A lawyer’s conduct of repeatedly recommending his clients to invest money in funds promoted by his friend’s firm was held liable for the client’s loss when it turned out to be a Ponzi scheme.
In Quebec, lawyers are obliged to follow two key duties: “duty to advise” and “duty of loyalty”. Mr. Salomon was a lawyer representing Thompsons’ businesses for several years. In the year, 2003 with Mr. Thompson’s death; Ms. Matte-Thompson had asked him for advice in relation to the money left in her trust. She wanted to live off the interest only and save the remaining for her children. Mr. Salomon introduced Ms. Matte-Thompson to his personal friend, Mr. Papadopoulos, and recommended the services of his firm, Triglobal Capital Management. Following which he stated that investing in one of the funds promoted by Mr. Papadopoulos’s firm would help Ms. Matte-Thompson achieve her goals.
Ms. Matte-Thompson and her business invested in and sustained their shares in Triglobal, persuaded by Mr. Salomon. In the course of the years, more than 7.5 million dollars were spent in two trusts. Ms. Matte-Thompson showed her concern to Mr. Salomon about certain investments but he advised her to continue to invest. He also convinced Mr. Papadopoulos. With nearly $100 million he vanished in 2007 with his business associate. This included the contributions of more than US$ 5 million from Ms. Matte-Thompson. Ms. Matte-Thompson later pointed out that, during his advisory years, Mr. Papadopoulos paid nearly $40,000 to Mr. Salomon.
Mr. Salomon and his law practice were sued by Ms. Matte-Thompson and her business in 2008. She alleged that Mr. Salomon’s has failed in his responsibility to inform because he recommended and accepted inappropriate investments and welcomed them. She said that his allegiance obligation was disregarded as well. This was attributed to a conflict of interest that forced him to disregard the threats. The judge of the trial said the damages were the fault of Mr Papadopoulos and his wife. But Mr. Salomon did not say that it was. The Court of Appeal has confirmed that the judge of the trial committed major errors. Mr. Salomon said he was responsible, and the judge’s ruling was overturned.
The Supreme Court decided that Mr. Salomon did not meet its responsibility to counsel Ms. Matte-Thompson and her firm. This was due to Ms. Matte-Thompson’s support for several years to spend and retain the capital (and the money of the company) in the funds, although they did not achieve their targets. He never looked at the funds he suggested, but assured her that the investments were secure. The majority decided that, had Mr. Salomon not been in his position to counsel, Ms. Matte-Thompson would never have invested in Triglobal funds. He got embroiled in a conflict of interest in his relationship and investment with Mr Papadopoulos.
This case concerned the liability of lawyers as they go deeper than just referring clients to another practitioners. This decision does not mean that lawyers take more risk now than before advising someone. Advocates can and will forward consumers to others but the Court observed that they must only do so in compliance with the technical and legal activities.