Overview of Fiduciary Duties and Remedies for Breach

Fiduciary law is usually introduced through its duties: the no-conflict rule and the no-profit rule. Yet the distinctive character of fiduciary doctrine in English law lies less in these duties themselves than in the remedies that equity deploys when they are breached. Those remedies are often unusually strict. Courts may strip away gains through an account of profits, recognise proprietary rights via constructive trusts, undo transactions through rescission, or restore losses through equitable compensation. 

The severity of these remedies reflects a central concern running throughout fiduciary doctrine: those who undertake fiduciary responsibilities must act with what the courts have repeatedly described as “single-minded loyalty.” Equity’s remedial framework is designed to enforce that obligation and to deter fiduciaries from placing their own interests ahead of those whom they serve. 

Understanding fiduciary law therefore requires looking not only at the duties imposed on fiduciaries but also at the remedial structure that supports them.

The fiduciary obligation of loyalty

The modern starting point for fiduciary doctrine remains Millett LJ’s well-known explanation in Bristol & West Building Society v Mothew that a fiduciary is someone who has undertaken to act for another: “in circumstances which give rise to a relationship of trust and confidence.”

The defining obligation arising from such relationships is loyalty. The principal is entitled to the fiduciary’s “single-minded loyalty,” meaning that the fiduciary must not allow personal interests to interfere with the proper performance of their duties.

This obligation manifests most clearly through two strict rules. The no-conflict rule prevents fiduciaries from placing themselves in situations where their personal interests may conflict with their duties. The no-profit rule prevents fiduciaries from making unauthorised profits arising from their fiduciary position.

These rules apply across a wide range of relationships recognised by English law, including trustees, company directors, agents and partners. However, fiduciaries frequently owe multiple overlapping duties. As recognised in Henderson v Merrett Syndicates Ltd, fiduciary obligations often coexist with contractual and tortious duties. The distinctive character of fiduciary law therefore lies less in the duties themselves than in the remedies available when those duties are breached.

The strict logic of fiduciary remedies

The strictness of fiduciary remedies is not accidental. From the earliest authorities, courts have emphasised that the rules governing fiduciaries must be applied rigorously in order to remove the temptation for fiduciaries to exploit their position.

The classic illustration is Keech v Sandford (1726). A trustee renewed a lease for himself after the landlord refused to renew it for the beneficiary. Even though the beneficiary could never have obtained the lease, the trustee was nevertheless required to account for the profit. Lord King LC explained that the rule had to be applied strictly because otherwise trustees might be tempted to put their own interests ahead of those whom they serve.

Modern courts continue to emphasise this preventative logic. In Rukhadze v Recovery Partners GP Ltd [2025] UKSC, the Supreme Court reaffirmed that the strict rules governing fiduciary profits exist to guard against the risk that fiduciaries will allow personal interests to displace their duty of loyalty.

Against that background, the remedies available for breach of fiduciary duty assume particular significance.

The account of profits

The primary remedy for breach of fiduciary duty is the account of profits. Unlike damages at common law, this remedy is gain-based rather than compensatory. Its purpose is not to compensate the claimant for loss but to strip away any profit obtained through the breach of fiduciary duty.

The classic authorities illustrate the strictness of this approach. In Regal (Hastings) Ltd v Gulliver, company directors who had personally acquired shares in a subsidiary company were required to account for profits realised when those shares were later sold. Similarly, in Boardman v Phipps, a solicitor who used information obtained in a fiduciary capacity to acquire company shares was required to account for the profits made from the investment, despite acting honestly and even though the trust had benefited from his actions.

The Court of Appeal explored the rationale underlying the remedy in Murad v Al-Saraj [2005] EWCA Civ 959. Arden LJ held that the purpose of an account of profits is to strip the fiduciary of the profit derived from the breach, and that the fiduciary cannot reduce liability by relying on hypothetical reconstructions of what might have happened had the breach not occurred. The law does not attempt to recreate alternative bargain scenarios in order to limit the fiduciary’s liability.

The Supreme Court revisited the scope of the profit rule in Rukhadze v Recovery Partners. One of the arguments advanced in that case was that fiduciaries should only be required to account for profits that would not have been obtained but for the breach of duty. The Court rejected that proposal. Lord Briggs emphasised that introducing a counterfactual “but-for” test would undermine the prophylactic function of fiduciary law. The strict profit rule exists precisely to deter fiduciaries from placing themselves in situations where conflicts may arise. Introducing counterfactual analysis would dilute that deterrent effect.

Taken together, Murad and Rukhadze confirm that English law continues to adopt a rigorous and largely uncompromising approach to the disgorgement of fiduciary profits.

Proprietary remedies

In some circumstances equity goes further than requiring the fiduciary to pay the value of the profit. Instead, it recognises that the property obtained through the breach is held on constructive trust for the principal.

The leading authority is FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45. The Supreme Court held that bribes and secret commissions received by an agent are held on constructive trust for the principal.

The recognition of a proprietary remedy has important consequences. It allows the principal to recover the asset itself, trace it into substitute property, and obtain priority over unsecured creditors if the fiduciary becomes insolvent.

Constructive trusts therefore play a crucial role in ensuring that fiduciaries cannot retain the benefits of their wrongdoing.

Equitable compensation

Although fiduciary law is often associated with gain-based remedies, claimants may also pursue equitable compensation where the breach has caused loss.

Equitable compensation is a loss-based remedy designed to restore the claimant to the position they would have occupied had the breach not occurred. However, its operation depends on the nature of the breach.

The Court of Appeal in Davis v Ford clarified that equitable compensation for breach of fiduciary duty may operate on two distinct bases.

Where the breach involves misappropriation of existing trust property, the remedy operates on a substitutive basis. The objective is simply to restore the value of the property that has been improperly removed from the trust fund. In such cases the claimant does not need to establish causation in the conventional sense.

By contrast, where the breach does not involve misappropriation of existing trust property, equitable compensation operates on a reparative basis. In these circumstances the court must determine what would have happened if the fiduciary had properly discharged their duties, which requires an inquiry into how the principal would have acted if fully informed using a ‘but-for’ test of causation.

This distinction reflects the broader principles governing equitable compensation discussed in earlier authorities such as Target Holdings v Redferns and Swindle v Harrison. In Swindle v Harrison, Evans LJ explained that the stringent approach to equitable compensation is not universal. He observed: “the stringent rule of causation or measure of damages does not apply as regards breaches of equitable duties unless the breach can properly be regarded as the equivalent of fraud.”

Where the breach is not equivalent to fraud, the claimant must therefore establish that the loss would not have occurred but for the breach of duty. The decision illustrates that equitable compensation occupies a distinctive position within fiduciary remedies: while gain-based remedies operate with considerable strictness, loss-based remedies may involve more familiar inquiries into causation and counterfactual outcomes.

Allowances and the mitigation of strictness

Despite the strictness of fiduciary remedies, courts sometimes recognise that fiduciaries may have contributed significant skill or effort to generating the profits in question.

In such circumstances the court may grant an equitable allowance, as occurred in Boardman v Phipps, where the fiduciary was required to account for profits but received a generous allowance for his work.

Allowances therefore provide a limited mechanism through which courts can mitigate the harshness of strict fiduciary liability while preserving the deterrent function of the profit rule.

Conclusion

Fiduciary law imposes some of the most demanding obligations in English private law. The duties of loyalty expressed through the no-conflict and no-profit rules are enforced through a distinctive and powerful set of remedies.

Through accounts of profits, equity strips away gains obtained through fiduciary breaches. Through constructive trusts, it recognises proprietary rights in those gains. Through equitable compensation, it restores losses caused by breaches of duty, sometimes on a substitutive basis and sometimes on a reparative basis depending on the nature of the breach.

Taken together, these remedies demonstrate equity’s central concern: ensuring that those who undertake fiduciary responsibilities act with undivided loyalty. The law’s strictness may sometimes appear severe, but it reflects a deliberate policy choice. As courts have recognised since Keech v Sandford, fiduciary rules must be rigorous enough to remove the ever-present temptation for fiduciaries to put their own interests first.

Law Tutors Online, UK Law Tutor, UK Law Notes, Law Assessment, Manchester Law Tutor, Birmingham Law Tutor, Nottingham Law Tutor, Oxford Law Tutor, Cambridgeshire Law Tutor, New York Law Tutor, Dubai Law Tutor, Sydney Law Tutor, Singapore Law Tutor, Hong Kong Law Tutor, London Tutors, Top Tutors Online and London Law Tutor are trading names of London Law Tutor Ltd. which is a company registered in England and Wales. Company Registration Number: 08253481. VAT Registration Number: 160291824 Registered Data Controller: ZA236376 Registered office: Berkeley Square House, Berkeley Square, London, UK W1J 6BD. All Rights Reserved. Copyright © 2012-2026.