Secret commissions and bribes: recovering a bribe paid to an agent
Whether a bribe or secret commission obtained by an agent is held by the agent on trust for his principal, or whether the principal has only a right to equitable compensation in that amount, was recently considered by the Supreme Court in FHR European Ventures LLP v Cedar Capital Partners.
This question, which the judgment conceded was ‘rather technical sounding’, does have far-reaching consequences. If the agent’s bribe or commission is held on trust for his principal, then the principal has a proprietary right in it, and accordingly can trace in equity, allowing him to follow the money in a bid to reclaim it. In the event of the agent’s insolvency, the principal would also rank above the agent’s unsecured creditors.
By contrast, if the principal is entitled only to equitable compensation, then there is no proprietary interest, and the principal cannot trace the money in equity. Lord Neuberger, delivering the judgment of the court, notes that this is the case ‘unless we develop the law of equitable tracing beyond its current boundaries’, but this possibility was not considered any further. In the event of the agent’s insolvency, the principal would rank pari passu with the other unsecured creditors…
Click on the link below to read the rest of the Winckworth Sherwood 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 Winckworth Sherwood
News from The Lawyer
Briefings from Winckworth Sherwood
The NPPG includes a proposal that a financial credit should be applied to affordable housing contributions where buildings are brought back into use or demolished in order to allow redevelopment.
Inflation has, in recent years, occupied an almost permanent slot in our news headlines.