Ontario's Partnerships Act governs disputes between business partners, including the right to a formal accounting of partnership finances, grounds for dissolving the partnership, and claims where a partner has breached their fiduciary duty — such as by diverting partnership opportunities or misusing partnership funds. Without a written partnership agreement, the Act's default rules apply, which are often less favourable than terms partners would have negotiated for themselves.
- Partners owe each other a fiduciary duty — a duty of utmost good faith — which is higher than the duty owed in an ordinary business relationship.
- Any partner can generally demand a formal accounting of partnership finances, income, and expenses.
- A partnership can be dissolved by agreement, by a partner's withdrawal or death, or by court order where a partner's conduct makes continuing the business impractical.
- Without a written partnership agreement, Ontario's Partnerships Act default rules apply — often not what the partners would have actually wanted.
- Partners are generally jointly and severally liable for partnership debts, which affects both litigation strategy and personal exposure.
- Diverting a partnership opportunity to a partner's own separate venture is a classic and actionable breach of fiduciary duty.
The Fiduciary Duty Between Partners
Business partners owe each other a duty of utmost good faith — a fiduciary duty that goes beyond the ordinary obligations between contracting parties. This includes honest disclosure of partnership affairs, not competing with the partnership business, and not diverting partnership opportunities or assets for personal gain. A breach of this duty is one of the most common triggers for partnership litigation.
The Right to an Accounting
Any partner generally has the right to demand a formal accounting — a detailed review of the partnership's income, expenses, assets, and each partner's capital account. Where a partner refuses to provide financial transparency, or where the numbers do not add up, a court can order a formal accounting as part of resolving the broader dispute.
A partner who becomes evasive about partnership finances is often signalling a deeper problem — whether mismanagement, diversion of funds, or preparation to exit the partnership on unfavourable terms to the others.
Dissolving the Partnership
A partnership can be dissolved several ways: by mutual agreement, automatically upon a partner's death or withdrawal (unless the partnership agreement provides otherwise), or by court order where continuing the partnership has become impractical — for example, where a partner's misconduct, incapacity, or persistent breach of duty makes the working relationship unworkable.
| Method | How It Happens |
|---|---|
| By agreement | Partners mutually agree to wind up the business |
| Automatic | Death, bankruptcy, or withdrawal of a partner (absent contrary agreement) |
| By court order | Misconduct, incapacity, or a relationship that has become unworkable |
When There Is No Written Agreement
Many small business partnerships in Ontario operate without ever signing a formal partnership agreement. In that case, Ontario's Partnerships Act supplies default rules covering profit-sharing (generally equal, regardless of unequal contributions, unless proven otherwise), decision-making, and how dissolution proceeds — defaults that are often significantly different from what the partners would have negotiated had they turned their minds to it at the outset.
Personal Liability for Partnership Debts
Partners are generally jointly and severally liable for partnership obligations, meaning a creditor can pursue any individual partner for the full debt, regardless of that partner's proportionate share in the business. This exposure is a major reason partnership disputes often surface, and escalate quickly, once the business runs into financial difficulty. See our related guide on debt collection lawsuits for how creditors pursue exactly these claims.
Two Ontario partners run a consulting business without a written agreement. One partner quietly starts taking on the same type of client work through a separate company. The other partner demands a formal accounting, discovers the diverted revenue, and pursues both a breach of fiduciary duty claim and dissolution of the original partnership.
Resolving a Partnership Dispute
We begin by reviewing any partnership agreement (or applying the Partnerships Act defaults where none exists), assessing the strength of an accounting or fiduciary duty claim, and evaluating whether a negotiated exit or wind-down is achievable before resorting to litigation. Where urgent action is needed — for example, to prevent a partner from further dissipating assets — we can seek an emergency injunction.
Call our Ontario partnership dispute lawyers at 416-274-2222 to discuss your situation.
Frequently Asked Questions
Partners owe each other a duty of utmost good faith, including honest disclosure of partnership matters, not competing with the partnership, and not diverting partnership opportunities or funds for personal benefit. This is a higher standard than the duty owed between ordinary contracting parties.
Yes — partners generally have a right to a formal accounting of partnership finances, and courts can order this where a partner refuses to provide it voluntarily. Withholding financial information from a partner is itself often evidence of a broader problem.
A partnership can dissolve by agreement between the partners, automatically on a partner's death or withdrawal (unless the partnership agreement says otherwise), or by court order where it becomes impractical to continue — including where a partner's misconduct has made the relationship unworkable.
Yes. Where partners have not signed their own agreement, Ontario's Partnerships Act supplies default rules covering profit-sharing, decision-making, and dissolution. These defaults are often not what the partners would have negotiated for themselves, which is precisely why disputes without a written agreement can be especially contentious.
Generally, yes — partners are typically jointly and severally liable for partnership debts and obligations, meaning a creditor can pursue any partner individually for the full amount, not just their proportionate share. This is a key reason partnership disputes often move quickly once financial trouble appears.
Generally not, if it competes with the partnership business or diverts partnership opportunities, absent the other partners' informed consent. This is a common and often clear-cut breach of the fiduciary duty partners owe one another.