The appellants, who served as presidents of a group of insurance companies under an incentive pay agreement with the majority shareholders, learned that a major company was interested in acquiring the group.
Rather than disclosing this to the shareholders, the presidents purchased the shareholders' interests and resold them at a substantial profit.
The Supreme Court of Canada held that the presidents breached both an implied contractual obligation to inform arising from the nature of the Presidents' Agreement and the obligation to perform that agreement in accordance with the requirements of good faith under arts. 1434 and 1375 of the Civil Code of Québec.
Disgorgement of profits was held unavailable as a non-compensatory remedy absent an obligation of maximalist loyalty, but damages equivalent to the appellants' profits were awarded pursuant to a rebuttable presumption that the shareholders' lost gain equalled those profits, where the appellants' own disloyal conduct prevented precise proof of injury.
The appeal was dismissed with costs.
