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IDENTIFYING THE PROFITS FOR WHICH A FIDUCIARY MUST ACCOUNT

Published online by Cambridge University Press:  30 April 2020

Matthew Conaglen Open the ORCID record for Matthew Conaglen [Opens in a new window]
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Abstract

This article addresses the manner in which accounts of profits are quantified when they are ordered against fiduciaries. Unlike previous scholarship, which has often sought to explain recent case law by reference to preconceived conceptual models, the present article addresses the topic by drawing on the reasoning adopted in the cases over a longer period, with a view to helping with the practical resolution of future cases, while also offering arguments drawn from that analysis as to the correct approach to the conceptual questions that arise.

Keywords

fiduciariesaccount of profitscausationattributionallowances
Type
Articles
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The Cambridge Law Journal , Volume 79 , Issue 1 , March 2020 , pp. 38 - 63
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Copyright © Cambridge Law Journal and Contributors 2020

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Footnotes

*

Professor of Equity and Trusts, University of Sydney.

I am grateful, with the normal disclaimer, to Jamie Glister, Bill Gummow, Richard Nolan, Joellen Riley, Sandy Steel, Cameron Stewart and Andreas Televantos for helpful discussions and comments.

References

1 Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [513].

2 Dale v Inland Revenue Commissioners [1954] A.C. 11, 27, 34, 35; Brown v Inland Revenue Commissioners [1965] A.C. 244, 256, 263, 265; Consul Development Pty. Ltd. v DPC Estates Pty. Ltd. (1975) 132 C.L.R. 373, 385; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [71], [142]–[143]; Piety v Stace (1799) 4 Ves. 620, 622 (31 E.R. 319).

3 Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [517]; Re Jarvis [1958] 1 W.L.R. 815, 820.

4 Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 154; Hospital Products Ltd. v United States Surgical Corp. (1984) 156 C.L.R. 41, 110.

5 E.g. Lees v Nuttall (1829) 1 Russ. & M. 53 (39 E.R. 21); affirmed: (1834) 2 My. & K. 819 (39 E.R. 1157); Fawcett v Whitehouse (1829) 1 Russ. & M. 132 (39 E.R. 59).

6 O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 458.

7 The analysis is also potentially relevant to the remedies available against other participants in a breach of fiduciary duty (as to which compare Novoship (UK) Ltd. v Mikhaylyuk [2014] EWCA Civ 908, [2015] Q.B. 499 with Akita Holdings Ltd. v Attorney General of the Turks and Caicos Islands [2017] UKPC 7, [2017] A.C. 590 and Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918; and see Gummow, W.M.C., “Dishonest Assistance and Accounts of Profits” [2015] C.L.J. 405CrossRefGoogle Scholar; Turner, P.G., “Accountability for Profits Derived from Involvement in Breach of Fiduciary Duty” [2018] C.L.J. 255CrossRefGoogle Scholar), and whether the liability of those other participants is joint and several, or only several (as to which see e.g. Flockton v Bunning (1864) L.R. 8 Ch. App. 323n., 326; Vyse v Foster (1872) L.R. 8 Ch. App. 309, 323; Vyse v Foster (1874) L.R. 7 H.L. 318, 333–34; Ultraframe (UK) Ltd. v Fielding [2005] EWHC 1638 (Ch), at [1589]–[1601]; J.D. Heydon, M.J. Leeming and P.G. Turner, Meagher Gummow & Lehane's Equity: Doctrines & Remedies, 5th ed. (2015), [5-270]). There is not space in the present article to address these questions.

8 As to which, see e.g. Cory, I.P., A Practical Treatise on Accounts, 2nd ed. (London 1839)Google Scholar; Daniell, E.R., The Practice of the High Court of Chancery, vol. 2 (London 1840), 877Google Scholar; Williams, S.E., The Law of Account (London 1899)Google Scholar; Henderson, J.G., Chancery Practice (Chicago 1904)CrossRefGoogle Scholar.

9 Nevill, A.G. and Ashe, A.W., Equity Proceedings with Precedents (New South Wales) (Sydney 1981)Google Scholar, at [301].

10 Parker v McKenna (1874) L.R. 10 Ch. App. 96, 122. See also Hill v South Staffordshire Railway Co. (1865) 11 Jur. N.S. 192, 193.

11 Kerly, D.M., Historical Sketch of the Equitable Jurisdiction of the Court of Chancery (Cambridge 1890), 272–73Google Scholar.

12 The direction to make just allowances fell away over time as civil procedure rules came to provide for it automatically: Williams, The Law of Account, pp. 30–31 (and see e.g. Rules of the Supreme Court 1883 (UK), O. 33 r. 8). Prior to these procedural changes, the Master was unable to make allowances if the court had not so directed: Hill, J., The Law Relating to Trustees (London 1845), 593Google Scholar; Howell v Howell (1837) 2 My. & Cr. 478 (40 E.R. 722).

13 Bennet, W.H., The Master's Office in the Court of Chancery (London 1834), 17–18Google Scholar; Hill, The Law Relating to Trustees, p. 602; Daniell, Chancery Practice, p. 887; Williams, The Law of Account, p. 31; Parker v McKenna (1874) L.R. 10 Ch. App. 96, 122; Agar v Gurney (1817) 2 Madd. 389, 390 (56 E.R. 378).

14 Crosley v Derby Gas-Light Co. (1838) 3 My. & Cr. 428 (40 E.R. 992), 435–36.

15 See e.g. Cook v Collingridge (1823) Jac. 607 (37 E.R. 979), 625.

16 The report in Featherstonhaugh v Turner (1858) 25 Beav. 382 (53 E.R. 683), 392–93, is unusual for containing a statement of how the Chief Clerk took the account in that case.

17 Bennet, The Master's Office, pp. 20–22; Daniell, Chancery Practice, p. 887.

18 See e.g. Wedderburn v Wedderburn (1854) 18 Beav. 465 (52 E.R. 183) where Lord Langdale ruled upon exceptions to the Master's report, but without determining which principle the Master ought to have applied.

19 H.W. Seton, Judgments and Orders, 7th ed., by A.R. Ingpen, F.T. Bloxam and H.G. Garrett, vol.2 (London 1912), 1312; Bennet, The Master's Office, p. 23.

20 The National Archives hold some records of the work done by Masters in Chancery, but the different kinds of records (pleadings, orders, evidence, Masters’ records etc) in the relevant cases are kept separately according to the type of record rather than the case to which they relate (see http://www.nationalarchives.gov.uk/help-with-your-research/research-guides/chancery-equity-suits-after-1558/). It has not been possible to consult those materials in preparing this article.

21 Siddell v Vickers (1892) 9 R.P.C. 152, 162–63; Crosley v Derby Gas-Light Co (1838) 3 My. & Cr. 428 (40 E.R. 992), 434–35; Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 44. These are intellectual property cases, but the difficulties in calculating accounts in such cases are analogous to those in fiduciary cases: see also N. Lindley, Law of Partnership, 5th ed., by N. Lindley, W.C. Gull and W.B. Lindley (London 1888), 524–25. However, not all aspects of intellectual property account cases analogise well with fiduciary cases: see note 141 below.

22 See e.g. Crawshay v Collins (1808) 15 Ves. 218 (33 E.R. 736), where the account was ordered in 1808, and a final decree was made in 1826. Similarly, in Wedderburn v Wedderburn (1836) 2 Keen 722 (48 E.R. 807), the bill was filed in 1831; an account was ordered in 1836; the Master reported on the account in 1846 but the report was sent back to the Master (see Wedderburn v Wedderburn (1854) 18 Beav. 465 (52 E.R. 183)); the Master reported again in 1855; exceptions to that report were determined in April 1856; and an appeal to the Lords Justices was finally compromised in December 1856: Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039). See also Stocken v Dawson (1843) 6 Beav. 371 (49 E.R. 869); (1845) 9 Beav. 239 (50 E.R. 335); (1848) 17 L.J. Ch. 282 (L.C.). There were, of course, also delays in Chancery generally – not merely in the taking of accounts – during this period, famously satirised by Dickens: see e.g. Lees (1829) 1 Russ. & M. 53 (39 E.R. 21) and (1834) 2 My. & K. 819 (39 E.R. 1157), where the Lord Chancellor determined an appeal from a decision which the Master of the Rolls had reached five years earlier.

23 Wedderburn v Wedderburn (1838) 4 My. & Cr. 41 (41 E.R. 16), 55; D.J. Hayton, P.B. Matthews and C.C.J. Mitchell, Underhill & Hayton's Law of Trusts and Trustees, 19th ed. (London 2016), [27.34]. See also W.M. Hindmarch, A Treatise on the Law Relating to Patent Privileges for the Sole Use of Inventions (London 1846), 297; Siddell v Vickers (1892) 9 R.P.C. 152, 163.

24 Partnership articles were also drafted with the intention of avoiding these complications after the death of a partner: see e.g. Vyse v Foster (1874) L.R. 7 H.L. 318, 338.

25 Wedderburn v Wedderburn (1838) 4 My. & Cr. 41 (41 E.R. 16), 55. Similarly in intellectual property cases (Crosley (1838) 3 My. & Cr. 428 (40 E.R. 992), 436; Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 36), where the courts also occasionally praised the wisdom of waiving the right to an account in favour of a more straightforward damages calculation: e.g. Penn v Bibby (1866) L.R. 3 Eq. 308, 311 (V.-C.); Automatic Coal Gas Retort Co. Ltd. v Mayor &c. of Salford (1897) 14 R.P.C. 450, 471.

26 Brown v de Tastet (1821) Jac. 284 (37 E.R. 858), 298. See also W. Strachan, The Law of Trust Accounts, 2nd ed. (London 1937), 197; Lindley, Law of Partnership, p. 519.

27 Strachan, The Law of Trust Accounts, 197–98; Daniell, Chancery Practice, p. 887; Re Norrington (1879) 13 Ch.D. 654, 662–63; Re Jarvis [1958] 1 W.L.R. 815, 820; E.V. Williams, The Law of Executors and Administrators, vol. 2 (London 1832), 1137–38; United States Surgical Corp. v Hospital Products International Pty. Ltd. [1983] 2 N.S.W.L.R. 157, 242; Victoria University of Technology v Wilson [2006] VSC 186, (2006) 68 I.P.R. 597, at [13].

28 Bagnall v Carlton (1877) 6 Ch.D. 371, 400, 403, 404, 408; Emma Silver Mining Co. v Grant (1879) 11 Ch.D. 918, 940; Yates v Finn (1880) 13 Ch.D. 839, 843; Edwards v Lee's Administrator (1936) 96 S.W. 2d. 1028, 1032; Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 154.

29 Cf. P. Devonshire, “Account of Profits in Breach of Fiduciary Duty” (2010) 32 Syd.L.R. 389, at 404.

30 Emma Silver Mining Co. v Grant (1879) 11 Ch.D. 918, 939–41.

31 Bagnall v Carlton (1877) 6 Ch.D. 371, 408; De Bussche v Alt (1878) 8 Ch.D. 286, 307; Lydney & Wigpool Iron Ore Co. v Bird (1886) 33 Ch.D. 85, 95; Bennet, The Master's Office, p. 148; cf. P. Devonshire, Account of Profits (Wellington 2013), [4.1].

32 Brown v de Tastet (1821) Jac. 284 (37 E.R. 858), 294.

33 O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 468.

34 J. Palmer, “The Availability of Allowances in Equity: Rewarding the Bad Guy” (2004) 21 N.Z.U.L.R. 146.

35 T. Lewin, The Law of Trusts and Trustees (London 1837), 443; Hill, The Law Relating to Trustees, pp. 598–601.

36 Re Duke of Norfolk's Settlement Trusts [1982] Ch. 61, 78; Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [312].

37 Trustees and executors were not “in general” allowed remuneration for time spent managing the trust (Bennet, The Master's Office, p. 147; E.H.T. Snell, Principles of Equity, 12th ed., by A. Brown (London 1898), 159–62), but the court had a discretion to allow it: Hill, The Law Relating to Trustees, p. 601; Williams, The Law of Account, p. 185. The default position meant there was no right to this kind of allowance (which was then sometimes treated as a rule against it: Stocken v Dawson (1843) 6 Beav. 371 (49 E.R. 869), 375 and (1848) 17 L.J. Ch. 282, 285 (L.C.), citing Burden v Burden (1813) 1 V. & B. 170 (35 E.R. 67), 172) but it could be allowed where that was in the best interests of the beneficiaries: Marshall v Holloway (1820) 2 Swans. 432 (36 E.R. 681), 453–54; Cook v Collingridge (1823) Jac. 607 (37 E.R. 979), 623; Green v Folgham (1823) 1 Sim. & St. 398 (57 E.R. 159), 407; Morison v Morison (1838) 4 My. & Cr. 215, 224 (41 E.R. 85); Bainbrigge v Blair (1845) 8 Beav. 588 (50 E.R. 231), 596–97; Re Masters [1953] 1 W.L.R. 81, 83; Dale v Inland Revenue Commissioners [1954] A.C. 11, 34; Duke of Norfolk's ST [1982] Ch. 61, 75–76, 79; Re Queensland Coal & Oil Shale Mining Industry (Superannuation) Ltd. [1999] 2 Qd. R. 524, 526–27.

38 Brown v Litton (1711) 1 P. Wms. 140 (24 E.R. 329) (L.K.), 141. See also Cook v Collingridge (1823) Jac. 607 (37 E.R. 979), 623.

39 Dale v Inland Revenue Commissioners [1954] A.C. 11, 27.

40 Compare Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [336]; Mid-City Skin Cancer & Laser Centre Pty. Ltd. v Zahedi-Anarak [2006] NSWSC 844, (2006) 67 N.S.W.L.R. 569, at [273], with Guinness plc v Saunders [1990] 2 A.C. 663, 701.

41 Phipps v Boardman [1964] 1 W.L.R. 993, 1018; Green v Bestobell Industries Pty. Ltd. (No. 2) [1984] W.A.R. 32, 36.

42 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 562.

43 Cook v Collingridge (1823) Jac. 607 (37 E.R. 979), 623; Green v Bestobell Industries Pty. Ltd. (No. 2) [1984] W.A.R. 32, 38; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [88].

44 Australian Postal Corp. v Lutak (1991) 21 N.S.W.L.R. 584, 596.

45 Phipps v Boardman [1964] 1 W.L.R. 993, 1018; Re Macadam [1946] Ch. 73, 82–83; O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 468. See also Re Berkeley Applegate (Investment Consultants) Ltd. [1989] Ch. 32, 50–51; Heydon et al., Meagher Gummow & Lehane's Equity, [5-280].

46 Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [328].

47 O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 469; cf. Victoria University of Technology [2006] VSC 186, (2006) 68 I.P.R. 597, at [53], [55], which purports to apply the reasoning in O'Sullivan but misapprehends its meaning.

48 O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 469; Green v Bestobell Industries Pty. Ltd. (No. 2) [1984] W.A.R. 32, 38–39.

49 O'Sullivan v Management Agency and Music Ltd. [1985] 1 Q.B. 428, 459, 469, 473.

50 Ibid., at p. 469, emphasis added. Dunn L.J. agreed: p. 459.

51 Green v Bestobell Industries Pty. Ltd. (No. 2) [1984] W.A.R. 32, 39; Halliday & Nicholas Insurance Brokers Pty. Ltd. v Corsiatto [2001] NSWCA 188, (2001) 11 A.N.Z. Ins. Cas. 75,848, at [30].

52 V-Flow Pty. Ltd. v Holyoake Industries (Vic.) Pty. Ltd. [2013] FCAFC 16, (2013) 296 A.L.R. 418, at [71]. See also M. Harding, “Justifying Fiduciary Allowances” in A. Robertson and H.W. Tang (eds.), The Goals of Private Law (Oxford 2009), 341, 347; M. Conaglen, “The Extent of Fiduciary Accounting and the Importance of Authorisation Mechanisms” [2011] C.L.J. 548, 570; L. Ho, “Deemed Performance in Account of Profits” in P. Devonshire and R. Havelock (eds.), The Impact of Equity and Restitution in Commerce (Oxford 2019), 183, 198–99.

53 New Zealand Netherlands Society “Oranje” Inc. v Kuys [1973] 1 W.L.R. 1126, 1129–30; Consul Development Pty. Ltd. v DPC Estates Pty. Ltd. (1975) 132 C.L.R. 373, 392–93; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [82].

54 R. Goff, “The Search for Principle” (1983) 69 Proc. Brit. Acad. 169, 174.

55 Grimaldi v Chameleon Mining NL (No. 2), [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [515].

56 De Bussche v Alt (1878) 8 Ch.D. 286, 307. This order was affirmed on appeal: (1878) 8 Ch.D. 286, 317. The account in Massey v Davies (1794) 2 Ves. Jun. 317 (30 E.R. 651) would also have been straightforward (colliery manager held liable to account for profits made on sale of timber to the colliery).

57 Attorney-General v Edmunds (1868) L.R. 6 Eq. 381, 395.

58 Re Dover Coalfield Extension Ltd. [1908] 1 Ch. 65, 69.

59 Brown v Inland Revenue Commissioners [1965] A.C. 244, 260, 263, 265, 268.

60 E.g. an income-producing Crown charter for salmon fishing, granted to a Town Council only because of its ownership of the riparian land, where the Council held that land in trust for the plaintiff: Aberdeen Town Council v Aberdeen University (1877) 2 App. Cas. 544, 549, 553, 555–56.

61 Lindley, Law of Partnership, p. 522. In A-G v Edmunds, the defendant Clerk was referred to as “quasi a trustee”: (1868) L.R. 6 Eq. 381, 390.

62 Tang v Tang (2017) 20 H.K.C.F.A.R. 53, at [14]–[16].

63 Scott v Scott (1963) 109 C.L.R. 649.

64 Tang v Tang (2017) 20 H.K.C.F.A.R. 53, at [23]–[25].

65 Foskett v McKeown [2001] 1 A.C. 102.

66 See e.g. Paul A. Davies (Australia) Pty. Ltd. v Davies [1983] 1 N.S.W.L.R. 440, 455–59; Lutak, (1991) 21 N.S.W.L.R. 584. See also D. Friedmann, “Restitution of Benefits Obtained Through the Appropriation of Property or the Commission of a Wrong” (1980) 80 Columbia L.Rev. 504.

67 See also D. Friedmann, “Restitution for Wrongs: The Measure of Recovery” (2001) 79 Texas L.Rev. 1879, at 1918.

68 Gardner v M'Cutcheon (1842) 4 Beav. 534 (49 E.R. 446), 541, 543. The tea appears to have been bought with the proceeds of a consignment of opium, sold illegally in China, which was also considered to have been done on the partners’ joint account: see pp. 538–39.

69 Dean v MacDowell (1878) 8 Ch.D. 345, 355. See also Lindley, Law of Partnership, pp. 309–10; Shallcross v Oldham (1862) 2 J. & H. 609 (70 E.R. 1202).

70 Sugden v Crossland (1856) 3 Sm. & G. 192 (65 E.R. 620), 194; Re Macadam [1946] Ch. 73, 82.

71 Lindley, Law of Partnership, p. 524; Williams, The Law of Account, p. 89; M.J. Tilbury, Civil Remedies (Sydney 1990), [4082]; Featherstonhaugh v Turner (1858) 25 Beav. 382 (53 E.R. 683), 392.

72 Lindley, Law of Partnership, p. 590.

73 Ibid., at p. 592.

74 Wedderburn v Wedderburn (1836) 2 Keen 722 (48 E.R. 807), 750; Manley v Sartori [1927] 1 Ch. 157, 162, 163. The earlier decisions treat the deceased estate as beneficially interested in the partnership assets: Crawshay v Collins (1808) 15 Ves. 218 (33 E.R. 736), 227; Featherstonhaugh v Fenwick (1810) 17 Ves. 298 (34 E.R. 115), 310. This was later denied in Knox v Gye (1872) L.R. 5 H.L. 656, 675–76 (although see Lord Hatherley L.C.'s dissent at pp. 678–79), in order that the accounting be statute-barred after six years as a debt. But the debt is an unusual one (R.C.I. Banks, Lindley & Banks on Partnership, 20th ed. (London 2017), [23–34], [19-09]–[19-10]), and the principles by which the account of profits is calculated stem from the beneficial ownership mode of analysis. The tension created by Knox v Gye remains evident on the face of ss. 42 and 43 of the Partnership Act 1890 (UK). See generally P.D. Finn, Fiduciary Obligations (Sydney 1977), [199]–[203].

75 See e.g. Wedderburn v Wedderburn (1836) 2 Keen 722 (48 E.R. 807), 752; Lord Provost, Magistrates and Town Council of Edinburgh v Lord Advocate (ex parte M‘Laren) (1879) 4 App. Cas. 823, 839; Yates v Finn (1880) 13 Ch.D. 839, 843–44.

76 Lindley, Law of Partnership, pp. 320–21; Popat v Shonchhatra [1997] 1 W.L.R. 1367, 1371–72.

77 Vyse v Foster (1872) L.R. 8 Ch. App. 309, 331; cf. G.F. Hamilton, “On the Doctrine of Vyse v. Foster” (1887) 3 L.Q.R. 211, which Frederick Pollock considered to be “fighting against the current of opinion and expectation, if not of authority”: see p. 220.

78 Simpson v Chapman (1853) 4 De G.M. & G. 154 (43 E.R. 466), 170.

79 Willett v Blanford (1842) 1 Hare 253 (66 E.R. 1027).

80 Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039), 105.

81 Simpson v Chapman (1853) 4 De G.M. & G. 154 (43 E.R. 466), 171; Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039), 117.

82 Willett v Blanford (1842) 1 Hare 253 (66 E.R. 1027), 270. See also Birtchnell v Equity Trustees, Executors & Agency Co. Ltd. (1929) 42 C.L.R. 384, 398; Manley v Sartori [1927] 1 Ch. 157, 165–66; Sheldon v Metro-Goldwyn Pictures Corp. 309 U.S. 390 (1940), 401; Hospital Products v United States Surgical Corp. (1984) 156 C.L.R. 41, 109; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 561; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [77].

83 Willett v Blanford (1842) 1 Hare 253 (66 E.R. 1027), 271.

84 Some decisions indicated that partnership goodwill would be subject to survivorship (e.g. Hammond v Douglas (1800) 5 Ves. 539 (31 E.R. 726), 539–40; Lewis v Langdon (1835) 7 Sim. 421 (58 E.R. 899), 425), but that was inaccurate: Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039), 104; Smith v Everett (1859) 27 Beav. 446 (54 E.R. 175), 452; Re Arbitration between David & Matthews [1899] 1 Ch. 378, 382–83; Manley v Sartori [1927] 1 Ch. 157, 166; Lindley, Law of Partnership, pp. 443–44, 446.

85 Capital contributions might have changed over time as well, by further additions or subtractions, although partnership capital did not normally change without agreement: Willett v Blanford (1842) 1 Hare 253 (66 E.R. 1027), 266, 272; Lindley, Law of Partnership, p. 321.

86 Simpson v Chapman (1853) 4 De G.M. & G. 154 (43 E.R. 466), 171.

87 Ibid., at p. 172. See also Crawshay v Collins (1808) 15 Ves. 218 (33 E.R. 736), 230 and (1820) 1 Jac. & W. 267, 278 (37 E.R. 377); Featherstonhaugh v Fenwick (1810) 17 Ves. 298 (34 E.R. 115), 314; Willett v Blanford (1842) 1 Hare 253 (66 E.R. 1027), 272–74; Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039), 117.

88 See Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), 664–65, 673; Clegg v Fishwick (1849) 1 Mac. & G. 294 (41 E.R. 1278), 298–99, 301 and (1849) 1 H. & Tw. 390 (47 E.R. 1463), 398, 400; Warman International Ltd. v Dwyer (1992) 46 I.R. 250, 260; Lindley, Law of Partnership, p. 522.

89 Featherstonhaugh v Turner (1858) 25 Beav. 382 (53 E.R. 683), 391–92. See also Featherstonhaugh v Fenwick (1810) 17 Ves. 298 (34 E.R. 115), 314.

90 Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [560]; R.C. Nolan, “The Administration and Maladministration of Funds in Equity” in P.G. Turner (ed.), Equity and Administration (Cambridge 2016), 72.

91 Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), 668.

92 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [85].

93 Wedderburn v Wedderburn (1856) 22 Beav. 84 (52 E.R. 1039), 99–100.

94 Clegg v Edmondson (1857) 3 De G.M. & G. 787 (44 E.R. 593), 806; Chan v Zacharia (1984) 154 C.L.R. 178. See also Featherstonhaugh v Fenwick (1810) 17 Ves. 298 (34 E.R. 115), 311.

95 Williams, The Law of Account, pp. 88, 184; Lindley, Law of Partnership, pp. 522–23.

96 E.g. Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [517], [526].

97 Re Jarvis [1958] 1 W.L.R. 815, 820.

98 Ibid. The plaintiff's claim ultimately failed because of laches: see p. 821.

99 See John Taylors v Masons [2001] EWCA Civ 2106, [2005] W.T.L.R. 1519, at [37].

100 Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), 673; Flockton v Bunning (1864) L.R. 8 Ch. App. 323n.; Vyse v Foster (1872) L.R. 8 Ch. App. 309, 334.

101 Rocke v Hart (1805) 11 Ves. 58 (32 E.R. 1009), 61; Ratcliffe v Graves (1683) 1 Vern. 196 (23 E.R. 409), 197.

102 Prior to Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), return of the misapplied capital coupled with interest seems to have been the normal remedy, but the possibility of an award of profits generated from that capital was not unrecognised: see Williams, The Law of Executors, 1134; cf. R. Lee, “Disgorgement of Unauthorised Fiduciary Gains: An Exercise in Causation?” (2017) 11 J. Eq. 29, at 34–35.

103 Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), 673.

104 Re Davis [1902] 2 Ch. 314, 317; Docker v Somes (1834) 2 My. & K. 655 (39 E.R. 1095), 673.

105 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [62], [116].

106 Aas v Benham [1891] 2 Ch. 244, 255; Birtchnell v Equity Trustees, Executors & Agency Co. Ltd. (1929) 42 C.L.R. 384, 409. This is so even where the partnership agreement contains a clause prohibiting other activity: Dean v MacDowell (1878) 8 Ch.D. 345.

107 CMS Dolphin Ltd. v Simonet [2001] 2 B.C.L.C. 704, at [140].

108 Re Jarvis [1958] 1 W.L.R. 815, 820.

109 Dwyer v Warman International Ltd. (unreported, Queensland Court of Appeal, 23 February 1994), per McPherson J.A. (dissenting) at p. 28.

110 Re Jarvis [1958] 1 W.L.R. 815, 820.

111 CMS Dolphin Ltd. v Simonet [2001] 2 B.C.L.C. 704, at [97] (citing Hospital Products v United States Surgical Corp. (1984) 156 C.L.R. 41, 110). See also Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [16].

112 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 558, 567; Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [517]. A similar point is made in intellectual property cases, where the same difficulties are encountered: see Sheldon v Metro-Goldwyn Pictures Corp. 309 U.S. 390 (1940), 404; Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 46; Dart Industries Inc. v Decor Corp. Pty. Ltd. (1993) 179 C.L.R. 101, 111, 119. Difficulties in assessment do not relieve the court from its responsibility, just as difficulty in assessing compensatory damages at times also requires guesswork: see Commonwealth v Amann Aviation Pty. Ltd. (1991) 174 C.L.R. 64, 83.

113 Ultraframe (UK) Ltd. v Fielding [2005] EWHC 1638 (Ch), at [1588].

114 “[T]he purpose of the processes of the Court of Chancery was to rectify and reform the conscience of the wrongdoer. … its orders are primarily coercive or remedial rather than punitive”: Australian Consolidated Press Ltd. v Morgan (1965) 112 C.L.R. 483, 498–99. See also Vyse v Foster (1872) L.R. 8 Ch. App. 309, 333, 334; Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 34; Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [300]–[310], [406]–[407].

115 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [83]; see also at [93]–[95].

116 Maguire v Makaronis (1997) 188 C.L.R. 449, 468.

117 Timber Engineering Co. Pty. Ltd. v Anderson [1980] 2 N.S.W.L.R. 488, 496; Hospital Products v United States Surgical Corp. (1984) 156 C.L.R. 41, 116; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 568; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [97]. There is an analogy here with intellectual property cases where the infringing product is entirely attributable to the wrongful use of the plaintiff's patent, design or copyright: see Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 43.

118 Timber Engineering Co. Pty. Ltd. v Anderson [1980] 2 N.S.W.L.R. 488, 496.

119 Hospital Products v United States Surgical Corp. (1984) 156 C.L.R. 41, 116. A constructive trust may be an inappropriate means of stripping profits if it would undesirably yoke parties together (Warman International Ltd. v Dwyer (1992) 46 I.R. 250, 261–62) or where the plaintiff's property made only a very small and indirect contribution to the generation of the profit (Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [672]–[681]). English law will need to address whether these considerations can affect the recognition of a constructive trust over profits taken in breach of fiduciary duty, given remedial constructive trusts are not recognised in England: FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] A.C. 250, at [47]; Heydon et al., Meagher Gummow & Lehane's Equity, [5-250].

120 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918.

121 The analysis here leaves to one side questions as to whether the liability of a participant in a breach of fiduciary duty should differ from that of the fiduciary: see note 7 above.

122 Lifeplan Australia Friendly Society Ltd. v Ancient Order of Foresters in Victoria Friendly Society Ltd. [2017] FCAFC 74, (2017) 250 F.C.R. 1, at [86].

123 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [8]; see also at [4], [10], [16], [17].

124 Ibid., at paras. [111], [113].

125 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 566, 568.

126 Ibid., at p. 566.

127 Ibid., at pp. 566–67, 568.

128 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [21].

129 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 566.

130 Cf. R. Lee, “Causation and Accounts of Profits for Breach of Fiduciary Duty” [2006] Sing. J.L.S. 488, at 502; C. Mitchell, “Causation, Remoteness, and Fiduciary Gains” (2006) 17 K.C.L.J. 325, at 338; G.J. Virgo, “Restitutionary Remedies for Wrongs: Causation and Remoteness” in C. Rickett (ed.), Justifying Private Law Remedies (Oxford 2008), 301, 326; Hayton et al., Underhill & Hayton, [27.49].

131 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 565.

132 Ibid., at p. 567.

133 Ibid., at p. 558. See also Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [116]. In CMS Dolphin Ltd. v Simonet [2001] 2 B.C.L.C. 704, CMSD did not seek an account for any period beyond the year in which Simonet committed his breaches of fiduciary duty, and so while he effectively carved out CMSD's business (CMSD was left with no business apart from the litigation: see at [4]), this issue did not arise: see at [140]. cf. Devonshire, “Account of Profits”, which describes CMS Dolphin Ltd. as taking an expansive view of profits (see p. 395), but then says that Simonet was actually “found liable on a more restrictive basis”: see p. 396 (fn. 61).

134 Gummow, “Dishonest Assistance”, p. 409. See generally O. Dixon, Jesting Pilate (Sydney 1965), 14.

135 Tang v Tang (2017) 20 H.K.C.F.A.R. 53, at [16]. See also e.g. Lifeplan Australia Friendly Society Ltd. v Ancient Order of Foresters in Victoria Friendly Society Ltd. [2017] FCAFC 74, (2017) 250 F.C.R. 1, at [68].

136 United Pan-Europe Communications N.V. v Deutsche Bank A.G. [2000] 2 B.C.L.C. 461, at [47]. See also Novoship (UK) Ltd. v Mikhaylyuk [2014] EWCA Civ 908, [2015] Q.B. 499, at [96] (although cf. at [109]); Akita Holdings Ltd. v Attorney General of the Turks and Caicos Islands [2017] UKPC 7, [2017] A.C. 590, at [17].

137 G.J. Virgo, The Principles of Equity and Trusts, 3rd ed. (Oxford 2018), 528; Lee, “Disgorgement of Unauthorised Fiduciary Gains”, p. 41.

138 Lee, “Causation and Accounts of Profits”, pp. 499–500.

139 J. Stapleton, “An ‘Extended But-For’ Test for the Causal Relation in the Law of Obligations” (2015) 35 O.J.L.S. 697, at 714 (fn. 81).

140 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [89]; Gummow, “Dishonest Assistance”, p. 408; Ho, “Deemed Performance”, p. 195.

141 See e.g. Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 154–55; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 557, 558; Foster Bryant Surveying Ltd. v Bryant [2007] EWCA Civ 200, [2007] 2 B.C.L.C. 239, at [88], [101]; Akita Holdings Ltd. v Attorney General of the Turks and Caicos Islands [2017] UKPC 7, [2017] A.C. 590, at [17]; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [70]; Keystone Healthcare Ltd. v Parr [2019] EWCA Civ 1246, [2019] 4 W.L.R. 99, at [15].

Hence, the claim is not an action in unjust enrichment (and nor is it restitutionary: Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [414]), as there is no need for the fiduciary's profit to have been obtained at the expense of the plaintiff. This renders less informative the US case law on the topic, which is based more heavily on an unjust enrichment analysis: see D.B. Dobbs and C.L. Roberts, Law of Remedies, 3rd ed. (St Paul 2018), 415, 418; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 557 (fn. 25). Caution is also needed with intellectual property cases for the same reason: see Dart Industries Inc. v Decor Corp. Pty. Ltd. (1993) 179 C.L.R. 101, 111, 114–15, 123; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 557.

It is unclear why the High Court of Australia considered in Warman that “in some situations, it may also be relevant to ascertain what was lost by the plaintiff” when determining the proper basis for an account of profits (see p. 565). This may refer to the situation, discussed earlier, where the whole of the business for which the fiduciary must account has been “carved out” of the plaintiff's business, as that despoliation inevitably causes a loss to the plaintiff.

142 Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 144.

143 Ibid., at p. 145.

144 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [71].

145 Harris v Digital Pulse Pty. Ltd. [2003] NSWCA 10, (2003) 56 N.S.W.L.R. 298, at [414]; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [74], [107]; Conaglen, “The Extent of Fiduciary Accounting”, pp. 557–58.

146 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [76]; see also at [99]-[106]. And see e.g. Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 154; Gray v New Augarita Porcupine Mines Ltd. [1952] 3 D.L.R. 1, 15; Gwembe Valley Devt. Co. Ltd. v Koshy (No. 3) [2003] EWCA Civ 1048, [2004] 1 B.C.L.C. 131, at [145]; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [9]; Keystone Healthcare Ltd. v Parr [2019] EWCA Civ 1246, [2019] 4 W.L.R. 99, at [19]–[20]. See also text accompanying note 48 above; and see Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 565–66, where “but for” Dwyer's breach he would have acquired the distributorship after no more than a further year, but the account of profits was not limited to that period.

147 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [71].

148 Cf. Virgo, The Principles of Equity and Trusts, p. 528; Cunnington, R., “The Assessment of Gain-Based Damages for Breach of Contract” (2008) 71 M.L.R. 559, 583–84CrossRefGoogle Scholar.

149 Stapleton, J., “Unnecessary Causes” (2013) 129 L.Q.R. 39Google Scholar; Stapleton, “An ‘Extended But-For’ Test”, p. 709.

150 Stapleton, “An ‘Extended But-For’ Test”, pp. 718, 725.

151 See e.g. Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [88]; Williams v Barton [1927] 2 Ch. 9, 12; V-Flow Pty. Ltd. [2013] FCAFC 16, (2013) 296 A.L.R. 418, at [67]; Emma Silver Mining Co. v Grant (1879) 11 Ch.D. 918, 938; Lifeplan Australia Friendly Society Ltd. v Ancient Order of Foresters in Victoria Friendly Society Ltd. [2017] FCAFC 74, (2017) 250 F.C.R. 1, at [66].

152 Keystone Healthcare Ltd. v Parr [2019] EWCA Civ 1246, [2019] 4 W.L.R. 99, at [18]; cf. Hayton et al., Underhill & Hayton, [27.44]–[27.45].

153 Keystone Healthcare Ltd. v Parr [2019] EWCA Civ 1246, [2019] 4 W.L.R. 99, at [18]; see also at [22].

154 Maguire v Makaronis (1997) 188 C.L.R. 449, 468 (quoting Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 557).

155 Chan v Zacharia (1984) 154 C.L.R. 178, 199.

156 See also Boston Deep Sea Fishing & Ice Co. v Ansell (1888) 39 Ch.D. 339, 367; Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 557; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [68].

157 Parker v McKenna (1874) L.R. 10 Ch. App. 96, 118, 124; Re Canadian Oil Works Corp. (Hay's Case) (1875) L.R. 10 Ch. App. 593, 601, 605; Boston Deep Sea Fishing & Ice Co. v Ansell (1888) 39 Ch.D. 339, 363–64; Aas v Benham [1891] 2 Ch. 244, 255; Birtchnell v Equity Trustees, Executors & Agency Co. Ltd. (1929) 42 C.L.R. 384, 409; Furs Ltd. v Tomkies (1936) 54 C.L.R. 583, 592, 600; Boardman v Phipps [1967] 2 A.C. 46, 127; Industrial Development Consultants Ltd. v Cooley [1972] 1 W.L.R. 443, 451; United Pan-Europe [2000] 2 B.C.L.C. 461, at [47]; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [112].

158 Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 139, 144–45, 147, 149, 153, 158; Russell v Austwick (1826) 1 Sim. 52 (57 E.R. 498); Williams v Stevens (1866) L.R. 1 P.C. 352, 359; Hospital Products v United States Surgical Corp. (1984) 156 C.L.R. 41, 107; John Taylors v Masons [2001] EWCA Civ 2106, [2005] W.T.L.R. 1519, at [28]; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [85], [119].

159 Burton v Wookey (1822) 6 Madd. 367 (56 E.R. 1131), 368; Parker v McKenna (1874) L.R. 10 Ch. App. 96, 118; Aas v Benham [1891] 2 Ch. 244, 255; Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134n., 137; Re Macadam [1946] Ch. 73, 81; Industrial Development Consultants Ltd. v Cooley [1972] 1 W.L.R. 443, 453; Consul Development Pty. Ltd. v DPC Estates Pty. Ltd. (1975) 132 C.L.R. 373, 393, 394; John Taylors v Masons [2001] EWCA Civ 2106, [2005] W.T.L.R. 1519, at [27]. See also Cory, A Practical Treatise, p. 277.

160 Visnic v Sywak [2009] NSWCA 173, (2009) 257 A.L.R. 517, at [22].

161 Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [9] (quoting Jenyns v Public Curator (Q.) (1953) 90 C.L.R. 113, 118).

162 Warman International Ltd. v Dwyer (1995) 182 C.L.R. 544, 568.

163 Birtchnell v Equity Trustees, Executors & Agency Co. Ltd. (1929) 42 C.L.R. 384, 417.

164 Simpson v Chapman (1853) 4 De G.M. & G. 154 (43 E.R. 466), 172; Featherstonhaugh v Turner (1858) 25 Beav. 382 (53 E.R. 683), 391; CMS Dolphin Ltd. v Simonet [2001] 2 B.C.L.C. 704, at [97]; John Taylors v Masons [2001] EWCA Civ 2106, [2005] W.T.L.R. 1519, at [36]; Murad v Al-Saraj [2005] EWCA Civ 959, [2005] W.T.L.R. 1573, at [115]; Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [517], [540], [710], [712]; Ancient Order of Foresters in Victoria Friendly Society Ltd. v Lifeplan Australia Friendly Society Ltd. [2018] HCA 43, (2018) 92 A.L.J.R. 918, at [12], [92]. See also note 87 above. And see Dart Industries Inc. v Decor Corp. Pty. Ltd. (1993) 179 C.L.R. 101, 120; Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd. (1968) 122 C.L.R. 25, 39, 42–43.

165 Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6, (2012) 200 F.C.R. 296, at [517].