Establishing factual and legal causation in a fiduciary's liability to account for profits

Abstract

The fiduciary doctrine holds that a fiduciary must avoid a conflict of duty and personal interest and must not derive any profit from his fiduciary position. Liability for breach attracts the more extensive remedies of equity's armoury, including the gain-stripping remedy of an account of profits. With respect to a fiduciary's liability to account, although Hong Kong courts recognise that a causal connection between a breach and its ensuing gain is required, there have so far been scant judicial remarks on this front. This article argues that issues of causation and remoteness in the award of an account of profits for a breach of fiduciary duty can be determined by a two-stage inquiry. First, this article examines the possible approaches to establishing factual causation and suggests that a probabilistic approach to causation may be a better way forward. The answer to the second inquiry depends on the nature and purposes of the equitable principles involved.