Fiduciary duties arise in a variety of commercial contexts. One of the most common of these is the duty owed by a director to a company. In certain circumstances, the liability of defaulting fiduciaries can also extend to those who 'assisted' the breach.
The fiduciary liability of defaulting directors, accessory liability and the appropriate remedies were all examined during the High Court's grant of special leave to appeal in the long-running Bell Resources case, Westpac v The Bell Group Ltd. The High Court's ultimate decision is likely to have significant ramifications for banks and others that may be joined to proceedings under 'knowing assistance' claims.
One of the key issues to be considered in the appeal is remedies - namely, whether:
- they are limited to equitable compensation, which focuses on the loss suffered by the principal; or
- an account of profits is available, which involves an assessment of the profits made by the defaulting fiduciary as a result of its breach.
In appropriate cases, the court may order that the defaulting fiduciary give an account of profits (requesting disgorgement of its ill-gotten gains). The difference in outcome between equitable compensation and an account of profits can be stark.
The case should define more precisely when claims of 'knowing assistance' will be made out, and to what extent it is necessary to prove a "fraudulent and dishonest design" in order for an accessory to be found liable. In particular, the proceedings raise the issue of whether the Briginshaw standard should be applied to knowing assistance claims - that is, given the seriousness of the allegations, it should be necessary for the decision maker to be "comfortably satisfied" of the truth of the facts in issue, rather than simply be satisfied on the balance of probabilities.
The High Court's decision promises to be of widespread commercial significance.
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