Accounting for gains from knowing participation in breach of fiduciary duty

This comment discusses the High Court’s decision in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd concerning the remedy of account of profits for knowing participation in a dishonest and fraudulent breach of fiduciary duty. It endorses the Court’s confirmation that equitable, rather than common law, causation principles apply in determining an account of profits against the knowing participant, but prefers Gageler J’s minority view that the requisite causal link is between the participant’s gain and the fiduciary’s wrongdoing, rather than between the participant’s gain and their own wrongdoing. The equitable methodology for quantifying the knowing participant’s gain is discussed and it is argued that the Court failed to provide a convincing explanation for why its quantification of the profits was preferable as a matter of principle to that of the Full Federal Court. This failure creates uncertainty and undermines the credibility of equity’s judicial method. The reluctance of the Court to engage with the conceptualisation of some equitable participatory liability as accessorial in nature is also noted.