Seven Justices of the Supreme Court were given an opportunity to consider whether the test for requiring an account of profits should be altered to introduce a requirement that the fiduciary could not have made the same profit in a way that avoided a breach of duty, ie: ‘Could the same profit have been made but for the breach of fiduciary duty’?
In a landmark 113 page judgment, the Supreme Court unanimously dismissed the appeal and declined the Appellants’ invitation to depart from long-established legal principles, overrule two leading House of Lords authorities, and fundamentally change this aspect of the law.
In his majority judgment (with which Lords Reed, Hodge and Richards agreed), Lord Briggs held that in respect of the test for requiring an account of profits, the court does not and should not concern itself with what might have happened in a hypothetical “but for” situation.
His Lordship opined that introducing a “but for” test would undermine the essential purpose of the profit rule by treating it as a mere remedy and thus watering down its disincentivising effect on fiduciaries contemplating disloyalty.
Lord Leggatt, Lord Burrows and Lady Rose reached the same conclusion but offered different explanations as to how they got there in their respective concurring judgments.
Read the full judgment here.
