The availability of account of profits reflects the strict and unrelenting approach with which Equity polices those in fiduciary positions. It is commonly accepted that this approach is prophylactic:5 to prevent the risk of any harm to the principal as a result of abuse or exploitation by the fiduciary of his or her position. In order to achieve this, Equity imposes the no-conflict and no-profit rules on fiduciaries, and supplements these with a suite of remedies, both personal and proprietary. It has been said that these rules and remedies ensure that the fiduciary remains disinterested in carrying out his duties,6 or is deterred from the temptation of abuse.7 From another perspective, they may be seen as exacting the single-minded loyalty of the fiduciary to the principal.8

The particular remedy of account of profits generates difficulty and uncertainty, including as to the underlying reason(s) for its award (for example, does it serve a punitive function?) and the circumstances in which it will be awarded (for example, should it be available for breach of contract?). A more specific issue is the degree of causation required (if any) between the breach by the fiduciary and the making of the profit, and, in particular, whether a “but-for” test applies, as in the case of equitable compensation.9 This was recently considered by the Hong Kong Court of Appeal in Tang Ying Loi v Tang Ying Ip,10 to which we can now turn. The judgment is also noteworthy for discussion of liability in a case of mixing of trust funds and the personal funds of the fiduciary, which will also be examined briefly.