Hodgkinson v. Simms (1994), 49 B.C.A.C. 1 (SCC);

    80 W.A.C. 1

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]


Robert L. Hodgkinson (appellant) v. David L. Simms and Jerry S. Waldman, carrying on business as Simms & Waldman, and the said Simms & Waldman, a partnership (respondents)


Indexed As: Hodgkinson v. Simms et al.

Supreme Court of Canada

La Forest, L’Heureux-Dubé, Sopinka, Gonthier, McLachlin, Iacobucci and Major, JJ.

September 30, 1994.


The plaintiff, who was a young, but ex­perienced and successful stockbroker sought advice from the defendant accountant, who represented correctly that he was knowledgable about multiple unit residential buildings (MURB’s) as investments, espe­cially as tax shelters. As a result of his advice, the plaintiff invested in several projects. The trouble was that the defendant was being paid for financial services by the project developers, but did not so inform the plaintiff. The plaintiff received full value for his investments, but the real estate market collapsed and he lost heavily. He sued the defendant for damages for breach of fiduciary duty and breach of contract.

The British Columbia Supreme Court, in a judgment reported 43 B.L.R. 122, allowed the action and found the defendant liable on both grounds. Damages were awarded in the amount of the plaintiff’s net loss (over $350,500). The defendant appealed.

The British Columbia Court of Appeal, in a judgment reported 11 B.C.A.C. 248; 22 W.A.C. 248, allowed the appeal, ruling that, although the defendant was liable for breach of contract for failing to disclose his interest, there was no fiduciary relationship between the parties. Damages were limited to the plaintiff’s pro rata share of the amount of the fees charged by the defendant to the devel­opers, divided among all investors in the projects. The plaintiff appealed.

The Supreme Court of Canada, Sopinka, McLachlin and Major, JJ., dissenting, allowed the appeal and restored the trial judge’s decision on liability and dam­ages. There was a fiduciary relationship between the parties and nondisclosure of the defen­dant’s interest breached that duty.

Damages – Topic 7061

Contracts – Contract for services – Gen­eral – [See
Equity – Topic 3655

Equity – Topic 3606

Fiduciary or confidential relationships – Fiduciary relationship – What constitutes – A young, but experienced and successful stockbroker sought the advice of an ac­countant, who presented correctly that he was knowledgeable about multiple unit residential buildings (MURB’s) as a tax shelter investment – As a result of his advice, the stockbroker invested in several projects – The accountant failed to dis­close that he was also being paid by the developers of the projects for every investor he secured – The stockbroker received full value for his investment, but lost everything when the real estate market collapsed – The Supreme Court of Canada held that the trial judge did not err in finding that a fiduciary relationship existed and that the accountant’s nondisclosure of his financial conflict of interest breached that duty – See paragraphs 53 to 70.

Equity – Topic 3655

Fiduciary or confidential relationships – Breach of fiduciary relationship – Dam­ages – On an investment counsellor’s sound advice, an investor invested funds in four real estate development projects, receiving good value for his money – The counsellor failed to disclose a financial conflict of interest, that he received monies from the developers each time he secured an investor – The real estate market col­lapsed and the investor lost heavily – The Supreme Court of Canada found the coun­sellor liable in damages for breach of fiduciary duty and breach of contract – The court held that the trial judge did not err in awarding damages equal to the capital invested in the projects, minus the tax benefits received, plus an additional amount paid by way of arrears on the income tax reassessments on two of the projects, plus legal and accounting costs to extricate the investor from each of the MURB’s and in settling his accounts with Revenue Canada – The court determined that it was just that the counsellor bear the cost of the market collapse where the investor would not have invested had proper disclosure been made – See para­graphs 71 to 96.

Equity – Topic 3719

Fiduciary or confidential relationships – Commercial relationships – Professional advisory relationships – The Supreme Court of Canada discussed the existence of fiduciary relationships in professional advisory relationships (e.g., accountants, stockbrokers, bankers and investment counsellors), particularly where the benefi­ciary retained the ultimate discretion or power to make the final investment deci­sion – The court held that it was too re­strictive to equate reliance in the advisory context with a wholesale substitution of decision-making power from the benefici­ary to the advisor – The critical issue was whether in each specific factual context the trust and reliance placed in the advisor was such that the power or discretion was, in fact, being exercised by the advisor, not­withstanding the beneficiary had the final decision – Sopinka, McLachlin and Major, JJ., dissenting, stated that a fiduciary rela­tionship would exist only if there was total reliance and dependence on the advisor, where one party “unreflectively and auto­matically accepts the advice of the other” and not where one party retains the power and ability to make his own decisions – See paragraphs 31 to 70.

Equity – Topic 3741

Fiduciary or confidential relationships – Investment counsellor-client relationship – General – [See
Equity – Topic 3719

Equity – Topic 3743

Fiduciary or confidential relationships – Investment counsellor-client relationship – What constitutes – [See
Equity – Topic 3606

Practice – Topic 8800

Appeals – Duty of appellate court re fact findings by trial judge – A trial judge found a fiduciary relationship based on detailed findings of fact and an assessment of credibility – The Supreme Court of Canada stated that “it is axiomatic that a reviewing court must exercise considerable deference with respect to a trial judge’s findings of fact, all the more so when those findings are based on credibility … the reasons supporting this principle apply with particular force to situations where a trial judge is asked to characterize a rela­tionship for the purpose of determining the nature and extent of civil liability. … I stress that the principle of nonintervention … is not merely cautionary; it is a rule of law. Failing a manifest error, an appellate court simply has no jurisdiction to interfere with the findings and conclusions of fact of a trial judge” – Where a trial judge applied the relevant authorities in finding a relationship to be fiduciary and did not commit an error of law, an appeal court lacked jurisdiction to interfere – See para­graphs 53 to 57.

Cases Noticed:

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1, consd. [para. 2].

Hospital Products Ltd. v. United States Surgical Corp. (1984), 55 A.L.R. 417 (H.C.), refd to. [para. 13].

Burns v. Kelly Peters & Associates Ltd. (1987), 16 B.C.L.R.(2d) 1 (C.A.), refd to. [para. 17].

Jacks v. Davis, [1983] 1 W.W.R. 327 (B.C.C.A.), refd to. [para. 17].

Lloyd’s Bank Ltd. v. Bundy, [1975] Q.B. 326 (C.A.), refd to. [para. 25].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1, refd to. [para. 26].

Nocton v. Lord Ashburton, [1914] A.C. 932, refd to. [para. 26].

Canadian Aero Service Ltd. v. O’Malley, [1974] S.C.R. 592, refd to. [para. 27].

Waters v. Donnelly (1884), 9 O.R. 391, refd to. [para. 27].

Norberg v. Wynrib, [1992] 2 S.C.R. 226; 138 N.R. 81; 9 B.C.A.C. 1; 19 W.A.C. 1, refd to. [para. 27].

Johnson v. Birkett (1910), 21 O.L.R. 319 (H.C.), refd to. [para. 28].

McLeod v. Sweezy, [1944] S.C.R. 111, refd to. [para. 28].

Standard Investments Ltd. et al. v. Cana­dian Imperial Bank of Com­merce (1985), 11 O.A.C. 318; 52 O.R.(2d) 473; 22 D.L.R.(4th) 410 (C.A.), leave to appeal refused, [1986] 1 S.C.R. vi; 65 N.R. 78; 15 O.A.C. 237, refd to. [para. 28]

Keech v. Sandford (1726), Sel. Cas. T. King 61; 25 E.R. 223, refd to. [para. 29].

K.M. v. H.M., [1992] 3 S.C.R. 3; 142 N.R. 321; 57 O.A.C. 321, refd to. [para. 29].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161, refd to. [para. 29].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 30].

Dolton v. Capital Federal Saving and Loan Association (1982), 642 P.2d 21 (Colo. App.), refd to. [para. 33].

Canadian Pioneer Management Ltd. v. Labour Relations Board (Sask.), [1980] 1 S.C.R. 433; 31 N.R. 361; 2 Sask.R. 217, refd to. [para. 33].

Thermo-King Corp. v. Provincial Bank of Canada (1981), 34 O.R.(2d) 369 (C.A.), leave to appeal refused, [1982] 1 S.C.R. xi; 42 N.R. 352, refd to. [para. 33].

McInerney v. MacDonald, [1992] 2 S.C.R. 138; 137 N.R. 35; 126 N.B.R.(2d) 271; 317 A.P.R. 271, refd to. [para. 34].

Harry v. Kreutziger (1978), 95 D.L.R.(3d) 231 (B.C.C.A.), refd to. [para. 35].

National Westminster Bank v. Morgan, [1985] 1 All E.R. 821 (H.L.), refd to. [para. 37].

Jirna Ltd. v. Mister Donut of Canada Ltd. (1971), 22 D.L.R.(3d) 639 (Ont. C.A.), affd. [1975] 1 S.C.R. 2, refd to. [para. 38].

Midcon Oil & Gas Co. v. New British Dominion Oil Co., [1958] S.C.R. 314, refd to. [para. 38].

Henderson v. Thompson (1909), 41 S.C.R. 445, refd to. [para. 42].

Fine’s Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R.(2d) 529 (C.A.), refd to. [para. 42].

Fletcher v. Manitoba Public Insurance Co., [1990] 3 S.C.R. 191; 116 N.R. 1; 71 Man.R.(2d) 81; 44 O.A.C. 81, refd to. [para. 42].

Baskerville et al. v. Thurgood (1992), 100 Sask.R. 214; 18 W.A.C. 214 (C.A.), refd to. [para. 43].

Elderkin, Fox, Lamy, Smith, Van Snick and Lamy (A.C) Enterprises Ltd. v. Merrill Lynch, Royal Securities Ltd. and Lacas (1977), 22 N.S.R.(2d) 218; 31 A.P.R. 218; 80 D.L.R.(3d) 313 (C.A.), refd to. [para. 43].

Glennie v. McDougall & Cowan Holdings Ltd., [1935] S.C.R. 257, refd to. [para. 43].

Burke v. Cory (1959), 19 D.L.R.(2d) 252 (Ont. C.A.), refd to. [para. 43].

Maghun and Maghun v. Richardson Se­curities of Canada Ltd., Klaus and Both­am (1986), 18 O.A.C. 141; 34 D.L.R. (4th) 524 (C.A.), refd to. [para. 43].

Wakeford v. Yada Tompkins Huntingford & Humphries (1986), 4 B.C.L.R.(2d) 306 (C.A.), refd to. [para. 43].

Laskin v. Bache & Co., [1972] 1 O.R. 465 (C.A.), refd to. [para. 43].

Varcoe v. Sterling (1992), 7 O.R.(3d) 204 (Gen. Div.), refd to. [para. 44].

R. v. Kelly, [1992] 2 S.C.R. 170; 137 N.R. 161; 9 B.C.A.C. 161; 19 W.A.C. 161, refd to. [para. 49].

Granville Savings and Mortgage Corp. v. Slevin et al. (1990), 68 Man.R.(2d) 241 (Q.B.), revd. [1992] 5 W.W.R. 1; 78 Man.R.(2d) 241; 16 W.A.C. 241 (C.A.), refd to. [para. 50].

Granville Savings and Mortgage Corp. v. Slevin et al., [1993] 4 S.C.R. 279; 160 N.R. 243; 88 Man.R.(2d) 145; 51 W.A.C. 145, refd to. [para. 50].

MacDonald Estate v. Martin and Rossmere Holdings (1970) Ltd., [1990] 3 S.C.R. 1235; 121 N.R. 1; 70 Man.R.(2d) 241, refd to. [para. 52].

Gray, Administrator of MacDonald Estate – see MacDonald Estate v. Martin and Rossmere Holdings (1970) Ltd.

Martin v. Gray – see MacDonald Estate v. Martin and Rossmere Holdings (1970) Ltd.

Laurentide Motels Ltd. et al. v. Beauport (Ville) et al., [1989] 1 S.C.R. 705; 94 N.R. 1; 23 Q.A.C. 1, refd to. [para. 53].

Lensen v. Lensen, [1987] 2 S.C.R. 672; 79 N.R. 334; 64 Sask.R. 6; [1987] 1 W.W.R. 190; 44 D.L.R.(4th) 1, refd to. [para. 53].

White v. R., [1947] S.C.R. 268, refd to. [para. 53].

Huff v. Price (1990), 51 B.C.L.R.(2d) 282 (C.A.), refd to. [para. 53].

Lapointe v. Chevrette, [1992] 1 S.C.R. 351; 133 N.R. 116; 45 Q.A.C. 262, refd to. [para. 53].

Varga v. Deacon (F.H.) & Co., [1975] 1 S.C.R. 39, refd to. [para. 60].

London Loan & Savings Co. of Canada v. Brickenden, [1934] 2 W.W.R. 545 (P.C.), refd to. [para. 76].

Commerce Capital Trust Co. v. Berk, Wall, Chadwick et al. (1989), 33 O.A.C. 373; 57 D.L.R.(4th) 759 (C.A.), refd to. [para. 76].

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1, refd to. [para. 76].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 83].

K.R.M. Construction Ltd. v. British Col­umbia Railway Co. (1982), 40 B.C.L.R. 1 (C.A.), refd to. [para. 84].

Waddell v. Blockey (1879), 4 Q.B.D. 678 (C.A.), refd to. [para. 85].

Huddleston v. Herman & MacLean (1981), 640 F.2d 534 (5th Cir.), affd. in part (1983), 459 U.S. 375, refd to. [para. 85].

McGonigle v. Combs (1992), 968 F.2d 810 (9th Cir.), refd to. [para. 85].

Allan v. McLennan (1916), 31 D.L.R. 617 (B.C.C.A.), refd to. [para. 88].

Chasins v. Smith Barney & Co. (1970), 438 F.2d 1167, refd to. [para. 90].

Hatrock v. Jones (Edward D.) & Co. (1984), 750 F.2d 767, refd to. [para. 90].

Marbury Management Inc. v. Kohn (1980), 629 F.2d 705 (2nd Cir.), refd to. [para. 91].

Bastian v. Petren Resources Corp. (1988), 681 F.Supp. 530 (N.D. Ill.), refd to. [para. 91].

Casella v. Webb (1989), 883 F.2d 805 (9th Cir.), refd to. [para. 91].

Baud Corp. N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271; [1978] 6 W.W.R. 301; 89 D.L.R.(3d) 1, refd to. [para. 92].

Asamera Oil Corp. v. Sea Oil & General Corp. – see Baud Corp. N.V. v. Brook.

Dawson, Re; Union Fidelity Trustee Co. v. Perpetual Trustee Co., [1966] 2 N.S.W.R. 211, refd to. [para. 93].

Island Realty Investments Ltd. v. Douglas (1985), 19 E.T.R. 56 (B.C.S.C.), refd to. [para. 93].

Rothko v. Reis (1977), 372 N.E.2d 291 (C.A.N.Y.), refd to. [para. 93].

Parsons (H.)(Livestock) Ltd. v. Uttley Ing­ham & Co., [1978] Q.B. 791, refd to. [para. 95].

Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 1 All E.R. 997 (C.A.), refd to. [para. 113].

Koufos v. Czarnikow (C.) Ltd., [1969] A.C. 350, refd to. [para. 113].

Girardet v. Crease & Co. (1987), 11 B.C.L.R.(2d) 361 (S.C.), refd to. [para. 125].

Hadley v. Baxendale (1854), 9 Ex. 341; 156 E.R. 145 (H.L.), refd to. [para. 148].

Statutes Noticed:

Criminal Code, R.S.C. 1985, c. C-46, sect. 426(1)(a) [para. 49].

Income Tax Act Regulations (Can.), sect. 1100(1) [para. 7]; Schedule B [para. 7].

Authors and Works Noticed:

British Columbia, Institute of Chartered Accountants, Duncan Manson Memoran­dum, generally [para. 51].

British Columbia, Institute of Chartered Accountants, Rules of Professional Con­duct (1980), rules 204, 208.1 [para. 51].

Canadian Bar Association, Code of Pro­fessional Conduct (1987), c. 19, comm. 8 [para. 50].

Edmond, James G., Fiduciary Duties Owed by Insurance, Real Estate and Other Agents, in The 1993 Isaac Pitblado Lec­tures, Fiduciary Duties/Conflicts of In­terest (1993), pp. 75 to 86 [para. 42].

Ellis, Mark, Financial Advisors, in Fiduciary Duties in Canada (1988), pp. 20 to 22 [para. 93]; c. 7, 8 [para. 43].

Finn, P.D., Conflicts of Interest and Pro­fessionals, in Legal Research Foundation Inc. Seminar, Professional Responsibility (1987), pp. 14, 15 [para. 46].

Finn, P.D., Contract and the Fiduciary Principle (1989), 12 U.N.S.W.L.J. 76, p. 82 [para. 46].

Finn, P.D., Fiduciary Obligations (1977), generally [para. 29].

Finn, P.D., The Fiduciary Principle, in Equity Fiduciaries and Trusts (1989)(T.G. Youdan, ed.), pp. 27 [para. 46]; 45 [para. 27]; 50, 51 [para. 33].

Frankel, Tamar, Fiduciary Law (1983), 71 Cal. L.R. 795, pp. 802-804 [para. 46].

Frankel, Tamar, Fiduciary Law: The Judi­cial Process and the Duty of Care, in the 1993 Isaac Pitblado Lectures, Fiduciary Duties/Conflicts of Interest (1993), p. 145 [para. 46].

Fridman, G.H.L., The Law of Contract in Canada (2nd Ed. 1986), pp. 301 to 311 [para. 27].

Gummow, J., Compensation for Breach of Fiduciary Duty, in Equity, Fiduciaries and Trusts (1989)(T.G. Youdan, ed.), pp. 57 to 62 [para. 87].

Hawkins, R.E., LAC and the Emerging Obligation to Bargain in Good Faith (1990), 15 Queen’s L.R. 65, generally [para. 38].

Hubband, Charles R., Remedies and Resti­tution for Breach of Fiduciary Duties, in The 1993 Isaac Pitblado Lectures, Fiduciary Duties/Conflicts of Interest (1993), p. 31 [para. 80].

Kaufman, Michael, J., Loss Causation: Exposing a Fraud on Securities Law Jurisprudence (1991), 24 Ind. L. Rev. 357, generally [para. 91].

Krever, Horace, and Lewis, Marion Rand­all, Fiduciary Obligations and the Pro­fessions, in Special Lectures of the Law Society of Upper Canada, 1990, Fidu­ciary Duties (1991), pp. 291 to 293 [para. 27].

Maddaugh, Peter D., Definition of Fiduciary Duty, in Special Lectures of the Law Society of Upper Canada, 1990, Fiduciary Duties (1991), p. 20 [para. 27].

Merrit, Andrew L., A Consistent Model of Loss Causation in Securities Fraud Liti­gation: Suiting the Remedy to the Wrong (1988), 66 Tex L. Rev. 469, generally [para. 91].

Ong, D.S.K., Fiduciaries: Identification and Remedies (1984), 8 U. Tasm. L. Rev. 311, p. 315 [para. 132].

Shepherd, J.C., The Law of Fiduciary Duties (1981), pp. 28 [para. 42]; 78 to 83 [para. 46].

Thompson, Robert B., The Measure of Recovery Under Rule 10B-5: A Restitu­tion Alternative to Tort Damages (1984), 37 Vand. L. Rev. 349, generally [para. 91].

Waddams, S.M., The Law of Contracts (3rd Ed. 1993), p. 515 [para. 92].

Waddams, S.M., The Law of Damages, (2nd Ed. 1991), paras. 14.280, 14.290 [para. 95].

Waters, D.W.M., Law of Trusts in Canada (2nd Ed. 1984), pp. 31 [para. 119]; 712 to 714 [para. 33].

Weinrib, Ernest J., The Fiduciary Obliga­tion (1975), 25 U.T.L.J. 1, pp. 6 [para. 27]; 15 [para. 46].

Youdan, T.G., Equity, Fiduciaries and Trusts (1989), pp. 27 [para. 46]; 45 [para. 27]; 50, 51 [para. 33]; 57 to 62 [para. 87].


Earl A. Cherniak, Q.C., Gregory T. Walsh and Kirk Stevens, for the appellant;

Glenn A. Urquhart and Arthur M. Grant, for the respondents.

Solicitors of Record:

Walsh & Company, Vancouver, B.C., for the appellant;

Singleton, Urquhart, Macdonald, Vancou­ver, B.C., for the respondents.

This appeal was heard on December 6, 1993, before La Forest, L’Heureux-Dubé, Sopinka, Gonthier, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.

The judgment of the court was delivered in both official languages on September 30, 1994, and the following opinions were filed:

La Forest, J. (L’Heureux-Dubé and Gonthier, JJ., concurring) – see para­graphs 1 to 97;

Iacobucci, J. – see paragraphs 98 to 99;

Sopinka and McLachlin, JJ. (Major, J., concurring), dissenting – see para­graphs 100 to 161.


Hodgkinson v. Simms et al.

(1994), 49 B.C.A.C. 1 (SCC)

Supreme Court of Canada
Reading Time:
1 hour 32 minutes
Gonthier, Iacobucci, L’Heureux-Dubé, La Forest, Major, McLachlin, Sopinka 

La Forest, J.:
This is a case of material nondisclosure in which the appellant alleges breach of fiduciary duty and breach of con­tract against the respondent in the perfor­mance of a contract for investment advice and other tax-related financial services. The respondent, Mr. Simms, was a Chartered Accountant and partner in the respondent firm Simms & Waldman. Though the firm and Mr. Waldman are parties to these pro­ceedings, I shall because of Mr. Simms’ central role generally be referring to him when I speak of “the respondent”. Mr. Simms had developed a special expertise in relation to multi-unit residential buildings (MURBs). In 1980 the appellant Mr. Hodg­kinson retained Mr. Simms’ services in the areas of tax planning and preparation, and in finding stable, tax-sheltering investments. Mr. Hodgkinson was a “neophyte” in the field of tax planning and tax-related invest­ments. He approached Mr. Simms as an independent professional who would give him the impartial service and advice he was looking for. Mr. Hodgkinson decided to put himself in Mr. Simms’ hands with respect to his tax planning and tax sheltering needs. In the course of their relationship, Mr. Simms recommended four MURB projects to Mr. Hodgkinson as meeting his investment cri­teria. Mr. Hodgkinson duly invested in these projects. What Mr. Hodgkinson did not know, however, was that at the time Mr. Simms was making these recommendations, he was in a financial relationship with the developers of the projects. The more MURBs Mr. Simms sold to Simms & Wald­man clients, the larger the fees he reaped from the developers. While Mr. Simms attempted to deny the nondisclosure by arguing at discovery that his relationship with the developers was in fact disclosed to Mr. Hodgkinson, and then stating at trial that his business relationship with the developers did not commence until after Mr. Hodgkin­son had invested in the projects, this line of defence was rejected by the trial judge and was not pursued on appeal. Rather, this appeal concerns the proper characterization of the relationship between the parties and determining the nature and extent of the civil liability, if any, flowing from the nondis­closure.

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