Supreme Court confirms secret commission held on trust by agent for buyer

Supreme Court confirms secret commission held on trust by agent for buyer

What is the remedy for a buyer whose agent acquires a secret commission from the seller? The Supreme Court decided that a bribe or secret commission accepted by an agent is held on trust for his principal. Here the secret commission was obtained by the agent of the buyers of the Monte Carlo Grand Hotel.

Original news

In FHR European Ventures v Cedar Capital [2013] UKSC 45, an agent received a ‘secret commission’ from the seller of the Monte Carlo Grand Hotel where his principal had bought it at a price negotiated on his behalf by the agent.

An investor group bought the share capital in the hotel. The price was negotiated by Cedar who, without notifying the buyers, had entered into an exclusive brokerage agreement with the seller, earning it 10 million euros in commission from the seller.

The High Court had decided that the buyers were only entitled to a personal remedy of an account in equity. The Court of Appeal allowed the buyers’ appeal deciding that they were entitled to the proprietary remedy of a constructive trust in the commission paid to Cedar.

The Supreme Court dismissed the appeal against the Court of Appeal’s decision.

What is the law in this area?

Where an agent acquires a benefit which came to his notice as a result of his fiduciary position, or pu

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About the author:
Joanna is a commercial property specialist. Prior to joining the LexisPSL Property team, she was a transactional lawyer. She qualified in 1995 at Shoosmiths and subsequently worked at Nabarro, Charles Russell, Bircham Dyson Bell and Pemberton Greenish. She has wide-ranging experience of all non-contentious property transactions, with a particular emphasis on landlord and tenant work.