Suing Parents For Breach of Fiduciary Duty

Suing Parents For Breach of Fiduciary Duty

In Hughes v Hughes 2019 BCSC 1109 a daughter sued her parents for breach of fiduciary duty for forcing her to have an abortion when she was 17 years of age.

The claim was dismissed for being outside of the statute of limitations, but the court reviewed the leading case relating to the nature of parental fiduciary duty, as set out in KLB v British Columbia 2003 SCC 51 at paragraphs 48-49:

48. “ What then is the content of the parental fiduciary duty? This question returns us to the cases in the wrong at the heart of breaches of this duty. The traditional focus of breach of fiduciary duty is breach of trust, with the attendant emphasis on disloyalty and promotion of one’s own or others’ interests at the expense of the beneficiary’s interests. Parents stand in a relationship of trust and owe fiduciary duties to their children. But the unique focus of the parental fiduciary duty, as distinguished from other duties imposed on them by the law, is breach of trust. Different legal and equitable duties may arise from the same relationship and circumstances. Equity does not duplicate the common-law causes of action, but supplements them. Where the conduct evinces breach of trust, it may extend liability, but only on that basis. In Norberg v Wynrib (1992) to SCR 226. it was stated in negligence and contract, the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. The essence of the fiduciary relationship, by contrast, is that one party exercises power on behalf of another, and pledges himself or herself to act in the best interests of the other. “

49. “ I have said that concern for the best interests of the child informs the parental fiduciary duty. But the duty imposed is to act loyally, and not to put one’s own or others’ interests ahead of the child’s in a manner that abuses the child’s trust. This explains the cases referred to above. The parent who exercises undue influence over the child in economic matters for his own gain has put his own interests ahead of the child’s, in a manner that abuses the child’s trust in him. The same may be said of the parent or uses a child for his sexual gratification or parent who, wanting to avoid trouble for herself or her household, turns a blind eye to the abuse of a child by her spouse. The parents need not, as the Court of Appeal suggested in the case at bar, be consciously motivated by a desire for profit or personal advantage; nor does it have to be her own interests, rather than those of a third-party, that she puts ahead of the child’s.

It is rather a question of disloyalty – of putting someone’s interests ahead of the child’s in a manner that abuses the child’s trust. Negligence, even aggravated negligence, will not ground parental fiduciary liability, unless it is associated with breach of trust in this sense.

Breach of Fiduciary Duty and Constructive Trust Remedy

Trustee For Child Under Will Has Priority

Li v Piao 2019 BCSC 488 involved a claim for inter alia, breach of fiduciary duty and the imposition of a remedial constructive trust as a result of the defendant’s failure to deliver an expensive car to the plaintiff as per the contract.

Breach of Fiduciary Duty

A fiduciary relationship arises when the following conditions are met:

a) The fiduciary has scope for the exercise of some discretion or power,

b) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiaries legal or practical interests,

c) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power, and

d) An undertaking by the alleged fiduciary to act in the best interest of the alleged beneficiary or beneficiaries

Two of the leading cases on breach of fiduciary duty is the Supreme Court of Canada decision of lac Minerals Ltd. v . International Corona Resources LTD (1989) to SCR 574 at 646, and professional Institute of the public service of Canada cv , Canada (Atty. General ) 2012 SCC 71 at paragraphs 121 – 123

 

Remedial Constructive Trust For Breach of Fiduciary Duty

A breach of fiduciary duty may traditionally give rise to a remedial constructive trust that is imposed upon the asset(s).

Four conditions in the determination of remedial constructive trust were identified in Soulos v Korkontzilas (1997) 2 SCR 217 at paragraph 45:

1) The defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities, giving rise to the assets in his hands;

2) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;

3) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and;

4) There must be no factors which would render imposition of a constructive trust unjust and all of the circumstances of the cased ie the interests of intervening creditors must be protected.

Substantive v Remedial Constructive Trusts

Substantive v Remedial Constructive Trusts

Trainer v Tractorhill Sales Ltd v Teck Metals Ltd 2018 BCSC 2043 discusses the difference between a substantive constructive trust and a remedial constructive trust.

In BNSF Railway Co v Teck Metals Ltd 2016 BCCA 350, the Court of Appeal reviewed the development of the constructive trust in Canada, the United Kingdom and the United States in order to consider whether constructive trusts were only available to remedy unjust enrichment and breach of fiduciary duty or whether they were also available on a wider substandard or institutional basis. ( They are available for ” good conscience” reasons).

The Trainer decision involved a plaintiff who had pled unjust enrichment and constructive trust in relation to the claims pertaining to the shares and warrants of a company.

The Law

A substantive constructive trust is distinguished from a remedial constructive trust in that a substantive constructive trust, the acts of the parties in relation to some property are such that those acts or later declared by a court to have given rise to a substantial of constructive trust and to of done so at a time when the acts of the parties brought the trust into being.

The difference between a substantial of constructive trust and a resulting trust may, in cases where the property reverts to the settlor, be no more than a matter of terminological preference.

In a remedial constructive trust on the other hand, the acts of the parties are such that a wrong is done by one of them to another so that, while no substantial trust relationship is then and there brought into being by those acts, nonetheless a remedy is required in relation to property and the court grants that remedy in the form of a declaration which when the order is made creates a constructive trust by one of the parties in favor of another party.

In BNSF Railway the appeal court concluded that in Canada, a remedial constructive trust is available to remedy unjust enrichment and breach of fiduciary duty but it is also open to the court to develop the law pertaining to substantial of constructive trusts on a case-by-case basis where “good conscience so requires”. The BNSF decision followed Soulos v Korkontzilas (1997) to SCR at paragraph 34.

In both substantial and remedial constructive trusts, there are two criteria that must be met:

a) The plaintiff must demonstrate a substantial and direct link, a causal connection or a nexus between his or her claim in the property which is the subject of the substantial of construction trust or the proposed remedial constructive trust ( Pro- Sys consultants Microsoft Corporation 2013 SCC at paragraph 92;

b) The plaintiffs must demonstrate that a monetary award is insufficient or an appropriate in the circumstances. Pro-Cys at para. 92,.

The election in this regard need not be made until the end of trial but at that stage the plaintiff must select and if you she Alexa constructive trust he or she must be able to show that monetary damages are insufficient or inappropriate.

The court cites BSNF at paragraph 85 as authority for the factual basis for asserting that damages would be an insufficient remedy should be pled.