Fact-Based Fiduciary Accountability in Canada

Abstract

The Supreme Court endeavored in Galambos v. Perez to reduce the confusion that exists in Canada over the test for fact-based fiduciary accountability. The unanimous decision produced a mixed, possibly conventional, outcome. The court did discard a number of unsatisfactory recent accretions to the jurisprudence. Difficulties remain, however, with its newest reformulation of the definitive criteria. The court declared that fact-based fiduciary accountability arises where two elements are present: (1) an undertaking to act in the best interest of another and (2) discretionary power to affect the legal and practical interests of that other. As I will explain, when understood in terms of limited access, the requirement of an undertaking is conventional science. The requirement of discretionary power, however, is radical. I will examine the materials the court relied on to conclude that this second element is required. I will also show that classifying discretionary power as a necessary condition potentially has two effects. It may significantly narrow the range of application of conventional fiduciary accountability and it may sanction judicial assessment of the merits of a good faith exercise of discretion. Neither effect is desirable. That said, there possibly is an entirely different interpretation of the decision. The court may have articulated a limited access test of fiduciary accountability. Rather than implicitly denying the conventional function of controlling opportunism, it implicitly may have embraced that function.

Keywords: fiduciary, loyalty, fact-based, ad hoc, limited access, opportunism, undertaking, discretionary power, reasonable expectation