In June 2016, Paul Caron and Dirk Plate were convicted of fraud in connection with an employee benefit overbilling scheme at Atlas Copco Canada, Inc. (“Atlas Copco”). Mr. Caron was the insurance broker who was responsible for the company’s benefit program. Mr. Dirk was employed as the General Manager of the company’s Construction and Mining division, and later as Vice-President. Mr. Dirk was ultimately sentenced to five years in prison, and was ordered to repay his former employer for the $1.4 million in retirement annuities he had purchased with the stolen money. Mr. Caron was sentenced to six and a half years in prison, and was ordered to pay $10 million to the company. The other two men involved in the scheme were the company’s human resources manager, who pleaded guilty in 2013, and financial manager, who avoided being charged by returning the money he stole and agreeing to testify against his co-conspirators.
The fraudulent scheme involved the misappropriation of funds from the company through the use of false advances and bonuses, approvals of illegitimate expense reimbursements, and inflated and/or false invoices. Justice Poupore, who presided over the criminal jury trial and sentencing of Messrs. Caron and Plate, found that although he had not been a central or integral member of the scheme, Mr. Plate had known of and participated in the fraudulent scheme against his employer beginning in 2001. Justice Poupore found that Mr. Plate had been in the best position to “bring it to a grinding halt” but had failed to do so, and had instead participated in the “overbilling/kickback scheme”.
Atlas Copco brought an action against Mr. Plate for breach of fiduciary duty in respect of Mr. Plate’s involvement in the overbilling scheme. Atlas Copco relied on the findings of Justice Poupore in support of a motion for summary judgment against Mr. Plate for damages of $20 million.
The Court found that Mr. Plate was precluded by the doctrine of abuse of process from re-litigating the findings made by Justice Poupore in the criminal trial. Accordingly, Atlas Copco was entitled to rely on the findings of Justice Poupore in support of its claim for damages against Mr. Plate.
The Court found that Mr. Plate had been a fiduciary of Atlas Copco from 2002 to 2007, and accordingly owed the company a fiduciary duty. The Court noted that “[a] fiduciary does not have the option of remaining mute in the presence of an identified, known scheme that is actively harming his employer” (para 65). The Court ultimately found that Mr. Plate had breached his fiduciary duty to the company, and was liable for “all of the damages arising from the fraudulent scheme that he failed in his duty to put an end to” (para 70).
This case demonstrates that the liability associated with a breach of fiduciary duty may be significant, and that a fiduciary may be liable for damages that far exceed any benefit he or she may have derived from the breach of duty. Indeed, it is not necessary for an employer to prove that a fiduciary gained any benefit in order to establish an entitlement to damages (Varcoe v Sterling, 1992 CanLII 7478 (ONSC); aff’d 1992 CanLII 7730 (ONCA), leave to appeal refused  SCCA No. 440). Where an employer has been seriously harmed by the acts or omissions of a fiduciary, it will be entitled to claim all damages flowing from that breach.