Supreme Court corrects “wrong turn” in English law, holding that bribes received by an agent are held on trust for the principal

Who is the rightful owner of a bribe?  Is a bribe or secret commission received by an agent “held on trust” for his principal?  Or is the principal’s claim against the agent a personal one for equitable compensation equal to the value of the bribe or commission?  The issue is of critical importance.  It affects everything in litigation against dishonest agents, from the nature of the injunctive relief available at the outset to the rights in his insolvency.  Perhaps most importantly of all, it affects whether the bribe can be “traced” into the hands of third parties and recovered as “trust” property (including claims based upon knowing receipt). 

After over 100 years of judicial wrangling and academic debate, the Supreme Court decided last week that bribes and secret commissions are held on trust by an agent for his principal: FHR European Ventures LLP and others (Respondents) v Cedar Capital Partners LLC (Appellant) [2014] UKSC 45. In doing so, the Supreme Court overturned various well-known authorities (including Lister v Stubbs and Sinclair v Versailles) and aligned English law with several jurisdictions which long ago broadened the availability of proprietary remedies.

The implications are significant.  Most importantly, the principal can claim a proprietary remedy against the bribe/secret commission itself, rather than a personal one against the defaulting agent.  Click here for more on this decision from Robert Hunter and Tom Wood.