Herrod & Ors v Johnston & Anor

The Court of Appeal dealt with the underlying basis for the awarding of compound interest in cases of breach of fiduciary duty or breach of trust.  In his careful analysis Muir JA identified the compensatory and restitutionary nature of equitable compensation and the extent to which that impacts upon the Courts’ discretion to make an award of compound interest.  His Honour noted that the purpose of awarding compound interest was not to punish the errant fiduciary or trustee but to ensure that no profit was retained by that trustee or fiduciary as a consequence of that breach of duty.  In considering the rate of interest to apply, the Court should consider the use to which the money has been put and the actual profits which have been derived.  The circumstances in which laches will ground a defence were also discussed.