What Shall We Do With The Dishonest Fiduciary? The Unpredictability Of Allowances For Work And Skill

Abstract

Fiduciaries who breach their obligations by making a profit may apply to the courts for an allowance for the work and skill that generated the profit, but it is unclear whether a court will indulge the application if the fiduciary’s breach was tainted with dishonesty. There are two different approaches available to the courts when faced with a dishonest fiduciary applying for an allowance. Courts that choose the first approach will rely on Boardman v Phipps and award an allowance that reflects the fiduciary’s conduct. Courts that follow the second approach will ignore the fiduciary’s dishonesty by relying on Warman International Ltd v Dwyer, and will award an allowance to prevent the principal’s unjust enrichment. The availability of the two different approaches has resulted in inconsistent outcomes and confusion in the law. This article explores the justifications for adopting each of the available approaches whenever a dishonest fiduciary applies for an allowance. Part I outlines the progression of the case law since Boardman v Phipps. Part II describes the rationales for adopting each of the approaches to awarding allowances to dishonest fiduciaries. It concludes that the conduct-based approach in Boardman v Phipps should be rejected, and that the unjust enrichment-based approach provided by Warman International Ltd v Dwyer should be adopted by the courts when awarding allowances to defaulting fiduciaries.