Kenneth F. Salomon v. Sternthal Katznelson Montigny LLP, 2019 SCC 14

SUPREME COURT OF CANADA Citation: Salomon v. Matte-Thompson, 2019 SCC 14, [2019] 1 S.C.R. 729 Appeal Heard: March 19, 2018 Judgment Rendered: February 28, 2019 Docket: 37537 Between: Kenneth F. Salomon and Sternthal Katznelson Montigny LLP Appellants and Judith Matte-Thompson and 166376 Canada Inc. Respondents Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ. Reasons for Judgment: (paras. 1 to 97) Gascon J. (Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Rowe and Martin JJ. concurring) Dissenting Reasons: (paras. 98 to 215) Côté J. Salomon v.

Ma tte-Thompson, 2019 SCC 14, [2019] 1 S.C.R. 729 Kenneth F. Salomon and Sternthal Katznelson Montigny LLP Appellants v. Judith Matte-Thompson and 166376 Canada Inc. Respondents

Indexed as: Salomon v. Matte-Thompson 2019 SCC 14 File No.: 37537. 2018: March 19; 2019: February 28.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ. on appeal from the court of appeal for quebec Law of professions — Lawyers — Professional liability — Duty to advise — Duty of loyalty — Lawyer recommending financial advisor to clients — Clients investing millions of dollars with recommended financial advisor’s firm — Lawyer repeatedly endorsing advisor and encouraging clients to make and retain investments — Investments made in funds that were parts of Ponzi scheme — Millions lost in fraud — Clients claiming that lawyer and his law firm were professionally negligent — Trial judge dismissing claim — Court of Appeal allowing appeal and ordering that clients be compensated for losses — Whether Court of Appeal erred by employing notion of distorting lens in determining whether trial judge had made palpable and overriding errors — Whether Court of Appeal expanded professional obligations of lawyers who refer clients to independent advisors — Whether Court of Appeal erred by interfering with trial judge’s findings relating to faults committed by lawyer and to causation.

In 2003, a lawyer introduced two clients to his financial advisor and personal friend, and recommended that they consult him. In the following four years, the clients ended up investing over $7.5 million with the recommended financial advisor’s investment firm. Over the course of those four years, the lawyer repeatedly endorsed the recommended advisor as a financial advisor and encouraged his clients to make and retain investments with the investment firm. In 2007, the recommended advisor and his associate disappeared with the savings of around 100 investors, including those of the lawyer’s clients.

The clients instituted legal proceedings, claiming that the lawyer and his law firm were professionally negligent in two ways: first by breaching their duty to advise them and second, by disregarding their duty of loyalty to them. The trial judge dismissed the claim. The Court of Appeal concluded that the trial judge had made reviewable errors, and it reversed her judgment. In its opinion, the trial judge had viewed the lawyer’s acts and their consequences through a distorting lens which had led her to erroneously assess the evidence in isolated silos, without the insight provided by a global analysis.

The Court of Appeal ordered the lawyer and his law firm solidarily to fully compensate the clients for their losses. Held (Côté J. dissenting) : The appeal should be dismissed. Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Brown, Rowe and Martin JJ.: The Court of Appeal had a sufficient basis for intervening and reversing the trial judge’s decision. It properly applied the standards of appellate review, as imposed by Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235. The professional liability of the lawyer and the law firm for the clients’ losses has been established.

Findings with respect to fault involve questions of mixed fact and law and findings with respect to causation, questions of fact. In both situations, absent a palpable and overriding error, an appellate court must defer to the conclusions reached by the trial judge. It can only intervene if there is an obvious error in the trial decision that is determinative of the outcome of the case. The fact that an alternative factual finding could be reached based on a different ascription of weight does not mean that a palpable and overriding error has been made.

An appellate court must identify a crucial flaw in the lower court’s decision, and a distorting lens, that is, a lens through which a trial judge assessed the evidence and that had a distorting effect, cannot be invoked as a substitute for identifying a reviewable error or to mask the fact that an error identified by an appellate court does not meet the high standard imposed by Housen .

In the case at bar, the Court of Appeal held that the distorting lens through which the trial judge has viewed the evidence — in this case a narrow, siloed approach — had led her to make precisely identified palpable and overriding errors. The notion of a distorting lens was nothing more than a metaphor the Court of Appeal used to explain why the standard of appellate review established in Housen was met; it was not used to mask an absence of palpable and overriding errors.

The Court of Appeal did not err by employing the notion of a distorting lens in determining whether the trial judge had made palpable and overriding errors. Where the first court of appeal has justifiably intervened in the trial judgment and disagreed with the trial judge, the Court will intervene only if its own disagreement stems from a clear satisfaction that an error has occurred in the first appellate court’s assessment of the facts.

The focal point of the analysis that the Court — as the second and final court of appeal — has to perform in applying the Housen standards of review is the decision of the first court of appeal, not that of the trial judge. The onus is on the appellants to demonstrate an error in the court of appeal’s decision. Here, the appellants did not satisfy their onus.

The Court of Appeal did not err by concluding that the trial judge had made palpable and overriding errors, by interfering with the trial judge’s findings relating to the lawyer’s duty to advise and duty of loyalty, nor by interfering with the trial judge’s findings that the lawyer’s fault had not caused the clients’ losses. There is no reason for the Court to interfere with the Court of Appeal’s findings. The relationship between lawyers and their clients can usually be characterized as a contract of mandate.

Although lawyers, as mandataries, do not guarantee the services rendered by professionals or advisors to whom they refer their client, they must nevertheless act competently, prudently and diligently in making such referrals, which must be based on reasonable knowledge of the professionals or advisors in questions. Lawyers who refer clients to other professionals or advisors have an obligation of means, not one of result. They must be convinced that the professionals or advisors to whom they refer clients are sufficiently competent to fulfill the contemplated mandates.

Referral is not a guarantee of the services rendered by the professional or advisor to whom the client is referred, but it is also not a shield against liability for other wrongful acts committed by the referring lawyer. In the instant case, the lawyer had done far more than merely make a referral. It was the entirety of his conduct that led the Court of Appeal to hold the lawyer and his law firm liable in the circumstances. The Court of Appeal’s decision did not broaden the basis of liability for lawyers who refer clients to other professionals or advisors.

A lawyer’s duty to advise is threefold, encompassing duties to inform, to explain, and to advise in the strict sense. It is inherent in the legal profession and exists regardless of the nature of the mandate. Its exact scope depends on the circumstances, including the object of the mandate, the client’s characteristics and the expertise the lawyer claims to have in the field in question. When lawyers do provide advice, they must always act in their clients’ best interests and meet the standard of the competent, prudent and diligent lawyer in the same circumstances.

Any advice lawyers give that exceeds their mandate may, if wrongful, engage their liability. Here, the Court of Appeal had sufficient basis to intervene and find that the lawyer had failed to advise his clients as a competent, prudent and diligent lawyer would have done. It properly and precisely identified palpable and overriding errors made by the trial judge in her assessment of the parties’ relationships, which had a direct impact on her findings regarding the scope of any wrongful advice given.

When properly assessed as a whole, as the Court of Appeal did, the evidence reveals that the lawyer’s advice and reassurances were all part of a single continuum, and that placing them in separate silos would be artificial. The lawyer breached his duty to advise by recommending a non-diversified investment in offshore hedge funds to clients whose primary goal was to preserve the capital, by recommending financial products without performing due diligence and by repeatedly reassuring his clients that their investments gave them security of capital.

As mandataries, lawyers also have a duty to avoid placing themselves in situations in which their personal interests are in conflict with those of their clients. The duty to avoid conflicts of interest is a salient aspect of the duty of loyalty they owe to their clients. The duty of loyalty shields the performance of the lawyer’s duty to advise clients from the taint of undue interference.

In the instant case, the Court of Appeal was justified in finding that the lawyer’s personal and financial relationship with the recommended advisor had placed him in a conflict of interest and that he had neglected his clients’ interests. The trial judge adopted an unduly restrictive approach in analyzing the principles relating to conflicts of interest, which tainted her entire analysis concerning the breach of the lawyer’s duty of loyalty. A proper consideration of the evidence as a whole leads to the conclusion that this very close relationship affected the lawyer’s objectivity in advising his clients.

The lawyer’s divided loyalties led him to neglect his clients’ interests: he disregarded his duty of confidentiality regarding his communications with them and teamed up with the recommended advisor in an attempt to convince them not to withdraw their investments. More than one fault can cause a single injury so long as each of the faults is a true cause, and not a mere condition, of the injury. A fault is a true cause of its logical, immediate and direct consequences. This characterization is largely a factual matter, which depends on all the circumstances of the case.

A person who commits a fault is not liable for the consequences of a new event that the person had nothing to do with and that has no relationship to the initial fault. Two conditions must be met for the principle of novus actus interveniens to apply. First, the causal link between the fault and the injury must be completely broken. Second, there must be a causal link between that new event and the injury. A client’s ability to rely on advice given by his or her lawyer is central to the lawyer-client relationship and a client’s acceptance of a lawyer’s negligent advice cannot shield the lawyer from liability.

Fraud committed by a third party also does not shield from liability persons who failed to take required precautions. Where the risk of a decline in market prices or fraud by a third party materialize, and where lawyers have failed to abide by the standards of professional conduct that are meant to protect their clients against these very risks, they may be liable for their clients’ investment losses. Here, the trial judge’s findings regarding the extent of the faults committed by the lawyer no doubt had an impact on her causation analysis.

Assessing the evidence in separate silos based on the timing of the events and the specific funds that had been recommended was artificial. The trial judge’s causation analysis was also distorted by her erroneous finding that the lawyer had not breached his duty of loyalty. Taken together, the lawyer’s faults with respect to both his duty to advise and his duty of loyalty were a true cause of the losses suffered by his clients. The fraud did not break the chain of causation — no losses would have been suffered without the faults first committed by the lawyer.

Per Côté J. (dissenting): The appeal should be allowed. The Court of Appeal should not have substituted its own view of the case for that of the trial judge as there were no palpable and overriding errors in her key findings. The Court of Appeal wrongly intervened on the basis of mere differences of opinion regarding the assessment of the evidence, which is clearly inconsistent with the role of an appellate court. When a first appellate court interferes with a trial judge’s findings in the absence of reviewable errors, it is the Court’s role to step in and to restore the trial judge’s decision.

On questions of fact or of mixed fact and law, an appellate court cannot make its own findings and draw its own inferences unless the trial judge is shown to have committed a palpable and overriding error. As a precondition to intervening in a trial judge’s decision, the appellate court must point to a specific and identifiable error that amounts to more than a divergence of opinion and that error must be shown to be determinative of the outcome of the case. The identification of a palpable and overriding error does not require a review of the evidence as a whole.

The focus of the review is the trial judge’s reasons and, if need be, specific pieces of evidence to which the appellant draws the attention of the appellate court to show that a given finding is unsupported by the evidence. It would be inappropriate for the appellate court to conduct its own assessment of the evidence and then to take note of points of disagreement with the trial judge’s findings and hold that those findings result from palpable and overriding errors in order to justify intervening.

Appellate courts are, in comparison to trial judges, ill-equipped for the task of fact-finding and must thus leave the task to trial judges. The distorting lens metaphor does not dispense with the requirement of identifying reviewable errors in accordance with the standards articulated in Housen . A “distorting lens” cannot justify a wide-ranging review of the entire record unless adopting the lens is shown to be, in itself, a reviewable error.

The distorting lens metaphor may arguably be useful to illustrate how certain palpable errors taint the analysis of the evidence to the point of having an overriding effect, but a metaphor is not a full explanation. The appellate court must explain why the trial judge erred by viewing the case through the impugned “distorting lens”, why that error amounts to more than a mere divergence in opinion, and precisely how it distorted the trial judge’s analysis and affected the outcome of the case.

Part of the Court’s role as a second and final court of appeal is to ensure that a trial judge’s findings of fact or of mixed fact and law remain undisturbed unless a palpable and overriding error is established. Although the focal point of the Court is the first appellate court’s decision, not that of the trial judge, the Court must inevitably return to the trial judge’s reasons in order to determine whether the first appellate court correctly identified reviewable errors. In that regard, the Court should not defer to the first appellate court with respect to the identification of reviewable errors.

When the Court reviews a decision in which the first appellate court has substituted its own findings of fact or of mixed fact and law for those of the trial judge, it must first inquire into whether the first appellate court correctly identified reviewable errors. If it did not, the trial judge’s findings must be restored regardless of the merits of the first appellate court’s findings. If, however, the Court agrees that the intervention was warranted, it must ask whether the first appellate court has erred in making its own independent assessment of the relevant evidence.

It is only at this step that the Court will

show a certain deference and will therefore avoid intervening unless clearly satisfied that the first appellate court’s findings are erroneous. In the instant case, the trial judge did not make a palpable and overriding error with respect to fault and causation. The Court of Appeal merely preferred a different “lens” than the one used by the trial judge. Further, it relied on a broad reassessment of the evidence in order to identify the purported errors, which is at odds with Housen and its progeny.

The Court of Appeal’s intervention was unwarranted and the Court must intervene to restore the trial judge’s findings. Whenever lawyers recommend other professionals, or express confidence in them, they must meet the standard of a reasonably competent, prudent and diligent lawyer in the same circumstances. Lawyers should make such inquiries as will enable them to acquire reasonable knowledge of professionals they recommend unless they already have relevant experience dealing with them.

Not every professional error made in making such inquiries — or in failing to make them — will amount to a fault if the lawyer’s conduct does not depart from the standard expected, and courts must be careful not to assess recommendations in light of facts discovered subsequently. Moreover, referring lawyers are not required to monitor the advice given by the professionals they recommended, as this would defeat the purpose of referral.

In the instant case, the Court of Appeal did not identify a specific reviewable error in the trial judge’s reasons in relation to the lawyer’s initial recommendation and later expressions of confidence. The lawyer did not commit a fault in recommending the investment firm and the financial advisor and in expressing confidence in them. While the lawyer had a duty to advise both his clients and a duty of loyalty to both of them, those duties were largely circumscribed by the very nature and scope of his mandates.

The precise scope of a mandate does not always limit a lawyer’s duties, but it is certainly one of the main considerations for a judge when assessing professional liability. In the present case, as the lawyer had had no specific mandate with regard to the clients’ investments, it was appropriate for the trial judge to eschew an overly broad approach to liability. The lawyer’s confidence in the competence and probity of the investment firm and the recommended advisor was based on reasonable knowledge. He therefore acted as a reasonably competent, prudent and diligent lawyer in the circumstances.

A lawyer’s duty to advise generally includes obligations to inform the client of the relevant facts, to explain available options and their implications, and to recommend a course of action. Yet, the precise content of that duty is highly dependent on the circumstances, including the scope of the mandate, the obligations assumed by the lawyer and his or her areas of expertise. In this case, there is no palpable and overriding error in the trial judge’s finding that the lawyer’s only fault relating to his duty to advise was to recommend specific investment products.

As the trial judge concluded, the lawyer failed to act as a reasonably competent, prudent and diligent lawyer in recommending specific investment products and in volunteering investment advice even though such advice fell outside of the limits of his mandates. In so doing, he breached his duty to advise. Indeed, to the extent that a lawyer does provide advice, he must meet the standard of a reasonably competent, prudent and diligent lawyer in the same circumstances irrespective of the scope of his mandate.

The Court of Appeal had some basis for concluding that the lawyer had committed the same faults in respect of both his clients, but even if this error is assumed to be palpable, it did not affect the outcome of the case. This error did not justify the Court of Appeal’s conducting a broad reassessment of the evidence for the purpose of finding other potential errors. The analysis of an alleged fault related to the duty of loyalty involves a question of mixed fact and law and, unless a pure question of law can be extricated, the appropriate standard is that of palpable and overriding error.

An extricable question of law generally concerns a mischaracterization of the applicable legal test or a failure to consider a required element of that test. The analysis of an alleged conflict of interest is inherently fact-based and alleged conflicts must be assessed on a case-by-case basis. Not every potential violation of the duty of loyalty will give rise to an action in civil liability. The court must analyze the nature and the circumstances of the alleged conflict for the purpose of characterizing the violation and, if warranted, determining the appropriate remedy.

A trial judge does not have to discuss in detail every single fact alleged by the parties or every piece of evidence and declining to draw an inference falls squarely within its purview. The question is not whether the trial judge brushed aside elements that the court of appeal deemed important, but whether those omissions might have affected the conclusion. Here, the Court of Appeal erred in interfering with the trial judge’s finding that the lawyer had not breached his duty of loyalty to his clients.

It proceeded to revisit the issue of conflict of interests by applying the standard of correctness, as if a question of law had been identified. Yet, the Court of Appeal has not suggested that the trial judge failed to identify the correct legal principles applicable to the alleged fault related to the duty of loyalty or that there is an error in the trial judge’s characterization of the applicable legal test. The Court of Appeal failed to identify a palpable and overriding error and impermissibly reassessed the evidence as a whole on the basis of a disagreement over the weight to be given to the evidence.

The fact that the Court of Appeal would have weighed the evidence differently, or drawn different inferences, does not justify its intervention. Even if the trial judge did not address certain aspects of the professional relationship between the lawyer and the recommended advisor, especially the disclosure by the former of communications with his client and the fact that he had cooperated extensively with the recommended advisor and the investment firm on at least one occasion, those omissions did not affect her conclusions.

The trial judge properly considered the factors that could have cast doubt on the lawyer’s undivided loyalty and commitment to his clients, that is, his friendship with the recommended advisor and their financial relationship, including the gifts or commissions he had received. The conclusion that these factors were not enough to have placed the lawyer in a position where his personal interest conflicted with that of his clients was open to her, and is entitled to deference. A fundamental principle of civil liability is that a person is liable only for injury caused by his or her own fault.

A true cause is established when the plaintiff proves that the injury is a logical, immediate and direct consequence of the fault. It does not suffice to show that the fault increased the likelihood of the injury occurring if there is no evidence that the fault directly caused the injury either in whole or in part. The analysis of causation remains a context-based exercise which does not lend itself to legal theorizing. It is up to the trier of fact to draw a line, or identify a breaking point, between the consequences that flow directly and immediately from the fault and the others.

Proving breaches of a lawyer’s professional duties does not suffice to establish civil liability in the absence of a causal link to an injury. In the instant case, the Court of Appeal should not have completely reassessed the evidence and interfered with the trial

judge’s conclusions regarding causation of the basis of the distorting lens metaphor. It was open to the trial judge to find that the fraudwas the only true cause of the losses and that the recommendation of the investment firm and financial advisor was not close enough tothe injury to qualify as a logical, direct and immediate cause. With respect to the duties of loyalty and confidentiality, it is unclear howthe alleged breaches might have caused the losses. Moreover, even if the lawyer did commit additional faults related to his duty to adviseand his duties of loyalty and confidentiality after he had become aware of a news

article raising doubts about the firm’s practices, theoutcome would be the same as the funds were no longer recoverable by that time. Hence, any faults occurring after that date had noconsequence on the losses. Cases Cited By Gascon J. Distinguished: Harris (Succession), Re, 2016 QCCA 50, 25 C.C.L.T. (4th) 1; referred to: Housen v. Nikolaisen,2002 SCC 33, [2002] 2 S.C.R. 235; Montréal (Ville) v. Lonardi, 2018 SCC 29, [2018] 2 S.C.R. 103; Benhaim v. St-Germain,2016 SCC 48, [2016] 2 S.C.R. 352; 3091-5177 Québec inc. (Éconolodge Aéroport) v.

Lombard General Insurance Co. of Canada, 2018SCC 43, [2018] 3 S.C.R. 8; St-Jean v. Mercier, 2002 SCC 15, [2002] 1 S.C.R. 491; South Yukon Forest Corp. v. R., 2012 FCA 165, 4B.L.R. (5th) 31; H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401; J.G. v. Nadeau, 2016 QCCA 167; Nelson (City)v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, 2017 SCC 26,[2017] 1 S.C.R. 478; Ford du Canada ltée v. Automobiles Duclos inc., 2007 QCCA 1541; Softmedical inc. v.

Daabous,2017 QCCA 1270; Droit de la famille — 161960, 2016 QCCA 1300; Droit de la famille — 132381, 2013 QCCA 1505; Francoeur v.4417186 Canada inc., 2013 QCCA 191; Desrochers v. 2533-0838 Québec inc., 2016 QCCA 825; Gutin v. Cenfood International Inc.,2018 QCCA 317; 2758792 Canada inc. v. Bell Distribution inc., 2017 QCCA 603; Mangiola v. R., 2017 QCCA 741; Dunkin’ BrandsCanada Ltd. v. Bertico Inc., 2015 QCCA 624, 41 B.L.R. (5th) 1; Hydro-Québec v. Construction Kiewit cie, 2014 QCCA 947; R. v.Lalonde, 2014 QCCA 639; Poulin v. Pilon, [1984] C.S. 177; Labrie v. Tremblay, [2000] R.R.A. 5; Côté v.

Rancourt, 2004 SCC 58,[2004] 3 S.C.R. 248; Sylvestre v. Karpinski, 2011 QCCA 2161; Daigneault v. Lapierre, [2003] R.R.A. 902; Canadian National RailwayCo. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649; R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631; Parizeau v. Poulin DeCourval, (QC CA), [2000] R.R.A. 67; Dallaire v. Paul-Émile Martel Inc., (SCC), [1989] 2 S.C.R.419; Compagnie 99885 Canada Inc. v. Monast, (QC CA), [1994] R.R.A. 217; Quebec (Commission des droits de lapersonne et des droits de la jeunesse) v.

Bombardier Inc. (Bombardier Aerospace Training Center), 2015 SCC 39, [2015] 2 S.C.R. 789;Stellaire Construction Inc. v. Ciment Québec Inc., ; Laflamme v. Prudential-Bache Commodities Canada Ltd., 2000SCC 26, [2000] 1 S.C.R. 638; Laval (Ville de) (Service de protection des citoyens, département de police et centre d’appels d’urgence911) v. Ducharme, 2012 QCCA 2122, [2012] R.J.Q. 2090; Lacombe v. André, (QC CA), [2003] R.J.Q. 720;Beaulieu v. Paquet, 2016 QCCA 1284; 124329 Canada inc. v. Banque Nationale du Canada, 2011 QCCA 226, [2011] R.J.Q. 295;Hodgkinson v. Simms, (SCC), [1994] 3 S.C.R. 377.

By Côté J. (dissenting) Laferrière v. Lawson, (SCC), [1991] 1 S.C.R. 541; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R.235; Underwood v. Ocean City Realty Ltd. (1987), (BC CA), 12 B.C.L.R. (2d) 199; Prud’homme v. Prud’homme,2002 SCC 85, [2002] 4 S.C.R. 663; St-Jean v. Mercier, 2002 SCC 15, [2002] 1 S.C.R. 491; Montréal (Ville) v. Lonardi, 2018 SCC 29,[2018] 2 S.C.R. 103; Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; South Yukon Forest Corp. v. R., 2012 FCA 165, 4B.L.R. (5th) 31; Jaegli Enterprises Ltd. v. Taylor, (SCC), [1981] 2 S.C.R. 2; Schreiber Brothers Ltd. v.

Currie ProductsLtd., (SCC), [1980] 2 S.C.R. 78; Galambos v. Perez, 2009 SCC 48, [2009] 3 S.C.R. 247; Laflamme v. Prudential-BacheCommodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638; Hodgkinson v. Simms, (SCC), [1994] 3 S.C.R. 377;Lapointe v. Hôpital Le Gardeur, (SCC), [1992] 1 S.C.R. 351; H.L. v. Canada (Attorney General), 2005 SCC 25,[2005] 1 S.C.R. 401; P.L. v. Benchetrit, 2010 QCCA 1505; Schwartz v. Canada, (SCC), [1996] 1 S.C.R. 254; Nelson(City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Van de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014; J.G. v.

Nadeau, 2016QCCA 167; Canada (Attorney General) v. Bedford, 2013 SCC 72, [2013] 3 S.C.R. 1101; Waxman v. Waxman (2004), (ON CA), 186 O.A.C. 201; Ford du Canada ltée v. Automobiles Duclos inc., 2007 QCCA 1541; Beaudoin-Daigneault v. Richard, (SCC), [1984] 1 S.C.R. 2; Palsky v. Humphrey, (SCC), [1964] S.C.R. 580; Maze v. Empson, (SCC), [1964] S.C.R. 576; Côté v. Rancourt, 2004 SCC 58, [2004] 3 S.C.R. 248; Sylvestre v. Karpinski, 2011 QCCA 2161;Bessette v.

Pharmacie Suzanne Payer inc., 2017 QCCS 2474; Harris (Succession), Re, 2016 QCCA 50, 25 C.C.L.T. (4th) 1; Roberge v.Bolduc, (SCC), [1991] 1 S.C.R. 374; Phillips v. Naamani, ; F.H. v. McDougall, 2008 SCC 53, [2008]3 S.C.R. 41; Hinse v. Canada (Attorney General), 2015 SCC 35, [2015] 2 S.C.R. 621; Parrot v. Thompson, (SCC),[1984] 1 S.C.R. 57; Quebec (Commission des droits de la personne et des droits de la jeunesse) v. Bombardier Inc. (BombardierAerospace Training Center), 2015 SCC 39, [2015] 2 S.C.R. 789; Dallaire v. Paul-Émile Martel Inc., (SCC), [1989] 2S.C.R. 419; Stellaire Construction Inc. v.

Ciment Québec Inc., ; Lacombe v. André, (QC CA),[2003] R.J.Q. 720. Statutes and Regulations Cited Civil Code of Québec, arts. 1607, 1613, 2138. Code of ethics of advocates, CQLR, c. B-1, r. 3. Code of Professional Conduct of Lawyers, CQLR, c. B-1, r. 3.1, s. 25. Authors Cited Baudouin, Jean-Louis, et Pierre-Gabriel Jobin. Les obligations, 7e éd. par Pierre-Gabriel Jobin et Nathalie Vézina, dir. Cowansville,Que.: Yvon Blais, 2013.

Baudouin, Jean-Louis, Patrice Deslauriers et Benoît Moore. La responsabilité civile , 8 e éd. Cowansville, Que.: Yvon Blais, 2014. Lévesque, Frédéric. Précis de droit québécois des obligations . Cowansville, Que.: Yvon Blais, 2014. Lluelles, Didier, et Benoît Moore. Droit des obligations , 2 e éd. Montréal: Thémis, 2012. Tancelin, Maurice. Des obligations en droit mixte du Québec , 7 e éd. Montréal: Wilson & Lafleur, 2009.

Thouin, Marie-Chantal. “L’avocat, toujours de bon conseil?”, dans Service de la formation permanente du Barreau du Québec, vol. 228, Développements récents en déontologie, droit professionnel et disciplinaire . Cowansville, Que.: Yvon Blais, 2005, 49. APPEAL from a judgment of the Quebec Court of Appeal (Kasirer, Vauclair and Parent JJ.A.), 2017 QCCA 273 , 41 C.C.L.T. (4th) 1, [2017] AZ-51368107, [2017] J.Q. n o 1326 (QL), 2017 CarswellQue 1076 (WL Can.) , setting aside a decision of Dulude J., 2014 QCCS 3072 , [2014] AZ-51085557, [2014] Q.J. No. 6361 (QL), 2014 CarswellQue 6527 (WL Can.).

Appeal dismissed, Côté J. dissenting. Douglas C. Mitchell , Audrey Boctor and Olga Redko , for the appellants. Pierre Bienvenu , Azim Hussain , Andres C. Garin and Frédéric Wilson , for the respondents. The judgment of Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Brown, Rowe and Martin JJ. was delivered by Gascon J. — I.

Overview [ 1 ] This case concerns the professional liability of a lawyer who has referred clients to a financial advisor where that advisor subsequently turns out to be a fraudster and where, in addition to the referral, the lawyer has over a number of years been recommending and endorsing the advisor’s investments. [ 2 ] By 2003, the first appellant, Kenneth F. Salomon, had been the lawyer of the respondents, Judith Matte-Thompson and 166376 Canada Inc. (“166”), in Quebec for a long time.

During that year, he introduced them to Themis Papadopoulos, his personal friend and his own financial advisor, and recommended that they consult him. In the following four years, the respondents ended up investing over $7.5 million with Mr. Papadopoulos’s investment firm, Triglobal Capital Management Inc. (“Triglobal”). Over the course of those four years, Mr. Salomon repeatedly endorsed Mr. Papadopoulos as a financial advisor and encouraged the respondents to make and retain investments with Triglobal. In 2007, Mr.

Papadopoulos and his associate, Mario Bright, disappeared with the savings of around 100 investors, including those of the respondents. [ 3 ] The respondents claimed that Mr. Papadopoulos and Mr. Bright had fraudulently misappropriated their investments. They also claimed that Mr. Salomon and the second appellant, his law firm Sternthal Katznelson Montigny LLP (“SKM”), [1] had been professionally negligent in two ways. First, Mr. Salomon and SKM had breached their duty to advise the respondents by recommending, endorsing and encouraging inappropriate investments with Mr. Papadopoulos’s firm.

Second, they had disregarded their duty of loyalty to the respondents by placing themselves in a conflict of interest that led them to turn a blind eye to the situation. The respondents sued Mr. Papadopoulos, Mr. Bright, Mr. Salomon and SKM for the loss of their investment capital, the loss of the opportunity to realize a return on those investments, and moral injury. They also sought an award of punitive damages against Mr. Papadopoulos and Mr. Bright. [ 4 ] The trial judge held that Mr. Papadopoulos and Mr.

Bright were liable for the respondents’ investment losses and moral injury, as well as for punitive damages, but dismissed the claim against Mr. Salomon and SKM. She concluded that Mr. Salomon had not committed any fault that was a cause of the respondents’ losses. In her view, although he had breached his professional standard of care by making his initial recommendation to the individual respondent, Ms. Matte-Thompson, with regard to her investments, there was no causal link between that fault and Ms. Matte-Thompson’s subsequent losses. The trial judge also found that Mr.

Salomon had not been in a conflict of interest and that he had not provided financial advice to the corporate respondent, 166. [ 5 ] The Court of Appeal concluded that the trial judge had made reviewable errors, and it reversed her judgment. It made a number of findings, including (1) that Mr. Salomon’s faults were not limited in time to that of the initial recommendation, (2) that those faults were committed not only against Ms. Matte-Thompson, but also against 166, and (3) that those faults caused the losses suffered by both of the respondents. In the Court of Appeal’s opinion, the trial judge had viewed Mr.

Salomon’s acts and their consequences through a distorting lens which had led her to erroneously assess the evidence in isolated silos, without the insight provided by a global analysis. The Court of Appeal also held that the trial judge had taken an unduly restrictive approach in analyzing Mr. Salomon’s conflict of interest. [ 6 ] I am satisfied that the Court of Appeal had a sufficient basis for intervening as it did. I would therefore dismiss the appeal. II. Context [ 7 ] Malcolm Thompson and his wife, Ms. Matte-Thompson, were business people who operated restaurant franchises in Ontario and Quebec.

Four companies (“Companies”), including 166, were set up for the purpose of operating the restaurants. Mr. Thompson and Ms. Matte-Thompson owned, respectively, two thirds and one third of the shares of 166, and Mr. Thompson was the sole shareholder of the other three companies. In 2002, the Thompsons sold all of their restaurant franchises but one. With that one

exception, the Companies remained owners of the real estate only. [ 8 ] Mr. Thompson passed away in 2003. Ms. Matte-Thompson then became the sole director of the Companies. She remained 166’s sole director until October 2006, when David Gemmill and Joseph Miller were appointed to the board. Mr. Gemmill had been Mr. Thompson’s lawyer in Ontario, and Mr. Miller had been his brother-in-law. [ 9 ] Mr. Thompson left two wills, in which he created three trusts for his grandchildren and one trust (“Trust”) for most of his assets, including his shares in the Companies. Mr. Thompson appointed his wife, Mr. Gemmill and Mr.

Miller as the trustees and executors under the wills. The wills named Ms. Matte-Thompson as the income beneficiary of the Trust until her death. The capital of the Trust was to be distributed to the children of Mr. Thompson and those of Ms. Matte-Thompson after Ms. Matte-Thompson’s death. The purpose of this arrangement was to ensure that Ms. Matte-Thompson’s needs were met and to provide her with financial security while preserving the capital for the children. Preserving the capital was a paramount consideration under the wills. [ 10 ] Mr.

Salomon had been the Thompsons’ lawyer for their business operations in Quebec since 1989. Following her husband’s death, Ms. Matte-Thompson regularly consulted Mr. Salomon for advice regarding the

interpretation and implementation of the wills. She was uncomfortable with her dual position as an income beneficiary and a trustee of the Trust, and worried about how she could maintain her lifestyle without spending the children’s capital. Ms. Matte-Thompson was an educated and experienced businesswoman, but did not have sophisticated knowledge of the investment world. [ 11 ] Mr. Salomon introduced Ms. Matte-Thompson to Mr. Papadopoulos, his personal financial advisor and the directing mind of Triglobal, in September 2003. He had met Mr.

Papadopoulos in 2001 when he himself was looking for a personal financial advisor. The two had subsequently become close friends. Mr. Salomon personally invested in three funds promoted by Triglobal: he put the bulk of his savings in a Manulife Financial product (“Manulife”) and some smaller amounts in Focus Management Inc. (“Focus”) and iVest Fund Ltd. (“iVest”). Respectively based in the Cayman Islands and the Bahamas, Focus and iVest were two offshore hedge funds linked to Triglobal and to Mr. Papadopoulos and Mr. Bright. [ 12 ] Mr. Salomon recommended Triglobal and its iVest fund to Ms. Matte-Thompson.

Among other things, he described iVest as “an excellent vehicle wherever security of capital is important” (A.R., vol. 3, at p. 352). Relying on that advice, Ms. Matte- Thompson decided to invest some of her personal savings with Triglobal in early 2004. She made an initial investment of $100,000 in iVest and a second one of $1,245,000 in Manulife. In the months that followed, she transferred $400,000 from the Manulife account to iVest. [ 13 ] From 2003 to 2006, Mr. Salomon was involved in a reorganization of the Companies. All of them, except the one still operating a restaurant, were merged into 166.

Then, in February 2006, Mr. Salomon arranged the sale of 166’s assets and prepared resolutions that authorized the opening of accounts for 166 with iVest and Manulife. In February and April 2006, following instructions received from a Triglobal representative, the proceeds of the sale, in the amount of $5,830,642, were invested entirely in Focus. In July 2006, Ms. Matte-Thompson redeemed part of her investment in iVest, and she also put a total of $1,188,949 in Focus in March and October 2006. [ 14 ] Beginning in April 2006, Ms. Matte-Thompson expressed concern to Mr.

Salomon regarding the investments, including Focus. She wanted more information on the nature of the investments and had been having difficulty communicating with Triglobal. Each time she expressed concern, Mr. Salomon either promptly reassured her or informed Mr. Papadopoulos, who would himself reassure her. [ 15 ] Near the end of 2006, Mr. Miller urged the other two trustees and executors to request the redemption of 166’s investments in Focus. They followed this advice in January 2007, but requested only gradual redemptions in order to avoid any penalty.

Between February and July 2007, 166 received redemptions totalling $900,000. [ 16 ] In May 2007, the La Presse Affaires magazine published an

article that questioned investments made through Triglobal in iVest and Focus. In December 2007, Ms. Matte-Thompson asked for complete redemption of the investments in Focus, but by then, Triglobal, iVest and Focus had ceased doing business and their assets had been frozen. Most unfortunately for the respondents, the Focus and iVest funds turned out to be parts of a Ponzi scheme. Ms. Matte-Thompson lost $1,188,068 in Focus and iVest; 166 lost $4,006,366 in the same two funds. Globally, almost $100 million was lost in the fraud by approximately 100 investors. [ 17 ] Sometime after the collapse of Triglobal, Ms.

Matte-Thompson learned that Mr. Salomon had received payments from Mr. Papadopoulos totalling $38,000 in 2006 and 2007. In early 2006, following a recommendation by Mr. Papadopoulos, Mr. Salomon had incorporated a company, 4307909 Canada Inc. (“430”), for the purpose of “financial consulting” (A.R., vol. 6, at p. 1778). Mr. Papadopoulos instructed 430 to issue two invoices, each in the amount of $10,000, for which payments were received in May and June 2006 even though no services were ever rendered in this regard. According to Mr.

Salomon, these payments constituted a “gift” to help him renovate his apartment (A.R., vol. 10, at p. 3108). In February 2007, 430 received a further payment of $8,000, the purpose of which was allegedly to cover the taxes on the previous $20,000 “gift”. [ 18 ] Then, in June 2007, Mr. Salomon made a request for redemption of his $70,000 investment in Focus, and he eventually received $50,000 in this regard. In September 2007, again following an instruction from Mr. Papadopoulos, Mr. Salomon issued a $50,000 invoice through 430 in order to receive an initial “bi-weekly” cheque.

The following month, 430 received two cheques of $5,000 each from a company belonging to Mr. Papadopoulos called Themis Papadopoulos Financial Services Inc. Mr. Salomon testified that these payments represented a redemption of his own investment in Focus, but in an email written by Mr. Papadopoulos at that time, they were referred to as commissions. [ 19 ] At the hearing before us, counsel for the appellants confirmed that Mr. Salomon had personally lost approximately $20,000 as a result of the fraud. Although the payments received by Mr.

Salomon ($38,000) were small compared to the respondents’ investments with Triglobal, I note that they were in fact greater than his personal loss from the fraud ($20,000). [ 20 ] The respondents instituted their legal proceedings in January 2008.

III. Judicial History A. Quebec Superior Court ( 2014 QCCS 3072 ) [ 21 ] Mr. Papadopoulos and Mr. Bright did not defend the action against them. In a default judgment, the trial judge held that they were liable for the respondents’ investment losses and for Ms. Matte-Thompson’s moral injury. In addition, she ordered them to pay punitive damages to the respondents. Her conclusions with respect to Mr. Papadopoulos and Mr. Bright were not appealed. [ 22 ] The trial judge dismissed the claim against Mr. Salomon and SKM, however. She found that, although Mr.

Salomon had committed a fault in specifically recommending iVest to Ms. Matte-Thompson for her initial personal investment in 2003, that fault was not the cause of her subsequent losses from her investment in Focus. In the trial judge’s view, by the time Ms. Matte-Thompson invested in that fund in 2006, she had developed her own relationship with Mr. Papadopoulos and therefore was not relying on Mr. Salomon’s advice in making her investment decisions. The judge stressed that Mr. Salomon could not be held liable for the fraud committed by Mr. Papadopoulos and Mr. Bright. [ 23 ] The trial judge also held that Mr.

Salomon had committed no fault against 166, because he had not provided investment advice to the company, nor had he gone too far in reassuring it. Noting that Mr. Salomon had not been consulted before the money from 166 was wired to Focus, the trial judge found that 166 had not relied on his advice in deciding to invest in that fund. It was not Mr. Salomon’s responsibility to verify the appropriateness of the investment recommended by specialists. Moreover, there was no proof that Mr.

Salomon could have done anything after he learned about 166’s investment in Focus. [ 24 ] Finally, the trial judge concluded that Mr. Salomon had not been in a conflict of interest. She gave credence to Mr. Salomon’s testimony and stated that there was no specific proof that any of the payments made by Mr. Papadopoulos and received by Mr. Salomon through 430 were commissions received in exchange for referring clients to Triglobal. B.

Quebec Court of Appeal ( 2017 QCCA 273 , 41 C.C.L.T. (4th) 1) [ 25 ] The Court of Appeal unanimously allowed the appeal, holding that the trial judge had made palpable and overriding errors in her decision. First, it found that she had erred by limiting Mr. Salomon’s breach of his duty to advise to the case of Ms. Matte- Thompson. It agreed with the trial judge that Mr. Salomon had breached his duty to advise Ms. Matte-Thompson by recommending iVest. However, the Court of Appeal held that Mr. Salomon had been acting for both of the respondents beginning in 2003, and had had the same obligations to both of them.

The Court of Appeal concluded that the judge had viewed the evidence through a distorting lens (para. 66), which had led her to the erroneous conclusion that Mr. Salomon’s fault had been committed against Ms. Matte-Thompson only. [ 26 ] Second, the Court of Appeal held that the trial judge had erred by limiting Mr. Salomon’s faults to the initial investment in iVest in 2003 and 2004. The Court of Appeal concluded that his faults had continued through to 2007 and that they concerned the respondents’ investments in both iVest and Focus. Mr.

Salomon’s repeated reassurances had induced an air of confidence regarding the investments, when in reality they were manifestly inadequate in relation to the respondents’ needs. He had also failed to perform due diligence. These faults ceased only with the collapse of Triglobal at the end of 2007. [ 27 ] Third, the Court of Appeal held that the trial judge had erred by taking a restrictive approach to the evidence when considering Mr. Salomon’s duty of loyalty. In its view, Mr. Salomon had placed himself in a conflict of interest which constituted an additional fault committed against the respondents.

His relationship with Mr. Papadopoulos had led him to breach his duty of confidentiality and neglect the respondents’ interests. The Court of Appeal stressed that Mr. Salomon had teamed up with Mr. Papadopoulos in order to ensure that the respondents retained their investments with Triglobal, revealingly using the pronoun “we” in some of his emails to Mr. Papadopoulos. In addition, the Court of Appeal was of the view that the trial judge had not given satisfactory reasons to explain her conclusion that Mr.

Salomon had not received commissions for the clients he had referred to Triglobal. [ 28 ] Fourth, again alluding to the notion of a distorting lens (para. 120), the Court of Appeal held that the trial judge had erred in considering the issue of causation, and that the impact of Mr. Salomon’s faults was far more significant than she had found them to be. The Court of Appeal was convinced that the respondents would have never invested money with Triglobal had Mr. Salomon acted as a competent, prudent and diligent lawyer from the outset. Moreover, Mr.

Salomon had missed many opportunities to rectify the situation after 2003. The Court of Appeal also explained that the fraud did not break the causal link between Mr. Salomon’s faults and the respondents’ losses. [ 29 ] The Court of Appeal therefore ordered Mr. Salomon and SKM solidarily to fully compensate the respondents for their investment losses, and Ms. Matte-Thompson for her non-pecuniary loss. IV. Issues [ 30 ] The appellants challenge the Court of Appeal’s decision on essentially four grounds: A.

Did the Court of Appeal err by employing the notion of a distorting lens in determining whether the trial judge had made palpable and overriding errors? B. Did the Court of Appeal err by improperly expanding the professional obligations of lawyers who refer their clients to independent advisors? C. Did the Court of Appeal err by interfering with the trial judge’s findings relating to the faults committed by Mr. Salomon? D. Did the Court of Appeal err by interfering with the trial judge’s findings relating to causation?

V. Analysis A. Did the Court of Appeal Err by Employing the Notion of a Distorting Lens in Determining Whether the Trial Judge Had MadePalpable and Overriding Errors? [31] To determine whether the Court of Appeal erred by using the notion of a distorting lens, I must summarize thestandards of appellate review it was required to apply in this case. These standards of review are not contested in this Court. They are theones that were articulated in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, which also apply to Quebec civil law cases (see,e.g., Montréal (Ville) v.

Lonardi, 2018 SCC 29, [2018] 2 S.C.R. 103, at para. 68; Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R.352, at paras. 36-37). [32] Findings with respect to fault involve questions of mixed fact and law (3091-5177 Québec inc. (ÉconolodgeAéroport) v. Lombard General Insurance Co. of Canada, 2018 SCC 43, [2018] 3 S.C.R. 8, at para. 23, citing St-Jean v. Mercier, 2002SCC 15, [2002] 1 S.C.R. 491, at paras. 60 and 104). Findings with respect to causation involve questions of fact (Éconolodge, at para. 24,citing Lonardi, at para. 41, Benhaim, at para. 36, and St-Jean, at paras. 104-5).

In both situations, absent a palpable and overriding error,an appellate court must defer to the conclusions reached by the trial judge. [33] Where the deferential standard of palpable and overriding error applies, an appellate court can intervene only if thereis an obvious error in the trial decision that is determinative of the outcome of the case (Benhaim, at para. 38, quoting South YukonForest Corp. v. R., 2012 FCA 165, 4 B.L.R. (5th) 31, at para. 46; see also H.L. v. Canada (Attorney General), 2005 SCC 25,[2005] 1 S.C.R. 401, at paras. 56 and 69-70).

Morissette J.A. explained this metaphorically as follows in J.G. v. Nadeau, 2016 QCCA167, at para. 77 : [translation] “. . . a palpable and overriding error is in the nature not of a needle in a haystack, but of a beam inthe eye. And it is impossible to confuse these last two notions” (quoted in Benhaim, at para. 39). The fact that an alternative factualfinding could be reached based on a different ascription of weight does not mean that a palpable and overriding error has been made(Nelson (City) v.

Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138, at para. 38). [34] It is helpful at this point to recognize that the Housen standards of review also apply to this Court (Quebec (Directorof Criminal and Penal Prosecutions) v. Jodoin, 2017 SCC 26, [2017] 1 S.C.R. 478, at para. 51; see also St-Jean, at paras. 37 and 46).That said, the focal point of the analysis that this Court — as the second and final court of appeal — has to perform in applying thesestandards is the decision of the first court of appeal, not that of the trial judge.

The onus is on the appellants to demonstrate an error inthe court of appeal’s decision; this Court’s role is not to conduct a de novo analysis of the trial judge’s decision.

Where the first court ofappeal has justifiably intervened in the trial judgment and disagreed with the trial judge, this Court will intervene only if its owndisagreement stems from “a clear satisfaction that an error has occurred in the first appellate court’s assessment of the facts” (St-Jean, atparas. 38-39 and 46). [35] As a general matter, the appellants suggest that the Court of Appeal erred in applying the standard of appellatereview, because it relied on the notion of a distorting lens in determining whether the trial judge had made palpable and overridingerrors.

I disagree. [36] In its decision, the Court of Appeal alluded twice to the notion of a distorting lens: first in its discussion on the faultscommitted against 166, and second in its analysis on causation. However, in discussing both of these issues, the Court of Appealexplicitly stated that it could reverse the trial judge’s conclusions only if it were to find palpable and overriding errors. [37] Thus, the notion of a distorting lens was nothing more than a metaphor the Court of Appeal used to explain why thestandard of appellate review established in Housen was met.

That metaphor has its genesis in Ford du Canada ltée v.

Automobiles Duclosinc., 2007 QCCA 1541: [translation] . . . the high degree of deference owed to the trial judge with regard to the assessment of evidence, a principle statedrepeatedly by the Supreme Court, cannot preclude intervention by an appellate court where an analysis of the case shows that the trialjudge assessed the evidence through a lens that must be discarded and that clearly had a distorting effect. [para. 128 ] [38] Since that case, the Quebec Court of Appeal has on numerous occasions used the notion of a distorting lens whenoverturning findings made by trial judges that it considered to be tainted to some extent by a general misperception (see Softmedical inc.v.

Daabous, 2017 QCCA 1270, at paras. 47 and 66 ; Droit de la famille — 161960, 2016 QCCA 1300, at paras. 76-78 ;Droit de la famille — 132381, 2013 QCCA 1505, at paras. 104-5 ; Francoeur v. 4417186 Canada inc., 2013 QCCA 191, atparas. 64-65 ). [39] Unfortunately, some litigants have seen this as an invitation to ask the court to retry the case, which is simply notwhat is intended (see Desrochers v. 2533-0838 Québec inc., 2016 QCCA 825, at para. 49 ).

It is interesting to note that therehave been several cases in which the Quebec Court of Appeal has in fact referred specifically to this notion of a distorting lens indeclining to interfere with the findings of a trier of fact (Gutin v. Cenfood International Inc., 2018 QCCA 317, at paras. 24-26 ;2758792 Canada inc. v. Bell Distribution inc., 2017 QCCA 603, at para. 9 ; Mangiola v. R., 2017 QCCA 741, at paras. 4-5; Desrochers, at para. 46; Dunkin’ Brands Canada Ltd. v. Bertico Inc., 2015 QCCA 624, 41 B.L.R. (5th) 1, at para. 120; Hydro-Québec v. Construction Kiewit cie, 2014 QCCA 947, at para. 102 ; R. v.

Lalonde, 2014 QCCA 639, at para. 16 ). [40] In this regard, I agree with the appellants that a distorting lens cannot be invoked as a substitute for identifying areviewable error “or to mask the fact that an ‘error’ identified by an appellate court does not meet the high standard imposed by Housen”(A.F., at para. 81). Although appellate courts may find this notion helpful in explaining the basis for their interventions, it in no waychanges the standards articulated in Housen.

An appellate court must identify a crucial flaw in the lower court’s decision, be it —depending on which Housen standard applies — an error of law or a palpable and overriding error. More particularly, the notion of adistorting lens does not warrant an appellate court’s reweighing the evidence or merely substituting its own factual findings for those ofthe trial judge. [41] In the case at bar, the Court of Appeal did not use the notion of a distorting lens to mask an absence of palpable and

overriding errors. On the contrary, the Court of Appeal held that the distorting lens through which the trial judge had viewed theevidence — in this case a narrow, siloed approach — had led her to make precisely identified palpable and overriding errors: first,despite evidence clearly showing that Mr. Salomon had been acting for both respondents as early as 2003, the trial judge found that hehad provided financial advice to Ms. Matte-Thompson only; second, despite evidence clearly showing that Mr.

Salomon’s faults hadcontinued after 2004, the trial judge found that they had been limited in time to 2003 and 2004; third, despite clear evidence of Mr.Salomon’s divided loyalties to the respondents on the one hand and to Mr. Papadopoulos and Triglobal on the other, the trial judge foundthat he had not placed himself in a conflict of interest; and fourth, despite the clear relationship between Mr.

Salomon’s faults and therespondents’ losses, causation had not been established. [42] The appellants have not satisfied me that the Court of Appeal erred by concluding that the trial judge had made thesepalpable and overriding errors. I see no reason to interfere with the Court of Appeal’s findings. B.

Did the Court of Appeal Err by Improperly Expanding the Professional Obligations of Lawyers Who Refer Their Clients toIndependent Advisors? [43] Before entering into the details of this analysis, I wish to emphasize that the courts below properly agreed that therelationship between lawyers and their clients can usually be characterized as a contract of mandate, and that the relationship in theinstant case is no exception (trial reasons, at para. 113 ; C.A. reasons, at para. 94; see J.-L. Baudouin, P. Deslauriers andB. Moore, La responsabilité civile (8th ed. 2014), at No. 2-124).

As mandataries, lawyers are subject to the obligations provided for inart. 2138 of the Civil Code of Québec (“C.C.Q.”), which reads as follows: 2138. A mandatary is bound to fulfill the mandate he has accepted, and he shall act with prudence and diligence in performing it.

He shall also act honestly and faithfully in the best interests of the mandator, and shall avoid placing himself in a position where hispersonal interest is in conflict with that of his mandator. [44] Although they do not frame their arguments in such a way as to allege an error of law, the appellants nonethelesssuggest that the Court of Appeal failed to consider one of its recent decisions (Harris (Succession), Re, 2016 QCCA 50, 25 C.C.L.T.(4th) 1) that, in their submission, limits the obligations owed by a referring lawyer to his or her client.

They assert that Harris isapplicable in the circumstances of this appeal. I do not share that view. [45] The principles articulated in Harris can be summarized as follows. Lawyers who refer clients to other professionalsor advisors have an obligation of means, not one of result. Although lawyers do not guarantee the services rendered by professionals oradvisors to whom they refer their clients, they must nevertheless act competently, prudently and diligently in making such referrals,which must be based on reasonable knowledge of the professionals or advisors in question.

Referring lawyers must be convinced that theprofessionals or advisors to whom they refer clients are sufficiently competent to fulfill the contemplated mandates (Harris, at paras. 16,20 and 22). In Harris, the Quebec Court of Appeal pointed out that the question of the referring lawyer’s liability [translation] “cannot beanswered in the abstract. The answer necessarily depends on the facts of the case” (para. 13).

The court added that “[i]n such matters, thecircumstances are everything” (para. 22). [46] That is an apt description of the standard of conduct for lawyers who refer clients to other professionals andadvisors, and I endorse it. [47] Applying these principles, the Quebec Court of Appeal found in Harris that Mr. Salomon and SKM (coincidentallyalso the lawyer and law firm involved in that case) were not liable for the losses suffered by a client as a result of fraud committed byestate liquidator Earl Jones, whom Mr. Salomon had recommended.

In the appellants’ opinion, the case at hand is analogous to Harris,because Triglobal had a good reputation until its collapse in 2007, and Mr. Salomon cannot be faulted for having failed to discover afraud that no one had seen. [48] Harris can be distinguished on the basis of the facts surrounding the referral, but there is another importantdistinction between it and the instant case that relates to the entirety of Mr. Salomon’s conduct. Whereas Harris involved a mere referral,neither the trial judge nor the Court of Appeal found that Mr. Salomon had merely referred the respondents to Mr.

Papadopoulos.Although they reached different results, they both analyzed the legal consequences of several of Mr. Salomon’s acts subsequent to thereferral, from the recommendation of the iVest fund in 2003 to the promotion, endorsement and encouragement of Triglobal’s productsthat followed and, finally, to the reassurances offered in the months before Triglobal’s collapse in 2007. [49] The question in the case at bar is not whether the initial referral of the respondents to Mr. Papadopoulos was or wasnot sufficient in and of itself to establish the appellants’ professional liability.

The focus here is instead on the entirety of Mr. Salomon’sconduct. But one thing is clear. Just as a referral is not a guarantee of the services rendered by the professional or advisor to whom theclient is referred, it is also not a shield against liability for other wrongful acts committed by the referring lawyer.

This is one way inwhich the facts in this case differ substantively from the facts in Harris. [50] Contrary to the appellants’ assertion, the decision of the Court of Appeal in the instant case did not broaden the basisof liability for lawyers who refer clients to other professionals or advisors beyond the standard recently set in Harris: lawyers can refertheir clients to other professionals or advisors so long as they discharge their professional obligations in so doing. The Court of Appealdid not find that the referral itself was determinative; rather, it assessed all of Mr.

Salomon’s acts in the context of his professional duties— the duty to advise and the duty of loyalty in particular — to his clients. It found that Mr. Salomon had done far more than merelymake a referral. As I will explain below, Mr. Salomon also repeatedly recommended Mr. Papadopoulos, his investment firm and their in-house products, and encouraged the respondents to invest — and retain their investments — in Triglobal funds. Moreover, Mr. Salomonturned a blind eye to a conflict of interest which resulted in him serving two masters and sacrificing the respondents’ interests. It was theentirety of Mr.

Salomon’s conduct that led the Court of Appeal to hold the appellants liable in the circumstances.

C. Did the Court of Appeal Err by Interfering With the Trial Judge’s Findings Relating to the Faults Committed by Mr. Salomon? [51] The appellants argue, next, that the Court of Appeal erred by interfering with the trial judge’s findings relating toMr. Salomon’s duty to advise and duty of loyalty. I disagree with that submission. I will discuss each of these findings in turn.

(1) Mr. Salomon’s Duty to Advise [52] A lawyer’s duty to advise is threefold, encompassing duties (1) to inform, (2) to explain, and (3) to advise in thestrict sense. The duty to inform pertains to the disclosure of relevant facts; the duty to explain requires that the legal and economicconsequences of a course of action be presented; and the duty to advise in the strict sense requires that a course of action berecommended (Poulin v. Pilon, [1984] C.S. 177, at p. 180; M.-C.

Thouin, “L’avocat, toujours de bon conseil?”, in Service de laformation permanente du Barreau du Québec, vol. 228, Développements récents en déontologie, droit professionnel et disciplinaire(2005), 49, at pp. 51-52). [53] The duty to advise is inherent in the legal profession and exists regardless of the nature of the mandate (Baudouin,Deslauriers and Moore, at No. 2-138; Labrie v. Tremblay, [2000] R.R.A. 5 (Que. C.A.), at p. 10).

Its exact scope depends on thecircumstances, including the object of the mandate, the client’s characteristics and the expertise the lawyer claims to have in the field inquestion (Côté v. Rancourt, 2004 SCC 58, [2004] 3 S.C.R. 248, at para. 6; Thouin, at pp. 55-69). [54] As no bright lines can be drawn in this regard, the case law is replete with examples of situations in which courtshave had to perform the difficult task of deciding whether lawyers should, in advising their clients, have taken the initiative to go beyondwhat the clients specifically asked them for (see, e.g., Labrie, at p. 11; Sylvestre v.

Karpinski, 2011 QCCA 2161, at para. 19 ;Daigneault v. Lapierre, [2003] R.R.A. 902 (Que. Sup. Ct.)). One thing is clear, however: when lawyers do provide advice, they mustalways act in their clients’ best interests and meet the standard of the competent, prudent and diligent lawyer in the same circumstances.In this respect, I agree with the Court of Appeal that any advice lawyers give that exceeds their mandates may, if wrongful, engage theirliability. Whether Mr. Salomon was acting within the limits of his mandate in providing financial advice to the respondents is thereforeimmaterial.

He is liable for any wrongful advice he gave in that context. [55] In this case, the Court of Appeal found that Mr. Salomon had failed to advise the respondents as a competent,prudent and diligent lawyer would have done. Contrary to the trial judge, it held that Mr. Salomon was acting for both Ms. Matte-Thompson and 166 when he provided wrongful investment advice, and that his faults had continued throughout the period from 2003 to2007.

On both of these issues, the court properly identified palpable and overriding errors made by the trial judge in her assessment ofthe parties’ relationships and in her finding that those relationships had not continued up until the collapse of Triglobal. These errorswere identified precisely, and they had a direct impact on the trial judge’s findings regarding the scope of any wrongful advice given byMr. Salomon. I conclude that the Court of Appeal had a sufficient basis to intervene as it did in this regard. [56] First, the Court of Appeal did not err in holding that Mr.

Salomon had provided financial advice to both respondents.As the Court of Appeal emphasized, Ms. Matte-Thompson had consulted Mr. Salomon for advice regarding her delicate position as abeneficiary of the Trust’s fruits and revenues — which were supposed to meet her financial needs — and as a trustee — with anobligation to preserve the Trust’s capital for the children. At the time, Ms. Matte-Thompson wore many different hats, as she (1) was anexecutor of Mr. Thompson’s wills, (2) served as a trustee, (3) was the president and a director of 166, and (4) acted in her personalcapacity.

It was in these multiple capacities that she retained Mr. Salomon’s services, and he understood the nature of this situation verywell. To isolate the relationship between Ms. Matte-Thompson and Mr. Salomon from that between 166 and Mr. Salomon was indeed totake an improperly narrow view of the evidence as a whole, and this justified the Court of Appeal’s criticism of the trial judge’scompartmentalized vision of those relationships. [57] In this regard, the Court of Appeal noted, for instance, that, starting in 2003, Mr. Salomon had charged virtually allhis legal fees to 166, including fees for introducing Mr.

Papadopoulos to Ms. Matte-Thompson, preparing the initial emailrecommending the iVest fund, and requesting investment information from Triglobal. As well, Mr. Salomon’s key memoranda outliningfinancial strategies for Ms. Matte-Thompson and for the Trust were addressed to 166. [58] Second, the Court of Appeal did not err in holding that Mr. Salomon had breached his duty to advise therespondents. Beyond the fact that Mr.

Salomon often flirted with — or overstepped — the limits of his professional capabilities, theadvice he provided to both of the respondents was wrongful for a number of reasons, which the Court of Appeal summarized (para. 69).To start with, Mr. Salomon should not have recommended a non-diversified investment in offshore hedge funds to clients whose primarygoal was to preserve the capital. In this regard, the trial judge herself stated that Mr.

Salomon “knew that in order to respect the legalrights and interests of all the beneficiaries of the trusts and to abide by the terms of the wills, the investments decisions had to beconsistent with the requirement of capital preservation” (para. 172 (footnote omitted)). Yet, according to the uncontradicted expertevidence, offshore hedge funds (like iVest and Focus) are not investment vehicles that offer security of capital. [59] Mr. Salomon also breached his duty to advise by continually recommending financial products without performingdue diligence or asking any questions about them.

The trial judge noted that, before recommending iVest, Mr. Salomon had merely“relied on [Mr.] Papadopoulos’ advice and felt comfortable with that advice” (para. 188 (footnote omitted)). Mr. Salomon failed to verifythe nature or the terms and conditions of the recommended financial products. Had he made such inquiries, he would have learned thatiVest and Focus were not registered with the Autorité des marchés financiers (“AMF”). In fact, neither Mr. Papadopoulos nor Triglobalwas registered with the AMF as a securities adviser or dealer under Quebec securities law.

As the Court of Appeal rightly noted, thisfault of omission on Mr. Salomon’s part was of a continuous nature, given that he had intervened several times over the years to reassurethe respondents prior to Triglobal’s collapse in 2007 without ever making any of the appropriate inquiries. [60] Third, the Court of Appeal did not err in holding that Mr. Salomon’s faults against the respondents had commencedin 2003 and had continued until 2007. Mr. Salomon had, on the sole basis of his blind confidence in Mr. Papadopoulos, induced hisclients to erroneously believe that investing in iVest and Focus was safe.

From 2003 to 2007, he repeatedly reassured the respondentsthat their investments with Triglobal gave them security of capital. In this regard, the Court of Appeal noted the following comments

made by Mr. Salomon: • In August 2003, he stated, “iVest is an excellent vehicle whenever security of the capital is important (as with the grandchildren and yourself)” (para. 52 (emphasis deleted); A.R., vol. 3, at p. 352). • In September 2003, he suggested that the respondents “invest the Estate assets based on a conservative model, perhaps using iVest products and a mix of segregated products (for absolute security of capital)” (para. 59 (emphasis deleted); A.R., vol. 6, at p. 1828). • The following month, he added, “I would point out that [Mr.

Papadopoulos] is very conservative when it comes to preservation of capital” (para. 62; A.R., vol. 3, at p. 393). • In July 2004, he stated, “the RBC proposal is somewhat undimensional ( sic ) and is interest rate sensitive. The Triglobal proposal is less risky and the returns are good.

Let’s talk” (para. 123 (emphasis deleted); A.R., vol. 3, at p. 566). • In June 2005, he stated, referring to the iVest and Manulife funds, “I believe that both forms of investments are excellent and quite conservative, and I would have no difficulty in recommending either one to you and to your co-trustee . . . (as trustees acting responsibly)” (para. 125; A.R., vol. 4, at p. 657). • In April 2006, he responded to concerns expressed by Ms.

Matte-Thompson regarding the security of the respondents’ investments (including in Focus) that he was “certain that everything [was] ok” (para. 78 (emphasis deleted); A.R., vol. 4, at p. 935). • In November 2006, he stated, after informing Ms. Matte-Thompson that he had visited Mr.

Bright in Nassau, that the latter “has become resident there in order to manage the Focus, Ivest and structured products funds”, concluding that “[a]ll is well” (para. 130 (emphasis deleted); A.R., vol. 5, at p. 1248). • In July 2007, he stated, “[t]he Triglobal returns continue to be excellent and I remain very happy to have my investments performing so well with such controlled risk” (para. 133; A.R., vol. 6, at p. 1603). • In September 2007, he added, “I think that the two funds (iVest and Focus) are performing as predicted” (para. 134 (emphasis deleted); A.R., vol. 6, at p. 1660). • In December 2007, he stated, commenting on Mr.

Papadopoulos’s latest promises to worried investors, “FYI. This is good” (para. 138 (emphasis deleted); A.R., vol. 6, at p. 1690). [ 61 ] Given the foregoing, the Court of Appeal had a strong basis for concluding that the trial judge was wrong to assert that Mr. Salomon had committed a fault only as against Ms. Matte-Thompson in her personal capacity and only in 2003. When properly assessed as a whole, as the Court of Appeal did, the evidence reveals that the advice and reassurances Mr.

Salomon gave between 2003 and 2007 were all part of a single continuum, and that placing them in separate silos would be artificial. Regardless of the scope of his original mandate, Mr. Salomon voluntarily chose to provide (and be paid for) his advice and reassurances to the respondents over the four years leading up to the collapse of Triglobal. Having so chosen, he cannot escape liability by pointing to the narrow scope of his original mandate. [ 62 ] When he interacted with Ms. Matte-Thompson, Mr. Salomon provided advice with respect to all the patrimonies she administered.

At no time did he differentiate between the respondents, as he often provided advice to both of them in the same emails and in memoranda addressed to 166. As the Court of Appeal pointed out, references Mr. Salomon had made in 2003 to the trusts, to the Companies and to capital preservation — which he knew to be crucial for the Trust — show that his recommendations extended beyond Ms. Matte-Thompson’s personal interests. It should be borne in mind that reconciling her many roles was the very reason why Ms. Matte-Thompson had sought Mr.

Salomon’s advice from 2003 onwards. [ 63 ] I agree with the Court of Appeal that a proper review of the whole of the evidence reveals that, during this entire period from 2003 to 2007, Mr. Salomon was acting for both respondents when he provided financial information and advice. His comments about the nature and the quality of investments with Triglobal concerned both the financial strategy of 166 and that of Ms. Matte-Thompson. [ 64 ] From this standpoint, it is immaterial that 166’s assets had not yet been sold in 2003, since Mr.

Salomon consistently maintained the same position vis-à-vis Triglobal and its in-house products. Moreover, he never distinguished between his recommendations and reassurances regarding Ms. Matte-Thompson’s personal investments and those regarding 166’s later investments. Even the trial judge disbelieved Mr. Salomon’s claim that “he had absolutely no involvement in 166376’s decision to invest and that he knew nothing about it” (para. 220). In fact, his actions included commenting on the advisability of investing the proceeds of the sale of 166’s assets in iVest and participating in meetings with Ms.

Matte-Thompson and Mr. Papadopoulos at which they discussed the investment strategy for the sale proceeds. It is worth noting, as the Court of Appeal did, that Mr. Salomon himself considered Focus to be “less risky” than iVest (para. 131 (emphasis deleted), quoting A.R., vol. 6, at p. 1553). [ 65 ] In sum, the Court of Appeal provided solid justifications and explanations for concluding that it was not only the initial recommendation of iVest to Ms. Matte-Thompson that was wrongful, but that Mr.

Salomon’s breaches of his duty to advise concerned 166 as well and that they continued until Triglobal’s collapse in 2007. There is no basis for this Court to interfere and to vary the judgment of the first court of appeal on this point.

(2) Mr. Salomon’s Duty of Loyalty [ 66 ] The Court of Appeal also concluded that Mr. Salomon’s personal and financial relationship with Mr. Papadopoulos had placed him in a conflict of interest, which constituted an additional fault committed against the respondents. The trial judge had found that there was no conflict of interest. In this regard, the evidence established not only that Mr. Papadopoulos was Mr. Salomon’s

close friend and personal financial advisor, but also in particular that, unbeknownst to the respondents, Mr. Salomon had received payments totalling $38,000 from Mr. Papadopoulos in 2006 and 2007 while continuing to reassure them regarding their investments with Triglobal. [ 67 ] On this point, the trial judge found that “[t]he fact that [Mr.] Salomon had some personal investments with Triglobal did not preclude him from referring his clients to a financial advisor with whom he was satisfied”, given that the clients were aware of those investments (para. 142).

However, this narrow and limited statement disregards the fact that Mr. Salomon went well beyond merely making a referral. As the Court of Appeal noted, [ translation ] “Mr. Salomon put himself in a conflict of interest by not limiting the role he played with the [respondents] to simply recommending Triglobal, its representative, [Mr.] Papadopoulos, and the products they offered” (para. 98). [ 68 ] The trial judge also accepted the explanations given by Mr. Salomon for the different payments he had received from Mr.

Papadopoulos through 430, namely that these payments represented (1) “gifts” for the renovation of his apartment, (2) an additional amount to cover the taxes on those “gifts”, and (3) the redemption of his own investment in Focus. She found that there was no proof that these payments were commissions for referring clients to Triglobal or that Mr. Salomon had received such commissions in 2003 or in 2006 when Ms. Matte-Thompson and 166, respectively, had made their first investments. She stated that she could not therefore conclude that these circumstances had placed Mr.

Salomon in a conflict of interest. [ 69 ] On this issue, the Court of Appeal expressed the opinion that the trial judge had adopted an unduly restrictive approach in analyzing the principles relating to conflicts of interest. It found that she had erred by holding that an exact concomitance between the payments and the referral or “specific proof” that the payments were indeed commissions (trial reasons, at para. 155) was needed before such a conflict of interest could be found to exist. This unduly restrictive approach tainted her entire analysis concerning the breach of Mr.

Salomon’s duty of loyalty to the respondents. [ 70 ] As the Court of Appeal rightly noted, the trial judge had failed to comment on or explain certain other factors that confirmed the very close nature of the relationship between Mr. Salomon and Mr. Papadopoulos and that could not be ignored in assessing the payments received by Mr. Salomon in 2006 and 2007. A proper consideration of the evidence as a whole leads to the conclusion that this very close relationship affected Mr. Salomon’s objectivity in advising the respondents. This breach of his duty of loyalty informs the assessment of Mr.

Salomon’s breach of his duty to advise, as it ultimately led him to turn a blind eye to a situation to which he should have been more attentive and alert. [ 71 ] As mandataries, lawyers have a duty to avoid placing thems

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