Canlii Supreme Court of Canada – Canada – Damages — Breach of fiduciary duty — Solicitor preparing conveyance not advising purchasers of secret profit made on a flip — On agreed facts, purchasers fully apprised of situation would not have entered the transaction — Action arising because inability of other professionals found liable in tort for faulty construction of building on subject lands to pay damages — Whether or not damages recoverable.
The claim was brought by developers of land against the lawyers who had acted for them in the purchase of the land. The lawyers acted in breach of their fiduciary duty by failing to disclose their knowledge that a third party was making a secret profit from the purchase. The development proved to be a failure as a result of the negligence of the engineers and contractors involved. The appellants sought to recover the loss incurred on the development from the lawyers, on the basis that they would not have proceeded with the purchase if they had known of the secret profit. Recognising that the loss would not be recoverable in an action founded on breach of contract, negligence or deceit, the appellants instead sought equitable compensation for breach of fiduciary duty, arguing that such compensation was unlimited by principles of causation, remoteness or intervening acts.
La Forest J (majority) distinguished between the breach of a trustee’s obligation to hold the object of the trust, where ‘on breach the concern of equity is that it be restored . . or, if that cannot be done, to afford compensation for what the object would be worth’, and on the other hand ‘a mere breach of duty’, where ‘the concern of equity is to ascertain the loss resulting from the particular breach of duty.’ In the former situation the difference between restoration and damages was abundantly clear, but in the latter situation ‘the difference in practical result between compensation and damages is by no means as clear’. He went on to observe in relation to claims of the latter kind: ‘The truth is that barring different policy considerations underlying one action or the other, I see no reason why the same basic claim, whether framed in terms of a common law action or an equitable remedy, should give rise to different levels of redress.’
McLachlin J dissented as to the way the result was obtained but not as to the result. She rejected the argument that the starting point, when quantifying compensation for breach of fiduciary duty, should be an analogy with tort or contract. In her view, that approach overlooked the unique foundation and goals of equity. In negligence and contract the parties were taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently, the law sought a balance between enforcing obligations by awarding compensation, and preserving optimum freedom for those involved in the relationship. The essence of a fiduciary relationship, by contrast, was that one party pledged herself to act in the best interests of the other. The freedom of the fiduciary was diminished by the nature of the obligation she had undertaken. The fiduciary relationship had trust, not self-interest, at its core.
She concluded: ‘In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie, the plaintiff’s loss of opportunity. The plaintiff’s actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.’
Judges:
Lamer CJ and Wilson, La Forest, L’Heureux-Dube, Sopinka, Gonthier, Cory, McLachlin and Stevenson JJ
Citations:
[1991] 3 SCR 534, 1991 CanLII 52 (SCC), (1991) 85 DLR (4th) 129, [1992] 1 WWR 245, 1 BCLR (2d) 1
Links:
Jurisdiction:
Commonwealth
Cited by:
Cited – AIB Group (UK) Plc v Mark Redler and Co Solicitors SC 5-Nov-2014
Bank not to recover more than its losses
The court was asked as to the remedy available to the appellant bank against the respondent, a firm of solicitors, for breach of the solicitors’ custodial duties in respect of money entrusted to them for the purpose of completing a loan which was to . .
Cited – Michael Wilson and Partners Ltd v Emmott ComC 8-Jun-2011
The claimant challenged an arbitration award made concerning the agreement under which the defendant had been admitted to partnership. MWP contended that the Tribunal were guilty of a large number of serious irregularities in their conduct of the . .
Lists of cited by and citing cases may be incomplete.
Equity, Damages
Updated: 16 May 2022; Ref: scu.553778