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Case and Comment
FHR bought a long lease for [euro]211.5 million. Cedar Capital conducted the negotiations on FHR's behalf, but also received a [euro]10 million commission from the vendor. On becoming aware of this commission, FHR sought to recover it from Cedar Capital. As its negotiating agent, Cedar Capital owed fiduciary duties to FHR, and had not obtained FHR's fully informed consent to the commission. Cedar Capital therefore had to account to FHR for the commission. However, applying the Court of Appeal's decision in Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. [2011] EWCA Civ 347, [2012] Ch. 453, Simon J. held that the remedy was purely personal; FHR could not assert a proprietary constructive trust over the [euro]10 million: FHR European Ventures LLP v Mankarious [2011] EWHC 2999 (Ch). The Court of Appeal allowed an appeal as to remedy, distinguishing the facts from those in Sinclair v Versailles, but also casting some doubt on the correctness of that decision: [2013] EWCA Civ 17, [2014] Ch. 1. The Supreme Court was thus required to pass judgment on the voluminous debate as to whether English law should follow Lister & Co. v Stubbs (1890) 45 Ch.D. 1, or Attorney-General for Hong Kong v Reid [1994] 1 A.C. 324.
Delivering judgment less than a month after argument, the Supreme Court has now held that Lister v Stubbs was mistakenly decided and overruled Sinclair v Versailles, holding that "where an agent acquires a benefit which came to his notice as a result of his fiduciary position, or pursuant to an opportunity which results from his fiduciary position, the equitable rule ('the rule') is that he is to be treated as having acquired the benefit on behalf of his principal, so that it is beneficially owned by the principal": FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2014] 3 W.L.R. 535 at [7]. The Court of Appeal had, therefore, correctly found that FHR was entitled to a proprietary constructive trust over the [euro]10 million.
The authorities on this issue had been, to say the least, confused: "it is not possible to identify any plainly right or plainly wrong answer ... as a matter of pure legal...