Essentially, it is sufficient to note that a notary was sued for having prepared the deed of sale of property designated as the common portion of an immovable owned in divided co-ownership and reserved for commercial use, whereas the parties wished to acquire full ownership for residential purposes. The Fund, which was added as a defendant, tried unsuccessfully to resolve the dispute by proposing various solutions to the parties involved.

Brodeur J. of the Superior Court rendered judgment in this rather troubled context, marked by acrimony among the various protagonists involved in the case. She first analyzed the notary’s liability and found that he had committed a gross fault. Following this analysis, she commented on the conduct of the Fund in the defence of this matter. The Fund argued that the plaintiffs had failed to mitigate their damages by refusing the settlement offers presented by its representative. However, the judge criticized this line of argument and the settlement offers filed into evidence by the Fund. She expressed her disapproval of the amendments to the Fund’s defence, which she considered late (Paragr. 174), and furthermore had not been served on all the parties likely to be affected (Paragr. 175). She also criticized the Fund’s settlement offers, which did not provide a solution to the plaintiffs’ problems (182). Finally, she noted that [translation] “this matter could have been settled quickly. The fault was promptly admitted, the damages could be established with ease, and the causal connection was clear.” (Paragr. 200).

Noting the distinction between the faults that may be alleged against a professional order and the insurer of its members (Paragr. 196), the judge emphasized the insurer’s obligations with respect to handling its files and fulfilling its duties, as in her view, persons who contract with members of a professional order have the right to expect its insurer to conduct itself in a diligent and exemplary manner (Paragr 199). Finally, although the Court did not consider the Fund to be in bad faith, it found that the Fund had exercised its right to take part in judicial proceedings abusively as a result of its excessive and unjustified contestation of the action (Paragr. 202).

The nightmarish facts of this case certainly had an impact on the judge’s comments in regard to the Fund’s conduct of the defence. All parties to a dispute, whether an insurer defending a professional or other, must ensure not to exercise their right to take part in judicial proceedings abusively. The standard of conduct is no different for a professional liability insurer.