Executive Summary: Key Legal and Evidentiary Issues

• The existence of a fiduciary duty was a key legal issue; the Court of Appeal found the trial judge erred in concluding such a relationship existed between Marsh and PRM.

• Misuse of PRM’s confidential information by Marsh supported findings of breach of confidence and breach of contract, but not breach of fiduciary duty.

• The trial judge’s damages award of $1,534,000 was overturned; the appellate court substituted an award of $77,000 based on a springboard advantage period of three months.

• Solicitor and client costs awarded at trial were set aside because the necessary conditions, such as a fiduciary breach or exceptional litigation conduct, were absent.

• PRM’s cross appeal claiming breach of the duty of honest contractual performance was dismissed; the appellate court agreed no dishonest performance occurred.

• The appellate decision confirmed Marsh could lawfully compete for PRM’s clients after termination of the broker relationship, provided it did not misuse confidential information.

Facts of the case

Prairie Risk Management Inc. (PRM) provided insurance consulting services to a buying group of hog farmers and producers in Manitoba. Marsh Canada Ltd. (Marsh) acted as PRM’s broker of record from December 23, 2008, to March 1, 2017, placing group insurance policies in the Lloyd’s market in London, England. Apart from the broker of record document, there was no written contract governing their relationship.

In November 2016, PRM informed Marsh that it would not renew Marsh’s appointment for the next insurance period beginning March 1, 2017. PRM intended to place insurance directly in the Lloyd’s market. Following this, Marsh began contacting the insured members directly and succeeded in retaining insured members representing approximately 45% of PRM’s revenues. In 2019, PRM and related parties sold their shares to BFL Canada Insurance Services Inc., assigning the rights in the legal action to PRM Investments Inc.

Discussion of policy terms and clauses at issue

The Court considered that confidentiality was an implied, if not express, term of the contract between PRM and Marsh. This was supported by the General Insurance Agent Code of Conduct, which required brokers to hold client information “completely confidential” and avoid conflicts of interest without client consent. The case focused on PRM’s client information, including the “schedule of values,” created by PRM’s principal using skill and industry knowledge, and whether Marsh improperly used this data outside its authorized purpose of placing insurance for PRM.

Outcome

The trial judge found Marsh liable for breach of contract, breach of confidence, and breach of fiduciary duty, awarding PRM $1,534,000 in damages plus solicitor and client costs. However, the Court of Appeal concluded that no fiduciary relationship existed because Marsh, as an arm’s length commercial entity, had not undertaken to act solely in PRM’s interest.

The Court upheld findings of breach of contract and breach of confidence. It determined that Marsh gained a limited head start—the so-called springboard advantage—by misusing PRM’s confidential data. The appellate court reduced damages to $77,000, reflecting PRM’s lost profits during the three months Marsh would have needed to independently recreate the data and solicit the insured members.

The appellate court set aside the award of solicitor and client costs, as such costs require exceptional circumstances or fiduciary breach, which were not present. PRM’s cross appeal alleging breach of the duty of honest contractual performance was dismissed, as the trial judge correctly found that Marsh had not been dishonest in its contractual performance, but had breached its duty of confidentiality. Each party was ordered to bear its own costs of the appeal and cross appeal.