Supreme Court Judgment on Fiduciary Obligation

The Supreme Court has just released its judgment in the case of Galambos v. Perez, 2009 SCC 48 (CanLII). The opinion of the court was written by Cromwell J., his second[1. His first was R. v. Godin, 2009 SCC 26 (CanLII)], I believe, since his installation on the court, and concurred in by all eight other members of the court.

This judgment might be of special interest to the bar as it deals with relations between a bookkeeper for a small firm and the bankrupt firm. Essentially, the bookkeeper and de facto office manager loaned large sums of money to the firm; when the firm went bankrupt and she became merely an unsecured creditor, she sued for negligence, breach of contract and breach of fiduciary duty. At trial the plaintiff’s claims were rejected. The B.C. Court of Appeal overturned the trial judgment, finding that there had been a breach of a fiduciary obligation.

The Supreme Court reinstated the trial judgment, ruling that the B.C. Court of Appeal had over-extended the scope of fiduciary obligations. The plaintiff was not in fact in a power-dependency relationship with the defendant; not all power-dependency relationships are fiduciary in nature, and an ad hoc obligation does not arise in the absence of an undertaking, express or implied, by the fiduciary; and the absence of the power in the defendant to affect the interests of the plaintiff negates the existence of any fiduciary obligation.

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Comments

  1. I’m glad to see the SCC is not treating fiduciary duty as the universal solvent, fit to use in all cases where you want a result. I remember a brilliant and amusing lecture by Donovan Waters, delivered for about 45 minutes – the professor’s standard – at 9 a.m. on a dark November morning, without a note, but as learned as amusing – in which he excoriated the courts for finding fiduciary duties everywhere.

    The result in the instant case looks fair to me, though one has some sympathy with the bookkeeper who just got too heavily invested emotionally in the firm and figured she could keep it alive by her own contributions. As Cromwell J says, whether it was ethical for the lawyer to let it happen, or to turn a blind eye to what was going on, was a different question from whether the law or equity imposed a duty on him to compensate her before his other creditors.