As part of a dispute between siblings who are shareholders and directors in a family-owned company, the sister (in her capacity as a director) proactively contacted the real estate taxation director and provided inflated, unsubstantiated valuations of the company's assets. This action was taken to increase the tax liabilities of her brother regarding a share purchase transaction he had executed.
The Court partially accepted the claim and held that the sister, in her capacity as a director, breached her fiduciary duty toward the shareholder and must pay damages. In a small family company functioning as a "quasi-partnership," officers owe direct fiduciary duties to shareholders as well. Fiduciary duty requires utmost good faith and prohibits actions involving conflicts of interest or those stemming from foreign and vengeful motives. The primary remedy in fiduciary law is not compensation for damages but the stripping of profits gained by the breacher. In the absence of such profits, the remedy may involve voiding the action or awarding "equitable compensation". In this case, the sister exploited inside information accessible only to her as a director, concealed her communication from the plaintiffs, and provided erroneous data without proper due diligence, deviating from the accepted professional standard (as she was also a real estate appraiser by profession). Although the payment of "true tax" does not constitute compensable damage in itself, the director is liable for "equitable compensation" for ancillary expenses (appraisal and legal fees) as well as punitive damages due to the breach of fiduciary duty.