Held, Appeal and cross-appeal dismissed. (1) The judge rightly found that there was no pre-existing profit-sharing agreement, but, had there been, the issue was whether such an agreement would have been relevant to the scope of the account. A fiduciary could not make an unauthorised profit from his fiduciary position, and an errant fiduciary was required to account to his principal for all unauthorised profits falling within the scope of his fiduciary duty. The strict enforcement of an errant fiduciary’s liability to account for all profits was mitigated only by the separate power of the court to make an allowance for the fiduciary’s work and skill in generating those profits. It would seem clear that the fact that an errant fiduciary would have received remuneration (whether in the form of salary, fees, bonuses, a percentage of profits or otherwise) from the principal had he not left to compete with the principal in breach of his fiduciary duty would in no way limit his liability to account for the profits he made. To permit the fiduciary to retain profits in the amount of sums he would have received from the principal had he not breached his duty would remove the deterrent effect of the stringent rule and “whittle away” at its scope. The fiduciary would have nothing to lose by breaching his duty, whilst hoping to make a greater profit at the expense of his principal. The strict rule required that the fiduciary account for all profits and be limited to such allowance as the court considered just, taking into account the work done and skill deployed, but also the policy underlying the rule ( paras 34–44).

(2) Although relief by way of an account of profits was discretionary, the court had to act in accordance with settled principles. Unconscionability was a core principle. There was no good reason why unreasonable delay, or indeed other unreasonable behaviour on the part of a claimant, should not be capable in an appropriate case of limiting rather than barring relief if justice so required, whether temporally or otherwise. However, as with the defence of laches, any restriction on relief by reference to delay would need to involve not only delay that was unreasonable in the circumstances, but factors that rendered it unjust to grant the relief—or in the present case the full extent of the relief—sought. Those factors would typically relate to the position of the defendant, the most obvious being a material element of detriment. Whether it was necessary to limit relief to avoid an inequitable result would depend on the individual facts and circumstances. Mere delay, even if lengthy, would certainly be insufficient. The law did not, and should not, require a claimant to take action as soon as they become aware of a breach of fiduciary duty, or else risk losing their ability to obtain an account of profits. That would be inconsistent with the long-established strictness of the rule that unauthorised profits made by persons subject to fiduciary obligations must be accounted for. It might be reasonable for a claimant to “wait and see” for a number of reasons. Those might well include whether the venture proved profitable—so that there was something to have a realistic dispute about—as well as other considerations, such as in the present case the position with the family. A lack of funds might also be relevant. “Standing by” was not, as such, a defence or partial defence to a claim for an account. Relief could be only denied or restricted on account of delay when the circumstances were such that, taking full account of the strictness of the rule, it would nonetheless be inequitable to grant the full relief sought. However, on the findings of fact made by the judge, there was no basis upon which the relief could properly be limited (paras 56, 77–78, 80–83, 90–91, 100–101).

(3) The jurisdiction to make an equitable allowance was well-established, and in general terms it could be said that it should be exercised only in exceptional circumstances. An equitable allowance would not be the usual order or one which the defaulting fiduciary could expect as of right. The ultimate test was whether it would be inequitable for the beneficiaries to step in and take the benefit of the profits made by the fiduciary without paying for the skill, labour and risk which has produced it. The taking of an account was an equitable remedy, as was the making of any allowance in favour of the defaulting fiduciary in the fashioning of the account. The assessment would be fact specific. It would not be inequitable for beneficiaries to take the profits without making an allowance for remuneration if and to the extent that such an allowance would be seen as encouraging fiduciaries to breach their fiduciary duties. It would be relevant to consider the degree of culpability which was to be ascribed to the breach of fiduciary duty. It would be more inequitable to deprive a defaulting fiduciary of the profit resulting from his own skill and labour, without making an allowance, where his breach was honest and well intentioned than when it was dishonest or otherwise highly culpable; and the deterrent imperative was all the stronger in the case of dishonest breaches than it was for honest and well-intentioned ones. But that was not to say that the jurisdiction to grant an allowance could only be exercised in cases where the personal conduct of the fiduciary could not be criticised. An allowance of some, but part only, of the remuneration which a defaulting fiduciary would have earned in generating the profit if not acting in breach of fiduciary duty might satisfy the rationale that it would act sufficiently as a deterrent, whereas a full allowance would not. That might justify some allowance even where there was a significant degree of culpability in the behaviour of the defaulting fiduciary. Thus an allowance might be made by way of an order for profit sharing, especially if the market was one in which remuneration would have been earned by the beneficiary, in the absence of breach of duty, by a profit sharing arrangement; and an allowance might be made where there was a degree of culpability in the fiduciary’s breach, in a lesser sum than the remuneration a fiduciary would have earned absent breach. A claim for an equitable allowance should in principle be pleaded and supported by evidence in the usual way. The quantification would often not be a matter of mathematical calculation. The determination of what was equitable involved an evaluative judgement akin to the exercise of a discretion, and the appellate court would only interfere with a first instance decision in the well-known and restricted circumstances which applied to the exercise of such a discretion. On the facts, the judge had not fallen into error in concluding that the defendants were entitled to an equitable allowance of 25% (paras 112, 117–119, 122–123, 126, 150–152).