A right is only as good as its remedy, and when fiduciary obligations are breached, Equity answers with tools far more flexible than ordinary damages. This piece previews how equitable compensation departs from common law logic to deliver a remedy shaped by trust, hindsight, and the full measure of what should have been.
Equitable Compensation and Common Law Damages
Equitable compensation is, unequivocally, different to that of common law damages. From Southwind v Canada,[1] citing from Canson,[2] the Supreme Court reiterates that, “It [equitable compensation] differs from common law damages because of the “unique foundation and goals of equity”.[3]
In Canson, McLachlin J. stressed the differences between equitable remedies and common law damages, explaining that the purpose of equity is to enforce the trust which lies at its heart.[4] In McLachlin’s concurring analysis she, along with Lamer C.J.C and L’Heureux-Dube, find that analogy with common law damages may not be appropriate given the misalignment between the purpose of fiduciary obligations and obligations through tort and contract.[5]
In short, common-law damages, whether contract or tort, tend to employ either a reliance-based approach or an expectation-based approach. Reliance based approaches, take a backward-looking approach. They are commonly awarded in contract and tort cases as a secondary remedy, aiming to compensate for the harm caused by a defendant’s breach of duty via a dollars-and-cents figure. Similarly, Expectation damages are the primary remedy in breach of contract cases, reflecting a forward-looking approach. Their purpose is to place the plaintiff in the position they would have been in had the contract been fully performed. This remedy recognizes the plaintiff’s right to the benefits anticipated from the contract and seeks to provide them with what they reasonably expected to receive.
While these approaches are functional within the context in which they operate, wherein the parties are taken to be independent and equal operating according to their own self-interest, it does not translate well to the fiduciary relationship where one party pledges themselves to act in the best interests of another.[6]
Is There a Substantive Difference Between Equitable Damages and Equitable Compensation?
Equitable damages may be awarded when other equitable remedies, such as specific performance or a mandatory injunction, cannot be granted due to practical difficulties.[7] These practical difficulties may include challenges in supervision or the potential impact on the rights of non-parties.[8] In such a circumstance, equitable damages allow for compensation where the more traditional equitable remedies, or common law remedies for that matter, might not fully readdress the harm done to the claimant.
Equitable compensation, on the other hand, is typically awarded where there is a breach of an equitable duty, such as a breach of trust, fiduciary duty, or confidence. It is a form of restitutionary relief meant to compensate the claimant for harm caused by the breach of an equitable duty.
Basic Principle of Equitable Damages
The notion of equitable damages finds its foundation in Lord Cairns’ Act,[9] which permits courts to award damages in circumstances where a claim for damages could not typically be pursued at common law.[10] Today this is reflected by section 99 of the Court of Justice Act, which states:
Damages in substitution for injunction or specific performance
99 A court that has jurisdiction to grant an injunction or order specific performance may award damages in addition to, or in substitution for, the injunction or specific performance.[11]
Within Equity, however, the core principle of compensation remains more elastic than those of the Common Law.[12] While the goals between both remain compensatory, aiming to place the innocent party in the same position they would have been, Equity, operating in personam, could order the wrongdoer to make restitution or compensate the claimant by putting him in as good a position pecuniarily as he would have been before the breach.[13]
For instance, in Johnson v. Agnew,[14] Lord Wilberforce emphasized that while the principle of compensatory damages generally leads to assessment at the date of the breach, courts may use discretion to set a different date if following the standard rule would lead to injustice.
Equitable Compensation
Prior to Southwind, there had been some debate over whether equitable compensation should be classified as damages, since the remedy may not always involve a monetary payment. Previous decisions examining equitable remedies flowing from breach of fiduciary duty, such as Guerin[15] and Hodgkinson,[16] assessed that where possible the Court should aim restore the claimant’s assets in specie via an accounting for profits or constructive trust.[17] While the return of a claimant’s assets in specie is preferred by Equity, where this is not possible, Southwind suggests that equitable compensation may be available.[18]
How is Equitable Compensation Calculated?
Equitable compensation is not meant to be a mathematical exercise; rather, it is a flexible and discretionary remedy. The primary goal is to:
- Compensate the injured party to the best extent possible.
- Deter further breaches of fiduciary duty.
In Stirrett v. Cheema[19], the Ontario Court of Appeal explained that compensation for the breach of fiduciary duty is typically assessed based on restitutionary principles. The idea is not only that the claimant should be placed in the position they would have been in had the breach not occurred, but also to restore the lost opportunity caused by the fiduciary’s breach.[20] Here, Equity assesses the loss at the date of trial and with the benefit of hindsight, compensating for lost opportunity caused by the breach, with the benefit of hindsight, regardless if that opportunity could have been foreseen at the time of breach.[21] While already generous in this principle, Equity goes a step further to presume that the claimant would have made the most favourable use of the trust property.[22]
Concluding Comments
In closing, the jurisprudence makes clear that equitable compensation is not simply an alternative label for common law damages, but a fundamentally distinct remedy rooted in the protective, deterrent, and restorative aims of equity. Where the common law focuses on measurable loss and predictable consequences, equity responds to the breach of a relationship of trust with remedies that are flexible, hindsight-driven, and oriented toward restoring the beneficiary’s position and the integrity of the fiduciary obligation itself.
The divergence is not merely conceptual; it reflects equity’s longstanding commitment to ensuring that those who assume fiduciary responsibilities are held to the highest standards of loyalty and prudence.
[1] Southwind v. Canada, 2021 SCC 28 (CanLII). (“Southwind”)
[2] Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC). (“Canson”)
[3] Ibid., at para 61.
[4] Ibid, at para 61; Southwind, at para 71.
[5] Canson, at para 75.
[6] Canson, at para 61.
[7] See Jeffrey Berryman, The Law of Equitable Remedies, 2d ed (Toronto: Irwin Law Inc, 2013), at pp 476. (“Berryman”)
[8] Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 SCR 415, at para 11.
[9] Chancery Amendment Act 1858 (U.K.), 21 & 22 Vict., c. 27.
[10] Canson, at para 21.
[11] Courts of Justice Act, R.S.O. 1990, c. C.43, at section 99.
[12] Canson, at para 29.
[13] Canson, at para 29.
[14] Johnson v Agnew [1980] AC 367.
[15] Guerin v. The Queen, 1984 CanLII 25 (SCC). (“Guerin”)
[16] Hodgkinson v. Simms, 1994 CanLII 70 (SCC). (“Hodgkinson”)
[17] Southwind, at para 68; Guerin, at para 50; Hodgkinson, at para 93.
[18] Southwind, at para 126.
[19] Stirrett v. Cheema, 2020 ONCA 288 (CanLII)
[20] Southwind, at para 70.
[21] Ibid., at para 74.
[22] Ibid., at para 79.
Menu
Written by: Grant Swedak
Posted on: November 28, 2025
Categories: Commentary, WEL Newsletter
A right is only as good as its remedy, and when fiduciary obligations are breached, Equity answers with tools far more flexible than ordinary damages. This piece previews how equitable compensation departs from common law logic to deliver a remedy shaped by trust, hindsight, and the full measure of what should have been.
Equitable Compensation and Common Law Damages
Equitable compensation is, unequivocally, different to that of common law damages. From Southwind v Canada,[1] citing from Canson,[2] the Supreme Court reiterates that, “It [equitable compensation] differs from common law damages because of the “unique foundation and goals of equity”.[3]
In Canson, McLachlin J. stressed the differences between equitable remedies and common law damages, explaining that the purpose of equity is to enforce the trust which lies at its heart.[4] In McLachlin’s concurring analysis she, along with Lamer C.J.C and L’Heureux-Dube, find that analogy with common law damages may not be appropriate given the misalignment between the purpose of fiduciary obligations and obligations through tort and contract.[5]
In short, common-law damages, whether contract or tort, tend to employ either a reliance-based approach or an expectation-based approach. Reliance based approaches, take a backward-looking approach. They are commonly awarded in contract and tort cases as a secondary remedy, aiming to compensate for the harm caused by a defendant’s breach of duty via a dollars-and-cents figure. Similarly, Expectation damages are the primary remedy in breach of contract cases, reflecting a forward-looking approach. Their purpose is to place the plaintiff in the position they would have been in had the contract been fully performed. This remedy recognizes the plaintiff’s right to the benefits anticipated from the contract and seeks to provide them with what they reasonably expected to receive.
While these approaches are functional within the context in which they operate, wherein the parties are taken to be independent and equal operating according to their own self-interest, it does not translate well to the fiduciary relationship where one party pledges themselves to act in the best interests of another.[6]
Is There a Substantive Difference Between Equitable Damages and Equitable Compensation?
Equitable damages may be awarded when other equitable remedies, such as specific performance or a mandatory injunction, cannot be granted due to practical difficulties.[7] These practical difficulties may include challenges in supervision or the potential impact on the rights of non-parties.[8] In such a circumstance, equitable damages allow for compensation where the more traditional equitable remedies, or common law remedies for that matter, might not fully readdress the harm done to the claimant.
Equitable compensation, on the other hand, is typically awarded where there is a breach of an equitable duty, such as a breach of trust, fiduciary duty, or confidence. It is a form of restitutionary relief meant to compensate the claimant for harm caused by the breach of an equitable duty.
Basic Principle of Equitable Damages
The notion of equitable damages finds its foundation in Lord Cairns’ Act,[9] which permits courts to award damages in circumstances where a claim for damages could not typically be pursued at common law.[10] Today this is reflected by section 99 of the Court of Justice Act, which states:
Damages in substitution for injunction or specific performance
99 A court that has jurisdiction to grant an injunction or order specific performance may award damages in addition to, or in substitution for, the injunction or specific performance.[11]
Within Equity, however, the core principle of compensation remains more elastic than those of the Common Law.[12] While the goals between both remain compensatory, aiming to place the innocent party in the same position they would have been, Equity, operating in personam, could order the wrongdoer to make restitution or compensate the claimant by putting him in as good a position pecuniarily as he would have been before the breach.[13]
For instance, in Johnson v. Agnew,[14] Lord Wilberforce emphasized that while the principle of compensatory damages generally leads to assessment at the date of the breach, courts may use discretion to set a different date if following the standard rule would lead to injustice.
Equitable Compensation
Prior to Southwind, there had been some debate over whether equitable compensation should be classified as damages, since the remedy may not always involve a monetary payment. Previous decisions examining equitable remedies flowing from breach of fiduciary duty, such as Guerin[15] and Hodgkinson,[16] assessed that where possible the Court should aim restore the claimant’s assets in specie via an accounting for profits or constructive trust.[17] While the return of a claimant’s assets in specie is preferred by Equity, where this is not possible, Southwind suggests that equitable compensation may be available.[18]
How is Equitable Compensation Calculated?
Equitable compensation is not meant to be a mathematical exercise; rather, it is a flexible and discretionary remedy. The primary goal is to:
In Stirrett v. Cheema[19], the Ontario Court of Appeal explained that compensation for the breach of fiduciary duty is typically assessed based on restitutionary principles. The idea is not only that the claimant should be placed in the position they would have been in had the breach not occurred, but also to restore the lost opportunity caused by the fiduciary’s breach.[20] Here, Equity assesses the loss at the date of trial and with the benefit of hindsight, compensating for lost opportunity caused by the breach, with the benefit of hindsight, regardless if that opportunity could have been foreseen at the time of breach.[21] While already generous in this principle, Equity goes a step further to presume that the claimant would have made the most favourable use of the trust property.[22]
Concluding Comments
In closing, the jurisprudence makes clear that equitable compensation is not simply an alternative label for common law damages, but a fundamentally distinct remedy rooted in the protective, deterrent, and restorative aims of equity. Where the common law focuses on measurable loss and predictable consequences, equity responds to the breach of a relationship of trust with remedies that are flexible, hindsight-driven, and oriented toward restoring the beneficiary’s position and the integrity of the fiduciary obligation itself.
The divergence is not merely conceptual; it reflects equity’s longstanding commitment to ensuring that those who assume fiduciary responsibilities are held to the highest standards of loyalty and prudence.
[1] Southwind v. Canada, 2021 SCC 28 (CanLII). (“Southwind”)
[2] Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC). (“Canson”)
[3] Ibid., at para 61.
[4] Ibid, at para 61; Southwind, at para 71.
[5] Canson, at para 75.
[6] Canson, at para 61.
[7] See Jeffrey Berryman, The Law of Equitable Remedies, 2d ed (Toronto: Irwin Law Inc, 2013), at pp 476. (“Berryman”)
[8] Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 SCR 415, at para 11.
[9] Chancery Amendment Act 1858 (U.K.), 21 & 22 Vict., c. 27.
[10] Canson, at para 21.
[11] Courts of Justice Act, R.S.O. 1990, c. C.43, at section 99.
[12] Canson, at para 29.
[13] Canson, at para 29.
[14] Johnson v Agnew [1980] AC 367.
[15] Guerin v. The Queen, 1984 CanLII 25 (SCC). (“Guerin”)
[16] Hodgkinson v. Simms, 1994 CanLII 70 (SCC). (“Hodgkinson”)
[17] Southwind, at para 68; Guerin, at para 50; Hodgkinson, at para 93.
[18] Southwind, at para 126.
[19] Stirrett v. Cheema, 2020 ONCA 288 (CanLII)
[20] Southwind, at para 70.
[21] Ibid., at para 74.
[22] Ibid., at para 79.
Author
View all posts