Akita Holdings Limited v The Honourable Attorney General of The Turks and Caicos Islands

A knowing recipient of property transferred in breach of fiduciary duty may be personally liable to account as if a trustee. That liability is distinct from a proprietary claim to follow or trace the property. A claimant does not lose the personal remedy by choosing not to pursue proprietary relief. A fiduciary’s liability to account for profit does not depend on loss to the principal or benefit to the principal, and is not confined to the amount of an undervalue. The account is concerned with stripping unauthorised profit, rather than compensating loss.

A government minister acquired Crown land at a substantial discount under a conditional purchase lease, despite possessing a higher private valuation. He transferred his right to purchase to Akita, which acquired the freehold at the discounted price and later developed the land.

The Attorney-General claimed unjust enrichment or unconscionable receipt. The Chief Justice ordered an account based on the government’s proportionate interest in the land and benefits attributable to its use. The Court of Appeal dismissed Akita’s appeal. The central issue before the Board was whether Akita’s personal liability was limited to the undervalue or extended to profits arising from the transaction and use of the land.

Disposition

The appeal was dismissed. The Board upheld the availability of a personal account against a knowing recipient who acquired fiduciary rights at an undervalue.

1. Distinct remedies. Applying Arthur v Attorney General of The Turks and Caicos Islands ([2012] UKPC 30) and explaining Foskett v McKeown ([2001] 1 AC 102), the Board distinguished proprietary remedies from personal liability. Following or tracing concerns the transferred property or its inherent value. A personal account as constructive trustee remains available where following or tracing is unavailable. The government had not forfeited that remedy by declining to pursue a proprietary claim.
2. Knowing recipient’s liability. Cook v Deeks ([1916] 1 AC 554) illustrated that a company acquiring fiduciary rights with full knowledge may be equally liable to account. Akita was in a similar position and was liable in principle to account in the same way as Mr Hanchell.
3. Extent of the account. The Board rejected the submission that liability was confined to the amount of the underpayment. Under Regal (Hastings) Ltd v Gulliver (Note) ([1967] 2 AC 134), fiduciary liability to account for profit does not depend on loss or benefit to the principal. United Pan-Europe Communications NV v Deutsche Bank AG ([2000] 2 BCLC 461) confirmed that no additional causation requirement was necessary and that an account removes unauthorised profit rather than compensating loss. Although Novoship (UK) Ltd v Mikhaylyuk ([2015] QB 499) recognised a possible distinction for a mere dishonest assistant outside a position of trust, that qualification did not improve Akita’s position.

The Board did not need to determine the unargued form of the account or whether a greater share of profits could have been claimed. Subject to submissions within 14 days, Akita was ordered to pay the government’s costs of the appeal.

1. Privy Council: In [2017] UKPC 7, the Board dismissed the appeal from the Court of Appeal.
2. Court of Appeal of the Turks and Caicos Islands: The appeal from the Chief Justice’s judgment was dismissed in a judgment given by Mottley JA.
3. Supreme Court of the Turks and Caicos Islands: Goldsborough CJ gave judgment for the government and ordered an account based on its proportionate interest in the land and benefits attributable to its use.