What is a constructive trust and when can it be imposed on an Ontario director?

A constructive trust is an equitable remedy that courts impose to prevent unjust enrichment. When an Ontario director breaches their fiduciary duty and profits from that breach — for example, by taking a corporate opportunity for personal gain, engaging in self-dealing, or receiving secret commissions — a court may declare that the director holds those profits on constructive trust for the corporation. This means the director has legal title to the asset or money but must transfer it to the corporation.

The constructive trust remedy is powerful because it is proprietary — it attaches to the specific asset or profits, not merely to a personal debt obligation. If the director invested the improperly obtained funds in an asset that increased in value, the constructive trust can reach that increased value, not just the original amount taken.

For a constructive trust to be imposed, courts look for: a fiduciary relationship, a breach of that fiduciary duty, property held by the fiduciary, and a connection between the breach and the property. Because directors clearly hold a fiduciary position, the analysis focuses heavily on whether the specific property in the director's hands is traceable to the breach of duty. This remedy is most commonly sought in cases of serious self-dealing or misappropriation of corporate assets. If you are a corporation seeking recovery from a director who has taken corporate assets or opportunities, a lawyer can advise on whether a constructive trust claim is appropriate given the specific facts.