Navigating the Maze: Making Sense of Equitable Compensation and Account of Profits for Breach of Fiduciary Duty

Abstract

This article examines the main monetary remedies for breach of fiduciary duty under Singapore law: equitable compensation and account of profits. Both areas of law are in need of clarification, though for different reasons. The law on the account of profits appears stable and uncontroversial. There has not been an opportunity for the courts to consider more fully the proper limitations on the scope of account. However, the authorities that are on point suggest that the duty to account for profits follows almost as a matter of course from breach. In particular, causation between profits and breach is seemingly irrelevant for the errant fiduciary’s liability. This article, however, cautions against an overly simplistic analysis. The law on equitable compensation for breach of fiduciary duty is, by contrast, a muddied terrain as a result of recent developments in Singapore and elsewhere. This article focuses on the role as well as operation of the causation concept in monetary remedies for breach of fiduciary duty. It suggests that a study of the account of profits and equitable compensation side by side, though unconventional, illuminates the proper questions that should be asked. By considering the fundamental tenets of the fiduciary doctrine as well as case law developments, we argue that relevant considerations for crafting appropriate remedial principles include scope of duty, deterrence, proportional consequences and good faith. How these considerations are to be prioritised and whether all of them should be taken on board may vary depending on jurisdictional prerogatives. In this article, we also highlight the structural differences in the analysis of the two remedies under current law and attempt to rationalise the differences.