The Rise of the “Remedial” Fiduciary Relationship: A
Comment on International Corona Resources Ltd v. Lac
Minerals Ltd
Dennis R. Klinck*
Beginning from the observation that courts
have been exhibiting a growing readiness to
apply the fiduciary concept to commercial re-
lations, the author examines the recent On-
tario Court of Appeal decision in
International Corona Resources Ltd v. Lac
Minerals Ltd as an example of this trend.
After attempting to elucidate the relationship
between “breach of confidence”, which is
also at issue in the case, and breach of fi-
duciary duty generally, he considers the
Court’s treatment of the latter. He argues that
the Court fails to make sufficiently explicit
the defining criteria it adopts in finding a fi-
duciary relationship here, and does not ex-
plore specifically enough the nature of the
obligation or to whom it is owed. The author
then seeks to identify criteria for fiduciary
relationships that emerge from a survey of
the writings of various commentators. These
emphasize two essential features: the pres-
ence of an obligation on one party to act ex-
clusively in an interest other than his own,
and the conferring of a power, involving a
measure of discretion, on the party so acting.
In terms of these criteria, it is possible to
support the finding of a fiduciary relationship
in Corona, but applying the criteria would
constrain the analysis and, perhaps, the scope
of the fiduciary relation in the case.
Prenant comme point de depart l’observation
voulant que les tribunaux se montrent de
plus en plus disposes A appliquer le concept
de rapport fiduciaire aux relations commer-
ciales, l’auteur pr6sente le recent arret de la
Cour d’appel de l’Ontario dans l’affaire In-
ternational Corona Resources Ltd c. Lac Mi-
nerals Ltd comme une illustration de cette
tendance. Apr~s avoir tent6 de d~gager le lien
entre l’utilisation d’information confiden-
tielle, qui est aussi une question soulev~e par
cet arr&t, et ]a violation de relation fiduciaire
en g6n~ral, il consid~re l’analyse faite par la
Cour de ce dernier aspect. 11 soutient que le
tribunal n’a pas suffisamment explicit6 les
critres servant A d6terminer l’existence d’un
rapport fiduciaire, et il ajoute qu’on aurait d~l
aborder de fagon plus sp~cifique la nature de
‘obligation de fiduciaire et l’identit6 des
cr~anciers de cette obligation.
‘auteur pour-
suit en tentant d’identifier les crit~res d6ter-
minants d’un rapport fiduciaire qui 6mergent
de ]a litt~rature sur le sujet. II ressort de cette
litt6rature deux 616ments essentiels: l’obli-
gation de l’une des parties d’agir dans un in-
t~ret autre que le sien, ainsi qu’un pouvoir,
impliquant une part de discr6tion, pour la
partie agissant ainsi. Selon ces critres, il se-
rait possible d’identifier un rapport fiduciaire
dans Corona, mais l’auteur ajoute que le re-
cours A ces crit~res limiterait l’analyse et,
peut-6tre, l’6tendue du rapport fiduciaire
dans cette affaire.
‘Assistant Professor, Faculty of Law, McGill University. My thinking about fiduciary rela-
tionships has been influenced, in ways not easy to specify, by discussions at the “International
Symposium on Trusts, Equity and Fiduciary Relationships”, held at the University of Victoria,
14 to 17 February 1988. Of particular interest was a detailed analysis of the fiduciary principle
in relation to the doctrines of good faith and unconscionability by Paul D. Finn. The proceedings
of the Conference are to be published by Carswell.
1988]
CHRONIQUE DE JURISPRUDENCE
I.
Introduction
Speaking from an American perspective, Tamar Frankel not long ago
observed that “[tihe twentieth century is witnessing an unprecedented ex-
pansion and development of fiduciary law.”‘ And an Australian, R.P Austin,
has remarked that the fiduciary concept has lately been invading the com-
mercial sphere:
What is new, or at any rate much more to the forefront in recent years, is the
extent to which fiduciary relationships are being asserted and sometimes es-
tablished in commercial relationships which are outside the traditional fidu-
ciary categories.2
Two cases recently decided in the Ontario Court of Appeal -Standard
Investments Ltd v. Canadian Imperial Bank of Commerce3 and International
Corona Resources Ltd v. Lac Minerals Ltd4 –
illustrate this tendency in
Canada. In the first, the Court found a fiduciary relationship between a bank
and its corporate customer; in the second – which is the subject of this
comment –
the Court imposed fiduciary obligations on a party negotiating
for a joint venture in relation to a mineral property.
The – ostensibly increasing –
resort to the fiduciary concept to ground
liability in commercial contexts has a number of important implications.
For one thing, the fiduciary concept offers a basis of attack where elements
necessary to contract or tort liability are lacking. Thus, in Corona itself,
there was no contract; 5 the availability of an alternative basis of liability
was of great value to the plaintiff. Moreover, the person arguing breach of
fiduciary relationship has less to prove than a plaintiff alleging breach of
contract or tortious injury. Once the relationship is characterized as fiduciary
and the breach established, all else follows, so to speak. The position has
been stated by Lord Russell of Killowen in Regal Hastings v. Gulliver
The rule of equity which insists on those, who by use of a fiduciary position
make a profit, being liable to account for that profit, in no way depends on
fraud, or absence of bona fides; or upon such questions or considerations as
whether the profit would or should otherwise have gone to the plaintiff.., or
‘”Fiduciary Law” (1983) 71 Calif. L. Rev. 795 at 796.
2″The Corporate Fiduciary: Standard Investments Ltd. v. Canadian Imperial Bank of Com-
merce” (1986-87) 12 Can. Bus. L.J. 96 at 100.
3(1985), 52 O.R. (2d) 473, 22 D.L.R. (4th) 410 [hereinafter Standard Investments]; leave to
appeal to S.C.C. refused (1986), 53 O.R. (2d) 663, 65 N.R. 78.
4(1987), 23 O.A.C. 263, 62 O.R. (2d) I (C.A.) [hereinafter Corona cited to O.A.C.].
SSee the trial judgment of Holland J., (1986) 53 O.R. (2d) 737 at 770-71, 25 D.L.R. (4th)
504 (H.C.) [hereinafter Corona trial judgment cited to O.R.]. In the tort context, see Nocton
v. Ashburton, [1914] A.C. 932, [1914-15] All E.R. Rep. 45 (H.L.), where the House of Lords
pointed out that an action for breach of fiduciary duty is sustainable in the absence of proof
of fraud sufficient to ground an action in deceit.
McGILL LAW JOURNAL
[Vol. 33
whether he took a risk or acted as he did for the benefit of the plaintiff, or
whether the plaintiff has in fact been damaged or benefited by his action. The
liability arises from the mere fact of a profit having, in the stated circumstances,
been made.6
Further, an action based on breach of fiduciary duty is advantageous from
the point of view of remedy. Not only is the plaintiff’s claim measured
according to the defendant’s gain rather than according to the plaintiff’s
loss, 7 but the range of available remedies is greater –
including, notably,
the constructive trust.8
The point is that invocation of the fiduciary principle can be a very
attractive option for a plaintiff- more attractive, indeed, than a contractual
approach. Its recognition by the courts thus raises the question of the extent
to which “commercial morality” 9 should be enforced apart from more or
less explicit agreements between parties. In this connection, Ernest Weinrib
has observed that, besides having a role in safeguarding “the integrity of
the plaintiff’s business structure”, “the fiduciary concept simultaneously
performs the subordinate function of maintaining the integrity of the mar-
ketplace in which the organization operates.”‘ 0 If it is true that the fiduciary
concept is a necessary complement to other legal principles in maintaining
the integrity of the marketplace, the further question that must be asked is
“What is the ambit of the fiduciary principle?” Is it something that can be
encapsulated in rules and definitions, or must it remain a rather broad quasi-
moral concept?
Although arguably once referring to a number of clearly-defined cate-
gories, ” the term “fiduciary relationship” has in recent years become rather
more protean. Indeed, one not infrequently encounters the assertion that
6(1942), [1967] 2 A.C. 134 at 144-45, [1942] 1 All E.R. 378 (H.L.) [hereinafter Regal
Hastings]. See also, for example, comments by Wilson J. in Guerin v. Canada, [1984] 2 S.C.R.
335 at 360-61, 13 D.L.R. (4th) 321, 55 N.R. 161 [hereinafter Guerin cited to S.C.R.].
7See, for example, Laskin J. (as he then was) in Canadian Aero Service Ltd v. O’Malley
(1973), [1974] S.C.R. 592 at 621-22, 40 D.L.R. (3d) 371.
8See D. Waters, “Banks, Fiduciary Obligations and Unconscionable Transactions” (1986) 65
Can. Bar Rev. 37 at 45: “[E]quity offers remedies which go beyond common law remedies to
bring about the most meritorious outcome to the dispute.”
9This expression occurs in, for example, Hospital Products Ltd v. United States Surgical
Corp. (1984), 55 A.L.R. 417 at 436, 156 Commonwealth L.R. 41, 58 A.L.J.R. 587 [hereinafter
Hospital Products cited to A.L.R.] where Gibbs C.J. said that it was not necessary there to
invoke the fiduciary principle “to vindicate commercial morality, for the ordinary remedies
for fraud and breach of contract were available to USSC … .” Note that these words point to
a residual or gap-filling role for the fiduciary concept. In Corona, the Court of Appeal spoke
of the trial judge’s decision as recognizing “a usage in the mining industry which is consistent
with business morality”: supra, note 4 at 304.
10″The Fiduciary Obligation” (1975) 25 U.T.L.J. 1 at 11, 15.
“But see Tate v. Williamson (1866), L.R. 2 Ch. App. 55.
19881
the categories of fiduciary are not “closed”.’ 2 Despite the word “categories”,
this suggests a fact-based approach relating to broad principles, rather than
cut-and-dried “classification”. 13
COMMENTS
The problem is, however, that the relevant principles themselves remain
undefined and perhaps undefinable. Thus, for example, Gibbs C.J. in Hos-
pital Products Ltd v. United States Surgical Corp. observed the following:
The authorities contain much guidance as to the duties of one who is in
a fiduciary relationship with another, but provide no comprehensive statement
of the criteria by reference to which the fiduciary relationship may be
established. 14
According to one commentator, a conclusion coming out of that case is that
there can be “no universal, all-purpose definition of the fiduciary relation-
ship.”‘ 15 This poses some difficulties. We seem to have a potent legal concept
whose defining criteria remain largely unidentified. Again, it may be desir-
able to have a residual equitable category for enforcing commercial morality,
based to some extent on courts’ intuitions about what is “just and proper”. 16
On the other hand, as J.C. Shepherd has said, because of the potentially
broad use of fiduciary relationships to ground constructive trusts, it may
be desirable to attempt “to pin down the theoretical basis of this concept.”’17
This question of what is the specific theoretical basis of the fiduciary
concept is raised by Corona, to which I now turn.
12See, notably, Laskin v. Bache & Co. (1971), [1972] 1 O.R. 465 at 472, 23 D.L.R. (3d) 385
(C.A.), Arup J.A.:
[T]he category of cases in which fiduciary duties and obligations arise from the
circumstances of the case and the relationship of the parties is no more “closed”
than the categories of negligence at common law.
See also Guerin, supra, note 6 at 384, Dickson C.J.C.
13See Waters, supra, note 8 at 47: “A person may be a fiduciary … for one of two reasons.
Either equity has already ruled that the relationship in question is inherently fiduciary… or,
if such a ruling has not taken place, the alleged victim is able to show on the facts and in the
circumstances of his case that the other owed him a fiduciary standard of behaviour.” Waters
suggests that these two cases might be termed “the pre-existing fiduciary relationship” and “the
ad hoc fiduciary relationship” respectively.
14Supra, note 9 at 432.
t5R.P. Austin, “Commerce and Equity –
Fiduciary Obligation and Constructive Trust”
(1986) 6 Oxford J. of Leg. Stud. 444 at 445-46. And see Waters, supra, note 8 at 55:
[C]ourts of equity never felt the need to spell out the criteria for the fiduciary
. The courts have appeared willing to say simply that
relationship in any detail …
one person is a fiduciary vis-a-vis the other, thus merely assuming the answer to the
primary issue of whether the particular person should be subject to a particular
express trustee obligation.
16See Corona, supra, note 4 at 301.
17″Towards a Unified Concept of Fiduciary Relationships” (1981) 97 L.Q. Rev. 51.
REVUE DE DROIT DE McGILL
[Vol. 33
II. Corona: The Facts and the Decision
Because the case has received considerable publicity, I shall only briefly
outline the factual situation in Corona, highlighting a few points crucial to
the fact-based approach adopted by the courts.
Corona owned mining rights on a parcel of land in Northern Ontario.
Its exploration of the land led it to believe that there was gold present on
that parcel and adjacent land (“the Williams property”). Some – but not
all – of the results of its exploration had been made public in mining circles,
partly because Corona was interested in attracting financial (and other) sup-
port in developing the mining potential of the land. Lac expressed interest
in the project, and Corona and Lac embarked on negotiations with a view
to a possible joint venture. During these negotiations, Corona made avail-
able to Lac technical information – notably, samples of drill core –
relating
to its exploration. Corona sought to acquire mining rights to the Williams
property, but Lac put in a competing bid, which was accepted by the owner,
in spite of Corona’s subsequently submitting a better offer. This precipitated
the collapse of negotiations between the two parties. Lac thereafter devel-
oped a producing gold mine on the land thus acquired.
Among the salient facts emphasized by Holland J. at trial were the
following: Corona and Lac were seriously negotiating for a joint venture;
mining industry custom requires that parties so negotiating not act to each
other’s detriment; information imparted by Corona to Lac was indeed con-
fidential and was imparted solely to permit Lac to evaluate the possible
joint venture; and, but for Lac’s actions, Corona would have acquired the
mineral rights in question.
On the basis of these and other facts, Holland J. found that Lac had
committed a breach of confidence by misappropriating the information that
Corona had disclosed, and that there was a fiduciary relationship between
the two parties, which Lac had also breached. While acknowledging that
“breach of confidence” and “breach of fiduciary duty” are distinct causes
of action, the trial judge said that in this case the two were “intertwined”.
He declared that, upon Corona’s paying Lac $153,978,000, and other sums,
Lac was to transfer its interest in the minerals and the producing gold mine
on the land to Corona. The $153,978,000 order in Lac’s favour was made
on the basis of subsection 37(1) of the Conveyancing and Law of Property
Act,18 which allows to a person who “makes lasting improvements on land
under the belief that it is his own” “a lien upon it to the extent of the
amount by which its value is enhanced by the improvements.”
I8R.S.O. 1980, c. 90 [hereinafter the Conveyancing and Law of Property Act].
1988]
CHRONIQUE DE JURISPRUDENCE
The Ontario Court of Appeal upheld the trial decision, again finding
both a breach of fiduciary duty and a breach of confidence. The Court,
however, rejected Holland J.’s reasoning with respect to the applicability of
subsection 37(1) of the Conveyancing and Law of Property Act, since, before
it made the improvements in question, Lac had notice of Corona’s claim.
Nevertheless, the Court did allow a lien in favour of Lac for the value of
developing the mine and mill, on the basis of broad equitable principles:
The sheer magnitude of the enrichment of, or benefit conferred on, Corona if
LAC were denied a lien cannot be ignored, particularly in the light of the reality
that the expenditures made by LAC to make the property productive inevitably
would have been required on the part of Corona had there been no breach of
the constructive trust. The principles of equity, in our view, need not be em-
ployed in a manner that itself creates an unjust enrichment or disturbs the
conscience of the court.19
And later: “Forfeiting the investment as well as the property is too unrea-
sonable a price to pay.”20
This epitome is, I think, a fair indication –
albeit sketchy – of what
happened in the case. I want now to proceed to a consideration of the legal
principles at issue. My main concern is with how the Court treated –
and
how it might have treated –
the fiduciary concept. However, because it
formed an alternative basis of decision in the case and because of its close
identification with fiduciary relationships, I must discuss the notion of
“confidentiality” as well. As I have already noted, both courts regarded the
“breach of confidence” issue and the fiduciary issue as “intertwined”. This
interpenetration of the two concepts is true not only of this case, but more
generally. Although “breach of confidence” and “breach of fiduciary duty”
are notionally distinct, they not infrequently arise together; indeed, “con-
fidence” is often spoken of as if it were the defining criterion of fiduciary
relationships.21 The central object of this comment is to say something about
such defining criteria.
19Supra, note 4 at 316.
20 Ibid.
21See, for example, Surveys & Mining Ltd v. Morrison, [1969] Qd. R. 470 at 473 (S.C.),
Campbell J.: “[T]he special position held by a consulting geologist involves the placing of
confidence in him by his principal and is such as to impress him with a fiduciary character
…. A similar approach seems to characterize the English case of Tufton v. Sperni, [1952] 2
T.L.R. 516 (C.A.). See also R.P. Meagher, W.M.C. Gummow & J.R.E Lehane, Equity:Doctrines
and Remedies, 2d ed. (Sydney: Butterworths, 1984) at 123 [hereinafter Meagher et al.]; B.H.
McPherson, “Joint Ventures” in RD. Finn, ed., Equity and Commercial Relationships (Syndey:
Law Book Co., 1987) 29 [hereinafter Finn].
McGILL LAW JOURNAL
[Vol. 33
III. “Breach of Confidence”
“Confidence” has two rather different meanings in the context with
which we are concerned, and these two meaning are not always adequately
distinguished. “Confidence” can mean something like “trust”, as in “I have
confidence in him.” This is the sense in which, for example, Lord Denning
used the term in Lloyds Bank v. Bundy, when he said: “The relationship
between the bank and the father was one of trust and confidence. The bank
knew that the father relied on it implicitly to advise him about the trans-
action. The father trusted the bank. ’22 I shall return to this meaning pres-
ently, when I consider whether it might be a sufficient criterion for fiduciary
relationships. Suffice it for the moment to observe that confidence in this
sense requires a “that” clause: “I have confidence that X will do something
or behave in a certain way.” We may have to look to the “that” clause in
a particular case to determine whether the confidence creates a fiduciary
relationship.
On the other hand, “confidence” can mean something like “secrecy”,
as in “I told him in the strictest confidence.” This seems to be the primary
meaning in the “breach of confidence” cause of action, and on one analysis,
what was at stake in Corona. Before looking at “breach of confidence” in
this sense, I must mention that the two meanings of “confidence” are often
themselves “intertwined”. Thus, X may give Y “confidential” (that is, se-
cret) information, in the “confidence” (that is, trust) that Y will not reveal
it or misappropriate it. Indeed, “confidence” in the sense of trust is perhaps
an inevitable part of “confidence” in the sense of secrecy, although the
converse is almost certainly not true.
That said, it appears that the “breach of confidence”cause of action
typically arises in situations involving the misuse of private information.
The elements of “breach of confidence” have been outlined, for example,
by Megarry J. in Coco v. A.N. Clark (Engineers) Ltd-
In my judgment, three elements are normally required if, apart from con-
tract, a case of breach of confidence is to succeed. First, the information itself,
in the words of Lord Greene, M.R. in the Saltman case[231 on page 215, must
“have the necessary quality of confidence about it.” Secondly, that information
must have been imparted in circumstances importing an obligation of confi-
dence. Thirdly, there must be an unauthorised use of that information to the
detriment of the party communicating it.24
-(1974), [1975] Q.B. 326, [1974] 3 All E.R. 757 (C.A.) [hereinafter Lloyds Bank v. Bndy].
23[Saltman Engineering Co. v. Campbell Engineering Co. (1948), 65 R.RC. 203 (Ch.D. &
24(1968), [1969] R.P.C. 41 at 47 (Ch.D.) [hereinafter Coco].
C.A.), [1963] 3 All E.R. 413 (C.A.).
1988]
COMMENTS
Frances Gurry, who in his book Breach of Confidence essentially adopts
Megarry J.’s criteria, 25 adds:
The test … for establishing the existence of an obligation of confidence is
predicated on the basis of a disclosure of confidential informationfor a limited
an obligation will exist whenever confidential information is im-
purpose –
parted by a confider to a confidant for a limited purpose.26
In his judgment in Corona, Holland J. follows the approach outlined by
as does the Ontario Court of Appeal. Given Hol-
Megarry J. and Gurry –
land J.’s factual findings, I have no quarrel with his approach to the “breach
of confidence” issue. However, I do have a few comments on its
implications.
The first is that the situation in Corona typifies those in which courts
have found an obligation of confidence to arise. As Gurry notes, in cases
of pre-contractual negotiations, including proposed joint ventures, where
negotiations have failed, “the courts have readily held the confidant bound
by an obligation not to use the confidential information for any purpose
other than assessing the feasibility of the proposal under negotiation.
’27
Second, there may be a question whether the information actually used
or relied on was confidential. Here, as I have already noted, Corona had
publicized some of the results of its explorations.28 Holland J. found, how-
ever, that crucial information imparted to Lac by Corona was really private.
The distinction between “public” and “private” information – where ar-
guably both are used by the confidant – may be extremely problematical.
Thus, in Coco, Megarry J. pointed out that “[t]he difficulty comes … when
the information used is partly public and partly private; for then the recipient
must somehow segregate the two and, although free to use the former, must
take no advantage of the communication of the latter.”’29 One problem may
be that the confidant who is unable to segregate the two may be, of all the
world, prevented from benefitting from the public information. 30 Or, if he
thinks he has successfully segregated the two, relying only on the public
information, he may find that a court takes a different view.
25(Oxford: Clarendon Press, 1984) at 3-5 [hereinafter Gurry].
26Ibid. at 113. See also PD. Finn, “Confidentiality and the “Public Interest”‘ (1984) 58
Australian L.J. 497 at 499.
(Ch.D. & C.A.).
27Supra, note 25 at 125. See, for example, Seager v. Copydex Ltd (1966), [1967] R.P.C. 349
28For details, see Corona, supra, note 4 at 281ff.
29Supra, note 24 at 47.
30Thus, suppose that negotiations between Lac and Corona had broken off before either had
acquired the Williams property: would Lac have been precluded from acquiring the property
on the basis that it had confidential information about it?
REVUE DE DROIT DE McGILL
[Vol. 33
Third, respecting the requirement that the information have been im-
parted “in circumstances importing an obligation of confidence”, it appears
that constructive knowledge of the obligation will suffice. Thus, again in
Coco, Megarry J. suggests a “reasonable man” test,31 and Gurry says that
the circumstances that might give rise to an inference of constructive knowl-
edge include “custom”. 32 More particularly, in Corona, Holland J. seems
to have relied on Megarry J.’s observation in Coco that
where information of commercial or industrial value is given on a business-
like basis and with some avowed common object in mind, such as a joint
venture … , I would regard the recipient as carrying a heavy burden if he seeks
to repel a contention that he was bound by an obligation of confidence ….33
Fourth, Megarry J.’s third element requires that the misuse of the con-
fidential information cause the confider some detriment. Here, the trial judge
found such detriment in the fact that but for Lac’s breach, Corona would
have acquired the property for itself. However, the presence of the require-
ment may cause problems in other contexts. To take an extreme example,
suppose that it had turned out that the acquisition of the property in question
was ultra vires Corona. Lac’s misappropriation of the information would
then not have caused Corona any detriment – at any rate, not the detriment
found here. Would this have precluded Corona’s claim for breach of con-
fidence? In his enumeration of the elements in the cause of action, Gurry
does not mention detriment; he says only that breach occurs “when it is
shown that the confidant has made an unauthorized use of the information
by using it for a purpose other than that for which it was imparted to him.”’34
And Megarry J. himself leaves open the question whether detriment, at least
to the confider himself, is an absolute prerequisite. 35
This point is relevant to the question of the relationship between breach
of confidence and breach of fiduciary obligation, for it is clear in the case
of the latter that detriment to the plaintiff need not be shown. 36 If it need
be shown in breach of confidence cases, then one can imagine situations
involving the imparting of confidential information in which a breach of
confidence action would fail but an action for breach of fiduciary duty (if
such could be found) might succeed. The plaintiff would want to argue that
the imparting of the confidential information, apart from its relevance to
“breach of confidence”, created a fiduciary relationship between the parties.
31Supra, note 24 at 48.
32Supra, note 25 at 120.
33Supra, note 24 at 48. See also Corona trial judgment, supra, note 5 at 772, 775.
3Supra, note 25 at 5.
35Coco, supra, note 24 at 48.
36See, for example, Regal Hastings, supra, note 6; Boardman v. Phipps (1966), [1967] 2 A.C.
46, [1966] 3 All E.R. 721 (H.L.).
19881
CHRONIQUE DE JURISPRUDENCE
This may, of course, be a superfluous point if detriment in fact need not be
proven for “breach of confidence”. Incidentally, another factor perhaps in-
dicating that detriment is not required is the availability of accounting for
profits as a remedy for breach of confidence. This suggests again that the
inquiry is not into the plaintiff’s loss, but into the defendant’s gain.
Thus, a resolution of Corona on the basis of “breach of confidence” –
a cause of action founded on Lac’s misuse of information confided to it
privately for a limited purpose –
appears appropriate, although some po-
tential analytical problems do arise.37
Given that there was in Corona an appropriation of confidential in-
formation, two further inquiries are suggested: (1) What is the relationship
of this kind of “confidence” to “confidence” more broadly conceived as
“trust”? and (2) What is the relationship of either kind of “confidence” to
the fiduciary concept?
As I have already intimated, any situation involving confidential in-
formation can be conceived as involving “confidence” in the broader sense
as well. Thus, the information is imparted in the “confidence” that it will
be used only for an understood limited purpose. The confider is “trusting”
the confidant with the information. However, the sharing of private infor-
mation is only one way in which one party may express confidence in
another. In Corona there was a “confidential” relationship –
based at the
least on Corona’s sharing information with Lac, but perhaps founded as
well on other forms of trust between the parties.
37Another question in the case was whether the imposition of a constructive trust is an
available remedy for breach of confidence. Thus, for example, Gurry makes no mention of the
constructive trust in his discussion of remedies. The Court of Appeal in Corona affirms that
“there can be no doubt that one of the remedies available” when an equitable obligation is
breached is the constructive trust. The Court relies on Goff and Jones’ The Law of Restitution,
3d ed. (London: Sweet & Maxwell, 1986) for this position. Although Goff and Jones assert it
as a desideratum, the authority they offer is sparse. Indeed, among the cases they cite in this
context is O’Sullivan v. Management Agency and Music Ltd (1984), [1985] Q.B. 428, [1985]
3 All E.R. 351, which seems not to be about confidential information at all. The Court of
Appeal does, however, point to a Supreme Court of Canada case – Pre-Cam Exploration &
Development Ltdv. McTavish, [1966] S.C.R. 551, 57 D.L.R. (2d) 557 – as authority forgranting
a constructive trust for breach of confidence. Unless that case is to be distinguished –
for
example, on the basis that it involved use of confidential information by an ex-employee –
the issue may be settled. Clearly, ifa constructive trust is not available for breach of confidence
per se, a plaintiff would want to establish the presence of a fiduciary relationship, so as not to
be limited to personal remedies.
Also of concern in the area of remedies for breach of confidence is Gurry’s observation that
the defendant “is liable to account only for such profits as are attributable to his wrongful use
of the plaintiff’s property”: supra, note 25 at 418. This may lead the courts to make appor-
tionment of profits in some cases, although, when this becomes too complicated, Gurry suggests
that damages are an appropriate substitute.
McGILL LAW JOURNAL
[Vol. 33
Does the presence of this confidentiality entail the existence of a fi-
duciary relationship? The answer is not clear. As an illustration, Gurry
asserts that “the obligation of confidence can itself be regarded as a fiduciary
obligation which defines for its own purposes its own class of fiduciaries.” 38
If this is true, then every case of breach of confidence will also be a breach
of fiduciary duty. Further inquiry, once the breach of confidence was estab-
lished, would be rendered superfluous. Although the courts in Corona re-
garded the two concepts as “intertwined”, it is not clear that they have
become indistinguishable.
Another view is represented by Austin, who says: “Sometimes the term
‘fiduciary’ is misleadingly applied to other relationships, such as the rela-
tionship between informant and confidant in the law of misuse of confi-
dential information (breach of confidence) … .”,39 This implies that
something more, or at least different, is required to find a fiduciary
relationship.
The question is complicated by the fact that misuse of confidential
information is frequently a feature of breaches of fiduciary obligations. Here
a distinction must be made:
In a breach of confidence action, the court’s concern is for the protection of a
confidence which has been created by the disclosure of confidential information
by the confider to the confidant. The court’s attention is thus focused on the
protection of the confidential information because it has been the medium for
the creation of a relationship of confidence; its attention is not focused on the
information as a medium by which a pre-existing duty is breached. 40
Thus, for example, in Boardman, the defendants, as solicitor and agent,
respectively, of the trust, already stood in a fiduciary relationship to it. In
the context of that relationship, they acquired confidential information
which they used personally. This use of the confidential information was
the mode of their breach of their fiduciary obligation. Had they not stood
in a pre-existing fiduciary relationship to the trust, but been given confi-
dential information, this imparting of the information would have created
a confidential relationship. The question is whether the relationship thus
created would have been fiduciary.
38Supra, note 25 at 159. See also Meagher et al., supra., note 21 at 123: “Perhaps, also, the
equitable doctrine relating to undue influence … and confidential information should be in-
cluded under the general ‘fiduciary’ rubric, though specific bodies of doctrine have been de-
veloped in relation to each.”
39Supra, note 2 at 97. See also Waters, supra, note 8 at 41, referring to the bank-customer
relationship: “Most [courts] have used the term ‘fiduciary,’ but others have spoken of a ‘con-
fidential’ relationship, and the “confidential’ has been distinguished from the ‘fiduciary’ –
something less, but requiring of the bank similar good faith conduct.”
4Gurry, supra, note 25 at 161-62. See also Waters, supra, note 8 at 61.
1988]
COMMENTS
With these considerations in mind, I want to turn now to the handling
of the fiduciary concept in Corona, and to an examination of other attempts
to characterize fiduciary relationships – with a view to elucidating poten-
tially unifying criteria.
IV. The Fiduciary Relationship in Corona
There are two possible bases for discerning a fiduciary relationship in
Corona. First, Lac and Corona were parties whose relationship, albeit not
formalized, contemplated cooperative or joint activity,41 and thus involved
mutual confidence. Again, this basis might require an answer to the question
“Confidence that what?” Second, the imparting or transfer of confidential
information by Corona to Lac could itself have constituted the fiduciary
relationship. A third possibility is that the fiduciary relationship resulted
from some combination of the two. For example, the fact that Corona gave
confidential information to Lac, although perhaps not in itself sufficient to
constitute a fully-fledged fiduciary relationship, was one element in the re-
lationship pointing to the intensity of the trust Corona reposed in Lac. 42
Although it is not entirely clear how the courts ultimately sorted out
these bases, they both alluded to all the above possibilities. My concern
here is to ask whether the relationship, apart from the imparting of confi-
dential information, was fiduciary and, if not, whether the imparting of
confidential information –
already sufficient in itself to ground the breach
of confidence suit –
should suffice to create a fiduciary relationship.
Both courts found a fiduciary relationship without depending on the
transfer of confidential information. Thus, the Court of Appeal said:
[T]he trial judge was correct in finding that a fiduciary relationship came into
existence between LAC and Corona as soon as they entered into serious ne-
gotiations with respect to a joint venture between them …. 43
As authorities for the proposition that not only those who had already
formed a partnership or embarked upon a joint venture, but also parties
(in certain circumstances) negotiating towards one of those ends, may be
although not pursuant to any formal contract.
41Some cooperative activity, a “joint geochemical sampling program”, had already begun,
42This point is in fact made in the Court of Appeal’s judgment: supra, note 4 at 278.
43Ibid. at 301.
REVUE DE DROIT DE McGILL
[Vol. 33
fiduciaries, 44 the courts cited, inter alia, Lindley on Partnership,45 Fawcett
v. Whitehouse,46 and United Dominions Corp. v. Brian Pty Ltd.47
Some comment on this last case is appropriate, since the Court refers
to it several times. Although the Australian High Court did find a fiduciary
relationship among intending joint venturers, the scope of that finding must
be scrutinized. Mason J. said, for example:
[A] fiduciary relationship with attendant fiduciary obligations may, and ordi-
narily will, exist between prospective partners who have embarked upon the
conduct of the partnership business or venture before the precise terms of any
partnership agreement have been settled. 48
In the case, moreover,
the arrangements between the prospective joint venturers had passed far be-
yond the stage of mere negotiation. Each had … agreed to be, and been accepted
as, a participant in each of the proposed joint ventures, if both or either of
them went ahead.4 9
In Corona, the Court of Appeal remarked that the intended relationship in
United Dominions had developed further than that between Corona and
Lac, but found facts – notably, mining industry practice, the confiding of
information, and the cooperative geochemical programme –
taking the
relationship beyond “mere negotiation”. Nevertheless, unlike in United Do-
minions, the terms of the prospective joint venture had not been settled,
nor had any terms been given defacto effect.
In finding a fiduciary relationship on the basis of negotiation for a joint
venture, the Court of Appeal relied heavily on the trial judge’s finding that
there is a custom in the mining industry “that imposes an obligation when
parties are seriously negotiating not to act to the detriment of each other.” 50
As a result of their “serious negotiation” in the context of industry practice,
“Lac and Corona owed fiduciary duties each to the other … not to act to
“R.A. Ladbury has recently questioned whether even the typical consummated joint venture
amounts to a fiduciary relationship: see “Commentary” in Finn, supra, note 21, 37. He notes,
for example, that in contrast to partners, joint venturers normally “are carrying on business
severally and not in common” (at 41) and that they are not agents for each other (at 43).
45E.H. Scamell & R.C. Banks, eds, Lindley on the Law of Partnership, 15th ed. (London:
Sweet & Maxwell, 1984) at 480.
46(1829), 1 Russ. & M. 132, 39 E.R. 51 (Ch.) [hereinafter Favcett cited to E.R.].
47(1985), 59 A.L.J.R. 676, 157 Commonwealth L.R. 1, 60 A.L.R. 741 (H.C.) [hereinafter
United Dominions cited to A.L.J.R.].
48Ibid. at 680.
49Ibid.
50Corona, supra, note 4 at 281, 304.
1988]
CHRONIQUE DE JURISPRUDENCE
the detriment of the other”; 51 moreover, “Lac was in breach of that duty
by acquiring the Williams’ property. 52
This conclusion raises several questions. One of these is whether the
Court of Appeal is implicitly enunciating a test of fiduciary relationships in
something like the following terms: “A fiduciary relationship exists where
the dealings between the parties are such as to indicate that one party is
not to act to the detriment of the other.” I shall return to this hypothesis
later in discussing a number of tests that have been proposed for discerning
the presence of fiduciary relationships.
A second question involves the validity of the observation that the
simple acquisition of the Williams property by Lac (leaving aside for the
sake of argument the breach of confidence) was a breach of a fiduciary duty.
Perhaps one or two hypotheticals will illustrate my point. Suppose that all
the information relevant to evaluating the Williams property was public,
and that Lac and Corona were seriously negotiating for a joint venture, and
Lac acquired the property on its own account.. Would there have been a
breach of a fiduciary obligation? I think that such a conclusion would have
been harder to reach. Or, suppose the facts of Corona, including the serious
negotiation. But suppose that, instead of Lac’s acquiring the property, Cor-
ona (without informing Lac) had acquired it. Would we say that, on the
basis of the negotiations tending toward a joint venture, and the mining
industry custom, that Corona held the property for itself and Lac –
or, on
the basis of the approach in Corona, exclusively for Lac? Again, the answer
is far from self-evident. Indeed, we might be inclined to say that, since
Corona “owned” the really critical information relevant to the acquisition,
the fact of the pre-contractual negotiations was relatively unimportant. Or,
suppose that, while negotiating with Lac, Corona was simultaneously ne-
gotiating with another party, and chose to enter a joint venture with that
party. Would we say that Corona was in breach of a fiduciary obligation to
Lac, and require it to hold its interest in the joint venture for Lac?
In each of these hypotheticals we can say that the criteria emphasized
in the Court of Appeal are met: parties are negotiating seriously, and one
party acts in such a way as to cause a detriment to the other –
at least to
the extent that that other is deprived of an anticipated benefit. But it is not
clear in any of them that it would be appropriate to cry “breach of fiduciary
duty” and impose a constructive trust. The Court of Appeal refers to a
broad responsibility of “dealing fairly” in the context of such “fiduciary
5’Ibid. at 281.
52Ibid.
McGILL LAW JOURNAL
[Vol. 33
relationships”. 53 In these hypotheticals, one might find an obligation to “deal
fairly” –
for example, by one party’s notifying the other that it intends to
acquire the property, or is negotiating simultaneously with someone else. If
this fair dealing is absent, we might feel comfortable about giving the “in-
jured” party compensation for actual detriment suffered as a result of its
reliance on the other. But this falls far short of treating the offender as a
fiduciary, all of whose gains are to be held on trust.
Thus, if we abstract the breach of confidence from the situation in
Corona, the argument for a fiduciary relationship becomes rather tenuous.
Even if it is appropriate to base a fiduciary relationship on the pre-
contractual interactions here, the finding that Lac holds the whole benefit
of the proposed joint venture for Corona seems extreme. The Court of
Appeal does deal with this issue, but not entirely satisfactorily. In this con-
text, interestingly, it in fact downplays the significance of the “negotiation”
relationship:
All parties acknowledged that LAC and Corona have never reached an agree-
ment as to the terms of any contemplated partnership or joint venture. Nor
was there any obligation on them to reach such an agreement. At most they
were obliged to negotiate in good faith. 54
Relative to an earlier point, I would ask whether an obligation “at most”
“to negotiate in good faith” amounts to a fiduciary relationship.
More particularly with respect to my present point, I would ask why a
breach of a putative fiduciary relationship created by negotiations for a joint
venture should result in a benefit for only one of the parties. Had Corona
and Lac in fact agreed upon a joint venture, and had Lac purported to
acquire for itself a benefit contemplated by the joint venture, it would have
held that benefit as a constructive trustee for Corona and itself, in the pro-
portions contemplated by the agreement. 55 Why then should the fact that
a more clearly fiduciary relationship (an actual joint venture) was not con-
summated redound to the benefit of the plainti? 56 There seems to be an
interesting inversion here: had there been a clear contractual arrangement,
and Corona been limited to suing for breach of contract, it could have
recovered only for its loss; had the contract created a fiduciary relationship,
531bid. at 301.
54Ibid. at 312.
55See, for example, McLeod v. Sweezey, [1944] S.C.R. 111, [1944] 2 D.L.R. 145.
56perhaps an answer to this objection appears in the words of Gibbs C.J. in UnitedDoininions,
supra, note 47 at 680:
Indeed, in such circumstances [i.e., pre-contractual negotiations], the mutual con-
fidence and trust which underlie most consensual fiduciary relationships are likely
to be more readily apparent than in the case where mutual rights and obligations
have been expressly defined by some formal agreement.
19881
COMMENTS
Corona could have sought a proprietary remedy with respect to a proportion
of Lac’s gain; but since no agreement defining relative interests was reached,
Corona can claim Lac’s whole gain 57 on the basis of what at best is scarcely
more than an inchoate fiduciary relationship. In this regard, it is worth
noting that Lord Lyndhurst in Fawcett v. Whitehouse held that a person
negotiating for an intended partnership5 8 “who clandestinely receives an
advantage for himself, must account for that advantage to the partner-
ship.”’59 That is, to the partnership, including himself; not simply to the
other partners.
Once again, these criticisms are based on an artificial deletion of the
breach of confidence in Corona. But they do relate to real and important
implications of the Court of Appeal’s reasoning. Moreover, on one analysis,
the fact that the breach of fiduciary duty took the form of a misuse of
confidential information does not alter the argument that Lac holds on trust
not for Corona alone, but for itself and Corona. In the words of Dixon J.
in Birtchnell v. Equity Trustees, Executors and Agency Co., relationships
like that in Corona are “based … upon a mutual confidence” that the parties
will “engage in [the] particular … activity or transaction for the joint ad-
vantage only.”‘ 60 Thus, assuming a fiduciary relationship between Corona
and Lac, what was transacted between them was implicitly to be for their
common advantage. Corona imparted confidential information to Lac in
the context of the fiduciary relationship thus defined – or defined by the
courts. The information was given to Lac not so that Lac could use it only
for Corona, but so that Lac could use it in relation to the common or mutual
benefit contemplated by the fiduciary relationship. If we were to say that,
in the context of the relationship, one of the parties (Corona) was acting
only in its own interest, Lac might legitimately object that it was acting only
in its own interests and can be held to have undertaken nothing in any
other behalf –
thus, that it was not a fiduciary. This follows from the courts’
conclusions, which characterize the fiduciary relationship based on “serious
negotiation” as mutual If the confidential information was imparted for
the common benefit, then any gain made on the basis of that confidential
information must similarly be held for Lac and Corona jointly.
On this first analysis, of course, the imparting of confidential infor-
mation does not create the fiduciary relationship. The appropriation of con-
57I am not forgetting, of course, that Corona was ordered to compensate Lac for the cost of
acquiring the property and developing the mine and mill. But this is different from the ongoing
interest in the property that Lac almost certainly would have had in any joint venture.
58The negotiator there was described as an “agent” of the other two parties to the proposed
partnership: supra, note 46 at 57.
59These are the words of Gibbs C.J. in United Dominions, supra, note 47 at 677, summarizing
the effect of Fawcett v. Whitehouse ibid.
60(1929), 42 Commonwealth L.R. 384 at 407-08 (Aus. H.C.).
REVUE DE DROIT DE McGILL
[Vol. 33
fidential information is merely the mode in which a fiduciary relationship
otherwise constituted is breached.
I turn now to the other possibility –
that the fiduciary relationship
was created by Corona’s giving confidential information to Lac. This variant
gives rise to considerations which may be rather different from those in-
volved in the first.
First, as already mentioned, there is legitimate doubt that a fiduciary
relationship existed solely on the basis of the negotiations. That is, it is
arguable that the sine qua non of the fiduciary relationship here was the
imparting of confidential information. If so, the question may again be
asked: why should not a breach of confidence analysis suffice, without resort
to the fiduciary concept? A related question is, “If a breach of confidence
is simply a category of breach of fiduciary duty, why is it treated as inde-
pendent or alternative –
as it is even in Corona?” Assuming finally, never-
theless, that the giving of confidential information does create a fiduciary
relationship, how precisely does it do so?
One answer is that the confiding of certain information manifests the
particular trust or confidence that one party is reposing in the other, thus
making that other a fiduciary for specific purposes. To establish the “terms”
of the fiduciary relationship on this basis one must ask, “What is the object
of the confidence thus reposed?” “I”, Corona might say, “am giving you
this private information in the confidence that you will use it only to assess
the desirability of entering a joint venture or only for my benefit or only in
ways that will not hurt me.” It seems to me that a court must decide which
of these possible objects is present before determining the consequences of
the breach of fiduciary duty. Arguably, if it is the first (“to assess the desir-
ability of the joint venture”) the fiduciary relationship is one in which Lac
must attend to the joint interests of Corona and itself. The presence of this
joint interest should be reflected in the remedy. On the other hand, it might
be said that Corona gave the information to Lac on the understanding that
it would be used only for Corona’s benefit. That is, before a joint venture
was established, Lac could not be said to have had a joint interest in any-
thing. The information would thus have been given to Lac only to allow it
to decide whether to benefit Corona. Having acquired a benefit, it should
on this analysis be deemed to have chosen to benefit Corona, and to have
acquired the gain accordingly. If, as some of the language of the Court of
Appeal implies, the understanding of Corona was essentially a negative one
“I am giving you this information in the confidence that you will not
–
use it to hurt me” –
it would seem that any remedy should relate only to
Corona’s loss. Here, it is merely fortuitous that the court was able to measure
such loss according to Lac’s gain.
1988]
CHRONIQUE DE JURISPRUDENCE
What I am saying is no more than that a court must inquire (1) who
is the beneficiary of the fiduciary relationship and (2) what is the benefit
contemplated – which defines in turn the extent of the fiduciary obligation.
In Corona, the court seems simply to assume (perhaps justifiably) that the
“truster” is the exclusive beneficiary of everything the fiduciary acquires.
Another way of analysing the fiduciary relationship as one created by
the confiding of information is to regard the information as property. The
Court of Appeal may be doing something like this, implicitly. At one point
the Court mentions that one traditional way in which fiduciary obligations
arise is where A trusts B with property.6 1 This observation is not, at that
point, applied to the facts of Corona. Later, however, the Court does treat
the information as property, citing Fridman and McLeod, Restitution (1982):
[T]here appears to be no doubt that a fiduciary who has consciously made use
of confidential information for private gain will be forced to account for the
entire profits by holding such profits made from the use of confidential infor-
mation in a constructive trust for the beneficiary-estate. The proprietary remedy
flows naturally from the conclusion that the information itself belonged to the
beneficiary and there has been no transaction effected to divest his rights over
the property.62
This quotation, of course, supposes a pre-existing fiduciary relationship; the
appropriation of confidential information is simply the mode of breach.
However, if the Court of Appeal is adopting the view that information
is property, it might be easier to find a fiduciary relationship based on the
transfer of the information. In effect, Corona would then be saying: “I am
giving you my property, on the trust that you will use it for certain purposes
only –
for example, only for my benefit. If you use that property to acquire
more or other property, that further property will be held on the same trust.”
Characterizing confidential information as property might, therefore,
be relevant for two reasons. Its transfer serves as a less ambiguous basis for
a fiduciary relationship, and its misappropriation might more naturally lead
to a proprietary remedy. However, even if this is the basis of the fiduciary
relationship in Corona, questions similar to those I have already asked might
6tSupra, note 4 at 298. And see Waters, supra, note 8 at 54.
62Corona, ibid. at 312. Compare Gurry, supra, note 25 at 417, regarding breach of confidence:
“the defendant has improperly received or withheld profits acquired from the use of the
plaintiff’s property –
in violation of the
plaintiff’s rights.” The Supreme Court of Canada has recently, in Stewart v. R. (26 May 1988),
No. 17827, decided that confidential information is not “property” for the purposes of the
theft provision of the Criminal Code. It explicitly left open the question whether confidential
information can be regarded as property in civil contexts, Lamer J. saying that the question
has not been “conclusively decided” by any Canadian court (at 13). For a thorough discussion
of this issue, see A.S. Weinrib, “Information and Property” (1988) 38 U.T.L.J. 117.
in this case his confidential information –
McGILL LAW JOURNAL
[Vol. 33
be posed: For whose benefit is Lac holding Corona’s property in the form
of information –
for Corona’s only, or for Corona’s and Lac’s jointly? If
the information is treated as property, it is easier to say that Lac holds it,
pending or failing actual agreement about a joint venture, solely for Corona.
Moreover, it might be harder to say that Lac holds Corona’s property only
so as not to hurt Corona.
In the end, characterizing confidential information as property may be
rather artificial, even unnecessary, in the fiduciary context. For one thing,
we know that the presence of a fiduciary relationship does not depend upon
a transfer of property. Correspondingly, a proprietary remedy in the form
of a constructive trust may arise where the fiduciary does not exploit
property.
I want now to return to a question posed at the outset of this comment:
can we specify any criteria or essential characteristics that identify fiduciary
relationships generally? Again, I will attempt to relate my discussion to the
facts of Corona.
V. The Fiduciary Concept
In Corona, the Court of Appeal enumerated four classes of relationships
which have been held to be fiduciary. One, as we have seen, depends upon
the transfer of property, or at least the holding of the principal’s property
by the fiduciary. A second is “where persons repose trust in one another
where common [sic] property may or may not be involved. ‘ 63 This was
the kind of situation the courts found in Corona itself. A third class is “that
where a relationship of dependency exists” which “may or may not involve
trust property or the passing of confidential information. ‘ 64 And the fourth
class arises “where the person seeks the advice of another and the other is
aware of the first person’s reliance on that advice”; 65 the court cites Standard
Investments66 and Lloyds Bank v. Bundy67 as examples. Indicators of the
see Austin, supra, note 2.
63Corona, ibid. at 298.
64Ibid. at 299.
65Ibid.
66Supra, note 3. The characterization of the relationship here as fiduciary has been questioned:
67Supra, note 22. This case is not overwhelming authority for the existence of a fiduciary
relationship in such situations, even though Sachs L.J. more than once uses the expression
“fiduciary care”. The case was concerned with the presence of undue influence, and considered
the defendant’s reliance on the plaintiff for advice in that context. Commenting in the case of
National Westminster Bank v. Morgan, [1985] A.C. 686 at 709, [1985] 1 All E.R. 821 (H.L.),
Lord Scarman agreed that the relationship in Bundy was such as to support an inference of
undue influence, but said: “I would prefer to avoid the term ‘confidentiality’ as a description
of the relationship which has to be proved.”
1988]
COMMENTS
existence of a fiduciary relationship include, then, property-holding, confi-
dence or trust, dependency, and reliance. As the Court of Appeal notes, none
of these elements is necessarily determinative: “These relationships have a
fiduciary component if appropriate circumstances are found to exist.”‘ 68 So
the standard is “appropriate circumstances”: what is “appropriate”?
In Guerin, Dickson C.J.C. noted that “[t]he concept of fiduciary obli-
gation originated long ago in the notion of breach of confidence”. 69 Indeed,
as I have previously mentioned, “confidence”
is frequently cited as the
essential feature of fiduciary relationships, and the words of Lord Chelms-
ford in Tate v. Williamson are frequently invoked:
[T]he courts have always been careful not to fetter this useful jurisdiction by
defining the exact limits of its exercise. Wherever two persons stand in such
a relation that, while it continues, confidence is necessarily reposed by one,
and the influence which naturally grows out of that confidence is possessed by
the other, and this confidence is abused, or the influence is exerted to obtain
an advantage at the expense of the confiding party, the person so availing
himself of his position will not be permitted to retain the advantage …. 70
At the same time, the simple reposing of confidence may not be sufficient.
For example, J.C. Shepherd says: “It is patent that people go around trusting
others all the time, without necessarily creating a fiduciary relationship as
a result.”‘ 71 Thus, while we would expect confidence to be present in most
fiduciary relationships, it will not be present in all,72 and it may be present
in many relationships that are not fiduciary.
Several commentators have essayed to isolate the defining criterion of
“fiduciary” – with debatable success. I will not presume to offer anything
new in this regard, but will merely attempt to locate common threads in
what others have said.
Austin Scott, referring to the parable of the unjust steward,73 says that
he was “certainly in a fiduciary position”: “It was his duty in dealing with
68Corona, supra, note 4 at 299.
69Supra, note 6 at 383.
70Supra, note 11 at 61.
71Supra, note 17 at 59. To similar effect, see Gibbs C.J. in Hospital Products, supra, note 9
at 433. Thus, I may have confidence that the doctor removing my gall bladder knows what he
is doing; this does not in itself create a fiduciary relationship. On the other hand, my confidence
that my doctor will not exploit for his own advantage personal or professional information I
impart to him in the context of our physician-patient relationship may very well entail fiduciary
obligations.
72Notably, it may not be present in the quintessential fiduciary relationship, the trust. The
73The New Testament, Luke 16:1-8.
beneficiary need not have any confidence at all in the trustee.
REVUE DE DROIT DE McGILL
[Vol. 33
his master’s affairs to act solely in the interest of his master. ‘ 74 Scott for-
mulates the following definition:
Who is a fiduciary? A fiduciary is a person who undertakes to act in the interest
of another person. It is immaterial whether the undertaking is in the form of
a contract. It is immaterial that the undertaking is gratuitous. 5
This is somewhat ambiguous. It contains the notion of acting for another,
but not the complete selflessness implied in the earlier “solely in the interest”
of another. Presumably, Scott does not mean to include ordinary contractual
situations, in which A agrees to act in B’s interests in the sense that he
undertakes to do something for B. Indeed, Scott cites the Restatement of
Trusts, section 170:
The first duty of a trustee is … “to administer the trust solely in the interest
of the beneficiary.” It is this duty of loyalty, owing from every fiduciary to his
principal, which I am to discuss… .76
More recently, Weinrib has identified what he describes as “two ele-
ments” that “form the core of the fiduciary concept” and that “can also
serve to delineate its frontiers”: “First, the fiduciary must have scope for
the exercise of discretion, and, second, this discretion must be capable of
affecting the legal position of the principal. ’77 Is it enough basis for a fi-
duciary relationship that one party may exercise a discretion affecting an-
other? By putting it in slightly different terms we may perhaps highlight
what Weinrib is getting at: the relationship is one in which one party has
power and the other party is correspondingly vulnerable. Still something is
missing –
a factor that Weinrib mentions in analysis, but not as a defining
criterion: “The desirability of deterring the fiduciary from using his discre-
tion except for the benefit of the principal or beneficiary … .,”78 This seems
to point to something like what Scott had in mind: the relationship is one
in which the fiduciary is bound to use his power solely for the principal.
But, rather than seeing this as an antecedent requirement, Weinrib treats it
as a consequence flowing from a relationship otherwise established.
In Guerin, Dickson C.J.C. apparently approves Weinrib’s assertion that
“the hallmark of a fiduciary relation is that the relative legal positions are
such that one party is at the mercy of the other’s discretion. ‘ 79 At the same
time, he incorporates another element:
74″The Fiduciary Principle” (1949) 37 Calif. L. Rev. 539 at 540.
751bid.
761bid.
77Supra, note 10 at 4.
78lbid.
79Guerin, supra, note 6 at 384, quoting Weinrib, supra, note 10 at 7.
1988]
CHRONIQUE DE JURISPRUDENCE
[W]here by statute, agreement, or perhaps by uni-lateral undertaking, one party
has an obligation to act for the benefit of another, and that obligation carries
with it a discretionary power, the party thus empowered becomes a fiduciary.80
[emphasis added]
Paul D. Finn similarly emphasizes that the “in limine requirement”
making a position fiduciary is that “it must exist for the benefit of another”,
and that this requirement “excludes a wide variety of persons in many
common relationships from the potential class of fiduciaries.”‘ 81 He points
out as well that the fiduciary must have some discretion as to how he will
serve the beneficiaries. 82
J.C. Shepherd, attempting to define the essence of “fiduciary”, considers
a number of suggested theories –
“unjust enrichment”, “commercial util-
ity”, “reliance”, “unequal relationship”, “property”, “undertaking”, and
“power and discretion”. Criticizing them all, he suggests:
A fiduciary relationship exists whenever any person receives a power of any
type on condition that he also receive it with a duty to utilise that power in
the best interests of another, and the recipient of the power uses that power.83
Again, we have here the notion of a power coupled with an obligation to
exercise the power without regard to self-interest.
Tamar Frankel has similarly sought to adumbrate “a unified approach
to the law governing fiduciary relations. ‘ 84 Frankel identifies two charac-
teristic elements in the fiduciary relation. One is “the understanding of the
parties and the perception by the courts that the fiduciary acts as a substitute
for the entrustor, to benefit the entrustor. ‘ 85 This, he says, is in contrast
with contract and status relations, in which each party acts for his own
benefit.86 The second characteristic element is that “the fiduciary obtains
power from the entrustor or from a third party for the sole purpose of
enabling the fiduciary to act effectively.”‘ 87
Once more, we see the obligation to act in the interest of another cou-
pled with a power that is to be devoted only to giving effect to that obligation.
This seems to be the approach taken recently by Waters as well. Fiduciary
relationships, he says, have been found by analogy with the express trust
relation:
8OGuerin, ibid.
81Fiduciary Obligations (Sydney: Law Book Co., 1977) at 10.
82Ibid. at 13.
83Supra, note 17 at 75.
84Supra, note 1 at 808.
“5Ibid.
8S6Ibid.
8Vbid. at 809.
McGILL LAW JOURNAL
[Vol. 33
Two features of an express trust have dominated the courts’ thinking; the fact
that the trustee is vested with title to specific, earmarked property, for which
property he must account to the beneficiary, and, secondly, that the trustee is
discharging a task for the exclusive benefit of another 8 8
With respect to the second, Waters says that it “allowed Equity to bring
within the analogy of trusts all those who put their skills at the service of
others, and exercise a degree of discretion as to how best to carry out the
task at hand.”8 9 While, Waters says, both characteristics –
“control of
property and an obligation to act for another” –
are present in the express
trust, only one is required for fiduciary relationships more generally.90
Perhaps the clearest judicial adoption of this approach to fiduciary re-
lationships occurs in the Australian High Court case of Hospital Products.
There, Gibbs C.J., while doubting (as we have seen) that a “universal, all-
purpose definition” of fiduciary relationships is possible, approved the test
invoked by the court of appeal in that case, namely, where “in a particular
matter a person has undertaken to act in the interests of another and not
in his own.” 91 And Mason J. said that:
The critical feature of these relationships is that the fiduciary undertakes or
agrees to act for or on behalf of or in the interests of another person in the
exercise of a power or discretion which will affect the interests of that other
person in a legal or practical sense. 92
This approach has been judicially recognized in Canada. Thus, Lambert
J.A. in Burns v. Kelly Peters & Associates Ltd referred to Hospital Products
and said that “two key questions” must be answered, namely:
(1) whether the defendants had undertaken with the plaintiffs to act in
relation to the … transaction, or transactions of that nature, in the interests of
the plaintiffs;
(2) whether the defendants had been entrusted with power to affect the
plaintiffs’ interests in a legal or practical sense, so that the plaintiffs were in a
position of vulnerability.93
Austin, commenting on Hospital Products, notes that the court there was
broadly agreed on a couple of other propositions: that a person “may be a
fiduciary quoad part of his activities but not quoad other parts” and that
“a relationship may be fiduciary where B’s duty is neither to exclude his
“sSupra, note 8 at 54.
89Ibid.
9OIbid.
9 1Hospital Products, supra, note 9 at 435.
92Ibid. at 454.
93(1987), 16 B.C.L.R. (2d) 1 at 27, [1987] 6 W.W.R. I (B.C.C.A.).
1988]
COMMENTS
personal interest entirely nor even to put A’s interest above his own, but is
instead a duty to act in A’s and B’s joint interest. ’94
Assuming the approach I have just outlined to be the appropriate one
for identifying fiduciary relationships, how would it apply to Corona?
First, let us look at the relationship of negotiation and ask the initial
question: was there an obligation on the parties to act solely in an interest
other than their own individual or separate interests? The courts found that
they were obliged not to act to each other’s detriment: is this the same thing
as an obligation to act exclusively in each other’s interest? I should think
not. In the negotiations, each party was legitimately pursuing its own in-
terests. At most, they were obliged, on the basis of the stage which the
negotiations had reached, to seek not their own individual interests, but
some joint interest. But, as I have already observed, this would not support
a constructive trust solely in Corona’s favour.
Even if there was an obligation to act in the joint interest to the exclu-
sion of separate interests, did the relationship confer a discretionary power
on either party, allowing it to affect the other’s, or the joint, position? Again,
it is highly doubtful that the negotiations, tout court, involved the conferring
of such a power.
Thus, if this is the test, the Ontario Court of Appeal was probably wrong
to imply a fiduciary relationship simply on the basis that the parties were
seriously negotiating towards a joint venture.
Even if the broad relationship was not fiduciary, were there any aspects
of it that were? This brings us to the issue of Corona’s entrusting confidential
information to Lac. Here, the case for fiduciary obligation is much stronger.
Clearly, Corona did not give Lac the information so that Lac could use it
for its own purposes. Almost as clearly, however, Corona did not give the
information to Lac on the understanding that Lac was to consult only the
interests of Corona in using the information. An argument could be made,
although this is not the only argument that could be made, that Lac was to
use the information only for some kind of joint interest –
a joint interest
which would define to whom Lac owed fiduciary obligations. Alternatively,
it could be argued that the information was imparted for the joint interest
on condition that that joint interest crystallized; failing such crystalization,
Lac was to hold the information solely for Corona.
Moreover, in this case, a power was much more clearly conferred upon
one of the parties – Lac. By giving Lac the information, Corona put itself
in a vulnerable position, because of the possibility that Lac would use the
94Supra, note 4 at 101.
REVUE DE DROIT DE McGILL
[Vol. 33
power in ways other than its implicit undertaking obliged it to. Thus, one
could say that the divulging of the confidential information did create a
fiduciary relationship, the only question being whether the obligation was
exclusively to Corona or to Corona and Lac jointly. One implication of this
analysis is an answer to a question canvassed earlier: almost inevitably, any
breach of confidence will entail a breach of fiduciary obligation.
VI. Conclusion
The Ontario Court of Appeal was probably right in finding a fiduciary
relationship on the facts of Corona. However, the absence of precision in
the reasoning of the decision might have implications for other cases, where
the facts satisfy a broad or intuitive approach, but not a more precise one.
In abandoning any attempt to identify general criteria for fiduciary rela-
tionships, the Court decided the case in the absence of standards, or on the
basis of unenunciated standards. The Court’s reasons, distilled to their es-
sence, might read, “We’re not sure what we’re supposed to be looking for,
but we’ll know when we’ve found it.”
An aspect of this imprecision is the Court’s failure to elucidate the scope
of the fiduciary relationship in Corona. By this I mean that it failed to
recognize the problems of pinpointing which aspects of the relationship were
fiduciary, and to whom the fiduciary obligations were owed. Again, it may
have been right in accepting that the whole relationship was fiduciary, and
that Lac was bound to consult Corona’s interest exclusively. But a more
rigorous approach would have required it to consider these issues more
explicitly.
It is, of course, possible to maintain –
on the basis of Tate v. Wil-
.iamson and its progeny –
that the fiduciary concept is inherently nebulous,
and that its value lies in the adaptability that this character imparts. This
position may be supported by reference to the unsatisfactory and contra-
dictory efforts to outline (I hesitate to say “define”) criteria. At stake is the
enduring legal tension between “clarity and predictability” 95 on the one
hand, and the open-texturedness that allows “justice” to be accomplished
in each situation, on the other. Since the province of equity is still ostensibly
the latter, it is perhaps perverse to build an argument by resort to the former.
95The words are Austin’s, ibid. at 105.
