Graham Virgo: Once it's been established that a defendant is a fiduciary, in a fiduciary relationship,
and that they have breached their fiduciary duty,
we then need to consider the remedies that might be available.
Clearly, from what you've seen already,
it's possible to compensate the principle for any loss that has been suffered.
And it's also possible to require the defendant to account for any profits that have been made,
as a result of the breach of fiduciary duty.
That remedy of an account of profits is a personal remedy;
a remedy where you work out what the value of the profits made are
and that amount is transferred to the principal.
But a question that has been controversial for a long time is, whether it is appropriate
to impose a remedy, which is proprietary in effect by means of a constructive trust.
This of course has certain key advantages for the principal.
If for example, the profits made by the defendant have increased in value,
then the principal will get that increasing value.
Or, if the fiduciary has become insolvent, then the principal will get
a security protection over unsecured creditors of the fiduciary.
And finally, if that property which is held on constructive trust is received by a third party,
they will be subject to the obligation to give that property to the principal;
even though, they are not a fiduciary and are not liable for any breach of fiduciary duty.
Now we know that in English law, after a period of real uncertainty,
we know now that proprietary remedy can be awarded for breach of fiduciary duty.
And that certainly has all the benefits that I’ve just identified.
But there is a really important question of policy here.
Is it appropriate to give the principle the proprietary benefits
of the constructive trust?
And if it is, what is the justification for imposing a constructive trust on the fiduciary?
Is it for example, because the fiduciary is deemed to have made any profits,
in breach of fiduciary duty, on behalf of the principle?
Now once we've identified the rationale, and the policy justification,
this area of law can be said to be resolved.
I think it's fair to say, the law is clear now, as to the award of a proprietary remedy.
But there is still uncertainty as regards the justifications for the propriety remedy
and the underlying rationale.
And those are issues you need to think about as you consider the law in this area.