It is well known that breaches of fiduciary duty may give rise to awards of damages. In certain circumstances, a breach may also result in a forfeiture of fees that would otherwise have been payable. Whether this occurs is likely to turn on the nature of the breach, the duration of the conduct and the extent to which the defendant has otherwise provided value to the plaintiff.
The recent English case of Avrahami & Others v Biran & Others  EWHC 1776 (Ch) arose out of a property development project. The defendant project manager was accused by the claimant owners of perpetrating a large-scale fraud on them, resulting in the misappropriation of over ₤1.5 million. It was accepted by all parties that the manager owed fiduciary duties to the property owner.
The Court found that the manager breached those duties by misappropriating funds. It was then required to consider whether, as a result of the breach, he had forfeited any rights to management fees and was liable to repay any fees already paid.
In finding against the manager, the Court canvassed relevant case law, including the decision of the New Zealand Court of Appeal in Stevens v Premium Real Estate Ltd in which a refund of a real estate agent's commission was ordered, in addition to an award of damages, because it had not been earned by good faith performance.
A key issue for the Court was whether the forfeiture of the fees would be disproportionate or inequitable. It held that it would not, given that the dishonest conduct lasted for seven years, and the manager's interests stood to benefit from the success of the project in any event. In this regard, the case was distinguishable from the decision in Governor and Company of the Bank of Ireland v Jaffery  EWHC 1377 (Ch), in which forfeiture would not have been equitable because the defendant bank executive's breaches were isolated and, in other respects, he had been a valuable and diligent employee.