Hodgkinson+v.+Simms

Facts: Hodgkinson went to Simms for advice on real-estate tax-shelter investments. Simms convinced him to invest in some Multi-Unit Residential Buildings. Simms recommended four projects to Hodgkinson. He invested. What he did not know was that Simms was in a financial relationship with the real-estate developers. He got fees from them every time he sold a MURB to a client. Eventually, the property market crashed and H lost a lot of money. He took action against Simms.

Issue: Did S breach a fiduciary duty to H? What is the proper quantum of damages?

Holding: There was a fiduciary duty, and a breach. H should get restitution damages. (Sopinka and McLachlan dissenting)

Majority Reasons of La Forest J.: La Forest begins by saying that the concept of vulnerability is an important indicum of the existence of fiduciary relationships, but not their hallmark. Vulnerability can exist in a lot of causes of action: negligent misrepresentation, undue influence and unconscionability are a few. But to find a fiduciary duty, we need more: we need loyalty, trust (i.e., trusting the stronger party not to use his power), and confidence. The reasonable expectations of the parties and community standards (in this case, codes of professional responsibility) are other factors that may be taken into account.

This means necessarily that fiduciary duty is all about the relationship of the parties after their agreement is formed, unlike unconscionability, which deals with their pre-contract positions (i.e., their bargaining power and the like). The nature of the relationship is key. The specific category of actor involved is not important.

__Criticism of the Frame Test__: La Forest says that the problem with the Frame test is that it does not help us recognize situations where despite the lack of a fiduciary relationship, there are situations where fiduciary obligations are imposed. The idea is that I can have situational, fiduciary obligations despite not being in a fiduciary relationship. Similarly, I can be in a fiduciary __relationship__ where not all of my __obligations__ are fiduciary in nature. So advisory relationships do not automatically give rise to fiduciary duties. Most transactions at the bank are creditor-debtor in nature, e.g.

Outside the established categories of fiduciary relationship, what is required for finding a fiduciary obligation is a mutual understanding that one party has relinquished his self-interest and agreed to act only on the behalf of the other, in such a way that the latter "relaxes the care or vigilance he would or should have."

__Distinguishing from Lac__: In the context of commercial negotiations, it is reasonable to expect a party to protect itself. Here, not so much. The whole point is that you don't know what you're doing and can't protect yourself so you hire someone else to protect your interests on your behalf. The essence of the relation is thus not self-interest; it is trust and confidence. This means that we do not face the same problems of undermining self-interest in commercial negotiations (a value we like) in this context.

__Importance of Lac:__ After Lac, the line between reliance and vulnerability was clarified. We no longer see mere reliance as indicative of vulnerability.

__Application to the facts:__ The retainer, combined with the disclosing of information, means that there was a power dependency here. The trust and reliance placed in the respondent was serious enough to make his giving of advice an exercise of power given over by the appellant. __Damages:__ To mitigate, the respondent must prove that H would still have suffered the damage without the breach of duty. The duty breached was directly related to the risk of the investments (how? La Forest never says) and S had been retained specifically to invest. Given that we need to deter this kind of breach and given that we need to put special pressure on people in situations of trust, the TJ's damage award should be restored.

Dissent of Sopinka and McLachlan: __Criticism of the Frame Test:__ As Sopinka pointed out in Lac, the conditions in the test are neither exhaustive nor determinative. So it's not actually a test.

__False Indicators of a Fiduciary Relationship:__ conduct that attracts judicial sanction and the "category" into which the relationship falls.

This was not a fiduciary relationship in the traditional sense. Do other factors make it one? Hard to say. We have to evaluate the necessary measure of trust suficient to give rise to the obligation. The judges decide that the standard should be whether or not one party is "at the mercy" of the other -- there must be total reliance and dependence. The key is "unilateral power." There was no exercise of unilateral power here because S consulted H and gave him complete information.

__Damages:__ They look at the issue as one of K damages and apply the "reasonably foreseeable" damages test found in //Hadley v. Baxendale// and //Victoria Laundry//. As the crash was not foreseeable, the damages should be mitigated.

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