Fiduciary Duty in Canadian Law

What a fiduciary duty is

A fiduciary owes a duty of loyalty to the beneficiary of the relationship. The duty has two principal limbs:

• A duty not to profit from the position without the beneficiary''s informed consent.
• A duty to avoid conflicts of interest, or to manage them with informed consent.

The duty is a duty of loyalty — distinct from a duty of care (which fiduciaries also owe). Loyalty is the heart of the fiduciary obligation.

Per-se fiduciary relationships

Some relationships are categorically fiduciary:

• Trustee–beneficiary.
• Solicitor–client.
• Director–corporation (BCE).
• Partner–partner.
• Agent–principal.
• Parent–child (limited; KLB v BC).

In these relationships, the duty of loyalty arises automatically.

Ad hoc fiduciary duties

Outside the per-se categories, a fiduciary obligation may arise from the facts of the relationship. The classic indicia (Frame v Smith, Hodgkinson v Simms):

• Scope for the exercise of discretion or power.
• Ability to exercise that power so as to affect the beneficiary''s legal or practical interests.
• Particular vulnerability of the beneficiary to the holder.

Galambos v Perez (2009) added a critical refinement: an ad hoc fiduciary obligation also requires an explicit or implicit undertaking by the alleged fiduciary to act in the beneficiary''s interest. Without an undertaking of loyalty, the relationship may be commercial but not fiduciary.

Hodgkinson and Galambos in practice

Hodgkinson v Simms (1994) found a fiduciary duty in a tax-planning advisor relationship marked by trust, vulnerability, and reliance. The advisor''s failure to disclose a conflict of interest breached loyalty.

Galambos restricted ad hoc fiduciary duties to relationships exhibiting an undertaking of loyalty, narrowing Hodgkinson''s reach. The two cases are read together: vulnerability + power-discretion + undertaking.

Remedies for fiduciary breach

• Disgorgement (account of profits).
• Constructive trust (proprietary remedy).
• Equitable compensation (a more flexible measure than common-law damages).

The remedy targets the breach of trust, not just the harm.

Common errors

• Treating any inequality as fiduciary. Inequality alone is not fiduciary; the relationship must include an undertaking of loyalty.
• Conflating fiduciary breach with breach of contract. Fiduciary breach is a breach of loyalty; contractual breach is a breach of agreement. Different remedial regimes.
• Conflating fiduciary duty with duty of care. A fiduciary owes both, but the fiduciary duty (loyalty) and the duty of care (competence) are analytically separate.