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In Warman Int Ltd v Dwyer (1995) 182 CLR 544, the High Court of Australia found that the defendant Dwyer, a manager of Warman, was in breach of his fiduciary duty to Warman and liable to account for profits made in a competing business. Two other defendants were companies set up by Dwyer and they were also required to account for profits. However, the companies were liable for knowing assistance. The HCA relies on Gibbs J's judgment in Consul Dev v DPC Estates (1975) 132 CLR 373, 397, for the proposition that an accessory is liable to account for profits, but that case does not provide any authority in support.

The HCA gives Warman an election between compensation for loss and account of profits and goes on to say at 569 that "It is arguable that any order for an account of equitable compensation for the loss sustained by Warman should have been made against Dwyer only", ie that accessories should not be liable to compensate for losses.

I find this puzzling, for it seems that the opposite should be true: that the normal rule of compensating for harm caused by wrongdoing should apply to the accessory and that there ought to be a reason for allowing restitutionary recovery. The breach of the fiduciary's obligation to subordinate his interests to the plaintiff is sufficient basis for restitutionary recovery (disgorgement) in the absence of loss to the plaintiff, but what is the basis for the same measure of relief against the accessory? I'm not opposed to profit stripping in this case, but find it odd that the HCA thinks that the normal rules are reversed without much consideration of the point.

Does anyone know of any authorities on this point (or have any opinion)? Most commentators tend to focus on the degree of knowledge or notice required for accessory liability and not the appropriate measure of liability.

Thanks,

Robert Chambers
U Melbourne Law School