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(ii) Deterrence and Ethical Standards

In some situations gain-based remedies can be justified on the grounds that they are necessary to deter wrongdoing and to maintain ethical standards.[1]

(1) Abuse of a Relationship of Trust and Confidence

Where the defendant abuses a relationship of trust and confidence with the claimant, the award of gain-based relief will be available in Equity.[2] It is not every relationship between the parties which deserves such protection, but, where there is a relationship of trust and confidence, this is, to use Jackman’s terminology, a facilitative institution which deserves particular protection from the law.[3] This is because the key characteristic of such relationships is that the claimant is dependent on the defendant for advice and management, so the defendant is placed in a particularly powerful position where there is a constant temptation to exploit the claimant. It is to deter the defendant from succumbing to this temptation that restitution of any benefits obtained by breach of trust or confidence will be awarded to the claimant.[4] This is why a gain-based remedy may be awarded even though there is no evidence that the defendant did actually abuse the relationship of trust and confidence.

(2) Illegal Conduct

Where the wrong committed by the defendant involves the commission of an illegal act it is entirely appropriate for the defendant to disgorge benefits acquired from the commission of that wrong to the claimant. The award of gain-based relief in such circumstances is justified by the need to deter defendants from committing such wrongs. It is for this reason that such relief is appropriate where the defendant has obtained a benefit by committing a crime.[5]

(3) The Defendant’s Culpability

Although it has sometimes been suggested that gain-based remedies should be available where the defendant’s conduct in committing the wrong is particularly blameworthy, the nature of the defendant’s culpability cannot operate as a principle to identify those wrongs for which gain-based relief is available, simply because the defendant’s culpability will vary from case to case. The House of Lords recognized in Attorney-General v Blake[6] that the fact that the defendant has deliberately committed a wrong is not a reason in its own right to award restitution. But, once it has been determined by reference to other principles that gain-based relief is appropriate for a particular type of wrongdoing, the defendant’s culpability may be taken into account to determine the type of relief which is appropriate on the particular facts of the case. So, for example, the fact that the defendant deliberately committed a wrong may be a reason why the defendant should be required to disgorge all benefits received as a result of the wrongdoing.[7]

(iii) Inadequacy of Compensatory Remedies

In those cases where the typical remedy awarded for the commission of a wrong is damages to compensate the claimant for loss suffered as a result of the wrong, gain- based remedies are appropriate where such compensatory remedies are inadequate. This is a particularly significant reason why gain-based remedies may exceptionally be available where the defendant has obtained a benefit as a result of breaching a contract.[8]

  • [1] of a Wrong’. 49 See Chapter 19.
  • [2] 50 Jackman, ‘Restitution for Wrongs’, 311-17. See also S Worthington, ‘Reconsidering Disgorgement for
  • [3] Wrongs’ (1999) MLR 218.
  • [4] Murad v Al-Saraj [2005] EWCA Civ 959, [2005] WTLR 1573, [74] (Arden LJ). See generally M
  • [5] Conaglen, Fiduciary Loyalty: Protecting the Due Performance of Non-Fiduciary Duties (Oxford: Hart Publishing, 2010), especially ch 4. 52 See Chapter 20.
  • [6] [2001] 1 AC 268, 286 (Lord Nicholls).
  • [7] The deliberate nature of the breach of contract was influential in both Attorney-General v Blake [2001] 1
  • [8] AC 268 and Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA Civ 323, [2003] 1 All ER (Comm)830. See p 476, below. See also Jegon v Vivian (1871) LR 6 Ch App 742, 761 (Lord Hatherley LC). See generallyEdelman, Gain-Based Damages, who argues that disgorgement damages should be awarded where thedefendant acted cynically in committing the wrong. 3 See Chapter 18. See generally p 440, below.
 
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