UK: England and Wales: fiduciary liability - account of profits and causation

Judgment was given by the Court of Appeal yesterday in Gray v Global Energy Horizons Corporation [2020] EWCA Civ 1668. The decision is noteworthy because of what is said about the equitable claim for an account of profits and the extent to which - if at all - causation is an essential element.  The court unanimously observed (paras. [126] and [127]):  

.... the basic equitable rule is indeed a stringent one which requires an errant fiduciary to account to his principal for all unauthorised profits falling within the scope of his fiduciary duty. The rule is intended to have a deterrent effect, and to ensure that no defaulting fiduciary can make a profit from his breach of duty. It does not matter if the result is to confer a benefit on the principal which the principal would otherwise have been unable to reap ... It follows, in our view, that the doctrine of unjust enrichment has, at best, only a subsidiary role to play in limiting the liability of a fiduciary to account.  We are here concerned with the obligation of a defaulting fiduciary to account for unauthorised profits, not with compensation for an equitable wrong, and still less with an independent cause of action in restitution to reverse an unjust enrichment of the defendant at the expense of the claimant ... the liability of a defaulting fiduciary to account for unauthorised profits is a strict one, which has always been jealously enforced by courts of equity. There needs to be some link or nexus between the breach of duty proved and the profits for which an account is ordered, such that there is a “reasonable relationship” between them (as Lewison J said in the Ultraframe case).  But the link or nexus does not need to be of a causal character. It will normally be sufficient if the profit arose within the scope of the defaulting fiduciary’s conduct in breach of duty".