Lloyd's Maritime and Commercial Law Quarterly
Account of profits and the causation paradigm
Peter Devonshire *
This article addresses the role of causation in defining the scope of an account of profits against a defaulting fiduciary. The fiduciary’s strict duty to disgorge illicit gains effectively removes the economic incentive for exploiting a position of trust. However, the extent to which this is achieved is mediated through causation and limiting principles such as foreseeability, remoteness and intervening cause. These principles are pivotal in fulfilling equity’s objectives. Their precise application is context-sensitive, reflecting the diversity of fiduciary relationships and the different intensities of obligation they engender. Starting from first principles, an account of profits must be understood in relation to the duty it enforces. This requires an analysis of the fiduciary principle and the forms of obligation that underpin it. Attention then turns to the role of causation in determining liability. Particular reference is made to different analytical models and their implications in enforcing fiduciary doctrine. This concludes by examining the role of remoteness in defining the gains for which a defaulting fiduciary must account. It is here that the court’s perception of the moral nuances of a given case may curtail or extend the range of accountable gains.
I. INTRODUCTION
Civil liability is founded on core concepts, of which causation is perhaps the most fundamental. This article addresses the role of causation in relation to an account of profits against a defaulting fiduciary. The fiduciary’s strict duty to disgorge illicit gains reflects a prophylactic design to discourage temptation and enforce the highest ethical standards. This objective is most effectively achieved if the threshold for liability is not significantly impeded by causation and limiting principles such as remoteness, foreseeability and intervening cause. It may be objected that this exposes a greater range of conduct to censure and affords undue primacy to the ideals of fiduciary doctrine. With these perspectives in mind, this article will assess where the line should be drawn, having regard to the diversity of fiduciary relationships and the different intensities of obligation they engender.1
Starting from first principles, an account of profits must be understood in the context of the duty it enforces. This requires an analysis of the fiduciary principle and the forms
* Professor of Law, University of Auckland. A version of this article was presented to the Restitution Section of the Society of Legal Scholars at the annual conference, King’s College London, September 2022. I am grateful to George Barton for his research assistance. I would also like to thank the referees for their helpful comments.
1. This is foreshadowed, rather dauntingly, by the observation that “causation ... is one of the most difficult [concepts] in the law, and one about which abstract discussion is seldom valuable for courts and those who practise in them”: ACQ Pty Ltd v Cook (2009) 237 CLR 656, [14] (per curiam).
Account of profits and the causation paradigm
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