Breach of Fiduciary Duty Lawyer

What Is a Fiduciary Duty

One of the Most Demanding Obligations Recognized by Law

A fiduciary duty is a legal obligation requiring one party to act in the best interests of another. It arises where one party places trust and confidence in another who has accepted a position of power or responsibility. The law imposes strict obligations on fiduciaries precisely because of the vulnerability created by that trust.

The core obligations include the duty of loyalty, the duty to avoid conflicts of interest, the duty not to profit from the fiduciary position without informed consent, and the duty to act in good faith. A breach of any of these duties can give rise to significant legal liability.

Directors and officers of corporations
Partners in a business partnership
Senior employees and key personnel
Trustees administering assets
Agents and professional advisors

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When trust is broken, the consequences can be severe.

Fiduciary breach claims carry remedies that go well beyond ordinary damages. A court can order the breaching party to account for all profits made from the breach, impose a constructive trust over assets they acquired, and award equitable compensation for losses suffered.

Whether you are pursuing a claim or defending one, understanding the full scope of fiduciary duties and the remedies available is essential from the outset. We act for both sides of these disputes across Ontario and BC.

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Who Owes Fiduciary Duties

Fiduciary Relationships Recognized in Ontario and BC

Directors & Officers

Directors and officers owe statutory and common law fiduciary duties to the corporation, including acting honestly and in good faith, avoiding conflicts of interest, and not using corporate opportunities for personal gain.

Business Partners

Partners owe fiduciary duties to one another and to the partnership. They must act in the best interests of the partnership, account for profits derived from partnership business, and avoid using partnership assets for personal advantage.

Senior Employees

Senior employees with significant discretion, access to confidential information, and authority to affect the employer's interests may owe fiduciary duties. A senior employee who sets up a competing business while still employed may face a fiduciary breach claim.

Trustees

Trustees hold assets for the benefit of beneficiaries and owe strict fiduciary duties in the administration of those assets. Mismanagement, self-dealing, or failure to account can all constitute fiduciary breaches.

Agents & Advisors

Agents, brokers, and advisors who have undertaken to act in a client's interest may owe fiduciary duties depending on the nature of the relationship, the degree of discretion exercised, and whether the client was in a position of dependence.

What Constitutes a Breach

The Most Commonly Litigated Forms of Fiduciary Breach

Breach Type 1 Conflict of Interest Personal interests vs. duty to the principal

A fiduciary must not place themselves in a position where their personal interests conflict with their duty to the person they serve. Acting on both sides of a transaction, holding an interest in a competing business without disclosure, or making decisions that benefit the fiduciary at the expense of the beneficiary are classic forms of conflict of interest.

Breach Type 2 Diverting Corporate Opportunities Taking what belongs to the corporation

Where a fiduciary becomes aware of a business opportunity in the course of their role, they cannot take that opportunity for themselves without proper authorization. A director who learns of a potential acquisition or contract through their position and pursues it personally, to the exclusion of the corporation, has likely breached their fiduciary duty.

Breach Type 3 Self-Dealing and Unauthorized Profit Profiting from the fiduciary position

A fiduciary must not profit from their position without the informed consent of the person they serve. Receiving undisclosed commissions, kickbacks, or benefits in connection with their fiduciary role, or using their position to extract favourable terms in transactions that benefit them personally, constitutes a breach.

Breach Type 4 Disloyalty Acting against the principal's interests

The duty of loyalty requires a fiduciary to act in the best interests of their principal at all times. Assisting a competitor, sharing confidential information with an adverse party, or taking steps during or after the relationship that undermine the principal's position can all constitute a breach of the duty of loyalty.

Breach Type 5 Failure to Disclose Material Information Withholding what the principal needed to know

Fiduciaries are often required to disclose information material to the principal's decisions. Withholding that information, particularly where doing so benefits the fiduciary or a third party at the principal's expense, can constitute a breach of fiduciary duties.

Remedies for Breach of Fiduciary Duty

Among the Most Powerful Remedies in Civil Law

Account of Profits

A court can order the breaching fiduciary to pay over all profits made from the breach, regardless of whether the principal suffered a corresponding loss. This reflects the principle that a fiduciary should not be permitted to benefit from their wrongdoing.

Equitable Compensation

Where the breach caused a loss, the court can award equitable compensation to restore the plaintiff to the position they would have been in had the breach not occurred. The rules are more flexible than those applying to common law damages.

Constructive Trust

Where a fiduciary acquired property through a breach of duty, a court may impose a constructive trust over that property in favour of the principal. This gives the principal a proprietary interest in the asset itself, which is particularly significant where the fiduciary may be insolvent.

Injunctions

Where a breach is ongoing or imminent, an injunction can stop the fiduciary from continuing the harmful conduct, including restraining them from soliciting clients, using confidential information, or acting for a competitor while the claim is resolved.

Rescission

Transactions entered into as a result of a fiduciary breach may be set aside where the parties can be restored to their original positions and it is equitable to do so.

Defending a Claim

Not every allegation of fiduciary breach is well-founded. Defences include that no fiduciary relationship existed, that the principal gave informed consent, that no loss or profit resulted, and that limitation periods have expired.

Why Acting Early Matters

The Cost of Delay vs. The Value of Early Action

Risks of Waiting Too Long

Assets moved or dissipated before a claim is filed
Evidence destroyed or unavailable
Limitation periods expiring on part or all of the claim
The fiduciary entrenches their position further
Profits from the breach compound over time
Loss of the ability to seek urgent injunctive relief

Benefits of Acting Promptly

Ability to freeze assets before they disappear
Evidence preserved while it is still available
Full range of remedies including account of profits
Injunctions available to stop ongoing harm immediately
Stronger negotiating position from the outset
Better control over the scope and cost of the litigation

Fiduciary breach cases are time-sensitive. The sooner you act, the more options remain available.

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Frequently Asked Questions

Breach of Fiduciary Duty: Common Questions

What is the difference between a breach of fiduciary duty and a breach of contract?

A breach of contract arises when a party fails to perform a contractual obligation. A breach of fiduciary duty arises when a person in a position of trust fails to act in the best interests of the person they owe that duty to. The two can arise from the same facts, but the legal analysis, the available remedies, and the standard of conduct applied are different. Fiduciary duties are generally more demanding than contractual ones, and the remedies available for their breach are often broader.

What constitutes a breach of fiduciary duty?

A fiduciary breach occurs when a person in a fiduciary position fails to meet the obligations that position imposes. Common forms include conflict of interest, diverting corporate opportunities, self-dealing and unauthorized profit, disloyalty to the principal, and failure to disclose material information. The analysis is fact-specific and depends on the nature of the fiduciary relationship and the obligations it imposed.

What is a remedy for breach of fiduciary duty?

The remedies available for a fiduciary breach are among the most powerful in civil law. They include an account of profits requiring the fiduciary to pay over all gains from the breach, equitable compensation for losses suffered, a constructive trust over assets acquired through the breach, injunctions to stop ongoing harmful conduct, and rescission of transactions tainted by the breach. The right remedy depends on the facts and the nature of the wrong.

Does every director of a company owe a fiduciary duty?

Yes. Directors of corporations in both Ontario and BC owe statutory and common law fiduciary duties to the corporation. Those duties require acting honestly and in good faith with a view to the best interests of the corporation, and avoiding conflicts of interest. The duty is owed to the corporation, not directly to shareholders, though shareholders may have derivative or oppression remedies available in some circumstances.

What is breach of fiduciary duty in Ontario?

In Ontario, breach of fiduciary duty is a cause of action that arises when a person in a fiduciary position, such as a director, officer, partner, trustee, or senior employee, fails to meet the obligations that position imposes. Claims proceed in the Ontario Superior Court of Justice. The applicable remedies include equitable compensation, account of profits, constructive trust, and injunctive relief. The basic limitation period is two years from discovery, though the analysis can be complex where the breach was concealed.

A director diverted a business opportunity to a company they own. What are our options?

This is a classic corporate opportunity doctrine case. Directors are prohibited from taking for themselves opportunities that properly belong to the corporation without the corporation's informed approval. If a director has done this, the corporation may be entitled to the profits from that opportunity, a constructive trust over any assets acquired, and compensation for any additional loss suffered. You should preserve documents relating to the opportunity and the director's conduct and seek legal advice promptly.

We have been accused of breaching a fiduciary duty. What should we do?

Take the allegation seriously and get legal advice before responding. Fiduciary breach claims carry significant potential liability, including liability to account for profits that may exceed any actual loss suffered by the claimant. The strength of the claim depends on whether a fiduciary relationship actually existed, what it required, and whether the conduct alleged actually breached those requirements. Many claims in this area do not survive scrutiny, but the defence needs to be built carefully and on the right legal foundation.

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