Causation and Breach of Fiduciary Duty
23 Pages Posted: 27 Feb 2008
Two recent English decisions have highlighted the issue of causation in the context of breach of fiduciary duty. In both cases, the defendant implicitly argued that whether the profits or conflicts rule is breached, the causation standard is the same. This article suggests that the causation standards applicable for the profits and conflicts rules are different. When equitable compensation is sought for loss due to breach of the conflicts rule, there must be a causal connection between the conflict and the loss. But there is not special causation standard applicable when an account of profits is sought following a breach of the profits rule. Any unauthorised profit made within the scope of the relationship attracting fiduciary duties must be accounted for. These standards are appropriate in the context of the rules breached, because they best achieve approximation of loyal performance of the duties owed.
Keywords: Breach of fiduciary duty, causation, profits rule, conflicts rule
JEL Classification: K42
Suggested Citation: Suggested Citation