Case Summary: Raponi v Olympia Trust Company

  • October 05, 2022
  • Tyler O’Henly

The Facts

Raponi v. Olympia Trust Company, 2022 ONSC 4481, was a decision on a certification motion brought in the wake of the Fortress Developments (“Fortress”) scandal. Fortress was a developer that financed its projects through syndicated mortgages that were largely funded by small private lenders. Among other false representations, Fortress assured investors that its development projects were “fully secured” and a “qualified investment” as defined under the Income Tax Act (the “ITA”), and could therefore be invested in through a registered savings account. Some 13,000 lenders invested in syndicated mortgages in reliance on these representations. Once they did so, their money was placed with the trustee and administrator, Olympia Trust Company (“Olympia”), who forwarded payments to Fortress. Many of the projects financed by Fortress syndicated mortgages eventually failed, and it was revealed after the fact that the mortgages were neither “fully secured” nor “qualified investments”.

The representative plaintiff alleged that, as trustee, Olympia owed a duty to ensure the syndicated mortgages were compliant with the ITA throughout the term of the mortgages. The source of these duties and obligations, the plaintiff contended, was a regulation under the ITA that required a trustee to “exercise the care, diligence and skill of a reasonably prudent person to minimize the possibility that a trust governed by the registered plan holds a non-qualified investment.” On behalf of lenders who invested in Fortress syndicated mortgages through registered savings accounts, the plaintiff sued Olympia for breach of fiduciary duty, breach of trust, breach of contract, and negligence.

The Decision

Justice Perell for the Ontario Superior Court of Justice declined to certify the action on the basis that no cause of action was sufficiently pleaded.

In addressing the plaintiff’s claims of breach of fiduciary duty and trust, Justice Perell found the causes of action were largely predicated on a false premise that “fiduciary and trust duties are immutable and cannot be restricted or nullified.” He further highlighted three doctrinal mistakes made by the plaintiff when designing the claim:

  1. He conflated breach of fiduciary duty with breach of a trustee’s duty of care;
  2. He reasoned backwards to conclude that whenever there is a trust or fiduciary relationship and harm is suffered, there is a breach of trust or of fiduciary duty; and
  3. He conflated powers with duties.

Justice Perell instead consulted the case law and made three key conclusions:

  1. A fiduciary’s duties are malleable and are established on a case-by-case basis;
  2. Only breaches that amount to “a betrayal of that trust component of the relationship” between the fiduciary and beneficiary amount to a breach of trust or fiduciary duty; and
  3. Citing a fiduciary relationship to establish liability for any harm suffered by the beneficiary would be “reading equity backwards.”

Justice Perell then reviewed the relationship at hand and found that Olympia’s duties under the agreements executed between it and the lenders “expressly disavowed responsibilities to Lenders to confirm the tax status of their investments” and “do not extrapolate to require extensive gatekeeping responsibilities.” The ITA, a taxation statute, does not regulate consumer protection or financial products and should not have been read to supersede the relationship established by contract in this instance. Olympia indeed had power under the agreements to refuse an advance of funds to a development if it felt the syndicated mortgage was not a qualified investment, but this permissive authority under their agreements with lenders did not equate to a duty, fiduciary or otherwise.

The plaintiff failed “to distinguish quality of trust and fiduciary duties from contractual and tortious duties.” Olympia was permitted to restrict its “gatekeeper” duties to the class with respect to confirming the ITA status of the syndicated mortgages. Therefore, a claim against it for damages resulting from the ITA was plainly and obviously doomed to fail.


Raponi provides helpful guidance for plaintiffs who wish to sue a party for breach of fiduciary duty and trust. Plaintiffs should not simply assume an express or implied fiduciary relationship between parties creates “blanket liability” for a trustee or fiduciary. They must instead assess trust and fiduciary relationships on a case-by-case basis to determine whether a fiduciary relationship indeed exists, its parameters, and whether the fiduciary’s breach of its duty to the beneficiaries led to the harm alleged.

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