Boris Ignachkov Legal Principles and Key Points
- In the case of FHR European Ventures LLP v Mankarious [2014] UKSC 45, the main issue at the stage of appeal before the Supreme Court was whether a secret commission received by an agent was held by them on trust of their principal or if the principal only had a claim for equitable compensation for the commission
- Overruled Metropolitan Bank v Heiron [1880] and Co v Stubbs [1886-90]
Facts of the Case
- Cs were an investor group and Ds acted as their agents in the purchase transaction of a Monaco hotel for €211.5 million
- There was a brokerage agreement between Ds and the sellers of the hotel, whereby Ds would receive €10 million if they introduced a purchaser for the hotel and the sale indeed became successful
- Ds claimed the €10 million after the sale; Cs were not aware of Ds secret arrangements at first
Issues in FHR European Ventures LLP v Mankarious [2014] UKSC 45
- Cs brought an action to recover the €10 million secret facilitation fee
- Cs claimed Ds had received the facilitation fee in breach of its fiduciary duty to the Cs
- The judge in the initial hearing upheld the claim as Ds had failed to obtain Cs’ fully informed consent on receiving the facilitation fee; D ordered to pay the €10 million to Ds, though Cs were entitled to a personal (rather than a proprietary remedy) to recover the sum
- The Court of Appeal reversed the decision from the first instance and ruled out that Ds had received the fee on a constructive trust for Cs; Cs appealed to the Supreme Court
Held by the Supreme Court
- Appeal dismissed – the commission accepted by D was held on trust for the principal, including where in circumstances of a breach of fiduciary duty owed to the principal
Lord Neuberger
Lord Neuberger read out the judgement, pointing at the start that for the past 200 judicial verdicts on such matters were inconsistent; the appeal was dismissed and the Court of Appeal’s position was upheld because the Court of Appeal was right to regard itself as bound by Sinclair Investments v Versailles, which they nevertheless managed to distinguish
- ‘The considerations of practicality and principle discussed in paras [33]–[44] above appear to support the respondents’ case, namely that a bribe or secret commission accepted by an agent is held on trust for his principal. The position is perhaps rather less clear when one examines the decided cases, whose effect we have summarised in paras [13]–[28] above. However, to put it at its lowest, the authorities do not preclude us adopting the respondents’ case in that they do not represent a clear and consistent line of authority to the contrary effect. Indeed, we consider that, taken as a whole, the authorities favour the respondents’ case.’ [paragraph 46]
