Account of profits
Encyclopedia
An account of profits 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 profit
s 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.
Co-owners in concurrent estate
s also have the right to an accounting of profits, in order to properly apportion income from the use or leasing
of the property.
Case law has shown roughly two approaches to assessing the extent of an account of profits:
Equitable remedy
Equitable remedies are judicial remedies developed and granted by courts of equity, as opposed to courts of common law. Equitable remedies were granted by the Court of Chancery in England, and remain available today in most common law jurisdictions. In many jurisdictions, legal and equitable...
most commonly used in cases of breach of fiduciary duty. It is an action taken against a defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
to recover the profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
s taken as a result of the breach of duty, in order to prevent unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
.
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
Accounting records
Accounting records are all sources of information and evidence that are used in preparing, verifying and or auditing financial statements. Accounting records also includes documentation to prove ownership of assets creation of liabilities and evidence of monetary and non monetary...
must be examined (sometimes by a forensic accountant
Forensic accountant
Forensic accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring...
) 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.
Co-owners in concurrent estate
Concurrent estate
A concurrent estate or co-tenancy is a concept in property law which describes the various ways in which property is owned by more than one person at a time. If more than one person own the same property, they are referred to as co-owners, co-tenants or joint tenants...
s also have the right to an accounting of profits, in order to properly apportion income from the use or leasing
Leasing
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments....
of the property.
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)
External links
- 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 lawPatent infringement under United Kingdom lawIn the United Kingdom, a patent provides its proprietor with the right to exclude others from utilizing the invention claimed in that patent. Should a person utilize that invention, without the permission of the patent proprietor, they may infringe that patent.- Legislation :Infringement under...
. (mirror of referenced article)