In an important decision which tackled the thorny issue of bribery in the commercial context, the Supreme Court has ruled that agents who received payment from both sides in negotiations for the purchase of a luxury hotel must account in full for their Euros 10 million ill-gotten gain.
The agents had been instructed to act for the buyers in negotiating the purchase, which ultimately went through at a price of more than Euros 200 million. However, the agents had also entered into an exclusive agreement with the sellers who paid them a ‘bribe or secret commission’ of Euros 10 million on completion of the deal.
A judge subsequently found that the agents had breached the fiduciary duty that they owed to the buyers in failing to obtain their fully informed consent to the payment of the fee. However, the judge ruled that the buyers had only an equitable, rather than a proprietary, interest in the Euros 10 million. That was a matter of importance as a proprietary interest would have given the buyers priority over unsecured creditors in the event that the agents became insolvent.
The Court of Appeal subsequently allowed the buyers’ appeal and upheld their proprietary interest in the fee. In dismissing the agents’ challenge to that decision, the Supreme Court found that, by reason of their breach of fiduciary duty, they had received the fee on behalf of the buyers and held it on trust for the same.