#6628 - Canson Enterprises V. Boughton - Commercial Remedies BCL

Canson Enterprises v. Boughton

Facts

In May 1977, on the proposal of the respondent Treit, the appellants, Canson Enterprises Ltd. and Fealty Enterprises Ltd., and the respondent, Peregrine Ventures Inc., agreed to purchase a piece of property and to enter a joint venture to develop it. The purchasers agreed to pay Treit a commission of 15 per cent of any profit on resale. Unknown to Canson and Fealty, but known to Peregrine, Treit had arranged for an intermediate company, Sun-Mark Development Corporation, to share in the profit from the sale, a profit from which Treit would share equally. This profit came about because Sun-Mark had entered an interim agreement to buy the land from the vendors, Mr. and Mrs. Henderson, for $410,000. The price paid by the purchasers was $525,000, so the secret profit to Peregrine and Treit from the "flip" was $115,000. According to the agreed facts, the appellant purchasers, Canson and Fealty, would not have purchased the property or entered into a joint venture had they known of the interim agreement with Sun-Mark.

The solicitor, Wollen, of the defendant law firm, Boughton & Co., acted for the purchasers in the preparation of the conveyance and joint venture agreement. He also acted for Sun-Mark in its purchase and resale of the property, but did not disclose to the appellant purchasers that the property was not being purchased directly from the Hendersons. Furthermore, Wollen prepared the statement of adjustments for the vendors (the Hendersons) showing the sale price to be $410,000, and also prepared the statement of adjustments for the purchasers (the appellants and Peregrine) showing the price to be $525,000 and the vendors to be the Hendersons. Therefore, this statement of adjustments did not disclose Sun-Mark's interest. Wollen paid over the $115,000 secret profit to Sun-Mark and did not disclose this payment to the appellants.

Following the purchase, the appellants proceeded with a warehouse development on the property, but suffered substantial losses when piles supporting a warehouse constructed on the property began to sink, causing extensive damage to the building. The appellants then brought action in the British Columbia County Court against the soils engineers and a pile-driving company retained by the purchasers for the damage to the warehouse. At trial, the soils engineers were found negligent in failing to detect a layer of peat in the soil, and damages of $4,920,200.33 were awarded against them.

The appellants then commenced the present action against the respondent solicitor and his law firm for the amount of the shortfall, alleging that the failure to disclose the secret profit was actionable as deceit or breach of fiduciary duty.

Appellant’s claim: the appellants would not have purchased the property or entered into the joint venture agreement had they known about the secret profit. Thus, the appellants seek an order that they are entitled to compensation from the respondents for their entire loss, to be proved at trial, which was incurred as a result of embarking upon the joint venture. Damages would include the amount of the secret profit, and consequential damages unlimited by principles of remoteness, causation or intervening acts.

Holding

Remedies in Common Law and Equity can be pursued as alternatives

The appellants, we saw, firmly base their claim in equity for breach of a fiduciary duty. Although they could pursue various claims at common law, they maintain that they can seek equitable remedies concurrently and may choose the remedy most advantageous to them. The respondents do not contest this and, in my view, quite properly concede this point. The appellants' position is fully supported so far as torts and contracts are concerned by this court's decision in Central Trust Co. v. Rafuse, supra, and so far as claims in law and equity are concerned by the House of Lord's decision in Nocton v. Lord Ashburton, [1914] A.C. 932.

Not necessary that the fiduciary must have made a profit for himself

What has just been said is consistent with the subsequent case of London Loan & Savings Co. v. Brickenden, [1934] 2 W.W.R. 545, [1934] 3 D.L.R. 465 (P.C.) (affirming [1933] S.C.R. 257, [1933] 3 D.L.R. 161), involving a similar fact situation. It is apparent from the language of Lord Thankerton, giving the judgment of the Privy Council, that a solicitor may be liable for a fiduciary duty for non-disclosure even when his or her personal interest is not at stake though that is a factor of some importance.

This does not mean, however, that the question whether a fiduciary benefits from a breach of his duties is not important. This may, in an appropriate case, give rise to a constructive trust or other equitable remedy.

Difference between taking of accounts and compensating for loss

The appellants urged us to accept the manner of calculating compensation adopted by the courts in trust cases or situations akin to a trust, and they relied in particular on the Guerin case, supra. I think the courts below were perfectly right to reject that proposition. There is a sharp divide between a situation where a person has control of property which in the view of the courts belongs to another, and one where a person is under a fiduciary duty to perform an obligation where equity's concern is simply that the duty be performed honestly and in accordance with the undertaking the fiduciary has taken on: see L.S. Sealy, "Some Principles of Fiduciary Obligation," [1963] Cambridge L.J. 119; L.S. Sealy, "Fiduciary Relationships," [1962] Cambridge L. J. 69. In the case of a trust relationship, the trustee's obligation is to hold the res or object of the trust for his cestui que trust, and on breach the concern of equity is that it be restored to the cestui que trust or if that cannot be done to afford compensation for what the...