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FIDUCIARY DUTIES AND PROPRIETARY REMEDIES: ADDRESSING THE FAILURE OF EQUITABLE FORMULAE

Published online by Cambridge University Press:  20 November 2013

Sarah Worthington
Sarah Worthington*
Affiliation:
Downing Professor of the Laws of England, University of Cambridge.
*
Address for correspondence: Trinity College, Cambridge CB2 1TQ. Email: [email protected].
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Abstract

This article proposes a new framework for determining the availability of proprietary remedies for breach of the fiduciary duty of loyalty. It examines the alternative and conflicting arguments put forward in the leading cases, and suggests that they fail to justify their conclusions, either under- or over-estimating the incidence of proprietary relief for fiduciary disloyalty. These shortcomings appear to be the result of inappropriate reliance on familiar equitable formulae, in particular the routine equitable duty to account, the seemingly inescapable maxim that “equity treats as done that which ought to be done”, and the potent rules of tracing.

Keywords

Fiduciariesconflict of duty and interestbribesproprietary remedies
Type
Articles
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The Cambridge Law Journal , Volume 72 , Issue 3 , November 2013 , pp. 720 - 752
Copyright
Copyright © Cambridge Law Journal and Contributors 2013 

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References

1 See especially Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd (in admin rec) [2011] EWCA Civ 347 (CA) (“Sinclair”); and FHR European Ventures LLP v Mankarious [2013] EWCA Civ 17 (CA) (“Mankarious”). Also see A.G. for Hong Kong v Reid [1994] 1 A.C. 324 (PC) (“Reid”) and Lister & Co. v Stubbs (1890) L.R. 45 Ch. D. 1 (CA) (“Lister”). Also see Lord Millett, “Bribes and Secret Commissions Again” [2012] C.L.J. 583.

2 The scope of the fiduciary's role and of tracing into secondary profits are also discussed here. The range of individuals subjected to fiduciary obligations is not considered.

3 See Mankarious [2013] EWCA Civ 17 at [79] (Etherton C.) affirming the widely held view that Reid [1994] 1 A.C. 324 would be followed notwithstanding its merely persuasive authority. On the critics and supporters, see Sinclair [2011] EWCA Civ 347 at [81]–[82] (Lord Neuberger); Mankarious [2013] EWCA Civ 17 at [15] (Lewison L.J.); Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. (in administrative receivership) [2010] EWHC 1614 (Ch) at [50]–[52] (Lewison J.); Millett [2012] C.L.J. 583.

4 Sinclair [2011] EWCA Civ 347. In summary, the principals' money (held by the fiduciary on trust) was used by the fiduciary in an unauthorised and elaborate Ponzi scheme. The money was not exchanged, but was used to give the impression of substantial trading activity in various companies in which the fiduciary had an interest. As a consequence, the share price in those companies escalated, and the fiduciary was able to sell shares for a price in excess of £28 million when their real value was probably nil. It was conceded by both sides that this profit, and its traceable proceeds including the sale proceeds from a house purchased with the funds, represented an unauthorised fiduciary gain for which the fiduciary was accountable to the principals. The principals claimed the remedy was proprietary. The Court of Appeal held it was not. This was fatal to the principals' claim, since the funds/traceable proceeds had been paid over to banks, including banks with the security of a floating charge. Had the principals' claim been proprietary, the principals would only have been successful against the banks if the banks were not bona fide purchasers without notice. Although the fiduciary's profits were not by way of bribe, the case was argued on the basis that if current law was to the effect that a bribe was held on constructive trust, then this gain too would inevitably be held on constructive trust. Equally, it seems to have been conceded that if a bribe would not be held by fiduciary on constructive trust, then nor would these gains. As a consequence, the argument focused entirely on whether Reid [1994] 1 A.C. 324 or Lister (1890) L.R. 45 Ch. D. 1 provided the right legal analysis of the problem.

5 Sinclair [2011] EWCA Civ 347, especially [76]–[84].

6 See note 24 below for the detail, but in favour of Sinclair: R. Goode (2011) 127 L.Q.R. 493; G. Virgo [2011] C.L.J. 502; W. Swadling, (2012) 18 Trusts and Trustees 985; J.E. Penner (2012) 18 Trusts and Trustees 1000. Against: D. Hayton (2011) 127 L.Q.R. 487; P. Millett [2012] C.L.J. 583; L. Smith [2013] C.L.J. 260; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 (FCAust Fed Ct).

7 The fiduciary's bona fides are irrelevant; so too is the fact that a principal may receive a completely unexpected windfall: Boardman v Phipps [1967] 2 A.C. 46 (H.L.) (“Boardman”) is usually cited by way of illustration.

8 Reid [1994] 1 A.C. 324. A public prosecutor in Hong Kong took bribes to “lose” files, thus subverting prosecutions. The bribes were used to buy houses in New Zealand, held in the names of the fiduciary's wife and solicitor. The Privy Council held that the fiduciary (or his wife or solicitor) held the bribes or their proceeds on constructive trust for the Crown.

9 Reid [1994] 1 A.C. 324, 331. If it makes a difference, Lord Millett has added a further gloss to this, suggesting that the conclusion can be justified on the basis that the breach was not the fiduciary's receipt of the bribe, but the failure to hand it over: “Restitution and Constructive Trusts” (1998) 114 L.Q.R. 399, 407. Also see “Proprietary Restitution” in S. Degeling and J. Edelman (eds.), Equity in Commercial Law (Sydney 2005), 309ff at 324.

10 Lister (1890) L.R. 45 Ch. D. 1. In Lister & Co. v Stubbs, an agent took bribes from the vendor in return for contracts with his principal. The Court of Appeal held that the agent was personally liable to the principal for the value of the bribe only, and neither the bribe nor its successful investment proceeds were held on constructive trust for the principal.

11 See above, especially notes 3 and 6.

12 Sinclair [2011] EWCA Civ 347, affirming Lewison J., [2010] EWHC 1614 (Ch).

13 Sinclair [2011] EWCA Civ 347 at [88], [89].

14 Sinclair [2011] EWCA Civ 347 at [88].

15 They are analogies by way of language only: Lord Neuberger never once suggested that an opportunity is property.

16 Reid [1994] 1 A.C. 324, 331.

17 Being both its unsecured creditors and those holding charges (whether taken before or after receipt of the bribe). Chargees are caught since, if the disgorgement remedy is proprietary, and applying the analysis in A.G. for Hong Kong v Reid, the bribe would be held by the fiduciary on constructive trust for the principal from the instant it is received by the disloyal fiduciary. In those circumstances, an earlier charge on the fiduciary's assets would have nothing to bite on, and a subsequent charge would of course lose out under the normal rules of priority.

18 Being profits generated by successful investment of the bribe: see the investments in land in both Reid [1994] 1 A.C. 324 at note 8 above; and Sinclair [2011] EWCA Civ 347 at note 4 above.

19 See Reid [1994] 1 A.C. 324 at note 8 above, and the claims against the fiduciary's wife and solicitor.

20 It is a separate question whether, if the claim to the bribe is personal only, there might nevertheless be a further personal claim to secondary profits: Sinclair [2011] EWCA Civ 347 at [90]–[91] suggests yes; Lister (1890) L.R. 45 Ch. D. 1 suggests no, both by way of dicta only. Also see below.

21 Mankarious [2013] EWCA Civ 17.

22 Mankarious [2013] EWCA Civ 17 at [116] (Etherton C.).

23 Sinclair [2011] EWCA Civ 347, details the authorities favouring Lister; Millett [2012] C.L.J. 583 details those favouring Reid, including international authorities. Also see notes 3 and 6 above and 24 below, and the references cited there.

24 For example, in favour of Reid, see: P. Millett, “Bribes and Secret Commissions” [1993] R.L.R. 7 (relied upon by the Privy Council in Reid itself), and subsequently, e.g. in Sir Peter Millett, “Remedies: The Error in Lister v Stubbs” in P. Birks (ed.), The Frontiers of Liability: Vol I (Oxford 1994), pp. 51ff at p. 56 and “Proprietary Restitution” in S. Degeling and J. Edelman (eds.), Equity in Commercial Law (Sydney 2005), ch. 12 at pp. 312–319; Hayton, D., “Proprietary liability for secret profits” [2011] 127 L.Q.R. 487Google Scholar; and the majority of text books, although a good number rather briefly, and on the basis that Reid likely represented the current state of the law: as cited in Sinclair [2011] EWCA Civ 347 at [82], see e.g. Goff & Jones, The Law of Restitution (7th ed, 2007), para. 33–025, Underhill & Hayton, Law of Trusts and Trustees (18th ed, 2010), paras. 27.29–27.30, Lewin on Trusts, (18th ed, 2008), p. 589; and Snell's Equity, (32nd ed, 2010), paras. 7–041-7–042; but in contrast also see Bowstead & Reynolds on Agency, (19th ed, 2010), paras. 6–040-6–043.And in favour of Lister v Stubbs: P. Birks, An Introduction to the Law of Restitution, revd ed. (Oxford 1989), at pp. 386–389; Goode, R.M., “Proprietary liability for secret profits – a reply” [2011] 127 L.Q.R. 493Google Scholar, and earlier in “Ownership and Obligation in Commercial Transactions ” (1987) 103 L.Q.R. 433; “Proprietary Restitutionary Claims ”in W. Cornish et al (eds.), Restitution: Past, Present and Future (Oxford 1998), ch. 5; “Property and Unjust Enrichment” in A. Burrows (ed.), Essays on the Law of Restitution (Oxford 1991), 215; “The Recovery of a Director's Improper Gains: Proprietary Remedies for the Infringement of Non-Proprietary Rights” in E. McKendrick (ed.), Commercial Aspects of Trusts and Fiduciary Obligations (Oxford 1992), 137. In addition, see: G. Virgo, The Principles of the Law of Restitution (2nd ed, Oxford 2006), 519–524; A. Burrows, The Law of Restitution (2nd ed, Oxford 2002), 500, and also at (2001) 117 L.Q.R. 412, 427; and A. Tettenborn, The Law of Restitution in England and Ireland, 3rd ed. (London 2001), 231–233; Watts, P., “Bribes and Constructive Trusts” (1994) 110 L.Q.R. 178Google Scholar; D. Crilley, “A Case of Proprietary Overkill ” [1994] R.L.R. 57; McCormack, G., “The Remedial Constructive Trust and Commercial Transactions ” (1996) 17 Co. Lawyer 3Google Scholar. Also see A.D. Hicks, “The Remedial Principle of Keech v Sandford Reconsidered” [2010] C.L.J. 287; S. Gardner, “Two Maxims of Equity” [1995] C.L.J. 60, and the references cited in note 6 above.

25 See especially the policy arguments relating to insolvency concerns in Lister, Reid and Sinclair, all at note 1 above.

26 See the details in Millett [2012] C.L.J. 583. Also see especially Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 (FCAust Fed Ct), handed down after Sinclair, and with the judgment given by Finn J, the author of Fiduciary Obligations (Sydney 1977).

27 Mankarious [2013] EWCA Civ 17 at [13] (Lewison L.J), and [76] (Etherton C.). For the possibility of this in the future in English law, see Westdeutsche Landesbank Girozentrale v Islington L.B.C. [1996] A.C. 669 (H.L.) (“Westdeutsche”), 716 (Lord Browne-Wilkinson).

28 See Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 (Full Ct Aust Fed Ct), at [583] (Finn J): “…to accept that money bribes can be captured by a constructive trust does not mean that they necessarily will be in all circumstances. As is well accepted, a constructive trust ought not to be imposed if there are other orders capable of doing full justice … Such could be the case, for example, where a bribed fiduciary, having profitably invested the bribe, is then bankrupted and, apart from the investment, is hopelessly insolvent. In such a case a lien on that property may well be sufficient to achieve “practical justice” in the circumstances. This said, a constructive trust is likely to be awarded as of course where the bribe still exists in its original, or in a traceable, form, and no third party issue arises.” Also see [582].

29 Put rather pithily, it has been suggested that in these unenviable circumstances it might at least “be useful to have a judgment in English law which is right because it is final [as] there is precious little prospect of agreement on a judgment that is final because it is right.”: Nolan, R., “Bribes: a reprise” (2011) 127 L.Q.R. 19Google Scholar, 23.

30 Reid [1994] 1 A.C. 324, 331.

31 See, e.g., Swadling, note 6 above, decrying an immediate trust.

32 Except perhaps Swadling, note 6 above.

33 Sinclair [2011] EWCA Civ 347 at [88], [89].

34 Sinclair [2011] EWCA Civ 347 at [88].

35 Although without ever asserting that an opportunity is property: Lord Neuberger would not make that mistake.

36 See especially Mankarious [2013] EWCA Civ 17 at [57] (Lewison L.J.) and [84] (Etherton C.) and the references cited there. Also see R.P. Austin, “Fiduciary Accountability for Business Opportunities” in P.D. Finn (ed.), Equity and Commercial Relationships (Sydney 1987), ch. 6.

37 Mankarious [2013] EWCA Civ 17 at [83]–[84] (Etherton C.).

38 (1726) Sel. Cas. Ch. 61, expressly regarded in Sinclair as category (1), with a proprietary remedy, since the opportunity to renew a lease could be regarded as a “perpetual estate” belonging to the principal: Sinclair [2011] EWCA Civ 347 at [58].

39 [1916] 1 A.C. 554 (P.C.), not mentioned in the judgment in Sinclair, but regarded by most as warranting a proprietary remedy, so therefore perhaps category (2).

40 [1967] 2 A.C. 46 (H.L.), not classified in Sinclair, but the context suggests a personal remedy would be favoured by Lord Neuberger ([70]), so category (3). The remedy awarded in this case was in fact proprietary: see Millett [2012] C.L.J. 583 and Mankarious [2013] EWCA Civ 17 at [96].

41 [1967] 2 A.C. 134 (H.L.) (“Regal Hastings”), not classified in Sinclair, but the context suggests a personal remedy would have been favoured by Lord Neuberger ([69]), so category (3). And indeed a personal remedy was awarded in that case, although without argument, and indeed necessarily so since the disloyal benefit was cash (from the sale of the shares to the new owners), so there were probably no readily traceable proceeds over which to assert a constructive trust, and the trouble that might involve was in any event unnecessary since the directors in question were not insolvent.

42 [1916] 1 A.C. 554 (P.C.).

43 R. Goode, “Property and Unjust Enrichment” in A. Burrows (ed.), Essays on the Law of Restitution (Oxford 1991), ch. 9 at p. 230; and “Proprietary Restitutionary Claims”, in W.R. Cornish et al. (eds.), Restitution: Past, Present and Future (Oxford 1998), 63. For other writings by Goode, see note 24 above. It might well be the case that Lord Neuberger's category 2 is merely a differently worded assertion of the same test as advocated by Professor Goode. Both clearly advocate a very small category 2.

44 (1726) Sel. Cas. Ch. 61.

45 Scott, S., “Corporate Opportunity Doctrine and Impossibility Arguments” (2003) 66 M.L.R. 852CrossRefGoogle Scholar.

46 E.g. the land in both Reid and Sinclair.

47 Sinclair [2011] EWCA Civ 347 at [90]–[91].

48 (1984) 154 CLR 178, 198, cited with approval in Don King Productions Inc. v. Warren [2000] Ch. 291 (CA) at [40], and in Ultraframe (UK) Ltd. v Fielding [2005] EWHC 1638 (Ch) (“Ultraframe”) at [1305] (Lewison J.).

49 Noting too, further in the same paragraph, that “Notwithstanding authoritative statements to the effect that the “use of fiduciary position” doctrine is but an illustration or part of a wider “conflict of interest and duty” doctrine (see e.g., Phipps v. Boardman [1967] 2 A.C. 46, 123; N.Z. Netherlands Society “Oranjei” Inc. v Kuys [1973] 1 W.L.R. 1126, 1129), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete.” That is the approach adopted here, and implicitly adopted in a good number of English cases: see, e.g., Don King Productions Inc. v. Warren [2000] Ch. 291 (C.A.) at [40]; Ultraframe, ibid., at [1306] (Lewison J.); In Plus Group Ltd. v. Pyke [2002] 2 BCLC 201, 220.

50 Cadogan Petroleum plc v Tolley [2011] EWHC 2286 (Ch).

51 Ibid., at [23].

52 See S. Worthington, Equity, 2nd edn. (Oxford 2006), 131–140.

53 S. Worthington, “Fiduciaries: When is Self-Denial Obligatory?” [1999] C.L.J. 500.

54 As Newey J. put it (see above, text at note 50), these two categories concern “property or opportunities subject to fiduciary obligations'”.

55 Of course, the principal is not compelled to pursue this claim; no legal remedies are obligatory.

56 More specifically, at least in those category (3) cases which are not, alternatively, amenable to classification as category (1) or (2) cases.

57 For example, sometimes the “misuse of position”/“no profit” rule is regarded as part of the “conflict of duty and interest”/“no conflict” rule: Bray v Ford [1896] A.C. 44, 51–2; Boardman v Phipps [1967] 2 A.C. 46, 123. But other cases have regarded the two rules as distinct, although overlapping, so that a breach of the former cannot always be readily analysed as a breach of the latter: see, e.g., Regal Hastings [1967] 2 A.C. 134.

58 E.g., in the Companies Act 2006, the “conflicts” section, s. 175, combines aspects of categories (1), (2) and (3), and allocates to a separate section, s. 176, the specific duty not to accept benefits from third parties. There was, nevertheless, no indication that the Act intended to eliminate certain features of the common law rules on breach (although it amended the rules on their ratification). In short, the Act simply categorises the fiduciary duties differently, perhaps on the basis that certain distinctions are irrelevant in the assertion of breach, and relevant only in the characterisation of remedies, a matter which is left to the common law rules (s. 178).

59 This is not the place to elaborate on the various difficulties, but the problems are laid bare in the many cases referred to by Lewison J. in Ultraframe [2005] EWHC 1638 at [1305]ff and again by Lewison J. in Sinclair [2010] EWHC 1614 (Ch) at [31]ff, with cases discussed under the “no profit” heading which might equally well be classified as conflicts of duty and interest.

60 See the well-known words of Lord Russell in Regal (Hastings) Ltd. v Gulliver [1967] 2 A.C. 134, 147: “[these shares] were acquired by reason and only by reason of the fact that [the defendants were directors] and in the course of their execution of that office.”

61 Ibid.

62 Aas v Benham [1891] 2 Ch. 244 (CA), 256 (Lindley L.J.).

63 Boardman v Phipps [1967] 2 A.C. 46, 130, for the example given by Lord Upjohn in his dissenting opinion of the purchase of Whiteacre by the trustee of Blackacre.

64 Se the argument in Aas v Benham [1891] 2 Ch. 244.

65 What should be noticed here is that, with fiduciaries, this misuse of position rule is tough, in the way that fiduciary rules typically are, in that within the restricted context just described the rule requires disgorgement of profits made by use of position, even though a non-fiduciary would be liable only for misuse of position, being e.g. unauthorised use of confidential information, or breach of contract. Reflecting some discomfort generally with the extent of disgorgement remedies, see Muraj v Al Saraj [2005] EWCA Civ 959 at [82] (Arden L.J.) and [121] (Jonathan Parker L.J.), on the merits of relaxing the extent of disgorgement due under the no conflicts rule.

66 And indeed it is a moot point whether the language applies only to trustees or more widely to fiduciaries in general. It is commonly said that fiduciaries (using the expression generally) are obliged to “account in equity”, but assertions that the principal can “falsify” or “surcharge” the accounts is typically confined to express trustees.

67 Also see Swadling, note 6 above.

68 It might be said that Lord Millett has unintentionally contributed to this confusion by making such a point of the fiduciary's duty to account: see Millett, P., “Equity's place in the law of commerce” (1998) 114 L.Q.R. 214Google Scholar.

69 L. Smith, “Fusion and Tradition” in S. Degeling and J. Edelman (eds.), Equity in Commercial Law (Sydney 2005), at p. 34.

70 Regardless of whether the loss is caused by the fiduciary acting without power, or by the fiduciary exercising legitimate powers negligently.

71 See Lord Millett's writings generally as cited in note 24 above.

72 P. Millett, in Degeling et al, note 24 above, at p. 310.

73 S. Worthington, Proprietary Interests in Commercial Transactions (Oxford 1996), ch. 8, especially pp. 192–4; M. Bridge, L. Gullifer, G. McMeel and S. Worthington, The Law of Personal Property (London 2013), ch. 15 generally.

74 Sinclair [2011] EWCA Civ 347; and the pro-Sinclair references cited at note 24 above.

75 See M. Bridge, L. Gullifer, G. McMeel and S. Worthington, The Law of Personal Property (London 2013), ch. 15, for all the detail, also covered in all standard Equity textbooks.

76 Lord Millett has acknowledged that “[t]he rule is not a rule of natural law. It is not universal. We do not have to have such a rule. We choose to have it. Most civilian systems do not.”: see “Proprietary Restitution”, note 24 above, at p. 314.

77 See Worthington, Equity, note 52 above, pp.134–140.

78 And then regardless of the nature of the relationship between transferor and transferee.

79 And then regardless of the nature of the asset which is the subject matter of the obligation.

80 See note 77 above and associated text.

81 [2001] 1 A.C. 102 (H.L.).

82 See notes 1 and 3 above.

83 See notes 1 and 27 above.

84 [2011] EWCA Civ 347.

85 Ibid., at [90]–[91].

86 See S. Worthington, “Justifying Claims to Secondary Profits” in E. Schrage (ed.), Unjust Enrichment and the Law of Contract (The Hague, 2001), 452ff; and Equity (2nd ed., 2006), p. 106.

87 By contrast, if the principal has a constructive trust over the original £100,000, then she can trace her £10 into the lottery millions.

88 And if the concern is then to strip the third party volunteers with interests in these investments (e.g., in Reid, Reid's wife and solicitor) it might be hoped that there is scope within the dishonest assistance claim to strip them too, via a personal claim.

89 Or its identifiable secondary profit to which the principal has a proprietary claim.

90 See “Justifying Claims to Secondary Profits”, note 86 above, and as conceded in relation to these good faith volunteers by Lord Millett in “Proprietary Restitution”, note 24 above, at pp. 314–316.

91 See “Justifying Claims to Secondary Profits”, ibid.

92 Target Holdings Ltd. v Redferns [1996] A.C. 421 (H.L.).

93 See Tang Man Sit v Capacious Investments Ltd. [1996] A.C. 415 (P.C.): the principal can elect between compensation and disgorgement provided there is no double recovery.

94 Take the haulage company illustration used in the introductory section: if the fiduciary used the company's vehicles to undertake parts of the development, there would be no traceable gain, so no possibility of a proprietary remedy; but the fiduciary would nevertheless have profited from the vehicles' free provision in generating his development gain, and he would therefore be liable to disgorge a part of that gain representing his disloyal secret profit.

95 Tang Man Sit v Capacious Investments Ltd. [1996] A.C. 415 (P.C.) illustrates just such “use” gains, as distinct from “exchange gains”.

96 [2011] EWCA Civ 347 and note 4 above.

97 (1726) Sel. Cas. Ch. 61.

98 Some commentators class this as a “no profit” or misuse of position case, but the approach offered here seems preferable.

99 (1726) Sel Cas 61,62: “the trustee is the only person of all mankind who might not have the lease.”

100 Lord Upjohn in Boardman v Phipps, note 40 above, at p. 124, classified Regal Hastings as a clear case of conflict of duty and interest for reasons which seem impeccable. The majority of the House in Boardman probably decided the case as a misuse of property, unacceptably classing information as property. For reasons indicated earlier, this case should equally clearly be classed as a conflicts case: the trust owned shares in the target company; it could not be argued, therefore, that it was outside the scope of the fiduciary's endeavour to consider whether that holding should be increased or decreased. And it is immaterial to the scope issue that the principal would not or could not take up the opportunity in issue, a matter which seemed to preoccupy the House unduly. On the other hand, their sympathy for the defendants seems well-founded, given the rather technical nature of the fiduciaries' failures to get proper consent.

101 (1890) L.R. 45 Ch. D. 1 and note 10 above.

102 [2013] EWCA Civ 17.

103 Earlier cases on the equitable rule vary in their approach, some taking a narrow view of which opportunities are caught (Balston Ltd. v Headline Filters Ltd. [1990] FSR 385, 412; Industrial Development Consultants Ltd. v Cooley [1972] 1 W.L.R. 443), and some a wider view (Bhullar v Bhullarb [2003] EWCA Civ 424; Allied Business and Financial Consultants Ltd. v Shanahan (also known as O'Donnell v Shanahan) [2009] EWCA Civ 751).

104 Aas v Benham [1891] 2 Ch. 244.

105 See the discussion in L. Sealy and S. Worthington, Sealy & Worthington's Cases and Materials in Company Law, 10th edn (Oxford 2013), 372ff. The explanation is perhaps simple: the courts' focus has been on establishing the existence of a fiduciary breach, rather than identifying its precise genesis. And the remedial consequences of one categorisation over another have not often been in issue, since the litigation has generally been between principal and solvent fiduciary.

106 [1891] 2 Ch. 244 (C.A.).

107 See Lindley L.J. in Aas v Benham, [1891] 2 Ch. 244, 256, giving the example of a partner using his increased scientific knowledge, gleaned from working with the partnership, to publish a book on the subject, being a book which did not in any way compete with the partnership business: this profit would not be recoverable by the other partners.

108 O'Donnell v Shanahan [2009] EWCA Civ 751 at [69] (Rimer L.J.), suggesting, in the context of directors as fiduciaries, that a director was always a director; he did not have “off-duty” time. Similarly, see Bhullar v Bhullar, [2003] EWCA Civ 424 at [41]: a fiduciary has “one capacity and one capacity only”.

109 Hence the suggestion here of a strict and limiting “scope” or “line of business” test. By contrast, however, notice that there is no “line of business” limitation in category (1) use of property cases, nor in category (3) misuse of position cases, nor is one warranted: see immediately below.

110 [2003] EWCA Civ 424.

111 This is not the same type of classification problem identified in Mankarious [2013] EWCA Civ 17 at [83]–[84] (Etherton C.), where the problem was that a given set of facts could not be clearly classified as within or outside each of the categories in Sinclair.

112 Consider the way commentators write about Keech v Sanford, Regal Hastings and Boardman v Phipps, to take three well-known examples.

113 Although that is hardly persuasive, given the diversity of views in such cases.

114 See Mankarious [2013] EWCA Civ 17 at [116] (Etherton C.), noting the urgent need for the Supreme Court to resolve the issue.

115 See the cases and commentary cited in notes 6 and 24 above, noting especially the writings of R. Goode.

116 See the argument in V. Finch and S. Worthington, “The Pari Passu Principle and Ranking Restitutionary Rights” in F. Rose (ed.), Insolvency and Restitution (London 2000), ch. 1.

117 Ibid.