Secret Commissions and Constructive Trusts: Yet Again!

摘要

Much has been written about fiduciaries and unauthorised profits following the Court of Appeal judgment in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd. The judgment by Lord Neuberger M.R. (as he then was) was predicted by Virgo to become "a classic of equitable jurisprudence". However, the judgment received much criticism elsewhere, both academic, and more recently in court decisions. Strong criticism came first in the Australian decision in Grimaldi v Chameleon Mining NL (No.2) [2012] FCAFC 6. Recently the Court of Appeal itself launched an attack in FHR European Ventures Ltd v Mankarious. In Mankarious the Court of Appeal posed three crucial questions which need resolving by the Supreme Court in order to ensure clarity and certainty in the law. This article will argue that Sinclair Investments should be considered erroneous in law, principle and policy. Perhaps controversially, the article will argue that a beneficiary should, as of right, have a proprietary interest in any unauthorised profit obtained by a fiduciary in breach of the no-profit rule, which remains a central tenet of the fiduciary obligations. This is, in essence, the ratio of the decision in Attorney General for Hong Kong v Reid, a controversial Privy Council decision which Virgo has described as "inconsistent with authority, principle and policy". With such a proprietary interest as recognised in Reid, the fiduciary becomes a constructive trustee over the profit, and holds it on trust for the beneficiary. This article will seek to provide some arguments on how the Supreme Court should answer the questions posed in Mankarious, namely that a constructive trust should be the appropriate remedy for breach of the no-profit rule, even if this means that the constructive trust, in these cases, takes on the hallmark of a remedial trust.