SUPREME
COURT OF CANADA
Citation:
Salomon v. Matte-Thompson,
2019 SCC 14
|
Appeal Heard:
March 19, 2018
Judgment
Rendered: February 28, 2019
Docket:
37537
|
Between:
Kenneth
F. Salomon and Sternthal Katznelson Montigny LLP
Appellants
and
Judith
Matte-Thompson and 166376 Canada Inc.
Respondents
Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté,
Brown, Rowe and Martin JJ.
Reasons for
Judgment:
(paras. 1 to 97)
|
Gascon J. (Wagner C.J. and Abella, Moldaver, Karakatsanis,
Brown, Rowe and Martin JJ. concurring)
|
Dissenting
Reasons:
(paras. 98 to 215)
|
Côté J.
|
Note: This document is subject to editorial revision before its
reproduction in final form in the Canada Supreme Court Reports.
salomon v. matte‑thompson
Kenneth F. Salomon and
Sternthal Katznelson Montigny LLP Appellants
v.
Judith Matte‑Thompson and
166376 Canada Inc. Respondents
Indexed as:
Salomon v. Matte‑Thompson
2019 SCC 14
File No.: 37537.
2018: March 19; 2019: February 28.
Present: Wagner C.J. and Abella, Moldaver, Karakatsanis,
Gascon, Côté, Brown, Rowe and Martin JJ.
on appeal from the court of appeal for quebec
Law
of professions — Lawyers — Professional liability — Duty to advise — Duty of
loyalty — Lawyer recommending financial advisor to clients — Clients investing
millions of dollars with recommended financial advisor’s firm — Lawyer
repeatedly endorsing advisor and encouraging clients to make and retain
investments — Investments made in funds that were parts of Ponzi scheme —
Millions lost in fraud — Clients claiming that lawyer and his law firm were
professionally negligent — Trial judge dismissing claim — Court of Appeal
allowing appeal and ordering that clients be compensated for losses — Whether
Court of Appeal erred by employing notion of distorting lens in determining
whether trial judge had made palpable and overriding errors — Whether Court of
Appeal expanded professional obligations of lawyers who refer clients to
independent advisors — Whether Court of Appeal erred by interfering with trial
judge’s findings relating to faults committed by lawyer and to causation.
In
2003, a lawyer introduced two clients to his financial advisor and personal
friend, and recommended that they consult him. In the following four years, the
clients ended up investing over $7.5 million with the recommended financial
advisor’s investment firm. Over the course of those four years, the lawyer
repeatedly endorsed the recommended advisor as a financial advisor and
encouraged his clients to make and retain investments with the investment firm.
In 2007, the recommended advisor and his associate disappeared with the savings
of around 100 investors, including those of the lawyer’s clients. The
clients instituted legal proceedings, claiming that the lawyer and his law firm
were professionally negligent in two ways: first by breaching their duty to
advise them and second, by disregarding their duty of loyalty to them.
The
trial judge dismissed the claim. The Court of Appeal concluded that the
trial judge had made reviewable errors, and it reversed her judgment. In its
opinion, the trial judge had viewed the lawyer’s acts and their consequences
through a distorting lens which had led her to erroneously assess the evidence
in isolated silos, without the insight provided by a global analysis. The Court
of Appeal ordered the lawyer and his law firm solidarily to fully compensate
the clients for their losses.
Held (Côté J.
dissenting): The appeal should be dismissed.
Per
Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon,
Brown, Rowe and Martin JJ.: The Court of Appeal had a sufficient basis for
intervening and reversing the trial judge’s decision. It properly applied the
standards of appellate review, as imposed by Housen v. Nikolaisen,
2002 SCC 33, [2002] 2 S.C.R. 235. The professional liability of the lawyer and
the law firm for the clients’ losses has been established.
Findings with respect to fault involve questions of mixed fact and
law and findings with respect to causation, questions
of fact. In both situations, absent a palpable and overriding error, an
appellate court must defer to the conclusions reached by the trial judge. It
can only intervene if there is an obvious error in the trial decision that is
determinative of the outcome of the case. The fact that an alternative factual
finding could be reached based on a different ascription of weight does not
mean that a palpable and overriding error has been made. An appellate court
must identify a crucial flaw in the lower court’s decision, and a
distorting lens, that is, a lens through which a trial judge assessed the
evidence and that had a distorting effect, cannot be invoked as a substitute
for identifying a reviewable error or to mask the fact that an error identified
by an appellate court does not meet the high standard imposed by Housen.
In the case at bar, the Court of Appeal held that the distorting
lens through which the trial judge has viewed the evidence — in this case a
narrow, siloed approach — had led her to make precisely identified palpable and
overriding errors. The notion of a distorting lens was nothing more than a
metaphor the Court of Appeal used to explain why the standard of appellate
review established in Housen was met; it was not used to mask an absence
of palpable and overriding errors. The Court of Appeal did not err by employing
the notion of a distorting lens in determining whether the trial judge had made
palpable and overriding errors.
Where
the first court of appeal has justifiably intervened in the trial judgment and
disagreed with the trial judge, the Court will intervene only if its own
disagreement stems from a clear satisfaction that an error has occurred in the
first appellate court’s assessment of the facts. The focal point of the
analysis that the Court — as the second and final court of appeal — has
to perform in applying the Housen standards of review is the decision of
the first court of appeal, not that of the trial judge. The
onus is on the appellants to demonstrate an error in the court of appeal’s
decision. Here, the appellants did not satisfy their onus. The Court of Appeal
did not err by concluding that the trial judge had made palpable and overriding
errors, by interfering with the trial judge’s findings relating to the lawyer’s
duty to advise and duty of loyalty, nor by interfering with the trial
judge’s findings that the lawyer’s fault had not caused the clients’ losses. There is no reason for the Court to interfere with the Court of
Appeal’s findings.
The
relationship between lawyers and their clients can usually be characterized as
a contract of mandate. Although lawyers, as mandataries, do not guarantee the
services rendered by professionals or advisors to whom they refer their client,
they must nevertheless act competently, prudently and diligently in making such
referrals, which must be based on reasonable knowledge of the professionals or
advisors in questions. Lawyers who refer clients to other professionals or
advisors have an obligation of means, not one of result. They must be convinced
that the professionals or advisors to whom they refer clients are sufficiently
competent to fulfill the contemplated mandates. Referral is not a guarantee of
the services rendered by the professional or advisor to whom the client is
referred, but it is also not a shield against liability for other wrongful acts
committed by the referring lawyer. In the instant case, the lawyer had done far
more than merely make a referral. It was the entirety of his conduct that led
the Court of Appeal to hold the lawyer and his law firm liable in the
circumstances. The Court of Appeal’s decision did not broaden the basis of
liability for lawyers who refer clients to other professionals or advisors.
A
lawyer’s duty to advise is threefold, encompassing duties to inform, to
explain, and to advise in the strict sense. It is inherent in the legal
profession and exists regardless of the nature of the mandate. Its exact scope
depends on the circumstances, including the object of the mandate, the client’s
characteristics and the expertise the lawyer claims to have in the field in
question. When lawyers do provide advice, they must always act in their clients’
best interests and meet the standard of the competent, prudent and diligent
lawyer in the same circumstances. Any advice lawyers give that exceeds their mandate may, if wrongful,
engage their liability. Here, the Court of Appeal had sufficient basis to
intervene and find that the lawyer had failed to advise his clients as a
competent, prudent and diligent lawyer would have done. It properly and
precisely identified palpable and overriding errors made by the trial judge in
her assessment of the parties’ relationships, which had a direct impact on her
findings regarding the scope of any wrongful advice given. When properly
assessed as a whole, as the Court of Appeal did, the evidence reveals that the
lawyer’s advice and reassurances were all part of a single continuum, and that
placing them in separate silos would be artificial. The lawyer breached his
duty to advise by recommending a non-diversified investment in offshore hedge
funds to clients whose primary goal was to preserve the capital, by
recommending financial products without performing due diligence and by
repeatedly reassuring his clients that their investments gave them security of
capital.
As
mandataries, lawyers also have a duty to avoid placing themselves in situations
in which their personal interests are in conflict with those of their clients.
The duty to avoid conflicts of interest is a salient aspect of the duty of
loyalty they owe to their clients. The duty of loyalty shields the performance
of the lawyer’s duty to advise clients from the taint of undue interference. In
the instant case, the Court of Appeal was justified in finding that the lawyer’s
personal and financial relationship with the recommended advisor had placed him
in a conflict of interest and that he had neglected his clients’ interests. The
trial judge adopted an unduly restrictive approach in analyzing the principles
relating to conflicts of interest, which tainted her entire analysis concerning
the breach of the lawyer’s duty of loyalty. A proper consideration of the
evidence as a whole leads to the conclusion that this very close relationship
affected the lawyer’s objectivity in advising his clients. The lawyer’s
divided loyalties led him to neglect his clients’ interests: he disregarded his
duty of confidentiality regarding his communications with them and teamed up
with the recommended advisor in an attempt to convince them not to withdraw
their investments.
More
than one fault can cause a single injury so long as each of the faults is a
true cause, and not a mere condition, of the injury. A fault is a true cause of
its logical, immediate and direct consequences. This characterization is
largely a factual matter, which depends on all the circumstances of the case. A
person who commits a fault is not liable for the consequences of a new event
that the person had nothing to do with and that has no relationship to the
initial fault. Two conditions must be met for the principle of novus actus
interveniens to apply. First, the causal link between the fault and the
injury must be completely broken. Second, there must be a causal link between
that new event and the injury. A client’s ability to rely on advice given by
his or her lawyer is central to the lawyer-client relationship and a client’s
acceptance of a lawyer’s negligent advice cannot shield the lawyer from
liability. Fraud committed by a third party also does not shield from liability
persons who failed to take required precautions. Where the risk of a decline in
market prices or fraud by a third party materialize, and where lawyers have
failed to abide by the standards of professional conduct that are meant to
protect their clients against these very risks, they may be liable for their
clients’ investment losses. Here, the trial judge’s findings
regarding the extent of the faults committed by the lawyer no doubt had an
impact on her causation analysis. Assessing the evidence in separate silos
based on the timing of the events and the specific funds that had been
recommended was artificial. The trial judge’s causation analysis was also
distorted by her erroneous finding that the lawyer had not breached his duty of
loyalty. Taken together, the lawyer’s faults with respect to both his duty to
advise and his duty of loyalty were a true cause of the losses suffered by his
clients. The fraud did not break the chain of causation — no losses
would have been suffered without the faults first committed by the lawyer.
Per
Côté J. (dissenting): The appeal should be allowed. The
Court of Appeal should not have substituted its own view of the case for that
of the trial judge as there were no palpable and overriding errors in her key
findings. The Court of Appeal wrongly intervened on the basis of mere
differences of opinion regarding the assessment of the evidence, which is
clearly inconsistent with the role of an appellate court. When a first
appellate court interferes with a trial judge’s findings in the absence of
reviewable errors, it is the Court’s role to step in and to restore the trial
judge’s decision.
On
questions of fact or of mixed fact and law, an appellate court cannot make its
own findings and draw its own inferences unless the trial judge is shown to
have committed a palpable and overriding error. As a precondition to
intervening in a trial judge’s decision, the appellate court must point to a
specific and identifiable error that amounts to more than a divergence of
opinion and that error must be shown to be determinative of the outcome of the
case. The identification of a palpable and overriding error does not require a
review of the evidence as a whole. The focus of the review is the trial judge’s
reasons and, if need be, specific pieces of evidence to which the appellant
draws the attention of the appellate court to show that a given finding is unsupported
by the evidence. It would be inappropriate for the appellate court to conduct
its own assessment of the evidence and then to take note of points of
disagreement with the trial judge’s findings and hold that those findings
result from palpable and overriding errors in order to justify intervening.
Appellate courts are, in comparison to trial judges, ill-equipped for the task
of fact-finding and must thus leave the task to trial judges.
The
distorting lens metaphor does not dispense with the requirement of identifying
reviewable errors in accordance with the standards articulated in Housen. A
“distorting lens” cannot justify a wide-ranging review of the entire record
unless adopting the lens is shown to be, in itself, a reviewable error. The
distorting lens metaphor may arguably be useful to illustrate how certain
palpable errors taint the analysis of the evidence to the point of having an
overriding effect, but a metaphor is not a full explanation. The appellate
court must explain why the trial judge erred by viewing the case through the
impugned “distorting lens”, why that error amounts to more than a mere
divergence in opinion, and precisely how it distorted the trial judge’s
analysis and affected the outcome of the case.
Part
of the Court’s role as a second and final court of appeal is to ensure that a
trial judge’s findings of fact or of mixed fact and law remain undisturbed
unless a palpable and overriding error is established. Although the focal point
of the Court is the first appellate court’s decision, not that of the trial
judge, the Court must inevitably return to the trial judge’s reasons in order
to determine whether the first appellate court correctly identified reviewable
errors. In that regard, the Court should not defer to the first appellate court
with respect to the identification of reviewable errors. When the Court reviews
a decision in which the first appellate court has substituted its own findings
of fact or of mixed fact and law for those of the trial judge, it must first inquire
into whether the first appellate court correctly identified reviewable errors.
If it did not, the trial judge’s findings must be restored regardless of the
merits of the first appellate court’s findings. If, however, the Court agrees
that the intervention was warranted, it must ask whether the first appellate
court has erred in making its own independent assessment of the relevant
evidence. It is only at this step that the Court will show a certain deference
and will therefore avoid intervening unless clearly satisfied that the first
appellate court’s findings are erroneous.
In
the instant case, the trial judge did not make a palpable and overriding error
with respect to fault and causation. The Court of Appeal merely preferred a
different “lens” than the one used by the trial judge. Further, it relied on a
broad reassessment of the evidence in order to identify the purported errors,
which is at odds with Housen and its progeny. The Court of Appeal’s
intervention was unwarranted and the Court must intervene to restore the trial
judge’s findings.
Whenever
lawyers recommend other professionals, or express confidence in them, they must
meet the standard of a reasonably competent, prudent and diligent lawyer in the
same circumstances. Lawyers should make such inquiries as will enable them to
acquire reasonable knowledge of professionals they recommend unless they
already have relevant experience dealing with them. Not every professional
error made in making such inquiries — or in failing to make them — will amount
to a fault if the lawyer’s conduct does not depart from the standard expected,
and courts must be careful not to assess recommendations in light of facts
discovered subsequently. Moreover, referring lawyers are not required to
monitor the advice given by the professionals they recommended, as this would
defeat the purpose of referral.
In
the instant case, the Court of Appeal did not identify a specific reviewable
error in the trial judge’s reasons in relation to the lawyer’s initial
recommendation and later expressions of confidence. The lawyer did not commit a
fault in recommending the investment firm and the financial advisor and in
expressing confidence in them. While the lawyer had a duty to advise both his
clients and a duty of loyalty to both of them, those duties were largely
circumscribed by the very nature and scope of his mandates. The precise scope
of a mandate does not always limit a lawyer’s duties, but it is certainly one
of the main considerations for a judge when assessing professional liability.
In the present case, as the lawyer had had no specific mandate with regard to
the clients’ investments, it was appropriate for the trial judge to eschew an
overly broad approach to liability. The lawyer’s confidence in the competence
and probity of the investment firm and the recommended advisor was based on reasonable
knowledge. He therefore acted as a reasonably competent, prudent and diligent
lawyer in the circumstances.
A
lawyer’s duty to advise generally includes obligations to inform the client of
the relevant facts, to explain available options and their implications, and to
recommend a course of action. Yet, the precise content of that duty is highly
dependent on the circumstances, including the scope of the mandate, the
obligations assumed by the lawyer and his or her areas of expertise. In this
case, there is no palpable and overriding error in the trial judge’s finding
that the lawyer’s only fault relating to his duty to advise was to recommend
specific investment products. As the trial judge concluded, the lawyer failed
to act as a reasonably competent, prudent and diligent lawyer in recommending
specific investment products and in volunteering investment advice even though such
advice fell outside of the limits of his mandates. In so doing, he breached his
duty to advise. Indeed, to the extent that a lawyer does provide advice, he
must meet the standard of a reasonably competent, prudent and diligent lawyer
in the same circumstances irrespective of the scope of his mandate.
The
Court of Appeal had some basis for concluding that the lawyer had committed the
same faults in respect of both his clients, but even if this error is assumed
to be palpable, it did not affect the outcome of the case. This error did not
justify the Court of Appeal’s conducting a broad reassessment of the evidence
for the purpose of finding other potential errors.
The
analysis of an alleged fault related to the duty of loyalty involves a question
of mixed fact and law and, unless a pure question of law can be extricated, the
appropriate standard is that of palpable and overriding error. An extricable
question of law generally concerns a mischaracterization of the applicable
legal test or a failure to consider a required element of that test. The
analysis of an alleged conflict of interest is inherently fact-based and
alleged conflicts must be assessed on a case-by-case basis. Not every potential
violation of the duty of loyalty will give rise to an action in civil
liability. The court must analyze the nature and the circumstances of the
alleged conflict for the purpose of characterizing the violation and, if
warranted, determining the appropriate remedy.
A
trial judge does not have to discuss in detail every single fact alleged by the
parties or every piece of evidence and declining to draw an inference falls
squarely within its purview. The question is not whether the trial judge
brushed aside elements that the court of appeal deemed important, but whether
those omissions might have affected the conclusion. Here, the Court of Appeal
erred in interfering with the trial judge’s finding that the lawyer had not
breached his duty of loyalty to his clients. It proceeded to revisit the issue
of conflict of interests by applying the standard of correctness, as if a
question of law had been identified. Yet, the Court of Appeal has not suggested
that the trial judge failed to identify the correct legal principles applicable
to the alleged fault related to the duty of loyalty or that there is an error
in the trial judge’s characterization of the applicable legal test. The Court
of Appeal failed to identify a palpable and overriding error and impermissibly
reassessed the evidence as a whole on the basis of a disagreement over the
weight to be given to the evidence. The fact that the Court of Appeal would
have weighed the evidence differently, or drawn different inferences, does not
justify its intervention. Even if the trial judge did not address certain
aspects of the professional relationship between the lawyer and the recommended
advisor, especially the disclosure by the former of communications with his
client and the fact that he had cooperated extensively with the recommended
advisor and the investment firm on at least one occasion, those omissions did
not affect her conclusions. The trial judge properly considered the factors
that could have cast doubt on the lawyer’s undivided loyalty and commitment to
his clients, that is, his friendship with the recommended advisor and their
financial relationship, including the gifts or commissions he had received. The
conclusion that these factors were not enough to have placed the lawyer in a
position where his personal interest conflicted with that of his clients was
open to her, and is entitled to deference.
A
fundamental principle of civil liability is that a person is liable only for
injury caused by his or her own fault. A true cause is established when the
plaintiff proves that the injury is a logical, immediate and direct consequence
of the fault. It does not suffice to show that the fault increased the
likelihood of the injury occurring if there is no evidence that the fault
directly caused the injury either in whole or in part. The analysis of
causation remains a context-based exercise which does not lend itself to legal
theorizing. It is up to the trier of fact to draw a line, or identify a
breaking point, between the consequences that flow directly and immediately
from the fault and the others. Proving breaches of a lawyer’s professional
duties does not suffice to establish civil liability in the absence of a causal
link to an injury.
In
the instant case, the Court of Appeal should not have completely reassessed the
evidence and interfered with the trial judge’s conclusions regarding causation
of the basis of the distorting lens metaphor. It was open to the trial judge to
find that the fraud was the only true cause of the losses and that the
recommendation of the investment firm and financial advisor was not close
enough to the injury to qualify as a logical, direct and immediate cause. With
respect to the duties of loyalty and confidentiality, it is unclear how the
alleged breaches might have caused the losses. Moreover, even if the lawyer did
commit additional faults related to his duty to advise and his duties of
loyalty and confidentiality after he had become aware of a news article raising
doubts about the firm’s practices, the outcome would be the same as the funds
were no longer recoverable by that time. Hence, any faults occurring after that
date had no consequence on the losses.
Cases Cited
By Gascon J.
Distinguished:
Harris (Succession), Re, 2016 QCCA 50, 25 C.C.L.T. (4th) 1; referred
to: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235;
Montréal (Ville) v. Lonardi, 2018 SCC 29; Benhaim
v. St‑Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; 3091‑5177
Québec inc. (Éconolodge Aéroport) v. Lombard General Insurance Co. of Canada,
2018 SCC 43; St‑Jean v. Mercier, 2002 SCC 15, [2002] 1 S.C.R. 491;
South Yukon Forest Corp. v. R., 2012 FCA 165, 4 B.L.R. (5th) 31; H.L.
v. Canada (Attorney General), 2005 SCC 25,
[2005] 1 S.C.R. 401; J.G. v. Nadeau, 2016 QCCA 167; Nelson
(City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Quebec
(Director of Criminal and Penal Prosecutions) v.
Jodoin, 2017 SCC 26,
[2017] 1 S.C.R. 478; Ford du Canada ltée v. Automobiles Duclos
inc., 2007 QCCA 1541; Softmedical inc. v. Daabous,
2017 QCCA 1270; Droit de la famille — 161960,
2016 QCCA 1300; Droit de la famille — 132381,
2013 QCCA 1505; Francoeur v. 4417186 Canada inc.,
2013 QCCA 191; Desrochers v. 2533‑0838 Québec inc., 2016
QCCA 825; Gutin v. Cenfood International Inc., 2018 QCCA 317; 2758792 Canada inc. v. Bell
Distribution inc., 2017 QCCA 603; Mangiola v. R.,
2017 QCCA 741; Dunkin’ Brands Canada Ltd. v. Bertico Inc.,
2015 QCCA 624, 41 B.L.R. (5th) 1; Hydro‑Québec v. Construction Kiewit
cie, 2014 QCCA 947; R. v. Lalonde,
2014 QCCA 639; Poulin v. Pilon, [1984] C.S. 177; Labrie v. Tremblay,
[2000] R.R.A. 5; Côté v. Rancourt, 2004 SCC 58,
[2004] 3 S.C.R. 248; Sylvestre v. Karpinski,
2011 QCCA 2161; Daigneault v. Lapierre, [2003] R.R.A. 902; Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649; R.
v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631; Parizeau
v. Poulin De Courval, [2000] R.R.A. 67; Dallaire v. Paul‑Émile
Martel Inc., [1989] 2 S.C.R. 419; Compagnie 99885 Canada Inc. v.
Monast, [1994] R.R.A. 217; Quebec (Commission
des droits de la personne et des droits de la jeunesse) v. Bombardier Inc. (Bombardier Aerospace Training Center),
2015 SCC 39, [2015] 2 S.C.R. 789; Stellaire Construction Inc. v. Ciment
Québec Inc., 2002 CanLII 35591; Laflamme v. Prudential‑Bache
Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638; Laval (Ville de) (Service de protection des
citoyens, département de police et centre d’appels d’urgence 911) v. Ducharme, 2012 QCCA 2122, [2012] R.J.Q.
2090; Lacombe v. André, [2003] R.J.Q. 720; Beaulieu
v. Paquet, 2016 QCCA 1284; 124329 Canada inc. v.
Banque Nationale du Canada, 2011 QCCA 226, [2011] R.J.Q. 295; Hodgkinson
v. Simms, [1994] 3 S.C.R. 377.
By Côté J. (dissenting)
Laferrière v. Lawson,
[1991] 1 S.C.R. 541; Housen v. Nikolaisen,
2002 SCC 33, [2002] 2 S.C.R. 235; Underwood v. Ocean City Realty Ltd.
(1987), 12 B.C.L.R. (2d) 199; Prud’homme v. Prud’homme, 2002 SCC 85,
[2002] 4 S.C.R. 663; St‑Jean v. Mercier, 2002 SCC 15, [2002] 1
S.C.R. 491; Montréal (Ville) v. Lonardi, 2018 SCC 29; Benhaim v. St‑Germain, 2016 SCC
48, [2016] 2 S.C.R. 352; South Yukon Forest Corp. v. R., 2012 FCA 165, 4
B.L.R. (5th) 31; Jaegli Enterprises Ltd. v. Taylor, [1981] 2 S.C.R. 2; Schreiber Brothers Ltd.
v. Currie Products Ltd., [1980] 2 S.C.R. 78; Galambos
v. Perez, 2009 SCC 48, [2009] 3 S.C.R. 247; Laflamme v. Prudential‑Bache
Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638; Hodgkinson v.
Simms, [1994] 3 S.C.R. 377; Lapointe v. Hôpital Le Gardeur, [1992] 1
S.C.R. 351; H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401; P.L. v. Benchetrit, 2010
QCCA 1505, [2010] R.J.Q. 1853; Schwartz v. Canada, [1996] 1 S.C.R. 254; Nelson
(City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Van de Perre v. Edwards, 2001 SCC 60, [2001] 2
S.C.R. 1014; J.G. v. Nadeau, 2016 QCCA 167; Canada (Attorney General) v. Bedford, 2013
SCC 72, [2013] 3 S.C.R. 1101; Waxman v. Waxman (2004), 186 O.A.C. 201; Ford du Canada ltée
v. Automobiles Duclos inc., 2007 QCCA 1541; Beaudoin‑Daigneault v.
Richard, [1984] 1 S.C.R. 2; Palsky v. Humphrey, [1964] S.C.R. 580; Maze
v. Empson, [1964] S.C.R. 576; Côté v. Rancourt, 2004 SCC 58, [2004]
3 S.C.R. 248; Sylvestre v. Karpinski, 2011 QCCA 2161; Bessette v.
Pharmacie Suzanne Payer inc., 2017 QCCS 2474; Harris
(Succession), Re, 2016 QCCA 50, 25 C.C.L.T. (4th) 1;
Roberge v. Bolduc, [1991] 1
S.C.R. 374; Phillips v. Naamani, 1998 CanLII 9332; F.H. v. McDougall, 2008 SCC 53, [2008] 3
S.C.R. 41; Hinse v. Canada (Attorney General), 2015 SCC 35, [2015] 2 S.C.R. 621; Parrot v. Thompson,
[1984] 1 S.C.R. 57; Quebec (Commission des droits de la personne et des
droits de la jeunesse) v. Bombardier Inc. (Bombardier
Aerospace Training Center), 2015 SCC 39, [2015] 2
S.C.R. 789; Dallaire v. Paul‑Émile Martel Inc.,
[1989] 2 S.C.R. 419; Stellaire Construction Inc. v. Ciment Québec Inc.,
2002 CanLII 35591; Lacombe v. André, [2003] R.J.Q. 720.
Statutes
and Regulations Cited
Civil Code of Québec, arts. 1607,
1613, 2138.
Code of ethics of advocates, CQLR, c. B‑1,
r. 3.
Code of Professional Conduct of Lawyers,
CQLR, c. B‑1, r. 3.1, s. 25.
Authors Cited
Baudouin, Jean‑Louis, Patrice Deslauriers et Benoît Moore. La
responsabilité civile, 8e éd. Cowansville, Que.: Yvon Blais,
2014.
Baudouin, Jean‑Louis, et Pierre‑Gabriel Jobin. Les
obligations, 7e éd. par Pierre‑Gabriel Jobin et Nathalie
Vézina. Cowansville, Que.: Yvon Blais, 2013.
Lévesque, Frédéric. Précis de droit québécois des obligations.
Cowansville, Que: Yvon Blais, 2014.
Lluelles, Didier, et Benoît Moore. Droit des obligations, 2e
éd. Montréal: Thémis, 2012.
Tancelin, Maurice. Des obligations en droit mixte du Québec,
7e éd. Montréal: Wilson & Lafleur, 2009.
Thouin, Marie‑Chantal. “L’avocat, toujours de bon conseil?”,
dans Service de la formation permanente du Barreau du Québec, vol. 228, Développements
récents en déontologie, droit professionnel et disciplinaire. Cowansville, Que.: Yvon Blais, 2005, 49.
APPEAL
from a judgment of the Quebec Court of Appeal (Kasirer, Vauclair and Parent JJ.A.),
2017 QCCA 273, 41 C.C.L.T. (4th) 1, [2017] AZ‑51368107, [2017] J.Q. no 1326
(QL), 2017 CarswellQue 1076 (WL Can.), setting aside a decision of Dulude J.,
2014 QCCS 3072, [2014] AZ‑51085557, [2014] Q.J. No. 6361 (QL), 2014
CarswellQue 6527 (WL Can.). Appeal dismissed, Côté J. dissenting.
Douglas C.
Mitchell, Audrey Boctor and Olga Redko, for the appellants.
Pierre Bienvenu, Azim Hussain, Andres C. Garin and Frédéric Wilson, for the respondents.
The judgment of
Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Brown, Rowe and Martin
JJ. was delivered by
Gascon J. —
I.
Overview
[1]
This case concerns the professional liability of
a lawyer who has referred clients to a financial advisor where that advisor
subsequently turns out to be a fraudster and where, in addition to the
referral, the lawyer has over a number of years been recommending and endorsing
the advisor’s investments.
[2]
By 2003, the first appellant, Kenneth F.
Salomon, had been the lawyer of the respondents, Judith Matte-Thompson and
166376 Canada Inc. (“166”), in Quebec for a long time. During that year, he
introduced them to Themis Papadopoulos, his personal friend and his own
financial advisor, and recommended that they consult him. In the following four
years, the respondents ended up investing over $7.5 million with
Mr. Papadopoulos’s investment firm, Triglobal Capital Management Inc.
(“Triglobal”). Over the course of those four years, Mr. Salomon repeatedly
endorsed Mr. Papadopoulos as a financial advisor and encouraged the
respondents to make and retain investments with Triglobal. In 2007, Mr. Papadopoulos
and his associate, Mario Bright, disappeared with the savings of around 100
investors, including those of the respondents.
[3]
The respondents claimed that Mr. Papadopoulos
and Mr. Bright had fraudulently misappropriated their investments. They also claimed
that Mr. Salomon and the second appellant, his law firm Sternthal
Katznelson Montigny LLP (“SKM”),[1] had been professionally negligent in two ways. First, Mr. Salomon
and SKM had breached their duty to advise the respondents by recommending,
endorsing and encouraging inappropriate investments with
Mr. Papadopoulos’s firm. Second, they had disregarded their duty of
loyalty to the respondents by placing themselves in a conflict of interest that
led them to turn a blind eye to the situation. The respondents sued Mr.
Papadopoulos, Mr. Bright, Mr. Salomon and SKM for the loss of their investment
capital, the loss of the opportunity to realize a return on those investments,
and moral injury. They also sought an award of punitive damages against
Mr. Papadopoulos and Mr. Bright.
[4]
The trial judge held that Mr. Papadopoulos and
Mr. Bright were liable for the respondents’ investment losses and moral injury,
as well as for punitive damages, but dismissed the claim against
Mr. Salomon and SKM. She concluded that Mr. Salomon had not committed
any fault that was a cause of the respondents’ losses. In her view, although he
had breached his professional standard of care by making his initial
recommendation to the individual respondent, Ms. Matte-Thompson, with regard to
her investments, there was no causal link between that fault and Ms.
Matte-Thompson’s subsequent losses. The trial judge also found that
Mr. Salomon had not been in a conflict of interest and that he had not
provided financial advice to the corporate respondent, 166.
[5]
The Court of Appeal concluded that the trial
judge had made reviewable errors, and it reversed her judgment. It made a
number of findings, including (1) that Mr. Salomon’s faults were not
limited in time to that of the initial recommendation, (2) that those faults
were committed not only against Ms. Matte-Thompson, but also against 166,
and (3) that those faults caused the losses suffered by both of the
respondents. In the Court of Appeal’s opinion, the trial judge had viewed
Mr. Salomon’s acts and their consequences through a distorting lens which
had led her to erroneously assess the evidence in isolated silos, without the
insight provided by a global analysis. The Court of Appeal also held that the
trial judge had taken an unduly restrictive approach in analyzing Mr. Salomon’s
conflict of interest.
[6]
I am satisfied that the Court of Appeal had a
sufficient basis for intervening as it did. I would therefore dismiss the
appeal.
II.
Context
[7]
Malcolm Thompson and his wife,
Ms. Matte-Thompson, were business people who operated restaurant
franchises in Ontario and Quebec. Four companies (“Companies”), including 166,
were set up for the purpose of operating the restaurants. Mr. Thompson and
Ms. Matte-Thompson owned, respectively, two thirds and one third of the
shares of 166, and Mr. Thompson was the sole shareholder of the other
three companies. In 2002, the Thompsons sold all of their restaurant franchises
but one. With that one exception, the Companies remained owners of the real
estate only.
[8]
Mr. Thompson passed away in 2003.
Ms. Matte-Thompson then became the sole director of the Companies. She
remained 166’s sole director until October 2006, when David Gemmill and Joseph
Miller were appointed to the board. Mr. Gemmill had been Mr. Thompson’s
lawyer in Ontario, and Mr. Miller had been his brother-in-law.
[9]
Mr. Thompson left two wills, in which he created
three trusts for his grandchildren and one trust (“Trust”) for most of his
assets, including his shares in the Companies. Mr. Thompson appointed his wife,
Mr. Gemmill and Mr. Miller as the trustees and executors under the wills.
The wills named Ms. Matte-Thompson as the income beneficiary of the Trust until
her death. The capital of the Trust was to be distributed to the children of
Mr. Thompson and those of Ms. Matte-Thompson after Ms. Matte-Thompson’s death.
The purpose of this arrangement was to ensure that Ms. Matte-Thompson’s
needs were met and to provide her with financial security while preserving the
capital for the children. Preserving the capital was a paramount consideration
under the wills.
[10]
Mr. Salomon had been the Thompsons’ lawyer for
their business operations in Quebec since 1989. Following her husband’s death,
Ms. Matte-Thompson regularly consulted Mr. Salomon for advice regarding
the interpretation and implementation of the wills. She was uncomfortable with
her dual position as an income beneficiary and a trustee of the Trust, and
worried about how she could maintain her lifestyle without spending the
children’s capital. Ms. Matte-Thompson was an educated and experienced
businesswoman, but did not have sophisticated knowledge of the investment
world.
[11]
Mr. Salomon introduced
Ms. Matte-Thompson to Mr. Papadopoulos, his personal financial
advisor and the directing mind of Triglobal, in September 2003. He had met
Mr. Papadopoulos in 2001 when he himself was looking for a personal
financial advisor. The two had subsequently become close friends.
Mr. Salomon personally invested in three funds promoted by Triglobal: he
put the bulk of his savings in a Manulife Financial product (“Manulife”) and
some smaller amounts in Focus Management Inc. (“Focus”) and iVest Fund Ltd.
(“iVest”). Respectively based in the Cayman Islands and the Bahamas, Focus and
iVest were two offshore hedge funds linked to Triglobal and to
Mr. Papadopoulos and Mr. Bright.
[12]
Mr. Salomon recommended Triglobal and its
iVest fund to Ms. Matte-Thompson. Among other things, he described iVest
as “an excellent vehicle wherever security of capital is important” (A.R., vol.
3, at p. 352). Relying on that advice, Ms. Matte-Thompson decided to
invest some of her personal savings with Triglobal in early 2004. She made an
initial investment of $100,000 in iVest and a second one of $1,245,000 in
Manulife. In the months that followed, she transferred $400,000 from the
Manulife account to iVest.
[13]
From 2003 to 2006, Mr. Salomon was involved
in a reorganization of the Companies. All of them, except the one still
operating a restaurant, were merged into 166. Then, in February 2006,
Mr. Salomon arranged the sale of 166’s assets and prepared resolutions
that authorized the opening of accounts for 166 with iVest and Manulife. In
February and April 2006, following instructions received from a Triglobal
representative, the proceeds of the sale, in the amount of $5,830,642,
were invested entirely in Focus. In July 2006, Ms. Matte-Thompson redeemed
part of her investment in iVest, and she also put a total of $1,188,949 in
Focus in March and October 2006.
[14]
Beginning in April 2006, Ms. Matte-Thompson
expressed concern to Mr. Salomon regarding the investments, including
Focus. She wanted more information on the nature of the investments and had
been having difficulty communicating with Triglobal. Each time she expressed
concern, Mr. Salomon either promptly reassured her or informed
Mr. Papadopoulos, who would himself reassure her.
[15]
Near the end of 2006, Mr. Miller urged the
other two trustees and executors to request the redemption of 166’s investments
in Focus. They followed this advice in January 2007, but requested only gradual
redemptions in order to avoid any penalty. Between February and July 2007,
166 received redemptions totalling $900,000.
[16]
In May 2007, the La Presse Affaires magazine
published an article that questioned investments made through Triglobal in
iVest and Focus. In December 2007, Ms. Matte-Thompson asked for
complete redemption of the investments in Focus, but by then, Triglobal, iVest
and Focus had ceased doing business and their assets had been frozen. Most
unfortunately for the respondents, the Focus and iVest funds turned out to be
parts of a Ponzi scheme. Ms. Matte-Thompson lost $1,188,068 in Focus and
iVest; 166 lost $4,006,366 in the same two funds. Globally, almost $100
million was lost in the fraud by approximately 100 investors.
[17]
Sometime after the collapse of Triglobal,
Ms. Matte-Thompson learned that Mr. Salomon had received payments
from Mr. Papadopoulos totalling $38,000 in 2006 and 2007. In early 2006,
following a recommendation by Mr. Papadopoulos, Mr. Salomon had incorporated
a company, 4307909 Canada Inc. (“430”), for the purpose of “financial
consulting” (A.R., vol. 6, at p. 1778). Mr. Papadopoulos instructed 430 to
issue two invoices, each in the amount of $10,000, for which payments were
received in May and June 2006 even though no services were ever rendered in
this regard. According to Mr. Salomon, these payments constituted a “gift”
to help him renovate his apartment (A.R., vol. 10, at p. 3108).
In February 2007, 430 received a further payment of $8,000, the purpose of
which was allegedly to cover the taxes on the previous $20,000 “gift”.
[18]
Then, in June 2007, Mr. Salomon made a request
for redemption of his $70,000 investment in Focus, and he eventually received
$50,000 in this regard. In September 2007, again following an instruction
from Mr. Papadopoulos, Mr. Salomon issued a $50,000 invoice through
430 in order to receive an initial “bi-weekly” cheque. The following month, 430
received two cheques of $5,000 each from a company belonging to
Mr. Papadopoulos called Themis Papadopoulos Financial Services Inc.
Mr. Salomon testified that these payments represented a redemption of his
own investment in Focus, but in an email written by Mr. Papadopoulos at that
time, they were referred to as commissions.
[19]
At the hearing before us, counsel for the
appellants confirmed that Mr. Salomon had personally lost approximately
$20,000 as a result of the fraud. Although the payments received by Mr. Salomon
($38,000) were small compared to the respondents’ investments with Triglobal, I
note that they were in fact greater than his personal loss from the fraud
($20,000).
[20]
The respondents instituted their legal
proceedings in January 2008.
III.
Judicial History
A.
Quebec Superior Court (2014 QCCS 3072)
[21]
Mr. Papadopoulos and Mr. Bright did not
defend the action against them. In a default judgment, the trial judge held
that they were liable for the respondents’ investment losses and for
Ms. Matte-Thompson’s moral injury. In addition, she ordered them to pay
punitive damages to the respondents. Her conclusions with respect to
Mr. Papadopoulos and Mr. Bright were not appealed.
[22]
The trial judge dismissed the claim against
Mr. Salomon and SKM, however. She found that, although Mr. Salomon
had committed a fault in specifically recommending iVest to
Ms. Matte-Thompson for her initial personal investment in 2003, that
fault was not the cause of her subsequent losses from her investment in Focus.
In the trial judge’s view, by the time Ms. Matte-Thompson invested in that
fund in 2006, she had developed her own relationship with Mr. Papadopoulos
and therefore was not relying on Mr. Salomon’s advice in making her
investment decisions. The judge stressed that Mr. Salomon could not be
held liable for the fraud committed by Mr. Papadopoulos and Mr. Bright.
[23]
The trial judge also held that Mr. Salomon
had committed no fault against 166, because he had not provided investment
advice to the company, nor he had gone too far in reassuring it. Noting that
Mr. Salomon had not been consulted before the money from 166 was wired to
Focus, the trial judge found that 166 had not relied on his advice in deciding
to invest in that fund. It was not Mr. Salomon’s responsibility to verify
the appropriateness of the investment recommended by specialists. Moreover,
there was no proof that Mr. Salomon could have done anything after he
learned about 166’s investment in Focus.
[24]
Finally the trial judge concluded that
Mr. Salomon had not been in a conflict of interest. She gave credence to
Mr. Salomon’s testimony and stated that there was no specific proof that
any of the payments made by Mr. Papadopoulos and received by
Mr. Salomon through 430 were commissions received in exchange for
referring clients to Triglobal.
B.
Quebec Court of Appeal (2017 QCCA 273, 41
C.C.L.T. (4th) 1)
[25]
The Court of Appeal unanimously allowed the appeal,
holding that the trial judge had made palpable and overriding errors in her
decision. First, it found that she had erred by limiting Mr. Salomon’s breach
of his duty to advise to the case of Ms. Matte-Thompson. It agreed with the
trial judge that Mr. Salomon had breached his duty to advise
Ms. Matte-Thompson by recommending iVest. However, the Court of Appeal
held that Mr. Salomon had been acting for both of the respondents
beginning in 2003, and had had the same obligations to both of them. The Court
of Appeal concluded that the judge had viewed the evidence through a distorting
lens (para. 66), which had led her to the erroneous conclusion that
Mr. Salomon’s fault had been committed against Ms. Matte-Thompson
only.
[26]
Second, the Court of Appeal held that the trial
judge had erred by limiting Mr. Salomon’s faults to the initial investment in
iVest in 2003 and 2004. The Court of Appeal concluded that his faults had
continued through to 2007 and that they concerned the respondents’ investments
in both iVest and Focus. Mr. Salomon’s repeated reassurances had induced
an air of confidence regarding the investments, when in reality they were
manifestly inadequate in relation to the respondents’ needs. He had also failed
to perform due diligence. These faults ceased only with the collapse of
Triglobal at the end of 2007.
[27]
Third, the Court of Appeal held that the trial
judge had erred by taking a restrictive approach to the evidence when
considering Mr. Salomon’s duty of loyalty. In its view, Mr. Salomon had placed
himself in a conflict of interest which constituted an additional fault
committed against the respondents. His relationship with Mr. Papadopoulos
had led him to breach his duty of confidentiality and neglect the respondents’
interests. The Court of Appeal stressed that Mr. Salomon had teamed up
with Mr. Papadopoulos in order to ensure that the respondents retained
their investments with Triglobal, revealingly using the pronoun “we” in some of
his emails to Mr. Papadopoulos. In addition, the Court of Appeal was of
the view that the trial judge had not given satisfactory reasons to explain her
conclusion that Mr. Salomon had not received commissions for the clients
he had referred to Triglobal.
[28]
Fourth, again alluding
to the notion of a distorting lens (para. 120), the Court of Appeal
held that the trial judge had erred in considering the issue
of causation, and that the impact of Mr. Salomon’s
faults was far more significant than she had found them to be. The Court of
Appeal was convinced that the respondents would have never invested money with
Triglobal had Mr. Salomon acted as a competent, prudent and diligent
lawyer from the outset. Moreover, Mr. Salomon had missed many
opportunities to rectify the situation after 2003. The Court of Appeal also
explained that the fraud did not break the causal link between
Mr. Salomon’s faults and the respondents’ losses.
[29]
The Court of Appeal therefore ordered Mr. Salomon and SKM
solidarily to fully compensate the respondents for their investment losses, and
Ms. Matte-Thompson for her non-pecuniary loss.
IV.
Issues
[30]
The appellants challenge the Court of Appeal’s
decision on essentially four grounds:
A.
Did the Court of Appeal err by employing the
notion of a distorting lens in determining whether the trial judge had made
palpable and overriding errors?
B.
Did the Court of Appeal err by improperly
expanding the professional obligations of lawyers who refer their clients to
independent advisors?
C.
Did the Court of Appeal err by interfering with
the trial judge’s findings relating to the faults committed by
Mr. Salomon?
D.
Did the Court of Appeal err by interfering with
the trial judge’s findings relating to causation?
V.
Analysis
A.
Did the Court of Appeal Err by Employing the
Notion of a Distorting Lens in Determining Whether the Trial Judge Had Made
Palpable and Overriding Errors?
[31]
To determine whether the Court of Appeal erred
by using the notion of a distorting lens, I must summarize the standards of
appellate review it was required to apply in this case. These standards of
review are not contested in this Court. They are the ones that were articulated
in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235,
which also apply to Quebec civil law cases (see, e.g., Montréal
(Ville) v. Lonardi, 2018 SCC 29, at para. 68; Benhaim v.
St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352, at
paras. 36-37).
[32]
Findings with respect to fault involve questions
of mixed fact and law (3091-5177 Québec inc. (Éconolodge Aéroport) v.
Lombard General Insurance Co. of Canada, 2018 SCC 43, at para. 23, citing St-Jean
v. Mercier, 2002 SCC 15, [2002] 1 S.C.R. 491, at paras. 60 and
104). Findings with respect to causation involve
questions of fact (Éconolodge, at para. 24, citing Lonardi, at para. 41, Benhaim, at para.
36 and St-Jean, at paras. 104-5). In both situations,
absent a palpable and overriding error, an appellate court must defer to the
conclusions reached by the trial judge.
[33]
Where the deferential standard of palpable and
overriding error applies, an appellate court can intervene only if there is an
obvious error in the trial decision that is determinative of the outcome of the
case (Benhaim, at para. 38, quoting South Yukon Forest
Corp. v. R., 2012 FCA 165, 4 B.L.R. (5th) 31, at para. 46; see also H.L.
v. Canada (Attorney General), 2005 SCC 25,
[2005] 1 S.C.R. 401, at paras. 56 and 69-70). Morissette
J.A. explained this metaphorically as follows in J.G. v. Nadeau, 2016
QCCA 167, at para. 77 (CanLII): [translation]
“a palpable and overriding error is in the nature not of a needle in a
haystack, but of a beam in the eye. And it is impossible to confuse these last
two notions” (quoted in Benhaim, at para. 39). The fact that an
alternative factual finding could be reached based on a different ascription of
weight does not mean that a palpable and overriding error has been made (Nelson
(City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138, at
para. 38).
[34]
It is helpful at this point to recognize that the Housen standards
of review also apply to this Court (Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin,
2017 SCC 26, [2017] 1 S.C.R. 478, at para. 51; see
also St-Jean, at paras. 37 and 46). That said, the focal
point of the analysis that this Court — as the second and final court of appeal
— has to perform in applying these standards is the decision of the first court
of appeal, not that of the trial judge. The onus is on the appellants to
demonstrate an error in the court of appeal’s decision; this Court’s role is
not to conduct a de novo analysis of the trial judge’s decision. Where
the first court of appeal has justifiably intervened in the trial judgment and
disagreed with the trial judge, this Court will intervene only if its own disagreement
stems from “a clear satisfaction that an error has occurred in the first
appellate court’s assessment of the facts” (St-Jean, at
paras. 38-39 and 46).
[35]
As a general matter, the appellants suggest that the Court of
Appeal erred in applying the standard of appellate review, because it
relied on the notion of a distorting lens in determining whether the trial
judge had made palpable and overriding errors. I disagree.
[36]
In its decision, the Court of Appeal alluded twice to the notion
of a distorting lens: first in its discussion on the faults
committed against 166, and second in its analysis on causation. However,
in discussing both of these issues, the Court of Appeal explicitly stated that
it could reverse the trial judge’s conclusions only if it were to find palpable
and overriding errors.
[37]
Thus, the notion of a distorting lens was nothing more than a
metaphor the Court of Appeal used to explain why the standard of appellate
review established in Housen was met. That metaphor has its genesis in Ford
du Canada ltée v. Automobiles Duclos inc., 2007 QCCA 1541:
[translation]
. . . the high degree of deference owed to the trial judge with
regard to the assessment of evidence, a principle stated repeatedly by the
Supreme Court, cannot preclude intervention by an appellate court where an
analysis of the case shows that the trial judge assessed the evidence through a
lens that must be discarded and that clearly had a distorting effect.
[para. 128 (CanLII)]
[38]
Since that case, the Quebec Court of Appeal has on numerous
occasions used the notion of a distorting lens when overturning findings made
by trial judges that it considered to be tainted to some extent by a general
misperception (see Softmedical inc. v. Daabous,
2017 QCCA 1270, at paras. 47 and 66 (CanLII); Droit
de la famille — 161960, 2016 QCCA 1300, at
paras. 76-78 (CanLII); Droit de la famille — 132381,
2013 QCCA 1505, at paras. 104-5; Francoeur v. 4417186 Canada
inc., 2013 QCCA 191, at paras. 64-65 (CanLII)).
[39]
Unfortunately, some litigants have seen
this as an invitation to ask the court to retry the case, which is simply not
what is intended (see Desrochers v. 2533-0838 Québec inc., 2016 QCCA
825, at para. 49 (CanLII)). It is interesting to note
that there have been several cases in which the Quebec Court of Appeal has in
fact referred specifically to this notion of a distorting lens in declining to
interfere with the findings of a trier of fact (Gutin v. Cenfood
International Inc., 2018 QCCA 317, at paras. 24-26 (CanLII);
2758792 Canada inc. v. Bell Distribution inc., 2017 QCCA 603,
at para. 9 (CanLII); Mangiola v. R., 2017 QCCA 741, at
paras. 4-5 (CanLII); Desrochers, at para. 46; Dunkin’ Brands
Canada Ltd. v. Bertico Inc., 2015 QCCA 624, 41 B.L.R. (5th) 1, at
para. 120; Hydro-Québec v. Construction Kiewit
cie, 2014 QCCA 947, at para. 102 (CanLII); R. v. Lalonde,
2014 QCCA 639, at para. 16 (CanLII)).
[40]
In this regard, I agree with the appellants that a distorting
lens cannot be invoked as a substitute for identifying a reviewable error “or
to mask the fact that an ‘error’ identified by an appellate court does not meet
the high standard imposed by Housen” (A.F., at para. 81). Although
appellate courts may find this notion helpful in explaining the basis for their
interventions, it in no way changes the standards articulated in Housen.
An appellate court must identify a crucial flaw in the lower court’s decision,
be it — depending on which Housen standard applies — an error of law or
a palpable and overriding error. More particularly, the notion of a distorting
lens does not warrant an appellate court’s reweighing the evidence or merely
substituting its own factual findings for those of the trial judge.
[41]
In the case at bar, the Court of Appeal did not use the notion of
a distorting lens to mask an absence of palpable and overriding errors. On the
contrary, the Court of Appeal held that the distorting lens through which the
trial judge had viewed the evidence — in this case a narrow, siloed approach —
had led her to make precisely identified palpable and overriding errors: first,
despite evidence clearly showing that Mr. Salomon had been acting for both
respondents as early as 2003, the trial judge found that he had provided
financial advice to Ms. Matte-Thompson only; second, despite evidence
clearly showing that Mr. Salomon’s faults had continued after 2004, the trial
judge found that they had been limited in time to 2003 and
2004; third, despite clear evidence of Mr. Salomon’s divided loyalties
to the respondents on the one hand and to Mr. Papadopoulos and
Triglobal on the other, the trial judge found that he had not placed
himself in a conflict of interest; and fourth, despite the
clear relationship between Mr. Salomon’s faults and the respondents’ losses,
causation had not been established.
[42]
The appellants have not satisfied me that the
Court of Appeal erred by concluding that the trial judge had made these
palpable and overriding errors. I see no reason to interfere with the Court of
Appeal’s findings.
B.
Did the Court of Appeal Err by Improperly
Expanding the Professional Obligations of Lawyers Who Refer Their Clients to
Independent Advisors?
[43]
Before entering into the details of this
analysis, I wish to emphasize that the courts below properly agreed that the relationship
between lawyers and their clients can usually be characterized as a contract of
mandate, and that the relationship in the instant case is no exception (trial
reasons, at para. 113 (CanLII); C.A. reasons, at para. 94; see
J.‑L. Baudouin, P. Deslauriers and B. Moore, La responsabilité
civile (8th ed. 2014), at No. 2-124). As mandataries, lawyers are subject
to the obligations provided for in art. 2138 of the Civil
Code of Québec (“C.C.Q.”), which reads as follows:
2138. A mandatary is bound to fulfill the mandate he has accepted, and
he shall act with prudence and diligence in performing it.
He
shall also act honestly and faithfully in the best interests of the mandator,
and shall avoid placing himself in a position where his personal interest is in
conflict with that of his mandator.
[44]
Although they do not frame their arguments in
such a way as to allege an error of law, the appellants nonetheless suggest
that the Court of Appeal failed to consider one of its recent decisions (Harris
(Succession), Re, 2016 QCCA 50, 25 C.C.L.T. (4th) 1) that, in their
submission, limits the obligations owed by a referring lawyer to his or her
client. They assert that Harris is applicable in the
circumstances of this appeal. I do not share that view.
[45]
The principles articulated in Harris can be summarized as
follows. Lawyers who refer clients to other professionals or advisors have an
obligation of means, not one of result. Although lawyers do not guarantee the
services rendered by professionals or advisors to whom they refer their
clients, they must nevertheless act competently, prudently and diligently in
making such referrals, which must be based on reasonable knowledge of the
professionals or advisors in question. Referring lawyers must be convinced that
the professionals or advisors to whom they refer clients are sufficiently
competent to fulfill the contemplated mandates (Harris, at
paras. 16, 20 and 22). In Harris, the
Quebec Court of Appeal pointed out that the question of the referring lawyer’s
liability [translation] “cannot be
answered in the abstract. The answer necessarily depends on the facts of the
case” (para. 13). The court added that “[i]n such matters, the
circumstances are everything” (para. 22).
[46]
That is an apt description of the standard of conduct for lawyers
who refer clients to other professionals and advisors, and I endorse it.
[47]
Applying these principles, the Quebec Court of Appeal found in Harris
that Mr. Salomon and SKM (coincidentally also the lawyer and law firm
involved in that case) were not liable for the losses suffered by a client as a
result of fraud committed by estate liquidator Earl Jones, whom
Mr. Salomon had recommended. In the appellants’ opinion,
the case at hand is analogous to Harris, because Triglobal had a good
reputation until its collapse in 2007, and Mr. Salomon cannot be faulted
for having failed to discover a fraud that no one had seen.
[48]
Harris can be
distinguished on the basis of the facts surrounding the referral, but
there is another important distinction between it and the instant case that
relates to the entirety of Mr. Salomon’s conduct. Whereas Harris involved
a mere referral, neither the trial judge nor the Court of Appeal found that
Mr. Salomon had merely referred the respondents to Mr. Papadopoulos.
Although they reached different results, they both analyzed the legal
consequences of several of Mr. Salomon’s acts subsequent to the referral,
from the recommendation of the iVest fund in 2003 to the promotion, endorsement
and encouragement of Triglobal’s products that followed and, finally, to the
reassurances offered in the months before Triglobal’s collapse in 2007.
[49]
The question in the case at bar is not whether the
initial referral of the respondents to Mr. Papadopoulos was or was not sufficient
in and of itself to establish the appellants’ professional liability. The focus
here is instead on the entirety of Mr. Salomon’s conduct. But one thing is
clear. Just as a referral is not a guarantee of the services rendered by the
professional or advisor to whom the client is referred, it is also not a shield
against liability for other wrongful acts committed by the referring lawyer.
This is one way in which the facts in this case differ substantively from the
facts in Harris.
[50]
Contrary to the appellants’ assertion, the
decision of the Court of Appeal in the instant case did not broaden the basis
of liability for lawyers who refer clients to other professionals or advisors
beyond the standard recently set in Harris:
lawyers can refer their clients to other professionals or advisors so long as
they discharge their professional obligations in so doing. The Court of Appeal
did not find that the referral itself was determinative; rather, it assessed
all of Mr. Salomon’s acts in the context of his professional duties — the
duty to advise and the duty of loyalty in particular — to his clients. It found
that Mr. Salomon had done far more than merely make a referral. As
I will explain below, Mr. Salomon also repeatedly recommended
Mr. Papadopoulos, his investment firm and their in-house products, and
encouraged the respondents to invest — and retain their investments — in
Triglobal funds. Moreover, Mr. Salomon turned a blind eye to a conflict of
interest which resulted in him serving two masters and sacrificing the
respondents’ interests. It was the entirety of Mr. Salomon’s conduct that led
the Court of Appeal to hold the appellants liable in the circumstances.
C.
Did the Court of Appeal Err by Interfering With
the Trial Judge’s Findings Relating to the Faults Committed by Mr. Salomon?
[51]
The appellants argue, next, that the Court of Appeal erred by
interfering with the trial judge’s findings relating to Mr. Salomon’s duty to
advise and duty of loyalty. I disagree with that submission. I will discuss
each of these findings in turn.
(1)
Mr. Salomon’s Duty to Advise
[52]
A lawyer’s duty to advise is threefold, encompassing duties (1)
to inform, (2) to explain, and (3) to advise in the strict sense. The
duty to inform pertains to the disclosure of relevant facts; the duty to explain
requires that the legal and economic consequences of a course of action be
presented; and the duty to advise in the strict sense requires that a
course of action be recommended (Poulin v. Pilon, [1984] C.S. 177, at
p. 180; M.-C. Thouin, “L’avocat, toujours de bon conseil?”, in Service de
la formation permanente du Barreau du Québec, vol. 228, Développements
récents en déontologie, droit professionnel et disciplinaire (2005), 49, at
pp. 51-52).
[53]
The duty to advise is inherent in the legal profession and exists
regardless of the nature of the mandate (Baudouin, Deslauriers and Moore, at
No. 2-138; Labrie v. Tremblay, [2000] R.R.A. 5, at p. 10 (Que.
C.A.)). Its exact scope depends on the circumstances, including the object of
the mandate, the client’s characteristics and the expertise the lawyer claims
to have in the field in question (Côté v. Rancourt,
2004 SCC 58, [2004] 3 S.C.R. 248, at para. 6;
Thouin, at pp. 55-69).
[54]
As no bright lines can be drawn in this regard, the case law is
replete with examples of situations in which courts have had to perform the
difficult task of deciding whether lawyers should, in advising their clients,
have taken the initiative to go beyond what the clients specifically asked them
for (see, e.g., Labrie, at p. 11; Sylvestre v. Karpinski,
2011 QCCA 2161, at para. 19 (CanLII); Daigneault
v. Lapierre, [2003] R.R.A. 902 (Que. Sup. Ct.)). One thing is clear,
however: when lawyers do provide advice, they must always act in their clients’
best interests and meet the standard of the competent, prudent and diligent
lawyer in the same circumstances. In this respect, I agree
with the Court of Appeal that any advice lawyers give that exceeds their
mandates may, if wrongful, engage their liability. Whether
Mr. Salomon was acting within the limits of his mandate in providing
financial advice to the respondents is therefore immaterial. He is liable for
any wrongful advice he gave in that context.
[55]
In this case, the Court of Appeal found that
Mr. Salomon had failed to advise the respondents as a competent, prudent
and diligent lawyer would have done. Contrary to the trial judge, it held that
Mr. Salomon was acting for both Ms. Matte-Thompson and 166 when he
provided wrongful investment advice, and that his faults had continued
throughout the period from 2003 to 2007. On both of these issues, the court
properly identified palpable and overriding errors made by the trial judge in
her assessment of the parties’ relationships and in her finding that those
relationships had not continued up until the collapse of Triglobal. These
errors were identified precisely, and they had a direct impact on the trial
judge’s findings regarding the scope of any wrongful advice given by Mr.
Salomon. I conclude that the Court of Appeal had a sufficient basis to
intervene as it did in this regard.
[56]
First, the Court of Appeal did not err in
holding that Mr. Salomon had provided financial advice to both respondents. As
the Court of Appeal emphasized, Ms. Matte-Thompson had consulted
Mr. Salomon for advice regarding her delicate position as a beneficiary of
the Trust’s fruits and revenues — which were supposed to meet her financial
needs — and as a trustee — with an obligation to preserve the Trust’s capital
for the children. At the time, Ms. Matte-Thompson wore many different hats, as
she (1) was an executor of Mr. Thompson’s wills, (2) served as a
trustee, (3) was the president and a director of 166, and (4) acted in her
personal capacity. It was in these multiple capacities that she retained
Mr. Salomon’s services, and he understood the nature of this situation
very well. To isolate the relationship between Ms. Matte-Thompson and Mr.
Salomon from that between 166 and Mr. Salomon was indeed to take an improperly
narrow view of the evidence as a whole, and this justified the Court of
Appeal’s criticism of the trial judge’s compartmentalized vision of those
relationships.
[57]
In this regard, the Court of Appeal noted, for
instance, that, starting in 2003, Mr. Salomon had charged virtually all
his legal fees to 166, including fees for introducing Mr. Papadopoulos to
Ms. Matte-Thompson, preparing the initial email
recommending the iVest fund, and requesting investment information from
Triglobal. As well, Mr. Salomon’s key memoranda outlining financial
strategies for Ms. Matte-Thompson and for the Trust were addressed to 166.
[58]
Second, the Court of Appeal did not err in
holding that Mr. Salomon had breached his duty to advise the respondents. Beyond
the fact that Mr. Salomon often flirted with — or overstepped — the limits
of his professional capabilities, the advice he provided to both of the
respondents was wrongful for a number of reasons, which the Court of Appeal
summarized (para. 69). To start with, Mr. Salomon should not have
recommended a non-diversified investment in offshore hedge funds to clients
whose primary goal was to preserve the capital. In this regard, the trial judge
herself stated that Mr. Salomon “knew that in order to respect the legal
rights and interests of all the beneficiaries of the trusts and to abide by the
terms of the wills, the investments decisions had to be consistent with the
requirement of capital preservation” (para. 172 (footnote omitted)). Yet,
according to the uncontradicted expert evidence, offshore hedge funds (like
iVest and Focus) are not investment vehicles that offer security of capital.
[59]
Mr. Salomon also breached his duty to
advise by continually recommending financial products without performing
due diligence or asking any questions about them. The trial judge noted that,
before recommending iVest, Mr. Salomon had merely “relied on [Mr.]
Papadopoulos’ advice and felt comfortable with that advice” (para. 188
(footnote omitted)). Mr. Salomon failed to verify the nature or the terms
and conditions of the recommended financial products. Had he made such
inquiries, he would have learned that iVest and Focus were not registered with
the Autorité des marchés financiers (“AMF”). In fact, neither Mr.
Papadopoulos nor Triglobal was registered with the AMF as a securities adviser
or dealer under Quebec securities law. As the Court of Appeal rightly noted,
this fault of omission on Mr. Salomon’s part was of a continuous nature, given
that he had intervened several times over the years to reassure the respondents
prior to Triglobal’s collapse in 2007 without ever making any of the
appropriate inquiries.
[60]
Third, the Court of Appeal did not err in
holding that Mr. Salomon’s faults against the respondents had commenced in 2003
and had continued until 2007. Mr. Salomon had, on the sole basis of his
blind confidence in Mr. Papadopoulos, induced his clients to erroneously
believe that investing in iVest and Focus was safe. From 2003 to 2007, he
repeatedly reassured the respondents that their investments with Triglobal gave
them security of capital. In this regard, the Court of Appeal noted the
following comments made by Mr. Salomon:
•
In August 2003, he stated, “iVest is an
excellent vehicle whenever security of the capital is important (as with the
grandchildren and yourself)” (para. 52 (emphasis deleted); A.R., vol. 3, at p.
352).
•
In September 2003, he suggested that the
respondents “invest the Estate assets based on a conservative model, perhaps
using iVest products and a mix of segregated products (for absolute security of
capital)” (para. 59 (emphasis deleted); A.R., vol. 6, at p. 1828).
•
The following month, he added, “I would point
out that [Mr.] Papadopoulos is very conservative when it comes to
preservation of capital” (para. 62; A.R., vol. 3, at p. 393).
•
In July 2004, he stated, “the RBC proposal is
somewhat undimensional (sic) and is interest rate sensitive. The
Triglobal proposal is less risky and the returns are good. Let’s talk” (para.
123 (emphasis deleted); A.R., vol. 3, at p. 566).
•
In June 2005, he stated, referring to the iVest
and Manulife funds, “I believe that both forms of investments are excellent and
quite conservative, and I would have no difficulty in recommending either one
to you and to your co-trustee . . . (as trustees acting
responsibly)” (para. 125; A.R., vol. 4, at p. 657).
•
In April 2006, he responded to concerns
expressed by Ms. Matte-Thompson regarding the security of the respondents’
investments (including in Focus) that he was “certain that everything [was] ok”
(para. 78 (emphasis deleted); A.R., vol. 4, at p. 935).
•
In November 2006, he stated, after informing
Ms. Matte-Thompson that he had visited Mr. Bright in Nassau, that the
latter “has become resident there in order to manage the Focus, Ivest and
structured products funds”, concluding that “[a]ll is well” (para. 130; A.R.,
vol. 5, at p. 1248).
•
In July 2007, he stated, “[t]he Triglobal
returns continue to be excellent and I remain very happy to have my investments
performing so well with such controlled risk” (para. 133; A.R., vol. 6, at p.
1603).
•
In September 2007, he added, “I think that the
two funds (iVest and Focus) are performing as predicted” (para. 134; A.R., vol.
6, at p. 1660).
•
In December 2007, he stated, commenting on
Mr. Papadopoulos’s latest promises to worried investors, “FYI. This is
good” (para. 138; A.R., vol. 6, at p. 1690).
[61]
Given the foregoing, the Court of Appeal had a
strong basis for concluding that the trial judge was wrong to assert that
Mr. Salomon had committed a fault only as against Ms. Matte-Thompson
in her personal capacity and only in 2003. When properly assessed as a whole,
as the Court of Appeal did, the evidence reveals that the advice and
reassurances Mr. Salomon gave between 2003 and 2007 were all part of a
single continuum, and that placing them in separate silos would be artificial.
Regardless of the scope of his original mandate, Mr. Salomon voluntarily chose
to provide (and be paid for) his advice and reassurances to the respondents
over the four years leading up to the collapse of Triglobal. Having so chosen,
he cannot escape liability by pointing to the narrow scope of his original
mandate.
[62]
When he interacted with Ms. Matte-Thompson,
Mr. Salomon provided advice with respect to all the patrimonies she
administered. At no time did he differentiate between the respondents, as he
often provided advice to both of them in the same emails and in memoranda
addressed to 166. As the Court of Appeal pointed out, references
Mr. Salomon had made in 2003 to the trusts, to the Companies and to
capital preservation — which he knew to be crucial for the Trust — show
that his recommendations extended beyond Ms. Matte-Thompson’s personal
interests. It should be borne in mind that reconciling her many roles was the
very reason why Ms. Matte-Thompson had sought Mr. Salomon’s advice
from 2003 onwards.
[63]
I agree with the Court of Appeal that a proper
review of the whole of the evidence reveals that, during this entire period
from 2003 to 2007, Mr. Salomon was acting for both respondents when he
provided financial information and advice. His comments about the nature
and the quality of investments with Triglobal concerned both the financial
strategy of 166 and that of Ms. Matte-Thompson.
[64]
From this standpoint, it is immaterial
that 166’s assets had not yet been sold in 2003, since Mr. Salomon
consistently maintained the same position vis-à-vis Triglobal and its in-house
products. Moreover, he never distinguished between his
recommendations and reassurances regarding Ms. Matte-Thompson’s personal
investments and those regarding 166’s later investments. Even
the trial judge disbelieved Mr. Salomon’s claim that “he had absolutely no
involvement in 166376’s decision to invest and that he knew nothing about it”
(para. 220). In fact, his actions included commenting on the advisability
of investing the proceeds of the sale of 166’s assets in iVest and
participating in meetings with Ms. Matte-Thompson and
Mr. Papadopoulos at which they discussed the investment strategy for the
sale proceeds. It is worth noting, as the Court of Appeal did, that Mr. Salomon himself considered Focus to be “less risky” than
iVest (para. 131, quoting A.R., vol. 6, at p. 1553).
[65]
In sum, the Court of Appeal provided solid justifications and
explanations for concluding that it was not only the initial recommendation of
iVest to Ms. Matte-Thompson that was wrongful, but that Mr. Salomon’s
breaches of his duty to advise concerned 166 as well and that they continued
until Triglobal’s collapse in 2007. There is no basis for this Court to
interfere and to vary the judgment of the first court of appeal on this point.
(2)
Mr. Salomon’s Duty of Loyalty
[66]
The Court of Appeal also concluded that
Mr. Salomon’s personal and financial relationship with
Mr. Papadopoulos had placed him in a conflict of interest, which
constituted an additional fault committed against the respondents. The trial
judge had found that there was no conflict of interest. In this regard, the
evidence established not only that Mr. Papadopoulos was Mr. Salomon’s
close friend and personal financial advisor, but also in particular that,
unbeknownst to the respondents, Mr. Salomon had received payments
totalling $38,000 from Mr. Papadopoulos in 2006 and 2007 while
continuing to reassure them regarding their investments with Triglobal.
[67]
On this point, the trial judge found that “[t]he
fact that [Mr.] Salomon had some personal investments with Triglobal did not
preclude him from referring his clients to a financial advisor with whom he was
satisfied”, given that the clients were aware of those investments (para. 142).
However, this narrow and limited statement disregards the fact that
Mr. Salomon went well beyond merely making a referral. As the Court of
Appeal noted, [translation]
“Mr. Salomon put himself in a conflict of interest by not limiting the
role he played with the [respondents] to simply recommending Triglobal, its
representative, Mr. Papadopoulos, and the products they offered”
(para. 98).
[68]
The trial judge also accepted the explanations
given by Mr. Salomon for the different payments he had received from Mr. Papadopoulos
through 430, namely that these payments represented (1) “gifts” for the
renovation of his apartment, (2) an additional amount to cover the taxes on
those “gifts”, and (3) the redemption of his own investment in Focus. She found
that there was no proof that these payments were commissions for referring
clients to Triglobal or that Mr. Salomon had received such commissions in
2003 or in 2006 when Ms. Matte-Thompson and 166, respectively, had made
their first investments. She stated that she could not therefore conclude that
these circumstances had placed Mr. Salomon in a conflict of interest.
[69]
On this issue, the Court of Appeal expressed the
opinion that the trial judge had adopted an unduly restrictive approach in
analyzing the principles relating to conflicts of interest. It found that she
had erred by holding that an exact concomitance between the payments and the
referral or “specific proof” that the payments were indeed commissions (trial
reasons, at para. 155) was needed before such a conflict of interest could
be found to exist. This unduly restrictive approach tainted her entire analysis
concerning the breach of Mr. Salomon’s duty of loyalty to the respondents.
[70]
As the Court of Appeal rightly noted, the trial
judge had failed to comment on or explain certain other factors that confirmed
the very close nature of the relationship between Mr. Salomon and Mr.
Papadopoulos and that could not be ignored in assessing the payments received
by Mr. Salomon in 2006 and 2007. A proper consideration of the evidence as a
whole leads to the conclusion that this very close relationship affected
Mr. Salomon’s objectivity in advising the respondents. This breach of his
duty of loyalty informs the assessment of Mr. Salomon’s breach of his duty
to advise, as it ultimately led him to turn a blind eye to a situation to which
he should have been more attentive and alert.
[71]
As mandataries, lawyers have a duty to avoid
placing themselves in situations in which their personal interests are in conflict with those of their
clients (art. 2138 para. 2 C.C.Q.).
The duty to avoid conflicts of
interest is a salient aspect of the duty of loyalty they owe to their clients (Canadian National Railway Co. v.
McKercher LLP,
2013 SCC 39, [2013] 2 S.C.R. 649, at para. 19, citing R. v. Neil, 2002 SCC 70,
[2002] 3 S.C.R. 631, at para. 19; see also C.A. reasons, at
para. 94). In conjunction
with the duty of commitment to the client’s cause, the duty to avoid
conflicting interests ensures that “divided loyalt[ies] d[o] not cause the
lawyer to ‘soft peddle’ his or her representation of a client out of concern
for [other interests]” (McKercher, at para. 43, quoting Neil,
at para. 19). In the same manner, the duty of loyalty shields the
performance of the lawyer’s duty to advise clients from the taint of undue
interference.
[72]
It is true that Mr. Salomon’s friendship
with Mr. Papadopoulos had been divulged to Ms. Matte-Thompson.
However, that disclosure did not entitle him to shirk his duty to properly
advise the respondents. Again, the Court of Appeal had a solid basis for
finding that the record showed that Mr. Salomon’s relationship with
Mr. Papadopoulos had caused him to neglect his professional duty to advise
the respondents. In addition to his blindly endorsing Triglobal without performing
due diligence, there were two clear indications that Mr. Salomon’s divided
loyalties had led him to neglect the respondents’ interests. But because of the
trial judge’s restrictive approach to the conflict of interest analysis, she
did not comment on these revealing examples of his divided loyalties.
[73]
The first of these indications was that
Mr. Salomon had disregarded his duty of confidentiality regarding his
communications with the respondents. As this Court stated in McKercher,
“[t]he first major concern addressed by the duty to avoid conflicting interests
is the misuse of confidential information. The duty to avoid conflicts of
interest reinforces the lawyer’s duty of confidentiality — which is a distinct
duty — by preventing situations that carry a heightened risk of a breach of
confidentiality” (para. 24). In the case at bar, Mr. Salomon’s close
relationship with Mr. Papadopoulos fostered the precise type of divided
loyalties that would increase the risk of a breach of confidentiality. And such
breaches did in fact occur. Mr. Salomon repeatedly disclosed confidential
communications he had received from Ms. Matte-Thompson to Mr. Papadopoulos
without her authorization. For instance, he transmitted the content of several
of her emails to Mr. Papadopoulos, including ones in which she expressed
concerns about the trustworthiness of the investment firm, asked about
withdrawing the investments or announced that she intended to commence legal
proceedings.
[74]
The second indication was that Mr. Salomon had
teamed up with Mr. Papadopoulos in an attempt to convince
Ms. Matte-Thompson not to withdraw the respondents’ investments with
Triglobal. In emails addressed to Mr. Papadopoulos or to his assistant,
Mr. Salomon wrote:
What [Ms. Matte-Thompson]
wants to have is a report . . . .
I believe that I know exactly
what she wants and would like to help prepare this report . . . . 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 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 [Angelopoulos].
(A.R., vol. 5, at p. 1441
(emphasis added), referred to in C.A. reasons, at para. 99.)
I believe that we have
a very good mix of investments set up for
Judy . . . . She has received input (from her
accountant) that is critical of the investment strategy, and I want us to be
able to respond to same.
(A.R., vol. 5, at p. 1445 (emphasis
added))
She 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?
(A.R., vol. 6, at p. 1553
(emphasis added), quoted in C.A. reasons, at para. 131.)
[75]
The Court of Appeal pointed to the use of the
word “we” as a strong indication of Mr. Salomon’s divided loyalties in the key
period from 2006 to 2007. These emails evidenced a form of coalition between
Mr. Salomon and Mr. Papadopoulos. When Ms. Matte-Thompson expressed
concerns regarding the respondents’ investments, Mr. Salomon decided to
help Mr. Papadopoulos prepare a report meant to appease her and to [translation] “silence the criticisms”
(C.A. reasons, at para. 100), without ever inquiring into the basis of her
concerns. Another illustration of Mr. Salomon’s divided loyalties arose in May
2007, when he failed to inform the respondents of the La Presse Affaires article,
which raised “serious doubts about the investments made through Triglobal in
the iVest or Focus funds” (trial reasons, at paras. 260-61). In this context,
the Court of Appeal was right to conclude that Mr. Salomon had acted in a
manner that was incompatible with the respondents’ interests. The documentary
evidence supported this finding, which could hardly be disregarded in assessing
a conflict of interest allegation like the one raised by the respondents
against Mr. Salomon.
[76]
Furthermore, given the circumstances, including
this close relationship, the Court of Appeal was right to find it troubling
that Mr. Salomon had received $20,000 in “gifts” from
Mr. Papadopoulos in May and June 2006 through a company that had been
incorporated solely for that purpose and after invoices had been issued for
services that were in fact never rendered. These “gifts” were subsequently
topped up in February 2007 with an additional amount of $8,000 that was meant
to cover the taxes on the amount that had already been received.
[77]
Despite these facts, the trial judge found that
there was no conflict of interest, relying for this purpose solely on the
explanations given by Mr. Salomon. She insisted that there was no proof that
the payments constituted commissions for the referral of the respondents to
Triglobal or that that referral was contemporaneous with the payments. The
Court of Appeal found that this conclusion was palpably wrong. It was
inconsistent with the documentary evidence, which contained no mention of
“gifts”, and ignored the fact that 430’s stated purpose — “financial
consulting” — was relevant to the question of whether these payments were gifts
or commissions. As well, the payments had not been considered in the context of
the evidence as a whole, a context that raised concerns as to the divided
loyalties of Mr. Salomon: after all, the payments were at all times kept
secret from the respondents. In addition, the troubling fact of Mr.
Papadopoulos’s willingness to request and pay artificial invoices to 430 had
improperly been considered irrelevant, even though this raised obvious concerns
as to the general probity of the individual Mr. Salomon was recommending
and endorsing to the respondents at the same time as he was receiving these
payments. In fact, irrespective of whether they were characterized as gifts or
commissions, the payments raised serious doubts regarding the independence of
the lawyer who had received them.
[78]
The impact of this evidence was reinforced by
the two $5,000 cheques Mr. Salomon had subsequently received in October
2007 and by Mr. Papadopoulos’s email referring to
these payments as “comms” (A.R., vol. 6, at p. 1674). When she considered this
email, the trial judge wrote that there was nonetheless “no specific proof that
those commissions were given to [Mr.] Salomon in consideration of the
investments made by the [respondents] or any other clients” (para. 155).
The Court of Appeal was clearly uncomfortable with this conclusion, as it
stated: [translation] “How can it
not be concluded that Mr. Salomon received commissions for the clients he
referred to Mr. Papadopoulos?” (para. 107). Once again,
the Court of Appeal emphasized the trial judge’s failure to explain this.
[79]
I would reiterate that the incorporation of 430
for “financial consulting” purposes and the payment of false invoices for
services that had never been rendered occurred between March and June 2006. Mr.
Papadopoulos’s lack of probity in issuing payments for those false invoices was
therefore known to Mr. Salomon at that time. Yet it was in April 2006 that some
of his specific reassurances to the respondents about their investments with
Triglobal (which at the time included those in Focus) were made, and without a
single qualification. Meanwhile, the respondents were not aware of the
payments, which were never disclosed to them.
[80]
I therefore find that the Court of Appeal had
strong bases for overturning the trial judge’s conclusion in this respect, and
for concluding that Mr. Salomon’s personal and financial relationship with
Mr. Papadopoulos did place him in a conflict of interest in more than one
way. The trial judge’s unduly restrictive approach prevented her from properly
assessing the totality of the evidence on this topic. The evidence not only
pointed to questionable payments received by Mr. Salomon at the same time
as he was reassuring the respondents about their investments, it also revealed
his very close relationship with Mr. Papadopoulos and the divided
loyalties that had resulted from that relationship. The evidence as a whole on
this issue pointed to one reasonable conclusion: that Mr. Salomon was in a
conflict of interest.
[81]
Conflicts of interest must be proven on a
balance of probabilities (Parizeau v. Poulin De Courval, [2000] R.R.A.
67, at paras. 22-23 and 29 (Que. C.A.); see also, in the common law
context, McKercher, at para. 38). The trial judge erred by
disregarding the overwhelming evidence of Mr. Salomon’s close personal and
financial relationship with Mr. Papadopoulos on the basis that it did not
lead to the conclusion that there was a conflict of interest
(paras. 163-64; see also C.A. reasons, at para. 107). The Court of Appeal was justified in finding that Mr. Salomon
had been in a conflict of interest and that he had in the end neglected the
respondents’ interests, thereby violating his duty of loyalty to them in
addition to his duty to advise them.
D.
Did the Court of Appeal Err by Interfering With
the Trial Judge’s Findings Relating to Causation?
[82]
Finally, the Court of Appeal held that
the trial judge had made a palpable and overriding error by
concluding that Mr. Salomon’s fault had not caused the respondents’ losses. In
its view, the impact of Mr. Salomon’s faults was
much greater than she had found it to be. The appellants argue that this
decision was erroneous. They point out that the trial judge
had found that the respondents’ investment losses were a consequence of the
fraud committed by Mr. Papadopoulos and Mr. Bright, and not of
Mr. Salomon’s faults. Once again, I disagree with the appellants.
Once Mr. Salomon’s faults had been properly identified and circumscribed, the
causal link to the respondents’ losses was in fact quite obvious. As I will
explain, the Court of Appeal was right to intervene in the
trial judge’s conclusion on causation.
(1)
True Causal Connection
[83]
There is no doubt that the fraud committed in
the Ponzi scheme is a cause of the respondents’ losses. That said, more than
one fault — a contractual fault in this case — can cause a single injury so
long as each of the faults is a true cause, and not a mere condition, of the
injury (Baudouin, Deslauriers and Moore, at No. 1-685; Dallaire
v. Paul‑Émile Martel Inc., [1989] 2 S.C.R. 419, at p. 425; see,
e.g., Compagnie 99885 Canada inc. v. Monast, [1994] R.R.A. 217, at
p. 221 (Que. C.A.)). The liability of Mr. Papadopoulos and Mr. Bright
for their fraud therefore does not mean that the appellants are not liable if
their faults were a cause of the respondents’ losses.
[84]
A fault is a true cause of its logical,
immediate and direct consequences (art. 1607 C.C.Q.; Baudouin, Deslauriers and Moore, at No. 1-683; D. Lluelles and B. Moore, Droit des obligations (2nd
ed. 2012), at No. 2962; see Lonardi, at para. 76; Quebec (Commission des droits de la personne et des droits de
la jeunesse) v. Bombardier Inc. (Bombardier
Aerospace Training Center), 2015 SCC 39, [2015] 2
S.C.R. 789, at para. 50). This characterization is largely a factual
matter, which depends on all the circumstances of the case (Lluelles and Moore,
at No. 2962-63; Stellaire Construction Inc. v. Ciment Québec Inc.,
2002 CanLII 35591, at para. 39 (Que. C.A.)).
[85]
I agree with the Court of Appeal that the trial
judge erred by minimizing the consequences of the fault that Mr. Salomon
had in her view committed in relation to Ms. Matte-Thompson’s initial
investment in iVest. First, if he had performed due diligence regarding the
funds he recommended, he would have known that neither iVest nor Focus was
registered with the AMF. This information would have triggered further
suspicions about Mr. Papadopoulos and Triglobal, who were not authorized to
offer investment funds such as iVest and Focus. Second, if Mr. Salomon had
told Ms. Matte-Thompson from the start that offshore hedge funds were not
investment vehicles that provide security of capital, she would not have
invested in either iVest or Focus.
[86]
The trial judge’s findings regarding the extent
of the faults committed by Mr. Salomon no doubt had an impact on her
causation analysis. As I explained above, assessing the evidence in separate
silos based on the timing of the events and the specific funds that had been
recommended was artificial. The events at the heart of this case are part of a
single continuum that concerned both respondents and their losses in both iVest
and Focus. The trial judge’s causation analysis was also distorted by her
erroneous finding that Mr. Salomon had not breached his duty of loyalty.
[87]
Taken together, Mr. Salomon’s faults with
respect to both his duty to advise and his duty of loyalty were a true cause of
the losses suffered by the respondents. Ms. Matte-Thompson referred to
Mr. Salomon as her “friend and lawyer for the past 20+ years” (A.R.,
vol. 4, at p. 948). It is clear from the record that she had full confidence in
him and that she relied not only on his legal advice on the management of the
patrimonies she administered, but also on his professional judgment concerning
the investments she was contemplating. As the Court of Appeal found,
Mr. Salomon induced an air of confidence regarding the investments when in
reality they were manifestly inadequate in relation to the respondents’ needs.
The evidence supported the view that this was based on far more than simply a
general sense of confidence on their part. The respondents’ trust in and
reliance on Mr. Salomon was based on recommendations, endorsements and
reassurances that remained constant and uniform over the years.
Mr. Salomon actively encouraged their reliance by providing multiple
investment recommendations and professing to be knowledgeable in that field.
Over the years, Mr. Salomon made every effort to convince the respondents
to invest — and to retain their investments — with Triglobal. I would add that
such reliance by a client on the advice and opinion of his or her lawyer is
unsurprising, as it is inherent in the lawyer-client relationship. The
credibility that lawyers generally enjoy with their clients is a factor to bear
in mind when assessing the impact of the advice they provide (see Harris,
at para. 19).
[88]
From this standpoint, the fact that
Mr. Salomon initially recommended iVest and that the bulk of the respondents’
monies were subsequently transferred to or directly invested in Focus is
immaterial. This is a distinction without a difference because, as I mentioned
above, the respondents would never have invested in either iVest or Focus had
Mr. Salomon performed due diligence before making his initial investment
recommendation or had he told them that offshore hedge funds are not investment
vehicles that provide security of capital. It should be borne in mind in this
regard that iVest and Focus constituted a single Ponzi scheme in which funds
were transited through iVest to pay off investors in Focus, and that Mr.
Salomon himself considered Focus to be “less risky” than iVest (C.A. reasons,
at para. 131, quoting A.R., vol. 6, at p. 1553). As the Court of Appeal
aptly put it, the respondents’ lost investments [translation] “form indissociable parts of a system into
which the [respondents] were drawn by Mr. Salomon’s faults” (para. 140).
[89]
For the Court of Appeal, if Mr. Salomon had
properly advised the respondents as a competent, prudent and diligent lawyer,
and if the conflict of interest had not tainted his recommendations,
endorsements and reassurances over the years, the respondents would never have
invested, nor retained their investments, with Triglobal. They would
consequently not have suffered the significant losses they did. There is no
dispute that the faults of Mr. Salomon occurred well before any of their
losses materialized.
[90]
I note that the appellants argue that the
respondents’ losses were also caused by imprudence on Ms. Matte-Thompson’s
part. Given the circumstances of this case, I cannot accept this argument.
While one might find that Ms. Matte-Thompson was very trusting,
Mr. Salomon not only provided her with wrongful advice, but also
repeatedly reassured her when she did express concern regarding the
investments. In this context, Mr. Salomon’s liability is neither excluded
nor diminished by the fact that the respondents did not second-guess his wrongful advice. A client’s ability to
rely on advice given by his or her lawyer is central to the lawyer-client
relationship. As a matter of principle, “[a] client’s acceptance of a lawyer’s
negligent advice cannot shield the lawyer from liability” (R.F., at para. 102).
That would turn the law of professional liability on its head (see by analogy Laflamme
v. Prudential-Bache Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R.
638, at paras. 54-56).
(2)
Absence of a Break in the Chain of Causation
[91]
I also agree with the Court of Appeal that the
fraud did not break the causal link between Mr. Salomon’s faults and the
respondents’ losses. It is true that a person who commits a fault is not liable
for the consequences of a new event that the person had nothing to do with and
that has no relationship to the initial fault. This is sometimes referred to as
the principle of novus actus interveniens: that new event may break the
direct relationship required under art. 1607 C.C.Q. between
the fault and the injury. Two conditions must be met for this principle to
apply, however. First, the causal link between the fault and the injury must be
completely broken. Second, there must be a causal link between that new event
and the injury. Otherwise, the initial fault is one of the faults that caused
the injury, in which case an issue of apportionment of liability may arise (Baudouin, Deslauriers, Moore, at Nos. 1-691 to 1-692; Laval (Ville de)
(Service de protection des citoyens, département de police et centre d’appels
d’urgence 911) v. Ducharme, 2012 QCCA 2122, [2012] R.J.Q. 2090,
at paras. 64-65; Lacombe
v. André, [2003] R.J.Q. 720, at paras. 58-60 (C.A.)).
[92]
The Court of Appeal rightly found that the first of these two
requirements was not met in the case at bar; the causal link between the fault
and the injury was not completely broken, quite the contrary. The case law
confirms that fraud committed by a third party does not shield from liability
persons who failed to take required precautions (see, e.g., Beaulieu v.
Paquet, 2016 QCCA 1284, at paras. 36-41
(CanLII); 124329 Canada inc. v. Banque Nationale du Canada,
2011 QCCA 226, [2011] R.J.Q. 295, at paras. 82-89). In
the instant case, Mr. Salomon’s blind endorsement of
Mr. Papadopoulos, his failure to perform due diligence and his baseless
reassurances caused the respondents to be vulnerable to a potential fraud (see Beaulieu,
at para. 41). The fraud did not break the chain of causation. No losses
would have been suffered without the faults first committed by Mr. Salomon. As
this Court stated in Hodgkinson v. Simms, [1994] 3 S.C.R. 377, albeit in
the common law context, where the breach of an obligation “initiated the chain
of events leading to the investor’s loss . . . . it is right and just that the
breaching party account for this loss in full” (p. 443).
(3)
Foreseeability and Recoverability
[93]
I wish to add two comments. First, the
appellants argue that Mr. Salomon could not be held liable for damages
that were not foreseeable. In the contractual context, art. 1613 C.C.Q.
provides that “the debtor is liable only for damages that were foreseen or
foreseeable at the time the obligation was contracted, where the failure to
perform the obligation does not proceed from intentional or gross fault on his
part”. This does not assist the appellants here.
[94]
This standard does not mean that it was
necessary to be aware of or to suspect a potential fraud (see Beaulieu,
at para. 41). The major risks associated with investment
advice are a decline in market prices or fraud by a third party, either of
which would result in the loss of the invested money. Where these
risks materialize, and where the lawyers have failed to abide by standards of
professional conduct that are meant to protect their clients against these very
risks, they may be liable for their clients’ investment losses (C.A. reasons,
at para. 146; see also Hodgkinson, at p. 452). This
does not turn lawyers into insurers for their clients’ losses.
[95]
Second, the trial judge
found that there was no proof that Mr. Salomon could have remedied the
situation on learning about the respondents’ investments
in Focus. The Court of Appeal countered that the issue of recoverability in
2006 or 2007 is irrelevant, given that the faults had already been committed at
that time. I agree. It is often the case that the person who committed a fault
has no chance to correct it afterwards. That has no impact on his or her
liability. There is thus no need to speculate about whether the respondents
would have been successful if they had asked to redeem their investments
earlier. I nevertheless note that the respondents were able to redeem $900,000
from Focus and iVest between February and July 2007. In June 2007,
Mr. Salomon, too, requested the redemption of his $70,000 investment in
Focus, and he received $50,000.
VI.
Conclusion
[96]
This is not a case about a mere referral. It
concerns a referring lawyer who, over the course of several years, recommended
and endorsed a financial advisor and financial products, and encouraged his
clients to retain their investments with that advisor. Further, in doing this,
he failed to perform adequate due diligence, misrepresented investment
information, committed breaches of confidentiality and acted despite being in a
conflict of interest. In such a context, a lawyer cannot avoid liability by
hiding behind the high threshold for establishing liability that applies in a
case in which a lawyer has merely referred a client.
[97]
I am satisfied that the Court of Appeal applied
the Housen standards of appellate review properly before overturning the
trial judge’s decision. The trial judge made palpable and overriding errors in
her assessment of fault and causation, and she also erred in analyzing the
conflict of interest at issue in this case. The professional liability of the
appellants for the respondents’ losses has been established. I would dismiss
the appeal with costs.
The following are the reasons delivered by
Côté J. —
TABLE OF CONTENTS
|
Paragraph
|
I. Overview
|
98
|
II. Applicable
Standard of Appellate Review
|
105
|
A. The Principle
of Appellate Non-Intervention
|
105
|
B. The
Identification of Palpable and Overriding Errors
|
109
|
C. The “Distorting Lens” Metaphor
|
117
|
D. The Role of a
Second and Final Appellate Court
|
121
|
III. Analysis of
the Trial Judge’s Purported Errors
|
127
|
A. The Trial Judge Did Not
Make a Palpable and Overriding Error With Respect
to Fault
|
130
|
(1) Mr.
Salomon’s Mandates
|
134
|
(2) Mr.
Salomon’s Duty in Recommending Triglobal and Mr. Papadopoulos
|
139
|
(3) Mr.
Salomon’s Duty to Advise
|
156
|
(4) Mr.
Salomon’s Duty of Loyalty
|
178
|
B. The
Trial Judge Did Not Make a Palpable and Overriding Error With Respect to
Causation
|
194
|
(1) Principles
of Causation
|
194
|
(2) Application to the Case at Bar
|
199
|
IV. Conclusion
|
215
|
I.
Overview
[98]
No one doubts the disastrous consequences, for
the respondents, Judith Matte-Thompson and 166376 Canada Inc. (“166”), of
the fraud committed by their financial advisors, Themis Papadopoulos and
Mario Bright. No one would dispute that the conduct of their lawyer, the
appellant Kenneth F. Salomon, was in many respects far from commendable. Not
content with referring his clients to the two financial advisors and their
firm, Triglobal Capital Management Inc. (“Triglobal”), Mr. Salomon went on
to improperly volunteer investment advice, which he was not qualified to do.
Nevertheless, after carefully and thoroughly assessing the evidence, the trial
judge found that Mr. Salomon was not liable for the losses the respondents
had suffered as a result of their financial advisors’ fraudulent conduct (2014
QCCS 3072). Contrary to my colleague, I fail to see how that finding is marred
with reviewable errors. I am therefore of the opinion that the Court of
Appeal’s intervention was not warranted.
[99]
The Court of Appeal purported to have identified
four reviewable errors, and substituted the following findings for those of the
trial judge: (1) Mr. Salomon’s faults were not limited in time to the
initial recommendation of specific investment products, but instead took place
over a four-year period; (2) those faults were committed not only against
Ms. Matte-Thompson, but also against 166; (3) Mr. Salomon’s close
relationship with Mr. Papadopoulos amounted to a conflict of interest; and (4)
the impact of Mr. Salomon’s faults was such that they caused the
respondents’ losses (2017 QCCA 273, 41 C.C.L.T. (4th) 1).
[100]
The Court of Appeal’s grounds for intervening
rested largely on the premise that the trial judge had analyzed the case
through a distorting lens in that she had failed to adopt a so-called “global”
approach to the assessment of the evidence. In my view, however, it was open to
the trial judge to find that all of Mr. Salomon’s professional acts over a
four-year period could not be regarded as forming a single continuum for
the purpose of assessing his liability. Quite properly, the trial judge
carefully analyzed the evidence to determine the “exact nature of the
fault . . . and its consequences”, as required by the general
principles of Quebec civil law (Laferrière v. Lawson, [1991] 1 S.C.R.
541, at p. 609 (emphasis added)). In so doing, she benefited from a unique
familiarity with the record acquired in the course of a nine-day trial during
which six witnesses were heard and over 600 exhibits were produced. The trial
judge’s conclusions are entitled to deference.
[101]
It in fact appears to me that the Court of Appeal’s
approach, far from being truly “global”, focused unduly on Mr. Salomon’s
conduct, to the point that the Court of Appeal lost sight of relevant
circumstances. For instance, concerning fault, the Court of Appeal overstated
Mr. Salomon’s role and largely disregarded the specificity of his mandates and
the involvement of other professionals. With respect to causation, the Court of
Appeal disregarded the respondents’ own relationship with Triglobal and
Mr. Papadopoulos, and the fact that Mr. Salomon took no part in the
investment decisions that led directly to the losses. Such a harsh approach to
civil liability might inadvertently increase the exposure of numerous
professionals who regularly recommend other advisors and then collaborate with
them in their clients’ interests.
[102]
In any event, regardless of the merits of the
Court of Appeal’s approach, it should not have substituted its own view of the
case for that of the trial judge. With all due respect, the Court of Appeal’s
findings stem from nothing more than a divergence of opinion that is based on
its reweighing of the evidence as a whole, which is clearly inconsistent with
the role of an appellate court (see Housen v. Nikolaisen, 2002 SCC 33,
[2002] 2 S.C.R. 235, at para. 3, quoting Underwood v. Ocean City Realty Ltd.
(1987), 12 B.C.L.R. (2d) 199 (C.A.), at p. 204).
[103]
More specifically, I am satisfied that there
were no palpable and overriding errors in the following key findings of the
trial judge:
(a) Mr. Salomon did not commit a fault by recommending Triglobal
and Mr. Papadopoulos as financial advisors and expressing confidence in
them (paras. 302-4 (CanLII)).
(b) Mr. Salomon did commit a fault by recommending specific
investments, in 2003 and 2004 in particular, without making any inquiries and
without being a qualified financial advisor (paras. 188-99).
(c) However, Mr. Salomon’s wrongful investment recommendations did
not directly cause the losses (paras. 208-10 and 216).
(d) In 2005 and 2006, Mr. Salomon was not consulted regarding the
investment decisions of Ms. Matte-Thompson and 166 which caused the losses
(i.e. investing in Focus). By then, the respondents had established a good
relationship with Mr. Papadopoulos and were relying on him for investment
advice (paras. 201-11, 284, 288 and 290-292).
(e) Although Mr. Salomon became aware in April 2006 that Ms.
Matte-Thompson was nervous about some of the investments, and later acted as a
“conduit” to help her obtain the information she needed from
Mr. Papadopoulos and Triglobal, it was not his responsibility in the
circumstances to second-guess the investment advice given by the respondents’
financial advisors or to discover the fraud (paras. 214, 248-49 and 299-300).
(f) Insofar as Mr. Salomon should have warned Ms.
Matte-Thompson and 166 when he became aware of the May 2007 La Presse
Affaires article that raised doubts about Triglobal’s practices, it was at
that point likely too late to recover the funds (paras. 304 and 308).
(g) Despite Mr. Salomon’s personal and financial relationships
with Mr. Papadopoulos, especially the gifts he received, he did not place
himself in a conflict of interest, given his limited involvement in the
respondents’ investment decisions and the nature and timing of the payments
made by Mr. Papadopoulos (paras. 132-65).
[104]
When, as in this case, a first appellate court
interferes with a trial judge’s findings in the absence of reviewable errors,
it is this Court’s role to step in and to restore the trial judge’s decision.
In this regard, I worry that my colleague Gascon J. adopts an overly
deferential approach towards the Court of Appeal, and that this approach
undermines the principle of appellate non-intervention in respect of findings
of fact or of mixed fact and law made at trial. I find it necessary to address
this issue before considering the propriety of the Court of Appeal’s grounds
for intervention in this case.
II.
Applicable Standard of Appellate Review
A.
The Principle of Appellate Non-Intervention
[105]
In the present case, the only appropriate
standard of appellate review is that of “palpable and overriding” error, which
applies both to findings of fact, including inferences of fact, and to findings
of mixed fact and law (unless an extricable error of law can be shown to exist)
(Housen, at paras. 10, 19,
28-31 and 36; Prud’homme v. Prud’homme, 2002 SCC 85, [2002] 4 S.C.R.
663, at para. 66). Findings of fault raise questions of mixed fact and law,
because they involve the application of norms of behaviour required by law to a
set of facts (St-Jean v. Mercier, 2002 SCC 15, [2002] 1 S.C.R. 491, at
para. 104; Housen, at para. 29). As for causation, it plainly involves
questions of fact (Montréal (Ville) v. Lonardi, 2018 SCC 29, at
para. 41; Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352, at
paras. 36 and 92).
[106]
Palpable and overriding error is a “highly
deferential” standard (South Yukon Forest Corp. v. R., 2012 FCA 165, 4
B.L.R. (5th) 31, at para. 46, quoted in Benhaim, at para. 38). As this
Court has stressed repeatedly, “it is wrong for an appellate court to set aside
a trial judgment where there is not palpable and overriding error, and the only
point at issue is the interpretation of the evidence as a whole” (Jaegli Enterprises Ltd. v. Taylor, [1981] 2
S.C.R. 2, at p. 4; see also Schreiber Brothers Ltd. v. Currie Products Ltd.,
[1980] 2 S.C.R. 78, at
p. 84; Housen, at paras. 10, 20 and 29).
[107]
The many reasons that underlie this principle of
appellate non-intervention were aptly expounded in Housen (paras.
11-18). First, it promotes the autonomy and integrity of trial proceedings,
which furthers the goal of providing final, effective and efficient solutions
to legal disputes. Second, it recognizes that trial judges are better placed to make factual findings, given their exposure to the
entire record and their advantage of having heard testimony viva voce.
Third, it prevents a duplication of the fact-finding
process which would increase the number, length and cost of appeals without
offering any guarantee of a better outcome.
[108]
Given the importance of this principle of appellate non-intervention for the
sound administration of justice, this Court has
characterized it as a “rule of law”, and insisted that, failing a reviewable
error, “an appellate court simply has no jurisdiction” (Galambos v. Perez,
2009 SCC 48, [2009] 3 S.C.R. 247, at para. 49, and Laflamme v.
Prudential-Bache Commodities Canada Ltd., 2000 SCC 26, [2000] 1 S.C.R. 638,
at para. 41, quoting Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at p.
426, itself citing Lapointe v. Hôpital Le Gardeur, [1992] 1 S.C.R. 351, at pp. 358-59).
Therefore, on questions of fact or of mixed fact and law, an appellate court cannot
make its own findings and draw its own inferences unless the trial judge is
shown to have committed a palpable and overriding error (H.L. v. Canada
(Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401, at para. 89).
B.
The Identification of Palpable and Overriding
Errors
[109]
It follows that, as a precondition to intervening
in a trial judge’s decision, an appellate court must properly identify a
palpable and overriding error. While a palpable error is of course one that is
“obvious” or “plainly seen” (Housen, at paras. 5‑6), it must
nevertheless be explained. The appellate court must show why and in
what respect a given finding is marred with a “crucial flaw, fallacy or
mistake” — meaning that it is “unreasonable or unsupported by the
evidence” (H.L., at paras. 56 and 70). Saying that
an error is “palpable” does not make it so (P.L. v.
Benchetrit, 2010 QCCA 1505, [2010] R.J.Q. 1853, at
para. 24).
[110]
The appellate court must point to a “specific
and identifiable error” that amounts to more than a “divergence of opinion” (Schwartz
v. Canada, [1996] 1 S.C.R. 254, at para. 33 (emphasis deleted); see also Housen,
at paras. 23, 56, 58 and 62). As the majority explained in Housen, “a
trial judge should not be found to have misapprehended or ignored evidence, or
come to the wrong conclusions merely because the appellate court diverges in
the inferences it draws from the evidence and chooses to emphasize some
portions of the evidence over others” (para. 56). Likewise, it does not suffice
to say that the basis of certain findings appears to be “thin” (South Yukon
Forest Corp., at para. 53). If the trial judge’s findings are reasonably
supported by the evidence, an appellate court cannot “reweigh the
evidence by substituting . . . an
equally — or even more — persuasive
inference of its own” (H.L., at para. 74 (emphasis
in original); see also Nelson (City) v. Mowatt,
2017 SCC 8, [2017] 1 S.C.R. 138, at para. 38; Housen,
at paras. 22-23).
[111]
I would add that an omission in the reasons does
not amount to a palpable and overriding error unless “it gives rise to the
reasoned belief that the trial judge must have forgotten, ignored or misconceived
the evidence in a way that affected his conclusion” (Van
de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014, at para. 15, quoted in Housen, at para. 72; see also South
Yukon Forest Corp., at paras. 50-51). Trial judges are presumed
to have based their conclusions on a review of the entirety of the evidence (Housen,
at para. 72).
[112]
That being said, how should an appellate court
proceed in order to identify a palpable and overriding error? By definition,
this should not be a strenuous task. In this respect, like my colleague, I find
the metaphor used by Morissette J.A. in J.G. v. Nadeau, 2016 QCCA
167, at para. 77 (CanLII), to be very accurate and relevant:
[translation] “a palpable and
overriding error is in the nature not of a needle in a haystack, but of a beam
in the eye” (quoted in Benhaim, at para. 39). This metaphor does
not merely show how obvious the error must be. Most importantly, it illustrates
that the identification of a palpable and overriding error does not
require a review of the evidence as a whole. If the appellate court cannot find
such an error without combing through the proverbial haystack, then there is none.
Here is how Morissette J.A. explained it:
[translation]
Thus, the error must be
one that can be identified without expending extensive resources, without provoking a long semantic debate and without requiring
the review of great quantities of documentary or testimonial evidence that is
divided and contradictory, as is quite regularly what happens in
contentious cases of some difficulty that go to trial.
Although
the above ideas are not at all complex, and are even crystal-clear in several
respects, it might be asked whether they are clearly understood by all members
of the Bar. It still happens too frequently that a party urges the judges
hearing an appeal to review most of the evidence in the record in minute detail
in order to identify an alleged “palpable and overriding” error. A submission
that is supported like that seems instantaneously to be suspect, as it contravenes
the rule of conduct I stated in the final lines of the preceding
paragraph. . . .
. . .
.
. . [T]he Court of Appeal’s role is not to restart from the beginning —
as if its responsibility were to take the place of the judge who presided the trial
— the exercise of assessing the probative value of each witness’s testimony,
an arduous exercise that the trial judge is required to conduct. In South
Yukon Forest Corporation, Stratas J.A. wrote the following with respect to
the role of an appellate court: “The Federal Court judge had a basis in the
record for her key factual findings”. The same is necessarily true in the
instant case, in which the Court must determine, and confine itself to
determining, whether there is support for the trial judge’s findings of fact in
the evidence. [Emphasis added; paras. 76-77 and 79.]
[113]
This Court, too, has stressed that “the appellate task is not to review evidence globally, but rather to
review the conclusions the first instance judge has drawn from the evidence” (Canada (Attorney General) v. Bedford,
2013 SCC 72, [2013] 3 S.C.R. 1101, at para. 55). Thus, the focus of the
review is not the entire record, but the trial judge’s reasons and, if need be,
specific pieces of evidence to which the appellant draws the attention of the
appellate court to show that a given finding is unsupported by the evidence
(see Housen, at para. 4; Waxman v. Waxman (2004), 186 O.A.C. 201, at para. 307; Benchetrit, at para. 24). Put another way, it would be
inappropriate for the appellate court to conduct its own independent assessment
of the evidence and then to take note of points of disagreement with the trial
judge’s findings and hold that those findings result from “palpable and
overriding errors” in order to justify intervening (see Van de Perre, at
para. 16; Galambos, at para. 53). That would be not a review for
error, but a disguised rehearing, which is not the proper role of an appellate
court (H.L., at paras. 52 and 64).
[114]
In this regard, it should be borne in mind that a
trial judge’s familiarity with the case as a whole, and often large quantities
of evidence, is vastly superior to that of appellate courts (Housen, at
paras. 14, 18 and 25). The corollary is that appellate courts are in comparison
ill-equipped for the task of fact-finding. As the Court of Appeal for
Ontario explained in Waxman, appellate courts can
hardly claim to be in a better position to examine cases in a “global” manner:
In a
case as lengthy and factually complex as this case, appellate judges are very
much like the blind men in the parable of the blind men and the elephant.
Counsel invite the court to carefully examine isolated parts of the evidence,
but the court cannot possibly see and comprehend the whole of the narrative.
Like the inapt comparisons to the whole of the elephant made by the blind men
who felt only one small part of the beast, appellate fact-finding is not
likely to reflect an accurate appreciation of the entirety of the narrative.
This case demonstrates that the “palpable and overriding” standard of review is
a realistic reflection of the limitations and pitfalls inherent in appellate
fact-finding.
Despite
the benefit of detailed reasons for judgment, lengthy and effective argument by
counsel, and many hours of study, we are entirely satisfied that we cannot
possibly know and understand this trial record in the way that the trial judge
came to know and understand it. Her factual determinations are much more likely
to be accurate than any that we might make. [Emphasis added; paras. 294-95.]
[115]
In other words, while an appellate court can
certainly identify specific palpable errors in a trial judge’s decision, it
must acknowledge the trial judge’s privileged position and its own
institutional limitations. Owing to time constraints and to its inability to
hear witnesses, for instance, it cannot hope to do a better job than the trial
judge in assessing the evidence as a whole (see Benchetrit, at
para. 24). Absent palpable errors, appellate courts must thus leave the
task of fact-finding to trial judges and dedicate their efforts and limited
resources to their primary role, which is “to delineate and refine legal rules
and ensure their universal application” (Housen, at para. 9).
[116]
Further, it bears reiterating that identifying a
truly “palpable” error in an impugned finding does not give the appellate court
free rein to reassess the evidence as a whole and overturn all the trial
judge’s other findings. To warrant intervention, the error must also be shown
to be “overriding”, that is, it must be determinative of the outcome of the
case (Nelson, at para. 38; H.L., at paras. 55-56). Otherwise,
whatever the error, the trial judge’s findings must stand. To borrow the vivid
metaphor used by Stratas J.A. in South Yukon Forest Corp., at para. 46,
“it is not enough to pull at leaves and branches and leave the tree standing.
The entire tree must fall” (quoted in Benhaim, at para. 38).
C.
The “Distorting Lens” Metaphor
[117]
It is a different metaphor that informed the
appellate decision in the instant case, however. Resorting to the notion of a
“distorting lens”, the Court of Appeal found that the trial judge had in
analyzing the evidence taken an overly compartmentalized approach to civil
liability, thereby misapprehending Mr. Salomon’s professional conduct towards
166 and misconstruing the causal link between Mr. Salomon’s faults and the
losses of Ms. Matte-Thompson and 166 (paras. 65-66 and 120). I am of the view
that, in so doing, the Court of Appeal wrongly intervened on the basis of mere
differences of opinion regarding the assessment of the evidence.
[118]
As my colleague recognizes (at para. 40), the
distorting lens metaphor does not dispense with the requirement of identifying
reviewable errors in accordance with the standards articulated in Housen.
It follows that a “distorting lens” cannot justify a wide-ranging review of the
entire record unless adopting the lens is shown to be, in itself, a reviewable
error. A decision to the contrary would upend the principle of appellate
non-intervention, since it would allow an appellate court to reweigh the
evidence before a reviewable error has been identified. In my view, the
distorting lens metaphor may, at most, be useful to illustrate how certain palpable
errors (or errors of law) taint the analysis of the evidence to the
point of having an overriding effect. A metaphor is not
a full explanation, however. The appellate court must explain why the
trial judge erred by viewing the case through the impugned “distorting lens”,
why that “error” amounts to more than a mere divergence in opinion, and
precisely how it distorted the trial judge’s analysis and affected the outcome
of the case. In this regard, it is worth noting that, in the
first decision in which the Court of Appeal invoked the distorting lens
metaphor, Ford du Canada ltée v. Automobiles Duclos inc., 2007 QCCA
1541, at paras. 126-35 (CanLII), it held that adopting the “lens” at issue — an
incorrect understanding of the concept of abuse of right — constituted an error
of law which had distorted the trial judge’s assessment of the evidence and
resulted in reviewable errors of fact. Further, the effect on the outcome of
the case could be readily ascertained by examining the trial judge’s reasons,
without conducting an independent review of the record (see paras. 130-32).
Used in this way, the distorting lens metaphor was arguably consistent with the
principles from Housen.
[119]
In the instant case, however, I find that the
Court of Appeal merely preferred a different “lens” than the one used by the
trial judge. In my view, no true reviewable error justifying a broad
reassessment of the evidence was identified. The Court of Appeal does not even
say that, let alone explain how, the trial judge’s “distorting lens” — her
supposed failure to take a “broad” approach to the case — was in itself a
palpable error. Yet the Court of Appeal relied on that “lens” to justify
reassessing and reweighing the evidence (paras. 50, 65, 97 and 121), thus
disregarding well-settled principles of appellate review. My understanding is
that the Court of Appeal began its analysis by re-examining the entire record,
concluded that it disagreed with the trial judge’s approach to the case,
purported to identify “palpable and overriding errors”, and proceeded to
substitute its own findings for those of the trial judge. Indeed, this is
largely how my colleague describes the Court of Appeal’s review process:
When properly assessed as a whole,
as the Court of Appeal did, the evidence reveals
that the advice and reassurances Mr. Salomon gave between 2003 and 2007
were all part of a single continuum, and that placing them in separate silos
would be artificial. [Emphasis added; para. 61, see also paras. 63 and
70.]
[120]
In my respectful view, this is not how the
“distorting lens” metaphor should be invoked, and it is certainly not how the
standard of appellate review should be applied to findings of fact or of mixed
law and fact. My colleague condones this approach, but I see it as a serious,
and unjustified, dilution of the principle of appellate non-intervention as
articulated in Housen.
D.
The Role of a Second and Final Appellate Court
[121]
Whenever this Court hears an appeal, part of its
role as a second and final court of appeal is to ensure that a trial judge’s
findings of fact or of mixed fact and law remain undisturbed unless a “palpable
and overriding” error is established. It follows that this Court should not refrain from intervening if a first appellate
court has disregarded or misapplied the standards of appellate review.
[122]
In my view, my colleague downplays this Court’s
role in ensuring that the appropriate standards are applied (para. 34). I
agree that the “focal point” of this Court as a second and final court of
appeal is the first appellate court’s decision, not that of the trial judge.
Our role is not to redo the first appeal as if the first appellate court did
not exist. Therefore, there is no question that the onus is on the appellants
who are asking this Court to intervene, or that careful attention must be paid
to the reasons articulated by the first appellate court. However, the existence
of “palpable and overriding errors” is not simply to be accepted at face value.
In order to determine whether the first appellate court correctly identified reviewable
errors, this Court must inevitably return to the trial judge’s reasons and
conduct its own assessment (see Prud’homme, at paras. 66-67; as
illustrations of this approach, see, e.g., Housen, at paras. 50-55,
64, 66 and 71-75; H.L., at paras. 111-36; Laflamme, at
paras. 39-50; Galambos, at paras. 48-62; Benhaim, at paras. 80-86).
[123]
To be clear, this Court should not defer to the
first appellate court with respect to the identification of reviewable errors.
As the Court noted in Schwartz, at para. 36, it will intervene if it is
satisfied that the first appellate court’s decision unjustifiably interfered
with the trial court’s findings: “Clearly, if the ground upon which a first appellate court relies
to justify disturbance — being a question of law — is, in
the eyes of a second appellate court, ill-founded, the trial judge’s decision
will be restored by the second appellate court” (emphasis in original; see also
St-Jean, at para. 40; Beaudoin-Daigneault v.
Richard, [1984] 1 S.C.R. 2, at pp. 8-9; Palsky
v. Humphrey, [1964] S.C.R. 580, at p. 583; Maze v. Empson,
[1964] S.C.R. 576, at pp. 578-79).
[124]
Deferring to a conclusion that the trial judge
made a palpable and overriding error would mean that, in practice, this Court
would be affording more weight to the first appellate court’s assessment of the
facts than to the trial judge’s findings. This, it seems to me, would be
incompatible with the principle of appellate non-intervention, which is
primarily concerned with the autonomy and integrity of the trial process.
As La Forest J. noted in Schwartz, at para. 37, “judicial policy
concerns . . . regarding a trial court’s role would
obviously not justify deference towards the assessment made by an appellate
court”.
[125]
It is worth clarifying that there are two steps
to be taken when this Court reviews a decision in which the first appellate
court has substituted its own findings of fact or of mixed fact and law for
those of the trial judge. The first step is to inquire into whether the first
appellate court correctly identified reviewable errors. If it did not, the
trial judge’s findings must be restored regardless of the merits of the first
appellate court’s findings (see Nelson, at para. 38). If, however, this Court agrees that the intervention was
warranted, then the first appellate court was justified in proceeding with its
own independent assessment of the relevant evidence and substituting its own
findings. At that point, and this is the second step, this Court must ask
whether the first appellate court has erred in making its assessment. It is
only at this step that this Court will show a certain deference and will therefore
avoid intervening unless “clearly satisfied” that the first
appellate court’s findings are erroneous (St-Jean, at para. 46).
[126]
To sum up, I would reiterate that when the
occasion arises, it is the proper role of this Court to inquire into whether
the first appellate court’s intervention in the trial judge’s decision was
justified. If a reviewable error has not been correctly established, the trial
judge’s findings must be restored. Although our analysis focuses on the first
appellate court’s stated grounds for intervening, we must review them in light
of the trial judge’s decision itself.
III.
Analysis of the Trial Judge’s Purported Errors
[127]
When the principles of appellate review, which I
believe to be uncontroversial, are properly applied to the instant case, the
inevitable conclusion is that the Court of Appeal’s intervention was
unwarranted. In my respectful view, the reason why my colleague comes to a
different conclusion is that he largely skips over the first, and most
important, step of the analysis — that is, the review of the purported grounds
for intervention — and instead focuses on the Court of Appeal’s own findings.
For instance, regarding Mr. Salomon’s alleged fault in relation to the duty to
advise, my colleague concludes in a single paragraph that the Court of Appeal
“properly identified palpable and overriding errors” (para. 55) before going on
to consider whether it erred in its assessment of the facts (paras. 56-65).
Moreover, in discussing the duty of loyalty, my colleague does not take issue
with the Court of Appeal’s obvious failure to point to any specific reviewable
error, as if, in his view, disagreeing with the trial judge’s “restrictive
approach” was sufficient to justify retrying the case on the basis of the
written record. With respect, I beg to differ.
[128]
Upon a more rigorous examination, I am satisfied
that the Court of Appeal impermissibly reassessed the evidence as a whole, and
nonetheless found no truly reviewable error. As I noted above, the Court of
Appeal’s approach to appellate review was inconsistent with the principles
articulated in Housen. If I may paraphrase Morissette J.A.’s metaphor,
the Court of Appeal searched through the haystack, arguably found a needle, and
tried to present it as a beam. This Court should therefore restore the trial
judge’s findings.
[129]
With these considerations in mind, I will now
consider the purported palpable and overriding errors in the trial judge’s
findings on the subjects of (a) fault and (b) causation. While my understanding
of the case differs from my colleague’s, I am largely in agreement with his
summary of the context and judicial history and do not see a need to replicate
it. Rather, I will discuss the relevant facts in the course of my analysis. In
this respect, I feel compelled to delve into factual matters more than would
generally be appropriate for an appellate judge. This is warranted in the
instant case, however, given the approach taken by the Court of Appeal and by
my colleague.
A.
The Trial Judge Did Not Make a Palpable and
Overriding Error With Respect to Fault
[130]
Concerning fault, the purported errors identified
by the Court of Appeal boil down to a view that the trial judge failed to
assess the evidence in a “global” manner, and erroneously compartmentalized Mr.
Salomon’s conduct in accordance with the chronology of the respondents’
investments (paras. 50, 65-67, 70-71, 97 and 120). On the basis that this
“lens” had had a distorting effect, the Court of Appeal reassessed the evidence
as a whole and reached the conclusion that Mr. Salomon’s faults were not
limited to the initial recommendation of specific investments to
Ms. Matte-Thompson. Rather, in its view, those faults were part of a
single four-year continuum, and were committed against both Ms. Matte-Thompson
and 166. It added that the trial judge’s restrictive approach to the evidence
had led her to downplay the potential conflict of interest arising from Mr.
Salomon’s personal relationship with Mr. Papadopoulos.
[131]
As mentioned above, the purported distorting
lens could not, in my view, justify a broad reassessment of the evidence. My
colleague endorses the Court of Appeal’s approach (paras. 55-56, 61, 63,
65, 70 and 80-81), but I find that it falls squarely into “divergence of
opinion” territory. It was open to the trial judge to consider that all of Mr.
Salomon’s professional acts — in a four-year period — could not be lumped
together. And may I add that it was the proper way to approach the case. As
required under the principles of Quebec civil law, the trial judge canvassed
the evidence so as to determine the “exact nature of the fault” (Laferrière,
at p. 609). Quite correctly, she was careful not to oversimplify and
inappropriately mix the multiple mandates, professional relationships and
investments at issue over the relevant period. The Court of Appeal’s preferred
“lens”, by contrast, is “global” only insofar as Mr. Salomon’s conduct is
concerned. As my colleague explains, the scope of a lawyer’s duty to advise
depends largely on the context (para. 53). Yet, in the instant case, the Court
of Appeal lost sight of some of the relevant circumstances, especially the
scope of Mr. Salomon’s mandates and the roles of the other players. This
resulted in an approach which disregarded Mr. Salomon’s limited role in respect
of the investments that led to the losses.
[132]
In any event, irrespective of the merits of the
Court of Appeal’s approach, the trial judge’s findings should not be disturbed.
First, as I noted above, the Court of Appeal relied on a broad reassessment of
the evidence in order to identify the purported errors, which is at odds with Housen
and its progeny. This, it seems to me, should suffice to resolve the matter.
Second, I disagree with my colleague that the trial judge made her findings
“despite evidence clearly showing” the contrary (para. 41). But even if that
were true, it would not by itself amount to a palpable and overriding error. It
is open to trial judges to place more weight on some parts of the evidence than
on others (Housen, at para. 72; Nelson, at para. 38). Indeed,
that is precisely their job. The question is not whether the Court of Appeal
has found clear evidence supporting its preferred view of the case, but whether
it has shown that the trial judge’s findings are unsupported by the evidence.
If it has not done so, it is impermissibly reweighing the evidence. As this
Court stated in the very first paragraph of Housen, an appellate court
is prohibited “from reviewing a trial judge’s decision if there was some
evidence upon which he or she could have relied to reach that conclusion”
(emphasis added). In the instant case, the trial judge’s findings regarding
fault were available to her.
[133]
I will now explain in greater depth why I am
satisfied that there is no reviewable error with respect to fault. For that
purpose, I will examine (1) Mr. Salomon’s mandates, (2) his duty in
recommending Triglobal and Mr. Papadopoulos, (3) his duty to advise and
(4) his duty of loyalty.
(1)
Mr. Salomon’s Mandates
[134]
The trial judge was justified in starting her
analysis by circumscribing the scope of Mr. Salomon’s mandates (paras. 120-31).
While the precise scope of a mandate does not always limit a lawyer’s duties (Côté
v. Rancourt, 2004 SCC 58, [2004] 3 S.C.R. 248, at para. 6), it is certainly
one of the main considerations for a judge when assessing professional
liability (see, e.g., Sylvestre v. Karpinski, 2011 QCCA 2161, at para. 19 (CanLII); Bessette v. Pharmacie Suzanne Payer inc., 2017
QCCS 2474, at paras. 90-102 (CanLII)). As Baudouin, Deslauriers and Moore
explain:
[translation]
Fault is established by
reference to the type of obligation that is assumed,
to its intensity (obligation of means or of result), and to the whole of the
circumstances of the case.
. . .
Lawyers can, first of all, be
held liable for any faults committed in advising their clients, where, for
example, the clients consult them to learn about their rights or about the
legal consequences of a transaction. Although the duty to advise exists
regardless of the nature of the mandate, the scope of the latter has an
undeniable impact on liability. This means that it is necessary to specifically
review the scope of the lawyer’s mandate. The standard for comparison, once
again, is that of the normally competent, prudent and diligent lawyer. [Emphasis
added; footnotes omitted.]
(J.-L. Baudouin, P. Deslauriers
and B. Moore, La responsabilité civile (8th ed. 2014), at Nos.
2-136 and 2-138)
[135]
The trial judge noted that Mr. Salomon had had
“no specific mandate” with regard to the respondents’ investments (para. 130).
This is a very significant — and, in my view,
unchallenged — finding. Mr. Salomon was only
occasionally consulted regarding the investment decisions, and always in the
context of mandates related, inter alia, to the wills and trusts of Ms.
Matte-Thompson’s late husband Malcolm Thompson, the family business, the
reorganization of the companies and the sale of their properties (trial
reasons, at para. 129). In this respect, I disagree with my colleague’s
assertion that Mr. Salomon was “continually recommending financial
products” (para. 59 (emphasis added)). In light of the trial judge’s
findings, such an assertion clearly overstates Mr. Salomon’s role and the
obligations he assumed, and skews the analysis on his liability. Moreover, in
the absence of a reviewable error, it amounts to an impermissible reweighing of
the evidence.
[136]
Given the absence of a specific and continuous
mandate relating to the respondents’ investments, it was appropriate for the
trial judge to eschew an overly broad approach to liability. She instead
narrowed her analysis down to Mr. Salomon’s actual involvement in the various
investments of Ms. Matte-Thompson and 166. I see no palpable error in that
approach, quite the contrary.
[137]
I pause to point out that the trial judge found
that Mr. Salomon had from the outset been acting for both respondents. For
instance, she noted that, in 2003, his legal opinion on the interpretation of
Mr. Thompson’s wills, in which he had discussed the goal of capital
preservation, had been provided to both Ms. Matte-Thompson and 166 (paras. 44
and 122-23). It is thus not in dispute that Mr. Salomon had a duty to advise
both respondents and a duty of loyalty to both of them. However, those duties
were largely circumscribed by the very nature and scope of his mandates.
[138]
Although Mr. Salomon did volunteer investment
advice on several occasions, he did not purport to act as the respondents’
financial advisor, nor did he assume the obligation to fashion, monitor or
verify their investment strategy. Indeed, he referred Ms. Matte-Thompson and
166 to Triglobal and Mr. Papadopoulos precisely so that his clients could
obtain investment advice and services from professionals in that field (trial
reasons, at paras. 45 and 50). The respondents subsequently developed their own
independent relationship with the recommended professionals (trial reasons, at
paras. 211 and 288). With this in mind, the first question I will discuss is
whether Mr. Salomon committed a fault in recommending Triglobal and
Mr. Papadopoulos and in expressing confidence in them.[2]
(2)
Mr. Salomon’s Duty in Recommending Triglobal and
Mr. Papadopoulos
[139]
In my view, the Court of Appeal should not have
interfered with the trial judge’s finding that recommending Triglobal and Mr.
Papadopoulos — and expressing confidence in them — had
not in itself constituted a fault (trial reasons, at paras. 197 and
302-4). In keeping with its “global” approach to the case, the Court of Appeal
did not address that recommendation separately, but considered it together with
the recommendation of specific investment products. With all due respect, my
understanding is that rather than reviewing the trial judge’s reasons for
errors, the Court of Appeal proceeded, from the outset, to reassess the case
from another perspective.
[140]
While the Court of Appeal did not distinguish
explicitly between the referral and the specific investment advice, its reasons
suggest that recommending Triglobal and Mr. Papadopoulos without first making
inquiries of the Autorité des marchés financiers (“AMF”) was in itself wrongful
(paras. 70-72 and 117). The same suggestion can be found in my colleague’s
reasons (para. 59). This suggestion is at odds with the trial judge’s reasons,
as she found that Mr. Salomon’s initial referral and later expressions of
confidence in Triglobal and Mr. Papadopoulos had been reasonable at least until
May 2007, when the La Presse Affaires article was published. For
my part, I am satisfied that there is no palpable error in the trial judge’s
findings in that regard.
[141]
It is common practice for lawyers to
recommend other professionals to their clients. Indeed, as the appellants
points out, it is sometimes their duty to recognize the limits of their
competence and, where the circumstances so require, to consult other
professionals or to advise their clients to consult such persons. Whenever they
recommend other professionals, or express confidence in them, lawyers must meet
the standard of a reasonably competent, prudent and diligent lawyer in the same
circumstances. While they cannot be expected to guarantee the services of the
recommended professionals, they nonetheless have an obligation of means.
[142]
I agree with my colleague that the Quebec Court of Appeal
correctly set out the applicable principles in Harris (Succession), Re,
2016 QCCA 50, 25 C.C.L.T. (4th) 1, at para. 22:
[translation]
A lawyer who, as in this case, recommends that a client consult another person
must be convinced that the person is competent enough to adequately perform the
mandate in question. His conviction must be based on a reasonably informed
knowledge of the recommended person. In such matters, the circumstances are
everything.
[143]
In the instant case, the trial judge’s decision is
consistent with this approach even though it was rendered before Harris.
The trial judge took into consideration the fact that Mr. Salomon had conducted
“due diligence” in 2001 before retaining Triglobal’s services for his own
investments (paras. 34 and 133), that is, that he had inquired about the
lawyers and accountants assisting Mr. Papadopoulos. He knew and respected many
of them, which convinced him to invest with Triglobal. In the years that
followed, Mr. Salomon referred family members, friends and clients to the firm,
and was himself very pleased with the investment advice he received (trial
reasons, at paras. 35 and 134). Further, the trial judge
pointed out that “[Mr.] Salomon had no reason to suspect any wrongdoing from
Papadopoulos or Triglobal” and that “Triglobal had the reputation of a first
class investment firm [that was] very well-rated” before its implosion at the
end of 2007 (paras. 302-3). As the Court of Appeal explained in Harris,
at para. 28, courts must be careful not to assess recommendations in light of
facts discovered subsequently. Mr. Salomon’s confidence in the competence
and probity of Triglobal and Mr. Papadopoulos was based on reasonable knowledge.
Contrary to what my colleague asserts, it was not “blind confidence” (para.
60).
[144]
It follows that, although further inquiries
would have been advisable, especially given that Mr. Salomon went as far as to
say that he perceived Mr. Papadopoulos to be “very conservative” when it
came to capital preservation (trial reasons, at para. 49), Mr. Salomon acted as
a reasonably competent, prudent and diligent lawyer in the circumstances. While
it may be true that contacting the AMF would have been preferable, omitting to
do so did not amount to a fault given the reputation of the firm and Mr.
Salomon’s own familiarity with Triglobal’s services.
[145]
Moreover, recommending Triglobal and Mr.
Papadopoulos did not in itself require Mr. Salomon to double-check whether the
investment advice they gave was appropriate. As the appellants point out, the
very purpose of a referral is generally to have the client consult a
professional whose areas of expertise differ from those of the referring
lawyer. It would defeat that purpose to require a referring lawyer, as a
general rule, to monitor the advice given by the professionals he or she
recommended.
[146]
I am concerned that a conclusion to the contrary
would impose an excessive burden on many lawyers (and other professionals) who routinely
recommend other trusted professionals. In my view, this would imply that making
systematic inquiries of professional orders and other regulatory bodies would
generally be required before another professional could be recommended, and
that monitoring and verifying the recommended professional’s advice might
subsequently be required. This would go too far. Professionals might become
overcautious and avoid making recommendations altogether, which would be a
disservice to their clients.
[147]
I would instead say that lawyers should make
such inquiries as will enable them to acquire reasonable knowledge of
professionals they recommend unless they already have relevant experience
dealing with them. I would add that, as in other contexts, not every professional
“error” made in making such inquiries — or in failing
to make them — will amount to a fault if the lawyer’s
conduct does not depart from the standard expected of a reasonably competent,
prudent and diligent professional (see Roberge v. Bolduc, [1991] 1 S.C.R.
374, at pp. 427-28; Phillips v. Naamani, 1998 CanLII 9332 (Que. Sup.
Ct.), at paras. 66-67).
[148]
In the case at bar, Mr. Salomon already had
reasonable knowledge of Triglobal and Mr. Papadopoulos as a result of his
personal experience. With the benefit of hindsight, failing to take further
steps was very unfortunate, but it does not in itself make him liable.
[149]
In saying this, I am well aware that this case
is not merely about a referral. The trial judge found that Mr. Salomon’s
involvement was not limited to the initial recommendation in 2003, but that he
also went on to provide wrongful advice regarding specific investment products
(paras. 198-99). However, the principles from Harris are nonetheless
relevant to the assessment of Mr. Salomon’s conduct, and applying them properly
leads to the conclusion that it was open to the trial judge to find that
recommending Triglobal and Mr. Papadopoulos did not in itself constitute a
fault.
[150]
This is true not only of the initial referral,
but also of the later expressions of confidence. I see no ground for
intervening in the trial judge’s findings that Mr. Salomon’s confidence
remained reasonable until at least the publication of the La Presse Affaires
article in May 2007 and that, although he may have been “overly reassuring” to
Ms. Matte-Thompson at times, this does not suffice to establish liability
(trial reasons, at paras. 301-4). Up to the time when Mr. Salomon should
reasonably have begun to doubt the probity or competence of Triglobal and
Mr. Papadopoulos, it was just as appropriate for him to reaffirm his
confidence in them as it had been for him to recommend them on day one.
Likewise, it was open to the trial judge to find that Mr. Salomon had no
duty either to withdraw his recommendation or to investigate Triglobal and Mr.
Papadopoulos. As the trial judge found, to Mr. Salomon, “there was no
indication of anything illegal or unethical occurring at Triglobal up until May
2007” (para. 304).
[151]
In this regard, I wish to comment on the “gifts”
Mr. Papadopoulos made to Mr. Salomon in May and June 2006 and, later, in
February 2007. The trial judge found that Mr. Papadopoulos had wanted to help
Mr. Salomon renovate his apartment. For that purpose, he had proposed that Mr.
Salomon incorporate a company that could issue invoices for “financial
consulting” services. Mr. Salomon accepted, and later received $28,000
through that company without having rendered any services (trial reasons, at
paras. 142-46; C.A. reasons, at para. 104). My colleague is of the view that
Mr. Papadopoulos’s willingness to request fake invoices was sufficient to
raise “obvious concerns as to the general probity of the individual” (para.
77). I agree that such a scheme is troubling in many respects. However, as the
trial judge noted, regardless of whether the scheme constituted tax fraud, it
had “no connection to the investments made by the [respondents]” (para. 147).
This means that Mr. Papadopoulos’s gifts were arguably insufficient to set
off alarms with respect to the potential misappropriation of the respondents’
investments and to undermine Mr. Salomon’s confidence in Triglobal and Mr.
Papadopoulos.
[152]
That being said, I would agree that Mr.
Salomon’s reaction to the May 2007 La Presse Affaires article was
inappropriate. As the trial judge found, Mr. Salomon failed to bring the
article to his clients’ attention despite the fact that it “raised serious
doubts about the investments made through Triglobal in the iVest or Focus
funds” (paras. 260-61). Accordingly, it might be argued that Mr. Salomon should
have warned the respondents and recommended that they consult other financial
advisors.
[153]
There is little doubt that Mr. Salomon should
have been more circumspect from that point onwards. For instance, it was
probably inappropriate for him to state in July 2007 that he remained “very
happy to have [his] investments performing so well with such controlled risk”,
especially given that the respondents were having difficulty retrieving their
funds at the time (C.A. reasons, at para. 133). Even in December 2007, when
Triglobal was on the brink of collapse and the fraud was about to be uncovered,
Mr. Salomon was still reassuring Ms. Matte-Thompson about
Mr. Papadopoulos’s purported attempts to salvage the situation (C.A.
reasons, at para. 138).
[154]
However, even though these reassurances might
have been wrongful, the trial judge did not see the need to linger on them.
This is because she found that the loss had likely already been incurred by May
2007, which meant that there could be no causal link between faults committed
by Mr. Salomon at that time and the injury (trial reasons, at
paras. 304-5, 308 and 312-13). I will return to this finding in my
discussion on causation.
[155]
To sum up, I am of the opinion that the Court of
Appeal did not identify a specific reviewable error in the trial judge’s
reasons in relation to Mr. Salomon’s initial recommendation and later
expressions of confidence. It follows that the Court of Appeal could not
reassess the evidence as a whole on the basis of its preferred “global” view of
the case (paras. 69-75).
(3)
Mr. Salomon’s Duty to Advise
[156]
Again, the trial judge did not find that Mr.
Salomon’s conduct had been free of fault. She concluded that he had failed to
act as a reasonably competent, prudent and diligent lawyer in recommending
specific investment products (i.e. iVest and Manulife), especially in 2003 and
2004, and that in so doing, he had breached his duty to advise in three
respects. First, he had failed to inform Ms. Matte-Thompson of the limits of
his competence with respect to financial investments (trial reasons, at
paras. 196-99). Second, he had recommended investment products without
making any inquiries and without obtaining any information about their terms
and conditions (trial reasons, at paras. 188-91). Third, he had recommended
investing in an offshore hedge fund, iVest, which was inconsistent with his
clients’ primary goal of preserving capital (trial reasons, at paras. 193-94
and 198). These findings are not in dispute.
[157]
As my colleague explains, to the extent that a
lawyer does provide advice, he must meet the standard of a reasonably
competent, prudent and diligent lawyer in the same circumstances irrespective
of the precise scope of his mandate (para. 54; see also C.A. reasons, at para.
44). In the case at bar, Mr. Salomon committed faults in volunteering
investment advice even though such advice fell outside the limits of his
mandates.
[158]
The Court of Appeal did not take issue with the
trial judge’s findings in this regard (see paras. 68-69). However, as I
explained above, it concluded that the trial judge had played down the extent
of Mr. Salomon’s breaches of his duty to advise in finding (i) that he had
provided wrongful investment advice to Ms. Matte-Thompson only (paras. 61,
65, 69 and 89); and (ii) that the faults had concerned only certain specific
investment products and had occurred within a limited timeframe rather than continuing until the end of
2007 (paras. 70-75 and 89). In the Court of Appeal’s opinion, these two
reviewable errors stemmed from the trial judge’s distorting lens, that is, her
failure to consider the case from a “global” perspective (paras. 50, 66 and
120).
[159]
I agree with my colleague that the Court of
Appeal had some basis for concluding that Mr. Salomon had committed the same
faults in respect of both respondents (paras. 56-57 and 62). The trial judge’s
assertion that “[Mr.] Salomon never acted as a professional providing
financial advice to 166376” (para. 283) appears to be contradicted by her own
factual findings to the effect that Ms. Matte-Thompson had consulted him both
as an executor and a beneficiary of the trusts and as a director of 166 (para.
44). Indeed, Mr. Salomon’s memorandum of September 13, 2003
recommending an investment in iVest was addressed directly to 166 (C.A.
reasons, at paras. 49 and 59). And when the sale of 166’s properties was being
contemplated in June 2005, Mr. Salomon reiterated his recommendation to invest
the proceeds in Manulife or iVest. It therefore seems to me that, contrary to
the trial judge’s finding, Mr. Salomon gave the same wrongful investment
advice to both respondents.
[160]
But even if this error is assumed to be
palpable, I fail to see how it affected the outcome of the case. As I will
explain below in my analysis on causation, 166 did not rely at all on Mr.
Salomon’s investment advice after selling its assets in early 2006 (trial
reasons, at paras. 288). Ms. Matte-Thompson decided on her own to invest the
proceeds of the sale of 166’s assets in Focus rather than in the products Mr. Salomon
had initially recommended (i.e. Manulife and iVest). In this context, the trial
judge’s error cannot be said to have been “overriding” and, therefore, to have
justified appellate intervention. Neither did it justify the Court of Appeal’s
conducting a broad reassessment of the evidence for the purpose of finding other
potential errors.
[161]
I also part ways with my colleague on the second
purportedly reviewable error the Court of Appeal identified after
delving into the record. I am satisfied that there was no basis for overturning
the trial judge’s finding that Mr. Salomon had committed faults only in
recommending Manulife and iVest products, mostly in 2003 and 2004
(paras. 196-97), and that he was not at fault for the later investments in
Focus. After all, he was not involved in the respondents’ fateful decisions to
invest in that particular product in 2006 (trial reasons, at paras. 210-15,
285-88 and 290-94).
[162]
In purporting to identify a palpable and
overriding error, the Court of Appeal relied on its view that Mr. Salomon had
committed continuous faults of omission in failing, from 2003 to 2007, to make
inquiries regarding Triglobal and Mr. Papadopoulos and to verify their
investment products (paras. 70-72). This begs the question whether Mr. Salomon
had an obligation to take such steps in regard to the later investments in
Focus. As I mentioned above, the trial judge found that he had had no specific
mandate to recommend or review investment products (para. 130), and this finding
has not been challenged. Further, it was open to the trial judge to find that,
on the facts of the case, Mr. Salomon had had no obligation to make inquiries
of regulatory bodies before recommending Triglobal and Mr. Papadopoulos.
It is thus unclear to me what obligations Mr. Salomon might have failed to
fulfill.
[163]
What, then, might underlie the view that Mr.
Salomon had committed continuous faults of omission? The Court of Appeal seems
to have considered that Mr. Salomon’s [translation]
“interventions” with respect to the respondents’ investments in Focus up until
the end of 2007 also triggered a duty to advise and thus to make inquiries and
conduct verifications (paras. 71 and 75). I agree that a lawyer’s duty to
advise generally includes obligations to inform the client of relevant facts,
to explain available options and their implications, and to recommend a course
of action (Gascon J.’s reasons, at para. 52). Yet the precise content of
that duty is highly dependent on the circumstances, including the scope of the
mandate, the obligations assumed by the lawyer and his or her areas of
expertise (see Côté, at para. 6).
[164]
In the case at bar, the trial judge thoroughly
and carefully examined the role played by Mr. Salomon in 2006 and 2007 and,
based on her assessment of the evidence, she drew the reasonable inference that
Mr. Salomon had had no duty to advise his clients regarding their investments
in Focus, and had certainly had no duty to double-check the respondents’
investment decisions (paras. 213-14 and 285-88). Here again, the Court of
Appeal did not pinpoint a specific “crucial” flaw in the trial judge’s
findings, but instead intervened on the basis of a mere difference of opinion.
[165]
First, it is worth recalling the trial judge’s
uncontested factual finding that Mr. Salomon has not been consulted about the
respondents’ decisions to invest in Focus in 2006 and had not been involved in
those decisions (see paras. 204-5, 210, 219-22 and 290-93)[3]. He was not informed of them until after the fact. Although he did participate
in meetings regarding the upcoming sale of 166’s assets, there is no evidence
that potential investments in Focus were discussed on those occasions. Further,
he did not attend a key December 2005 meeting that dealt specifically with
166’s investment strategy. In any event, an investment in Focus was not yet
being contemplated at that time. At 166’s request, Mr. Salomon drafted
resolutions that authorized the opening of investment accounts for the sale
proceeds, but those resolutions referred to Manulife and iVest, not to Focus
(C.A. reasons, at para. 79).
[166]
I believe it will be helpful to quote several
paragraphs from the trial judge’s reasons on the subject of 166’s investments
in Focus. These paragraphs clearly underline how limited Mr. Salomon’s
involvement and knowledge were:
At the
end of 2005 and the beginning of 2006, [Mr.] Salomon still had a lawyer-client
relationship with Ms. Thompson. He was handling numerous matters that related
to the wills and trusts and family businesses. He knew that the proceeds of
the sale needed to be invested and was aware Papadopoulos was providing
investment proposals to Ms. Thompson and her Ontario lawyers. However, [Mr.]
Salomon did not participate in this investments strategy meeting. Although he
received a copy of the proposal provided by Papadopoulos to Ms. Thompson, he
was not part of the recommendations nor the discussions that related to the
investment.
[Mr.]
Salomon argues that he had absolutely no involvement in 166376’s decision to
invest and that he knew nothing about it. The evidence establishes the
contrary.
[Mr.]
Salomon prepared the resolutions for the opening of the investment account for
the executors and trustees. Prior to the investment, he was involved in the
investment discussions related to the sale proceeds and the expected return
required to meet Ms. Thompson’s needs. He knew that
166376 was contemplating to invest a significant portion of the sale proceeds
through Triglobal.
However
166376, through Ms. Thompson, intended to invest with Triglobal in Manulife and
iVest, the same investment vehicle that had been
previously recommended to Ms. Thompson in her personal capacity.
. . .
The
exhibits filed and the evidence show that in the winter of 2006, [Mr.] Salomon
was not aware of the exact amount invested by 166376 or in which vehicles it
had been invested. Contrary to the first investment made personally by Ms.
Thompson back in 2003, he was not consulted with respect to the investments
contemplated by 166376 in Focus.
How
could [Mr.] Salomon stop 166376 from entering into such a transaction when he
was not even aware that such investment was being made?
The
Court cannot conclude that [Mr.] Salomon failed to advise 166376 of the limit
of his ability at the time 166376 made the investment because he never
recommended the investment made in Focus. He only learned about it after the
fact.
Although
[Mr.] Salomon encouraged that the investment be made through Triglobal, he did
not encourage 166376 to purchase the Focus fund in February 2006. The proposition and recommendations with respect to the investment
were discussed in a strategy meeting with Papadopoulos, which [Mr.] Salomon did
not attend. [Emphasis added; footnotes omitted; paras. 219-22 and 290-93.]
[167]
Second, even when Mr. Salomon was finally made
aware of the respondents’ investments in Focus (in April 2006 in the case of
166, and in October 2006 in the case of Ms. Matte-Thompson), he did not
provide any wrongful legal advice, recommendation or reassurance regarding that
specific fund (trial reasons, at paras. 227-28, 236-37, 294 and 301), at
least not until May 2007. In fact, the Court of Appeal did not
point to any instance where Mr. Salomon had clearly recommended or endorsed
Focus. The only example it gave was an email Mr. Salomon had received from
Ms. Matte-Thompson on April 29, 2006, from which he had learned for the
first time that 166 had invested in Focus:
Ken
I do need to talk to you
as a friend… 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 informewd [sic] 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. As a friend and confident [sic]
I would like to talk to you…outside of business… [Emphasis added.]
(quoted in C.A. reasons, at paras.
77-78 and in trial reasons, at paras. 227‑28.)
[168]
In response to Ms. Matte-Thompson’s concerns
about the “difficult time” she was having getting information about the fund,
Mr. Salomon responded — without making any inquiries — that he was “certain that everything is ok”. He also offered
to discuss the matter further and then asked Mr. Papadopoulos to answer her
questions (trial reasons, at para. 228).
[169]
In my view, the Court of Appeal had no basis for
overturning the trial judge’s finding that Mr. Salomon’s response did not
constitute a fault (trial reasons, at paras. 296-300).[4] At the time, Ms. Matte-Thompson’s main concern was about the difficulty
she was having in obtaining information about 166’s investments. In this
regard, Mr. Salomon “did his best to get Papadopoulos to answer his clients”
(see trial reasons, at paras. 228 and 299). As the trial judge pointed
out, it might have been preferable for him to recommend that the respondents
consult another professional to obtain a second opinion, but this does not mean
that his conduct amounted to a fault (paras. 299-301). This finding of mixed
law and fact is based on the trial judge’s assessment of the evidence and is
entitled to deference.
[170]
Moreover, Ms. Matte-Thompson’s email did not
constitute a mandate to verify the propriety of 166’s investments. She made
clear that she was only asking for Mr. Salomon’s opinion “outside of business”,
as a “friend” — words which are not included
in the Court of Appeal’s quotation of the email (para. 77). I wonder on what
basis Mr. Salomon should have gotten involved, on his own initiative, in a
review of the investment decisions the respondents had made with their
financial advisors (see, e.g., Sylvestre, at paras. 16-19). As well, Mr. Salomon did say that he would be “happy to
discuss [the matter] at any time”, but it seems that Ms. Matte-Thompson
preferred not to involve him further (trial reasons, at para. 230).
[171]
It is also worth noting that Mr. Salomon knew he
was not the only lawyer involved in the sale of 166’s assets (trial reasons, at
paras. 217-19). At the time, lawyers David Gemmill and Rod Farn were
handling the Ontario legal aspects of the transaction. One of them, Mr.
Gemmill, was also an executor of Mr. Thompson’s estate (and Ms.
Matte-Thompson’s neighbour). Contrary to Mr. Salomon, Mr. Gemmill and Mr. Farn
had had Triglobal’s investment proposals presented to them (trial reasons, at
para. 219). I am not suggesting that they are to blame, but this might
also help explain why, under the circumstances, Mr. Salomon did not
consider that he had received a new legal mandate, especially given that he was
being asked for his personal opinion as a “friend”. He knew that lawyers were
already involved in the investment strategy. This is an example of the Court of
Appeal losing sight of relevant circumstances and placing undue emphasis on Mr.
Salomon’s behaviour.
[172]
Overall, I see no reason to believe that the trial
judge misapprehended the email’s content and Mr. Salomon’s response to it. I
wish to be clear that a lawyer’s “friendship” with a client does not give rise
to any form of immunity. However, given the absence of a specific mandate, it
was reasonable under the circumstances to find that Mr. Salomon’s duties had
not required him to verify 166’s investments. Accordingly, the fact that Mr.
Salomon conducted no inquiries or verifications cannot in itself justify the
Court of Appeal’s intervention.
[173]
The Court of Appeal also criticized Mr. Salomon
for certain [translation]
“communications that were seemingly more trivial” (para. 130). For
instance, in the fall of 2006, at a time when Mr. Salomon knew that the
respondents were still having difficulty obtaining information from Triglobal
(trial reasons, at para. 248), he visited Mr. Bright in the Bahamas. He
informed Ms. Matte-Thompson of his visit, which he had made while on vacation,
and stated that Mr. Bright had become a resident there “in order to manage
the Focus, Ivest and structured products funds”, adding that “[a]ll is well”.
In retrospect, such an expression of confidence may appear misguided. However,
the trial judge was entitled to find that, all things considered, those
reassurances did not amount to a fault.
[174]
At the time, Mr. Salomon was well aware of the
communication problems between his clients and Triglobal (trial reasons, at
para. 248). In fact, from April 2006 to the end of 2006, he tried to solve them
by serving as a “conduit” in order to obtain more information about the nature
and the status of 166’s investments in Focus (trial reasons, at para. 249),
especially for the purpose of helping the corporation’s accountant complete the
year-end financial statement (trial reasons, at paras. 240-44). Put
another way, Mr. Salomon was cooperating with his clients’ other advisors,
which was arguably his professional obligation in such circumstances (see,
e.g., s. 25 of the Code of Professional Conduct of Lawyers, CQLR,
c. B-1, r. 3.1). As the trial judge explained, it might have been advisable to
go further and recommend that the respondents consult another financial
advisor. However, this omission does not necessarily amount to a fault, given
that Mr. Salomon had not been confronted with any indicia of wrongdoing
related to the respondents’ investments other than communication issues (trial
reasons, at paras. 299-302).
[175]
The Court of Appeal’s finding that Mr. Salomon
should have taken it upon himself to advise the respondents against investing
in Focus — given that his personal
“investment philosophy” favoured diversification — is
surprising, to say the least (para. 84). First, the respondents did not
view Mr. Salomon as their financial advisor (trial reasons, at paras. 283-84)
and did not expect him to provide advice as to 166’s investment strategy (trial
reasons, at para. 288). Second, and more importantly, Mr. Salomon was not
a qualified financial advisor, which means that it might have amounted to a fault
for him to give investment advice about Focus, just as he committed faults by
recommending iVest and Manulife. In this context, it was reasonable for the
trial judge to find that Mr. Salomon had taken an acceptable — though admittedly not ideal — approach,
that is, to help his clients obtain more information from their actual
financial advisors.
[176]
As I explained above, it is certainly arguable
that from the time of the publication of the May 2007 La Presse Affaires
article, Mr. Salomon’s reassurances became negligent and that from then on he
had an obligation to recommend that the respondents consult other financial
advisors. However, even if it is assumed that Mr. Salomon committed a
fault at that time, the trial judge found that it would have had no impact on the
respondents’ losses. Hence, if the trial judge made a palpable error by failing
to properly consider Mr. Salomon’s conduct after he had become aware of the La
Presse Affaires article, that error would have no bearing on the outcome of
the case.
[177]
In sum, I am satisfied that there is in fact no
palpable and overriding error in the trial judge’s finding that Mr. Salomon’s
only fault relating to his duty to advise was to recommend specific
investment products, i.e. iVest and Manulife, mostly in 2003 and 2004. Having
carefully assessed the evidence, the trial judge was entitled to decide that
failing to raise concerns about the respondents’ investments in Focus while
occasionally serving as a “conduit” between his clients and their financial
advisors did not amount to a fault.
(4)
Mr. Salomon’s Duty of Loyalty
[178]
I am also satisfied that the Court of Appeal
erred in interfering with the trial judge’s finding that Mr. Salomon had not
breached his duty of loyalty to the respondents. Although Mr. Salomon was
certainly a client and a friend of Mr. Papadopoulos, and did receive
significant sums from him, support could be found in the record for the view
that he was not in a conflict of interest. This finding is based on a careful
weighing of the evidence, including oral evidence, and should not be disturbed
absent a reviewable error. Here again, I come to the conclusion that the Court
of Appeal failed to identify such an error and that it impermissibly reassessed
the evidence as a whole.
[179]
It is striking that the Court of Appeal did not
point to any reviewable error but merely criticized the trial judge’s
supposedly restrictive approach to the principles of conflict of interest
(para. 97; Gascon J.’s reasons, at para. 69). On that basis, the
Court of Appeal proceeded to revisit the issue by applying the standard of
correctness, as if a question of law had been identified. With respect, this
shows a blatant disregard for the principle of appellate non-intervention.
[180]
It is trite law that the analysis of an alleged
fault, including one related to the duty of loyalty, involves a question of
mixed fact and law. Where such a question arises, the appropriate standard is
that of a “palpable and overriding error” unless a pure question of law can be
readily extricated from it (Housen, at paras. 29-33). An extricable
question of law generally concerns a mischaracterization of the applicable
legal test or a failure to consider a required element of that test (Housen,
at para. 36).
[181]
Yet, in the instant case, the Court of Appeal did
not assert — nor does my colleague do so — that the trial
judge had made an extricable error of law. Indeed, no one has suggested that
she failed to identify the correct legal principles applicable to the alleged
fault related to the duty of loyalty (paras. 107-13 and 118-19). She properly
recognized that, as a mandatary under the Civil Code of Québec (“C.C.Q.”),
a lawyer is bound to “act honestly and faithfully in the
best interests of the mandator” and to “avoid placing himself in a position
where his personal interest is in conflict with that of his mandator” (art.
2138 para. 2 C.C.Q.; trial reasons, at para. 111). The trial judge also
pointed to the rules applicable to conflicts of interest under the former
Quebec Code of ethics of advocates, CQLR, c. B‑1, r. 3, which
at the relevant time informed the standard of a reasonably competent, prudent and diligent lawyer in such circumstances (see
Baudouin, Deslauriers and Moore, at Nos. 2-1 to 2-2). And she summarized
the general principles of civil liability, namely that a plaintiff has the
burden of proving a fault, an injury and a causal link between the two. All in
all, there is no error in her characterization of the applicable legal test,
which is consistent with my colleague’s own summary of the relevant principles
(para. 71).
[182]
I would add that, in cases involving negligence,
“it is often difficult to extricate the legal questions from the factual” (Housen,
at para. 36). The analysis of an alleged conflict of interest, in
particular, is inherently fact-based. For instance, a potential conflict might
not have the same ramifications in the context of day-to-day business dealings
as in that of a litigation case. Alleged conflicts must be assessed on a
case-by-case basis. Not every potential violation of the duty of loyalty — including
breaches of specific ethical rules — will give rise
to an action in civil liability. In each case, the court must analyze the
nature and the circumstances of the alleged conflict for the purpose of
characterizing the violation and, if warranted, determining the appropriate
remedy (Côté, at paras. 9-11 and 14). It follows that extricating an
error of law should be reserved for exceptional cases in which the legal test
has been mischaracterized, or one of its required elements disregarded.
[183]
Given that the trial judge applied the correct
legal principles, the next question is whether the Court of Appeal identified a
palpable and overriding error. Plainly, it did not. It bears repeating that the
Court of Appeal did not — nor does my
colleague — state explicitly that the trial
judge had made any such error. Rather, their conclusion is — as my colleague puts it — that
the trial judge disregarded the “overwhelming evidence of Mr. Salomon’s
close personal and financial relationship with Mr. Papadopoulos on the
basis that it did not lead to the conclusion that there was of a conflict of
interest” (para. 81; see also para. 70; C.A. reasons, at paras. 97 and
109). That is not a reviewable error, but a disagreement over the weight to be
given to the evidence. In my view, the trial judge properly considered the
factors that could have cast doubt on Mr. Salomon’s undivided loyalty and
commitment to his clients, that is, his friendship with Mr. Papadopoulos
and their financial relationship, including the “gifts” or “commissions” he had
received (see, e.g., trial reasons, at paras. 136-37, 142, 156-57 and 163).
Having weighed various pieces of evidence, she came to the conclusion that, on
the facts of the case, these factors were not enough to have placed
Mr. Salomon in a position where his personal interest conflicted with that
of his clients. That conclusion was open to her.
[184]
First, support can be found in the evidence for
the trial judge’s conclusion that Mr. Salomon’s friendship with Mr.
Papadopoulos, once put in context, had not run counter to his duty of loyalty
to the respondents. The trial judge found that Ms. Matte-Thompson had been
well aware of the relationship from the beginning. Mr. Salomon had never
attempted to hide it (trial reasons, at paras. 135-37). In fact, before making
her final decision to invest with Triglobal, Ms. Matte-Thompson had asked for
his impressions, “as long as it does not cross any lines for you”. I agree
that, under certain circumstances, such a close personal relationship could
certainly have placed Mr. Salomon in a conflict of interest regardless of
the disclosure. But in this case, it should be borne in mind that Mr. Salomon
had no specific mandate related to the investment strategy. As I explained
above, until at least May 2007, he had no duty to advise his clients in that
regard, and certainly no duty to double-check their investment decisions.
Further, when the respondents decided to redeem their investments with
Triglobal, they made a decision not to involve Mr. Salomon precisely
because of his close relationship with Mr. Papadopoulos (trial reasons, at para. 266).
Perhaps Mr. Salomon should have been more circumspect in his expressions
of confidence in Mr. Papadopoulos. Yet it seems to me that, given Ms.
Matte-Thompson’s awareness of their personal relationship and Mr. Salomon’s
limited role in respect of the respondents’ investments, it was open to the
trial judge to find that the friendship itself had not placed Mr. Salomon in a
conflict of interest.
[185]
Second, it was also open to the trial judge to
find that, in light of their nature and timing, the payments received by Mr.
Salomon had not placed him in a conflict of interest (paras. 157 and 164-65).
The trial judge found credible Mr. Salomon’s explanation for the two
payments of $10,000 each made by Mr. Papadopoulos on May 16 and June
9, 2006 and the additional payment of $8,000 on February 6, 2007 (paras.
143-48). As I mentioned above, Mr. Salomon testified that the payments had
been gifts to help him renovate his apartment at a time when he was having
financial difficulties. The documentary evidence shows that the payments were
transited through a corporation Mr. Salomon had set up, which issued invoices for
“financial consulting” services. Mr. Salomon explained that those services had
never been rendered. Contrary to what my colleague suggests, the trial judge
did not disregard this evidence. In fact, she addressed it directly (para.
143).
[186]
The trial judge also discussed two subsequent
payments of $5,000 each that Mr. Salomon had received in October 2007, which
were described as “comms” — for “commissions” — in
one of Mr. Papadopoulos’s emails (paras. 151-55; see also C.A. reasons, at
paras. 105-7). The trial judge noted that Mr. Salomon had
claimed that the payments represented redemptions of his own investments in
Focus and that, even assuming they were in fact commissions, there was no
evidence that they had been paid for referring the respondents. Most importantly,
the trial judge stressed that the payments received in October 2007 could
hardly amount to proof that Mr. Salomon had been paid commissions when he
initially referred the respondents to Triglobal in 2003, or when the
respondents invested in Focus in 2005 and 2006. Nor were they proof that the
“gifts” received in 2006 had been commissions. There is nothing “palpably
wrong” in that reasoning (see Gascon J.’s reasons, at para. 77).
[187]
In this regard, I disagree that the trial judge
erred in stating that there was no specific proof that Mr. Salomon and Mr.
Papadopoulos had had a financial relationship that placed him in a conflict of
interest when the respondents’ investments were made (paras. 155, 160 and 163).
In saying that, she was merely declining to infer from the fact that Mr.
Salomon had received payments from Mr. Papadopoulos in October 2007 that
he had been in a conflict of interest at all relevant times, including at the
time of the referral four years earlier (trial reasons, at para. 156). Declining
to draw an inference falls squarely within the purview of the trier of fact
(see St-Jean, at para. 114; F.H. v. McDougall, 2008
SCC 53, [2008] 3 S.C.R. 41, at para. 55; Benhaim, at paras. 93-94).
[188]
In short, I accept that the trial judge’s
characterization of the payments of May and June 2006 as personal gifts was
based on a reasonable assignment of weight to contradictory evidence, including
oral evidence that she perceived to be credible. As this Court reiterated in Housen,
at para. 58, “it was open to the trial judge to place less weight on certain
evidence and accept other, conflicting evidence which the trial judge found to
be more convincing”. The fact that the Court of Appeal would have weighed the
evidence differently, or drawn different inferences, does not justify its
intervention.
[189]
That said, assuming that the payments were not
commissions, I agree with my colleague that receiving a personal gift,
especially one of nearly $30,000 that is not disclosed, may raise
“serious doubts regarding the independence of the lawyer” (para. 77). But once again, this will depend on the circumstances. In this
case, Mr. Salomon received the gift in May and June 2006, a period in
which he had no specific mandate regarding the investments. It is true that in
the following months he served as an occasional “conduit” between the
respondents and Triglobal, but his role was nonetheless limited, and he had no
duty to verify the investments. Moreover, other lawyers were involved and were
advising the respondents regarding their investment strategy. Indeed, when the
respondents decided to gradually withdraw their funds from Triglobal, Mr.
Salomon was largely kept out of the loop. Although I agree that
Mr. Salomon should have been more forthright about the gifts he had received
from Mr. Papadopoulos, I am nevertheless satisfied that, given all the
relevant circumstances, the Court of Appeal failed to identify
a reviewable error in that regard.
[190]
I acknowledge that the trial judge did not
address certain aspects of the professional relationship between Mr.
Salomon and Mr. Papadopoulos, especially the disclosure by the former of
communications with Ms. Matte-Thompson (C.A. reasons, at paras. 87 and
101-3; Gascon J.’s reasons, at paras. 70 and 73) and the fact that he had cooperated
extensively with Mr. Papadopoulos and Triglobal on at least one occasion (C.A.
reasons, at paras. 98-100; Gascon J.’s reasons, at paras. 74-75). However,
as a majority of this Court stressed in Housen, “the failure to discuss
a relevant factor in depth, or even at all, is not itself a sufficient basis
for an appellate court to reconsider the evidence” (para. 39). A trial judge
does not have to discuss in detail every single fact alleged by the parties or
every piece of evidence. The question here is not whether the trial judge
brushed aside elements that the Court of Appeal (or this Court) deemed
important, but whether those omissions might have affected her conclusions (Van
de Perre, at para. 15; Housen, at para. 72). In my view, they did
not.
[191]
While it may be true that Mr. Salomon’s
indiscretions amounted to breaches of his duty of confidentiality under the
applicable rules of professional ethics, I am not convinced that they
constitute evidence that Mr. Salomon was in a conflict of interest at all relevant
times. For instance, I note the trial judge’s finding that, when
Mr. Salomon had informed Mr. Papadopoulos in April 2006 of Ms.
Matte-Thompson’s concerns, he had merely been doing “his best” to pressure Mr.
Papadopoulos to respond to her questions (paras. 228 and 299). Given that he
had not obtained her authorization to do this, the attempt was certainly
misguided, but it does not necessarily reveal a conflict of interest. As to his
forwarding of the August 2007 email concerning the respondents’ intent to
withdraw entirely from iVest and Focus, I agree that it appears to be a serious
breach of Mr. Salomon’s duties of loyalty to his clients and of
confidentiality. As I explained above, I would tend to find that
Mr. Salomon’s conduct after the May 2007 La Presse Affaires article
was wrongful. However, it may not have been enough to justify, retroactively so
to speak, an inference that Mr. Salomon had been in a conflict of interest
that began with the initial referral in 2003 and continued over time.
[192]
As for the claim that Mr. Salomon “teamed up”
with Mr. Papadopoulos in March 2007 to prepare a report on the
respondents’ investments, Mr. Salomon’s conduct on that occasion can be
interpreted in different ways (Gascon J.’s reasons, at paras. 74-75; C.A.
reasons, at paras. 98-100). At the time, Ms. Matte-Thompson was
encountering serious communication issues with Triglobal. Mr. Salomon,
with Ms. Matte-Thompson’s knowledge, volunteered to help the financial
advisors prepare a report that would contain all the information she sought,
and in plain language. In this context, the fact that Mr. Salomon used the
pronoun “we” in an email addressed to Mr. Papadopoulos is hardly
determinative. Granted, it could raise doubts about Mr. Salomon’s
independence. But it could also indicate a good faith effort to cooperate with
Triglobal for the purpose of solving what Mr. Salomon perceived to be
essentially a problem of communication. Given that the trial judge is presumed
to have made her findings on the basis of the entire record and that there were
different inferences that might have been drawn from the communications at
issue, I am satisfied that the fact that she failed to discuss this matter is
not in itself sufficient to cast doubt on those findings.
[193]
Overall, the Court of Appeal identified no
reviewable errors in the trial judge’s analysis of the alleged faults relating
to the duty of loyalty. In saying this, I do not mean to trivialize Mr.
Salomon’s conduct. For lawyers, avoiding conflicts of interest is essential if they
are to retain the independence they need in order to be entirely dedicated to
their clients. When in doubt, they should generally err on the side of caution
and disclose personal interests to their clients. In this case, Mr. Salomon
should probably have been more transparent about the payments he had received
from Mr. Papadopoulos. Nonetheless, the trial judge found that he had not been
in a conflict of interest at the relevant times, that is, when he had
recommended Triglobal and Mr. Papadopoulos and later reiterated his
confidence in them. That finding is entitled to deference. I would agree,
however, that the evidence strongly suggests that Mr. Salomon breached his
duty of confidentiality and placed himself in a conflict of interest in the last
few months of 2007. But by that time, it would likely have been impossible for
the respondents to retrieve the funds. It follows that, even if
Mr. Salomon did commit a fault at that point, he could not be held liable
for the respondents’ losses. This brings us to causation.
B.
The Trial Judge Did Not Make a Palpable and
Overriding Error With Respect to Causation
(1)
Principles of Causation
[194]
A fundamental principle of civil liability is that a person is
liable only for injuries caused by his or her own fault (Lonardi,
at para. 32; Hinse v. Canada (Attorney General), 2015 SCC 35, [2015] 2 S.C.R. 621, at para. 132). Baudouin,
Deslauriers and Moore explain this as follows:
[translation]
Logically, a person who
commits an act that constitutes a fault cannot be held liable for damage that
is unrelated to the fault or that he or she had
nothing to do with. A certain causal connection is essential, and it
therefore does not, despite what certain judicial decisions sometimes seem
to suggest, coincide with the fault itself. . . .
The fact that a person has
committed a fault and a victim has sustained damage does not necessarily mean
that the person who committed the fault must be held liable for it. One example will suffice to illustrate this. A municipality that
maintains its sidewalks or its roads poorly commits a fault in the sense that
it does not act as would an informed, prudent and diligent municipality. If
someone is injured, however, nothing in this fact alone makes it possible to
automatically, and with certainty, connect the municipality’s fault with the
victim’s injury. For that, a link must be established between the two
circumstances. . . .
The Quebec courts maintain a
distinction between fault and causation, stressing that on its own, the breach
of a legal obligation that involves a basic standard of prudence leads, in
theory, to a presumption of fault, but does not entitle one to compensation
unless there is a sufficient causal connection with the injury. [Emphasis added; footnotes omitted; Nos. 1‑665 to 1-666.]
[195]
In civil liability matters, a true
cause is established when the plaintiff proves that the injury is a “logical,
immediate and direct consequence of the fault” (arts. 1607 and 1613 C.C.Q.;
see, e.g., Hinse, at para. 132, citing Parrot v.
Thompson, [1984] 1 S.C.R.
57, at p. 71). Put another way, the fault must have a close
relationship with the injury (Quebec (Commission des droits
de la personne et des droits de la jeunesse) v. Bombardier Inc. (Bombardier
Aerospace Training Center), 2015 SCC 39, [2015] 2
S.C.R. 789, at para. 50, quoting Baudouin, Deslauriers and Moore, at No. 1-683;
see also Roberge, at p. 442). It does not
suffice to show that the fault increased the likelihood of the injury occurring
if there is no evidence that the fault directly caused the injury either in
whole or in part (Dallaire v. Paul-Émile Martel Inc., [1989] 2 S.C.R. 419, at p. 425; St-Jean, at para. 116).
The purpose of this directness requirement is to limit the
scope of any remedy (see J.-L. Baudouin and P.-G. Jobin, Les obligations
(7th ed. 2013), by P.-G. Jobin and N. Vézina, at No. 770).
[196]
Once again, the analysis of causation raises a question of fact (Lonardi,
at para. 41; Benhaim, at paras. 36 and 92). In seeking a causal link that is logical, direct and
immediate, the trial judge must assess “the events leading to the damage, their
sequence and their causal connection with the damage suffered” on the basis of
the evidence as a whole (see Dallaire, at pp. 425-26). As
Baudouin, Deslauriers and Moore put it:
[translation]
The courts require that the victim prove a direct connection between the injury
for which he or she claims compensation and the defendant’s alleged fault. The directness of that connection is assessed primarily by a
review of the fact situation in which the judge must weigh the respective
influence of each of the events and circumstances linked to the accident. [Emphasis added; No. 1-697.]
[197]
Various theories have been advanced to distinguish true causes,
which may result in civil liability, from mere “conditions”, that is, the
circumstances or occasion of the injury (see, e.g., Baudouin, Deslauriers and
Moore, at Nos. 1-669 to 1-677 and 1‑687; M. Tancelin, Des
obligations en droit mixte du Québec (7th ed. 2009), at Nos. 787-95;
F. Lévesque, Précis de droit québécois des obligations (2014), at
Nos. 463-67). In light of those theories, it may be helpful to
inquire into whether the fault made the injury objectively possible, whether
the injury was reasonably foreseeable and whether the sequence of events
over time is sufficient to support the existence of a close relationship (see
Baudouin, Deslauriers and Moore, at Nos. 1-683 and 1-697). However, while
such guideposts from the academic literature may help in sifting through the
facts, the analysis of causation remains a context-based exercise which does
not lend itself to legal theorizing (see D. Lluelles and B. Moore, Droit des
obligations (2nd ed. 2012), at Nos. 2962-63). As the Court of Appeal stated
in Stellaire Construction Inc. v. Ciment Québec Inc., 2002 CanLII 35591 (Que.), at para. 39,
it is up to the trier of fact to [translation]
“‘draw a line’, or identify a ‘breaking point’, between the consequences that
flow directly and immediately from the fault and the others” (footnotes
omitted). In doing so, a trial judge is entitled to great latitude
(Baudoin, Jobin and Vézina, at No. 770).
[198]
On appeal, given that causation essentially requires an
assessment of facts, the trial judge’s findings are owed deference and cannot
be disturbed absent a palpable and overriding error.
(2)
Application to the Case at Bar
[199]
In my view, the Court of Appeal should not have interfered with
the trial judge’s conclusions regarding causation on the basis of the
“distorting lens” metaphor (C.A. reasons, at para. 120). I am satisfied that
there is no reviewable error in the finding that Mr. Salomon’s only fault — recommending
Manulife and iVest — had no bearing on the respondents’ decisions to
invest in Focus, and therefore on their losses. Granted, if palpable errors had
been identified in the trial judge’s findings regarding fault, they
might have tainted the causation analysis, which, in turn, might have affected
the outcome of the case. However, no such errors have been identified, and I
see no other reason to disturb the trial judge’s factual findings on causation.
Even if it were assumed that Mr. Salomon committed a fault by recommending
Triglobal and Mr. Papadopoulos, the fact remains that he was not involved
in the respondents’ decisions to invest in Focus. By then, the respondents were
relying on their financial advisors, with whom they had developed their own
relationship over a period of approximately three years. It was thus open to
the trial judge to find that the fraud was the only true cause of the losses.
This implies that Mr. Salomon’s fault was too remote from the injury to be
considered a logical, direct and immediate cause. For all intents
and purposes, the chain of causation had been stretched beyond the breaking
point.
(a)
The Recommendation of Triglobal and Mr. Papadopoulos
[200]
I cannot accept the Court of Appeal’s conclusion
that [translation] “the
[respondents] would never have invested their money with Triglobal had
Mr. Salomon acted diligently and competently from the outset” (para. 121).
As I explained above, there was no reviewable error in the trial judge’s
finding that the initial referral of the respondents to Triglobal and
Mr. Papadopoulos (like the later expressions of confidence up until May
2007) was not wrongful (para. 302). Hence, independently of the causation
issue, Mr. Salomon cannot be held liable with respect to the referral
given that his conduct in making it was not wrongful.
[201]
Even if it were assumed that Mr. Salomon committed a fault by
recommending Triglobal and Mr. Papadopoulos, there would be no reviewable error
in the trial judge’s finding that the only true cause of the losses was the
fraud itself (paras. 215 and 318). In reaching this conclusion, I am not
relying on the principle of novus actus interveniens, that is, the
notion that an independent event may break the direct causal link between the
fault and the injury (Lacombe v. André, [2003] R.J.Q. 720 (C.A.), at paras. 58-59). Rather, I would
say that it was open to the trial judge to find, on the basis of her assessment
of the evidence, that the recommendation of Triglobal and Mr. Papadopoulos was
not close enough to the injury to qualify as a logical, direct and
immediate cause.
[202]
It bears repeating that, before investing in Focus, the
respondents had over a period of nearly three years established their own
“good” relationship with Triglobal and Mr. Papadopoulos (trial reasons, at
paras. 211 and 288). It was only then that they made the decision to transfer
their funds, and they did so without involving Mr. Salomon. Here is a
short summary of the sequence of events:
(a) In
2004, shortly after the initial referral by Mr. Salomon, Ms. Matte-Thompson
invested $1,245,000 (over 90 percent of her personal funds) in a legitimate and
appropriate vehicle, Manulife, on the recommendation of both Mr. Salomon
and Triglobal (trial reasons, at paras. 178-81 and 200).
(b) At
the time she made that investment, Ms. Matte-Thompson also filled out, directly
with Triglobal, a client data form setting out her investment objectives (para.
181).
(c) In
the following months, she made the decision to transfer $400,000 from Manulife
to iVest. By that time, she was dealing directly with Triglobal, and Mr. Salomon
was not consulted (trial reasons, at paras. 201-2).
(d) In
the fall of 2005, Ms. Matte-Thompson was “pleased” with her investments with
Triglobal, so she decided — on the basis of her “good relation[ship]”
with Mr. Papadopoulos — to invest the proceeds of the sale of
166’s assets with the firm (trial reasons, at para. 288; A.R., vol. 7, at
pp. 2603-4).
(e) In
early 2006, Ms. Matte-Thompson, an “educated business woman”, transferred
funds, both her own and 166’s, to Focus without consulting anyone outside
Triglobal and without making any inquiries (trial reasons, at paras. 204-10
and 289).
(f) In
April 2006 and in the following months, when Ms. Matte-Thompson began
expressing concerns about the investments in Focus and asked for
Mr. Salomon’s opinion as a “friend” and “outside of business”, it was
primarily Mr. Papadopoulos who reassured her (see, e.g., trial reasons, at
paras. 228, 233, 238 and 247).
[203]
The trial judge had to draw a line somewhere. And she came to the
conclusion that the fraud was the only true cause — and therefore
that Mr. Salomon’s recommendation of Triglobal and Mr. Papadopoulos was
not a logical, direct and immediate cause — of
the losses. By the time the respondents invested in Focus, they had formed
their own opinion on their financial advisors’ competence and probity which was
not dependent on Mr. Salomon’s initial recommendation or his subsequent
reassurances. Contrary to the suggestion made by the Court of Appeal and by my
colleague, this is not tantamount to saying that the fraud itself constituted a
novus actus interveniens. Rather, it is the result of the trial judge’s
careful examination of the sequence of events that led to the injury. Although
one may disagree with her assessment, the fact remains that a direct causal
link must be broken at some point. Otherwise, any lawyer who makes a wrongful
referral would become an insurer of the recommended professionals’ services for
years to come — with no end in sight. I am not suggesting that a
referring lawyer will never be liable for a recommended professional’s faults.
In the instant case, for instance, the outcome might have been different if the
respondents had not over time developed their own independent relationship with
their financial advisors. Put simply, this depends on the circumstances, and no
hard and fast rule can be stated. In the instant case, the trial judge was in
the best position to assess causation, and she found that the only true cause
was the fraud. I see no ground for interfering with that finding.
[204]
My colleague insists that the respondents were entitled to rely
on Mr. Salomon’s recommendation and his later reassurances because of
their lawyer-client relationship and that their own “imprudence” — in
deciding to transfer funds to Focus without consulting anyone and without
making any inquiries — is therefore irrelevant (para. 90). This may
sometimes be the case when a lawyer gives specific legal advice in his area of
expertise, which the client cannot be expected to second-guess. However, I
cannot accept that such a principle applies to the recommendation of another
professional. The respondents could not assume that Triglobal and
Mr. Padapopoulos would always conduct themselves as competent and
prudent financial advisors and that all of their advice would be appropriate
simply because Mr. Salomon expressed confidence in them.
(b)
The Recommendation of iVest
[205]
I will now turn to the faults that the trial judge did identify,
which related solely to Mr. Salomon’s specific recommendation of the Manulife
and iVest funds. Yet, as we know, the respondents’ losses stemmed mostly from
their investments in Focus, a fund which Mr. Salomon had not recommended, about
which he had not been consulted, and that he had had no duty to verify. More
specifically, the respondents’ decision to invest in Focus was taken by Ms.
Matte-Thompson without any input from Mr. Salomon. As the trial judge explained:
Even
if the Court concludes that [Mr.] Salomon was negligent when he reassured Ms.
Thompson with respect to the iVest investments, such negligence does not have
any causal link to the loss she suffered following her investments with Focus. The evidence shows that [Mr.] Salomon was never involved in the
decision to transfer the investments into the Focus funds. He was not consulted
and never provided any recommendations with regard to the security offered by
the investments made with Focus.
At
the time the decision was taken to transfer Ms. Thompson’s personal investments
in Focus, she dealt directly with the financial advisor and most of the time
[Mr.] Salomon was not involved. The evidence shows that by then, Papadopoulos
had established a good relationship with Ms. Thompson directly and she did
not discuss the investment proposals with [Mr.] Salomon.
. . .
. . . [T]he
evidence shows that when the decision to invest 166376’s money through
Triglobal was made, Ms. Thompson had developed by then a good relation with
Papadopoulos. She did not expect [Mr.] Salomon to provide her with investment
strategies because she did not ask him to attend the meeting scheduled to
discuss how the proceeds of the real estate sale should be invested.
Furthermore,
when Ms. Thompson received the wire instruction, she testified that she
realized that the money was to be transferred to an offshore fund named Focus.
Even though she was sceptical, Ms. Thompson, who was an educated business
woman, transferred the funds without consulting anyone, including [Mr.]
Salomon. The Court is of the view that she is the one who made an imprudent
decision at the time. [Emphasis added; footnote omitted; paras. 210-11 and
288-89.]
[206]
I am satisfied that there is no palpable error in these findings.
This does not amount to “blaming the victims” as the respondents put it (R.F.,
at para. 97). Rather, the trial judge found that Mr. Salomon could not be held
liable for investment decisions he had not taken part in, at least not on the
basis that he had recommended another investment vehicle three years
earlier. Yes, the record shows that he believed Focus to be “less risky” than
iVest (C.A. reasons, at paras. 131-32), but he did not say so to the
respondents. In short, the trial judge did not to see how giving wrongful
investment advice regarding iVest could be a direct cause of losses occurring
years later in Focus.
[207]
More specifically, the trial judge rejected the
claim — espoused by the Court of Appeal (at para. 130) and by my
colleague (at para. 87) — that Mr. Salomon’s recommendation of
Manulife and iVest induced an erroneous “climate of confidence” in all of
Triglobal’s products: “The Court fails to see how
[Mr.] Salomon’s reassurance in 2003 could lead to a general responsibility
towards all the investment decisions taken without him” (paras. 212-13). While
it is true that Mr. Salomon’s reassurances with respect to iVest were not
strictly limited to 2003, the fact remains that there was no reviewable error
in that broad conclusion.
[208]
Simply put, there is no evidence that Mr. Salomon’s
recommendation of iVest caused the respondents to invest in Focus. While my
colleague asserts that Ms. Matte-Thompson relied on Mr. Salomon’s “professional judgment concerning the investments she was contemplating” (para. 87), he cannot — nor could the Court of Appeal before
him — pinpoint any oral or documentary evidence showing that the
specific recommendation of iVest induced or encouraged the respondents
to invest in Focus or, more generally, with Triglobal. In fact, it seems that
Mr. Salomon’s recommendation was not determinative even of Ms.
Matte-Thompson’s decision to invest in iVest itself (trial reasons, at para. 51).
[209]
At most, the Court of Appeal pointed to a passage
from Ms. Matte-Thompson’s cross-examination in which she explained that
her “total mindset was that [she] was investing with
Triglobal. . . . Whether the heading is Focus, whether the
heading is iVest, whether the heading is Manulife, it was Triglobal” (C.A.
reasons, at para. 76). In my view, this passage suggests that the key
recommendation, the one that mattered to her, was the initial recommendation of
Triglobal itself. But, as I explained above, that recommendation was neither
wrongful nor close enough to have directly caused the losses. By contrast, Mr.
Salomon’s recommendation of iVest seemed to have been of secondary importance
to Ms. Matte-Thompson.
[210]
Overall, my understanding is that the Court of
Appeal merely assumed, as does my colleague, that there was a direct causal
link between Mr. Salomon’s fault concerning iVest and
the respondents’ losses in Focus (C.A. reasons, at paras. 74, 75 and 140).
Accordingly, I cannot accept that the trial judge’s rejection of the “climate
of confidence” theory is grounded in a palpable and overriding error. Once
again, all I see is a disagreement with the trial judge’s assessment of the
evidence and impermissible interference with her inference-drawing process.
[211]
It was also open to the trial judge to reject the claim that
Mr. Salomon’s failure to verify the propriety of investing in iVest had
directly caused the losses in Focus (C.A. reasons, at paras. 117-19; Gascon J.’s reasons, at paras. 88-89). As I understand it, the
idea here is that, had Mr. Salomon conducted due diligence and warned the respondents
that offshore hedge funds such as iVest were not appropriate investment
vehicles for the preservation of capital, the respondents would have doubted
the competence of Triglobal and looked for other — presumably more
trustworthy — financial advisors. For one thing, this view does not
account for the facts that Mr. Salomon was not even qualified to provide
investment advice and that it was not his role to provide such advice. Perhaps
more importantly, such a finding would amount to substituting mere speculation
for evidence of an actual direct causal link (see Waxman, at para. 306).
We do not know what might have happened had Mr. Salomon criticized Triglobal’s
iVest proposal. Triglobal might well have responded by proposing other
investment options, which the respondents might have accepted. In this regard,
it should be borne in mind that Ms. Matte-Thompson initially invested her
largest amounts in Manulife, another product recommended by Triglobal which was
an appropriate investment vehicle for her and was not part of the fraud (trial
reasons, at paras. 51, 200 and 208-9). In short, the trial judge was certainly
not required to draw the inference that Mr. Salomon’s failure to perform
due diligence concerning iVest had directly caused the respondents’ losses.
(c)
Other Alleged Faults
[212]
I would like to add a quick word on the duties of
loyalty and confidentiality. Even if it were assumed that Mr. Salomon committed
faults with respect to them, I note that the Court of Appeal did
not — nor does my colleague — point to any evidence of a
causal link between such faults and the respondents’ losses. Put simply, it is
unclear how the alleged breaches of the duties of loyalty and
confidentiality — such as Mr. Salomon’s sharing of emails from
the respondents with Mr. Papadopoulos — might have caused the losses. Yet
proving breaches of a lawyer’s professional duties does not suffice to
establish civil liability in the absence of a causal link to an injury (see by
analogy Côté, at para. 18; Baudouin, Deslauriers and Moore, at
Nos. 1-666 and 2-143).
[213]
Moreover, as I have mentioned a number of times in
these reasons, if I were to conclude that Mr. Salomon did commit additional
faults related to his duty to advise
and his duties of loyalty and confidentiality after he had become aware
of the May 2007 La Presse Affaires article, the outcome would be
the same. The trial judge found that, on a balance of probabilities, the funds
were no longer recoverable by that time. This inference is based on the fact
that, by June 2007, the respondents were already asking for a partial
redemption of the funds, but to no avail (trial reasons, at paras. 312-13).
Hence, any faults occurring after that date had no consequence on the losses.
Such finding of fact is entitled to deference.
(d)
Conclusion on Causation
[214]
To sum up, I am satisfied that there is no
reviewable error in the trial judge’s findings on causation. The Court of
Appeal’s intervention was based on its preferred “global” approach to Mr.
Salomon’s conduct, which led it to completely reassess the evidence with
respect both to potential faults and to their causal link to the respondents’
losses. A difference of perspective — a
preferred “lens” — is not enough to justify an appeal court’s
intervention in a trial judge’s findings. It was open to the trial judge in
this case to find that Mr. Salomon’s actual faults — the
recommendation of Manulife and iVest — had not caused the losses, at
least not directly, given that the respondents had not relied on his
recommendations when they invested in Focus. Likewise, even if it were assumed
that the recommendation of Triglobal and Mr. Papadopoulos constituted a
fault, the trial judge was entitled to find, on the facts of the case, that the
only true cause of the losses was the fraud itself.
IV.
Conclusion
[215]
There is no doubt that lawyers should refrain from recommending
other professionals lightly — especially given the trust and
confidence they themselves may inspire in their clients. This does not mean,
however, that the principles of civil liability should be relaxed so as to turn
referring lawyers into guarantors of the recommended professionals. While I am sympathetic to the predicament in which the respondents
find themselves, I am not convinced that Mr. Salomon is liable for their
losses. Most importantly, I am satisfied that the Court of Appeal did not
identify reviewable errors in the trial judgment. Rather, it erroneously
reweighed the evidence as a whole simply because it preferred to look at the
case through a different “lens”. Bearing in mind that the trial process must be
afforded deference, this Court must intervene to restore the trial judge’s
findings. I would therefore allow the appeal with costs in this Court and in
the courts below.
Appeal
dismissed with costs, Côté J.
dissenting.
Solicitors
for the appellants: IMK, Montréal.
Solicitors
for the respondents: Norton Rose Fulbright Canada, Montréal.