Executive Summary: Key Legal and Evidentiary Issues

• Scope of an insurer’s duty to defend when the new claim (Riopel action) concerns contribution between solidary co-debtors rather than a fresh third-party liability claim against directors and officers.
• Effect of the repeal of article 56 of the Loi sur les assurances and whether “acquired rights” under that article can extend the defence obligation to subsequent, related litigation.
• Characterisation of the Riopel action as a distinct recourse over (reallocation of a solidary judgment) rather than a continuation of the Rhéaume litigation for purposes of triggering defence coverage.
• Impact of the insurer’s earlier assumption of the defence in the Rhéaume action and whether this creates a continuing contractual or estoppel-type bar (forclusion) against refusing defence in later proceedings.
• Application of injunctive (Wellington-type) relief criteria, including clear or apparent right, irreparable harm, and balance of convenience, to a request for an order compelling defence funding.
• Distinction between claims seeking indemnity for past defence and indemnity costs arising from a prior judgment, and a current, independent duty-to-defend obligation in a new lawsuit.

Background and facts of the dispute

The judgment arises out of long-running litigation stemming from what is known as the Rhéaume lawsuit, in which Messrs. Daniel Riopel and Antoine Ponce were held solidarily liable, along with others, for failing to disclose information that should have been communicated to the defendants in that earlier proceeding. That failure of disclosure led to a substantial monetary condemnation by the courts. In the Rhéaume case, the Supreme Court of Canada ultimately confirmed the liability findings against Messrs. Riopel and Ponce and the resulting monetary judgment against them. Riopel and Ponce were condemned in solidum for an amount exceeding ten million dollars, namely 10,859,684 $, payable to third parties in that proceeding.

As a consequence of this solidary condemnation, Mr. Riopel personally paid that entire amount (or at least a very substantial portion of it) to the third-party creditors. Following that payment, he took the position that, as between him and Mr. Ponce, the 50/50 allocation implicitly assumed by the solidary judgment and its execution was unfair. In his view, Mr. Ponce should bear a larger share of the financial burden arising from their established liability.

This led to a new proceeding, the present Riopel action, in which Mr. Riopel sues Mr. Ponce for partial reimbursement of what he considers to be an overpayment on his part. In the current case, he seeks 6,955,216 $ from Mr. Ponce, which he characterises as the share of the Rhéaume judgment that Ponce ought equitably to bear, having regard to their respective conduct and responsibility. The essence of the new claim is not to re-litigate the underlying liability to third parties, which is res judicata, but to re-allocate, between the former co-defendants themselves, the solidary debt already paid.

In the earlier Rhéaume lawsuit at first instance, Industrielle Alliance, Assurance et Services Financiers Inc. (IA) had intervened as liability insurer. IA appointed defence counsel for both Messrs. Riopel and Ponce and paid their defence lawyers’ fees for the trial level. However, IA refused to pay the damages resulting from the judgment once the liability and the large monetary condemnation were pronounced. IA also declined to reimburse the legal fees incurred by Messrs. Riopel and Ponce in the subsequent appeals before the Court of Appeal and the Supreme Court.

Following that refusal, Mr. Ponce instituted a separate lawsuit in the district of Montréal against IA, seeking to recover both the amounts he paid under the Rhéaume judgment and the legal costs he assumed in the appellate courts. In that separate Montreal action, he also brought a Wellington-type motion—seeking specific performance of the alleged obligation to defend and indemnify—that was rejected at first instance and again on an application for leave to appeal, which was dismissed by the Court of Appeal.

The Wellington-type motion in the Riopel action

In the present Terrebonne proceedings (the Riopel action), Mr. Ponce again turns to IA, but this time in the context of the new litigation brought against him by Mr. Riopel. He files a Wellington-type motion, seeking an order that IA be compelled to assume his defence. Specifically, he asks the Superior Court to order IA to: (i) take over his defence, (ii) allow him to choose counsel at IA’s expense, and (iii) pay all past and future legal fees related to this Riopel action.

To support this request, Ponce relies on former article 56 of the Loi sur les assurances, which established a statutory framework for an insurer’s duty to defend. Although this provision was repealed in 2019, he argues that it continues to apply by virtue of the Loi sur l’interprétation. Under article 12 of that statute, an abrogated provision can remain effective insofar as a party proves that it enjoys an “acquired right” or that an obligation was contracted under the former law.

Ponce’s main thesis is that the current Riopel lawsuit is not a new and independent dispute, but rather a continuation or extension of the Rhéaume proceedings in which IA had already acknowledged its duty to defend. He contends that since IA accepted and fulfilled (at trial level) a duty to defend both himself and Riopel in the Rhéaume case, this creates a vested or acquired right to ongoing defence coverage for any subsequent claims “stemming from” the same facts and underlying omissions. In his view, the Riopel action is simply a new facet or phase of the same underlying controversy.

He also raises what is effectively a forclusion (estoppel-like) argument: by appointing counsel and paying trial-level legal fees in the Rhéaume case, IA would now be barred from denying a continuing duty to defend him in all proceedings that derive from that original factual matrix.

The insurer’s position and prior related proceedings

IA contests the Wellington-type motion on several grounds. First, it points out that article 56 of the Loi sur les assurances has been repealed and that any reliance on acquired rights must be strictly tied to obligations that were specifically contracted or vested under the old law. IA further notes that in the prior Montreal action brought by Ponce, a similar Wellington-type demand seeking execution in kind of an alleged defence and indemnity obligation was already rejected at both the Superior Court and Court of Appeal levels. Those judgments refused to compel IA to represent and indemnify Ponce for the Rhéaume judgment and his appellate legal costs.

IA also underscores that its acceptance of the defence in the Rhéaume case was done “sous toutes réserves de ses droits” (under full reservation of its rights). After the trial judgment by Justice Déziel in that case, IA withdrew from the debate and did not assume defence or indemnity responsibilities for the appellate stages. This conduct underscores that, in IA’s view, its involvement was limited and carefully circumscribed, and did not amount to a blanket or perpetual undertaking to defend Ponce in any and all future litigation arising from the same facts.

In the present Riopel case, IA argues that the new lawsuit is categorically different in nature from a third-party claim that would trigger the classic duty to defend under article 56. The new claim, they maintain, is a dispute between former co-defendants over the internal allocation of a debt that has already been judicially quantified and recognized, not a fresh liability action by a third party alleging fault or wrongful conduct by directors or officers.

Characterisation of the Riopel claim and its impact on coverage

The Superior Court accepts IA’s characterisation of the Riopel proceedings. The judge emphasizes that the current lawsuit is indeed “distinct,” despite having its roots in the prior Rhéaume judgments. The trame de base (factual backdrop) is the omission to disclose key information and the significant monetary condemnation that followed, but the object of the present case is no longer the responsibility of the defendants vis-à-vis third parties.

Instead, the present claim is a recourse over between Messrs. Riopel and Ponce, both of whom have already been held solidarily liable in Rhéaume. The question is now how to divide that solidary debt between them—whether Riopel has overpaid, and whether Ponce should reimburse a significant portion of what was paid to the third-party creditors. This is, in the Court’s formulation, a matter of “partage de responsabilité solidaire” (allocation of solidary liability) rather than a new third-party claim that raises questions about the conduct of directors and administrators towards external claimants.

Crucially, the Court finds that this kind of internal allocation dispute between co-debtors does not fall within the ambit of the duty to defend under article 56. That provision, even when it was in force, was geared to situations where an insured is sued by a third party, not where insured parties sue each other to redistribute the financial burden of an existing judgment. Consequently, the Court holds that the Riopel action does not qualify as a “poursuite d’un tiers” that would activate IA’s defence obligation.

Effect of the repeal of article 56 and the doctrine of acquired rights

On the question of the repeal of article 56, the Court notes that the provision was abrogated in June 2019 as part of a broader legislative reform (PL 141). While the Loi sur l’interprétation allows certain rights and obligations under repealed statutes to persist, this depends on whether the party invoking the repealed provision can demonstrate a true acquired right or pre-existing contractual obligation under that provision.

The Court rejects Ponce’s attempt to frame his current claim for defence coverage in the Riopel action as the continuation of a right acquired under article 56 during the Rhéaume case. The judge concludes that whatever defence obligation IA may have had in Rhéaume was specific to that lawsuit and limited in scope; it was not a perpetual or open-ended commitment to fund all future litigation among the same actors. In particular, the insurer’s earlier acceptance of the defence “sous toutes réserves” and its subsequent withdrawal after the Déziel judgment undermine any suggestion of a vested and continuing right.

As a result, the argument that article 56 continues to apply through the doctrine of acquired rights fails. With that, Ponce’s attempt to extend the old statutory duty to defend into the contemporary Riopel proceedings is dismissed.

Rejection of the forclusion argument and contractual extension theory

The Court also expressly refuses to endorse Ponce’s forclusion (estoppel) argument. The mere fact that IA appointed counsel and paid fees at first instance in Rhéaume does not bar the insurer from now declining to defend him in subsequent, distinct litigation. The judge underscores that any such defence in Rhéaume was subject to full reservation of rights, making it clear that IA did not intend to waive its coverage defences or to lock itself into a permanent defence obligation.

Similarly, the Court is not persuaded by the idea that a continuing contractual obligation to defend exists by virtue of the initial appointment of counsel in Rhéaume. The judge views that appointment as a limited response to a particular lawsuit, not as evidence of a broader contractual commitment encompassing future contribution or allocation disputes between co-defendants. Once the trial judgment was rendered in Rhéaume, IA lawfully exited the litigation, consistent with its reserved-rights stance.

Injunctive nature of the Wellington relief and absence of required criteria

The Wellington-type relief sought by Ponce is characterized by the Court as injunctive in nature: he is effectively asking for a mandatory order compelling IA to perform a specific obligation (to assume his defence and pay defence costs). As with other injunctive remedies, this requires the applicant to demonstrate, among other things, a clear or at least apparent right, irreparable harm, and that the balance of convenience favours issuing the order.

The Court concludes that none of these criteria are met in the present case. First, there is no clear or even apparent right to coverage, given the distinct nature of the Riopel action, the repeal of article 56, and the failure of the acquired-rights theory. Second, Ponce cannot show irreparable harm, because he is effectively seeking reimbursement of legal fees—a harm that is, by its nature, compensable in money. Third, the balance of convenience does not favour imposing a contested and legally doubtful defence obligation on the insurer when the underlying dispute is essentially about cost allocation between co-debtors.

On these grounds, the Court finds that the injunctive threshold for Wellington-type relief has not been met.

Outcome and financial consequences

In the result, the Superior Court dismisses Mr. Ponce’s Wellington-type motion in the Riopel action. It holds that the coverage he seeks under former article 56 of the Loi sur les assurances does not apply, that the Riopel lawsuit is a distinct recourse over between former co-defendants rather than a third-party liability claim, and that neither acquired rights nor forclusion can extend IA’s former defence involvement in Rhéaume into this new context.

Accordingly, the Court rejects Ponce’s request for an order compelling IA to assume his defence and pay his past and future legal fees in this proceeding. The successful party in this decision is IA, which obtains dismissal of the motion and an award of costs in its favour. The judgment orders that the motion be rejected “avec frais de justice en faveur de l’intimée,” but it does not specify the monetary quantum of those costs. The total amount actually recoverable by IA for costs and any related monetary award will therefore depend on subsequent taxation or tariff-based assessment, and cannot be determined from the judgment itself.