Restitution Discussion Group Archives
| Sender: |
Andrew Tettenborn |
| Date: |
Fri, 10 May 1996 10:17 BST |
| Re: |
Accessory liability |
In Warman
Int Ltd v Dwyer (1995) 182 CLR 544, the High Court of Australia
found that the defendant Dwyer, a manager of Warman, was in breach of
his fiduciary duty to Warman and liable to account for profits made
in a competing business. Two other defendants were companies set up
by Dwyer and they were also required to account for profits. However,
the companies were liable for knowing assistance. The HCA relies on
Gibbs J's judgment in Consul Dev v DPC Estates (1975) 132 CLR
373, 397, for the proposition that an accessory is liable to account
for profits, but that case does not provide any authority in support.
The HCA gives Warman an election between compensation
for loss and account of profits and goes on to say at 569 that "It
is arguable that any order for an account of equitable compensation
for the loss sustained by Warman should have been made against Dwyer
only", ie that accessories should not be liable to compensate for
losses. I find this puzzling, for it seems that the opposite
should be true: that the normal rule of compensating for harm caused
by wrongdoing should apply to the accessory and that there ought to
be a reason for allowing restitutionary recovery. The breach of the
fiduciary's obligation to subordinate his interests to the plaintiff
is sufficient basis for restitutionary recovery (disgorgement) in
the absence of loss to the plaintiff, but what is the basis for the
same measure of relief against the accessory? I'm not opposed to profit
stripping in this case, but find it odd that the HCA thinks that the
normal rules are reversed without much consideration of the point.
Does anyone know of any authorities on this point
(or have any opinion)? Most commentators tend to focus on the degree
of knowledge or notice required for accessory liability and not the
appropriate measure of liability. Thanks, Robert Chambers I agree that it is rather curious that the Dwyer companies
should not have to pay equitable compensation, assuming they had the requisite
degree of knowledge (or, at least in English law, `dishonesty': see Royal
Brunei Airlines v Tan (1995)). As for their liability to disgorge,
isn't the best way to deal with this to say that the liability for knowing
assistance in a breach of trust or fiduciary duty is - in substance if
not in form - a liability for a wrong? Although it has in the past been
called a species of constructive trust, this is a misnomer: the defendant
isn't a trustee of anything, since there isn't anything for him to be
a trustee of. And, of course, if we say that the knowing assister is liable
for a wrong, then it isn't too hard to say that his duty to disgorge profits
is simply a variety of restitution for wrongs?
Andrew Tettenborn,
U Melbourne Law School
Pembroke College,
Cambridge, UK.
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