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Causation - Cause-in-Fact versus Cause-in-Law. Aylmer Meat Packers Inc. v. Ontario [cause-in-fact and cause-in-law]
In Aylmer Meat Packers Inc. v. Ontario (Ont CA, 2022) the Court of Appeal considered a lawsuit by an abattoir against the province:(a) The Causation Governing Principles
[87] For it to incur liability for damages, the Ministry’s conduct must have been a cause-in-fact of Aylmer’s injury, based on the well-known “but for” test in Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at paras. 6-10; and, Donleavy v. Ultramar Ltd., 2019 ONCA 687, at para. 63, per van Rensburg J.A.
[88] The Ministry must also have been the cause-in-law of Aylmer’s injury. That is, the risk of the actual injury suffered by the plaintiff as a result of the defendant’s wrongful conduct must not be so remote that it would not be foreseeable to a reasonable person in the defendant’s position: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, at para. 79. And, see, Mustapha v. Culligan of Canada Ltd., 2008 SCC 27 (CanLII), [2008] 2 S.C.R. 114, at para. 13, citing Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty., [1967] A.C. 617 (P.C.), at p. 643. . Nelson (City) v. Marchi
In Nelson (City) v. Marchi (SCC, 2021) the Supreme Court of Canada considered an issue of causation:[96] It is well established that a defendant is not liable in negligence unless their breach caused the plaintiff’s loss. The causation analysis involves two distinct inquiries (Mustapha, at para. 11; Saadati v. Moorhead, 2017 SCC 28, [2017] 1 S.C.R. 543, at para. 13; Livent, at para. 77; A.M. Linden et al., Canadian Tort Law (11th ed. 2018), at p. 309-10). First, the defendant’s breach must be the factual cause of the plaintiff’s loss. Factual causation is generally assessed using the “but for” test (Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at paras. 8 and 13; Resurfice Corp. v. Hanke, 2007 SCC 7, [2007] 1 S.C.R. 333, at paras. 21-22). The plaintiff must show on a balance of probabilities that the harm would not have occurred but for the defendant’s negligent act.
[97] Second, the breach must be the legal cause of the loss, meaning that the harm must not be too far remote (Mustapha, at para. 11; Saadati, at para. 20; Livent, at para. 77). The remoteness inquiry asks whether the actual injury was the reasonably foreseeable result of the defendant’s negligent conduct (Mustapha, at paras. 14-16; Livent, at para. 79). Remoteness is distinct from the reasonable foreseeability analysis within duty of care because it focuses on the actual injury suffered by the plaintiff, whereas the duty of care analysis focuses on the type of injury (Livent, at para. 78; Klar and Jefferies, at p. 565). . 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.
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(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.
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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.
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(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.
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