Friday, 10 December 2010

UK: England and Wales: dishonestly procuring or assisting a breach of fiduciary duty

The remedies available in respect of the dishonest procurement or assistance of a breach of fiduciary duty are considered in Fiona Trust & Holding Corporation & Ors v Privalov & Ors [2010] EWHC 3199 (Comm), handed down today: see here. The trial judge, Mr Justice Andrew Smith, held (paras. [66] and [67]):

... I consider it now established that an account of profits is available under English law against one who dishonestly procures or assists a breach of fiduciary duty. There are strong reasons for recognising the remedy, which were explained by Gibbs J in Consul Development v DPC, (1975) 132 CLR 373 at p. 397:

'If the maintenance of a very high standard of conduct on the part of fiduciaries is the purpose of the rule it would seem equally necessary to deter other persons from knowingly assisting those in a fiduciary position to violate their duties. If, on the other hand, the rule is to be explained simply because it would be contrary to equitable principles to allow a person to retain a benefit that he gained from a breach of his fiduciary duty, it would appear equally inequitable that one who knowingly took part in the breach should retain a benefit that resulted therefrom'.

Therefore, although a person who assists a breach of trust or fiduciary duty is not himself a trustee, he is liable to account in equity as if he were: see Dubai Aluminium v Salaam [2003] 2 AC 366 at para 141 per Lord Millett.

There is a further issue about the limits of the remedies available to the claimants if [the defendants] are liable for procuring or assisting the breach of a fiduciary duty. [Counsel] argued that, if an account of profits is available, they are liable to account only for the profits that result from the act of dishonest assistance ... Accordingly, as it is argued, a dishonest assistant is not liable to account for profits that could and would have been made regardless of his dishonest participation in the fiduciary's breach; and he is liable to account only for profits which directly resulted from the transaction concluded through dishonest inducement or assistance and not profits which can truly be said to be the result of another subsequent event, such as the movement of the market. I do not accept this submission. The law does not enter into investigations of what would have happened if the fiduciary had performed his duty when taking an account of profits: see Murad v Al-Saraj [2005] EWCA Civ 959 ... at para 76 per Arden LJ".

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