Justice Sutherland recently heard an interesting trial, Wong v. Li et al., 2020 ONSC 4299, in Newmarket, Ont., involving a Richmond Hill lawyer who was suing two of his real estate assistants for damages related to his suspension by the Law Society of Ontario (LSO) in 2012.
At trial, the lawyer alleged that two of his former real estate assistants committed fraud, breached fiduciary duties they had to him and conspired against him causing him damages related to lost income and reputation he suffered as a result of the Law Society suspension. The assistants had been involved in preparing documentation related to many of the transactions complained of at the Law Society hearing in 2012.
The lawyer’s action was dismissed.
The case is interesting, not merely because of the facts underlying the cause of action, but also because of the discussion in the decision released July 29, 2020 of “ad hoc fiduciary relationships” and the emerging tort of “equitable fraud”.
Justice Sutherland noted that recent case law had expanded fiduciary duties beyond the traditional fiduciary relationships such as solicitor-client, doctor-patient and trustee-beneficiary. An ‘ad hoc’ fiduciary duty can now be found by the Court in less traditional relationships based on the circumstances of any specific case.
For an ad hoc fiduciary relationship to exist, Justice Sutherland noted that three elements must be demonstrated. There must be an undertaking, express or implied, by the alleged fiduciary to act in the best interests of the beneficiary. Further it must be possible to identify a person or class of persons who are vulnerable to the alleged fiduciary and it must be shown that the alleged fiduciary’s power may affect the legal or substantial practical interests of the beneficiary.
In Justice Sutherland’s matter, he accepted the evidence of Ms. Yu, one of the legal assistant defendants that she sought direction from the lawyer related to the unusual features of the real estate transactions she was involved in. Justice Sutherland further found that neither of the real estate assistants had provided any undertaking, express or implied, to act in the best interests of the lawyer and instead that they were merely independent contractors employed to perform real estate transactional work that was to be monitored by the lawyer.
Justice Sutherland also found that neither of the assistants had been delegated discretionary power by the lawyer and that thus neither the second nor the third elements required for a finding of fiduciary duty existed.
With respect to the issue of “equitable fraud”, Justice Sutherland reviewed the recent case law and noted that equitable fraud was conduct that was less than deceit but which was “conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other”.
The scope of equitable fraud, Justice Sutherland noted, is wider than the traditional elements of common law fraud and can include many kinds and varieties of unfair or unconscionable conduct.
The Court, Justice Sutherland held, is guided by “doing what is right if the Court forms the opinion that there is conduct where it is unconscientious for an individual to avail themselves of advantages gained by such conduct”.
Having explored and defined the scope of equitable fraud, however, Justice Sutherland found that there was no actionable equitable fraud committed by the real estate assistant defendants and thus the action was dismissed.
With respect to damages, the Court found that the damages suffered by the lawyer arose from his admitted failure to supervise his practice and his failure to properly advise lending institutions as admitted to at his Law Society hearing. As such, even if the Court had found a fiduciary duty to exist or the presence of equitable fraud, the lawyer’s damages suffered as a result of his suspension were not suffered as a result of the defendants’ conduct.
While the facts before Justice Sutherland did not support a breach of any ad hoc fiduciary duty, or a finding of equitable fraud, civil litigators could benefit from reading the analysis of Justice Sutherland of those emerging causes of action in this decision.
Richard Worsfold is a Partner, and Reshma Kishnani a Senior Litigation Associate at Mills & Mills LLP, a full-service law firm. Mr. Worsfold and Ms. Kishnani were counsel for one of the defendants in this matter at trial.
This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.
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