2016 QCCA 645, 2016 QCCA 645

Stein c. RSM Richter Chamberland, l.l.p 2016 QCCA 645 COUR D'APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N o : 500-09-024903-148 (500-17-072198-123) PROCÈS-VERBAL D'AUDIENCE DATE : Le 7 avril 2016 CORAM : LES HONORABLES YVES-MARIE MORISSETTE , J.C.A. JEAN BOUCHARD , J.C.A. MARK SCHRAGER , J.C.A. APPELANTS AVOCAT JACK STEIN 148677 CANADA INC. M e TUAN KHAI ALAIN NGUYEN ( Jeansonne Avocats, Inc. ) INTIMÉES AVOCATE RSM RICHTER CHAMBERLAND LLP RICHTER & ASSOCIATES G.P. Me CAROLINE MALO ( Clyde & Cie Canada) En appel d'un jugement rendu le 11 novembre 2014, par l'honorable William Fraiberg, de la Cour supérieure, district de Montréal.

NATURE DE L'APPEL : Contrats spéciaux – société – interprétation d’une clause d’indemnisation Greffière d’audience : Shirley Thomas Salle : Pierre-Basile-Mignault AUDITION 9 h 31 Ouverture de l'audience. Échanges entre le Juge Morissette et Me Nguyen. 9 h 32 Argumentation de Me Nguyen. 10 h 11 Suspension de l'audience 10 h 17 Reprise de l'audience. La Cour juge non nécessaire d'entendre les représentations de Me Malo. 10 h 18 Échanges entre le Juge Morissette et Me Nguyen. 10 h 19 Par la Cour: Arrêt unanime – voir page 3. 10 h 19 Fin de l'audience.

SHIRLEY THOMAS Greffière d’audience BY THE COURT : JUDGMENT [ 1 ] The Superior Court (the Honourable William Fraiberg) decided on November 11, 2014, that the indemnification clause contained in the parties’ agreement of February 16, 2007, did not include the obligation to reimburse Appellants’ legal fees incurred to defend disciplinary proceedings. [ 2 ] Appellant, Stein, is a chartered accountant, and was a partner in the Respondents’ accounting firm. Corporate Appellant is his holding company.

The agreement provided for his resignation as a partner, and the withdrawal of corporate Appellant from the partnership. The relevant clauses read as follows: The indemnification clause reads as follows: INDEMNIFICATION (

a) RSM Richter undertakes to indemnify and hold Jack [Appellant Stein] and Jackco [corporate Appellant] harmless with respect to any professional liability claims which may be (sic) against either of them as a Partner of RSM Richter in relationship to any event or occurrence which relates to the fulfillment of Jack or Jackco’s duties, except as regards the Excluded Matters.

Section 1 (

b) of the agreement defines “Excluded Matters” thus: (b) “Excluded Matters” means any rights which RSM Richter may have against either of the Partners relating to claims made against any RSM Richter Entity by any third party arising from any activities of Jack or Jackco:

(

i) outside the scope of his duties as a partner or arising from wilful misconduct or fraud; or (ii) relating to that matter commencing in September 2006 which ultimately led to Jack’s resignation as a Partner; [ 3 ] The judge held that given their very nature, it is impossible to indemnify against disciplinary complaints. The sanctions (reprimands, suspensions or revocation of licence) are purely personal, and, though monetary penalties could be reimbursed, the judge concluded that it would be against public order to do so.

Without expressing an opinion on this final reason, it is inescapable that Respondents were not obliged to indemnify or hold Appellants harmless from legal fees incurred to defend disciplinary complaints based on the plain meaning of the clause. Moreover, the judge’s reasons for not reading into the clause any obligation to defend are unassailable. [ 4 ] The judge also found that the testimony of the parties as to the meaning of the clause was not admissible since the wording of the document did not suffer from any ambiguity. We think the judge was correct.

Moreover, we have reviewed the testimony of each of the protagonists who negotiated the agreement (given under reserve of objections). Though they were both aware of the commencement of disciplinary proceedings by the Order of Chartered Accountants against appellant Stein at the time the agreement was negotiated, their testimony does not indicate a common intention that Appellants’ legal fees incurred or to be incurred in such matter be covered by the indemnification clause. [ 5 ] Contractual

interpretation raises questions of fact, [1] and, more specifically, the existence of an ambiguity in a contract is a question of fact. [2] Thus, Appellants’ burden before us is to demonstrate a palpable and overriding error in the judgment. This, the Appellants have failed to do. FOR THESE REASONS, THE COURT: [ 6 ] DISMISSES the appeal with legal costs YVES-MARIE MORISSETTE, J.C.A. JEAN BOUCHARD, J.C.A. MARK SCHRAGER, J.C.A.