“Fiduciary duty” is a concept that exists inherently in many types of relationships. To owe a fiduciary duty means having a responsibility to act in the best interest of another party. An estate trustee, for example, owes an inherent fiduciary duty to the beneficiaries of the estate. They must ensure that debts of the estate are properly paid off and that the assets of the estate are distributed fairly, in accordance with the Will, or with the applicable estate litigation, if there is no Will. While some relationships automatically impart this duty (otherwise knows as ‘per se‘ fiduciary duty), it is possible for a fiduciary duty to arise on an ad hoc basis, meaning that the particular circumstances involved in an existing relationship serve to impart this duty on one or more parties.
A recent Ontario Court of Appeal case revisited the test for determining when an ad hoc duty is formed, as originally set out by the Supreme Court of Canada (SCC). Further, the case looked at whether it is possible to award damages for a breach of fiduciary duty without also making a finding of causation.
In the case at hand, a patient who had been part of a medical research trial died as a result of complications that arose during an angiogram. His wife sued the two doctors who performed the angiogram and a researcher who had led the trial through which her husband’s care had been delivered. The action against the two surgeons was dismissed. However, the medical researcher who headed up the clinical research trial at the hospital where the angiogram was performed was not so lucky. The jury dismissed the negligence claim against him, but the trial judge found the doctor liable for a breach of an ad hoc fiduciary duty. The trial judge held that the liability finding meant that the issue of causation need not be considered.
Issues on Appeal
- Did the trial judge err in finding that the appellant owed and breached an ad hoc fiduciary duty?
- If so, did the trial judge err in holding that causation did not need to be established before awarding damages for the breach of duty?
Establishing a Fiduciary Duty
In the 2011 decision Alberta v. Elder Advocates of Alberta Society the SCC established the test that must be met in order to create an ad hoc fiduciary duty when dealing with situations apart from the established, or per se fiduciary relationships.
The test is as follows:
- An inherent vulnerability of the plaintiff to the defendant based on the nature and purpose of the relationship;
- An undertaking by the defendant to act in the best interests of the plaintiff;
- A legal or substantial real interest of the plaintiff that could be adversely affected by the defendant’s exercise of discretion or control by virtue of their position in the relationship.
The Need to Address Causation
In order to be awarded damages for a breach of fiduciary duty, the plaintiff must establish that their loss was caused by the now proven breach. The damages for such a breach are awarded according to the law of restitution principles. That means putting the plaintiff in the same position as they would have been had the breach not occurred based on Hodgkinson v. Simms (SCC) (1994). In the case at hand, the ONCA found the trial judge had erred in failing to consider and determine the issue of causation. There could be no finding of causation as a result of the breach of fiduciary duty, as that would be inconsistent with the jury’s finding that there was no causation as a result of negligence. Therefore, the appeal was allowed and the action against the researcher was dismissed.
Takeaways for Litigants
The case is useful for all litigants who hope to affix a fiduciary duty in the less common situations. The case law is not new but reinforces the test established by the SCC in Alberta v. Elder Advocates of Alberta Society.
Secondly, the case makes it very clear that a breach of fiduciary duty still requires proof that the breach caused or led to the damages suffered.
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