Claims against corporate directors & officers
Board-level conflicts, diversion of opportunities, secret commissions, and self-dealing. We move quickly to contain harm, preserve records, and seek gain-based relief where appropriate. Jump to section
Grigoras Law acts for corporations, shareholders, partners, trustees, and professionals in breach of fiduciary duty disputes across Ontario. We represent both plaintiffs and defendants in cases involving misuse of trust, conflict of interest, self-dealing, and diversion of corporate or client opportunities. We advise on fiduciary obligations in governance, employment, partnership, and advisory contexts, and act swiftly where urgent remedies are required, including injunctions, tracing, and preservation orders. Our litigation strategy emphasizes evidence-driven accountability and equitable relief (disgorgement of profits, constructive trust, accounting, or equitable compensation) together with practical outcomes that restore integrity, protect assets, and uphold the duties of loyalty and good faith.
Board-level conflicts, diversion of opportunities, secret commissions, and self-dealing. We move quickly to contain harm, preserve records, and seek gain-based relief where appropriate. Jump to section
JV freeze-outs, side deals, and misuse of shared assets. We pursue tailored remedies that unwind unfair advantage and restore the agreed allocation of benefits. Jump to section
Self-dealing, improper distributions, and conflict management in estates and trusts. We seek removal orders, passing of accounts, and constructive trusts where warranted. Jump to section
Advisors who leverage client confidence for personal gain or competing mandates. We address conflicts, confidential misuse, and undisclosed benefits. Jump to section
Departure schemes, opportunity diversion, and competitive misuse of insider knowledge. We act swiftly to secure data, restrain misuse, and quantify diversion. Jump to section
Disgorgement, accounting, constructive trusts, equitable compensation, and targeted injunctions. We tailor the relief to remove unfair advantage and deter repetition. Jump to section
Knowing assistance and knowing receipt claims, tracing into substituted assets, and preservation orders against complicit recipients. Jump to section
Early record-building, proportional discovery, and urgent motions for preservation, delivery-up, and confidentiality protections. Jump to section
Contesting fiduciary status, informed consent, statutory authorization, limits on gain-based relief, causation, and limitation defences. Jump to section
A breach of fiduciary duty arises when a person who has accepted a position of trust or discretionary power uses that position for personal benefit or otherwise acts disloyally toward the party they are meant to protect. Fiduciary law exists to preserve the integrity of relationships built on confidence and vulnerability—situations where one party justifiably relies on another to act selflessly and with complete candour.
Unlike an ordinary contractual or negligence dispute, a fiduciary claim does not hinge on mere error or lack of skill. It addresses the betrayal of loyalty. When a director secretly diverts a business opportunity, a trustee self-deals with trust property, or an investment advisor conceals a conflict of interest, the wrong is moral as well as legal. Equity intervenes not to punish negligence but to remove temptation and strip away profit gained through disloyalty.
Canadian courts, following decisions such as Hodgkinson v. Simms, [1994] 3 SCR 377 (CanLII), emphasize that fiduciary duty is one of utmost good faith and self-denial. The duty arises where confidence is reposed and influence is accepted. The fiduciary must act only for the benefit of the beneficiary, avoid conflicts, and never profit from the position unless fully informed consent is obtained.
Because these duties are rooted in equity, their remedies aim not merely to compensate loss but to maintain public confidence in professional, corporate, and institutional governance. Breach of fiduciary duty is therefore treated as one of the most serious civil wrongs in Canadian private law.
Fiduciary duties may arise by law or by fact. Courts divide them into two broad categories:
(1) per se relationships, which are automatically fiduciary, and
(2) ad hoc relationships, recognized when specific circumstances of trust, power, and vulnerability exist.
The distinction matters because equitable remedies attach only where a true fiduciary relationship has been proven.
Certain relationships are fiduciary by their very nature. They include:
Trustee and beneficiary, where legal title and beneficial ownership are divided.
Lawyer and client, reflecting the client’s total reliance on counsel’s loyalty and confidentiality.
Director or officer and corporation, as codified in the Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 122(1)(a) (e-Laws).
Agent and principal, where the agent holds authority to bind the principal.
Partners in a partnership, recognized under the Partnerships Act, R.S.O. 1990, c. P.5, s. 28.
Executors and estate beneficiaries, and guardians and wards.
In each case the law presumes an undertaking of loyalty and good faith. The fiduciary must avoid personal gain at the beneficiary’s expense and may not place themselves in a position of divided loyalty
Outside these classic categories, courts may recognize a fiduciary duty where three elements coincide:
Discretionary Power or Control – One party possesses a unilateral ability to affect the other’s interests.
Vulnerability and Reliance – The beneficiary depends on that discretion, lacking equal access to information or power.
Undertaking of Loyalty – The fiduciary expressly or implicitly promises to act in the other’s best interests.
This modern test was clarified in Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24 (CanLII). The Court warned that not every relationship involving trust or reliance is fiduciary: a bank–customer or supplier–purchaser relationship, for example, is commercial, not fiduciary, unless special circumstances transform it into one of loyalty and dependence.
By contrast, long-term professional or advisory relationships often satisfy these criteria. Investment managers, accountants, and even real-estate agents have been found fiduciary where they exercise discretionary judgment over their clients’ assets or affairs.
At the core of every fiduciary obligation lies the duty of loyalty, an expectation that the fiduciary’s judgment will remain unclouded by self-interest. Equity’s traditional maxims capture it succinctly: “No man can serve two masters.”
The leading Canadian articulation appears in Frame v. Smith, [1987] 2 SCR 99, where Justice Wilson described three defining characteristics:
The fiduciary has scope for the exercise of discretion or power.
The fiduciary can unilaterally exercise that power to affect the beneficiary’s legal or practical interests.
The beneficiary is particularly vulnerable to the fiduciary’s discretion.
From these characteristics flow specific obligations:
Good Faith and Honesty: All decisions must be made sincerely, without deceit or concealment.
Avoidance of Conflict: The fiduciary must not let personal, family, or outside interests interfere with duty.
No Secret Profit: Any benefit derived from the relationship belongs to the beneficiary unless fully disclosed and consented to.
Confidentiality: Information gained through the fiduciary position cannot be exploited for personal gain.
These rules are prophylactic – they prevent wrongdoing rather than merely compensating for it. The fiduciary’s motive is irrelevant: even honest intentions cannot excuse an undisclosed conflict. As the Supreme Court noted in Strother v. 3464920 Canada Inc., 2007 SCC 24 (CanLII), the law’s purpose is to maintain confidence in relationships of trust by “disabling the fiduciary from being swayed by considerations of personal interest.”
The distinction between fiduciary breach and other civil wrongs is crucial to understanding the remedies that follow.
Negligence focuses on carelessness. A professional who fails to meet the standard of a reasonable expert may be liable in tort, but if their error is honest and untainted by self-interest, the matter ends there.
Contract enforces promises that parties have bargained for. Remedies are usually compensatory and limited to foreseeable loss.
Fiduciary breach, by contrast, is moral and equitable. It condemns betrayal of loyalty, not failure of competence.
For example, a financial advisor who miscalculates a portfolio return might face a negligence claim. But if that advisor secretly channels investments to a company in which they hold shares, the wrong transcends negligence – the law demands disgorgement of profits, not merely damages.
Equity also differs procedurally. Once a fiduciary relationship is proven, the onus shifts: the fiduciary must demonstrate that they acted with full disclosure and consent. This reversal reflects the law’s protective instinct toward the vulnerable party.
The overlap of duties is recognized. In Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 SCR 534 (CanLII), the Supreme Court allowed concurrent claims in negligence and fiduciary breach, holding that the equitable duty does not vanish simply because a contract or tort remedy is available. However, damages cannot be duplicated; equity aims to make the plaintiff whole, not doubly compensated.
Fiduciary principles reach into nearly every corner of commercial and professional activity. Below are the most frequent settings in which Canadian courts find fiduciary obligations.
Directors and officers owe twin duties to the corporation:
(1) a statutory duty under s. 122(1)(a) of the Canada Business Corporations Act and its Ontario counterpart, s. 134(1)(a) of the Business Corporations Act, R.S.O. 1990, c. B.16; and
(2) a common-law fiduciary duty of loyalty and good faith.
They must place the corporation’s interests above their own and disclose any conflict in material transactions. Self-dealing, such as purchasing corporate assets at undervalue or diverting opportunities, violates this duty even if the corporation suffers no quantifiable loss. In Canadian Aero Service Ltd. v. O’Malley et al., 1969 CanLII 1731 (ON SC), two senior officers who resigned and pursued a corporate opportunity for themselves were held liable for disgorgement of all profits, reinforcing that fiduciaries must refrain from placing themselves in a position where duty and self-interest conflict.
Directors are, however, shielded when acting honestly and prudently under the business judgment rule, a doctrine reaffirmed in Peoples Department Stores Inc. v. Wise, 2004 SCC 68. That rule protects good-faith decisions made on reasonable information, even if hindsight shows them mistaken.
Partners owe each other utmost good faith and full disclosure in all matters affecting the partnership. Ontario’s Partnerships Act sets out some of these obligations. Secret profits, competition with the partnership, or diversion of clients are classic breaches. Courts have extended similar principles to joint ventures and pre-contractual collaborations where one party undertakes to act for both. The leading case, Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 SCR 574 (CanLII), imposed fiduciary liability on a mining company that misused confidential geological data shared in confidence during negotiations.
Trustees are paradigmatic fiduciaries. Their duties of loyalty, prudence, and impartiality are codified in the Trustee Act, R.S.O. 1990, c. T.23. They must invest only as permitted, account regularly to beneficiaries, and avoid any transaction that benefits themselves. Self-dealing is voidable regardless of fairness or intent. In Fales v. Canada Permanent Trust Co., [1977] 2 S.C.R. 302, the Supreme Court underscored that trustees must exercise the care, diligence, and skill of a prudent person of business. Misuse of trust property or personal borrowing from the estate constitutes a clear breach of fiduciary duty and may lead to removal or surcharge, as confirmed in Ontario cases such as Fox v. Fox Estate (1996), 28 O.R. (3d) 496 (C.A.).
Professionals such as lawyers, accountants, and financial consultants often occupy dual roles – as contract service providers and as fiduciaries. Where they exercise discretionary authority or hold confidential information, courts presume fiduciary duties of loyalty and candour.
In Hodgkinson v. Simms, [1994] 3 SCR 377, an investment advisor failed to disclose that he was receiving commissions from developers to whom he steered his clients. The Supreme Court held him liable for both the clients’ financial losses and the profits he earned, stressing that fiduciary law demands transparency “where one party’s expertise and influence create a corresponding duty of loyalty and disclosure.”
For lawyers, the fiduciary obligation extends beyond competence to conflicts of interest. Rules 3.4-1 to 3.4-4 of the Rules of Professional Conduct (Law Society of Ontario) reinforce this equitable standard in regulatory form.
Not all employees are fiduciaries. However, those occupying senior management or strategic roles, who influence policy, pricing, or client relations, bear fiduciary responsibilities to their employer. They must not compete, solicit clients, or misuse confidential information during or shortly after employment. In Canadian Aero Service Ltd. v. O’Malley (above), the Court described these duties as continuing even after resignation when the opportunity pursued “was acquired through the employee’s position and special knowledge.”
Equitable relief can include injunctions restraining solicitation or disclosure, as well as an accounting of profits earned from diverted opportunities. For ordinary employees, obligations are limited to contractual and statutory duties of fidelity under the Employment Standards Act, 2000 (S.O. 2000, c. 41) and common-law implied terms.
To succeed in an action for breach of fiduciary duty, a plaintiff must prove three essential elements:
(1) the existence of a fiduciary relationship,
(2) a breach of the duties arising from that relationship, and
(3) a resulting detriment to the beneficiary or an unjust gain to the fiduciary.
The first question is whether a fiduciary relationship exists. As reaffirmed in Galambos v. Perez, 2009 SCC 48 (CanLII), the determination is contextual: courts assess the nature of the relationship rather than relying on rigid categories. A fiduciary duty may be found when one party places confidence in another, who then undertakes to act primarily for that other’s benefit.
Indicators include:
Discretionary Power: the fiduciary has authority affecting another’s legal or financial interests.
Dependence and Vulnerability: the beneficiary must rely on the fiduciary’s integrity and judgment.
Reasonable Expectation of Loyalty: the relationship creates an obligation that the fiduciary act selflessly and avoid conflicts.
For instance, in Hodgkinson v. Simms, the Supreme Court held that a financial advisor owed fiduciary duties because his client relied entirely on his expertise and candour. Conversely, in Galambos, the Court refused to find a fiduciary relationship between an employer and employee in the absence of vulnerability or an undertaking of loyalty.
Once a fiduciary relationship is established, the plaintiff must show that the fiduciary failed to uphold its core obligations – loyalty, honesty, good faith, and avoidance of conflict. The breach may take many forms:
Self-Dealing: profiting personally from an opportunity that belonged to the beneficiary.
Conflict of Interest: placing oneself in a position where duty and self-interest diverge.
Secret Commissions or Kickbacks: accepting undisclosed benefits from third parties.
Misuse of Confidential Information: exploiting knowledge gained through the fiduciary position.
Failure to Disclose: withholding material facts that would have influenced the beneficiary’s decisions.
In Strother v. 3464920 Canada Inc., 2007 SCC 24, a tax lawyer continued advising one client while secretly investing in a competing venture. The Supreme Court found a breach even though the lawyer’s conduct initially appeared within the contract’s limits. Equity demanded disgorgement of all profits derived from the conflict.
The fiduciary’s intent is irrelevant. Even well-meaning actions can constitute a breach if they create a conflict or yield undisclosed profit. As Justice La Forest observed in Canson Enterprises, equity operates on a “no-tolerance principle”: the law removes the possibility of temptation.
Unlike negligence, a fiduciary claim does not require proof of economic loss. The mere fact that the fiduciary gained a profit or placed themselves in conflict suffices to invoke equitable remedies. The principle was established in Boardman v. Phipps [1967] 2 A.C. 46 (H.L.), where trustees were compelled to surrender profits from a transaction that ultimately benefited the trust. Canadian courts have repeatedly followed this strict approach, holding that deterrence and preservation of trust outweigh concerns about fairness to the fiduciary.
Remedies in fiduciary law are designed to restore integrity and strip away advantage, not merely to compensate. The equitable jurisdiction of Canadian courts allows a wide range of responses tailored to the nature of the wrongdoing.
The most common remedy is disgorgement, which compels the fiduciary to surrender all gains obtained through the breach, regardless of whether the beneficiary suffered loss. This is sometimes expressed as an “accounting for profits.” Its purpose is prophylactic: to ensure that loyalty, not opportunism, governs fiduciary behaviour.
In Canadian Aero Service Ltd. v. O’Malley, the Court required former executives to account for profits from a government mapping contract they had usurped. Similarly, in Strother, the lawyer was ordered to disgorge earnings from his undisclosed participation in a competing business. The quantum is determined by tracing benefits directly or indirectly flowing from the breach.
Where the fiduciary acquires property through disloyal conduct, equity may impose a constructive trust, effectively transferring ownership to the beneficiary. This remedy is proprietary rather than monetary – it recognizes that the property rightfully belongs to the person wronged. Courts invoke it where (1) there is a fiduciary relationship, (2) the fiduciary acquired specific property, and (3) a causal link connects the breach to that acquisition.
In Soulos v. Korkontzilas, [1997] 2 SCR 217 (CanLII), a real-estate agent purchased a property his client had been negotiating for. Even though the client suffered no economic loss, the Supreme Court imposed a constructive trust over the property to uphold fiduciary integrity. The Court emphasized that equity’s purpose is to prevent fiduciaries from retaining ill-gotten gains, not simply to repair measurable damage.
When the breach causes identifiable financial loss, the court may award equitable compensation. This remedy resembles damages in tort but operates on different principles: causation is applied flexibly, and foreseeability does not constrain recovery. The fiduciary must restore the beneficiary to the position they would have occupied had the duty been fulfilled.
In Canson Enterprises, negligent solicitors failed to disclose a secret profit in a real-estate transaction. The Court awarded compensation for the immediate loss resulting from the breach but refused to extend liability for subsequent market declines, distinguishing between equitable and tortious causation.
Equitable compensation is therefore discretionary; it depends on fairness, proportionality, and the causal nexus between the breach and the loss. Plaintiffs often combine it with disgorgement or restitutionary remedies.
Fiduciary breaches often require injunctive relief to prevent ongoing harm, such as prohibiting further misuse of confidential information or restraining competition by a former executive. Because equity acts in personam, courts can issue interim or permanent injunctions tailored to the fiduciary’s conduct.
Where a contract or transaction is tainted by breach, the court may order rescission, setting it aside entirely. For example, if a fiduciary induces a beneficiary to enter an agreement through nondisclosure, rescission restores both parties to their pre-contract positions, subject to restitution of benefits.
Fiduciary accountability extends beyond the immediate wrongdoer. Equity recognizes that those who knowingly assist or benefit from a fiduciary’s breach should not retain ill-gotten gains.
A third party who knowingly participates in the fiduciary’s disloyal acts may be liable for knowing assistance. The classic test from Air Canada v. M & L Travel Ltd., [1993] 3 SCR 787 (CanLII) requires:
A fiduciary duty and its breach;
The third party’s knowledge of that breach (actual, wilful blindness, or recklessness); and
Participation that furthers or facilitates the breach.
Knowledge is key. Innocent intermediaries are not liable, but deliberate or reckless involvement, such as assisting in the diversion of corporate assets, creates joint responsibility for the resulting loss.
A third party who receives property derived from a fiduciary breach may be liable for knowing receipt if they knew, or should have known, that the property was misapplied. Even passive retention can trigger restitutionary obligations once knowledge arises. Equity demands that recipients return or account for such assets to prevent unjust enrichment.
For instance, if a fiduciary transfers company funds to a relative’s account and the relative becomes aware of the wrongdoing, the court may order repayment or impose a constructive trust on the proceeds.
Canadian courts permit tracing (the equitable process of following misappropriated assets through transformations or transfers) to recover property or its substitutes. As long as the asset can be identified in some form, beneficiaries may claim it or its value. This tool ensures that fiduciaries cannot obscure their wrongdoing through layered transactions. Ontario’s tracing remedies derive from equitable doctrine and are frequently applied in conjunction with the Trustee Act and Rules of Civil Procedure (R.R.O. 1990, Reg. 194).
While fiduciary duties are stringent, they are not absolute. Courts recognize a limited number of defences grounded in consent, authorization, or fairness.
The most fundamental defence is to deny that any fiduciary relationship existed. Commercial parties often argue that their dealings were arm’s-length and governed solely by contract. The burden lies with the plaintiff to prove the relationship’s fiduciary character. Courts consider whether there was genuine vulnerability or a mutual understanding of loyalty. Mere reliance on skill or expertise, without discretionary control, is insufficient.
If the fiduciary made full disclosure and obtained informed consent to act in a potentially conflicting capacity, liability may be avoided. The consent must be truly informed: the beneficiary must understand the nature and implications of the conflict. In Kelly v. Cooper [1993] A.C. 205 (P.C.), real-estate agents representing competing clients were excused because all parties knew and accepted the potential conflicts in advance.
Some fiduciaries operate within statutory or contractual frameworks that permit limited self-interest if proper procedures are followed. Under s. 132 of the Business Corporations Act (Ontario), a director may engage in a contract with the corporation if they disclose the interest and abstain from voting. Similarly, partnership agreements may allow certain outside ventures provided disclosure is made. Compliance with these provisions can shield the fiduciary from equitable liability.
Equitable claims are subject to defences based on delay. The doctrine of laches bars relief where the plaintiff’s unreasonable delay prejudices the defendant. In Ontario, statutory limitation periods under the Limitations Act, 2002 (S.O. 2002, c. 24, Sch. B, s. 4) impose a two-year window from the date the breach was discovered or ought reasonably to have been discovered. However, concealed wrongdoing may suspend this period until the beneficiary learns of the misconduct.
Although fiduciary duties are strict, equity will sometimes decline to grant remedies if the breach caused no detriment and yielded no benefit. The principle arises mainly in discretionary relief, where courts balance deterrence with proportionality. For instance, technical non-disclosure that produced no gain or prejudice may not warrant disgorgement, though the fiduciary may still face costs consequences or declaratory relief.
Fiduciary duty frequently overlaps with other causes of action. Understanding its relationship with contract, tort, and equitable doctrines helps identify the most effective pleading strategy.
Where a written agreement exists, fiduciary duties may coexist with contractual terms. The contract may define the scope of the fiduciary’s discretion or impose additional standards of disclosure. In Hodgkinson v. Simms, the Court held that fiduciary duties survive alongside contractual obligations because they protect a different interest: loyalty, not performance. However, express contractual clauses can sometimes limit or clarify those duties, provided they do not offend public policy.
Fiduciary breaches often accompany torts such as deceit or negligent misrepresentation. The same facts (concealment, false advice, misuse of information) may support both claims. Plaintiffs typically plead them in the alternative. The difference lies in remedy: tort seeks damages proportionate to loss; fiduciary law may compel restitution of gains. Courts ensure that recovery under one head does not duplicate the other.
Fiduciary breaches commonly involve misuse of confidential information. Where trust and loyalty intersect with privacy, courts may award overlapping relief under both doctrines. The Lac Minerals decision demonstrates how breach of confidence and fiduciary duty can coexist: the defendant’s misuse of geological data violated both confidentiality and loyalty, justifying equitable remedies.
Fiduciary remedies often draw on unjust-enrichment principles. The fiduciary’s profit is “unjust” because it arises from disloyal conduct. In many cases, plaintiffs plead unjust enrichment as an alternative where a fiduciary relationship cannot be proven. The analytical tools differ – unjust enrichment requires enrichment, deprivation, and absence of juristic reason – but the remedial goal is similar: disgorgement or constructive trust.
Breach of fiduciary duty litigation demands meticulous preparation. Plaintiffs must marshal evidence of vulnerability, reliance, and discretionary power; defendants must demonstrate transparency and consent. The litigation typically unfolds in three stages.
1. Establishing the Relationship
The threshold inquiry – was there a fiduciary duty? – often dominates early motions. Documentary evidence (mandates, correspondence, meeting minutes) and testimony about reliance and discretion are key. Courts scrutinize how the parties actually behaved, not how they labelled their arrangement. Expert evidence on industry standards may assist in proving that the plaintiff reasonably relied on the fiduciary’s judgment.
2. Proving the Breach
Discovery focuses on communications, decision processes, and benefits received. Plaintiffs seek to demonstrate concealment, conflicting interests, or personal gain. Defendants should document full disclosure, board approvals, and independent advice to show informed consent. Even inadvertent omissions can appear self-serving without contemporaneous records.
3. Selecting Remedies
Strategically, counsel must choose between restitutionary and compensatory remedies. Where profits are large or loss is intangible, disgorgement or constructive trust may yield superior outcomes. Where measurable harm exists, equitable compensation or damages are appropriate. In mixed cases, courts may blend remedies to achieve fairness.
Fiduciary law reflects the moral foundation of equity: those who hold power on behalf of others must wield it selflessly. The purpose is not merely to punish disloyalty but to preserve confidence in institutions (corporations, trusts, partnerships, and professional relationships) that depend on trust.
The England and Wales Court of Appeal (Civil Division) observed in Bristol and West Building Society v. Mothew [1998] Ch. 1, an often-cited case on fiduciary law, that fiduciary obligations are the defining characteristic of the relationship of trust and confidence. Their strictness deters even the appearance of conflict, promoting transparency and accountability. Canadian jurisprudence aligns with this ethos: by compelling fiduciaries to disgorge profit, equity removes incentive for betrayal.
The doctrine also complements modern governance. In an era of complex financial structures and data-driven decision-making, fiduciary principles safeguard the public interest by ensuring that directors, professionals, and advisers act with undivided loyalty. It is the legal expression of the ethical maxim that trust, once betrayed, cannot easily be restored.
Fiduciary duty arises where one party wields discretionary power and the other is vulnerable to its misuse.
Breach occurs through disloyalty, self-dealing, conflicts, or misuse of confidential information.
Intent is irrelevant – equity enforces loyalty through strict prophylactic rules.
Remedies include disgorgement, constructive trust, equitable compensation, and injunctions.
Third parties who knowingly assist or benefit from a breach may share liability.
Defences such as informed consent, statutory authorization, or laches are narrowly construed.
Policy: the law seeks to preserve the integrity of trust relationships that underpin commerce and professional life.
Disclaimer: The answers provided in this FAQ section are general in nature and should not be relied upon as formal legal advice. Each individual case is unique, and a separate analysis is required to address specific context and fact situations. For comprehensive guidance tailored to your situation, we welcome you to contact our expert team.
A fiduciary duty arises when one party, the fiduciary, is entrusted to act in the best interest of another party, the beneficiary. This relationship is based on trust and confidence. Fiduciary duties are distinct from other legal obligations such as those in contracts or torts because they require a higher standard of conduct. The fiduciary must act selflessly, prioritizing the beneficiary’s interests above their own. This includes duties of loyalty, care, and full disclosure.
In a fiduciary relationship, the fiduciary is expected to avoid conflicts of interest, refrain from benefiting at the expense of the beneficiary, and disclose all relevant information. For example, a trustee managing a trust must invest and manage the trust assets prudently, solely for the benefit of the beneficiaries. Unlike contractual obligations, which are often mutual and based on the terms agreed by the parties, fiduciary duties are unilateral and impose an obligation on the fiduciary to act in a manner that benefits the beneficiary.
Fiduciary duties are also more stringent than tort obligations. While tort law primarily aims to prevent harm and provide compensation for wrongs, fiduciary duties demand proactive good faith actions to protect the beneficiary’s interests. This higher standard underscores the unique nature of fiduciary relationships, emphasizing the critical role of trust and ethical behaviour. Understanding these distinctions is crucial for navigating legal issues related to breach of fiduciary duty.
Determining whether a fiduciary relationship exists depends on the nature of the relationship and the expectations of the parties involved. A fiduciary relationship is typically present when one party places trust and confidence in another, who has accepted this trust and undertakes to act in the best interest of the trusting party. Common examples include relationships between trustees and beneficiaries, lawyers and clients, financial advisors and clients, corporate directors and companies, and partners in a partnership.
Several factors help identify a fiduciary relationship:
For example, in a lawyer-client relationship, the client relies on the lawyer’s legal expertise and expects them to act in the client’s best interests. Similarly, in a trustee-beneficiary relationship, the trustee manages the trust assets for the benefit of the beneficiaries.
If you are unsure whether a fiduciary relationship exists in your specific situation, consulting with a legal professional can provide clarity. They can assess the relationship based on these factors and determine whether fiduciary duties are applicable.
Courts apply a functional test, looking for hallmarks of a power imbalance and reliance. They ask whether one person (the fiduciary) wielded significant discretion over another’s assets or decisions, and whether the beneficiary or principal was effectively vulnerable, placing trust in that person’s loyalty. Clear indicators include:
Formal Positions: Directors, trustees, or professional advisors typically enjoy broad decision-making over a client’s interests.
Undertakings of Loyalty: Written or implied promises to safeguard or prioritize the other party’s welfare.
Specialized Influence: For instance, an investment advisor controlling major investment decisions for a less experienced client.
Merely occupying a trusted or professional role does not automatically confer fiduciary status, but once a court identifies these factors, it almost always designates the relationship as fiduciary.
A breach of fiduciary duty occurs when the fiduciary fails to act in the best interest of the beneficiary, violating the duties of loyalty, care, or full disclosure. This breach can take various forms, including:
To prove a breach of fiduciary duty, the beneficiary must demonstrate that a fiduciary duty existed, the duty was breached, and the breach caused harm or loss. Evidence such as documentation of the fiduciary relationship, records of the fiduciary’s actions or omissions, and proof of resulting damages are crucial in establishing a breach. Legal remedies for a breach of fiduciary duty may include compensatory damages, disgorgement of profits, imposition of a constructive trust, or punitive damages in cases of egregious conduct.
When a breach of fiduciary duty occurs, the law provides several remedies to compensate the beneficiary and address the wrongful conduct of the fiduciary. These remedies aim to restore the beneficiary to the position they would have been in had the breach not occurred and to prevent the fiduciary from benefiting from their wrongful actions. Common legal remedies include:
The specific remedy or combination of remedies awarded depends on the circumstances of the case, the nature of the breach, and the harm suffered by the beneficiary. Legal professionals can provide guidance on the appropriate remedies based on the facts of the case and help pursue the best possible outcome for the beneficiary.
Fiduciary duty is rooted in English equitable traditions, so many common law jurisdictions share similar doctrines. Nonetheless, local statutes and case law influence specifics—Ontario courts emphasize loyalty and the “no-profit rule” similarly to other Commonwealth courts, but the application of certain defences, limitation periods, or statutory frameworks (like the Business Corporations Act) may differ. In multi-jurisdictional disputes, counsel must consider each region’s approach to fiduciary relationships, since certain contexts (like U.S. corporate law) might interpret directorial duties somewhat differently. Still, the overarching principle—preventing unjust exploitation of trust—is consistent across these systems.
Not always. While the full scope of fiduciary obligations typically recedes once the relationship ends, residual duties can linger. A fiduciary cannot, for example, suddenly exploit confidential information gained during their tenure for personal gain if doing so violates the trust established previously. An ex-director might remain barred from pursuing corporate opportunities discovered while in office, unless the corporation explicitly waives its claim. Courts adopt this approach to discourage fiduciaries from hurriedly resigning to capitalize on an undisclosed opportunity or to avoid the final stages of accountability. Though the intensity of duties may lessen after formal ties end, post-tenure exploitation of knowledge or relationships still risks legal repercussions if it stems from earlier disloyalty.
Several defences can be raised against a claim of breach of fiduciary duty, each requiring substantial evidence to be successful. These defences include:
These defences require a careful examination of the facts and circumstances surrounding the alleged breach. Legal professionals can assess the validity of these defences and provide guidance on how to effectively raise them in court. The success of these defences depends on the specific details of the case and the strength of the evidence presented.
Yes. Breach of fiduciary duty does not require deliberate malice. It may arise from conflicts of interest or self-gain that occur even when the fiduciary did not set out to injure the beneficiary. For example, a corporate director might direct business to a personal venture, believing it helps the corporation but failing to fully disclose how they profit. Their subjective benevolent intent does not erase the fact that they placed personal interests alongside or above the corporation’s. Courts focus on loyalty rather than direct intent to harm—any act that deviates from the unwavering prioritization of the principal’s interest can trigger liability.
No. Poor investment decisions, lacking a conflict of interest or self-serving motive, typically constitute negligence or a failure of due diligence rather than a breach of the fiduciary standard. Fiduciaries must exercise skill and care, but fiduciary breaches revolve around the duty of loyalty—the requirement not to place personal interests over the beneficiary’s. For a misjudged investment to qualify as a fiduciary breach, one must show the decision was tainted by conflict or self-interest (e.g., choosing an investment that benefited the fiduciary’s family business, ignoring better options for the principal). If the fiduciary’s actions merely reflect incompetence, that may lead to other claims—like negligence—but not necessarily a breach of fiduciary duty.
Fiduciary breaches invoke strong equitable remedies that extend beyond typical compensatory damages:
Disgorgement (Account of Profits): The court forces the fiduciary to relinquish any gains derived from disloyal acts, even if the principal’s direct monetary losses are minimal.
Constructive Trust: If disloyal behaviour allowed the fiduciary to acquire property or assets, a constructive trust can be imposed, transferring beneficial ownership to the principal.
Injunctions: Halting ongoing misconduct or preventing the fiduciary from exploiting confidential information.
Compensatory Damages: Reimbursing the principal’s financial harm, including lost opportunities or diminished asset value.
Equitable Compensation: A unique measure that addresses intangible or indirect harm, reflecting the seriousness of betrayal in a relationship built on confidence and trust.
These remedies stress the guiding principle that no one should benefit from disloyalty. Courts often look to ensure the wrongdoer does not retain an unfair advantage or profit from their misconduct, even if the principal’s direct losses are difficult to quantify.
Third parties who do not themselves owe the fiduciary obligation can still be dragged into a breach of fiduciary duty dispute if they knowingly help or profit from the breach. Courts distinguish two scenarios:
Knowing Assistance: The third party actively facilitates or conceals the fiduciary’s wrongdoing, aware of its illicit nature (e.g., funneling misappropriated funds through an account they manage).
Knowing Receipt: The third party obtains property or funds that were taken in breach, realizing (or turning a blind eye to) the fact that the fiduciary was not entitled to them.
In either case, the third party may be required to return gains, face a constructive trust on the property, or pay damages to the principal. This broadens the net of accountability, ensuring that outsiders who collude with or exploit fiduciary misconduct cannot simply claim ignorance if “red flags” were apparent.
Often, yes—full, informed consent can cure potential conflicts of interest or profit-making scenarios, provided the fiduciary reveals every material detail. For instance, if a director stands to benefit personally from a proposed contract and they fully inform the board or shareholders, obtaining clear approval, the deal may proceed without violating fiduciary obligations. However, courts scrutinize the depth of the disclosure, verifying that the principal truly understood the nature and implications of the conflict before consenting. If consent is vague, coerced, or withheld key facts, a breach can still be found.
If loyalty has been compromised or confidential advantages diverted, Grigoras Law can help. We act quickly to secure evidence, contain ongoing harm, and pursue decisive equitable remedies that restore your position and remove the profit from disloyal conduct.
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