Fiduciary Duties and Remedies for Breach
3.1 From relationship to breach
After establishing fiduciary status and scope, the next task is to identify the loyalty rule engaged. The no-conflict rule restrains a fiduciary from acting where personal interest conflicts, or may conflict, with duty. The no-profit rule prevents unauthorised gains obtained by reason of the fiduciary position or opportunity. The strictness of the rules is prophylactic: equity seeks to remove temptation and preserve undivided loyalty.
3.2 Conflict and profit are related but analytically distinct
A fiduciary may breach because personal interests conflict with duty even before a measurable profit is made. Conversely, a gain may be recoverable because it was obtained through the position even if the principal cannot prove an equivalent loss. This is why an account of profits is conceptually different from compensation.
3.3 Account of profits
An account of profits focuses on stripping unauthorised gain rather than measuring the claimant’s loss. Warman International is central because it shows that the remedy can be adjusted where the fiduciary’s own skill, effort, capital or other factors contributed to profits. The purpose is not punitive confiscation but principled disgorgement of gains attributable to the breach.
3.4 Equitable compensation
Equitable compensation seeks monetary relief for loss caused by breach of equitable duty. The exact approach depends on the duty and context. Youyang is a significant High Court authority on breach of trust and restoration/compensation. A strong answer does not simply label every monetary remedy “damages”. It explains whether the relief is substitutive, restorative or gain-based and why the selected measure fits the breach.
3.5 Proprietary responses and constructive trusts
In some cases, equity may recognise a proprietary response over an asset or its traceable substitute. That can be especially powerful in insolvency. However, a constructive trust is not a universal response to fiduciary breach. The court must identify the doctrinal basis and remedial consequences rather than assuming that every breach automatically transfers beneficial ownership.
3.6 Remedy selection
Ask what the client wants: reversal of a transaction, recovery of a specific asset, stripping of profit, restoration of a trust fund, compensation for loss, or protective relief. Then match the remedy to the established wrong, causation and available property. Remedies are a distinct stage of analysis, not an afterthought.
Exam rule map
- Separate breach analysis from remedy analysis.
- No-conflict can operate even before a profit is realised.
- Account of profits is gain-based; equitable compensation is loss/restoration based.
- Do not call every equitable monetary remedy “damages”.
- Consider allowances and the contribution of the fiduciary’s own skill or capital where relevant.
Leading authorities
Strict application of fiduciary obligations where a former partner appropriated an opportunity connected with the partnership.
Leading High Court authority on account of profits, causation of gains and allowances for skill and effort.
Important High Court authority on fiduciary obligations, informed consent and the strict approach to solicitor-client conflicts.
High Court authority on breach of trust and monetary relief designed to restore the trust position.
Course source spine
- Paul Finn, Fiduciary Reflections (2014)
- Ong on Equity
- Meagher, Gummow & Lehane's Equity
- Dal Pont, Equity and Trusts: Commentary and Materials
These sources are teaching/research references. Primary legislation and judgments control where commentary differs.
FAQs — questions
FAQ 1. Must the principal prove loss to obtain an account of profits?
FAQ 2. Is a constructive trust automatic after every fiduciary breach?
FAQ 3. Why can a fiduciary receive an allowance after wrongdoing?
FAQ 4. What is the safest exam structure?
Multiple-choice questions
MCQ 1. An account of profits is principally designed to:
MCQ 2. Warman International is especially important for:
MCQ 3. Youyang is most closely associated with:
MCQ 4. Fully informed consent is best analysed:
Short-answer questions
Short answer 1. Distinguish account of profits and equitable compensation.
Short answer 2. What is the role of an allowance?
Short answer 3. Why does remedy selection matter in insolvency?
High-distinction IRAC problem
A senior employee, Priya, uses confidential commercial information and a customer opportunity obtained through her fiduciary role to establish a competing venture. The venture earns $2 million over three years, but Priya argues that most of the profit resulted from her personal expertise and later market growth. The former employer seeks all profits and a constructive trust. Advise on remedies.
Darius / 4KTrust / A4Effort / Desserto / Ophore
The actual Week 4 tutorial is now part of the Chapter 3 learning map. It requires separate analysis of Darius in his capacities as solicitor/adviser, trustee of 4KTrust, executor and beneficiary of Oscar’s estate, and investor on behalf of the trust. The key examination discipline is to identify the claimant and the specific fiduciary undertaking before asking whether a conflict, unauthorised profit, misuse of information, or breach of trustee investment duties arises. The complete facts supplied in the tutorial are used to structure the Chapter 3 model analysis.