PROPRIETARY REMEDIES FOR BREACH OF FIDUCIARY DUTY

Extract

FHR bought a long lease for €211.5 million. Cedar Capital conducted the negotiations on FHR's behalf, but also received a €10 million commission from the vendor. On becoming aware of this commission, FHR sought to recover it from Cedar Capital. As its negotiating agent, Cedar Capital owed fiduciary duties to FHR, and had not obtained FHR's fully informed consent to the commission. Cedar Capital therefore had to account to FHR for the commission. However, applying the Court of Appeal's decision in Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. [2011] EWCA Civ 347, [2012] Ch. 453, Simon J. held that the remedy was purely personal; FHR could not assert a proprietary constructive trust over the €10 million: FHR European Ventures LLP v Mankarious [2011] EWHC 2999 (Ch). The Court of Appeal allowed an appeal as to remedy, distinguishing the facts from those in Sinclair v Versailles, but also casting some doubt on the correctness of that decision: [2013] EWCA Civ 17, [2014] Ch. 1. The Supreme Court was thus required to pass judgment on the voluminous debate as to whether English law should follow Lister & Co. v Stubbs (1890) 45 Ch.D. 1, or Attorney-General for Hong Kong v Reid [1994] 1 A.C. 324.