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Partners and Fiduciary Duties

In Tim Ludwig Professional Corporation v. BDO Canada LLP (Ont CA, 2017) the Court of Appeal considers the fiduciary role of a partner:
[34] This court considered the interplay between the Partnerships Act and the common law in Rochwerg v. Truster (2002), 2002 CanLII 41715 (ON CA), 58 O.R. (3d) 687 (C.A.). Rochwerg involved a partner in an accounting partnership who disclosed to his partners that he was a director of a corporate client of the firm and remitted his director’s fees to the firm, but did not disclose that he was entitled as director to shares and stock options in the company. When he left the partnership, an issue arose as to whether he was required to account to his partners for his shares and stock options.

[35] Cronk J.A. held that both the common law of partnerships and the Partnerships Act imposed an obligation on the partner to disclose his shares and options. Cronk J.A. wrote, at para. 36:
It has long been established that partners owe a fiduciary duty to each other, and that equitable principles hold fiduciaries to a strict standard of conduct, encompassing duties of loyalty, utmost good faith and avoidance of conflict of duty and self-interest. These are well recognized, core principles of the law of partnership. [Emphasis added.]
[36] And, at paras. 62-63:
The fiduciary duty between partners thus arises not only from the reciprocal agency relationship between them but, also, from the duty of utmost good faith which each partner owes to the other. Fundamental to this overarching fiduciary duty is the requirement that each partner place the interests of the partnership, and the avoidance of situations which create, or could create, a conflict between fiduciary duty and the interests of the partnership, ahead of a partner's private interests. Accordingly, partners are required to prefer the interests of the partnership over their own personal interests. The scope of the fiduciary duty in partnerships is of the broadest nature. As stated by Vice-Chancellor Bacon in Helmore v. Smith (No. 1) (at p. 444):
[I]f fiduciary relation means anything I cannot conceive a stronger case of fiduciary relation than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust each other that the business goes on.

Mutual trust, confidence and good faith are the cornerstones of the modern professional services partnership. Without them, the very essence of the partnership arrangement is eroded and, ultimately, destroyed. In my view, the equitable principles developed over the last century concerning the fiduciary obligations of partners continue to control contemporary partnerships. They may require, however, flexible application to respond to changing partnership structures, activities and settings. [Citations omitted.]
[37] In the result, partners owe each other a duty of utmost good faith at common law and the traditional rules governing partnerships discussed in Lindley & Banks continue to apply in Ontario: see DiPoce v. DeCicco, 2013 ONSC 6409 (CanLII), [2013] O.J. No. 4741, at para. 18; and Springer v. Aird & Berlis LLP (2009), 2009 CanLII 15661 (ON SC), 96 O.R. (3d) 325 (S.C.), at paras. 167-168, aff’d, 2010 ONCA 287 (CanLII), 100 O.R. (3d) 575.


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