Duty of confidentiality and loyalty incumbent on Forensic Accountants who act as expert witnesses before the courts of Quebec

By : Luc Marcil, CPA, CPA●IFA, CFF

Managing Director

Lepage Marcil David Forensic Accountants inc.

On July 3, 2017, the Honourable Chantal Tremblay S.C. J. rendered an important judgment 1 concerning the duty of confidentiality and loyalty incumbent on Forensic Accountants who act as expert witnesses before the courts of Quebec. The Quebec Court of Appeal confirmed this decision on November 27, 2017.

Full disclosure: the undersigned was directly involved in the proceedings.

Summary of the facts:

• Groupe Jean Coutu (PJC) Inc. (“GJC”) is a corporation incorporated under the laws of Quebec on June 22, 1973 2.

• Sopropharm is a non-profit legal entity founded under the laws of Quebec on October 10, 19813.

• Sopropharm is a group of GJC franchisees.

• Between February 2009 and September 2012, then employed by Navigant Consulting LJ.inc., the services of the undersigned were retained by GJC regarding a dispute with pharmacist Michel Quesnel concerning section 49 of the Code of Ethics of Pharmacists 4 (the "Quesnel case").

• On September 2, 2014, in the context of a dispute with GJC concerning the royalty provided for in the franchise agreement, Sopropharm retained the services of Mr. Nicolas Plante of the Strategy and Performance Group of Raymond Chabot Grant Thornton LLP. ("RCGT") 5 to prepare an expert report to quantify the market value of the services offered to its members by GJC in consideration of the royalty paid to the latter.

• On March 16, 2015, some six (6) months after Sopropharm retained the services of Mr. Plante, the undersigned joined the ranks of RCGT as the Leader of the Forensic Accounting and Investigations practice.

• On July 15, 2016, with no settlement achieved, Sopropharm launched a class action against GJC that essentially seeks to determine whether the royalty clause contained in the franchise agreements between its members and GJC is contrary to section 49 of the Code of Ethics of Pharmacists and must be annulled (the "Sopropharm case").

• On July 19, 2016, the undersigned found out, through a newspaper article, that Sopropharm had retained Mr. Plante's services regarding the class action filed against GJC. The undersigned immediately sent an internal email to denounce that GJC had retained his services in the Quesnel case and to ensure an appropriate ethical wall was established and maintained between himself and Mr. Plante's group.

• On November 2, 2016, GJC filed a motion to disqualify RCGT, its employees and associates from acting as experts in Sopropharm's class action. GJC also requested the withdrawal of the expert reports prepared by Mr. Plante's team from the court file relating to Sopropharm's class action.

• The issue in the Quesnel case was essentially the same as that in Sopropharm, namely the interpretation to be given to section 49 of the Code of Ethics of Pharmacists and the effect of that provision on GJC's franchise agreement.

• During the undersigned's tenure at RCGT, the forensic accounting and investigations practice was first part of the Recovery and Insolvency Group and then moved to the Financial Advisory Group, two services with no relationship with the Strategy andPerformance Group (now called the Management Consulting Group) under Mr.Plante's direction.

• In addition to being a CPA and a Specialist in Investigation and Forensic Accounting (CPA•IFA), the undersigned was also a lawyer and a member in good standing of the Quebec Bar Association at the time of the relevant facts 6. The undersigned's services in the Quesnel case were retained as a Forensic Accounting expert, not as a lawyer.

The issue to be adjudicated by the Court

Are the duties of confidentiality and loyalty applicable to forensic accountants who act as expert witnesses before the courts the same as those incumbent on lawyers?

Position of the parties

GJC

Relying on the fact that the expert concerned (the undersigned) had dual professional affiliations as a lawyer and a CPA at the relevant time, GJC essentially argued that the principles derived from the MacDonald Estate and R. v. Neil case 7 regarding conflicts of interest and the duty of loyalty incumbent upon lawyers apply in full to forensic accountants, as a result of amendments that were made to the Rules of Professional Conduct for Accountants in 2004 to reflect the Supreme Court's teachings in the above-mentioned case.

Sopropharm & RCGT

For Sopropharm and RCGT, the rules applicable to the disqualification of an expert differ from those governing lawyers. This distinction is explained by the fact that an expert does not belong to anyone and does not represent a party. Its role is to enlighten the court on technical or scientific questions based on submitted facts. As a result, the teachings of the Court of Appeal in Watson v. Sutton 8 and 149644 Canada Inc. v. City of St-Eustache 9 dealing with the conflict of interest of an expert should apply.

Decision of the Quebec Superior Court

The Honourable Chantal Tremblay, S.C.J., dismissed GJC's motion for disqualification. At

paragraph 57 of her decision, she wrote the following:

[57] « Le Tribunal est d’avis qu’il n’y a pas lieu d’interdire à M. Plante et aux membres

de son équipe qu’ils puissent agir comme experts pour Sopropharm en I’instance.

II en va de même pour les autres associés et employés de RCGT. Le respect du

Code de déontologie des comptables professionnels agrées ne saurait être un

obstacle puisqu’un expert n’appartient à aucune des parties. De plus, la bonne

administration de la justice milite contre une telle interdiction: forcer Sopropharm à

retenir d’autres experts à ce stade-ci entrainerait des retards et des couts

additionnels importants. »

Decision of the Quebec Court of Appeal 10

GJC applied to the Quebec Court of Appeal for leave to appeal the Quebec Superior Court’s decision. The Quebec Court of Appeal rendered its decision on November 27, 2017.

The Honourable Robert Mainville, C.A.J. dismissed the application for leave to appeal from the above-mentioned judgment of the Superior Court of Quebec. We understand that the Tribunal made this decision based on the rules governing class action appeals. In addition, he wrote the following at paragraphs 28 and 29 of his decision:

[28] « La juge tire ensuite la conclusion suivante de ces faits :

[55] Par ailleurs, même si le test de l'affaire Succession MacDonald devait

s'appliquer, le Tribunal est convaincu qu'une personne raisonnablement informée,

par la preuve documentaire et les interrogatoires tenus, serait persuadée qu'aucun

renseignement confidentiel n'a été communiqué par M. Marcil aux membres de

l'équipe ayant réalisé les rapports d'expertise ni quiconque chez Raymond

Chabot »

[29] « Ainsi, même si la Cour venait à la conclusion que les règles de conflit énoncées dans Succession MacDonald s’appliquent, la question qui restera alors à trancher en appel comportera nécessairement une appréciation de la preuve qui fut présentée en première instance. Or, dans les circonstances de l’affaire et vu ce qui est consigné au dossier, les conclusions de fait de la juge voulant (a) que rien de confidentiel n’ait été révélé par Luc Marcil et (b) que les mesures d’isolement prises à son égard soient adéquates, ne peuvent raisonnablement être remises en question en appel et ne permettent pas de conclure que l'équité même de l’instance est en péril. »

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Conclusion

Given the above-referred cases, Forensic Accountants acting as expert witnesses before the Courts of Quebec are not subject to the duties of confidentiality and loyalty incumbent on lawyers. Expert witnesses do not belong to anyone and do not represent a party. Their role is to enlighten the court on technical or scientific questions based on submitted facts.

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1 Sopropharm & als v. Groupe Jean Coutu (GJC) Inc. and Raymond Chabot Grant Thornton LLP, mise en cause,

Superior Court of Quebec, District of Montreal, file number 500-06-000802-161.

2 According to the Registre des entreprises du Québec.

3 According to the Registre des entreprises du Québec.

4 RLRQ, c. P-10, r.7. CQLR, c. P-10, r.7. In summary, section 49 of the Code of Ethics of Pharmacists prohibits a

pharmacist from sharing his fees or profits from the sale of drugs with a non-pharmacist. Despite this prohibition,

the Ordre des pharmaciens du Québec has published an interpretation of the above-mentioned section 49,

according to which franchisors may be remunerated based on a royalty calculated as a percentage of a

pharmacist's gross sales (which include the sale of medications) if they can demonstrate that this is equivalent to

the market value of the services offered in return.

5 RCGT’s Strategy and Performance Group is now known as the Management Consulting Group.

6 The undersigned has since retired as a member of the Quebec Bar Association as of April 1, 2025.

7 [2002] 3 R.C.S. 631.

8 1990 CanLII 3408 (QC CA).

9 1996 CanLII 6541 (QC CA).

10 Quebec Court of Appeal, file number 500-09-026958-173 (500-06-000802-161).