A recent decision by the Court of Appeal for Ontario has revived a proposed class action alleging breach of fiduciary duty by investment advisors who failed to disclose a significant conflict of interest.

In Boal v. International Capital Management,1 the Divisional Court had concluded that regulatory "best interest" standards – such as those found in the rules of the Mutual Fund Dealers Association ("MFDA") – do not automatically create a fiduciary relationship between investment advisors and their clients. As a result, the Divisional Court dismissed a proposed class action because it found that the plaintiff's claim for breach of fiduciary duty was based solely on an alleged breach of the MFDA rules. We covered the Divisional Court's decision in a previous post, available here.

That decision was recently overturned by the Court of Appeal.2 The Court of Appeal found that the plaintiff had pleaded other facts that, if true, could give rise to a fiduciary duty between the advisors and client. The Court of Appeal did not specifically address the issue of whether professional rules alone can give rise to a fiduciary relationship; instead, it affirmed longstanding case law that holds that the existence of a fiduciary relationship depends on several factors.


The plaintiff, a client of the CIRO-registered defendants, started a class action for investment losses relating to investments in promissory notes in Invoice Payment Systems Corp. ("IPS"). The defendants and their immediate family members owned 75% of the IPS shares, but did not disclose this information to their clients before recommending the notes. The plaintiff brought a claim for breach of fiduciary duty and later sought to have it certified as a class action.

Court of Appeal Decision

The Court of Appeal held that the claim did disclose a cause of action for breach of fiduciary duty.

In its reasons, the Court of Appeal highlighted the interrelated factors that must be considered when determining whether a professional investment advisor owes a fiduciary duty to a client. Those factors include the client's vulnerability, the client's reliance on and trust in the advisor, the extent to which the advisor has power or discretion over the client's account, and any professional rules or codes of conduct applicable to the advisor.

The Court of Appeal found that the plaintiff's claim for breach of fiduciary duty did not rest solely on the defendants' breach of the former MFDA rules and bylaws in selling the promissory notes. Instead, taken as a whole, the claim also pleaded other facts that, if true, could give rise to a fiduciary duty. The Court of Appeal noted, for example, that the claim pleads that the relationship between the plaintiff and defendants with respect to the promissory notes was "one of vulnerability, trust, and reliance" in which the defendants "undertook to act in their clients' best interests."3 The claim also pleads that the defendants "unilaterally exercised their discretion" with respect to the proposed class members by reviewing the members' financial plans and choosing to whom to recommend the investments in promissory notes.4

Although the Court of Appeal observed that "the existence of industry standards is an important factor in determining whether there is an ad hoc fiduciary relationship" between advisors and clients,5 it did not address the question of whether professional rules requiring investment advisors to act in clients' "best interest" could by themselves create a fiduciary relationship.

Up Next: Should the Claim be Certified as a Class Action?

The Court of Appeal's decision addresses only the issue of whether the plaintiff had properly pleaded a recognized cause of action, which is the first criterion for the certification of a class proceeding.

The Court of Appeal sent the claim back to the Ontario Superior Court of Justice to consider whether the plaintiff's claim satisfies the other criteria for class certification.

Due to the individual nature of the analysis that usually must be conducted with respect to breaches of fiduciary duty owed by advisors to clients, the plaintiff will likely face an uphill battle in attempting to persuade the court that the claims of breach of fiduciary duty are suitable for resolution on a class-wide basis.


1. Boal v. International Capital Management Inc., 2022 ONSC 1280.

2. Boal v. International Capital Management Inc., 2023 ONCA 840.

3. Boal v. International Capital Management Inc., 2023 ONCA 840 at para 42.

4. Boal v. International Capital Management Inc., 2023 ONCA 840 at para 44.

5. Boal v. International Capital Management Inc., 2023 ONCA 840 at para 42.

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