An account of profits differs from an award of negotiating, or Wrotham Park, damages in that the court orders the defendant to hand over the entire profit made from the breach of contract. Following One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, it seems that an account of profits will remain an exceptional contractual remedy.
The defendant, a KGB spy and former MI5 agent, released for publication his autobiography thereby breaching a non-disclosure obligation contained in his original contract of employment. The Crown could not establish that it had suffered any loss by publication of the book. The House of Lords, Lord Hobhouse dissenting, held that it was just and equitable that the defendant should retain no benefit from his breach of contract and should account to the Crown for all the profits made.
Lord Nicholls (with whom Lord Goff, Lord Browne-Wilkinson and Lord Steyn agreed) at 284-285:
‘When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract. In the same way as a plaintiff’s interest in performance of a contract may render it just and equitable for the court to make an order for specific performance or grant an injunction, so the plaintiff’s interest in performance may make it just and equitable that the defendant should retain no benefit from his breach of contract . . .
Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligations as fiduciary, will provide an adequate response to a breach of contract. It will be only in exceptional cases, where those remedies are inadequate, that any question of accounting for profits will arise. No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought. A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.’
The defendant, a KGB spy and former MI5 agent, released for publication his autobiography thereby breaching a non-disclosure obligation contained in his original contract of employment. The Crown could not establish that it had suffered any loss by publication of the book. The House of Lords, Lord Hobhouse dissenting, held that it was just and equitable that the defendant should retain no benefit from his breach of contract and should account to the Crown for all the profits made.
Lord Nicholls (with whom Lord Goff, Lord Browne-Wilkinson and Lord Steyn agreed) at 284-285:
‘When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract. In the same way as a plaintiff’s interest in performance of a contract may render it just and equitable for the court to make an order for specific performance or grant an injunction, so the plaintiff’s interest in performance may make it just and equitable that the defendant should retain no benefit from his breach of contract . . .
Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligations as fiduciary, will provide an adequate response to a breach of contract. It will be only in exceptional cases, where those remedies are inadequate, that any question of accounting for profits will arise. No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought. A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.’
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