Obligation of Disclosure Between Partners/Fiduciaries

Obligation of Disclosure Between Partners/Fiduciaries

McNight v Hutchinson 2019 BCSC 944 discussed the obligation of disclosure between partners and other relationships characterized by a duty of utmost fairness and good faith ( fiduciary) . ( see also Aero Services Ltd v O’Mally (1973) 4 DLR 371 ).

The authorities emphasize that the purpose served by the requirement of disclosure is to allow the informed party to exercise an independent will and take any position that party might adopt as appropriate, and to be aware of any risk that the other might be tempted to fall short of the requisite duty. Hitchcock v Sykes (1914) SCR 403.

In the case of partnerships, the institution requires there be trust. In the usual case, the firm enterprise requires contribution from each partner and proportionate division is made of the profits or losses. There is no limitation from firm liability, and each partner potentially has the power to expose the full worth of every other partner.

Where relationships are marked by the obligation of utmost fairness and good faith, the remedy for breach extends beyond damage where there has been a breach of the fiduciary duty.

The law calls on the defendants to account to the plaintiff for any profit made or benefit received is result of the breach of duty. This is not the same as damages, which are compensatory in nature. The purpose of damages is to put the plaintiff in the same position it would’ve been if not for the wrongdoing.

Secret profits can be an issue that arises between partners. The remedy for breach of a fiduciary duty by the realization of secret profits or benefits requires that the fiduciary be prevented from retaining any gain from the activity which arose from the breach of duty. The assessment for such a breach focuses on the wrongdoers gain and not the beneficiaries loss.