Bribe and prejudice — Supreme Court decision on bribes or secret commissions received by fiduciaries
The Supreme Court’s recent judgment in FHR European Ventures LLP and others v Cedar Capital Partners LLC clarifies the treatment of bribes or secret commissions received by agents or those in fiduciary positions. The question before the court was whether a bribe or secret commission received by an agent was held by that agent on constructive trust for his principal or whether the principal’s remedy lay in a claim for equitable compensation for the value of the bribe or commission. In circumstances where a bribe or commission is held on trust, the principal’s claim is proprietary, whereas if the principal’s claim is for equitable compensation, his claim is not proprietary but rather a personal claim against the agent or fiduciary.
In the judgment of the court, delivered by Lord Neuberger, it was noted that the position was previously unclear, following more than 200 years of inconsistent judicial decisions on the issue. However, his Lordship concluded that, taken as a whole, the authorities (along with ‘arguments based on principle and practicality’) supported FHR’s case that bribes or secret commissions paid to fiduciaries were held on trust for the benefit of the principal. Furthermore, his Lordship made it clear that previous authorities often referred to in support of the contrary position (i.e. that bribes gave rise to a claim for equitable compensation only) should be treated as overruled.
In December 2004, the respondent, FHR, purchased the issued share capital of a Monte Carlo hotel company for €211.5m (£168m). The appellant, Cedar, which provides consultancy services to the hotel industry, acted as FHR’s agent in negotiating the purchase, and thus owed fiduciary duties to FHR. Cedar had also entered into an exclusive brokerage agreement with the seller, pursuant to which the seller was to pay Cedar €10m following the sale of the hotel company. The €10m brokerage fee was paid to Cedar in January 2005…
Click on the link below to read the rest of the Dentons briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from The Lawyer
Analysis from The Lawyer
So last week it emerged that Dentons, already the biggest law firm in the world, is currently in merger negotiations with 21 firms around the globe.
Life in Canada is getting harder for firms as commodities prices fall and work volumes slow