2017 QCCA 273, 2017 QCCA 273

Unofficial English Translation of the Judgment of the Court Matte-Thompson c. Salomon 2017 QCCA 273 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL Nos.: 500-09-024602-146 (500-17-040927-082) DATE: February 21, 2017 CORAM: THE HONOURABLE NICHOLAS KASIRER, J.A. MARTIN VAUCLAIR, J.A. ÉTIENNE PARENT, J.A. JUDITH MATTE-THOMPSON 166376 CANADA INC. APPELLANTS/INCIDENTAL RESPONDENTS – Plaintiffs v. KENNETH F. SALOMON STERNTHAL KATZNELSON MONTIGNY L.L.P.

RESPONDENTS/INCIDENTAL APPELLANTS – Defendants JUDGMENT [ 1 ] The appellants are appealing from a judgment rendered on June 19, 2014 by the Superior Court of the District of Montreal (the Honourable France Dulude) which dismissed, without costs, their application in civil liability against the respondents.

The respondents are appealing, by incidental appeal, the conclusion of the judgment refusing to grant them costs. [ 2 ] For the reasons of Parent J.A., with which Kasirer and Vauclair JJ.A. concur, THE COURT: [ 3 ] ALLOWS the appeal with legal costs. [ 4 ] REVERSES the judgment under appeal. [ 5 ] GRANTS in part the amended motion to institute proceedings against the respondents Kenneth F. Salomon and Sternthal Katznelson Montigny LLP. [ 6 ] CONDEMNS the respondents Kenneth F.

Salomon and Sternthal Katznelson Montigny LLP solidarily to pay the appellant Judith Matte-Thompson $1,575,797.15 and the appellant 166376 Canada Inc. $5,203,089.27, the whole with legal interest and the additional indemnity under

article 1619 C.C.Q. as of January 10, 2013. [ 7 ] CONDEMNS the respondents Kenneth F. Salomon and Sternthal Katznelson Montigny LLP solidarily to pay the appellant Judith Matte-Thompson $100,000, the whole with legal interest and the additional indemnity under

article 1619 C.C.Q. as of the date of the summons. [ 8 ] ORDERS the respondents Kenneth F. Salomon and Sternthal Katznelson Montigny LLP solidarily to pay the costs at trial, including the costs for the appellants’ experts. [ 9 ] DISMISSES the incidental appeal, with legal costs. NICHOLAS KASIRER, J.A. MARTIN VAUCLAIR, J.A.

ÉTIENNE PARENT, J.A. Mtre Azimuddin Hussain Mtre Frédéric Wilson NORTON ROSE FULBRIGHT CANADA For the Appellants/Incidental respondents Mtre Douglas Mitchell Mtre Emma Lambert IRVING MITCHELL KALICHMAN For the Respondents/Incidental appellants Date of hearing: August 29, 2016 REASONS OF PARENT J.A. [ 10 ] The appellant (“Ms. Thompson”) and her husband, Mac Thompson, operated several restaurants in Ontario and Quebec until 2002. The restaurants were held through companies of which Mac Thompson was the sole shareholder, except for the appellant 166376 Canada Inc. (“166”), in which Ms.

Thompson held one-third of the shares. [ 11 ] One year before Mac Thompson’s death in March 2003, every restaurant was sold, except one. The Thompsons kept only the immovables in which the restaurants were located. [ 12 ] Mac Thompson left two wills, one of which provided for the creation of a trust comprising his shares in the companies (“the Trust”). [1] Ms.

Thompson was the beneficiary of the fruits and income of the Trust in order to meet all her needs and, upon her death, the parties’ children were to share the capital of which they were the beneficiaries under the terms of the Trust. [ 13 ] In addition to being a testamentary legatee and the beneficiary of the fruits and income of the Trust, Ms. Thompson was appointed liquidator of the succession and trustee, jointly with an Ontario lawyer and friend of the family, David Gemmill (“Mtre Gemmill”), and the Thompsons’ brother-in-law, Joseph Miller (“Miller”), a retired businessman. Until October 2006, Ms.

Thompson was the sole director of the companies, a function she shared thereafter with Mtre Gemmill and Miller. [ 14 ] Faced with a series of questions about her rights and obligations due to the many responsibilities she had to assume following the death of her husband, Ms. Thompson consulted the respondent Kenneth F. Salomon (“Mtre Salomon”), a Montreal lawyer. She had known Mtre Salomon since the early 1980s, when he incorporated a company through which she operated for a time as a real estate broker.

He subsequently carried out various business mandates for the Thompsons in Quebec. [ 15 ] Starting in the summer of 2003, Mtre Salomon advised her a number of times on her obligations as a trustee, liquidator and director of the companies, including 166. He also advised her as the beneficiary of the fruits and income of the Trust, in particular by regularly discussing the matter of the personal needs she had to meet while growing the capital in the Trust. [ 16 ] It was in this context that Mtre Salomon suggested that Ms.

Thompson meet with the financial advisor he had been dealing with since 2001, Themis Papadopoulos (“Papadopoulos”), the driving force behind investment firm Triglobal Capital Management Inc. (“Triglobal”). [ 17 ] Mtre Salomon said that he was very satisfied with the services provided by Papadopoulos. He told Ms. Thompson that he regularly recommended him to his family members, friends and clients.

She accepted her lawyer’s suggestion and he set up the first meeting, which he attended, as he would for certain subsequent meetings. [ 18 ] Reassured by Mtre Salomon’s comments and by her meetings and discussions with Papadopoulos, Ms. Thompson entrusted Triglobal with a portion of her personal savings. On January 13, 2004, she gave Triglobal $100,000, which was invested in iVest, [2] an offshore hedge fund connected with Triglobal and its executives, Papadopoulos and his partner, Mario Bright (“Bright”).

On March 22 of that year, she invested another $1,245,000 with Triglobal in a Manulife fund. [3] On December 1, 2004, she transferred $400,000 from the Manulife fund to the iVest fund. [ 19 ] During 2005, Mtre Salomon continued to advise Ms. Thompson concerning the various aspects of her responsibilities. He was also involved in the corporate reorganization of the companies [4] and the sale of their tangible assets. Mtre Salomon’s firm billed all these professional services to 166. [5] [ 20 ] In February 2006, 166 sold all its assets, [6] resulting in substantial liquidity that was entrusted to Triglobal.

Mtre Salomon prepared the resolutions authorizing the companies to open accounts in the iVest and Manulife funds [7] through Triglobal. [ 21 ] At the request of a Triglobal representative, Ms. Thompson placed the 166 investment in another fund called Focus, also connected with Triglobal and its executives Papadopoulos and Bright. This fund was located in the Cayman Islands, whereas the iVest

fund was in the Bahamas. Mtre Salomon was not immediately informed of this change. [ 22 ] On February 21 and May 1, 2006, Ms. Thompson, on behalf of 166, therefore electronically deposited $4,975,527.32 and $855,114.69, respectively, into the Focus fund account. On March 1 and October 1, 2006, she personally invested $335,449.53 and $853,500 in the Focus fund. [ 23 ] On April 29, 2006, Ms. Thompson told Mtre Salomon that she was concerned about 166’s investments in the Focus fund.

She did not know its exact nature or redemption conditions. [ 24 ] Mtre Salomon quickly reassured her. [8] He informed Papadopoulos about Ms. Thompson’s questions. That same day, Papadopoulos wrote to her and confirmed that “everything is ABSOLUTELY OK”, while urging her to contact him directly in future for any information concerning her investments with Triglobal. [9] [ 25 ] In the fall of 2006, Ms. Thompson’s accountant asked for details on the nature of the Focus investment in order to prepare 166’s financial statements, since the situation was still unclear.

Mtre Salomon contacted Papadopoulos to obtain the required information, but without success. [ 26 ] In late 2006, trustee and liquidator Miller recommended to the two other trustees and liquidators, Ms. Thompson and Mtre Gemmill, that 166 redeem its investment in Focus. The redemption request was made by 166 in January 2007, but for gradual redemption in order to avoid the fees and penalties payable for early redemption of the entire investment. However, 166 only received a portion of the requested redemption. [10] Communications with Triglobal became more and more difficult, despite Ms.

Thompson’s repeated requests to Mtre Salomon for assistance. [ 27 ] In December 2007, when Ms. Thompson requested the complete redemption of her investments and those of 166 in Focus, she learned that the assets of Triglobal and the iVest and Focus funds had been seized and placed in receivership. [ 28 ] Papadopoulos and his partner Bright had disappeared with the savings of some 100 investors, including those of the appellants.

The investigation by the trustees in charge of liquidating the assets of Triglobal, Focus and iVest revealed a Ponzi scheme amounting to close to $100 million that would essentially never be recovered. [ 29 ] In January 2008, the appellants sued Papadopoulos, Bright, [11] Mtre Salomon and his law firm for damages. Judgment under appeal [ 30 ] At trial, the defendants Papadopoulos and Bright, who did not contest the application, were condemned to pay Ms. Thompson and 166 $1,575,797.15 and $5,203,089.27, respectively, for their lost investments and the revenues they should have generated. The judgment awarded Ms.

Thompson moral damages of $100,000 and punitive damages of $500,000. These conclusions are not the subject of this appeal. [12] [ 31 ] That being said, the judge dismissed the application against Mtre Salomon and his law firm without costs, a conclusion challenged on appeal. The respondents, through their incidental appeal, maintain that the appellants’ application should have been dismissed with costs. [ 32 ] The judgment analyzed the respondents’ liability from two perspectives, that of Ms. Thompson and that of 166. [ 33 ] First, the judge concluded that Mtre Salomon had breached his duty to advise Ms.

Thompson. The judge rejected the argument that Mtre Salomon had acted only as intermediary between Ms. Thompson and Papadopoulos. [ 34 ] The judge considered that Mtre Salomon’s fault, however, had not caused the damages suffered by Ms. Thompson. She noted that the initial distribution of her investment with Triglobal had been changed without Mtre Salomon having been consulted or having made recommendations in this regard.

According to the judge, Mtre Salomon’s fault was limited to the initial $100,000 investment in the iVest fund, for which he should not have stated that it was “an excellent vehicle whenever security of the capital is important” . [13] Ms. Thompson’s loss, however, was the result of subsequent investments in the Focus fund. [ 35 ] The judge dismissed the argument that Mtre Salomon’s actions had created a climate of trust between Ms. Thompson and the Triglobal executives, more specifically with Papadopoulos. She further felt that Mtre Salomon had not been required to ensure the quality of all of Ms.

Thompson’s investments with Triglobal. [ 36 ] Second, the judge considered that Mtre Salomon had not committed any fault with respect to 166. His role concerning 166’s investment in Triglobal had been limited to preparing resolutions and some follow up subsequent to the investments, which did not reveal any faulty conduct.

Furthermore, even if Mtre Salomon had breached his duty to advise after learning the nature of 166’s investment with Triglobal, the evidence does not support a finding that the investments could have been recovered at that time, because they had probably already been lost following Papadopoulos and Bright’s fraud. The judge added that the appellants’ loss had been due to the fraud of third persons, which was unforeseeable and could not be attributed to Mtre Salomon. [ 37 ] The appellants’ argument concerning Mtre Salomon’s alleged conflict of interest was also rejected.

At all relevant times, he had never hidden from his client the fact that he had investments with Triglobal or that he was close friends with Papadopoulos. The judge concluded that the various amounts received by Mtre Salomon from Papadopoulos or his companies, in the fall of 2007, did not establish that he had been in a conflict of interest when he advised Ms. Thompson on her investments with Triglobal. The judge believed Mtre

Salomon’s testimony that he had not received any payment from Triglobal or its executives in exchange for the investments made by the appellants. Issues in dispute [ 38 ] The appellants’ grounds can be summarized as follows: 1. Did Mtre Salomon commit any faults against 166? 2. Is there a causal link between the damage suffered by the appellants and Mtre Salomon’s faults? [ 39 ] The respondents filed an incidental appeal asking that the appellants be condemned to pay the costs at trial. They argue that the facts of the matter do not justify departing from the rule set out in

article 477 C.C.P. [14] Analysis [ 40 ] The appellants do not dispute the statements of principle concerning a lawyer’s responsibility, circumscribed by the judge in these terms: [110] The obligation of a professional is an obligation of means, not an obligation of result. … [111] As such they are not bound to produce a specific result but rather to adopt appropriate action in the circumstances. Lawyers are obliged to act with prudence and diligence, honestly, faithfully and in the best interest of their clients. [112] The legal profession is governed by the Code of ethics of advocates ( Code of ethics ).

The sections that are of interest in the present matter are the following: … 3.01.01. Before agreeing to provide professional services, the advocate must bear in mind the extent of his proficiency, knowledge and the means at his disposal. He must not, in particular, undertake or continue to provide any professional services for which he is not sufficiently prepared without obtaining the necessary assistance. … 3.06.05. An advocate shall safeguard his professional independence regardless of the circumstances in which he engages in his professional activities.

In particular, he must not let his professional judgment be subject to pressure exerted on him by anyone whomsoever. … 3.06.07. An advocate is in a conflict of interest where, in particular: … (2) the interests he represents are such that he might tend to favour certain among them or that his judgment and loyalty may be unfavourably affected;

… [113] The relationship between a lawyer and his client is traditionally qualified as a contract of mandate: … [115] The Supreme Court of Canada explains that the scope of the duty to advise will be different when a lawyer claims to have a certain expertise: … The boundaries of the duty to advise will depend on the circumstances, and expectations will be higher when a lawyer holds himself or herself out as an expert in a given field.

The duty to advise may be met, however, when the lawyer acknowledges the limitations of his or her competence and recommends that a client consult a specialist regarding a matter in respect of which the lawyer feels less qualified .

This approach is consistent with the spirit of s. 3.02.03 of the Code of ethics , which requires that lawyers avoid any misrepresentation with respect to their level of competence. [116] The Court of Appeal explains as follow the essence of the duty to advise: [ translation; original in french ] “… It seems useful to specify that the duty to advise exists at all times, regardless of the specific nature of the mandate entrusted by the client.

As the aforementioned author points out, courts will not hesitate to “condemn the attitude of a lawyer who has merely carried out his mandate without warning his client of the particular problems related to his case or who has failed to examine a facet of the file that may be a source of problems for his client. Even if the client expresses his desire to settle out of court, the lawyer has the duty to inform him of all his rights and indicate any action liable to protect them.” [ original in english ] (The Court underlines) [117] The duty to advise includes:

a) the duty to inform;

b) the duty to explain;

c) the duty to recommend. [118] Finally, a lawyer has the obligation to avoid any situation where his interest can be in conflict with those of his clients. [119] To engender a lawyer's liability, the Plaintiff has the burden of proving:

a) fault;

b) damages;

c) causality between

a) and b).

[120] Although a lawyer's duty to advise exists irrespective of the precise scope of the mandate, the Plaintiffs must establish a specific fault identified in the "general context" of the particular mandate.

Thus, in order to evaluate the duty to advise in this case, one needs to understand the scope of the mandate conferred by the Plaintiffs to Me Salomon. [15] [Emphasis and bold in the original.] [Citations omitted.] [ 41 ] The appellants maintain that the judge erred in applying these principles to the facts of the matter, with regard to both the fault committed with respect to 166 and the assessment of the causal link. The respondents rightfully argue that, in these circumstances, the appellants must establish the existence of palpable and overriding errors to justify the Court’s intervention.

Let us examine this more closely. 1. Mtre Salomon’s faults against 166 [ 42 ] The appellants submit that the judge was mistaken in finding that the respondent committed faults only against Ms. Thompson. The evidence established that, starting in 2003, Mtre Salomon’s advice was addressed to 166 as well as to Ms. Thompson. In addition, given the responsibilities assumed by Ms.

Thompson, it is not possible to compartmentalize the scope of Mtre Salomon’s involvement. [ 43 ] They further argue that the judge committed a palpable and overriding error by failing to consider the climate of trust created and maintained by Mtre Salomon as of 2003, which is as true for 166 as for Ms. Thompson.

According to the appellants, the evidence does not support a finding that Mtre Salomon did nothing to reassure the appellants regarding Papadopoulos’s competence and the quality of the investments he obtained for them after 2003. [ 44 ] It should be recalled that the scope of a lawyer’s duty to advise depends on the mandate he has been given and the limits within which he has agreed to act. That being said, he may also be liable for the advice he offers of his own initiative beyond his mandate if it is faulty.

His obligation to act prudently, diligently, faithfully, honestly and in the best interests of his mandator is not lessened in these circumstances. [ 45 ] The remarks of Binnie J., in a matter from British Columbia, set out this obligation: When a lawyer is retained by a client, the scope of the retainer is governed by contract. It is for the parties to determine how many, or how few, services the lawyer is to perform, and other contractual terms of the engagement. The solicitor-client relationship thus created is, however, overlaid with certain fiduciary responsibilities, which are imposed as a matter of law .

The Davis factum puts it well: The source of the duty is not the retainer itself, but all the circumstances (including the retainer) creating a relationship of trust and confidence from which flow obligations of loyalty and transparency . [para. 95] Not every breach of the contract of retainer is a breach of a fiduciary duty. On the other hand, fiduciary duties provide a framework within which the lawyer performs the work and may include obligations that go beyond what the parties expressly bargained for .

The foundation of this branch of the law is the need to protect the integrity of the administration of justice . [16] [Emphasis added.] [Citations omitted.] [ 46 ] As the lawyer’s duty to advise is to the client, it is also necessary to identify the client, the beneficiary of that duty. This exercise takes on its fullest importance in the present case since Ms. Thompson consulted Mtre Salomon with respect to her multiple responsibilities, of which he was perfectly aware. [ 47 ] Thus, in addition to her own assets, Ms. Thompson was the beneficiary of the fruits and income of the Trust.

She was also acting as trustee and liquidator of the succession. Finally, she held one-third of the shares in 166, of which she was the sole director until October 2006, the other shares being held by the Trust. [ 48 ] When Ms. Thompson consulted Mtre Salomon following her husband’s death, she found herself in a delicate situation: she had to preserve the capital as trustee, while meeting her needs using the income generated by this capital. Ms. Thompson was not acting on a purely personal basis.

She sought Mtre Salomon’s opinion on the scope of her obligations as trustee, liquidator and director of 166. [ 49 ] Mtre Salomon understood the situation very well. The memoranda he wrote in September 2003 were addressed to 166 and included recommendations for both Ms. Thompson’s needs and for the succession . [17] They contain several references to the liquidators and to the beneficiaries of the trusts’ capital. [18] As previously mentioned, he billed his professional services to 166 as of 2003. [19] [ 50 ] Thus, as of 2003, Mtre Salomon was retained not only by Ms.

Thompson, but also by the distinct persons and patrimonies for which she acted, which included 166. The appellants rightly note that it is not possible to affirm that Mtre Salomon’s actions, in 2003, concerned only Ms. Thompson. In such a context, it appears inadequate to analyze Mtre Salomon’s liability in isolated silos according to the chronology of investments. The necessary exercise requires a global analysis, which the judge did not do. [ 51 ] Let us take a more detailed look at some of the advice provided by Mtre Salomon.

[ 52 ] As early as August 19, 2013, he wrote to Ms. Thompson: iVest is the hedge fund that Themis [Papadopoulos] and his partner Mario Bright have developed and that will yield somewhere between 6% and 7% capital gains. The gains are locked in in a series of transactions where individual securities are purchased and at the same time “calls” are sold and “puts” are purchased.

I don’t think that Themis went over this type of example with you, so if I appear to be speaking in a foreign language, I will explain on Friday . iVest is an excellent vehicle whenever security of the capital is important ( as with the grandchildren and yourself). In their case, given their age, it would be reasonable ·to be somewhat more aggressive, while at the same time ensuring the long term safety of the capital.

If you can provide their dates of birth and places of residence, we can do a projection of what will happen over the lifetime of their individual trusts . [20] [Emphasis added.] [ 53 ] This correspondence reveals that Mtre Salomon assured Ms. Thompson that Papadopoulos’s proposal to invest in the iVest fund was excellent since this fund would preserve the capital, which Mtre Salomon knew was paramount for the trusts. In this sense, his opinion exceeded Ms.

Thompson’s personal interests. [ 54 ] In addition, Mtre Salomon’s statements establish, presuming that he acted within the limitations of his competence, as required by his rules of professional conduct, that he could express an opinion on the nature and security of an investment in an offshore hedge fund. [ 55 ] He reassured Ms. Thompson by telling her that he would explain the jargon associated with this type of fund, assuming that Papadopoulos had not given her these explanations. This reinforced the idea that he was proficient in the subject.

He even suggested that he could project the value of the grandchildren’s trusts. [ 56 ] It is also interesting to note that Mtre Salomon was already aware that Papadopoulos and Bright had developed the iVest fund. At the time, he had an investment in another Triglobal fund, the Focus fund. Mtre Salomon knew that the iVest and Focus funds were offshore hedge funds. [ 57 ] The reference to the grandchildren in this correspondence clearly shows that Mtre Salomon’s advice exceeded Ms.

Thompson’s personal interests, knowing that a trust had been created for each of them. [ 58 ] The memoranda prepared by Mtre Salomon over the course of his involvement in the file establish that there were many questions concerning various aspects surrounding the administration of the trusts and the companies with, as a backdrop, an analysis of Ms. Thompson’s rights and obligations. [ 59 ] In a memorandum addressed to 166 in September 2003, Mtre Salomon outlined his proposed strategy to ensure Ms. Thompson’s financial security and to preserve the trusts’ capital.

His advice encompassed the nature of the investments and their quality, for both 166 and Ms.

Thompson: The following would be the broad strokes of a strategy for Judy to ensure her financial well-being, while at the same time preserving the capital of the Estate relatively intact: 1. ascertain Judy's financial needs, and obtain the agreement of the executors to fully fund same (by setting up a regular cash flow that will automatically meet Judy's needs on a monthly basis, with the appropriate balloon payments wherever necessary); 2 reduce the number of companies by amalgamation at year end April 30, 2004, or sooner should that be practical (thereby eliminating much of last years more than $100,000 in professional fees); 3- evaluate all of the real estate; 4- investigate the possibility of a sale of the Pizza Hut properties en bloc, or retain them in the hope that Priszm will remain solvent and will renew the leases; 5- sell or liquidate/close the unproductive assets (if there would be no adverse recapture of “depreciation”); 6- invest the Estate assets based on a conservative model, perhaps using iVest products and a mix of segregated products (for absolute security of capital) ; 7- any income-producing securities to be held in Judy's RRSP (in terms of the overall mix), and Judy's non-registered funds to be invested for capital gains ; 8- for capital protection and growth; 55-65 % of Judy's non-registered funds should be invested in iVest. with the balance invested for long-term capital gains (with a more aggressive iVest mix and/or segregated funds) ; 9- grandchildren's trust ($375,000) to be invested for fully-secured long-term capital gains (iVest) ; 10- Judy to continue to earn a salary for administering all of the companies (at least the amount necessary to maximize her RRSP contributions); 11- the balance of Judy's cash requirements each year should come from after tax cash distributions from the Estate; and 12- Executor's fees to be paid to David and the brother-in-law. [21]

[Emphasis added.] [ 60 ] It should be noted that Mtre Salomon’s strategy reiterated the security of the iVest fund. His review focused on the situation of Ms. Thompson and the other patrimonies she administered. [ 61 ] The fact that at this time, 166’s assets had not yet been sold and that its investments in iVest were only being considered in the medium term does not change the fact that Mtre Salomon’s advice also concerned 166, given that, as we will see, his actions continued without him changing his position or warning 166. He therefore had the same obligations to 166 as to Ms. Thompson.

The judge committed a palpable and overriding error by disregarding this fact, which cannot be isolated from the analysis of Mtre Salomon’s actions as a whole. [ 62 ] On October 23, 2003, not only did Mtre Salomon assure Ms.

Thompson that Papadopoulos’s proposal concerning the iVest funds was a wise choice to preserve the capital, he also noted that Papadopoulos was very conservative in this regard, comparing his approach to his own: … I would point out that he [Papadopoulos] is very conservative when it comes to preservation of capital … I am quite conservative as well. [22] [ 63 ] At the time of this exchange, Ms. Thompson, aware of the privileged relationship between Mtre Salomon and Papadopoulos, asked him whether he was uncomfortable advising her.

He again reassured her and did not express any reservations, either then or at any point thereafter. I will come back to this later when discussing the conflict of interest argument. [ 64 ] Mtre Salomon’s statements concerning the protection of the capital, in his letter of October 23, 2003, where he notes that for the Trust “preservation of capital is paramount”, [23] echo his statement in his memorandum of September 16, 2003. [ 65 ] This brief review of the evidence establishes that as of 2003, Mtre Salomon was acting for Ms. Thompson as well as for the Trust and 166, which were represented by Ms. Thompson.

The failure to consider this aspect of the evidence and the resulting legal consequences is a reviewable error since the judgment limited the analysis of Mtre Salomon’s liability to 166 to the events subsequent to the 2005 decision to sell 166’s tangible assets. [24] [ 66 ] In this regard, the Court’s remarks in Ford du Canada ltée c.

Automobiles Duclos inc . take on their full meaning: [ translation ] Indeed, the high degree of deference owed to the trial judge in assessing the evidence , a principle stated many times by the Supreme Court, cannot be an obstacle to an appellate court’s intervention when an analysis of the case reveals that the trial judge’s assessment was conducted through a lens that must be set aside and that clearly had a distorting effect . [25] [ 67 ] The analysis of Mtre Salomon’s duty to advise, with respect to 166’s investment strategy, must therefore begin in 2003, as with Ms. Thompson.

Thus, the faults accepted by the judge concerning Ms. Thompson could also engage Mtre Salomon’s liability to 166. [ 68 ] The judge described Mtre Salomon’s faults as follows: [188] Me Sylvain Perreault, the Plaintiffs' expert, confirmed in his testimony that by their nature, hedge funds and in particular offshore hedge funds, are not an investment vehicle that offers security of capital . Before recommending investing in iVest, Mtre Salomon did not make any inquiries.

He only relied on Papadopoulos' advice and felt comfortable with that advice . [189] The evidence shows that Mtre Salomon never obtained any information regarding the terms and conditions of the proposed investment instrument nor did he ask for any prospectus or offering memorandum issued by iVest.

He did not ask for any audited financial statements of iVest, the legal and regulatory regime in force in the Bahamas governing iVest, nor did he identify the directors and shareholders of iVest. [190] In the same manner, Mtre Salomon made no inquiries with the Autorités des Marchés Financiers . [191] As such, Mtre Salomon should not have provided Ms. Thompson with any specific advice as to what kind of investment should be made or what security was offered by iVest . [192] Nevertheless, Mtre Salomon strongly recommended that Ms.

Thompson invest with Papadopoulos through Triglobal and went as far as advising her that part of her investments should be made in iVest. [193] Mtre Salomon should have been more prudent in his comments that the investment was risk free and secure .

[194] Mtre Salomon said that the investment vehicle was consistent with the requirement of capital preservation imposed by the trusts, without really knowing this to be the case . [195] Mtre Salomon breached the professional standard of care since his advice and assurances lead Ms. Thompson to be confident that her investments were not risky . [196] Mtre Salomon also failed to advise Ms. Thompson in 2003 and at the beginning of 2004, of the limits of his abilities with respect to investment transactions .

Thus, he did not act as a prudent and diligent attorney in the circumstances . [197] When asked, Mtre Salomon should have mentioned to Ms. Thompson that he could not provide her with any specific recommendations in relation to the security of the investments proposed by Papadopoulos . He should have then said that he referred her directly to Papadopoulos because he was not a financial advisor and could not provide such kind of advice. [198] Contrary to what he argues, at the end of 2003 and in the beginning of 2004, Mtre Salomon did not act only "as a conduit" between Papadopoulos and Ms. Thompson.

Not only did he introduce her to Papadopoulos but he received Papadopoulos' proposal and compared same to the RBC proposal . He confirmed to Ms. Thompson that her personal investment with Triglobal, generally and more specifically with iVest, an offshore hedge fund, was "an excellent vehicle when security of capital is important". [199] Since he was not a financial advisor, he should have refrained from making such comments. He thus breached his duty to advise . [26] [Emphasis added.] [ 69 ] The judge’s findings, supported by the evidence, reveal the extent of the faults committed by Mtre Salomon.

That being so, a number of the faults described by the judge against Ms. Thompson can be transposed to 166.

These faults can be briefly summarized as follows: • Faulty recommendation of an offshore hedge fund as a secure investment; • No inquiries into the recommended fund, in addition to it being inappropriate; • No inquiry regarding the conditions of the recommended investment; • No inquiries made with the Autorité des marchés financiers (the “AMF”); • The client was misled into mistakenly believing that the investments proposed by Triglobal were secure. [ 70 ] In addition to the fact that these faults also affected 166, the judge committed a palpable and overriding error by finding that they were limited to 2003 and the beginning of 2004 for the iVest fund investments.

Here is why. [ 71 ] First, it should be noted that Mtre Salomon’s faults of omission are continuous. They did not end at the beginning of 2004. They continued because Mtre Salomon multiplied his actions until late 2007 without ever making the slightest inquiry into Papadopoulos, Bright, Triglobal or the other companies they controlled, including iVest and Focus.

Through his omissions, Mtre Salomon continued to breach his duty to advise. [ 72 ] His failure to make the necessary inquiries with the competent authorities as to whether these persons were authorized to offer investment products and the nature of the proposed investments did not end in 2004. Mtre Salomon knew, until Triglobal and its funds collapsed and Papadopoulos and Bright disappeared in late 2007, that the appellants were doing business with them. He still had an obligation to make inquiries with the competent authorities, particularly the AMF. His failure continued despite the many requests from Ms.

Thompson, who wanted to understand the Focus fund investment. [ 73 ] But there is more. [ 74 ] The judge found that by reassuring the appellant about the security of the financial products offered by Papadopoulos, Mtre Salomon induced a feeling of trust in her, even though the iVest fund offered by Triglobal was clearly not suited to the trusts’ needs. [ 75 ] Mtre Salomon told Ms. Thompson the same thing many times between 2005 and 2007, when he was very familiar with the iVest and Focus funds. Therefore, the Court has no hesitation in stating that his actions misled Ms.

Thompson, not only on the nature and quality of the investments, but also on the competence of Triglobal and Papadopoulos. [ 76 ] In this sense, Ms. Thompson stated many times during her testimony that she was doing business with Triglobal and not with any investment fund in particular. Her decision to invest with Triglobal, be it in Focus or in iVest, was based on the representations of Papadopoulos and of Mtre Salomon. The following passage from her cross-examination speaks for itself:

Q- Right. And at the bottom, it says that it’s in Grand Cayman, Cayman Islands, right? A- I see that now, yes. Q- You didn’t see it at the time? A- I did not look at that at the time. As I said to you before, my total recollection, my total mind set was that I was investing with Triglobal. The money was sent, wired, was sent by cheque. Whether it was Manulife, it was whatever it was, I was investing with Triglobal. Triglobal was what I was sold as being the investment company that was solid, that would give me a return, it would protect my money. It was Triglobal the whole way for me.

Q- Did you ask, when you received something not from Triglobal, from Focus Management, how come… A- I was receiving documentation from Triglobal. Triglobal was the thing. Whether the heading is Focus whether the heading is Ivest, whether the heading is Manulife, it was Triglobal. [27] [ 77 ] Barely a few weeks after 166’s main investment in the Focus fund with Triglobal, referred to in the above passage, Ms. Thompson informed Mtre Salomon of some of her concerns: I am a bit nervous about my investment from the sale.

I have had a difficult time getting info and only have received a note from Austin Harris at Focus ststing (sic) amt of funds invested and interest to date. I have no contract to know about details…looks like a loan but I was told it is not …where are funds invested? The letter states there are conditions re early repayment and trequest ( sic ) for early repayment… I have not been informed of any of this. I think it all happened too fast and maybe I was too trusting ….I think of bernie R and then the LaCroix scandal… I cannot afford to be caught in something that has not been fully explained .

Perhaps I need to reconsider having all of my eggs in one basket . [28] [Emphasis added.] [ 78 ] Mtre Salomon forwarded this e-mail to Papadopoulos and, without any kind of inquiry whatsoever, merely told Ms. Thompson in the minutes that followed that he was “ certain that everything is ok and will be happy to discuss this at any time . ” [29] [ 79 ] There is nothing trivial in that statement. Ms. Thompson’s e-mail confirmed to Mtre Salomon, if he was not already aware of it at the time, that 166 had invested all the proceeds from the sale of its assets, approximately $5,000,000, in the Focus fund.

He was not shocked to learn that the investment was not in the iVest or Manulife funds, notwithstanding that the resolutions he had prepared a few weeks earlier provided so. [ 80 ] On the contrary, Mtre Salomon reassured Ms. Thompson, telling her that there was no problem with 166’s investment. He offered to discuss it with her at her convenience, thus establishing that he apparently had a grasp on the situation. [ 81 ] At trial, Mtre Salomon described his investment approach with Triglobal as follows: Q- But if it’s not a Manulife portfolio or similar, do you think it’s inappropriate?

You just said it was not a good…you seem to have said… A- I don’t think anyone will say that putting all your eggs in one (1) basket is a good investment . Although I figured…although, to me, Manulife was the most important product , and the best one, and the one that made me feel secure, I put some money into iVest, I put some money into Focus, I wanted some diversification . But I don’t think I’d want to put everything into one (1) specific product. [30] [Emphasis added.] [ 82 ] Mtre Salomon also stated the following concerning the Manulife fund: “that’s the reason I was in Triglobal in the first place.

That’s the thing that allowed me to sleep at night . ” [31] [ 83 ] In this context, how can one explain his reassuring response to the concerns expressed by Ms. Thompson scarcely a few weeks earlier after she had invested the proceeds from the sale of 166’s assets in the Focus fund? [ 84 ] According to his investment philosophy with Triglobal, he should have informed her that she was making a mistake by investing all of 166’s assets in a single fund, especially since he admitted that it was not Triglobal’s best investment. In fact,

Mtre Salomon knew that Focus was an offshore hedge fund, like iVest. He should have warned Ms. Thompson of the risk this investment represented for 166 given not only its nature, but also this concentration. Instead, he assured her that everything was fine whereas a prudent and diligent advisor would have sounded the alarm immediately.

One can only question Mtre Salomon’s response in light of his testimony that the Manulife fund was the primary reason he did business with Triglobal and that this investment allowed him to sleep at night. [ 85 ] The nonchalant assurance given by Mtre Salomon to the appellants at that time, and on numerous other occasions, may possibly be explained by his admiration for Papadopoulos and their close friendship. Even though it may have been involuntary, which I will return to shortly, this blindness is no less clear or faulty. [ 86 ] Having agreed to advise Ms.

Thompson, 166 and the trusts, Mtre Salomon had a duty to act as a prudent, diligent and independent advisor despite his relationship with Papadopoulos. He cannot take refuge behind the disclosure of this relationship to mitigate his obligations. He knew the magnitude of the appellants’ investments and the imperative need to protect their capital. [ 87 ] Moreover, it is astonishing to note that on at least two occasions, Mtre Salomon sent Papadopoulos Ms. Thompson’s e-mails, which clearly appear to be covered by professional secrecy.

In the e-mails, she informed Mtre Salomon of her dissatisfaction with Triglobal and explained her approach to gradually redeem her investments as well as those of 166. Astonishingly, Mtre Salomon rushed to inform Papadopoulos, while it is clear that had Ms. Thompson wanted to contact Papadopoulos, she would have done so directly, as she had on previous occasions. [ 88 ] This is only one example illustrating the extent to which Mtre Salomon breached his duty to advise the appellants. The fault is all the more serious because at no time did he inform Ms.

Thompson that his advice was not based on his knowledge, but was rather a slavish repetition of Papadopoulos’s statements. [ 89 ] To sum up, the evidence establishes that, in essence, Mtre Salomon committed the same faults against 166 as those committed against Ms.

Thompson, starting in 2003 until Triglobal and the iVest and Focus funds collapsed in late 2007. [ 90 ] Before concluding the analysis of the faults committed by Mtre Salomon, it is necessary to add the following comments concerning the additional fault raised by the appellants to the effect that Mtre Salomon placed himself in a conflict of interest between the appellants and Triglobal. [ 91 ] The judge described some of the evidence establishing the relationship between Mtre Salomon and Papadopoulos: [142] First, the evidence shows that Mtre Salomon had already made some investments with Triglobal in 2003 when he referred Ms.

Thompson to Papadopoulos. It was at the time an investment made with Manulife and with iVest. Ms. Thompson was well-aware that Mtre Salomon held such investments with Triglobal. It was not a secret.

The fact that Mtre Salomon had some personal investments with Triglobal did not preclude him from referring his clients to a financial advisor with whom he was satisfied . [143] Secondly, the evidence shows that in 2006, Papadopoulos recommended to Mtre Salomon that he incorporate a company for the purpose of ''financial consulting'' and as such Mtre Salomon incorporated 4307909 Canada Inc. (4307909). [144] As required by Papadopoulos, 4307909 issued two invoices for which two payments of $10,000 each were received on May 16, 2006, and June 9, 2006. [145] Mtre Salomon testified that Papadopoulos wanted to help him with the renovation of his apartment and as such, he received a gift totalling $20,000 , that came from the two payments mentioned hereinabove. [146] On February 6, 2007, Mtre Salomon received another payment of $8,000 through 4307909 in order to pay the taxes on the $20,000 previously received. [147] Whether or not the payment of such invoices for non-existent services constitutes a tax fraud has no bearing on the present matter.

Although the Plaintiffs, upon discovering this fact, were entitled to question Mtre Salomon's involvement with Papadopoulos, the fact that he received a gift from his friend, through a company, has no connection to the investments made by the Plaintiffs . … [151] On September 30, 2007, Papadopoulos instructed Mtre Salomon to send an invoice of $50,000 to ''Themis Papadopoulos Financial Services Inc.", in order for him to be able to issue "his bi-weekly $5,000 cheque". [152] On October 3 and 26, 2007, two cheques in the amount of $5,000 each were issued to 4307909. [153] The Plaintiffs assert that the internal Triglobal correspondence reveals that these payments were commissions paid to Mtre Salomon in return for his referring clients which, the Plaintiffs maintain, is clearly unethical and would place Mtre Salomon in a conflict of interest. [154] Mtre Salomon denies that assertion and testifies that the payments were a redemption of his personal investments in Focus, which he had partly received in June 2007, to pay for his daughter's wedding. [155] Although the e-mails produced imply that the two $5,000 payments were commissions given to Mtre Salomon in October 2007, there is no specific proof that those commissions were given to Mtre Salomon in consideration of the investments made by the Plaintiffs or any other clients . [156] Other than Papadapoulos' e-mails in October 2007, there is no evidence that Mtre Salomon would have received such commissions in 2003 , at the time Ms.

Thompson made her first investment or in January or February 2006, at the time 166376 made its

investments. [157] There is no evidence that would prove that Mtre Salomon received commissions before October 2007, and that the payments made at the time were in reality commissions for referring clients to Triglobal. Moreover, Mtre Salomon denies that these payments were commissions. There is no reason not to believe Mtre Salomon's testimony . [32] [Emphasis added.] [ 92 ] In

summary, according to the judge, there was no conflict of interest because there was no immediate temporal connexity between the amounts paid by Papadopoulos to Mtre Salomon and because their close relationship had been disclosed to Ms. Thompson. [ 93 ] It is useful to again reproduce the relevant excerpts from the Code of Professional Conduct of Lawyers [33] (the “ Code ”), which address various aspects of a lawyer’s duty of loyalty to his or her client and clearly prohibit any situation of conflict of interest: 3.05.13.

An advocate may not, except for the remuneration to which he is entitled, receive, solicit or acquire any rebate or other benefit relating to the professional services provided to a client. In addition, he may not pay, offer to pay or agree to pay any rebate, commission or other benefit relating to the professional services provided to a client. 3.06.05. An advocate shall safeguard his professional independence regardless of the circumstances in which he engages in his professional activities.

In particular, he must not let his professional judgment be subject to pressure exerted on him by anyone whomsoever. 3.06.05.01. An advocate shall subordinate to the interests of the client his personal interests, the interests of the partnership or joint-stock company within which he engages in his professional activities or in which he has an interest and the interests of any other person whether or not such person engages in his activities within such partnership or joint-stock company. 3.06.06. An advocate shall avoid any situation of conflict of interest. 3.06.07.

An advocate is in a conflict of interest where, in particular: (1) he represents conflicting interests; (2) the interests he represents are such that he might tend to favour certain among them or that his judgment and loyalty may be unfavourably affected; […] 3.05.13. L'avocat ne peut, à l'exception de la rémunération à laquelle il a droit, recevoir, solliciter ou acquérir quelque ristourne ou autre avantage relativement à la prestation de services professionnels à un client.

Il ne peut, non plus, verser, offrir de verser ni s'engager à verser aucune ristourne, commission ou autre avantage relativement à la prestation de services professionnels à un client. 3.06.05. L'avocat doit sauvegarder son indépendance professionnelle quelles que soient les circonstances dans lesquelles il exerce ses activités professionnelles. Il ne peut notamment subordonner son jugement professionnel à l'effet d'une pression exercée sur lui par quiconque. 3.06.05.01.

L'avocat doit subordonner à l'intérêt du client, son intérêt personnel, celui de la société au sein de laquelle il exerce ses activités professionnelles ou dans laquelle il a un intérêt et celui de toute autre personne exerçant ou non ses activités au sein de cette société. 3.06.06. L'avocat doit éviter toute situation de conflit d'intérêts. 3.06.07.

L'avocat est en conflit d'intérêts lorsque, notamment: 1° il représente des intérêts opposés; 2° il représente des intérêts de nature telle qu'il peut être porté à préférer certains d'entre eux ou que son jugement et sa loyauté peuvent en être défavorablement affectés; […] [Emphasis added.]

[ 94 ] These provisions describe, in considerable detail, the mandatary’s general obligation of loyalty to the mandator (art. 2138 C.C.Q.). The relationship of trust between client and lawyer must be preserved at all times. The apparent repetitiveness of the provisions in the Code conveys the primacy of the principle, which must not be reduced to solely a pecuniary interest. [ 95 ] In a recent judgment, the Supreme Court recalled the scope of the duty of loyalty: [19] A lawyer, and by extension a law firm, owes a duty of loyalty to clients.

This duty has three salient dimensions: (1) a duty to avoid conflicting interests; (2) a duty of commitment to the client’s cause ; and (3) a duty of candour. [34] [Emphasis added.] [Citations omitted.] [ 96 ] Speaking for the Court, the Chief Justice noted the relationship uniting the first two components of the duty of loyalty: [43] The duty of commitment is closely related to the duty to avoid conflicting interests. In fact, the lawyer must avoid conflicting interests precisely so that he can remain committed to the client.

Together, these duties ensure “that a divided loyalty does not cause the lawyer to ‘soft peddle’ his or her [representation] of a client out of concern for another client.” [35] [ 97 ] With respect, the judgment adopted a restrictive approach to these notions.

Analyzed globally, the uncontradicted evidence establishes that Mtre Salomon failed to protect the appellants’ interests because his judgment was clouded by his relationship with Papadopoulos, whether personal or financial. [ 98 ] Mtre Salomon clearly placed himself in a situation of conflict of interest by failing to limit his involvement with the appellants to merely recommending Triglobal, its representative Papadopoulos and the products they offered. [ 99 ] Below is an example taken from an e-mail sent by Mtre Salomon to Papadopoulos on March 16, 2007, when the situation between Ms.

Thompson and Triglobal was already very difficult, that clearly illustrates the conflict of interest. This excerpt is revealing: I had a long conversation with Judy (Ms. Thompson) earlier this evening, and she told me that Mario is preparing a report for her. What she wants is a report on all of her various holdings (estate, personal and corporate) from the beginning. I believe that I know exactly what she wants and would like to help prepare this report so that she will have all of the information that she needs and in a form that will make it easier for her to understand.

If we do this right , there will be no uncertainty in the future. It is important that we get this right this time so that she (Ms. Thompson) feels secure and can deal with the critics (e.g. Her accountant). Please let me know if it is okay for me to discuss this briefly with Mario . [Emphasis added.] [ 100 ] In

summary, at a time when his clients, the appellants, were concerned about their investments, Mtre Salomon asked Papadopoulos for permission to discuss the matter with Bright to help him prepare a report that would satisfy Ms. Thompson and silence the critics, in particular her accountant. The use of “we”, which shows Mtre Salomon’s solidarity with Papadopoulos and Triglobal, betrays the conflict, a situation that was repeated in other communications between them. [ 101 ] Another example. In August 2007, Ms. Thompson wrote Mtre Salomon, after reading an

article published in the media questioning Triglobal’s situation with regard to its ties with the iVest fund: Could you please comment on this ... I am having great concern over my assets in Focus & Ivest . I have asked Themis [Papadopoulos] to let me know what has happened to the value of my accounts since the recent downturn. I have had no response, I need to know if it is wise to withdraw the last amount available in the 3rd quarter ending Sept 07.

I really want to deplete that fund and get into something more transparent in reporting. [36] [ 102 ] Rather than taking steps to verify the merits of the allegations, he immediately wrote to Papadopoulos: We should respond to this as soon as possible. Please let me know how you want me to handle this . I will be speaking to her [Ms. Thompson] shortly, but would like to speak with you first. [37] [ 103 ] In this case, the conflict of loyalty affected Mtre Salomon’s obligation of confidentiality, because he decided to inform Papadopoulos of Ms.

Thompson’s concerns rather than protect the appellants’ interests. [ 104 ] But there is more. Despite the deference owed to the judge’s assessment of the facts, the uncontradicted documentary evidence clearly shows that as of 2006, Mtre Salomon had been receiving considerable amounts from Papadopoulos, through one of his companies.

The $20,000 [ translation ] “gift” received in 2006, by way of bogus fees from a company created for that purpose, which gift was increased by $8,000 to pay for the taxes related to the gift, gives pause for thought. [ 105 ] A series of e-mails [38] establishes that Mtre Salomon worked closely with Papadopoulos and Bright in relation to some of Mtre Salomon’s other clients, whom he approached to invest in Triglobal. The September 30, 2007 e-mail from Papadopoulos to Mtre Salomon was in reply to Mtre Salomon’s e-mail request to meet to discuss investments by two of his clients.

Below is Papadopoulos’s reply: Great news Kenny. Lots to talk this week. Keep in mind that I will issue your first bi-weekly 5K check this week . Please send me an invoice for 50K (this will cover the next months ). Make this invoice demand to “Themis Papadopoulos Financial Services Inc.” and sent to my attention. We will talk about the cases on Monday morning. [39]

[Emphasis added.] [ 106 ] And in an e-mail dated October 22, 2007, Papadopoulos asked his assistant “ to pay the 15K to bernucci for his comms and the 5K to ken salomon for his ”. [40] The assistant testified that “comms” is the abbreviation for “commissions”. [ 107 ] How can one fail to conclude that Mtre Salomon received commissions for the clients he referred to Papadopoulos?

With respect, the judgment offers no explanation to avoid such a finding, other than to accept a statement to the contrary from Mtre Salomon, whose only explanation was that it was the redemption of his investment, notwithstanding that the payment was made to the company he incorporated in 2006 at Papadopoulos’ request to offer him the $28,000 gift mentioned earlier. [ 108 ] In this regard, one can reasonably infer, based on the portion of the $20,000 gift received from Papadopoulos in May and June 2006, a very close relationship with Mtre Salomon, which originated before this date.

The judgment does not consider the situation from this perspective, even though, at the time, Ms. Thompson expressed her concern about 166’s investment in Focus. [41] How can one fail to conclude that Mtre Salomon was in a situation of conflict at the time, when he received a substantial gift from Papadopoulos, whose company, Triglobal, was benefiting from 166’s investment of several million dollars? [ 109 ] In

summary, not only did Mtre Salomon breach his duty to advise both Ms. Thompson and 166, it appears that he also placed himself in a situation of conflict of interest by advising the appellants on their investments with Triglobal, even though he had a close relationship with its executives, particularly Papadopoulos, which prevented him from acting objectively and faithfully, within the limitations of his competence. 2. Causal link [ 110 ] The judge concluded that Mtre Salomon’s multiple faults did not cause the losses suffered by Ms. Thompson and 166. According to her analysis, given that Ms.

Thompson had sold her investments in the Manulife and iVest funds, about which Mtre Salomon had advised her, and that the losses resulted from subsequent investments in the Focus fund, made without Mtre Salomon’s prior involvement, he was not liable for them. [ 111 ] Furthermore, even though the trial judge found no fault by Mtre Salomon against 166, she noted that even if there had been a fault, there was no causal link with the loss suffered. In fact, 166 did not consult Mtre Salomon prior to investing in Focus. He did not have any subsequent obligation to warn it.

In any case, the judge considered that at the time Mtre Salomon learned about this investment, it was unlikely that 166 could have recovered it, given the extent of Papadopoulos and Bright’s fraud. [ 112 ] Last, the judge mentioned that the appellants’ losses were the result of Papadopoulos and Bright’s fraud, which Mtre Salomon could not have foreseen and for which he was not liable because he was not his clients’ insurer. [ 113 ] With respect, I do not share this analysis. I will explain. [ 114 ] The judge acknowledged that Mtre Salomon’s professional advice convinced Ms.

Thompson to proceed with the investments proposed by Papadopoulos. The judge’s examination of the causal link, however, was implicitly based on the premise that the scope of Mtre Salomon’s advice was limited to the iVest and Manulife funds.

In fact, she found that since the losses occurred in the Focus fund, for which Mtre Salomon had not been consulted before the appellants invested, there was no causality. [ 115 ] The impact of Mtre Salomon’s faults, however, was far more significant. [ 116 ] Mtre Salomon stated that Papadopoulos and, by the same token, Triglobal, of which he was the driving force, had a “very conservative” approach. This statement was not based on any verification by or knowledge on the part of Mtre Salomon.

On the contrary, it was erroneous because the recommendation to invest in an offshore hedge fund is clearly not conservative, based on the uncontradicted evidence. [ 117 ] Moreover, as the judge noted, had Mtre Salomon checked with the AMF, he would have been able to inform Ms.

Thompson as early as 2003 that: Papadopoulos was not authorized to offer investment funds; Bright had not been authorized to offer investment funds since 2003, but had been authorized to do so from 2001 to 2003 with Norbourg Capital; Triglobal was not supposed to be offering investment funds such as iVest or Focus; The iVest fund was not in good standing with the AMF. [ 118 ] In addition, had Mtre Salomon advised Ms.

Thompson, as early as 2003, that Papadopoulos’s proposal for an offshore hedge fund did not constitute an investment that was suitable for her needs or those of 166, not only would she not have invested in the iVest fund, but the appellants would have known that the same applied to the Focus fund. [ 119 ] Furthermore, the appellants would have been informed of Papadopoulos’s dubious competence, to say the least, in learning that

he was proposing a product that he described as secure, namely the iVest fund, when it was nothing of the kind. Mtre Salomon did not have to suspect the possible fraud of Papadopoulos and his partner Bright to provide this information, which was available to any competent person in the field, and thereby avoid the disastrous fate that awaited the appellants. [ 120 ] The analytical lens selected by the judge, to borrow the term used by the Court in Ford, [42] caused her to adopt an approach that isolated Mtre Salomon’s representations according to whether they concerned Ms.

Thompson or 166, and the investments according to whether they concerned the iVest fund or the Focus fund. The judge limited the actual scope of the faults committed by Mtre Salomon. This approach affected her examination of the causal link. Moreover, the judge failed to globally assess the events that, despite being spread out over a four-year period, formed a continuum. [ 121 ] The evidence, when analyzed as a whole, shows that the appellants would never have invested in Triglobal had Mtre Salomon acted diligently and competently from the outset. It should be recalled that Ms.

Thompson knew that she was investing the couple’s lifetime savings, whose capital was intended for the children. [ 122 ] That being said, I note that Mtre Salomon could have rectified the situation on various occasions after 2003. [ 123 ] For instance, on July 6, 2004, after having supposedly conducted a comparative analysis of investment offers by RBC and Triglobal, he unequivocally stated: From what I can see, 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 . [43] [ 124 ] At trial, Mtre Salomon admitted that he had not conducted an independent analysis in support of this statement. He had blindly repeated what Papadopoulos had stated. It is useful to note once again that Mtre Salomon insisted that the Triglobal proposal was secure. This statement suggested to the recipient that the person making it was knowledgeable in the area of investments. Indeed, Mtre Salomon also listed “financial planning” [44] as one of his specializations on his firm’s website. Instead of inviting Ms.

Thompson to consult a competent and independent advisor, who could guide her in analyzing the offers proposed to her, he categorically stated that Triglobal’s proposal was less risky than that of RBC. [ 125 ] Another example. On June 13, 2005, he informed Ms. Thompson of possible investments for the trusts based on the applicable legislation. He took the opportunity to advise her on investment opportunities with Triglobal.

Referring to the Manulife and iVest funds, he stated: I believe that both forms of investment 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). [45] [ 126 ] These recommendations were addressed to Ms. Thompson as trustee. The faults committed were repeated. [ 127 ] About two weeks later, on June 29, 2005, Mtre Salomon forwarded to Ms. Thompson an e-mail sent to Papadopoulos, concerning the proceeds from the disposition of 166’s assets.

The following excerpt reveals not only the scope of his mandate regarding 166’s assets, but also his knowledge of the situation and the advice he provided to the appellants: We believe that the amount of capital that we will have to work with will be $5.4 million.

Please give me some thought as to how you would invest this money (perhaps a mix of iVest and a managed portfolio … ). [46] [ 128 ] Mtre Salomon thereby maintained the relationship between the appellants and Papadopoulos and suggested investing in an offshore hedge fund that did not respect the Trust’s cardinal principle of preserving the capital, as he himself had noted several months earlier in a memorandum. [ 129 ] The draft 166 and Stemac resolutions prepared by Mtre Salomon so that investments could be made in the iVest and Manulife funds, through Triglobal, stated that these accounts were being opened in the companies’ best interests.

Mtre Salomon sent these resolutions, initially drafted in November 2005, to Triglobal in February 2006. [47] He failed again, at that time, to warn Ms. Thompson that the iVest investment was inappropriate. [ 130 ] Other seemingly more mundane communications contributed to maintaining the climate of trust fostered since 2003. On November 30, 2006, Mtre Salomon informed Ms.

Thompson that he had visited Bright in Nassau, adding that Bright “has become resident there in order to manage the Focus, Ivest and structured products funds” and ending by assuring her that “all is well”. [48] [ 131 ] On that date, Mtre Salomon had already confirmed to Ms. Thompson that the Focus investments were appropriate. That message shows once again that he saw no difference, in terms of investment security, between the two funds. The following e-mail from Mtre Salomon to Papadopoulos, dated May 9, 2007, is revealing in this regard: She [ Ms. Thompson ] is unhappy with the Focus setup.

Can we make it simpler? Perhaps straight Ivest? Or is the idea to have the capital in the less risky Focus ? [49] [Emphasis added.] [ 132 ] It is clear that Mtre Salomon considered the Focus fund less risky than the iVest fund. However, he never advised Ms. Thompson of this. What is worse, he admitted at trial that he considered the Manulife fund “the most important product, and the best one, and the one that made me feel secure”, but never told Ms. Thompson this. Mtre Salomon’s faults continued. [ 133 ] On July 26, 2007, Ms.

Thompson told Mtre Salomon that she was having serious communication and redemption problems with

Triglobal. He answered: The Triglobal returns continue to be excellent and I remain very happy to have my investments performing so well with such controlled risk. [50] [ 134 ] On September 29, 2007, he reassured her again by telling her that “I think that the two funds (iVest and Focus) are performing as predicted ” . [51] [ 135 ] It therefore appears that barely months before Triglobal and its funds collapsed, Mtre Salomon did not just inform Ms.

Thompson of his satisfaction, but reiterated that the investments were controlled risks, a statement based only on his relationship of trust with Papadopoulos. [ 136 ] As previously stated, in August 2007, Ms. Thompson had expressed her concern to Mtre Salomon about the

article on Triglobal and the iVest fund. [ 137 ] Given the lack of distance between Papadopoulos and Mtre Salomon, Mtre Salomon did not make any inquiry or issue any warning concerning the allegations in the media and merely reassured Ms. Thompson based on his relationship with Papadopoulos. It is also surprising that Mtre Salomon took exception to the allegations in the

article that established a connection between Triglobal and the iVest fund, when we know that four years earlier, on August 19, 2003, he had written to Ms. Thompson that “iVest is the hedge fund that Themis [Papadopoulos] and his partner Mario Bright have developed”. [52] [ 138 ] Mtre Salomon’s attitude, for which the appellants are today paying the price, continued until days before Papadopoulos and Bright’s colossal fraud was uncovered, as illustrated in his short note to Ms.

Thompson on December 10, 2007, where he commented on Papadopoulos’ latest promises to concerned investors: “FYI, this is good”. [53] [ 139 ] In short, had Mtre Salomon properly fulfilled his duty to advise from the beginning of his mandate in August 2003, and had he not placed himself in a situation of conflict of interest, the appellants would never have entrusted their savings to Triglobal and the losses suffered would never have occurred. [ 140 ] That voids the argument that the losses did not result from investments in the iVest fund, but rather from those in the Focus fund.

These investments were inextricably linked to the chain of events in which the appellants were enmeshed through Mtre Salomon’s faults. [ 141 ] This finding also renders irrelevant the argument that when Mtre Salomon learned about the appellants’ investments in the Focus fund, it was possibly too late to recover them.

As stated, without his faults, the appellants would never have invested in Triglobal. [ 142 ] Last, in the alternative, the respondents argue that the fraud by the defendants Papadopoulos and Bright breaks the causal link that might exist between Mtre Salomon’s faults and the appellants’ losses. [ 143 ] According to

article 1607 C.C.Q., damages may be claimed for any injury that is an immediate and direct consequence of the debtor’s default. [ 144 ] Baudouin J.A., in Lacombe c. André , a case that addressed the problem of causation in professional liability, stated as follows: [ translation] [ 58] First, this is not a case where there is a genuine break in the causal link.

There is a long-standing trend in certain cases, especially in the area of professional liability (physicians, notaries and lawyers), to endorse a false application of the principle known in Latin as novus actus interveniens . [59] In law, an essential condition must be met in order to actually break the causal link and thereby justify exonerating the first person who committed a fault and retaining only the second one’s liability.

There must first be a finding that the link between the initial fault and the injury had completely ended and, second, the injury must be renewed or restarted due to an act that is not directly related to the initial fault . In all logic, there can be no break where there is continuity in time and therefore a causal link between the faults. [60] In the present case, it seems obvious that there is no break. Quite the contrary, there are two contributory faults (and that is where the confusion arises) which are not simultaneous, however, but are spread out over time.

Each one is, however, causally related to the outcome . [54] [Emphasis added,] [ 145 ] If we apply these principles to the facts of the case, it is impossible to conclude that the link between Mtre Salomon’s faults and the appellants’ injury had completely ended. On the contrary, the faults continued over the years and the link between those faults and the appellants’ injury was not broken. Although the fraudsters’ faults and those of Mtre Salomon did not occur simultaneously, this does not absolve Mtre Salomon.

This situation arises frequently in the area of professional liability, which accounts for the comments of Baudouin J.A. [55] [ 146 ] Imagine if market fluctuations caused the total or partial loss of investments. That the faulty adviser has no control over market movements could not be a ground for exoneration. The same reasoning applies in the present case. [ 147 ] In

summary, Mtre Salomon repeatedly breached his duty to advise and his duty of loyalty to the appellants, from 2003 until Triglobal and the iVest and Focus funds collapsed in December 2007. There is an immediate and direct link between the appellants’ losses and Mtre Salomon’s faults. [ 148 ] I note that both at trial and on appeal, the respondent partnership did not raise defences separate from those of Mtre Salomon and

the respondents filed a joint defence. Furthermore, they raised no defence concerning the quantum, the appellants' net losses having been admitted at trial. [ 149 ] In the circumstances, I would allow the principal appeal in accordance with its conclusions, with legal costs. [ 150 ] The respondents’ incidental appeal should therefore be dismissed, with legal costs. ÉTIENNE PARENT, J.A.