Simon's Megalomaniacal Legal Resources

Fiduciary - Ad Hoc

. Boal v. International Capital Management Inc.

In Boal v. International Capital Management Inc. (Div Ct, 2022) the Divisional Court considered where an ad hoc fiduciary relationship stands between investors and their advisors:

[64] In determining whether financial or investment advisors stand in a fiduciary relationship with their clients, the Court of Appeal summarized the five interrelated factors established by LaForest J. in Hodgkinson as follows in Hunt v. TD Securities Inc. (2003), 2003 CanLII 3649 (ON CA), 66 O.R. (3d) 481, 229 D.L.R. (4th) 609 (C.A.) at para. 40:

1. Vulnerability -- the degree of vulnerability of the client that exists due to such things as age or lack of language skills, investment knowledge, education or experience in the stock market.

2. Trust -- the degree of trust and confidence that a client reposes in the advisor and the extent to which the advisor accepts that trust.

3. Reliance -- whether there is a long history of relying on the advisor's judgment and advice and whether the advisor holds him or herself out as having special skills and knowledge upon which the client can rely.

4. Discretion -- the extent to which the advisor has power or discretion over the client's account.

5. Professional Rules or Codes of Conduct -- help to establish the duties of the advisor and the standards to which the advisor will be held.

....

[69] Simply casting away an analysis of discretionary authority in the case of financial advisors casts the net too wide. As stated in Galambos at para. 70:

Underpinning all of this is the focus of fiduciary law on relationships. As Dickson J. (as he then was) put it in Guerin v. The Queen, 1984 CanLII 25 (SCC), [1984] 2 S.C.R. 335, at p. 384: “It is the nature of the relationship . . . that gives rise to the fiduciary duty. . . .” The underlying purpose of fiduciary law may be seen as protecting and reinforcing “the integrity of social institutions and enterprises”, recognizing that “not all relationships are characterized by a dynamic of mutual autonomy, and that the marketplace cannot always set the rules”: Hodgkinson, at p. 422 (per La Forest J.). The particular relationships on which fiduciary law focusses are those in which one party is given a discretionary power to affect the legal or vital practical interests of the other: see, e.g., Frame v. Smith, 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99, per Wilson J., at pp. 136-37; Norberg, per McLachlin J., at p. 272; Weinrib, at p. 4, quoted with approval in Guerin, at p. 384.

[70] The goal of the imposition of fiduciary duties is to protect a relationship the law recognizes as one of high trust and confidence, based on the implicit dependency and vulnerability to another. With the recognition of the relationship comes the imposition of proscriptive duties, notably the no-profit rule and the no-conflict rules, as well as the prescriptive duties of good faith and confidence. But duties of good faith, care, confidentiality, and disclosure apply to a variety of non-fiduciaries as well. As the motion judge set out, the fiduciary standard is exceptional. Other legal concepts which may apply – protection in contract, tort, and unjust enrichment – are available to regulate the conduct alleged here, albeit not on a class, but an individual basis. While the MFDA rules and the FP Code are a part of the analysis, they are not the whole of the analysis.

. Density Group Limited v. HK Hotels LLC

In Density Group Limited v. HK Hotels LLC (Ont CA, 2014) the Court of Appeal commented as follows on ad hoc fiduciary duties:

[171] In her analysis of the fiduciary duty claim against Mr. Kallan, the motion judge referred to a number of leading Supreme Court of Canada decisions on fiduciary duties: Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, which cites the Court’s earlier decision in Frame v. Smith, 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99, and Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24 (CanLII), 2011 SCC 24, 2 S.C.R. 261.

[172] In particular, she highlighted the principle from Hodgkinson v. Simms that to establish a fiduciary duty outside the established fiduciary categories “what is required is evidence of a mutual understanding that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party”: pp. 409-10.

[173] She also referred to the requirements set out in Elder Advocates for establishing a fiduciary relationship outside a recognized category. First, there must be evidence that the alleged fiduciary undertook to act in the best interests of the beneficiary. Second, it must be shown that the alleged fiduciary has a discretionary power over a defined person or class of persons. Third, there must be evidence that the alleged fiduciary’s power may affect the legal or substantial practical interests of the beneficiary: Elder Advocates, paras. 30 to 34.

. Stirrett v. Cheema

In Stirrett v. Cheema (Ont CA, 2020) the Court of Appeal cited the criteria for finding an ad hoc fiduciary duty:

[53] In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261, at para. 36, McLachlin C.J., writing for the court, stated what a claimant must establish before a court will impose a fiduciary duty outside of the traditionally recognized categories of per se fiduciary relationships:

In summary, for an ad hoc fiduciary duty to arise, the claimant must show, in addition to the vulnerability arising from the relationship described by Wilson J. in Frame: (1) an undertaking by the alleged fiduciary to act in the best interests of the alleged beneficiary or beneficiaries; (2) a defined person or class of persons vulnerable to a fiduciary’s control (the beneficiary or beneficiaries); and (3) a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary’s exercise of discretion or control.

[54] Here, the trial judge recognized that the issue was whether the factual matrix before him raised a fiduciary duty. While he did not cite Elder Advocates for the factors giving rise to a fiduciary duty, he relied on Frame and Hodgkinson, two other leading cases from the Supreme Court on fiduciary duty.

. The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership

In The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership (Ont CA, 2020) the Court of Appeal set the test for finding an ad hoc fiduciary relationship:

[65] To establish the existence of an ad hoc fiduciary relationship a claimant must demonstrate three elements:

(i) an undertaking, express or implied, by the alleged fiduciary to act in the best interests of a beneficiary. The claimant must be able to point to a forsaking by the alleged fiduciary of the interests of all others in favour of those of the beneficiary in relation to the specific legal interest at stake;

(ii) the identification of a defined person or class of persons who are vulnerable to the alleged fiduciary in the sense that the alleged fiduciary has a discretionary power over them; and

(iii) the alleged fiduciary’s power may affect the legal or substantial practical interests of the beneficiary.

Elder Advocates of Alberta Society v. Alberta, 2011 SCC 24, [2011] 2 S.C.R. 261, at paras. 30-34; Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660, at paras. 124, 128 and 138.

....

[71] The existence of an ad hoc fiduciary relationship is determined on a case-by-case basis, including in cases of commercial transactions: PIPSC, at para. 113; Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, at pp. 667-668. ...

. Garneau v. Industrial Alliance Insurance and Financial Services Inc.

In Garneau v. Industrial Alliance Insurance and Financial Services Inc. (Ont CA, 2015) the court succinctly set out the test for finding a fiduciary relationship outside a categorical fiduciary relationship (ie. one where a fiduciary relationship is established by the type of the relationship, eg. solicitor-client):

[16] The test for establishing an ad hoc fiduciary duty has been modified since Frame v. Smith, 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99. This duty will only be found where the alleged fiduciary has provided an express or implied undertaking to act in the best interests of the other party: Galambos v. Perez, 2009 SCC 48 (CanLII), [2009] 3 S.C.R. 247, at para. 66; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24 (CanLII), [2011] 2 S.C.R. 261, at para. 30.