Date: Mon, 19 Sep 2005 08:11:01 -0400

From: David Cheifetz

Subject: Apportionment, Causative Potency, Blameworthiness

Charles,

I hope I haven't fallen into the trap of failing to keep separate the issues of the wrongdoers' liability and the extent of that liability to P from the issues of how to apportion financial responsibility between the wrongdoers. You are both right and wrong, I think, to point out that it's a non-sequitur to argue merely from the proposition that the fiduciary and assistant are jointly liable to P, as joint wrongdoers, that as between themselves they necessarily ought to be equally responsible for the loss. Canadian authority, in fact, doesn't require that conclusion. The nature of the duty breached by each of the wrongdoers is relevant to the apportionment. I suspect that if I searched, I'd find a case where the fact that T1 was the fiduciary and T2 the assistant resulted in T1 having a greater share. On the other hand, I think it just as likely we'd find sufficient involvement on the part of T2, even if not a fiduciary, to move the significance of T2's conduct sufficiently close to the level of T1's that the apportionments wouldn't be significantly different.

My point, though, is that on the assumption P1 and P2 are joint wrongdoers, it seems to me there's a logical inconsistency in that result (the greater share to T1) if the central basis for apportionment is causative potency. That inconsistency exists because, as joint wrongdoers, the conduct of one is the conduct of all, if apply the consequences of that deeming even in apportionment. To eliminate the inconsistency, we have to add, in the apportionment context, that the deeming of the conduct does not carry with it the moral approbation. I see no principled reason preventing that approach. The issues at the apportionment stage are sufficiently different that principle doesn't require that T2 always be deemed to be treated as if T2 had actually acted as T1 did. It's just that, if one does that, I think logic requires the realization that the consequence is inconsistent with the causative potency of all of the acts which the law deems to be T2's. Put another way, you are apportioning financial responsibility based only on the causative potency of T2's own acts. Again, there's nothing wrong with that distinction, particularly given the underpinning of the contribution remedy in UE. It just needs to be made clear that that is what is happening.

Anyway, I rather suspect that in most cases of the sort you are describing, we would have a finding that the assistant's conduct creates direct liability on the assistant and that that conduct was causative, given the current summary of the law required for T2 to be liable in such circumstances. See the summary in Commercial Union Life Assurance Co. of Canada v. John Ingle Insurance Group Inc., 2002 CanLII 45028 (Ont CA) at para 2-4 where the Ont CA summarizes the current law relating to the "nature of the breach of trust required to impose liability on a stranger for knowing assistance". I haven't thought it through but, on first blush, it seems to me that Canada's retention of the broad approach to the principles of tort liability that flows from Anns v Merton, which England has (somewhat ?) resiled from, might be relevant to explaining our approach.

I've been lax, the past two plus decades, in keeping up with cases that might affect how one meshes the traditional consequences of joint wrongdoing with apportionment legislation insofar as those consequences affect apportionment as between the wrongdoers . I'm reasonably certain the issue, put that way, is often considered; at least because there is a tendency in Canadian courts to say that the apportionment legislation means its no longer necessary to consider whether the wrongdoers are joint, so long as there's a finding that their conduct caused the same damages. (We've generally managed to avoid the damage / damages problem, so far.) I assume that one or more of the members of this list will know, of hand, if there are Canadian cases where the court has specifically considered how the apportionment is affected by the fact that T1 was the actual fiduciary and T2 merely the assistant. CGU doesn't assist, really, because the person who would have been T2 in your construct (John Ingle) wasn't found liable at all based on Canadian law and the conduct of the other person who was a stranger to the trust was sufficiently egregious as to create direct, personal liability for that conduct.

Regards,

David

----- Original Message -----
From: Charles Mitchell
To: David Cheifetz
Sent: Monday, September 19, 2005 5:26 AM
Subject: ODG: Re: Apportionment, Causative Potency, Blameworthiness

Dear David

I'll certainly go back and read Atiyah's piece: thanks for the reference. But my snap answer so far as the trustee/dishonest assistant example is concerned is that this is one of those rare situations contemplated by Atiyah where

it can be clearly demonstrated that the assistance of one of the parties made no difference to the result.

Under English law at least, the causation rules for dishonest assistance are unusual because the courts have recognised liability under this head as a kind of civil secondary liability analogous to criminal secondary liability - a step which they refused to take at common law in Credit Lyonnais v ECGD [2000] 1 AC 164. See most recently Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch) [1506] (Lewison J).

Hence, to establish liability all that needs to be proved against a dishonest assistant is that he did something which made the defaulting fiduciary's breach of duty easier than it would otherwise have been: Brown v Bennett [1999] 1 BCLC 649 at 659. Hence he may be liable even if the loss would have occurred anyway.

On your argument, it follows from the fact that a dishonest assistant D1 and a defaulting fiduciary D2 are jointly and severally liable to the principal, that when it comes to apportion between D1 and D2, the law must deem them to have caused the principal's loss jointly and thus to the same extent.

But I believe this to be a non sequitur. As between D1 and the principal, the law wishes to make D1 liable to the same extent as D2, even though the causative impact of his actions has been less, because he is a very bad guy, subjectively dishonest. But it does not follow from this that as between D1 and D2, the law must apportion as though the causative impact of their actions was identical.

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