By Theresa Power -
Snapshot
- Last year, in Recovery Partners GP Ltd v Rukhadze [2025] UKSC 10, the UK Supreme Court was invited to depart from settled House of Lords authority and significantly relax the strictness of the so-called ‘no profit rule’. The Court convened a special bench of seven justices who concurred in dismissing the appeal but delivered four separate sets of divergent reasons.
- The case is important in Australia because of the traditional close alignment of Australian and UK law in this area. It bodes against any relaxation of equally strict rules in an Australian context.
- This article will briefly outline the relevant basic principles under Australian law, examine the facts and various judgments in Recovery Partners and, finally, make some concluding observations on the relevance of the decision for Australian law.
The equitable remedy of account is ancient and notoriously difficult in practice (Warman International Ltd v Dwyer [1995] HCA 18 (‘Warman’) at [23]). The general principle of equity requiring a fiduciary to account for ‘personal benefit or gain’ embodies two themes (see Kak Loui Chan v Zacharia [1984] HCA 36 per Deane J at [24]):
- The ‘no conflict rule’, which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict. The objective is to preclude the fiduciary from being swayed by considerations of personal interest.
- The ‘no profit rule’, which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it. The objective is to preclude the fiduciary from actually misusing his position for his personal advantage.
