The Alberta Court of Appeal recently considered and clarified
the nature of the relationship between employers and the employees
they entrust with handling funds. As a result of the decision in
581257 Alberta Ltd. v Aujla, 2013 ABCA 16, employers may
more easily recover assets stolen, converted or misappropriated by
dishonest employees using a civil cause of action. The Alberta
Court of Appeal found that, in cases of theft, an employee owes
fiduciary obligations to its employer. In addition, the Court
overturned the lower court's decision that the plaintiff
employer was responsible not only for demonstrating that a fraud or
theft had occurred, but also for showing that all of the discovered
loss was a result of the employee's theft or fraudulent
According to the Alberta Court of Appeal, where an employer
gives an employee the responsibility for handling the
employer's funds, that employee has fiduciary obligations with
respect to those funds. Employers have a strong argument that a
similar fiduciary relationship exists where:
Employees handle inventory or valuable assets.
Employees handle cheques or transfers and have signing
The fiduciary obligation does not impose obligations of
non-competition or fidelity, but it shifts the evidentiary burden
respecting dealings with those funds.
The Court of Appeal held that once the employer proves fraud or
breach of fiduciary duty, the employer only needs to establish
reasonable efforts to determine the amount taken by the thieving
employee. At that point, the evidentiary burden shifts to the
employee to disprove the amount and the cause of the loss. This
shifting burden of proof enforces the policy that an employer
should not be precluded from recovery where the employee has
covered his tracks and compromised the ability of the employer to
prove the quantum of loss.
In Aujla, the defendants were cashiers and shelf stockers at the
plaintiff's liquor store. The plaintiffs became suspicious that
funds were going missing, but did not have sufficient evidence
because their inventory system was unsophisticated and their
surveillance was inadequate. The employer later installed a hidden
camera, which showed the employees stealing some money from the
till. This evidence established fraudulent behavior and breach of
fiduciary obligations, but only proved a small quantum of thefts.
However, the employee's bank records disclosed $116,000 in
funds that were not accounted for.
The shifting burden of proof of quantum of losses for breach of
fiduciary or fraud dramatically reduces the difficulty faced by
employers, who can only prove a few incidences of theft, but fairly
believe this theft represents part of a larger pattern. Employers
may be able to rely on the employee's lifestyle, habits (such
as gambling or shopping), or bank records to prove the loss.
While employers previously considered recovery impossible
because of insufficient proof of the full quantum of the loss, the
Alberta Court of Appeal has now leveled the playing field and
provided significant recourse for employers.
Please feel free to contact Jordan Deering of our Fraud
Corruption & Asset Recovery Group directly if you would like to
discuss the application of this decision to your particular
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