ABSTRACT
Breach of equity’s proscriptive fiduciary duties against unauthorized profit or conflict between self-interest and duty or conflict(s) between duties owed to multiple principals may result in a profit in the hands of the defendant wrongdoer. In Warman International Ltd v Dwyer, a unanimous High Court of Australia confirmed the ‘stringent rule that the fiduciary cannot profit from his trust’ such that it is irrelevant that the fiduciary is in good faith, has acted honestly and reasonably or that the profit is one which the principal ‘was unwilling, unlikely or unable’ to make. The claimant is entitled, subject to any discretionary factors such as laches and acquiescence, and any allowances, to an account of profits.
Subject to the doctrine of election, the fiduciary’s conduct also leaves her vulnerable to a claim for equitable compensation. Relevantly, equity recognizes as a head of loss the principal’s lost commercial opportunity, where a real loss has been suffered, such as a lost opportunity to put funding to a profitable use. In calculating the value of the lost chance, the court may make some adjustments to the value of the lost opportunity in recognition of the expenses which would have been incurred had the principal pursued the now lost opportunity. For example, a court may permit an adjustment to the value of loss for which equitable compensation is awarded reflecting ‘the notional salaries which would have been paid’ by the principal to the defaulting fiduciary had the commercial opportunity been pursued by the principal …
Degeling, Simone, Certainty in Calculating Monetary Remedies for Breach of Fiduciary Duty (2019) in K Barker and R Grantham (eds), Apportionment in Private Law (Hart Publishing, Oxford), 221-239, 2019.
First posted 2020-03-18 08:05:46
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