Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd

The High Court of Australia considered an appeal and cross-appeal concerning the equitable remedy of an account of profits. The dispute arose when two employees of Lifeplan Australia Friendly Society Ltd and its subsidiary, Funeral Plan Management Pty Ltd, breached their fiduciary duties by assisting the appellant, Ancient Order of Foresters in Victoria Friendly Society Ltd ("Foresters"), to develop its competing funeral products business. The employees subsequently joined Foresters, which was found to have knowingly assisted in these breaches.

The central legal issues before the High Court were whether Foresters, as a knowing assistant, was obliged to account for profits and, if so, how the quantum of those profits should be assessed. Specifically, the court had to determine if the profits of Foresters' business were a direct result of its knowing assistance, whether the entire capital value of the acquired business could be subject to an account of profits, and whether anticipated profits were recoverable.

The High Court reasoned that the principle underlying an account of profits is to prevent a wrongdoer from profiting from their wrongdoing. To confine the account to realised profits would sever this rationale. The court affirmed that unrealised profits are actual profits, earned when a legal right to payment arises, even if not yet brought into accounts. Consequently, the High Court allowed the cross-appeal, finding that Foresters should account for profits in equity, not limited to profits directly attributable in a narrow accounting sense, but encompassing the value of the business connections appropriated through its participation in the disloyalty of the employees.

The High Court ordered that Foresters account to Lifeplan Australia Friendly Society Ltd and Funeral Plan Management Pty Ltd for profits in equity in the sum of $14,838,063, setting aside the previous order of the Full Court of the Federal Court. The appellant was ordered to pay the respondents' costs of the appeal and cross-appeal.