FHR EUROPEAN VENTURES LLP V CEDAR CAPITAL PARTNERS LLC

[2014] UKSC 45, Supreme Court, Lord Neuberger, Lord Mance, Lord Sumption, Lord Carnwath, Lord Toulson, Lord Hodge and Lord Collins, 16 July 2014

Agency - Secret commission earned by agent - Whether principal entitled to proprietary or personal remedy - Constructive trust

Cedar Holdings, operated by the defendant, advised the claimant, the Investor Group, in relation to the purchase of the Monte Carlo Grand Hotel from MCGHSAM. Cedar entered into an agreement with MCGHSAM under which Cedar was to receive a fee of €10 million from MCGHSAM for securing a purchaser for the hotel. Cedar did not notify the Investor Group of that agreement. Cedar received its commission when the hotel was sold to the Investor Group in December 2004 for €211.5 million. It was found by the trial judge that Cedar had acted wrongfully in obtaining this secret commission. The sole question was whether the Investor Group was entitled to a proprietary remedy against Cedar (in which case the proceeds could be traced into assets purchased with the proceeds) or whether the Investor Group was only entitled to the personal remedy of an account in equity. The Supreme Court, resolving a conflict of authority running back for over a century, held that a bribe or secret commission obtained by an agent or other fiduciary was held on trust and not merely under a duty to account at common law.