Account of profits
|Legal remedies (Damages)|
An account of profits (sometimes referred to as an accounting for profits or simply an accounting) is a type of equitable remedy most commonly used in cases of breach of fiduciary duty. It is an action taken against a defendant to recover the profits taken as a result of the breach of duty, in order to prevent unjust enrichment.
In conducting an account of profits, the plaintiff is treated as if they were conducting the business of the defendant, and made those profits which were attributable to the defendant's wrongful actions. This can be rather complex in practice, because the defendant's accounting records must be examined (sometimes by a forensic accountant) to determine what portion of his gross profits were derived to the wrongful act in question.
Historically an account was not an equitable remedy, but was an action at common law, and is therefore technically an instrument of law, though it arose at a time before the distinction between law and equity was marked.
Case law has shown roughly two approaches to assessing the extent of an account of profits:
- To account not of the entire business but of the particular benefits which flowed to him in breach of his duty;
- To account for the entire business and its profits, due allowance being made for the time, energy, skill and financial contribution of the fiduciary (the approach in Boardman v Phipps)
- Black's Law Dictionary, 7th ed. 1999
- Leigh Ellis, Theory into Action: Calculating Damages Payments and Accounts of Profits in Patent Cases
- National Trust Co. v. H & R Block Canada Inc., 2003 SCC 66.
- Hospital Products Ltd. v United States Surgical Corporation
- Leigh Ellis, Theory into Action: Calculating Damages Payments and Accounts of Profits in Patent Cases Article discussing accounts of profits in the context of patent infringement under United Kingdom law. (mirror of referenced article)
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