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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> FHR European Ventures Llp & Ors v Mankarious & Ors [2011] EWHC 2999 (Ch) (15 November 2011) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2011/2999.html Cite as: [2011] EWHC 2999 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL (sitting at) The Law Courts, Quayside, Newcastle upon Tyne, NE1 3LA |
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B e f o r e :
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(1) FHR European Ventures LLP (2) Kingdom Hotels International (3) Kingdom 5-KR-176, Ltd (4) Fairmont Hotels and Resorts Inc (5) Fairmont Dubai Holdings Dubai (Bermuda) Ltd (6) Bank of Scotland PLC (7) Uberior Ventures Ltd |
Claimants |
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- and - |
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(1) Ramsey Neil Mankarious (2) Cedar Capital Partners LLC (3) Cedar Capital Partners Ltd |
Defendants |
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Mr Ian Mill QC (instructed by Farrer & Co LLP) for the Defendants
Hearing date: 1 November 2011
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Crown Copyright ©
Mr Justice Simon:
The Costs issue
The form of the Declaration
The Defendants' version:
It is declared that the Second Defendant, having failed to obtain the fully informed consent of any of the Claimants to the commission payment made to it by Monte Carlo Grand Hotel Limited ('MCGH') of the sum of 10 million in respect of the sale by MCGH of a long leasehold interest in the Hotel in December 2004 to the First Claimant, is liable to account for that sum to the Claimants (to each of which it owed fiduciary duties) following its receipt by the Second Defendant on or about 7 January 2005.
Mr Mill conceded that there should be liberty to apply for directions in relation to any claim for additional relief.
The Claimants' version is rather shorter,
It is declared that the Second Defendant received the sum of 10 million from Monte Carlo Grand Hotel Limited on or about 7 January 2005 on constructive trust for the Claimants absolutely and is liable to account to the Claimants therefore.
The crucial question is whether the Declaration should refer to the sum of 10 million being held subject to a Constructive Trust.
... a beneficiary of a fiduciary's duties cannot claim a proprietary interest, but is entitled to an equitable account, in respect of any money or asset acquired by a fiduciary in breach of his duties to the beneficiary, unless the asset or money is or has been beneficially the property of the beneficiary, or the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.
89. For the reasons I have given, previous decisions of this court establish that a claimant cannot claim proprietary ownership of an asset purchased by the defaulting fiduciary with funds which, although they could not have been obtained if he had not enjoyed his fiduciary status, were not beneficially owned by the claimant or derived from opportunities beneficially owned by the claimant. However, those cases also establish that in such a case a claimant does not have a personal claim in equity to the funds. There is no case which appears to support the notion that such a personal claim entitles the claimant to claim the value of the asset (if it is greater than the amount of funds together with interest), and there are judicial indications which tend to militate against that notion.
As I see it, it is also apparent from Sinclair that a distinction is to be drawn between (a) the exploitation by a fiduciary of property or opportunities subject to fiduciary obligations and (b) other exploitation by a fiduciary of his position. It can be seen from Lord Neuberger's judgment that an asset or money which a fiduciary has 'acquired in breach of his duties to the beneficiary' (see paragraph 88 of the judgment) or 'could have obtained if he had not enjoyed his fiduciary position' (paragraph 89 of the judgment) will not necessarily be held on trust for the beneficiary of the fiduciary's duties. The beneficiary cannot claim a proprietary interest 'unless the asset or money is or has been beneficially the property of the beneficiary or the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary' (paragraph 88 of the judgment).
There are undoubtedly authorities suggesting that proprietary claims can be made in respect of property obtained by the diversion of opportunities (in particular, maturing business opportunities) (see e.g Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), at paragraphs 1342 1344, 1355 and 1356). I am not aware, however, of any case in which an opportunity to obtain a reduced price has been considered a relevant opportunity for this purpose. In any event, I do not think that a bribe or secret commission is to be viewed as the diversion of an opportunity to obtain a reduced price. In Sinclair, Lord Neuberger said that there is a 'fundamental distinction between (i) a fiduciary enriching himself by depriving a claimant of an asset and (ii) a fiduciary enriching himself by doing a wrong to the claimant' and that 'a bribe paid to a fiduciary could not possibly be said to be an asset which the fiduciary was under a duty to take for the beneficiary'. A bribe is to be seen as something the fiduciary obtained by doing a wrong rather that by depriving the beneficiary of an opportunity. Were the position otherwise, beneficiaries would (contrary to the view of the Court of Appeal in Sinclair) very frequently have proprietary interests in bribes and secret commissions since they could commonly be said to have been derived from opportunities to obtain a reduced price (or, where an asset is being sold, an increased one), and cases approved in Sinclair could have been expected to be decided differently. As Lord Neuberger said in Sinclair (at paragraph 55), the money at issue in such cases 'was not money which was part of the assets subject to [the fiduciary's] duties, or derived from such assets.'