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What You Need to Know About Fiduciary Duty 

Matthew R Harris Law P.C. Aug. 31, 2022

Fiduciary Duty Logo with PenWhen we hear the term fiduciary obligation, or fiduciary duty, perhaps the first thing that comes to mind is that of a broker or investment counselor caring for someone else’s money. That, of course, is a primary example of a fiduciary obligation—the person accepting the other’s person money for investment is expected to act with due care and with the best interests of the other person in mind. 

In Canadian law, fiduciary obligation refers to a relationship in which one party (called the fiduciary) is responsible for looking after the best interests of another party (called the beneficiary) Canadian law recognizes that the fiduciary is able to exercise some discretion or power over the beneficiary, who is deemed the vulnerable party in the relationship. 

If a fiduciary wields that power or discretion in a way that deliberately harms the beneficiary, it can be said that a breach of fiduciary duty has occurred. Fiduciaries by law are prohibited from any personal profit-taking or any conflict of interest that goes beyond what is necessary in the relationship. Usually, improper benefits are financial, but they can take virtually any form. 

If you are the fiduciary or beneficiary in a fiduciary obligation relationship and a dispute has occurred in or around Toronto, Ontario, contact Matthew R Harris Law P.C. The firm offers commercial litigation and other business-related legal services and will be happy to discuss your situation with you and advise you of your best options going forward. Matthew R Harris Law PC serves clients in Toronto, Hamilton, London, Ottawa, and surrounding communities. 

Examples of Fiduciary Relationships 

The investment counselor and broker are common examples of those who are bound by the law of fiduciary obligation, but many other professional and other relationships are bound by fiduciary obligations as well. These include lawyer/client, physician/patient, priest/parishioner, parent/child, partner/partner, director/corporation, principal/agent, and even employee/employer. 

What Comprises a Fiduciary Relationship? 

Over the years, the Supreme Court of Canada has reviewed many cases involving alleged breaches of fiduciary obligation and at one point developed what it called a “rough and ready guide” to identifying a fiduciary relationship, with the following three elements: 

(1) The fiduciary has scope for the exercise of some discretion or power.  

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary‘s legal or practical interests.  

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. 

There is still some debate on the role of vulnerability. Some provincial and federal corporate law statutes contain provisions that arguably render fiduciary obligations in the corporate world a matter of statute rather than vulnerability. Even the Supreme Court has embraced sometimes-conflicting conclusions about vulnerability. 

What Constitutes a Breach? 

A fiduciary is bound by several duties, among which are the duty of care, the duty of loyalty, and the duty of candor (or disclosure). 

The duty of care refers to taking every step possible to ensure that you, as the fiduciary, are thoughtfully considering all options and engaging in sensible decision-making based on your careful examination of all available information. 

The duty of loyalty means the fiduciary must act in the best interest of the beneficiary at all times and avoid all conflicts of interest. 

The duty of candor, or disclosure, means just that—the fiduciary must be completely forthright with the beneficiary, disclosing any and all information that may have a bearing on their ability to carry out their obligations. 

A breach of fiduciary obligation can fall under any of those three categories. Generally speaking, a breach of fiduciary obligation legal action must contain four provable elements: 

  • The defendant was acting as a fiduciary of the plaintiff; 

  • The defendant breached a fiduciary duty to the plaintiff; 

  • The plaintiff suffered damages as a result of the breach; and 

  • The defendant's breach of fiduciary duty caused the plaintiff's damages. 

While many breach lawsuits revolve around financial issues—the fiduciary either caused the beneficiary to suffer losses or personally benefitted when they shouldn’t have—that’s not the only possible breach example. 

Employers have been known to seek breach of fiduciary obligation judgments against employees who left and took with them trade secrets that they then shared with others for financial gain. In the case of physician/patient or priest/parishioner, the breach can result in physical or mental suffering. In a partner/partner fiduciary relationship, a breach can result from one of several factors, including: 

  • Mismanaging company funds or assets 

  • Exposing the partnership to liability through negligence or malfeasance 

  • Damaging the good will and reputation of the company through illegal or wrongful behavior 

  • Concealing important information from partners 

  • Failing to disclose conflicts of interest 

  • Benefitting by taking a business opportunity offered the partnership and making it their own 

If a breach of fiduciary obligation lawsuit is successful, the fiduciary may be required to restore any funds gained from the breach and make good any losses the plaintiff suffered. Compensation may also be ordered for any plaintiff who suffered mentally or physically from the breach. The fiduciaries in a breach are sometimes subject to punitive damages as well. 

How Skilled Legal Counsel Can Help 

If you’re facing a fiduciary obligation dispute, either as fiduciary or beneficiary, you need to seek immediate legal clarification and guidance. It’s typically more advantageous to resolve these issues outside of the courtroom, and the lawyers at Matthew R Harris Law P.C. can help in negotiations. If matters do end up in court, the firm also stands ready to protect your interests and rights as either fiduciary or beneficiary. Set up a one-on-one consultation to start moving forward.