References:  UKSC 45,  2 Lloyd\'s Rep 471,  2 All ER (Comm) 425,  WTLR 1135,  4 All ER 79,  1 AC 250,  Lloyd\'s Rep FC 617,  3 WLR 535,  WLR(D) 317,  2 BCLC 145,  1 P &CR DG1, UKSC 2013/0049
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Coram: Lord Neuberger, President, Lord Mance, Lord Sumption, Lord Carnwath, Lord Toulson, Lord Hodge, Lord Collins
The Court was asked whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or commission.
Held: The appeal failed. An agent receiving a secret commission in breach of his fiduciary duties to his principal held that commission or bribe in trust for that principal and a proprietory remedy was available in respect of it.
There had been conflicting decisions and much academic discussion over the years as to the availability of the remedy requested. Where an agent acquires a benefit which came to his notice as a result of his fiduciary position, or pursuant to an opportunity which results from his fiduciary position, the general equitable rule ('the Rule') is that he is to be treated as having acquired the benefit on behalf of his principal, so it is beneficially owned by the principal. How did the rule apply where the bribe was taken by an agent in breach of his fiduciary duty.
This case cites:
- - At ChD - FHR European Ventures Llp and Others -v- Mankarious and Others ChD (Bailii,  EWHC 2308 (Ch),  2 BCLC 39)
The claimants sought return of what it said were secret commissions earned by the defendants when working as their agents, and the defendants counterclaimed saying that the commissions had been known to the claimants and that additional sums were . .
- Appeal from - FHR European Ventures Llp and Others -v- Mankarious and Others CA (Bailii,  EWCA Civ 17,  1 P &CR DG24,  1 CH 1,  2 BCLC 1, 15 ITELR 902,  2 All ER (Comm) 257,  1 Lloyd's Rep 416,  WTLR 631,  3 WLR 466,  WLR(D) 32,  2 EGLR 169,  3 All ER 29)
The defendants had taken a secret commission when acting for the claimant. They had succeeded in ther action and had an order in their favour, but had been refused a proprietary remedy for the sum received.
Held: The appeal was allowed, and a . .
- Cited - Keech -v- Sandford ChD ( Sel Cas 1 King 61, Bailii,  EWHC Ch J31, Commonlii,  EngR 954, (1726) 25 ER 223 (C), Bailii,  EWHC Ch J76)
A landlord refused to renew a lease to a trustee for the benefit of a minor. The trustee then took a new lease for his own benefit. The new lease had not formed part of the original trust property; the minor could not have acquired the new lease . .
- Cited - Carter, Esq -v- Sir William Henry Palmer, Bart ( EngR 397, Commonlii, (1841,1842) 8 Cl & Fin 657, (1842) 8 ER 256)
The employment of counsel as confidential legal adviser disables him from purchasing for his own benefit charges on his client's etates, without his permission ; and although the confidential employment ceases, the disability continues as long as . .
- Cited - Bowes -v- The City Of Toronto PC ( EngR 365, Commonlii, (1858) 11 Moo PC 463, (1858) 14 ER 770, Bailii,  UKPC 10)
The mayor of a city who bought discounted debentures issued by the city was in the same position as an agent vis-a-vis the city, and was to be treated as holding the debentures on trust for the city. . .
- Cited - Dunne -v- English ((1874) LR 18 Eq 524)
Because of the importance which equity attaches to fiduciary duties, 'informed consent' to a fiduciary acting for two parties is only effective if it is given after 'full disclosure'. . .
- Cited - Bagnall -v- Carlton CA ((1877) 6 Ch D 371)
Agents for a prospective company who made secret profits out of a contract made by the company were held to be 'trustees for the company' of those profits . .
- Cited - Cook -v- Deeks and Hinds PC ( 1 AC 554, Bailii,  UKPC 10)
Deeks and Hinds were the directors of a construction company. They negotiated a lucrative construction contract with the Canadian Pacific Railway. During the negotiations, they decided to enter into the contract personally, on their own behalves, . .
- Cited - Regal (Hastings) Ltd -v- Gulliver HL ( 2 AC 134, Bailii,  UKHL 1,  1 All ER 378)
Regal were in negotiation for the purchase of two cinemas in Hastings. There were five directors on the board, including Mr Gulliver, the chairman. Regal incorporated a subsidiary, Hastings Amalgamated Cinemas Ltd, with a share capital of . .
- Cited - Phipps -v- Boardman ChD ( 1 WLR 993)
Agents of certain trustees had purchased shares, in circumstances where they only had that opportunity because they were agents.
Held: The shares were held beneficially for the trust. . .
- Cited - Mothew (T/a Stapley & Co) -v- Bristol and West Building Society CA (Times 02-Aug-96, Bailii,  EWCA Civ 533,  Ch 1,  2 WLR 436,  4 All ER 698)
The solicitor, acting in a land purchase transaction for his lay client and the plaintiff, had unwittingly misled the claimant by telling the claimant that the purchasers were providing the balance of the purchase price themselves without recourse . .
- Cited - Bhullar and others -v- Bhullar and Another CA (Bailii,  EWCA Civ 424,  2 BCLC 241)
The claimants were 50% shareholders in a property investment company and sought relief alleging prejudicial conduct of the company's affairs. After a falling out, two directors purchased property adjacent to a company property but in their own . .
- Cited - Barker -v- Harrison ( EngR 533, Commonlii, (1846) 2 Coll 546, (1846) 63 ER 854)
A vendor's agent had secretly negotiated a sub-sale of part of the property from the purchaser at an advantageous price.
Held: that asset was held on trust for the vendor. . .
- Cited - Fawcett -v- Whitehouse ((1829) 1 Russ & M 132, Commonlii,  EngR 859, (1829) 1 Russ & My 132, (1829) 39 ER 51)
The defendant, intending to enter into a partnership with the plaintiffs, negotiated for the grant by a landlord of a lease to the partnership. The landlord paid the defendant £12,000 for persuading the partnership to accept the lease. <br . .
- Cited - Sugden -v- Crossland ( EngR 276, Commonlii, (1856) 3 Sm & G 192, (1856) 65 ER 620)
A sum of money paid to a trustee to persuade him to retire in favour of the payee was to be 'treated as a part of the trust fund'. . .
- Cited - In re Morvah Consols Tin Mining Co, McKay's Case CA ((1875) 2 Ch D 1)
A company bought a mine, and shares in the vendor were promised to the company's secretary.
Held: The shares were held by him for the company beneficially. . .
- Cited - In re Western of Canada Oil, Lands and Works Co, Carling, Hespeler, and Walsh's Cases CA ((1875) 1 Ch D 115)
Shares which had been transferred by a person to individuals to induce them to become directors of a company and to agree that the company would buy land from the person, were held by the individuals on trust for the company. . .
- Cited - In re Caerphilly Colliery Co, Pearson's Case CA ((1877) 5 Ch D 336)
A company director, had received shares from the promoters and then acted for the company in its purchase of a colliery from the promoters.
Held: The shares were held on trust for the company. . .
- Cited - Nant-y-glo and Blaina Ironworks Co -v- Grave ((1878) 12 Ch D 738)
Shares in a company had been given by a promoter to the defendant to induce him to become a director.
Held: They belonged to the company. . .
- Cited - Eden -v- Ridsdale Railway Lamp and Lighting Co Ltd CA ((1889) 23 QBD 368)
The company was held to be entitled as against a director to shares which he had secretly received from a person with whom the company was negotiating. . .
- Cited - Martin -v- Lowry (HM Inspector of Taxes) KBD ( 1 KB 550)
The taxpayer had other business, but purchased a substantial quantity of cloth and resold it. He said this was not by way of trade. The Revenue said that he had used all the standard trade practices, and it was taxable as such.
Held: The . .
- Cited - Martin -v- Lowry (HM Inspector of Taxes) CA ((1926) 1 KB 550)
The appellant purchased the entire stock of government surplus aircraft linen. He had another main business and had intended to resell it immediately. When that failed to promise a profit he set out to sell and sold the material over several months . .
- Cited - Williams -v- Barton ( 2 Ch 9)
A trustee, who recommended that his co-trustees use stockbrokers who gave him a commission, held the commission on trust for the trust. . .
- Cited - Tyrrell -v- The Bank Of London And Sir J -v- Shelley And Others HL ( EngR 498, Commonlii, (1862) 10 HLC 26, (1862) 11 ER 934)
A solicitor retained to act for a company in the course of formation secretly arranged to benefit from his prospective client's anticipated acquisition of a building called the 'Hall of Commerce' by obtaining from the owner a 50% beneficial interest . .
- Cited - Metropolitan Bank -v- Heiron CA ((1880) 5 Ex D 319)
a claim brought by a company against a director was time-barred: the claim was to recover a bribe paid by a third party to induce the director to influence the company to negotiate a favourable settlement with the third party. The bank failed in its . .
- Cited - Lister & Co -v- Stubbs CA ((1890) 45 Ch D 1)
It was alleged by the plaintiffs that their foreman had received secret commissions which he had invested in land and other investments. They sought interlocutory relief to prevent him dealing with the land and requiring him to bring the other . .
- Cited - In re North Australian Territory Co, Archer's case CA ( 1 Ch 322)
A bribe had been paid to an agent. . .
- Cited - Diplock And Others -v- Blackburn (Commonlii,  EngR 468, (1811) 3 Camp 43, (1811) 170 ER 1300 (A))
If the master of a ship in a foreign port, from the state of the exchange, receives a premum for a bill drawn upon England on account of the ship, this belongs to his owner, although there may have been a usage for masters of shps to apprapriate . .
- Cited - The Attorney General of Hong Kong -v- Reid and Reid And Marc Molloy Co PC (Bailii,  UKPC 36,  1 All ER 1,  AC 324,  3 WLR 1143)
(New Zealand) The Board considered the power to recover property owned by a public official found to have taken bribes.
Held: The bribes received by the policeman were held on trust for his principal, and so they could be traced into . .
- Cited - Kak Loui Chan -v- Zacharia ((1984) 154 CLR 178,  HCA 36, Austlii)
(High Court of Australia) The fundamental rule that obliged fiduciaries to account for personal benefit or gain had two separate themes: 'The variations between more precise formulations of the principle governing the liability to account are . .
- Cited - Fyffes Group Ltd -v- Templeman and others ComC (Bailii,  EWHC 224 (Comm),  2 Lloyd's Rep 643)
The claimants alleged that over a five year period from 1992 to 1996 their employee Mr Simon Templeman, the first defendant, took bribes amounting to over US $1.4 million from or with the connivance of the second to seventh defendants. The essential . .
- Cited - Daraydan Holdings Limited, Cairn Estates Limited and Others -v- Solland International Limited and Others ChD ( EWHC 622 (Ch), Bailii,  Ch 119)
- Cited - Sinclair Investments (UK) Ltd -v- Versailles Trade Finance Ltd and Others CA (Bailii,  EWCA Civ 347,  Bus LR 1126,  3 WLR 1153,  WTLR 1043,  Ch 453)
The appellant challenged a decision that it was not entitled to a proprietory interest in the proceeds of sale of some shares which had been acquired with the proceeds of a breach of trust. Specifically, the claims gave rise to (i) an issue as to . .
- Cited - Grimaldi -v- Chameleon Mining NL (No 2) (Austlii,  FCAFC 6, (2012) 200 FCR 296, (2012) 287 ALR 22, (2012) 87 ACSR 260)
Federal Court of Australia
CORPORATIONS - Corporations Act 2001 (Cth), s 9 - 'director' - 'officer' - de facto director - no single test for determining whether a person is such - assuming or performing the functions of a director of the . .
Agency, Equity, Torts - Other