Sinclair Investment Holdings SA v Versailles Trade Finance Ltd & Ors

A dishonest assistant in a breach of trust is not, merely by reason of that assistance, a fiduciary or trustee. The ordinary remedy is personal compensation for loss caused by the assistance. The assistant’s profits do not become trust property unless the claim is property-based, such as a proprietary claim arising from receipt or use of the claimant’s property.

A person’s assurances that he will oversee a company’s business do not necessarily create a separate fiduciary duty to an investor. The court examines the commercial substance of the relationship and the purpose of the assurances.

Sinclair advanced £2.35m to Trading Partners Limited on terms requiring the money to be used in trade finance transactions or held on trust. The money was instead used in a fraudulent cross-firing scheme involving Versailles Trade Finance Limited. Anthony Cushnie, who controlled the relevant companies, admitted liability for dishonest assistance in Trading Partners Limited’s breach of trust.

Sinclair sought a proprietary share of £5.2m held by receivers, claiming that the money represented profits obtained through Cushnie’s alleged personal fiduciary breach or, alternatively, through his dishonest assistance. The central issues were whether Cushnie owed Sinclair a personal fiduciary duty and whether a dishonest assistant could hold profits from the assistance on constructive trust.

1. The claim was dismissed. Sinclair failed to establish a proprietary entitlement to the £5.2m held by the receivers.
2. Although Cushnie’s assurances materially induced Sinclair’s investment, they were a sales representation that Trading Partners Limited would operate as a Cushnie-controlled business. They did not amount to an undertaking of loyalty or fidelity creating a separate personal fiduciary duty to Sinclair. The alleged fiduciary relationship was an artificial characterisation of the commercial arrangement.
3. Reliance would nevertheless have been established if a fiduciary duty could otherwise have arisen. It was sufficient that Cushnie’s assurances were made to Sinclair’s adviser, who relied on them in recommending the investment. Separate proof that the assurances were relayed to, and independently relied upon by, Sinclair’s directors was unnecessary.
4. Trading Partners Limited held Sinclair’s money on trust and Cushnie dishonestly assisted its breach of trust. However, accessory liability is personal and not property-based. A dishonest assistant is not a fiduciary merely because he is described as a constructive trustee, and the usual remedy is compensation for loss caused to the trust estate.
5. Identifiable profits obtained by a fiduciary in breach of fiduciary duty may be held on constructive trust for the principal, as illustrated by Boardman and Another v Phipps [1967] 2 AC 46. That principle does not ordinarily extend to profits made by a non-fiduciary dishonest assistant whose gains are not derived from the claimant’s property.
6. The court rejected the proprietary claim to profits from the share sales. A remedial constructive trust is not recognised as a means of converting a personal claim for an account or compensation into a proprietary interest. Sinclair had also pursued damages against Cushnie and could not use the present proceedings to obtain a further proprietary remedy.
7. Had it been necessary to decide the issue, the receivers would have been good-faith purchasers for value without notice of any trust in Sinclair’s favour. The court made no final quantification findings because the competing claim by Trading Partners Limited had not been tried.

The judgment records an earlier interlocutory appeal in the same litigation. The Court of Appeal dismissed the defendants’ appeal against refusal to strike out Sinclair’s claim: [2005] EWCA Civ 722; [2006] 1 BCLC 60. The present High Court trial subsequently dismissed the claim.