I would agree that it is potentially a significant distinction.  It suggests that one case can be regarded as a case of interceptive subtraction, whereby the secret commission effectively reflects a sum that the agent would have otherwise have been able to extract for the benefit of the principal.  I think there would be much to say for drawing the line between cases involving subtraction and those that do not.  However, I see a couple of problems with it.

(1)    Unfortunately, the distinctions generally favoured for allowing proprietary relief for some wrongs but not others, such as “deemed agency gains” and “opportunities belonging to the company”, do not seem to track this distinction.

(2)    I am dubious about the reading of the facts in Lister v Stubbs that allows it to be distinguished on this basis. There is a passing mention of the defendant being empowered to procure goods at “market prices”.  I think, however, that perhaps too much has been read into this.  Surely the defendant was expected to get the best price the market would support for the type of bulk orders he was making.  Is there really anything in the account of the facts in Lister that rules out treating it as a case involving a subtraction by virtue of the defendant paying too much for the goods he was purchasing for the principal and then receiving a kick back to reflect that excess.  I think the remark about the “absence of discretion in agreeing prices” assumes too much.  Is it really likely that the defendant was not supposed to get the best discount that he could negotiate?

 I am baffled by the remark that follows “and that there was no evidence or indeed allegation that the goods were purchased at less than market value.” Surely any relevant allegation would have been that the defendant had paid too much for the goods he way buying and this excess effectively financed the secret commission he received in return.  The court in Lister did not analyze the case in these terms one way or the other.  I think it assumes too much to conclude that the facts would not have supported such an analysis.

Craig Rotherham

University of Nottingham

Dr. Tsachi Keren-Paz

School of Law

Keele University

Staffordshire ST5 5BG

England

Office: CBC 2.015

Phone: 01782 734358

Email: t.keren-paz@law.keele.ac.uk

http://www.keele.ac.uk/law/staff/academicstaff/tsachikeren-paz/

Putting aside the difficult question whether a constructive trust should always automatically arise in relation to the identifiable fruits of profiting from breach of fiduciary position, in my respectful view the Court of Appeal in FHR has quite misunderstood the basis of the "business opportunity" constructive trust cases. It is also I believe not possible to reconcile on any rational ground the holding in this case with either Tyrrell v Bank of London or Lister v Stubbs, by which authorities the Court expressly accepted it was bound.

 

The trust remedy in the business opportunity cases is in effect a supplement to specific performance and the cases turn on the subject matter of the trust having particular relevance to the principal's business. This is also the explanation for many other species of constructive trust. Unless one adopts the view that one should get specific performance of even a money obligation (as Att-Gen for HK v Reid seemed to do), a mere side deal of the sort in FHR could not qualify, especially when the side deal in that case did involve only money.

 

Tyrrell is almost on all fours with FHR. There was a business opportunity in that case in the form of a building, which the House of Lords held was held on trust for the principal (perhaps unnecessarily because the plaintiff had before trial got ownership of the building). But there was also a side benefit, in that Tyrrell (solicitor to the promoters of the Bank) as part of the vendor's inducement to encourage the Bank to acquire the building was cut into acquiring the land that was contiguous to the building and made a substantial gain by acquiring that interest. It was held, reversing Romilly MR, that there could be no trust of this contiguous land because the Bank had no interest in acquiring it. What is less clear is whether the Court held Tyrrell accountable at all for the profit on this land. Having analysed (from the House of Lords' archives) the original pleadings and the case on appeal for both the appellant and the respondent, and all the evidence filed with the appeal documents, it is clear enough that the Bank did claim that the side benefit was corruptly received, and that the House did award a form of account of profits in respect of it. I shall be presenting a detailed analysis of Tyrrell in a paper to be given in February at the University of Nottingham. I hope to show that Lord Millett ([2012] CLJ 583) and P McGrath ([2012]LMCLQ 516) have not properly understood the case.

 

As for Lister, the only obvious point of difference seems to be that in FHR there was an express contract to pay the commission, whereas in Lister the secret commissions were simply cash payments. This cannot be a sound point of distinction. It is possible to infer that Etherton C and Lewison LJ also thought that Lister was flawed since the “business opportunity” argument and case law had not been considered, but that requires a finding that Lister was wrongly decided.

 

This is not to deny that there are other cases which might support a broader role for the constructive trust than Tyrrell and Lister.

 

Peter Watts

The University of Auckland

====

This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to <listserv@lists.mcgill.ca>. To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to <enrichment@lists.mcgill.ca>. The list is run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.

-- 

Dr. Tsachi Keren-Paz

School of Law

Keele University

Staffordshire ST5 5BG

England

Office: CBC 2.015

Phone: 01782 734358

Email: t.keren-paz@law.keele.ac.uk

http://www.keele.ac.uk/law/staff/academicstaff/tsachikeren-paz/

====

This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to <listserv@lists.mcgill.ca>. To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to <enrichment@lists.mcgill.ca>. The list is run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.