The term “fiduciary” does not get thrown around frequently outside of some advertisements for investment services. However, fiduciary relationships are at the heart of estate and trust law. What follows is a “Fiduciary FAQ.”
What is a fiduciary?
A fiduciary is a person who holds some right, power, or authority which, when exercised, impacts the interests of another person (the beneficiary). What characterizes the fiduciary relationship is that the fiduciary is under an obligation to exercise the power she holds in the best interests of beneficiary. Fiduciary relationships are defined by an element of trust; the beneficiary’s interests are vulnerable to the actions of the fiduciary.
Some of the best known examples of fiduciaries include estate trustees and trustees of a trust. In those cases, the (estate) trustee holds all the assets of the estate or trust and must manage those assets in such a way that it maximizes the benefit to the beneficiaries of the estate or trust.
However, other types of relationships can also be fiduciary in nature. For example, an attorney for property, an investment manager, a director of a corporation, and a lawyer may also be fiduciaries.
There are three characteristics which must be present for a relationship to be fiduciary in nature:
(1) the fiduciary must be able to exercise some form of discretionary power;
(2) the fiduciary must be able to exercise some power or discretion unilaterally, which then affects the beneficiary’s legal, financial, or practical interests;
(3) the beneficiary is at the mercy of the fiduciary holding that power.
What are a fiduciary’s duties?
A fiduciary’s duties vary depending on specific circumstances. However, underlying all of a fiduciary’s duties is the concept that the fiduciary must act in utmost good faith towards the beneficiary, or with a “heightened sense of loyalty and fidelity” towards the beneficiary.
In Valard Constructions Ltd. v. Bird Construction Co., the Supreme Court of Canada articulated three “fundamental” fiduciary duties:
(1) A fiduciary must act honestly and with that level of skill and prudence which would be expected of the reasonable person of business administering his or her own affairs.
(2) A fiduciary cannot delegate her responsibilities to another.
(3) A fiduciary cannot profit personally from her dealings with the trust property or with the beneficiaries of the trust. (Note that a fiduciary can charge for her services; in fact, this is common. However, the fiduciary cannot use her powers to obtain other types of profits from her position.)
What happens when a fiduciary breaches her duties?
A fiduciary must act with the degree of diligence that a person of ordinary prudence would exercise in the management of her own affairs. This means that the fiduciary must demonstrate “vigilance, prudence and sagacity” in her decisions. However, she is not expected to be perfect – many small mistakes will be forgiven.
However, where a fiduciary has failed to live up to the standard of care expected of her, or has breached one of her duties, the court may order the fiduciary to compensate the beneficiary for any loss suffered. The court has a broad discretion to determine the right remedy for the situation.
Common remedies ordered by the court include:
(1) Removing the fiduciary from her position.
(2) Reducing the amount of compensation charged by the fiduciary.
(3) Ordering the fiduciary to “disgorge” any profits obtained as a result of her breach of fiduciary duty.
(4) Ordering the fiduciary to pay damages to the beneficiary in the amount of the loss, with interest (if appropriate).
Now that you have a better understanding of what a fiduciary is, you will begin seeing them everywhere in your life!
 Mark Vincent Ellis, Fiduciary Duties in Canada (Toronto: Carswell, 2021) at §1.11.
 Leardoyd v. Whiteley, (1887), L.R. 12 App. Cas. 727 (UK HL).