MLL406 Lecture Notes - Lecture 4: Constructive Notice, Judiciary Of Australia, All England Law Reports
1 Jul 2018
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Topic 4: Fiduciary Remedies
•Proscriptive nature of fiduciary duties indicates nature of discretionary remedies
against fiduciary (and possibly third parties)
–remedy of constructive trust over ill-gotten gains
–account of profits wrongfully made within the scope of the duty, or the
plaintiff may elect instead
–equitable compensation
•Equitable remedies also apply outside fiduciary duties, e.g tracing assets applied in
breach of trust, remedies for breach of confidence
•Discretionary focus – very fact oriented
–Determining that relief should be available in the circumstances. i.e. Breach of
fiduciary duty.
–What remedy is the most appropriate?
•Does the party warrant relief? – Contributed to loss
•“Personal” and “proprietary” remedies
–Personal – loss or gain focused
–Proprietary – property focused
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EQUITABLE REMEDIES:
•EQUITABLE COMPENSATION: An inherent jurisdiction to make pecuniary
compensation as an appropriate remedy to an equitable wrong
•EQUITABLE DAMAGES: statutory power to order damages to be substituted for or
added to an order for specific performance or injunction, where these have been
sought in actions involving contracts, torts or wrongs (Giller v Procopets).
•Equity had inherent jurisdiction to award compensation: aim to restore the plaintiff to
the position she would have been in had there been no breach of duty.
•Plaintiff must elect (prior to judgment) between equitable compensation and an
account of profits (will usually take the most favourable)
•Pecuniary reward that seeks to put the person back to the position they were in
if the breach did not occur.
•Very powerful– based on restitution
•Expectation loss – reasonably forseeable
•What loss has flowed from the party that owed the duty ?
EQUITABLE COMPENSATION
•Restitutionary focus
•Defaulting Fiduciary must account for all loss flowing from the breach
•Must restore to the estate assets deprived from it (Re Dawson)
•Compensation is assessed at date of restoration and not the date of deprivation (Re
Dawson)
•Compensation is broad enough to include pecuniary and non-pecuniary losses
•Irrelevant to ‘speculate’ about what may have occurred had there been no breach
Talcko v Talacko
•In Talacko v Talacko(2009) VSC 533 at [117] Kyrou J summarised the general
principles to be applied in assessing equitable compensation. His Honour said:
•The Court, in its equitable jurisdiction, has the power to award compensation for a
breach of fiduciary duty.
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•As an equitable remedy, the award of compensation is discretionary and it is subject
to the usual equitable defences, such as laches or acquiescence, that the Court may
consider before granting relief.
•The objective of the remedy is to place the innocent party, as nearly as possible, in
the position in which he or she would have been had there been no breach of duty.
•Equitable compensation is conceptually different from common law damages in that
it involves restitution for the value of the loss or damage suffered by the innocent
party as a result of a breach of duty.
•While at common law damages for breach of contract are generally assessed as at the
date of the breach, the normal rule in equity is that equitable compensation for
breach of trust or fiduciary duty is assessed not as at the date of the breach but as at
the time of the trial, with the full benefit of hindsight. It can also be awarded on
terms.
Re Dawson – compensation had to be paid at current rate of exchange which was less
favourable compared to time of breach
•Payment in breach. Did Dawson have to repay value at the date of deprivation (when
currency in parity) or date of restoration when currency worth more?
•Breach of duty by trustee is very serious – high level of fiduciary
•‘The obligation is of a personal character and its extent is not to be limited by
common law principles governing remotness of damage….if a breach has been
committed then the trustee is liable to place the trust estate in the same position as it
would have been in if no breach had been committed….The obligation to make
restitution…is of a more absolute nature than the common law obligation to pay
damages for tort or breach of contract…In equity this relief is couched in terms
appropriate to require the defaulting trustee to restore to the estate the assets of
which it has been deprived by his default. Increases in market values between the
date of the breach and the date of recoupment are for the trustee’s account…This
obligation means that where monetary compensation is to be paid by reference to the
value of assets, it is the value at the date of restoration, not the date of deprivation.’
Brickenden Principle:
•Brickenden v London Loan and Savings Company of Canada [1934] 3 DLR 465:
•Equitable compensation for breach of fiduciary duty:
•If a fiduciary is one of the well established categories, and
•Has committed a culpable breach of their core duties of honesty and
confidentiality, then
•The fiduciary is liable to pay equitable compensation even if but-for
causation cannot be proved.
•Brickenden: a fiduciary who withheld material facts from his principal in a loss-
making transaction could not escape liability by arguing that his non-disclosure was
irrelevant
Maguire v Makaronis (1997) 188 CLR 449:
•Facts: H and W borrowed from former solicitors to purchase poultry farm. Breach
of fiduciary duty by the solicitor because of the undisclosed conflict between duty to
H and W and personal interest in mortgage.
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Document Summary
Proscriptive nature of fiduciary duties indicates nature of discretionary remedies against fiduciary (and possibly third parties) Remedy of constructive trust over ill-gotten gains. Account of profits wrongfully made within the scope of the duty, or the plaintiff may elect instead. Equitable compensation: equitable remedies also apply outside fiduciary duties, e. g tracing assets applied in breach of trust, remedies for breach of confidence, discretionary focus very fact oriented. Determining that relief should be available in the circumstances. i. e. breach of fiduciary duty. Plaintiff must elect (prior to judgment) between equitable compensation and an account of profits (will usually take the most favourable) Dawson: compensation is broad enough to include pecuniary and non-pecuniary losses. Irrelevant to speculate" about what may have occurred had there been no breach. In talacko v talacko(2009) vsc 533 at [117] kyrou j summarised the general principles to be applied in assessing equitable compensation.
