2017 NLCA 38, 2017 NLCA 38

Fish, Food and Allied Workers Union (appellant/respondent by cross-appeal) v. Edmund Moores, In His Personal Capacity and as Representative of Certain Fishing Area 14 Scallop License Holders in the Province of Newfoundland and Labrador, and Having Been Represented by Their Agent, The Fish, Food and Allied Workers (respondent/appellant by cross-appeal) (16/36 and 16/42) Indexed As: Moores v. Fish, Food and Allied Workers Union 2017 NLCA 38 2 C.A.N.L.R. 13 Court of Appeal of Newfoundland and Labrador White, Harrington and Hoegg JJ.A. June 16, 2017

Summary: A judge of the Trial Division (General) found that the appellant, Fish, Food and Allied Workers Union (FFAW) breached a fiduciary duty owed to Moores and other licensed scallop fishers by failing to inform them of the true nature and status of negotiations initiated by Nalcor Energy, a provincial Crown corporation, relating to an offer of compensation arising from Nalcor’s proposed installation of undersea electricity transmission cables in a

section of undersea scallop beds to be permanently closed to licensed fishers. The judge awarded compensation to the scallop fishers. FFAW appeals. The trial judge held that FFAW was entitled to retain an administration fee offered by Nalcor as part of the compensation package. Moores cross-appeals on behalf of the fishers seeking the amount of the administration fee by way of a court order for disgorgement of all or a portion of the administration fee. Held: Appeal dismissed, cross-appeal allowed in part.

Harrington J.A. (White and Hoegg JJ.A. concurring): A pure question of law is reviewed on a standard of correctness. Findings of fact, on the other hand, cannot be reversed unless the trial judge has made a palpable and overriding error. A question of mixed fact and law is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricable error in principle. The concept of a fiduciary is derived from equitable doctrines that developed with respect to the relationship of express trustee and beneficiary.

If and when an agent is considered to be a fiduciary, such an agent owes a duty of loyalty to the principal. An agent who allows his interests to prevail over those of his principal is guilty of a breach of the duty of loyalty. Therefore, an agent is obliged to make a full disclosure of all material circumstances relating to the performance of the undertaking. The following characteristics identify those relationships where fiduciary obligations have been imposed:

(1) The fiduciary has scope for the exercise of some discretion or power;

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests;

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power;

(4) There is an undertaking by the alleged fiduciary, either expressly or impliedly, to act in the best interest of the alleged beneficiary or beneficiaries. The trial judge did not err in holding that FFAW owed a fiduciary duty to the fishers, notwithstanding that its primary role as a trade union is representing fishers in collective bargaining with commercial fish harvesters and processors. The circumstances surrounding the

establishment and administration of the fund by FFAW was a separate and distinctly different matter from its usual role. The trial judge had equitable jurisdiction to determine whether the terms for compensation were fair and reasonable which led to hisfinding that the principle of entitlement to equal compensation sought on behalf of all of the licensed Area 14 fishers was a justifiableoutcome. The trial judge did not err by rejecting the position of FFAW that it could limit compensation solely to active fishers uponclosure of the Zone and unilaterally set a thirty-year payment period.

The FFAW objection to the immediate and equal payout isirrelevant given that the compensation was to be paid to individual license holders who decided as a group that each fisher was entitled toequal compensation. Nor was FFAW entitled to rely on the consent forms signed by fishers. The respondent fishers cross-appealed against the trial judge’s finding that the FFAW be permitted to retain its fee as a performance feerather than disgorging it and having it paid to the fishers. The fishers claimed that there should be no remuneration for an agent which isin breach of its fiduciary duty.

The fishers advanced a claim for unjust enrichment against FFAW. In order to prove a claim in unjust enrichment, the plaintiff mustestablish: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for theenrichment. Equitable remedies like disgorgement or restitution are always subject to the discretion of the court. Disgorgement of profit may bedirected to either or both of two equitable purposes, a prophylactic purpose, or a restitutionary purpose.

The trial judge held that the performance fee ought to be retained by FFAW given the fact that it was able to negotiate a substantialcompensation scheme for the fishers. This conclusion was consistent with the concept of a prophylactic purpose. The trial judge erred in allowing FFAW to retain the full administration fee as a performance fee. The criteria upon which the trial judgebased the award of the fee was not the original intention of the parties. The evidence indicates that the FFAW fee was tied to itsmanagement of the fund over a period of thirty years, when this was disallowed by the trial judge.

FFAW would receive a windfall bypayment of the entire fee. Nevertheless, some compensation to FFAW is justified for its efforts in negotiating the terms of compensationplan for its members. FFAW was ordered to transfer one half of the fee to the eligible fishers on an equal basis. Thus the appeal was dismissed and cross-appeal allowed in part. Cases cited: Ring v. Canada et al., 2010 NLCA 20, 297 Nfld. & P.E.I.R. 86 Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261 Frame v. Smith, (SCC), [1987] 2 S.C.R. 99 IPFPC v. Canada, 2012 SCC 71, [2012] 3 S.C.R. 660 Dayco (Canada) Ltd. v.

C.A.W – Canada, (SCC), [1993] 2 S.C.R. 230 C.B.R.T. & G.W. v. Knight (1988), (NB CA), 95 N.B.R. (2d) 342 (C.A.) Comeau v. Canadian Union of Postal Workers (1991), (NB CA), 112 N.B.R. (2d) 432 (C.A.) Professional Institute of the Public Service of Canada v. Canada, 2012 SCC 71, [2012] 3 S.C.R. 660 Strother v. 3464920 Canada Inc., 2007 SCC 24, 2 S.C.R. 177 Counsel: Thomas Johnson Q.C., for the appellant/respondent by cross-appeal; David P. Goodland Q.C. and Matthew Walsh, for the respondent/appellant by cross-appeal.

This appeal was heard on November 17 and 18, 2016 before White, Harrington and Hoegg JJ.A. The following judgment was delivered on June 16, 2017 by Harrington J.A. for the Court. ______________________________________________________________ Harrington J.A.: [ 1 ] The appellant, Fish, Food and Allied Workers Union (FFAW), appeals a decision of the Trial Division (General), which awarded compensation in a representative action pursuant to rule 7.11(1) of the Rules of the Supreme Court, 1986 to a group of fishers represented by Edmund Moores (Moores), a licensed scallop fisher and FFAW member.

The trial judge found that FFAW breached a fiduciary duty owed to Moores and other affected licensed scallop fishers by failing to inform them of the true nature and status of negotiations initiated by Nalcor Energy (Nalcor), a provincial Crown corporation, relating to an offer of compensation arising from Nalcor’s proposed installation of undersea electricity transmission cables in a

section of undersea scallop beds to be permanently closed to Moores and other licensed fishers. [ 2 ] The trial judge also held that FFAW was entitled to retain an administration fee offered by Nalcor as part of the compensation package. Moores cross-appeals on behalf of the fishers seeking the amount of the administration fee by way of a court order for disgorgement of all or a portion of the negotiated administration fee paid by Nalcor to FFAW. For reasons which follow, the appeal of FFAW is dismissed and the cross-appeal of the fishers is allowed in part.

BACKGROUND [ 3 ] In 2010, the federal Department of Fisheries and Oceans (DFO) permitted Nalcor to install three subsea cables with protective rock berms in a

section of scallop fishing Area 14 (Zone), across the Strait of Belle Isle from Forteau, Labrador to Shoal Cove, Newfoundland. The creation of the Zone was to apply to all current and future fishing licenses issued for Area 14 and resulting in a permanent termination of scallop fishing activity in the Zone.

Eighty-six fishers held licenses from DFO to harvest scallops in the Zone of which approximately nine to twelve fishers were actively harvesting scallops during the ten year period preceding the date of the intended closure. [ 4 ] Nalcor representatives held consultation meetings with FFAW staff members and some of the Area 14 fishers in May 2012 in order to discuss the implications of the closure.

FFAW undertook to represent the interests of the affected license holders during negotiations proposed by Nalcor with respect to the latter’s offer of monetary compensation for the permanent loss of access to the Zone. [ 5 ] Written consent forms drafted by FFAW staff and presented to the fishers authorized the union to conduct negotiations with Nalcor on their behalf. The consent forms were signed by 91% of the licensed scallop fishers in Area 14 between May and July 2013. Three fishers were appointed as a representative committee of the fishers (committee).

FFAW staff representatives were to consult with the committee during negotiations with Nalcor. A senior FFAW official confirmed at trial that the members of the committee never participated in the negotiations with Nalcor. The process led to controversy and later to litigation between the union and its Area 14 members regarding eligibility for compensation, the formula for payment and the failure to consult during negotiations with Nalcor. [ 6 ] The evidence at trial established that Nalcor intended that FFAW would manage the payment program.

All Area 14 licensed fishers, whether active or not, would be barred permanently from harvesting scallops in the Zone. The sum of $2,979,506.25 was agreed upon between Nalcor and FFAW to fund compensation payments to the affected fishers over a thirty-year period. The breakdown of the payment amount was set forth in paragraph 3.1 of the negotiated agreement between Nalcor and FFAW: Subject to

article 8, on the Closing Date, Operator agrees to pay to FFAW/CAW, in its capacity as representative of the Fishers, and FFAW/CAW agrees to accept, on behalf of the Fishers, from Operator the sum of Two Million Nine Hundred Seventy-Nine Thousand Five Hundred Six Dollars and Twenty-Five Cents ($2,979,506.25) (the “Settlement”) subject to the terms and conditions contained herein.

The said total amount is comprised of Two Million Five Hundred Ninety Thousand Eight Hundred Seventy Five Dollars ($2,590,875.00) in compensation to be paid to Fish Harvesters and Three Hundred Eighty Eight Thousand Six Hundred Thirty One Dollars and Twenty Five Cents ($388,631.25) for FFAW/CAW administration costs over the life of the compensation fund.

The settlement fund included an administration fee payable to FFAW in an amount of approximately $388,000 constituting approximately fifteen percent of the total capital amount earmarked as compensation to FFAW for its “administration costs over the life of the compensation fund”. [ 7 ] The trial judge heard testimony from the representative plaintiff, Moores, and five other fishers to the effect that they were not consulted by FFAW on a timely basis nor were they properly informed of the nature and progress of the negotiations with Nalcor which had commenced in February 2012.

The fishers were not informed that three proposals had been made by Nalcor to FFAW staff members between August 2012 and July 2013 or the contents of the proposed terms. The fishers were eventually notified of the existence of a compensation agreement negotiated by FFAW staff with officials of Nalcor.

The trial judge found that the existence and final terms of the agreement were only made known to the fishers in early 2014 when FFAW announced in a press release and subsequently confirmed to the committee members and other licensed fishers that negotiations had led to an agreement between officials of Nalcor and FFAW. [ 8 ] The six licensed fishers who testified for the respondent (two active and four inactive), expected FFAW to negotiate compensation for both active and inactive Area 14 license holders who held fishing rights in the Zone.

They expected that each fisher would receive an immediate equal lump sum payment of monetary compensation for relinquishing their licenses with the permanent loss

of harvesting rights in the Zone. The fishers were subsequently advised by staff members of FFAW that a binding agreement had been reached with Nalcor regarding a monetary compensation program solely for license holders who were active fishers at the date of the agreement. [ 9 ] The trial judge found that a senior staff member of the FFAW had met with small groups of fishers at various locations ostensibly to inform them of the progress of negotiations between Nalcor and FFAW and to seek a mandate to conclude an agreement.

Nalcor requested FFAW to confirm that an agreement in principle had been agreed upon with the fishers. In the early stage of negotiations, Jason Spingle, an FFAW staff representative had tendered what purported to be a consent form for execution by individual licensed Area 14 fishers meeting in small groups at various locations. The text of the form read: … I hereby authorize Fish, Food and Allied Workers to negotiate a compensation agreement with Nalcor to compensate license holders for lost access to the area in question.

I hereby confirm that I will accept any compensation agreement which Fish, Food and Allied Workers is able to negotiate with Nalcor. There was no other document presented by FFAW for execution by the fishers. [ 10 ] The trial judge found that these written consents were requested by Nalcor, prepared by FFAW counsel and presented to each of the fishers for their signatures. The conduct of this process and the

interpretation to be given to the terms in the consent form became the focus of disagreement between the Area 14 fishers and FFAW staff. The trial judge found that the fishers were not told when the consents were tendered to them for execution that an agreement had already been reached by FFAW staff representatives and Nalcor officials on the specific terms of a compensation plan which purportedly included a provision restricting eligibility for payment of compensation solely to active fishers.

Further, the fishers were not advised by FFAW that the fund would be paid out over a period of 30 years by applying a formula based on historic data of scallops harvested annually in Area 14 but reduced by the loss of access to scallops in the Zone.

The primary requirement governing eligibility was related to active scallop harvesting by license holders. [ 11 ] The Nalcor/FFAW agreement described the terms of payment of funds to FFAW, “in its capacity as representative of the fishers” whereby the fund would be paid firstly to FFAW and then disbursed solely to active Area 14 fishers based on calculations of the reduced scallop yields caused by closure of the Zone. [ 12 ] FFAW staff involved in the negotiations considered the consent form signed by individual fishers as written acceptance by eligible fishers of terms and conditions negotiated with Nalcor which would satisfy Nalcor’s requirement that 100% of active scallop license holders and 91% of all scallop license holders would consent to the compensation plan as evidenced by their signatures on the prior executed consent forms. [ 13 ] The scallop fishers were dissatisfied with this deal, and Mr.

Edmund Moore, as a representative of the dissatisfied Area 14 fishers, commenced a proceeding against FFAW, claiming (

i) a breach of fiduciary duty owed to all fishers holding scallop licenses for Area 14 and (ii) compensation for future loss of access rights to the Zone to harvest scallops. [ 14 ] In addition to the controversy over the import and intent of the consent forms drafted by the FFAW staff, the testimony at trial of each of the eight fishers, including one of the three committee members, was to the effect that they were not consulted by the FFAW nor were they informed of the status of the negotiations from February 21, 2012, the date of an initial consultation meeting at Flower’s Cove, until the FFAW made public the existence of the Nalcor/FFAW agreement early in 2014. [ 15 ] At paragraph 21 of his reasons the applications judge found: The evidence of Mr.

Bennett for Nalcor is that substantial agreement had been obtained in the Fall of 2013. The Order releasing Nalcor from the Environmental Protection Act, SNL 2002, c. E-14.2, s. 67(3)(

a) was given August, 1, 2013. In Mr. Bennett’s view there were outstanding for implementation of the Agreement, the Consents referred at paragraph 5.1(

b) of the Agreement as obtained, and the amendment to each of the scallop fishing licenses which was confirmed September 30, 2015, by DFO. Apparently FFAW was charged with obtaining each of those. [ 16 ] The trial judge held that FFAW breached its fiduciary duty owed to Area 14 licensed fishers by (

i) failing to keep them informed by reporting material information regarding the status of the negotiations with Nalcor which would have influenced their choices; (ii) failing to inform the fishers of the principles under which FFAW was about to and did subscribe to a compensation scheme negotiated with Nalcor; and (iii) failing to inform the fishers of the scope and consequences of executing the broadly worded consent form authorizing FFAW to negotiate on their behalf, particularly as it related to compensation for inactive license holders. [ 17 ] The trial judge found that it was always the intention of the FFAW that inactive fishers would not qualify for any compensation.

He held that the FFAW had no authority to retain the funds paid by Nalcor over a period of 30 years with annual payments to be made to fishers based on the reduction of scallop yields resulting from the closure of the Zone.

The trial judge held that all of the Area 14 scallop fishers licensed on September 30, 2013, the date when all conditions precedent to the agreement between FFAW and Nalcor took effect, were entitled to an equal share of the funds in the form of a single payment which the majority of fishers sought whether they were active or inactive fishers. [ 18 ] The trial judge ordered that the fund be divided on an “equal pro rata ” basis, i.e. an equal distribution, notwithstanding that the terminology in the agreement between Nalcor and FFAW was somewhat confusing.

He found that the payment terms were intended to mean “equal amounts per license holder.” The trial judge dismissed the fishers’ request to deny FFAW the administration fee agreed upon with Nalcor which was intended as a percentage of the overall funds (i.e. fifteen percent) to be paid by Nalcor and described by the trial judge as a performance fee. Finally, the trial judge rejected a request for an order for solicitor-client costs against FFAW. ISSUES [ 19 ] The issues on appeal are:

1. Did the trial judge err by finding that the FFAW had breached a fiduciary duty owed to the respondent fishers? 2. Did the trial judge err by failing to find that the respondent fishers had not knowingly ratified the terms of the compensationagreement negotiated by the FFAW with Nalcor by signing the consent forms? 3. Did the trial judge err by failing to find that FFAW had been unjustly enriched and to order FFAW to disgorge some or all of the“administrative fee” entitlement it obtained from the terms of the agreement with Nalcor?

STANDARD OF REVIEW [20] The standards of review applied by this Court were outlined in Ring v. Canada et al., 2010 NLCA 20, 297 Nlfd. & P.E.I.R. 86, atpara. 6: The standard of review applied by an appellate court depends upon the nature of the matter being reviewed. A pure question of law isreviewed on a standard of correctness and an appellate court is free to replace the opinion of the trial judge with its own. Findings of fact,on the other hand, cannot be reversed unless the trial judge has made a palpable and overriding error.

A determination of whether a legalstandard was met involves the application of a legal standard to a set of facts which is a question of mixed fact and law. A question ofmixed fact and law is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricableerror in principle with respect to the characterization of the standard or its application, in which case the error may amount to an error inlaw and the applicable standard is correctness. These principles are well established: Housen v. Nikolaisen, 2002 SCC 33 ,[2002] 2 S.C.R. 235.

APPLICABLE LAW [21] The text by G.H.L. Fridman, titled Canadian Agency Law, 2nd ed. (Markham: LexisNexis, 2012) provides an overview of theprinciples underlying the concept of fiduciary relationships as follows: 4.28 The concept of a fiduciary is derived from equitable doctrines that developed with respect to the relationship of express trustee andbeneficiary. Over time equity applied the notion of a fiduciary to persons other than express trustees, These included constructivetrustees, directors or certain other senior management employees of corporations, or solicitors (vis-à-vis their clients).

Indeed, as moderncases have revealed, the status of “fiduciary” can be, and has been, conferred on anyone who fits within the general idea of what isinvolved in being a (sic) agent. … 4.30 If and when an agent is considered to be a fiduciary, such an agent owes a duty of loyalty to the principal. Abrogating such loyaltyis a breach of fiduciary duty. Generally speaking, this obligation of loyalty means that the agent must not let his own personal interestsconflict with the obligation of loyalty that he owes to the principal.

An agent who allows his interests to prevail over those of hisprincipal is guilty of a breach of the duty of loyalty. At all times an agent is obliged to act in the interests of the principal. As it was putby Brodeur J. in Stahl v. Miller, the agent must do his best for the principal. This requires an agent to act with fidelity, in good faith andwith honesty. 4.31 Therefore, an agent is obliged to make a full disclosure of all material circumstances relating to the performance of theundertaking.

The duty to disclose requires disclosure of everything which, to the agent’s knowledge, might affect the principal’sjudgment. The test of what is relevant is objective: it is based upon whether a reasonable agent in the agent’s situation would considerthe information likely to influence the principal’s behaviour… (Emphasis added.) [22] Chief Justice McLachlin listed the per se fiduciary relationships in Alberta v.

Elder Advocates of Alberta Society, 2011 SCC 24,[2011] 2 S.C.R. 261 as follows: trustee–cestui que trust, executor-beneficiary, solicitor-client, agent-principal, director-corporation,guardian-ward, and parent-child. The Supreme Court also identified a template to identify ad hoc fiduciary duties in its decision inFrame v. Smith, (SCC), [1987] 2 S.C.R. 99 and in Elder Advocates, supra. Rothstein J. writing for the Court in IPFPCv.

Canada, 2012 SCC 71, [2012] 3 S.C.R. 660 summarized the criteria for recognition of ad hoc fiduciary relationships as follows: [121] Beginning with Wilson J.’s dissenting opinion in Frame, and subsequently adopted by the majority of this Court (see e.g.Hodgkinson v. Simms, (SCC), [1994] 3 S.C.R. 377), the following characteristics were said to identify thoserelationships where fiduciary obligations had been imposed.

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. [p. 136] [122] Most recently, in Elder Advocates, McLachlin C.J. stated that the aforementioned characteristics were useful but did not provide acomplete code.

This Court adopted the Hodgkinson factors, but added the requirement of an undertaking by the alleged fiduciary to actin the best interest of the alleged beneficiary or beneficiaries. (Emphasis added.) Rothstein J. elaborated at paragraph 124: It is now definitely a requirement of an ad hoc fiduciary relationship that the alleged fiduciary undertake, either expressly or impliedly, toact in accordance with a duty of loyalty.

It is critical that the purported beneficiary be able to identify a forsaking of the interests of allothers on the part of the fiduciary, in favour of the beneficiary, in relation to the specific interest at issue.

(Emphasis added.) [23] A fiduciary duty has been found to be owed by trade unions towards their members. Justice La Forest in Dayco (Canada) Ltd. v.C.A.W – Canada, (SCC), [1993] 2 S.C.R. 230 found that a fiduciary relationship might exist between certain retireesand their union. Further, in C.B.R.T. & G.W. v. Knight (1988), (NB CA), 95 N.B.R. (2d) 342 (C.A.) casual employeesof Canadian National Railway were successful in pursuing claims in fraud, deceit, misrepresentation and breach of fiduciary duty againsttheir union.

The New Brunswick Court of Appeal allowed equitable claims, including a fiduciary duty claim, noting that they arose outof rights independent of the collective agreement. (See also Comeau v. Canadian Union of Postal Workers, (1991), (NB CA), 112 N.B.R. (2d) 432 (C.A.).) [24] The circumstances surrounding the establishment and administration of the fund by FFAW was a separate and distinctly differentmatter from its usual role from collective bargaining and collective agreement administration on behalf of the fishers.

I find that the trialjudge did not err in holding that FFAW owed a fiduciary duty to the fishers, notwithstanding that its primary role as a trade union isrepresenting fishers in collective bargaining with commercial fish harvesters and processors. FFAW continued to owe a fiduciary duty toits members when it accepted a mandate to negotiate with Nalcor Energy regarding the termination of fishing rights of some of itsmembers and negotiating a compensation arrangement for them.

FFAW Breach of Fiduciary Duty [25] FFAW submits that the trial judge erred by failing to uphold the legal effect of the purported ratification by the Area 14 fishers ofthe compensation plan evidenced by prior execution of the consent forms drafted by FFAW staff. FFAW submits that the trial judgeerred in finding (

i) that it owed a fiduciary duty to Moores and other scallop fishers, and (ii) holding it liable for a breach of that duty byinducing the fishers to sign consent forms prior to the conduct of negotiations and concluding the agreement with Nalcor by exercisingsole authority of the final terms including eligibility of fishers for compensation. [26] FFAW submits that by accepting part payment of the compensation funding obtained from Nalcor, the fishers accepted thewhole of the final agreement including the provision for the payment of an administration fee to the union.

FFAW further submits thatabsent its negotiations with Nalcor, no compensation would have been available to Area 14 license holders since DFO had authority toclose the Zone at Nalcor’s request potentially leaving no basis upon which to obtain any compensation from Nalcor. [27] FFAW submits that the pro rata distribution to all fishers ordered by the trial judge is inequitable to active fishers because thefund was always intended by Nalcor to solely benefit active fishers who would suffer actual financial loss resulting from creation of theZone and the resulting permanent ban on fishing activities in that area. [28] FFAW submits that the immediate distribution of the funds to all license holders would be inequitable because it would expose itto claims from active fishers who would receive less compensation by an immediate payout to all license holders whether active or not.

Further, FFAW argues that this scenario could invite active fishers to sue Nalcor which in turn could lead to a claim for indemnity byNalcor against FFAW arising from the terms of the compensation agreement.

I do not find this line of argument persuasive given thatthere is no evidence which supports the proposition that the active fishers, who were small in number, would have sought morecompensation from FFAW under the scenario envisioned by FFAW. [29] The respondent replies that all of the grounds of appeal seek to set aside factual findings by the trial judge and are subject to astandard of review of palpable and overriding error. FFAW has not identified an error of law in the judge’s finding that FFAW owed andbreached a fiduciary duty to both the inactive fishers as well as the active fishers.

I concur with the respondents’ submission on theseissues. [30] FFAW submits that the trial judge erred in failing to find that the execution of the consent forms by the fishers who met withUnion staff representatives effectively authorized FFAW to conduct and conclude negotiations with Nalcor officials for compensation. Central to the dispute was a refusal by the fishers in 2014 to accept the term of the Nalcor/FFAW agreement which placed the limitationof eligibility for compensation to active scallop fishers in the Zone.

All fishers rejected the terms regarding eligibility and disputed theclaim by FFAW that the terms of the consent form constituted a written authorization to the union to negotiate with Nalcor and to issue arelease to Nalcor from any claims from inactive fishers. [31] The fishers sought restitution for all members holding licenses regardless of their status at the time that the consent forms weretendered and executed. [32] The trial judge did not err in finding that all of the fishers whether active or inactive at the date of conclusion of theNalcor/FFAW agreement were entitled to an equal amount of compensation.

He held that it was unreasonable for the fishers to have towait for distribution of payments over a thirty-year payment period and ordered that all fishers would be entitled to equal payment fromthe compensation fund. [33] The trial judge had equitable jurisdiction to determine whether the terms for compensation were fair and reasonable which led tohis finding that the principle of entitlement to equal compensation sought on behalf of all of the licensed Area 14 fishers was a justifiableoutcome.

I conclude that the trial judge did not err by rejecting the position of FFAW that it could limit compensation solely to activefishers upon closure of the Zone and unilaterally set a thirty-year payment period. [34] The trial judge found that FFAW was not entitled to rely upon the consent forms signed by fishers to give it unfettered authorityto negotiate compensation with Nalcor and to determine eligibility for receipt of payment by the fishers.

The primary loss suffered bythe fishers resulted from the FFAW refusing to pay any portion of the money tendered by Nalcor to inactive fishers at the date of closingof the Zone. Mr.

Moores, as the representative plaintiff for the fishers, submitted that the order for immediate distribution to all fisherssought by the respondent was not unfair to active fishers given that all licensed fishers would be compensated equally at a point when allfishing activity would permanently cease in the Zone. [35] The FFAW objection to the immediate and equal payout is irrelevant given that the compensation was to be paid to individual

license holders who decided as a group that each fisher was entitled to equal compensation. The interests of FFAW in the settlementamount was tied to Nalcor’s offer to make a separate payment of an administration fee estimated at approximately $388,000.

The trialjudge found that FFAW had not established that it would be exposed to any obligation to indemnify Nalcor or that it would be ineligiblefor the administration fee because of the immediate payment to all fishers. [36] I conclude that the trial judge did not err in his finding regarding eligibility of all license holders to equal compensation, nor didhe err in finding that the fee was no longer an administration fee.

CROSS-APPEAL [37] The respondent fishers cross-appealed against the trial judge’s finding that the FFAW be permitted to retain its fee as aperformance fee rather than disgorging it and having it paid to the fishers.

The fishers claim that there should be no remuneration for anagent which is in breach of its fiduciary duty. [38] The fishers by counter-claim advance a claim for unjust enrichment against FFAW by the manner in which it negotiated theterms of compensation from Nalcor by way of an administration fee. [39] The criteria for proving a claim of unjust enrichment were explained by the Supreme Court in Professional Institute of the PublicService of Canada v.

Canada, [2012] 3 S.C.R. 660, 2012 SCC 71, at para. 149: In order to prove a claim in unjust enrichment, the plaintiff must establish: (1) an enrichment of the defendant; (2) a correspondingdeprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (Pacific National Investments Ltd. v. Victoria (City),2004 SCC 75, [2004] 3 S.C.R. 575 (“Pacific National”), at para. 14).

Where these elements are satisfied, the remedy of constructivetrust may be available if (1) “monetary damages are inadequate”, and (2) “there is a link between the contribution that founds the actionand the property in which the constructive trust is claimed” (Peter v. Beblow, (SCC), [1993] 1 S.C.R. 980, at p. 988).

Disgorgement of the FFAW Fee/Restitution [40] The principles governing equitable remedies of disgorgement and restitution were canvassed in the reasons of Binnie J. inStrother v. 3464920 Canada Inc., 2007 SCC 24, 2 S.C.R. 177, at paras. 74-77: This Court has repeatedly stated that “[e]quitable remedies are always subject to the discretion of the court”. See, e.g., WewaykumIndian Band v. Canada, [2002] 4 S.C.R. 245, 2002 SCC 79, at para. 107; Hodgkinson v. Simms, (SCC), [1994] 3 S.C.R.377, at p. 444; Canson Enterprises Ltd. v. Boughton & Co., (SCC), [1991] 3 S.C.R. 534, at pp. 587-89, and Côté, atparas. 9-14.

In Neil, the Court stated emphatically: “It is one thing to demonstrate a breach of loyalty. It is quite another to arrive at anappropriate remedy” (para. 36). Monarch seeks “disgorgement” of profit earned by Strother and Davis. Such a remedy may be directed to either or both of two equitablepurposes.

Firstly, is a prophylactic purpose, aptly described as appropriating for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary incircumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: theobjective is to preclude the fiduciary from being swayed by considerations of personal interest. (Chan v. Zacharia (1984), 154 C.L.R. 178, per Deane J., at p. 198.

The second potential purpose is restitutionary, i.e. to restore to the beneficiary profit which properly belongs to the beneficiary, butwhich has been wrongly appropriated by the fiduciary in breach of its duty.

This rationale is applicable, for example, to the wrongfulacquisition by a fiduciary of assets that should have been acquired for a beneficiary, or wrongful exploitation by the defendant of theplaintiff’s intellectual property. … The concept of the prophylactic purpose is well summarized … as follows: [W]here a conflict or significant possibility of conflict existed between the fiduciary’s duty and his or her personal interest in the pursuitor receipt of such profits . . . equity requires disgorgement of any profits received even where the beneficiary has suffered no lossbecause of the need to deter fiduciary faithlessness and preserve the integrity of the fiduciary relationship.

Where, as here, disgorgement is imposed to serve a prophylactic purpose, the relevant causation is the breach of a fiduciary duty and thedefendant’s gain (not the plaintiff’s loss). … The prophylactic purpose thereby advances the policy of equity, even at the expense of awindfall to the wronged beneficiary. (Emphasis added.) [41] The trial judge addressed the issues raised by the respondent fishers when the fishers sought an order that FFAW disgorge thesubstantial administration fee negotiated separately with Nalcor. The trial judge found: [43] Neither Nalcor nor FFAW own the funds. Mr.

Bennett for Nalcor considers Nalcor to have commercially received that for which itmade payment, which are the amendments to all the scallop licenses to effect the drag free zone and the release and indemnity in theAgreement. Mr.

McCurdy sees the fund, excepting the administration fee, as for the fishers subject to the terms both Nalcor and FFAWhad hoped would survive the Agreement. [44] By this decision the ability of the Union to retain the funds is no longer available; that is, the failure to inform and to consult resultsin a breach of fiduciary duty collapsing the applicability of the authorization to the undisclosed basis for withholding. Consequently, the

ability to withhold the funds having failed, and the title unquestionably being in favour of the fishers, the Plaintiff is entitled to a pro-rata divided interest at the time of payment by Nalcor to the FFAW. The best evidence of the time for payment is the date of July 12, 2013, the date of the Agreement. However, payment was conditional upon the environmental release and the amendments by DFO to the licenses. As noted the evidence of environmental release is August 1, 2013.

As noted as well, the best evidence of the completion of license amendment was the written confirmation to that effect from DFO dated September 30, 2013. (Emphasis added.) [ 42 ] The trial judge concluded: [49] As has been seen in this case, the principals gave general authorization to negotiate. No specific detail was engaged nor was consultation made as has been determined. The payment of the administration fee was made by Nalcor as a separately negotiated amount though it is stated in the Agreement to be, as with the fund, for the fishers .

In this case the Plaintiff (fishers) accepts the payment amount as adequate compensation. They do not question the authority of the Defendant (FFAW) to accept the money. This is for very practical and strategic reasons. To challenge and defeat the authorization ab initio would be to potentially undermine the direct access to the funds received.

Additionally, it is apparent and not contested that DFO could have unilaterally effected the amendments to the Plaintiff’s licenses without compensation having been obtained . (Emphasis added.) [ 43 ] When active and inactive fishers holding licenses became aware of the FFAW plan, they objected and insisted that the funds be disbursed to all fishers holding licenses in Area 14.

They then turned their attention to the status of the substantial administration fee payable to the union. [ 44 ] The trial judge accepted the submission by the fishers that the FFAW ought not to receive any entitlement to an administration fee for having to administer payouts to fishers over a 30-year period given that the fishers had been successful in having the fund distributed immediately to all of the Area 14 license holders, whether active or inactive, eliminating the need for any administrative involvement of the FFAW over an extended period of time. [ 45 ] The conclusion of the trial judge was consistent with the concept of a prophylactic purpose as defined in Strother .

The trial judge held that the performance fee ought to be retained by FFAW given the fact that it was able to negotiate a substantial compensation scheme for the fishers. However, the characterization of the fee as a performance fee is at odds with the original identification of the fee as being earmarked for administration of the funds over a thirty-year period.

This point was addressed in evidence at trial by Gilbert Bennett, a senior official of Nalcor who confirmed that the compensation fund amount was firm regardless of whether the money was being paid to fishers immediately or over an extended period of time. [ 46 ] The fishers submit that the fact that the compensation fund would be paid out in full at an early date justifies a reduction of the fee. Nalcor did not seek any reimbursement, reduction or elimination of the fee.

It agreed to pay FFAW the total sum and the trial judge found that FFAW was entitled to receive a performance fee in place of an administration fee for conducting negotiations with Nalcor. [ 47 ] The fishers by cross-appeal claim that FFAW should not be entitled to the full amount of the fee but they acknowledge that they are beneficiaries of services performed by FFAW in negotiating compensation which ultimately benefitted all license holders.

This was the end result despite the effort by FFAW to limit compensation only to active fishers and to extend compensation payments over a 30- year term. [ 48 ] I find that the trial judge erred in allowing FFAW to retain the full administration fee as a performance fee. The criteria upon which the trial judge based the award of the fee was not the original intention of the parties. The primary purpose of the agreement was to obtain compensation for all FFAW members who lost fishing rights in the Zone. The evidence indicates that the FFAW fee was tied to its management of the fund over a period of thirty years.

FFAW would receive a windfall by payment of the entire fee amount given that it would be relieved of long term administrative duties resulting from the decision of the trial judge. Binnie J., at paragraph 77 of Strother emphasized the importance of the prophylactic purpose underlying protection of a fiduciary duty: … because of the need to deter fiduciary faithlessness and preserve the integrity of the fiduciary relationship. [ 49 ] Given the breach by FFAW of its fiduciary duty owed to its members, the retention of the full amount of the fee would constitute an unjustified windfall for FFAW.

Nevertheless, some compensation to FFAW is justified for its efforts in negotiating the terms of compensation plan for its members. For these reasons, I would order FFAW to transfer one half of the fee to the eligible fishers on an equal basis. CONCLUSION [ 50 ] In the result, I find that the learned trial judge did not err in finding that: (

a) FFAW had breached a fiduciary duty owed to the respondent fishers; (

b) The respondent fishers did not knowingly ratify the terms of the compensation agreement by signing the consent forms drafted by FFAW staff members; (

c) FFAW did not have authority to bind all active and inactive scallop fishers to the settlement terms with Nalcor without full and timely disclosure to and consent from all license holders; and (

d) FFAW did not have authority to exclude the inactive licensed fishers in Area 14 from participation in the compensation arrangement.

[ 51 ] However, I find that the trial judge did err by finding that the result achieved for the fishers by FFAW justified the full payment of the fee amount as a performance fee rather than as an administration fee. I would substitute an order that the fee be limited to one half of the amount agreed to be paid and that the other half be paid out to eligible fishers on an equal basis. COSTS [ 52 ] The claim for solicitor-client costs is dismissed. The conduct of the FFAW, while improper, was not so egregious as to warrant an order to disgorge the entire fee or to attract an award of solicitor-client costs.

FFAW was clearly acting outside its usual role and did not appreciate the full implications of its behaviour. The respondent shall have its costs based on Column 5 of the Scale of Costs for one counsel. [ 53 ] I would dismiss the appeal and allow the cross-appeal in part. Appeal dismissed. Cross-appeal allowed in part .