2) Fiduciary Law and Tort Law

A fiduciary relationship is an equitable concept that arises where a person (the beneficiary) has placed such reliance, confidence, power, and trust in the hands of another (the fiduciary) that the fiduciary may reasonably be expected to act with the utmost care, loyalty, and good faith towards the beneficiary. The fiduciary is required to set self-interest aside and to act, in the matter at hand, in the best interests of the beneficiary. Fiduciary relationships include the relationships of trustee and beneficiary, solicitor and client, religious leader and follower, physician and patient, parent and child, and principal and agent.

The relationship between a fiduciary and a beneficiary may also be contractual and it is likely to be sufficiently proximate to generate a prima facie duty of care. In such circumstances, the plaintiff often prefers to sue for breach of fiduciary duty. There are a number of reasons for this. First, fiduciary relationships give rise to strict obligations of loyalty, good faith, fidelity, and fiduciary care. These obligations are generally more stringent than those arising in tort and contract and they may elevate the standard of conduct required of the defendant. It is also easier to establish that the defendant owed positive obligations to act for the benefit of the plaintiff if he is a fiduciary. Second, the characterization of the relationship as fiduciary may secure a more generous limitation period for the commencement of an action. Third, the remedies for breach of a fiduciary obligation are in some instances more generous than those for breach of contract or tortious wrong-doing. The assessment of equitable compensation, for example, may be more generous than an award of damages for breach of contract or in tort. The courts seek to restore the plaintiff fully to the position he would have been in but for the breach of the fiduciary duty. To achieve this goal, the limitations applicable to the assessment of damages in tort and contract, including causation rules, remoteness of damage principles, and contributory negligence, may be applied more loosely or not at all. Additionally, a court may force the defendant to disgorge gains that have been secured from the breach of fiduciary duty and may be more willing to use the full range of equitable remedies.

There has been much less controversy in respect of the rules relating to situations that give rise to a concurrence of tort, contract, and fiduciary claims. The rule of concurrence of causes of action giving rise to a full and free choice to the plaintiff is applicable. In Canson Enterprises Ltd. v. Boughton & Co., [Note 5: [1991] 3 S.C.R. 534.] for example, the Supreme Court recognized that the plaintiff, who was a client of the defendant solicitor, could pursue claims for breach of contract, negligence, and breach of the solicitor's fiduciary duties concurrently and could choose the remedy most advantageous to him.

Until recently, the concurrence of causes of action between tort and fiduciary law was not particularly common because fiduciary relationships were restricted to a relatively few traditional categories, including those listed earlier. The categories of fiduciary relationship are not, however, closed and in the past couple of decades, fiduciary law has become a dynamic area of Canadian law. The Supreme Court has recognized that the concept of fiduciary care can arise in any relationship where a careful examination of the facts indicates sufficient elements of power, discretion, and influence on the part of the "fiduciary," and reliance, vulnerability, trust, and confidence on the part of the "beneficiary" to support the conclusion that the fiduciary must act selflessly in the interests of the beneficiary in the matter at issue. [Note 6: Hodgkinson v. Simms, [1994] 3 S.C.R. 377 at 409, LaForest J.] This has led to an extension of fiduciary relationships beyond their traditional categories to a range of personal and commercial relationships that, hitherto, were controlled largely by contractual and tortious principles. The invasion of fiduciary law into the field of tort law has been led by the Supreme Court. A few illustrative cases will indicate the Court's mood.

In Norberg v. Wynrib, [Note 7: [1992] 2 S.C.R. 226.] the Supreme Court dealt with the professional misconduct of the defendant physician who took advantage of a female patient who was addicted to painkillers. The defendant maintained her addiction by supplying the drugs she so desperately needed, in exchange for sexual favours. The majority of the Court relied on tort and contract principles to fashion a remedy for the plaintiff. McLachlin J., however, chose to emphasize the fiduciary nature of the physician- patient relationship. Hitherto, the only fiduciary obligation that was understood as arising from the physician/patient relationship was that of confidentiality. Her ladyship, however, identified fiduciary care as central to the whole relationship of physician and patient. The concept of fiduciary care, embodying the notion of selflessly acting in the best interests of the patient, captured most fully the nature of the defendant's wrongdoing and supported a more generous award of damages than that calculated by the majority under contract or tort principles. The characterization of the physician-client relationship as a fiduciary relationship was also central to the Court's decision in McInerney v. MacDonald, [Note 8: 1 [1992] 2 S.C.R. 138.] which held that a patient must be given complete access to the information contained in her medical records.

The Court has also emphasized the fiduciary nature of the relationship between parent and child. In M.(K.) v. M.(H.) [Note 9: 1 [1992] 3 S.C.R. 6.] a father's incestuous relationship with his daughter was regarded as a breach of his fiduciary duty. A recent British Columbia decision has developed that concept further and has recognized that the relationship between the provincial government and children in foster care is a fiduciary one. Liability was imposed for the abuse of the children at the hands of their foster parent because the Crown had failed to evaluate and supervise the nature of the care that was provided to them. [Note 10: B.(K.L.) v. British Columbia, [1998] 10 W.W.R. 348 (B.C.S.C.).]

The concept of fiduciary relationship has also intruded into commercial relationships. The most recent case is Hodgkinson v. Simms. [Note 11: Above note 6.] In that case, the defendant was an accountant specializing in real estate tax shelter investments. The plaintiff stockbroker relied heavily on the defendant and, following his advice, invested in a number of real estate tax shelters. Unknown to the plaintiff, the defendant had a profitable relationship with the land developers in whose projects the plaintiff invested. He received commissions for every investment made. The plaintiff discovered this situation of divided loyalty after the real estate market collapsed and he lost heavily on his investment. The defendant argued that the plaintiff's losses were caused not by his failure to disclose his interests in the transactions but by the general downturn of the property market. A majority of the Supreme Court found that there was a power/dependency relationship between the parties, and the total reliance of the plaintiff on the defendant and the influence the defendant had over the plaintiff supported the conclusion that, unlike many advisory relationships, this relationship was fiduciary in nature. The defendant was in breach of his fiduciary duty in failing to disclose his financial interest in the investments. The majority allowed the plaintiff to recover his complete loss on the ground that, if the appropriate disclosure had been made, he would not have made the investment and would not have suffered the loss. In its view, the same result could be reached for breach of contract. The minority held that the relationship was not a fiduciary one. The only remedy was for breach of contract and, in its opinion, under contract principles, the entire investment loss was not recoverable. The case illustrates the two main attractions of characterizing a claim as one for breach of fiduciary duty, namely, the intensification of obligations and the extensiveness of remedies.