Quebec court orders insurer to indemnify investors bilked by advisor

Quebec’s Court of Appeal ordered Lloyd’s to pay $460,000 to investors as a result of negligent acts committed by its financial planner and the firms for which he worked, Norton Rose Canada reports in a legal update.

The court’s unanimous decision in Souscripteurs du Lloyd’s v. Alimentation Denis & Mario Guillemette, released on Aug. 2, upheld a lower court judgment.

Denis Guillemette and France Mercier, a married couple, operated the Alimentation Denis & Mario Guillemette grocery store, Andre Legrand, a senior partner with Norton Rose Canada’s Montreal office, and Emmanuelle Demers, an associate there, write in the September 2012 bulletin. The couple entrusted their savings to Yves Tardif, a financial planner, from 1996 to 2005.

“Despite the fact that the respondents wished to secure their retirement through safe, low-risk investments, Tardif chose to focus their portfolio on high-risk products, resulting in the respondents losing all their money.”

The respondents instituted an action for damages against Tardif and the two companies, which have since gone bankrupt.

The trial judge found both Tardif and his employers liable, determining that Tardif “had failed in his duty to inform and to exercise due care as the financial planner of the respondents, who were laymen,” Legrand and Demers write. With regard to the companies, the judge noted a “firm is responsible for any injury caused to a client by the fault of one of its representatives in the performance of the representative’s function.”

In addition, the judge concluded “the insurer was required to indemnify the respondents under the terms of the liability insurance policies taken out by Tardif and iForum Financial Services Inc. [one of the companies for which he worked].” The respondents also sued Lloyd’s, which during the time in question insured the services of Tardif and iForum Financial Services Inc.

Lloyd’s appealed, noting that the judge erred on three counts: in not considering the contributory negligence of the respondents; in considering that Tardif’s negligence had been committed in the course of professional activities covered by the liability insurance policies and in the performance of his functions; and in finding the exclusion clauses for gross negligence and embezzlement inapplicable.

Quebec’s Appeal Court rejected all arguments. Among its findings, the court noted that Tardif, through his actions, “had abused the respondents’ trust and concluded that it should not be held against them,” Legrand and Demers write.

As well, “since Tardif had acted while he was performing his functions, the court determined that the insurance coverage also covered his employer, iForum Financial Services Inc.”