|
Causation - Cause-in-Fact versus Cause-in-Law (Proximate Cause)
COMMENT
'Cause in fact' is akin to physical cause (although it may sometimes be practically difficult to ascertain). In contrast, an example of 'cause in law' (aka 'proximate cause') would be when you see the defendant car driver cross-over into the opposing lane - and you would say that that they 'caused' the accident because they broke the rule about staying in the appropriate lane. 'Cause in law' involves the integration of social expectations and policies. It will come as no surprise that 'cause in law' is the more interesting legal topic.
MORE CASES
Part 2
. Hemmings v. Peng
In Hemmings v. Peng (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal from a medical malpractice case, here where a pregnant patient had a heart attack during surgery resulting in brain damage.
Here the court considers (and finds) the appellant's argument that the trial judge conflated the tests for factual and legal causation:A.2 General principles: Causation-in-fact and Legal causation
[60] To succeed in a negligence action a plaintiff must demonstrate that (i) the defendant owed her a duty of care, (ii) the defendant’s behaviour breached the standard of care, (iii) the plaintiff sustained damage, and (iv) the damage was caused in fact and law by the defendant’s breach: Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 SCR 114, at para. 3. The causation analysis involves two distinct inquiries: whether the defendant’s breach was the factual cause of the plaintiff’s loss and, in addition, the legal cause of the loss: Nelson (City) v. Marchi, 2021 SCC 41, 463 D.L.R. (4th) 1, at paras. 96-97.
Factual causation: The “but for” test
[61] In Canada, the general test for factual causation is the “but for” test. Under it, a plaintiff must show, on a balance of probabilities, that “but for” the defendant’s negligent act or omission, the injury would not have occurred: that is, the defendant’s negligence was necessary to bring about the injury: Clements v. Clements, 2012 SCC 32, [2012] 2 SCR 181, at para. 8.; Erika Chamberlain and Stephen G.A. Pitel, eds., Fridman’s The Law of Torts in Canada, 4th ed. (Toronto: Thomson Reuters, 2020), at p. 505.
[62] Application of the “but for” test involves a factual inquiry that does not require scientific evidence of the precise contribution the defendant’s negligence made to the injury but proceeds using a robust, common-sense examination of the evidence: Clements, at para. 9. A trial judge must always remember that employing a robust and common-sense approach does not mean the court is applying a discrete test for causation, rather it involves approaching the evidence relevant to “but for” causation in a certain manner. As this court stressed in Aristorenas v. Comcare Health Services (2006), 2006 CanLII 33850 (ON CA), 83 O.R. (3d) 282 (C.A.), leave to appeal refused, [2006] S.C.C.A. No. 487, at para. 54:[A] robust and pragmatic approach must be applied to evidence; it is not a substitute for evidence to show that the defendant’s negligent conduct caused the injury. [63] As explained by the authors of Fridman’s The Law of Torts in Canada, at p. 506, a “but for” cause-in-fact inquiry involves a counterfactual exercise where one:[H]old[s] fixed relevant background facts, together with the fact that the plaintiff suffered the injury complained of, and then hypothetically subtract the defendant’s allegedly negligent conduct from that factual matrix. If, in the counterfactual situation, the plaintiff would still have suffered the same injury, then the defendant is not a “but for” cause of the plaintiff’s injury: since the injury would have happened anyway, the defendant's conduct made no difference. If, on the other hand, the plaintiff's injury would not have occurred in the absence of the defendant’s conduct, then the defendant is said to be a “but for” cause of the plaintiff’s injury. The “but for” test therefore establishes a necessary connection between the defendant’s conduct and the plaintiff’s injury. It shows, in other words, that what the defendant did made a difference. [64] A plaintiff need not establish the defendant’s negligence was the sole cause of her injury; it is sufficient to prove, on a balance of probabilities, that the defendant’s carelessness was part of the cause of her loss: Athey v. Leonati, 1996 CanLII 183 (SCC), [1996] 3 S.C.R. 458, at para. 17.
[65] Although the law recognizes limited, defined exceptions to the “but for” test – applying a “material contribution to risk” test in some circumstances – in the present case the parties agree that the “but for” test governs the factual causation analysis: Fridman, at p. 510-23; Athey, at para. 15.
Legal causation
[66] In addition to showing the defendant’s conduct was a cause-in-fact of her injury, to establish the defendant’s liability a plaintiff must also prove the defendant was a legal cause of her injury: Saadati v. Moorhead, 2017 SCC 28, [2017] 1 S.C.R. 543, at para. 20. The jurisprudence calls this requirement by various names: such as “proximate cause”; not too “remote”; and “cause-in-law”. Whichever term is used, the basic inquiry remains the same: were the injuries suffered by the plaintiff linked in the right way to the carelessness of the defendant?[5] Or, as put in Mustapha, at para. 12: “whether ‘the harm [is] too unrelated to the wrongful conduct to hold the defendant fairly liable.’”
[67] In general terms, foreseeability lies at the heart of this inquiry: “it is the foresight of the reasonable man which alone can determine responsibility”: Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co., [1961] A.C. 388 (P.C.) (“The Wagon Mound No. 1”), at p. 424. Mere possibility that the harm would occur is not sufficient: “possibility alone does not provide a meaningful standard for the application of reasonable foreseeability”: Mustapha, at para. 13. Instead, in Mustapha, the Supreme Court stated the degree of probability or likelihood that would satisfy the reasonable foreseeability requirement is a “real risk”, that is “one which would occur to the mind of a reasonable man in the position of the defendan[t] . . . and which he would not brush aside as far-fetched”: Mustapha, at para. 13, quoting Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty., [1967] A.C. 617 (P.C.) (“The Wagon Mound No. 2”), at p. 643.
[68] A few additional points should be made about the practical application of the principle of legal causation:. Forseeability is assessed in the circumstances of the particular defendant: Brenenstuhl v. Caldwell, 2020 ABQB 315, at para. 94. As summarized in Mustapha, at para. 13, whether the risk of harm satisfies that degree of probability turns on whether the risk is “one which would occur to the mind of a reasonable man in the position of the defendan[t] . . . and which he would not brush aside as far-fetched.” [Emphasis added].
. What must be foreseen is the type of harm suffered and not the particular manner in which that harm occurred[6] or the “precise concatenation of events”: R. v. Côté et al., 1974 CanLII 31 (SCC), [1976] 1 S.C.R. 595, at p. 604. The harm “suffered must be of a kind, type or class that was reasonably foreseeable as a result of the defendant's negligence”: Frazer v. Haukioja, 2010 ONCA 249, 101 O.R. (3d) 528, at para. 51. As was explained in Abbott and Kleysen’s Cartage Co. Ltd. v. Kasza and Ace Construction Company Limited, 1974 CanLII 296 (AB KB), [1975] 3 W.W.R. 163 (Alta. S.C.), at p. 172, rev’d 1976 ALTASCAD 80 (CanLII), [1976] 4 W.W.R. 20 (Alta. C.A.):[T]he manner in which the damage did occur must be foreseeable in the sense that, although the precise manner in which it occurred was not foreseeable, nevertheless the kind of damage which did occur was foreseeable and the precise manner in which the damage occurred was a variant of the foreseeable or within the risk created by the negligence or not fantastic or highly improbable. . In judging whether a personal injury is reasonably foreseeable, the legal causation analysis looks at a person of “ordinary fortitude”, that is it looks at what kind of injury a person of ordinary fortitude would suffer: Mustapha, at paras. 14-16;
. As to the effect of a subsequent event following that of the original tortfeasor, Gerald B. Robertson and Ellen I. Picard, in Legal Liability of Doctors and Hospitals in Canada, 5th ed. (Toronto: Thomson Reuters, 2017), state, at p. 363, that “[i]f a doctor’s negligence results in the patient requiring further treatment, and this additional treatment causes injury to the patient, the doctor will be liable for the injury if it is a reasonably foreseeable consequence of the negligence”. Others have made this point in slightly different ways:
. In Jones v. Shafer, 1948 CanLII 32 (SCC), [1948] S.C.R. 166, the Supreme Court of Canada stated at pp. 170-71: “[T]he intervening conscious act of a third party will break the line of causation and relieve the party who may be otherwise negligent of liability, unless to a reasonable man in the same circumstances that conscious act would have been foreseeable”;
. The authors of Fridman write, at p. 541, that “[I]f it was likely that something of the sort would or might happen as a result of what the defendant did to the plaintiff then the subsequent cause remains connected to the original negligence”; and
. The Manitoba Court of Appeal in Powell v. Guttman (1978), 1978 CanLII 1933 (MB CA), 89 D.L.R. (3d) 180 (Man. C.A.), stated at p. 192:Where a tortfeasor creates or materially contributes to a significant risk of injury occurring and injury does occur which is squarely within the risk thus created or materially increased, then unless the risk is spent, the tortfeasor is liable for injury which follows from the risk, even though there are other subsequent causes which also cause or materially contribute to that injury. ....
B.1 Factual causation ground No. 1: There was insufficient evidence to permit the trial judge to find that Ms. Hemmings would have chosen an abortion if Dr. Padmore had informed her of that option
[73] As mentioned, in order to demonstrate factual causation, Clements requires that a plaintiff “must show on a balance of probabilities that ‘but for’ the defendant’s negligent act, the injury would not have occurred.” Usually, a common sense inference of “but for” causation from proof of negligence flows without difficulty: Clements, at paras. 8 and 10. However, some circumstances may prove more problematic, requiring a more elaborate analysis. In Sacks v. Ross, 2017 ONCA 773, 417 D.L.R. (4th) 487, this court, at para. 48, described this aspect of the causal reasoning process as a “trier of fact’s imaginative reconstruction of reality”; others have characterized it as a counterfactual exercise: Fridman’s The Law of Torts in Canada, at para. 506. Dr. Padmore submits the trial judge erred in concluding in his counter-factual exercise that, had he informed Ms. Hemmings of her option to terminate her pregnancy, she would have chosen to have an abortion.
....
Analysis
[114] Legal causation of a plaintiff’s injuries concerns whether the damage was caused in law by the defendant’s breach: Mustapha, at para. 3. As a legal question, it is subject to the correctness standard of review on appeal.
[115] In my view, the trial judge committed reversible error on the questions of whether the breaches of the standard of care by Dr. Padmore and Nurse San Juan caused, in law, the damages suffered by Ms. Hemmings.
[116] Starting with Nurse San Juan, the major error committed by the trial judge was his failure to conduct any legal causation analysis.
[117] The causation analysis the trial judge conducted, at paras. 118-120 of his reasons[24] concerned the issue of factual causation. There, the trial judge conducted a “but for” counter-factual exercise and set out his findings as to what probably would have happened had Nurse San Juan advised Ms. Hemmings to come to the Hospital on the evening of April 8, 2009. The Hospital submits this counter-factual exercise was tainted by legal error. I accept its submission.
[118] I arrive at that conclusion by comparing the counter-factual analysis the trial judge conducted in respect of Dr. Padmore with that he performed for Nurse San Juan. The counter-factual the trial judge performed in assessing Dr. Padmore’s liability – would Ms. Hemmings have had an abortion if informed of that option? –turned on an assessment of non-expert evidence. By contrast, the counter‑factual about the probable events of April 8 involving Nurse San Juan rested on expert evidence. That evidence was strongly divided on two issues: (i) if Ms. Hemmings had attended the Hospital on April 8, would she have been induced or would she have been sent home? (ii) if she had been induced, would the induction have resulted in a successful vaginal delivery or an emergency C-section? (On the latter issue, the trial judge made no definitive finding, concluding that a decision to induce labour would have been made or, alternatively, an urgent caesarean section would have been performed.) Notwithstanding that division in the expert evidence, the trial judge did not explain why he preferred one expert opinion over the other. On this issue, that constituted a material defect in his reasons: Champoux v. Jefremova, 2021 ONCA 92, at para. 23.
[119] Dealing with the lack of any legal causation analysis by the trial judge, I earlier rejected the appellant physicians’ general submission that the trial judge conflated, or misunderstood, the difference between factual and legal causation. However, in the case of the trial judge’s specific analysis of whether Nurse San Juan’s breaches caused, in law, Ms. Hemmings’ injuries, I conclude the trial judge did conflate the two concepts. At the end of his causation analysis regarding Nurse San Juan, the trial judge wrote, at para. 120:I have concluded that this is not “far-fetched” and merely the application of “robust common sense”. But for the negligence of the Scarborough Hospital, Sophia Hemmings would not have suffered the damages that occurred.
That paragraph obviously deals with the trial judge’s “but for” analysis. However, he picked out the phrase “far-fetched” from Mustapha’s definition of legal causation and combined it, erroneously, with Clement’s description of factual causation analysis employing “robust common sense”, thereby conflating legal causation with factual causation. [120] In any event, referring to one word from Mustapha does not satisfy the trial judge’s obligation to conduct a meaningful legal causation analysis of Nurse San Juan’s conduct.
[121] Such a meaningful analysis was required in the case of Nurse San Juan for two reasons. First, as I have described above, the record before the trial judge lacked any evidence from Nurse San Juan regarding her knowledge about the risks at issue as of April 8, 2009, or any expert evidence as to whether such risks were “real risks” that would occur to the mind of a reasonable person in the position of Nurse San Juan. The trial judge was obliged to explain how he could find that Ms. Hemmings’ damages were caused in law by Nurse San Juan’s breaches in the absence of such evidence. He failed to do so.
[122] Second, a meaningful causation analysis was required because of the temporal dimension of the legal causation issue involving Nurse San Juan: namely that the only interaction between Ms. Hemmings and Nurse San Juan took place during the telephone call on the evening of April 8, 2009, twelve days before Ms. Hemmings underwent the C-section. By contrast, Dr. O’Brien, who cared for Ms. Hemmings throughout the day on April 20, 2009, and performed the C‑section early that evening, testified that she did not “have any reason to believe” that Ms. Hemmings was going to have a panic attack or cardiac arrest because the patient was “completely stable”. The trial judge obviously accepted that evidence because, in dismissing the action against Dr. O’Brien, he wrote, at para. 114:It could not be anticipated by Dr. O’Brien that Dr. Jamensky’s efforts would result in an anesthetic complication and cardiac arrest. [Emphasis added]. [123] That finding by the trial judge raises the obvious question: If Dr. O’Brien could not anticipate, or reasonably foresee, that a C-section on Ms. Hemmings would result in an anesthetic complication and cardiac arrest, how could Nurse San Juan, whose interaction with Ms. Hemmings was limited to a telephone call twelve days before delivery?
[124] Framed differently, if it was not reasonably foreseeable to a reasonable obstetrician in the circumstances of Dr. O’Brien at the time of the C-section that Ms. Hemmings would suffer a cardiac arrest arising from an anesthetic complication, on what evidentiary basis would such a risk be reasonably foreseeable to a reasonable obstetrical nurse in Nurse San Juan’s circumstances twelve days earlier or to a reasonable obstetrician in Dr. Padmore’s circumstances many months earlier when he was found to have breached the standard of care in the August-October 2008 time period?
[125] The trial judge’s reasons provide no answers to these questions.
[126] In its factum, the Hospital submits the trial judge’s conclusions that Dr. O’Brien could not anticipate the anesthetic complications and cardiac arrest and yet Nurse San Juan was liable in negligence “are in direct contradiction and cannot stand”. I agree that such an inconsistency exists in the trial judge’s reasons, not only concerning his liability conclusion in respect of Nurse San Juan but also in his legal causation finding in respect of Dr. Padmore. Even applying a very generous reading, the trial judge’s reasons do not provide any insight into how he resolved those patent inconsistencies to reach his legal conclusions regarding Dr. Padmore and Nurse San Juan: Champoux, at para. 18. In those circumstances, the trial judge’s conclusions that the plaintiffs had demonstrated that Ms. Hemmings’ injuries were caused in law by the breaches of the standard of care found in respect of Dr. Padmore and Nurse San Juan cannot stand; they must be set aside as they are tainted by legal error on the issue of legal causation: Manary v. Strban, 2013 ONCA 319, at para. 60, per Doherty J.A. (dissenting, but not on this point), leave to appeal refused, [2013] S.C.C.A. No. 303.
[127] I see no reason in the circumstances to direct a new trial on the issue of causation regarding Dr. Padmore and Nurse San Juan. On this appeal, the trial judge’s dismissal of the action against Dr. O’Brien is not challenged. One is left with the trial judge’s finding that Dr. O’Brien, as an obstetrician, could not anticipate that Dr. Jamensky’s efforts, as an anesthetist, would result in an anesthetic complication and cardiac arrest. Based on my review of the trial record, that conclusion was supported by the weight of the evidence. So too, the evidentiary record (which in the case of Nurse San Juan included the absence of evidence) supports the conclusion that the respondent plaintiffs have not demonstrated that the acts or omissions of Dr. Padmore and Nurse San Juan, two of the obstetrical health care practitioners, caused, in law, the injuries suffered by Ms. Hemmings.
....
Analysis
[225] To assess this ground of appeal I start by recalling the observations made by the Supreme Court of Canada in Clements, at para. 10:A common sense inference of “but for” causation from proof of negligence usually flows without difficulty. Evidence connecting the breach of duty to the injury suffered may permit the judge, depending on the circumstances, to infer that the defendant’s negligence probably caused the loss. [226] To that I add, again, the principle set out in Clements, at para. 9, that factual, or “but for”, causation must be applied in a robust common sense fashion and there is no need for scientific evidence of the precise contribution the defendant’s negligence made to the injury. Those two principles apply to a court’s consideration of its “but for” analysis of what would likely have happened had the defendant not breached the standard of care in the way found by the trial judge: Sacks, at para. 47. . Stirrett v. Cheema
In Stirrett v. Cheema (Ont CA, 2020) the Court of Appeal considered causation in it's 'cause-in-fact' form, as it is required to assess compensation for breach of fiduciary duties (this is in contrast to it's 'proximate cause' form - ie. causation with the added legal policy features of remoteness, proximity, foreseeability and more - which is required for assessing damages in common law actions for tort and contract):[65] As we will explain, the trial judge misstated the law regarding the role of causation in cases involving a breach of fiduciary duty. Simply put, for compensation to be awarded for breach of fiduciary duty, the plaintiff must establish that the defendant’s breach caused the plaintiff’s loss. As a result, the trial judge erred in failing to consider and determine the issue of causation.
[66] Considering and applying the correct principles with respect to the issue of causation afresh, assuming that the appellant owed an ad hoc fiduciary duty to Mr. Stirrett and breached that duty, we conclude that there was no causal link between the appellant’s breach and the angiogram Mr. Stirrett underwent that led to his death. Moreover, the jury’s determination with respect to “but for” causation in the negligence claim is determinative. In the result, the respondent is not entitled to damages.
[67] Before turning to an analysis of the trial judge’s reasons, it is first necessary to review the law on causation in the fiduciary context.
....
(1) Compensation for breach of fiduciary duty
[68] Compensation for breach of fiduciary duty is typically determined according to restitutionary principles, where the plaintiff is entitled to be put in as good a position as he or she would have been in had the breach not occurred: Hodgkinson, at p. 440, per La Forest J. In M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, La Forest J., writing for the majority, pointed out that in equity there is no capacity to award damages and that the distinction between damages and compensation is often slight, with the courts tending to merge the principles of law and equity when necessary to achieve a just remedy: at pp. 80-81. Over time, courts have used the term “damages” to denote monetary compensation for breach of fiduciary duty. Remedies in cases of breach of fiduciary duty (such as disgorgement of profits and exemplary compensation) can also have a prophylactic or deterrent purpose: Strother v. 3464920 Canada Inc., 2007 SCC 24, [2007] 2 S.C.R. 177, at paras. 74-77. Irrespective of the purpose, there must be a causal link between the breach of fiduciary duty and the compensation sought.
[69] As we will explain, when considering equitable compensation, or damages, the fiduciary breach must have been the cause in fact – the effective cause – of the loss in respect of which compensation is sought. There is of course a difference between the right to a remedy, and the assessment of damages. Causation in fact is relevant to the first issue. Legal causation, which incorporates limiting factors such as remoteness, proximity, foreseeability, and intervening act, is part of the second issue.
[70] We acknowledge that a source of confusion over the role of causation is in the use of the word “causation” in some of the cases both to describe causation in fact and as part of the test for applying common law limiting factors to limit the extent of a damages claim. These two uses should not be confounded.
[71] In the tort context, Philip H. Osborne cautions that causation in fact, which focuses on the factual issue of the sufficiency of the connection between the defendant’s wrongful act and the plaintiff’s loss, should not be confused with the “control device” of remoteness of damages, sometimes known as proximate cause, which may excuse a defendant from liability for loss caused to the plaintiff on the ground of fairness: Philip. H. Osborne, The Law of Torts, 5th ed. (Toronto: Irwin Law, 2015), at p. 54.
[72] Similarly, Sir Andrew Tipping, in “Causation at Law and in Equity: Do We Have Fusion?” (2000) 7:3 Canterbury L. Rev. 433, at p. 433, emphasizes the conceptual difference between the need to demonstrate a causal relationship that is “separate from and precedes the further controls provided by the concepts of foreseeability and remoteness”.
[73] Writing on fiduciary law, Leonard I. Rotman distinguishes between legal and factual causation: Leonard I. Rotman, Fiduciary Law, (Toronto: Thomson Reuters Canada Limited, 2005). At p. 634, he writes:Both the common law and Equity require that there be some connection between the harm or loss caused and the actions of the person who is alleged to be liable for it.
…
Each starts with the idea of “but for”, “cause-in-fact”, or “sine qua non” causation. This generally satisfies Equity, but the common law requires more; it demands a finding of materiality or substantial cause to link the impugned activity with the harm to the plaintiff. Further, the common law imports ideas of foreseeability (or reasonable contemplation) and remoteness into its assessment of causality. Mitigation of losses is another relevant consideration under the common law’s assessment of damages for harm or loss, as is contributory negligence. These other considerations do not readily enter into Equity’s assessment of fiduciary accountability. [Footnotes omitted.] [74] As this passage suggests, and as we will discuss below with reference to the case law, cause in fact is required in the fiduciary context. This case turns on the cause in fact requirement: did the respondent prove that the appellant’s breach of fiduciary duty caused the loss in respect of which compensation is sought? That loss is Mr. Stirrett’s death from the February 2005 angiogram. Because damages were agreed, it is unnecessary to go further and consider the extent of recoverable losses or whether a different measure should apply where the claim is for breach of fiduciary duty rather than negligence.
....
(2) Factual causation
[76] While the appropriate approach to the assessment – that is, the measure and extent – of damages for breach of fiduciary duty was the subject of debate and discussion in the Supreme Court during the 1990s, namely in Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC), [1991] 3 S.C.R. 534, and Hodgkinson, the Supreme Court was unanimous that whether dealing with a common law cause of action, or a claim sounding in equity, the plaintiff must establish that the defendant’s wrong was the cause in fact of some injury or loss.
[77] Canson involved a claim against a solicitor who handled a real estate transaction and who failed to disclose to his clients, the purchasers, a secret profit made by a third party. It was claimed that the solicitor was not only liable for the secret profit but also for the losses flowing from the negligence of engineers and pile-drivers who performed work on the purchased property.
[78] All eight justices who heard the case agreed that the defendant solicitor should be liable for the secret profit but not for the construction losses that were caused by the engineers. And, while the justices expressed differing opinions on whether and when the common law limiting factors would apply to compensation for breach of fiduciary duty, importantly, they agreed that, in order to award compensation for breach of a fiduciary duty, there must be a loss or injury that “flows from” or “results from” the breach.
[79] La Forest J., writing for the majority, stated, at pp. 578-79, that “[i]n the case of a mere breach of duty [by contrast to a breach of trust], the concern of equity is to ascertain the loss resulting from the breach of the particular duty”, and that it was imperative “to ascertain the loss resulting from the breach of the relevant equitable duty” (emphasis added).
[80] While generally agreeing with La Forest J., Stevenson J. wrote brief separate reasons in which he noted that the “losses [were] too remote, not in the sense of failing the ‘but for’ test, but in being so unrelated and independent that they should not, in fairness, be attributed to the defendant’s breach of duty”: at p. 590 (emphasis added).
[81] McLachlin J., writing for herself, Lamer C.J., and L’Heureux-Dubé J., agreed that the court was engaged in determining the loss resulting from the breach of the relevant equitable duty: at p. 551. She distinguished causation in fact from legal causation, stating, at p. 552, that “[t]he requirement that the loss must result from the breach of the relevant equitable duty does not negate the fact that ‘causality’ in the legal sense as limited by foreseeability at the time of the breach does not apply in equity” (emphasis added). Similarly, she stated that “while the loss must flow from the breach of fiduciary duty, it need not be reasonably foreseeable at the time of the breach”: at p. 552 (emphasis added).
[82] The Supreme Court next addressed compensation for breach of fiduciary duty in Hodgkinson, a case involving alleged breaches of fiduciary duty and contract in the performance of a contract for investment advice and other tax-related financial services.
[83] La Forest J., writing for the majority, found that Mr. Simms, an investment advisor, owed, and had breached, a fiduciary duty to Mr. Hodgkinson. He found that the damages owed for breach of fiduciary duty were the same as for breach of contract, taking into account the impact of market fluctuations that occurred after the breach.
[84] La Forest J. referred to the task of determining the damages “flowing from” the breach of fiduciary duty. The investment advisor induced Mr. Hodgkinson to make investments that he would not have otherwise made by deliberately concealing his own financial interest, thus “initiat[ing] the chain of events leading to the investor’s loss”: at p. 443.
[85] In summary, in Canson and Hodgkinson there was a causal link between the breach of fiduciary duty of the defendant and the harm to the plaintiff. The plaintiffs in Canson would not have entered into the transaction if the defendant solicitor had disclosed the secret profit. And, in Hodgkinson, the plaintiff would not have made the investments if he had known of the true relationship between the defendant and the developers. The point of contention in these cases was not whether a loss was caused by the breach, but the extent to which compensation for consequential losses could be recovered.
[86] The need for cause in fact to be established before compensation or damages are awarded for breach of fiduciary duty has also been consistently recognized by this court.
[87] For example, in Martin v. Goldfarb (1997), 1997 CanLII 12430 (ON SC), 31 B.L.R. (2d) 265 (Ont. Gen. Div.), the plaintiff claimed damages as a result of losses suffered in commercial dealings with a disbarred lawyer who had been convicted of fraud. Following a first trial awarding $5.95 million in damages to the plaintiff, a successful appeal by the defendant, and a new trial which resulted in the dismissal of his claim, the plaintiff appealed. The issue on the appeal of the new trial was whether the trial judge erred in requiring that the plaintiff’s personal losses be direct: see Martin v. Goldfarb (2003), 2003 CanLII 28757 (ON CA), 68 O.R. (3d) 70 (C.A.). This court stated, at para. 8, that “[d]amages cannot be awarded absent evidence of a causal connection”. This court held that the trial judge was justified in dismissing the claim because the plaintiff had not established a causal connection in fact between the losses he sustained in a bankruptcy and the breach of fiduciary duty.
[88] Further, in Waxman, this court accepted that “[t]he basic rule of equitable compensation is that the injured party will be reimbursed for all losses flowing directly from the breach”: at para. 651 (emphasis added).
[89] Also, in Standard Trust Company v. Metropolitan Trust Company of Canada, 2007 ONCA 897, 232 O.A.C. 74, MacFarland J.A. confirmed, in a breach of fiduciary duty case, that the trial judge was required “on a common sense and reasonable consideration of the evidence, [to] conclude what the losses were that flowed from the breach”: at para. 49 (emphasis added). [90] To put it succinctly, a plaintiff seeking compensation for breach of fiduciary duty must establish that the losses flowed from the breach.
[91] We add this. While legal causation is not at issue in this appeal, we note that the Supreme Court and other appellate courts have accepted that common law limiting principles may apply to limit equitable compensation in order to treat similar wrongs similarly, but only where: (1) it is necessary to achieve a just and fair result; and (2) doing so does not raise any policy concerns: Canson, at pp. 581, 586-87, per La Forest J.; Hodgkinson, at p. 443, per La Forest J.; Waxman, at para. 662; and Dhillon v. Jaffer, 2016 BCCA 119, 86 B.C.L.R. (5th) 239, at paras. 26-28.
[92] For example, in M. (K.), La Forest J. declined to award any additional compensation for a parent’s breach of fiduciary duty after concluding that the underlying policy objectives for compensation were the same as those animating the jury’s award of damages for sexual assault and battery in a case of incest: at pp. 81-82.
|
