"Disgorgement of unauthorised fiduciary gains: An exercise in causation?"
Journal of Equity
2017, vol 11, pp. 29-47
2017, vol 11, pp. 29-47
Abstract: This article examines the relevance of causation in attributing and quantifying unauthorised fiduciary gains. Proceeding from some recent accounts of the fiduciary no-profit rule being merely a primary rule of attribution, it considers whether fiduciary accountability necessarily entails that liability to account for profits is an order that enforces the trustee’s primary duty directly, and thus excludes causal inquiries; as well as whether deterrence as a normative rationale for complete disgorgement applies to all breach of fiduciary duty cases. Based on the principles developed from the foregoing analysis, the article then illustrates its implications by reference to a recent Hong Kong case on disgorgement. It is suggested that the lower courts in that case mistakenly applied causation in deciding whether an account of profits should be available in a misapplication of trust fund situation, which mistake was corrected by Lord Millett NPJ [in Libertarian Investments Ltd v Thomas Alexej Hall (2013) 16 HKCFAR 681] only when the case reached the Court of Final Appeal.
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