Common Breaches of Fiduciary Duty

A breach of fiduciary duty occurs when fiduciaries fail to meet the high standards imposed by fiduciary law. Courts frequently examine whether fiduciaries acted with loyalty and good faith, or whether their conduct served their own interests instead of the beneficiary’s interests.

Common examples of breach of fiduciary duty include:

Conflicts of Interest

A conflict of interest arises when fiduciaries place themselves in situations where their personal interests compete with the person’s interests they are obligated to protect. The no conflict rule requires fiduciaries to avoid conflicts unless they obtain informed consent.

Secret Profits or Self-Dealing

The no profit rule prevents fiduciaries from profiting from their fiduciary position without proper disclosure. When fiduciaries use their authority to obtain personal gain or advance their own self interest, courts may find a fiduciary breach.

Misuse of Trust Property

Trustees who improperly manage or misappropriate trust assets may commit a breach of fiduciary duty under the Trustee Act and applicable common law principles.

Failure to Disclose Material Information

Fiduciaries must disclose relevant facts so beneficiaries can make informed decisions. When fiduciaries conceal financial statements or other relevant documents, a breach of fiduciary duty may arise.

Acting in Self-Interest

A fiduciary breach may also occur when fiduciaries prioritize their own self interest, influence business decisions for personal advantage, or otherwise advance their own interests rather than the best interests of the person relying on them.

Where a fiduciary fails to meet these standards, courts may conclude that a serious violation of fiduciary obligations has occurred.

Consequences of Breaching Fiduciary Duty

A breach of fiduciary duty is considered a serious violation because fiduciaries are entrusted with significant power and discretion. When a breach occurred, courts may scrutinize the fiduciary’s actions closely to determine whether they complied with established fiduciary principles.

Canadian courts emphasize that fiduciaries must exercise undivided loyalty and protect the person’s interests entrusted to them. If a fiduciary fails to meet these obligations, the consequences can include:

• Liability for losses caused by the fiduciary breach.
• Disgorgement of profits gained from the misconduct.
• Court orders reversing certain business decisions.
• Removal from a fiduciary position.

In assessing liability, courts may conduct further inquiry into the circumstances surrounding the alleged misconduct. Judicial reasoning often draws upon case law and evolving fiduciary jurisprudence, including guidance from the Supreme Court interpreting fiduciary law in Canada.

Remedies Available

Courts applying equitable principles have broad discretion to remedy a breach of fiduciary duty. Remedies are designed not only to compensate victims but also to ensure fiduciaries do not benefit from misconduct.

Common remedies include:

Constructive Trust

A constructive trust may be imposed where fiduciaries improperly acquire property or profits. Under this remedy, assets are treated as though they were always held for the beneficiary.

Disgorgement of Profits

Where fiduciaries earn profits through improper conduct, courts may order disgorgement to prevent unjust enrichment.

Compensation

Victims of a breach of fiduciary duty may receive damages reflecting losses caused by the fiduciary’s actions.

Equitable Remedies

Additional equitable remedies may include rescission of transactions, accounting for profits, or further equitable relief grounded in fiduciary principles.

These remedies ensure fiduciaries remain accountable for their conduct and reinforce the strict standards imposed by fiduciary law.

How Long Do You Have to File a Breach of Fiduciary Duty Lawsuit?

The time limit for bringing fiduciary duty claims in Ontario depends on the application limitation period and the specific circumstances of the case.

In many situations, a fiduciary duty lawsuit must be commenced within two years of discovering the breach of fiduciary duty. However, courts may examine when the claimant knew or ought to have known that a breach occurred.

In certain circumstances, limitation periods may be affected where fiduciaries concealed misconduct or where the claimant could not reasonably identify the wrongdoing earlier.

Because limitation issues can be complex, parties considering fiduciary duty claims should seek legal advice promptly to preserve their rights and properly navigate the litigation process.

Why Choose Chand & Co.?

Allegations involving fiduciaries are often complex and fact-intensive. Successfully pursuing or defending a breach of fiduciary duty claim requires careful analysis of fiduciary law, common law, and the unique features of the legal system governing such disputes.

At Chand & Co., we assist by:

• Evaluating whether appropriate circumstances exist to establish a fiduciary duty.
• Determining whether a fiduciary breach occurred.
• Gathering evidence such as relevant documents.
• Analyzing whether fiduciaries acted in good faith.
• Navigating the litigation process.
• Seeking remedies such as a constructive trust.

Disputes involving fiduciaries frequently arise in corporate disputes, trust litigation, shareholder conflicts, and employment relationship matters. An experienced lawyer at Chand & Co. can help assess whether the conduct of fiduciaries violated the reasonable expectations of the parties involved and whether legal action is warranted. Don’t hesitate to reach out to us to schedule a consultation.