Executive Summary: Key Legal and Evidentiary Issues

• Two joined small claims actions alleged professional negligence by a notary who prepared a deed of donation without discussing its tax consequences.
• Each plaintiff claimed $15,000 in damages after Revenu Québec assessed a taxable benefit and an additional capital gain arising from the donation.
• The central issue was whether the notary breached her duty to inform and advise, measured against the standard of a reasonably prudent and diligent notary.
• Evidence showed the notary was never mandated to advise on tax matters, and the client never raised tax concerns before signing.
• Clauses 12 and 15 of the deed expressly addressed fiscal values, which the court held should have prompted an experienced businessman to make inquiries.
• Failing proof of fault, the court dismissed both claims without needing to analyze damages or causation.

Facts of the case

In 2016, Réjean Vachon was president and majority shareholder of Services d'arbres Katra inc. ("Katra"). He wished to transfer a parcel of wooded land held by Katra to his son Guillaume, who was also a shareholder of the company. Me Annie Pelletier, a notary, was mandated to formalize the deed of donation, which was signed on July 22, 2016. On November 18, 2019, the Agence du revenu du Québec (ARQ) issued a draft assessment to Mr. Vachon and Katra for the taxation year ending April 30, 2017: by making the donation, Katra had realized an additional capital gain of $18,004 and conferred a taxable benefit of $41,400 on Mr. Vachon. The assessment came as a great surprise to Mr. Vachon, since the tax consequences of the transaction had not been discussed with Me Pelletier. Mr. Vachon and Katra retained a tax specialist and a property appraiser to contest the draft assessment, and at Mr. Vachon's request, Me Pelletier prepared a deed of retrocession of the land, signed on October 14, 2020. On July 6, 2021, in response to the notices of objection, the ARQ reduced the taxable benefit received by Mr. Vachon to $24,000 and the additional capital gain realized by Katra to $12,000. Alleging they would not have proceeded with the donation had Me Pelletier informed them of its tax impacts, Mr. Vachon and Katra each claimed $15,000 in damages from the notary and from the Fonds d'assurance responsabilité professionnelle de la Chambre des notaires du Québec (the "Fonds"), which had refused their indemnification claim. Me Pelletier and the Fonds denied any liability.

Contractual clauses at issue

Clause 12 of the deed of donation, entitled "Considération," stated that the donation was made on a purely gratuitous basis (clause 12.1) and that, for tax purposes, the parties established the fair market value of the immovable at $16,583 (clause 12.2). That same sum of $16,583 also constituted the "base d'imposition du droit de mutation" under clause 15.1.4, while clause 15.1.3 set "le montant de la contrepartie pour le transfert de l'immeuble" at $16,100. These clauses, which explicitly touch on fiscal matters, became central to the court's assessment of who bore responsibility for raising tax questions.

The court's reasoning and analysis

The plaintiffs bore the burden of establishing, on a balance of probabilities, the three conditions of civil liability: fault by Me Pelletier, the damages each suffered, and a causal link between the two. In the Tribunal's view, Mr. Vachon and Katra did not demonstrate that Me Pelletier committed a fault by breaching her duty to inform and advise, or by departing from the standard of competence of a reasonably prudent and diligent notary in the same circumstances. Me Pelletier acknowledged that she had not read the deed to Mr. Vachon in its entirety, clause by clause, before signing, and had no recollection of her client asking about taxation or of the topic being discussed, though she presumed she had provided adequate explanations regarding clauses 12 and 15. Mr. Vachon stated that Me Pelletier said nothing about the tax impact of the transaction, but admitted he never raised the subject. While the notary's duty to advise included explaining the normally foreseeable legal consequences of the donation, including economic or fiscal ones, the Tribunal relied on the Court of Appeal's teaching in Clément c. Lemieux (2021 QCCA 1676) that the duty to inform is assessed in the particular context of the mandate. It was clear that Me Pelletier had never been mandated to advise her clients on the tax consequences of the donation; Mr. Vachon never claimed to have entrusted her with such a mandate, and nothing indicated he expressed concerns of that nature before signing. Moreover, Mr. Vachon, who was not deemed to be ignorant of the law, had an obligation to inform himself about the tax consequences, especially after reading clauses 12 and 15, which explicitly deal with taxation. An experienced businessman, he did not pay sufficient attention to the commitments he signed on behalf of his company. The notary, who is not a tax specialist, needed only to recommend competent professionals if she felt unable to advise adequately, but her client's silence never gave her the opportunity to do so. Even assuming a fault had been committed — which was not demonstrated — the plaintiffs would have had to bear full responsibility for the harm attributable to their own lack of diligence.

Ruling and outcome

Given its conclusion on fault, the Tribunal found it unnecessary to examine the extent of the damages suffered by Mr. Vachon and Katra or the causal link between their alleged harm and the notary's conduct. Both claims were dismissed, making Me Annie Pelletier and the Fonds the successful parties. No damages were awarded to the plaintiffs; instead, the judgments were rendered with legal costs of the contestation in the defendants' favour, fixed at $217 in file no. 200-32-708283-220 (Katra's claim) and $325 in file no. 200-32-708281-224 (Mr. Vachon's claim), for a combined total of $542.