2011 QCCA 1837, 2011 QCCA 1837

Valeurs mobilières Desjardins inc. c. Lepage 2011 QCCA 1837 COUR D’APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N° : 500-09-019764-091 500-09-019766-096 (500-17-021417-046) DATE : le 6 octobre 2011 CORAM : LES HONORABLES PIERRE J. DALPHOND, J.C.A. ALLAN R. HILTON, J.C.A. JULIE DUTIL, J.C.A. DOSSIER N° : 500-09-019764-091 VALEURS MOBILIÈRES DESJARDINS INC. APPELANTE – INTIMÉE INCIDENTE – Défenderesse c. HUGUETTE LEPAGE INTIMÉE – Demanderesse et FRANÇOIS OUELLET INTIMÉ – APPELANT INCIDENT – Demandeur DOSSIER N° : 500-09-019766-096 JEAN-FRANÇOIS BASTIEN APPELANT – INTIMÉ INCIDENT – Défendeur c.

HUGUETTE LEPAGE INTIMÉE – Demanderesse et FRANÇOIS OUELLET INTIMÉ – APPELANT INCIDENT – Demandeur ARRÊT [ 1 ] LA COUR; -Statuant sur les appels et les appels incidents d'un jugement rendu le 22 mai 2009 par la Cour supérieure, district de Montréal (l'honorable Louis-Paul Cullen), qui a accueilli en

partie la réclamation de l'intimé François Ouellet et accueilli la réclamation de l'intimée Huguette Lepage; [ 2 ] Pour les motifs du juge Hilton, auxquels souscrivent les juges Dalphond et Dutil: DOSSIER N° : 500-09-019764-091 [ 3 ] ACCUEILLE l'appel de Valeurs mobilières Desjardins inc. avec dépens, sauf pour les coûts de reproduction de son cahier de sources, déposé hors délai; [ 4 ] INFIRME le jugement de la Cour supérieure quant à celle-ci; [ 5 ] REJETTE les réclamations des intimés François Ouellet et Huguette Lepage, sans frais en Cour supérieure; [ 6 ] REJETTE l'appel incident de François Ouellet, sans frais.

DOSSIER N° : 500-09-019766-096 [ 7 ] ACCUEILLE l'appel de Jean-François Bastien, sans frais; [ 8 ] INFIRME le jugement de la Cour supérieure quant à celui-ci;

[ 9 ] REJETTE les réclamations des intimés François Ouellet et Huguette Lepage, sans frais en Cour supérieure; [ 10 ] REJETTE l'appel incident de François Ouellet, sans frais. PIERRE J. DALPHOND, J.C.A. ALLAN R. HILTON, J.C.A. JULIE DUTIL, J.C.A. Me Julie-Martine Loranger GOWLING LAFLEUR HENDERSON Pour les Valeurs mobilères Desjardins inc. Me Martin Courville DE CHANTAL D’AMOUR FORTIER Pour Huguette Lepage et François Ouellet Me Pierre D. Sauvé Pour Jean-François Bastien Date d’audience : le 4 mai 2011 REASONS OF HILTON, J. A.

I THE PROCEDURAL CONTEXT [ 11 ] The principal issues in these two appeals arise out of the same judgment. They are whether the trial judge correctly determined: first, the civil liability of Jean-François Bastien, an investment advisor at the time of the events in issue, and his employer, Valeurs mobilières Desjardins; and, second, the method used to establish the quantum of damages in favour of each of the respondents and whether there was a direct causal relationship between the faults attributed to the appellants and such damages. The trial judge held that Mr.

Bastien committed faults in his role as an investment advisor at the time of the opening and during the administration of the investment accounts of François Ouellet and Huguette Lepage. The liability of Desjardins was based on its role as Mr. Bastien's principal, and independently of that status, its failure to adequately supervise his work on behalf of Mr. Ouellet and Ms. Lepage. [ 12 ] The judgment of the Superior Court maintained the claim of Mr. Ouellet in part and that of Ms. Lepage for the amount she sought at trial.

The judgment thus condemned the appellants, solidarily, to pay them respectively $110,669.63 and $317,742.82 in principal, plus interest, the additional indemnity and costs. [1] [ 13 ] Through his incidental appeal, Mr. Ouellet seeks to increase the damages to $422,141.39, which is the amount he claimed in the Superior Court. II THE FACTS [ 14 ] Ms. Lepage is the mother of Mr. Ouellet, and at the relevant time they lived in Rouyn-Noranda. Between 1995 and 2000, Mr. Ouellet was employed by a mining company after having obtained a collegiate diploma in mining techniques.

His work involved him working beneath ground in mines and being exposed to the hazards of that occupation. [ 15 ] Ms. Lepage is widowed. She worked as a sales representative for the Fondation Universitas , a company in the business of selling registered education savings plans, for which she had a permit from the Quebec securities authority. Her principal source of income, however, consisted of the payments she received from her Quebec provincial widow's pension. [ 16 ] Dr. Suzanne Lebel is the niece of Ms. Lepage and the cousin of Mr. Ouellet. She was the president and founder, along with Steven N.

Silaty, of a privately held company known as Genomics One Corporation that was in the business of creation and distribution of gene discovery tools designed to assist in the development of genetic research. Based on information that was not in the public domain that Dr. Lebel provided to them, first Ms. Lepage and then Mr. Ouellet began purchasing shares in Genomics. [ 17 ] In February of 1997, more than three years before she opened her accounts at Desjardins, Ms. Lepage's acquired 17,213 shares of Genomics that were deposited in her RRSP account at the National Bank.

She further acquired 6,000 additional shares in May of 1998. Ms. Lepage paid in excess of $23,000 for these shares knowing, as she put it, that they were somewhat risky. [ 18 ] Mr. Ouellet's purchases of Genomics were much more extensive. Like his mother, he too was aware that their acquisition was somewhat of gamble.

[ 19 ] Mr. Ouellet's initial foray was in April of 1998 for 6,000 shares, followed by another in May of 1999 for 45,000 shares, some of which were for his mother or a friend, although the major portion were for himself. In November of 1999, he purchased 10,000 more Genomics shares, which were accompanied by an equivalent amount of share warrants. Not long after this transaction, Genomics went public and was available on the open market. [ 20 ] The value of Genomics shares took off beginning in February of 2000, only to descend rapidly within a relatively short time.

At the beginning of the month, Genomics shares were trading at $3.10, and by the end of that month, at $20.95. A few days later, on March 2, they reached an intra-day trading high of $46 per share, only to fall to the status of being a penny stock by July of 2001. [ 21 ] Mr. Ouellet knew Mr. Bastien and that he was in the investment business. He decided to contact him for an appointment, and met him at his office in Gatineau on February 28, 2000. In the preceding weeks, Mr. Bastien had prepared an opening of account form he sent to Mr. Ouellet. Between February 28 and March 2, Mr.

Ouellet had sold 25,000 shares of Genomics, thus generating $631,510 in principal. It is a measure of the volatility of the stock that for the first of the two sales effected on February 28, the sale price per share was $16.90, but that two days later on March 2, that price at which he sold the shares had more than doubled to $35.00. [ 22 ] As for Ms. Lepage, she also sold some of her Genomics shares prior to opening an account at Desjardins, and in so doing generated $64,000 in principal. [ 23 ] Both Mr. Ouellet and Ms. Lepage had previous experience in the market prior to beginning their relationship with Mr.

Bastien and Desjardins. Mr. Ouellet had opened accounts with two brokerage firms, showing an interest for short-term capital gains that would comprise the entirety of his portfolios, with what was described as a 100% tolerance of high risk. In both instances, he was described as having a good knowledge of investments, and engaged in the acquisition of stocks such as Loubel Exploration Inc. and Coleraine Ressources that are acknowledged to be speculative in nature. [ 24 ] For her part, Ms. Lepage had an account at a discount broker, InvesTel, and another with Dundee, a retail broker.

At the latter, she was described as being interested in speculative stocks for short-term gain, with a 100% tolerance of high risk, and having a good knowledge of investments. [ 25 ] Mr. Ouellet opened his two accounts when he was 24 years old. Mr. Bastien recorded him as having a "passable" knowledge of investments, with investment objectives of 40% long-term growth and 60% speculation. As far as Ms.

Lepage was concerned, she was characterized as having a good knowledge of investments, with the same investment objectives as those of her son. [ 26 ] Both parties signed the forms that contained the foregoing information. [ 27 ] Towards the end of March and the beginning of April, the assets that would comprise Mr. Ouellet's RRSP and margin accounts were transferred to Desjardins. They had a value of $992,157, comprised of $590,782 in cash and the balance of $401,375 in equities, the majority of which were Genomics shares and share warrants.

In fact, the latter consisted of close to 41% of the assets transferred to Desjardins. [ 28 ] Ms. Lepage's accounts at Desjardins were opened in March of 2000, at which time she was 55 years old. The assets transferred to an RRSP account in May that year were valued at $352,508, close to 80% of which consisted of Genomics shares. By that time, however, the value of Genomics shares had already dropped considerably from their historic high value in early March.

During the month of May, Genomics was trading for as little as $10 on May 5 but as high as $18 on May 19. [ 29 ] It is not disputed that at or around the time the respondents opened their accounts with Desjardins, the North American stock market had begun its significant downward cycle that was provoked by the bursting of the technology bubble. [2] This phenomenon ended the significant upward trajectory of technology stocks, with consequential effect on the rest of the market as well. [ 30 ] When the relationship between the parties began, Mr.

Bastien had been employed for less than one year by Desjardins as an investment advisor. It is important to specify that Mr. Bastien could not undertake any transactions in his clients' accounts without their prior approval. His role was to advise and make recommendations to them, whether on his own initiative or in response to an instruction to effect a transaction.

He could never, however, decide on his own to initiate transactions on their behalf, whether to buy or sell securities. [ 31 ] In this respect, the nature and extent of his duties undertaken on behalf of his clients differed from those of a portfolio manager empowered to trade stocks in clients' accounts on a discretionary basis and without their prior approval. [3] The trial judge acknowledged the existence of this distinction. [ 32 ] Mr. Ouellet terminated his relationship with Desjardins in August of 2001; Ms. Lepage did likewise in May of 2002.

In the interim, their respective portfolios diminished in value from their opening values. The principal issue in the Superior Court, as it is in this Court, is whether the damages, as claimed, were the direct result of one or more faults of Mr. Bastien in his role as an investment advisor and that of Desjardins as his employer, having in mind that the respondents either initiated or otherwise approved every transaction in their respective accounts. III THE JUDGMENT OF THE SUPERIOR COURT [ 33 ] The trial judge provided a detailed account of the evidence. Central to this account was his view that Mr.

Ouellet and Ms. Lepage were in fact inexperienced investors who tended to overestimate their own investment skills. [ 34 ] Thus, for example, despite what she declared on the account opening form with Desjardins, the trial judge found that Ms. Lepage did not have "good" knowledge of investing. He concluded that Mr. Bastien could have ascertained an accurate reflection of her knowledge had he not taken her assertion at face value. Moreover, Mr. Bastien did not take account of her having told him that she

was coming to him for assistance in the management of her assets with a view to retiring within five years. [ 35 ] In that context, the trial judge concluded that Mr. Bastien's failure to recommend that Ms. Lepage dispose of her Genomics shares was mistaken. He did acknowledge, however, that Mr. Bastien had suggested a better diversification of her portfolio, which would mean the disposal of at least some of her Genomics shares. The trial judge also discounted Mr. Bastien's explanation that Ms. Lepage's account at Desjardins was growth oriented since she had significant and more secure investments elsewhere.

He pointed to the silence of the account opening forms as to that assertion, which, he added, was contradicted in any event by the fact that Ms. Lepage accepted his advice to acquire Hydro-Québec coupons. The trial judge saw this as an indication that Ms. Lepage was receptive to holding secure investments while all the while having growth oriented objectives. [ 36 ] The trial judge found that Mr. Ouellet was particularly interested in growth of his assets without, however, being prepared to incur any and all risks.

He did keep considerable cash in his account from which he ultimately withdrew $234,000 to satisfy various debts and maintain his lifestyle, as he had terminated his employment with the mining company. Mr. Ouellet also refused to part with his Genomics shares, to which he was evidently attached, despite Mr. Bastien's recommendation that he do so. Nevertheless, the trial judge did not consider that Mr. Bastien made this recommendation with any particular conviction or insistence. The trial judge further noted that Mr. Bastien did not entertain any further discussions with Mr.

Ouellet with respect to his investment objectives after he had been informed of the latter's decision to leave his employment, enrol in an educational program and live off his investments while personally paying attention to their evolution more closely. [ 37 ] The trial judge also provided a

summary of the evidence of the three expert witnesses who testified, all of whom he qualified to provide expert opinions on the subjects canvassed in their reports. [ 38 ] He began with that of Jean-Claude Dorval, who testified on behalf of Mr. Ouellet. [ 39 ] According to Mr. Dorval, Desjardins had the duty to have in place a structure that would allow the branch manager to verify all transactions effected on a daily basis and to intervene whenever necessary. Nothing in the file permitted Mr. Dorval to confirm whether this duty was respected.

The performance of this duty would be particularly important in the case of Mr. Bastien, who had less than one year of experience at Desjardins. It was also a matter of concern that some transactions were effected simply by the client giving instructions to an office secretary, and without any discussion about the advisability of the transaction between the client and Mr. Bastien. [ 40 ] Mr. Dorval emphasized it was of critical importance for an investment advisor to know his client.

This capacity requires the advisor to be able to recognize the level of investment ignorance of the client, despite what the client may tell the advisor. It also requires the advisor to verify the accuracy of the information the client is providing, as well as the source of the funds to be transferred. In addition, the advisor must be sure of the client's investment objectives and understanding of the level of risk being assumed. [ 41 ] Any significant change in the client's particular situation must necessarily require a reassessment of the client's investment objectives.

Such a significant change would include the decision of a client to stop working. [ 42 ] Mr. Dorval opined that the success Mr. Ouellet had achieved with his shares in Genomics was not a valid basis to determine the extent of his investment experience. Moreover, Mr. Ouellet's investment objectives could not be properly determined based on the composition of his existing portfolio. [ 43 ] Without taking account of Mr. Ouellet's profile at other investment dealers, it was inappropriate to have his investment objectives as high as 60% in speculative stocks.

Taken together with the objective of 40% long-term growth, Mr. Ouellet was left with no fixed income. [ 44 ] In any event, the stated investment objectives were not reflected in the composition of the portfolio. [ 45 ] Despite Mr. Ouellet's wishes, Desjardins never should have kept Genomics shares in his RRSP portfolio. [4] Similarly, in this respect and with respect to the acquisition of other speculative stocks, Desjardins' investment advisors should have encouraged their client to adopt a prudent approach. [ 46 ] In

summary, Mr. Dorval concluded that Desjardins' representatives failed in their duty to Mr. Ouellet in several respects: insufficient knowledge of their client; inadequate information from their client and inadequate advice to him; failure to control the degree of risk to which he was exposed; absence of an investment strategy; excessive concentration of certain stocks and presence of high-risk stocks in the portfolio. [ 47 ] Echoing many of the opinions of Mr. Dorval, Ms. Lepage's expert Jocelyne Marquis was of the view that Desjardins' representatives were insufficiently familiar with Ms.

Lepage and her lack of investment awareness to properly advise her. This state of affairs, including Ms. Lepage's intention to retire five years later, led Desjardins to allow Ms. Lepage to have an excessively aggressive and insufficiently diversified portfolio that increased the risk to which she was exposed. For example, she had only one fixed income security that represented less than 5% of the initial value of her portfolio at Desjardins, her share holdings were concentrated in four volatile sectors of the market out of 14 available sectors, and she held only one U.S. security. [ 48 ] Ms.

Lepage's personal profile was inconsistent with having so many speculative stocks, and her declared knowledge of investments was overrated. In particular, her concentration of holdings in Genomics should have led to clarification of the investment advisor's mandate with respect to this stock since its extreme volatility was inconsistent with her profile. [ 49 ] Ms. Marquis concluded that while Ms. Lepage's portfolio did correspond with the declared objectives on the account opening form, these objectives did not reflect the reality of her personal situation.

An investment advisor had the duty, whether a transaction was recommended to the client or requested by the client, to ensure its compatibility with the client's properly understood objectives. Apart from Mr. Bastien, the Desjardins branch manager failed in his duty to ensure that the actual needs of Ms. Lepage were properly reflected on the account opening form she signed.

[ 50 ] Jean Gosselin, a chartered accountant and a former chief inspector for the Montreal Stock Exchange between 1995 and 2000, testified on behalf of Desjardins with respect to the claims of both Mr. Ouellet and Ms. Lepage. [ 51 ] Mr. Gosselin agreed with Mr. Dorval and Ms. Marquis that an investment advisor's knowledge of a client is indispensable, and that remaining aware of the client's situation is an ongoing process that requires as many meetings with the client as may be called for in the circumstances. [ 52 ] Mr.

Gosselin placed considerable importance for an evaluation of the civil liability of the parties on the distinction between a portfolio manager, who enjoys the discretion to effect transactions on behalf of clients without their prior authorization, and that of an investment advisor, who acts both as the client's mandatary to effect transactions and as an advisor. When a client requires a transaction to be effected with which the advisor does not agree, he has a duty to counsel against it, but at the end of the day it is the client's decision that prevails.

In other words, the advisor cannot refuse to follow the client's instruction despite his or her own advice to the contrary that the client has chosen to decline. [ 53 ] Mr. Gosselin noted that Mr. Ouellet approved all of the transactions made in his name, as well as the decision not to dispose of his holdings in Genomics. [ 54 ] In assessing the performance of Mr. Ouellet's portfolio between its opening and closing, Mr. Gosselin observed that Genomics shares and share warrants initially represented 40.5% of his portfolio ($401,375) with the balance of 59.5% ($590,782) in cash. He also noted that Mr.

Ouellet's interest in the acquisition of speculative stocks such as Jitec Inc., Loubel Exploration and Tom Exploration were the result of information personal to him, and that he initiated these transactions that Desjardins effected on his behalf. In that respect, the apportionment of 60% of his portfolio in speculative stocks upon the opening of the account corresponded with his investment profile upon his arrival at Desjardins, as well as with the other investment firms at which Mr. Ouellet had accounts. [ 55 ] Desjardins' representatives left Mr.

Ouellet to his own devices when it came to choosing speculative stocks. Mr. Bastien did, however, recommend he acquire stocks with long-term growth prospects in the technology sector, such as JDS Uniphase, Research In Motion, Nortel Networks, 724 Solutions Inc., Cisco Systems Inc., Corning Inc., Juniper Networks, Microsoft Corp., NBC Internet Inc., Palm Inc. and Yahoo Inc.. These securities could not be considered speculative, any more than Mr.

Bastien's recommendation to purchase stock market indexes such as NASDAQ Trust Shares and the S&P/TSX 60 Index Fund. [ 56 ] With respect to four other stocks recommended to Mr. Ouellet, three of them were well known, paid regular income or were no longer start-up companies. [ 57 ] The loss of $182,582 Mr. Ouellet incurred from the purchase of shares Desjardins' representatives recommended was comparable to the performance at the time of the benchmark stock market indexes. Mr.

Gosselin therefore concluded that the stocks so recommended were neither speculative nor of inferior quality to those of the indexes and that they were compatible with Mr. Ouellet's stated long-term growth objectives. [ 58 ] On the other hand, Mr. Ouellet's loss of $442,702 in stocks for which he initiated the purchase largely surpassed the losses seen on the market. The overwhelming majority of such losses were directly attributable to the volatility of Genomics, which accounted for a huge percentage of that total. [ 59 ] No less than 71% of Mr.

Ouellet's losses were the result of transactions he initiated, with the balance of 29% coming from losses on acquisitions recommended by Desjardins. [ 60 ] Mr. Gosselin concluded with respect to Mr. Ouellet that in light of the nature of the assets he transferred to Desjardins and his evident interest in speculative stocks, Desjardins correctly assessed Mr. Ouellet's investment profile at the outset. That being said, he acknowledged that Desjardins failed to update that profile having in mind Mr.

Ouellet's decision to stop working, and that it should have recommended the acquisition of income generating stocks instead of seeing him retain or acquire more speculative stocks. [ 61 ] In performing a similar analysis concerning the losses Ms. Lepage suffered, Mr. Gosselin noted that of the $352,508 worth of assets she transferred to Desjardins, $68,546 or 20% was in cash while the balance of $283,962 or 80% was in speculative stocks. The vast majority of the latter category consisted of $280,182 or 79% worth of stock in Genomics. Ms.

Lepage's remaining losses of $25,367 were the result of diminished value of shares that Desjardins recommended, however, a major portion of that total was attributable to Nortel, which Desjardins had recommended be sold but which Ms. Lepage chose to retain. [ 62 ] The trial judge also noted that Mr. Gosselin did not consider that Ms. Lepage had in reality a good knowledge of investments, and that Mr. Bastien should have recommended to her that she dispose of her holdings in Genomics. Given her personal situation, including her age, financial obligations and retirement plans, Mr.

Gosselin would have recommended fixed income investments to her that represented a percentage of her portfolio that was equal to her age. [ 63 ] After enumerating the statutory [5] and regulatory [6] obligations of Mr. Bastien with respect to his knowledge of and advice to his clients, the trial judge quoted from the Cours relatif au Manuel sur les normes de conduite.

It emphasizes the importance for investment advisors of a duty of care that consists of knowing the client well, exercising reasonable diligence in advising the client after a serious analysis of information relating to the client and any proposed transaction, and, cautioning the client about a transaction the client proposes that does not seem to correspond with the client's situation or investment objectives. [ 64 ] In this respect, the trial judge found that the information on the account opening form that Mr. Bastien completed for Mr. Ouellet, while accurate, was incomplete.

Moreover, the document was never revised to take account of the subsequent changes in his life that had a direct bearing on the kind of advice he should have been receiving. Apart from the confidence that Mr. Ouellet had in Mr. Bastien, to whom he had entrusted the majority of his assets, Mr. Ouellet's limited knowledge of investments and the concentration of his assets in Genomics ought to have led Mr. Bastien to revise Mr. Ouellet's investment strategy and diversify his portfolio to ensure an income stream rather than holding onto a volatile stock such as Genomics.

[ 65 ] Instead, Mr. Bastien was content to let Mr. Ouellet manage the speculative stocks in his portfolio without any advice or recommendations to him about the advisability of what he was doing, thereby exposing him to the risks that ultimately occurred. Since Mr. Ouellet's initial investment strategy was disconnected from the reality of his actual situation, whatever advice Mr. Bastien did give him was necessarily inadequate. Even the advice Mr. Bastien provided with long-term growth objectives were in reality those of short-term growth.

In any event, there was insufficient diversification of stocks in this category, and in some instances unduly precipitous sales at a loss when the stocks were held for a short time. [ 66 ] Mr. Bastien's liability was thus engaged. [ 67 ] The same scenario was observed with respect to Ms. Lepage. Mr. Bastien's superficial analysis of her situation led him to assimilate her investment objectives with those of her son. Moreover, he did not adequately take account of her plans to retire in five years. He also overestimated her investment knowledge.

Accordingly, the investment objectives recorded on the account opening form were inconsistent with Ms. Lepage's true needs. Thus, Mr. Bastien never recommended that she dispose of her Genomics shares, nor did he try to dissuade her from acquiring other speculative stocks. In addition, the stock purchases he did recommend were insufficiently diversified and presented undue risks. [ 68 ] The trial judge concluded that Mr. Bastien did very little for Ms. Lepage and more or less left her on her own. [ 69 ] Desjardins was found liable for two reasons: first, for inadequate supervision of Mr.

Bastien with respect to the establishment of proper investment objectives for his two clients and what transpired thereafter as a result; and second, as Mr. Bastien's principal. [7] The trial judge was also particularly critical of Desjardins for allowing transactions requested by clients to be effected by simply speaking to the office secretary, thus depriving them of the opportunity to receive whatever advice from their investment advisor that might have been appropriate in the circumstances.

He nevertheless recognized that this inappropriate practice had little direct impact in the evolution of events in light of the faults of Mr. Bastien and those he attributed to Desjardins. [ 70 ] Having concluded that the appellants were negligent, the trial judge nevertheless did not consider that their fault was intentional or amounted to gross fault. [8] Rather, Mr. Bastien erred in his appreciation of the awareness of his clients and their ability to make informed decisions, as well as with respect to their tolerance for risk given their inexperience.

Essentially for the same reasons – lack of knowledge and experience – it could not be said that Mr. Ouellet and Ms. Lepage knowingly ratified the transactions effected in their names. [ 71 ] The trial judge then proceeded to analyze the amount of damages to which Mr. Ouellet and Ms. Lepage were entitled. [ 72 ] He first recalled the basic criteria for an award of damages, [9] including in particular for breach of contract. [10] He then mentioned that the plaintiffs before him had the burden to establish fault, damage and a direct causal relationship between the two by a preponderance of evidence.

The defendants before him, however, had the burden to prove that the plaintiffs would have made the same investment decisions they did had Mr. Bastien not committed the faults attributed to him. [11] [ 73 ] Mr. Dorval had established the losses attributable to Mr. Ouellet in the amount of $300,406.01 for his RRSP account and $121,735.38 for his margin account. Both of these calculations were based on estimates from hypothetical accounts, that is, what typical such accounts might have looked like had they been managed by a portfolio manager. The trial judge acknowledged that Mr.

Ouellet did not give such a mandate to Desjardins. He nevertheless found this method of calculation to be appropriate, since the investments in the hypothetical portfolio correspond with the evidence about Mr. Ouellet and the kind of investments he probably would have made but for the fault of Mr.

Bastien: [346] Dans le cas présent, monsieur Ouellet n'a pas confié aux défendeurs le mandat de gérer son portefeuille, mais, au contraire, il a toujours conservé son pouvoir décisionnel. [347] Cette distinction n'est pas déterminante cependant, puisque les placements retenus par l'expert Dorval se concilient avec la preuve relative au demandeur.

Ainsi, monsieur Ouellet était décidé à faire croître ses avoirs aussi rapidement que possible et disposé à courir certains risques dans ce but, mais n'était pas téméraire au point de risquer de perdre sa nouvelle fortune et retourner dans la mine. [348] Si monsieur Bastien l'avait convenablement informé de ce risque, des autres possibilités de placement à sa disposition, de l'importance de diversifier son portefeuille et d'équilibrer ses objectifs de placement, en toute probabilité, monsieur Ouellet aurait effectué des placements semblables aux placements hypothétiques présentés par l'expert Dorval, lesquels reflètent raisonnablement bien les dispositions caractérielles de monsieur Ouellet. [ 74 ] In effect, the trial judge was of the view, generally speaking, that if Mr.

Bastien had informed himself properly about Mr. Ouellet and his needs on an ongoing basis and advised him accordingly, Mr. Ouellet would not have made the investment decisions he did. The one exception to that principle that the trial judge found related to Mr. Ouellet's excessive attachment to Genomics, which the appellants succeeded in showing he would not have liquidated even if Mr. Bastien had recommended more persuasively that he do so. [ 75 ] The trial judge therefore deducted losses generated by Mr. Ouellet having held onto Genomics from Mr.

Dorval's calculation of damages on the premise of what the assets Mr. Ouellet transferred to Desjardins would have earned if invested in the manner reflected in the hypothetical portfolio. For the same reason relating to Genomics, the trial judge declined to award Mr. Ouellet the moral damages he also claimed. [ 76 ] It therefore fell to the trial judge to arbitrate what Mr. Ouellet's damages should be.

In so doing, he awarded nothing for the losses in the RRSP account that consisted only of Genomics stock, and reduced the losses in the margin account by an amount corresponding to the 9.09% of Genomics stock in the account. [ 77 ] The principal amount of damages therefore came to $110,669.63 for Mr. Ouellet. [ 78 ] The same kind of analysis led the trial judge to award Ms. Lepage the entirety of the amount recommended by her expert

Ms. Marquis, which was also calculated based on hypothetical investments that would have been made but for the faults attributed to Mr. Bastien and Desjardins. Although Ms. Lepage also had Genomics shares in her account, the trial judge felt that the entirety of the evidence disclosed that she would not have refused to part with them if Mr. Bastien had made the recommendation that her personal situation required. The trial judge also awarded her $5,000 of moral damages, bringing the total in principal to $317,742.82. IV ISSUES AND ANALYSIS [ 79 ] Desjardins and Mr. Bastien [12] urge four grounds of appeal, which I will examine in the same sequence.

(1) Did the trial judge err in the application of the legal principles that governed the mandate the respondents conferred on the appellants? [ 80 ] The legal relationship between the parties is one governed by the law of mandate. [13] It thus becomes essential to ascertain correctly the nature of that mandate. [ 81 ] The appellants argue that they respected the mandate Mr. Ouellet and Ms. Lepage conferred upon them as investment advisors, and that they at all times had the final say about the content of their portfolio. They also note that Mr.

Bastien's recommendations were consistent with their stated investment objectives, and that the losses arising out of his recommendations were comparable to those seen in the benchmark indexes in the context of the stock markets' significant downward turn. [ 82 ] As for Mr. Ouellet and Ms. Lepage, they forcefully contend that the trial judge correctly determined that Mr. Bastien breached the primary duty he had to his clients: to know them sufficiently well to advise them appropriately, and, in the case of Mr. Ouellet, to remain abreast of his changed circumstances. For that reason, they argue that Mr.

Bastien's appreciation of their true situation and his ability to counsel them accordingly was fatally flawed from the outset. From their perspective, the only meaningful question is whether Mr. Bastien's advice was consistent with their real objectives, and not the relative success of the transactions he did recommend. [ 83 ] Whatever its other components may be, and irrespective of Mr.

Bastien's status as an investment advisor as opposed to a portfolio manager, they argue that he nevertheless had a statutory and private law duty to ensure that his advice was consistent with the investment objectives and financial situation of his clients. Putting aside for the moment the issue of the stated as opposed to real objectives of Mr. Bastien's clients, their respective financial situations were of considerable importance. In the case of Mr. Ouellet, his decision to abandon his employment and live off the proceeds of his investments was a significant one, as was the fact that Ms.

Lepage's impending retirement was a mere five years away. [ 84 ] The trial judge was critical of the manner in which Mr. Bastien informed himself of these factors. [ 85 ] Insofar as Mr.

Ouellet is concerned, he said this: [277] À l'époque du transfert chez VMD de la majorité des avoirs de monsieur Ouellet, l'obligation de prudence s'impose d'autant plus à monsieur Bastien qu'il a connaissance des faits suivants : - monsieur Ouellet lui voue une telle confiance qu'il lui confie la majorité de ses avoirs qui sont alors importants; - les connaissances en matière de placements de monsieur Ouellet sont, tout au plus, « passables »; - la situation financière et personnelle de monsieur Ouellet s'est récemment modifiée de manière importante; - le récent enrichissement de monsieur Ouellet n'est pas attribuable à sa compétence en matière de placements, mais plutôt à des contacts familiaux privilégiés joints à une chance extraordinaire; - l'objectif de placement « Spéculation 60 % » comporte des risques élevés qui sont incompatibles avec la nouvelle situation et orientation de monsieur Ouellet; - la tolérance au risque élevée de monsieur Ouellet n'est sans doute pas émoussée par le rendement de GENOMICS; - la volatilité de l'action de GENOMICS est élevée. [278] Réalisant tout cela, un professionnel avisé aurait révisé sans délai avec son client les objectifs de placement élaborés quelques semaines auparavant dans un tout autre contexte pour s'assurer qu'ils reflétaient encore réellement sa volonté. [279] Il aurait également pris soin d'expliquer à son client les risques élevés associés à ses objectifs de placements spéculatifs et l'aurait mis en garde quant à la possibilité très réelle de perdre ses gains récents et de devoir retourner travailler à la mine. [280] Enfin, il lui aurait souligné l'importance de diversifier son portefeuille et d'y inclure des titres à revenu fixe, afin de lui permettre de subvenir à ses besoins courants. [281] Cela n'est pas fait. [ 86 ] The trial judge was no less critical when it came to his assessment of Mr.

Bastien's treatment of Ms. Lepage: [309] En raison d'une analyse superficielle de sa part, monsieur Bastien a surestimé les connaissances de madame Lepage en matière de placements et a erronément assimilé ses objectifs de placement à ceux de son fils, malgré leurs situations personnelles et financières très différentes.

[310] Monsieur Bastien n'a rien noté au formulaire d'ouverture de compte de madame Lepage des projets précis dont elle lui faisait part et qui étaient incompatibles avec les objectifs de placement risqués qu'il inscrivait pour elle. [311] Ces erreurs fondamentales ont empêché monsieur Bastien de conseiller sa cliente adéquatement et, tout particulièrement, de la mettre en garde à l'égard des risques auxquels elle s'exposait. [312] Ainsi, il ne lui a pas recommandé de vendre ses actions de GENOMICS ni même de faire preuve de prudence relativement à la conservation de ce

titre spéculatif et volatile. [313] De plus, les quelques titres qu'il lui a recommandés étaient insuffisamment diversifiés et indûment risqués, car il ne s'agissait que de trois titres à revenu variable, tous du secteur de la technologie, et d'un seul

titre à revenu fixe, lequel ne représentait qu'un faible pourcentage de son portefeuille total chez VMD en mai 2000. [314] Enfin, il n'a pas tenté de la dissuader de procéder à d'autres placements spéculatifs. [315] En conséquence, dans l'ensemble, monsieur Bastien a très peu fait pour madame Lepage, qu'il a plutôt laissée à elle-même. [ 87 ] It was open to the trial judge to make these determinations. The legal consequences that flow from these findings, however, remain to be determined. [ 88 ] In particular, the fact that Mr.

Bastien's conduct may be said to have infringed the statutory and regulatory regimes that were in place at the time is irrelevant to the decision whether he and Desjardins are civilly liable to Mr. Ouellet and Ms. Lepage. In this respect, the words of Rochon, J. A. on behalf of the Court in Richter & Associés inc. v. Merrill Lynch Canada inc. [14] bear repetition: [72] Le premier devoir du courtier est d'agir avec prudence et diligence ( art. 2139 C.c.Q .).

La responsabilité du courtier doit être examinée en fonction du courtier « raisonnablement prudent et diligent exerçant des fonctions semblables et placé dans une situation analogue ». Le courtier doit tenir informé son client de l'exécution de son mandat (art. 2139 C.c.Q .).

S'ajoute aux obligations du courtier celle de conseiller son client par une information adéquate et pertinente de façon à permettre au client de prendre une décision éclairée en fonction de ses intérêts. [73] L'intensité des obligations du courtier variera en fonction de plusieurs paramètres dont, notamment, l'objet précis du mandat, les objectifs du client, les connaissances du client dans le champ de l'investissement envisagé, les risques associés à l'opération, la situation financière et la personnalité du client. [74] Par ailleurs, tout manquement à une disposition statutaire et réglementaire n'entraîne pas de façon inéluctable la responsabilité du courtier.

Règle générale, ces différentes règles prescrivent des normes de prudence et de diligence qui balisent la conduite du courtier. Toutefois, pour retenir la responsabilité du courtier, il faut établir un lien de causalité entre le manquement statutaire ou réglementaire et le dommage subi. [75] Pour s'acquitter de ses obligations envers un client, le courtier se doit de bien le connaître. Le fait de connaître son client permet au courtier de le jauger correctement et ainsi établir les besoins, les objectifs du client, le niveau d'encadrement requis et ses besoins au

chapitre de l'information et du conseil. Cette obligation de bien connaître son client s'impose plus particulièrement si le mandat en est un de gestion de portefeuille. [References omitted, emphasis added] [ 89 ] The dilemma in this case is that while it is difficult to challenge the trial judge's finding of fact that Mr. Bastien breached his civil duty to "know your client", the advice he did give with respect to transactions were well within the stated objectives of Mr. Ouellet and Ms. Lepage as he understood them.

The fact that many acquisitions he proposed were in the technology sector was not unusual at the time, and it is not with the benefit of perfect hindsight that these transactions should be assessed. [15] Similarly, Mr. Bastien cannot be held responsible for the bursting of the technology bubble and the consequential market downturn that followed. [ 90 ] I would reject this ground of appeal to the extent it challenges the trial judge's finding of fact with respect to Mr. Bastien's failure to "know your client", but I will consider the consequence of that breach when examining the appellants' third submission.

(2) Did the trial judge err in his application of the duty of care, advice and caution incumbent on the appellants? [ 91 ] Stated bluntly, the issue here is to what extent, if any, did Mr. Bastien have the duty to protect Mr. Ouellet and Ms. Lepage from themselves insofar as a significant proportion of their holdings consisted of shares in Genomics and to a lesser extent other speculative stocks? Both Mr. Ouellet and Ms. Lepage came to Desjardins with Genomics stock in hand, and persisted in maintaining them in their portfolio despite continuously mounting evidence that the time had come to minimize their losses.

In addition, both of them had previous experience with other investment firms, including discount brokers from whom they received no advice. They clearly showed by their prior conduct, which they continue to display during their relationship with Desjardins, a distinct interest for speculative stocks, short-term gains and an elevated tolerance for risk. [ 92 ] The main reproach addressed to Mr.

Bastien is that he inadequately counselled his clients with respect to Genomics in light of their true needs, especially in light of the fact that it constituted, by far, the greatest single asset they transferred to Desjardins. That being said, there is no doubt that both Mr. Ouellet and Ms. Lepage had access to information from Dr. Lebel, the co-founder of Genomics (Mr. Ouellet's cousin and Ms. Lepage's niece), that was not in the public domain. They were thus in a much better position than Mr.

Bastien to assess the wisdom of holding onto the stock, or acquiring more shares during the time they had accounts at Desjardins. [ 93 ] Insofar as this reproach relates to Mr. Ouellet, the extract from paragraph [349] of the judgment of the Superior Court, which I quote at length in the context of Mr. Ouellet's incidental appeal at paragraph [127] of these reasons, eloquently explains why nothing Mr. Bastien could have said would have detracted Mr. Ouellet from treating his shares in Genomics any differently than he did.

[ 94 ] It is indeed a contradiction for the trial judge to have effectively concluded that had Mr. Bastien given Mr. Ouellet the advice he ought to have given, he would have accepted it, but only to the extent the advice was unrelated to Genomics. This is a scenario that is, to say the least, patently unrealistic in the circumstances. [ 95 ] The extract I have quoted below shows Mr.

Ouellet had a significant propensity for acquiring speculative stocks before, during and after his relationship with Desjardins, which necessarily would have to be taken into account in assessing his willingness to accept and act on Mr. Bastien's advice to the contrary. So too did he acquire other speculative stocks through other investment firms based on personal contacts at the very same time he had his accounts at Desjardins. Not only did he purchase Genomics stock through the intermediary of Desjardins, but through other brokers as well. He further ignored such recommendations as Mr.

Bastien did provide him about disposing of Genomics. Moreover, Mr. Ouellet declined Mr. Bastien's advice to include fixed income securities in his RRSP account. [ 96 ] Quite simply, Mr. Ouellet's portrait is not that of someone who was open to be persuaded by logic and reason. [ 97 ] It would be placing an excessive burden on an investment advisor to effectively immunize a client such as Mr. Ouellet from the consequences of his own avarice. As I have already mentioned, it would also be unrealistic to conclude that Mr. Ouellet would accept some but not all of the advice Mr.

Bastien supposedly should have provided him. This Court has previously held that the intensity of the obligation of someone in the position of Mr. Bastien is one of means, not result. [16] The trial judge's conclusion proceeds on the basis that Mr. Bastien not only had an obligation to counsel Mr. Ouellet to act other than the way he actually did, but to succeed in the endeavour. In my view, this amounts to the improper imposition of an obligation of result. The well known proverb that "you can lead a horse to water but you can't make it drink" comes to mind in describing the insurmountable obstacles Mr.

Bastien faced in persuading Mr. Ouellet to dispose of his Genomics shares. [ 98 ] As far as Ms. Lepage is concerned, she acknowledged that her decision to invest in Genomics was motivated by the confidence she had in her niece, Dr. Lebel. The sale she effected of 3,200 shares before the transfer of her account to Desjardins occurred at a time when the stock was increasing in value, with the idea that she would dispose of other shares in Genomics as its value increased. Instead, the reverse happened, for which Mr. Bastien cannot be held to account.

She knew that the value of her Genomics holdings was decreasing on a continuing basis. She assiduously followed its share price on her own and knew as well what the values were from the statements of account she received from Desjardins. On July 18, 2000, while she had her accounts at Desjardins, she purchased 1,500 shares of Genomics at $8.00 per share through the intermediary of another broker, well after the Genomics price per share had begun its downward trend, as she knew. She purchased other speculative stocks essentially on the advice of Mr. Ouellet.

Finally, more than two years after she had closed her account at Desjardins, on December 21, 2004, Ms. Lepage sold 12,000 shares of Genomics for $0.22 per share from her account with the investment firm Canaccord. [ 99 ] She further acknowledged having declined Mr. Bastien's advice, with respect to long-term growth instruments, to sell her stock in Nortel. Although, as the trial judge pointed out, she did accept Mr. Bastien's advice to acquire Hydro-Québec fixed income coupons, she did so while reiterating that her investment objective was growth, not income.

This is an important qualification that the trial judge failed to properly take into account when assessing whether Ms. Lepage would have accepted the advice Mr. Bastien supposedly should have given. [ 100 ] The trial judge concluded that nevertheless, had Mr. Bastien or his superiors been insistent, Ms. Lepage would have acquiesced in a forceful recommendation to dispose of her Genomics shares. In my view, this is a conclusion based on mere speculation.

There is much contemporaneous evidence to the contrary and precious little credible evidence about what she would have done had such advice been given to her. [ 101 ] That she claimed at trial to have been vulnerable and would have acted other than the way she did should hardly come as a surprise, but the weight to attach to such a contention is minimal. Rather, her claim should be assessed with the clarity provided by her actual conduct at the time. Her investment decisions at Desjardins and elsewhere about which she now complains were made in the present, not in the past.

They should therefore be assessed in light of the circumstances as they existed at the time, and not from the perspective of the result of those decisions. [ 102 ] I consider the appellants' submissions on this issue to be well founded.

(3) Did the trial judge err in his application of the general principles of civil liability with respect to the determination of damages? [ 103 ] This ground of appeal challenges the trial judge's finding on the causal relationship between the faults he ascribed to the appellants and the damages he awarded Mr. Ouellet and Ms. Lepage. As we have seen, the amount of damages was based on hypothetical portfolios their experts prepared that are comprised of securities they supposedly should have had but for the faults of Mr. Bastien and Desjardins.

In doing so, the experts selected securities that in their opinion were compatible with what they perceive the true investment objectives of the respondents should have been, as if, in effect, their investment advisor was a portfolio manager with discretionary authority to transact on behalf of them without their prior approval. [ 104 ] The appellants contend that the trial judge erred in relying on this methodology, which is based on an investment mandate the respondents did not confer on them. They also argue that the losses Mr. Ouellet and Ms.

Lepage suffered were not caused by their fault, but by the respondents own investment decisions or market fluctuations that were beyond their control. Subsidiarily with respect to Ms. Lepage, they argue that to the extent the Court concludes there is any loss for which they are responsible, it should be limited to the losses she incurred as a result of Mr. Bastien's recommendations, less those associated with her decision not to accept his advice to sell her holdings in Nortel.

The amount of damages thus reduced would be $7,229. [ 105 ] The appellants have an additional complaint arising out of the calculation on which the trial judge relied concerning the methodology Ms. Marquis used to calculate the loss of Ms. Lepage. In addition to their general objection as to the hypothetical nature of a portfolio that Ms. Lepage ought to have had, they contend that the component factors of the hypothetical portfolio are themselves

inappropriate. [ 106 ] Ms. Lepage's expert, Ms. Marquis, assumed that the portion of the portfolio that should have been in income producing bonds would be the mirror image of the Scotia Capital Universal Bond Index. That index reflects the performance of the broad Canadian bond market for the bonds of the government of Canada, provincial and municipal governments bonds as well as those of highly rated corporations. According to Desjardins, no single investor could hold all the bonds comprising this index.

An actual result consistent with the index would therefore be a matter of pure chance, and thus cannot properly form the basis of damages that are certain. [ 107 ] Ms. Marquis further assumed with respect to the shareholdings portion of the hypothetical portfolio that its results would be equivalent to the benchmark TSE 300 index, but capped to exclude the performance of Nortel. This approach, however, presents a false picture since it has the effect of artificially increasing the value of the index. More significantly, it ignores the fact that Ms.

Lepage insisted on maintaining Nortel stock in her portfolio, contrary to Mr. Bastien's advice. [ 108 ] The respondents defend the approach adopted by their expert witnesses, which the trial judge accepted as a valid basis to establish the amount of damages, subject to Mr. Ouellet's incidental appeal that argues he erred in deducting from the calculations the losses associated with Genomics. They dispute the main contention of the appellants and affirm that there is no reason to distinguish the outcome from the perspective of portfolio management from that of investment advice.

The causal relationship between fault and damage flows from the failure of Mr. Bastien and Desjardins to properly assess the investment profile of Mr. Ouellet and Ms. Lepage, irrespective of whether they initiated transactions on their own or acted on Mr.

Bastien's advice. [ 109 ] With great respect, I do not subscribe to the trial judge's reasoning on causation. [ 110 ] First, it is important to note that investment advisors can properly be found liable in damages for negligence in the execution of their mandate. [17] The appellants' position that they had no choice but to follow their clients' instructions, irrespective of what Mr. Bastien may have thought about them, is both simplistic and wrong.

An investment advisor who disagrees with a client's proposed transaction is always free to decline to effect it by terminating the mandate, just as a member of the Bar can cease to act on behalf of a client instead of doing exactly what a client instructs. [ 111 ] That being said, the existence of a fault in the execution of the appellants' mandate still requires proof of a causal relationship between the fault and the losses that are a direct result of that fault, as the judgments of this Court in Bélanger v. Geoffrion Leclerc Inc. [18] and Richter & Associés inc. v.

Merrill Lynch Canada Inc . [19] show. [ 112 ] The real issues are whether anything Mr. Bastien could have or should have done would have deterred Mr. Ouellet and Ms. Lepage from proceeding exactly as they did, and whether it is proper, with the benefit of perfect hindsight, to determine the amount of their losses on the basis of a mandate the respondents did not give and hypothetical investments Mr. Dorval and Ms.

Marquis constructed for them with knowledge of the results before the hypothetical investment decisions would actually have been made. [ 113 ] While it may be reasonable to conclude that a young man returning to an academic program and a woman five years away from her retirement should avoid the risks of speculative stocks and concentrate on more secure investments, it is impossible to envisage such a scenario in the case of Mr. Ouellet and that of Ms. Lepage.

The vast majority of their losses are attributable to Genomics, with which they arrived at Desjardins, and which they steadfastly maintained, undoubtedly because of a misplaced confidence as to its potential for growth. There is also, of course, the significant market downturn that affected the performance of the other components of their portfolio. [ 114 ] Baudouin and Deslauriers describe the law on causation this way: [...] Les tribunaux exigent que la victime fasse preuve d'un lien direct entre le préjudice dont elle réclame l'indemnisation et la faute qu'elle reproche au défendeur.

Le caractère direct de ce lien est apprécié, avant tout, par l'examen de la situation de fait, au cours duquel le juge est amené à peser l'influence respective de tous les évènements et circonstances ayant entouré l'accident. Pour lui permettre de se faire une opinion, trois éléments principaux entrent en général en ligne de compte soit conjointement, soit alternativement. D'abord, la possibilité objective de la création du préjudice; ensuite, la prévisibilité raisonnable de celle-ci et enfin la situation dans le temps des divers facteurs à caractère causal.

On ne saurait s'étonner, dans un tel système, qu'on confonde souvent faute et causalité et que l'on réduise parfois cette dernière à un simple élément de la première. [20] [Emphasis added, reference omitted] [ 115 ] Even if one were to accept the premise that it was objectively possible that the faults attributed to the appellants could give rise to losses, it is much harder to conclude that Mr. Bastien ought to have known that his conduct exposed Mr. Ouellet and Ms. Lepage to the losses they claimed based on a mandate they did not give him.

In effect, the trial judge was aware of factors that had a direct bearing on causation of which he took no account: the respondents almost obsessive predilection for speculative stocks, manifested not only in their accounts at Desjardins but elsewhere as well; and the severe downturn in the market brought about by the bursting of the technology bubble. [ 116 ] In my respectful view, the trial judge also erred by effectively shifting the burden of proof on causation to the appellants. [21] It was not up to the appellants to disprove causation by showing that the results obtained through the hypothetical portfolios would not have been achieved had they acted faultlessly.

Rather, it was for the respondents to prove that a reasonable investment advisor in the position of Mr. Bastien would have made such recommendations and that the respondents would always have accepted every one of them. In the latter respect, such proof is not only lacking, but is contradicted by the contemporaneous conduct of the respondents. That conduct is a sounder basis on which to judge them, and not an ex post facto assessment of their true needs and the hypothetical results obtained as if Mr.

Bastien was a portfolio manager. [ 117 ] That is the difficulty in transposing what a portfolio manager might have done, knowing that such a person does not require the consent of his or her client to effect a transaction, with that of an investment manager, who can do no more than advise and recommend. The example offered by the judgment of the Supreme Court in Laflamme [22] is therefore inapplicable to the circumstances of this case.

[ 118 ] As far as the moral damages of $5,000 the trial judge awarded to Ms. Lepage is concerned, it is interesting to observe that her claim and that of Mr. Ouellet in the Superior Court in this respect was for $100,000 each.

The trial judge described the evidence in support of this head of damages as very superficial. [ 119 ] His brief reasoning in support of this award is in the following terms: [371] Quant à madame Lepage, son préjudice moral se rapporte essentiellement à une perte d'agrément liée à des ressources pécuniaires limitées en raison de la diminution marquée de ses avoirs par la faute de monsieur Bastien et de VMD. [372] Un lien direct entre son préjudice et la faute des défendeurs est donc établi. [373] Tenant compte de la nature, de la durée et de l'intensité relativement légère du préjudice prouvé ainsi que des circonstances de la commission des fautes, Tribunal arbitre le montant des dommages-intérêts de madame Lepage à ce

titre à 5 000 $. [ 120 ] Although I have concluded that the trial judge's conclusions that the faults attributed to the appellants should not be disturbed, the respondents failed to show a causal relationship between those faults and the compensatory damages they contend they suffered. Had the trial judge come to the same conclusion, there is no reason to believe he would have awarded Ms. Lepage any moral damages. [ 121 ] I would therefore consider this ground of appeal to be well founded.

(4) Did the trial judge err in his determination that Ms. Lepage would have sold her shares in Genomics if such a recommendation had been made to her? [ 122 ] For the reasons I have already given, I would answer this question in the affirmative. VI THE INCIDENTAL APPEAL [ 123 ] Mr. Ouellet's incidental appeal raises two grounds, the first of which seeks an increase in the amount of damages to those he claimed in the Superior Court.

The second ground of appeal is subsidiary and solicits an increase in the amount of damages by $11,065.75, which represents the deduction of the value of Genomics shares effected by the trial judge from his margin account. [ 124 ] Given my conclusion that the principal appeals should be allowed, Mr. Ouellet's incidental appeal must be dismissed. Had I been of the view to dismiss the appeals of Desjardins and Mr. Bastien, however, I would nevertheless have rejected his first ground of appeal but maintained the second one for the reasons that follow.

(1) Did the trial judge err in concluding that Mr. Ouellet would not have sold his Genomics shares if he had been so recommended? [ 125 ] Mr. Ouellet argues that the trial judge attached too much weight to his supposedly excessive attraction to Genomics shares. He says the failure to recognize his error in this respect was due to his misunderstanding of its inherently speculative nature, especially since Mr. Bastien was reassuring that the stock market would eventually climb out of its cyclical tumble.

He goes on to argue that the trial judge's conclusion is incompatible with his determination that the hypothetical portfolio Mr. Dorval put forward, on which the trial judge otherwise relied, represented Mr. Ouellet's true objectives, which excluded any holdings in speculative stocks. Had Mr.

Bastien properly informed of the risks associated with Genomics, he would have been more careful in his decision-making with respect to it. [ 126 ] It would have sufficed to dispose of this ground of appeal to conclude that the trial judge's finding of fact was not affected by any overriding or palpable error that would have justified the Court's intervention. This is all the more so when it is remembered that Mr. Ouellet purchased shares in Genomics in February and March of 2004, long after he had terminated his relationship with Desjardins and Mr.

Bastien, and even after his demand letter in June of 2002. [ 127 ] Here is the trial judge's finding: [349] […] (l)a défense a établi que même si monsieur Ouellet avait été convenablement informé des risques liés à la conservation des actions de GENOMICS et même si les défendeurs lui avaient recommandé de vendre ces actions ou une

partie de celles-ci lors du transfert de son portefeuille chez VMD ou par la suite, il aurait probablement rejeté cette recommandation :

a) Monsieur Ouellet n'hésite pas à prendre seul d'importantes décisions relativement à ses placements. Ainsi, avant de rencontrer monsieur Bastien à Gatineau et sans l'entremise de ce dernier, il décide seul de vendre successivement des milliers d'actions de GENOMICS pour prendre une

part importante de son profit et laisser immédiatement la mine.

b) Monsieur Ouellet rejette à l'occasion les recommandations de monsieur Bastien. Il rejette, entre autres, sa suggestion le 28 février 2000 d'acquérir des titres à revenus fixes, puis procède à des achats d'actions non sollicités de TOM EXPLORATION et de LOUBEL.

c) Monsieur Ouellet n'imite pas monsieur Charron qui vend devant lui toutes ses actions de GENOMICS le 24 juillet 2000.

d) Au contraire, il continue de conserver ses actions de GENOMICS malgré l'avis défavorable des analystes de VMD dont monsieur Bastien lui fait part en novembre 2000.

e) Monsieur Ouellet tient de façon émotive au

titre de GENOMICS acquis grâce à des informations familiales privilégiées et il croira longtemps à sa croissance future : i. La haute direction de GENOMICS, ses procédés technologiques et leur domaine d'application impressionnent, au point où messieurs

Bastien et Charron en achètent eux-mêmes. ii. Le 28 février 2000, avant de transférer son portefeuille chez VMD, monsieur Ouellet rejette la suggestion de monsieur Bastien de vendre ne serait-ce qu'une

partie des actions de GENOMICS contenues de son compte RÉER dans l'espoir de bénéficier en franchise d'impôt de leur éventuel accroissement de valeur. iii. Le

titre connaît une énorme croissance pendant les trois premiers mois de 2000. iv. Monsieur Ouellet continue pendant longtemps d'acheter des actions de GENOMICS chez CIBC : 100 (à 11,90 $) et 400 (à 11,75 $) en mai 2000, 10 000 (à 0,52 $) en février 2004 et 3 000 (à 0,37 $) en mars 2004. v. Il ne vend plus d'actions de GENOMICS pendant des années, sauf pour en acquérir à meilleur prix ou pour financer un achat spéculatif à l'égard duquel il croit détenir des informations privilégiées. Il vend 5 000 actions de GENOMICS (à 0,42 $) en février 2005 et 8 500 actions (à 0,31 $) en mars 2005 chez CIBC.

f) Même en conservant toutes les actions de GENOMICS transférées chez VMD, monsieur Ouellet disposait encore d'un montant important aux fins de placements moins risqués chez VMD. [Reference omitted] [ 128 ] The trial judge's reasoning in this respect is beyond reproach. I would reject this ground of appeal.

(2) Did the trial judge err in the manner he established the damages to which Mr. Ouellet was entitled? [ 129 ] Mr. Ouellet argues that subsidiarily, the trial judge should not have deducted $11,065.75 for the loss attributed to the margin account, which was the only account for which damages were awarded. This sum represents the value of Genomics shares that the trial judge considered to be 9.09% of the margin account. Mr.

Ouellet correctly points out, however, that as of April 2000, all of his Genomics shares were in his RRSP account, with the result that no deduction should have been effected from the margin account. [ 130 ] Desjardins and Mr. Bastien argue that the trial judge's finding of fact commands deference, and that Mr. Ouellet is foreclosed from raising on appeal an argument that he did not submit to the trial judge. They are wrong on both counts. [ 131 ] First, there is a palpable and overriding error of fact.

The incidental respondents do not even attempt to demonstrate the correctness of the finding by reference to specific elements of the evidence. [ 132 ] Second, there is nothing that prevents a party from raising as a ground of appeal an argument that arises out of the judgment under review. Mr. Ouellet can hardly be blamed for raising in this Court a submission that he could not possibly have anticipated at the stage of oral argument in the Superior Court. [ 133 ] Had it been otherwise open to me, I would have given effect to this subsidiary ground of appeal.

VII PROPOSED DISPOSITION [ 134 ] I would allow the appeal of Desjardins. I would do so with costs in this Court, except for the cost of its book of authorities filed beyond the 30-day time limit prior to the hearing of the appeal (Articles 86 and 87 of the Rules of Practice of the Court of Appeal in Civil Matters ). Accordingly, I would dismiss the respondents' action against Desjardins, but without costs in the Superior Court given the faults properly ascribed to it. [ 135 ] I would also allow Mr.

Bastien's appeal, without costs in light of his limited involvement in this Court, and dismiss the respondents' action against him in the Superior Court, but without costs given the faults properly ascribed to him. [ 136 ] Finally, I would dismiss Mr. Ouellet's incidental appeal without costs given his liability for costs in this Court on Desjardins' appeal. ALLAN R. HILTON, J. A.