Rahme v Smith & Williamson Trust Corporation Ltd

A fiduciary who acts in a clear conflict with the interests of the principal forfeits the right to remuneration under the relevant arrangement. The principal may recover remuneration already paid, without allowing the fiduciary credit for services performed, and may also recover any secret commission. The court may assess the evidence with particular care where a claim is first advanced against a deceased person who cannot rebut it. Where a witness’s truthfulness is not challenged in cross-examination, fairness ordinarily prevents the court from finding that the evidence was deliberately fabricated.

The claimant brought numerous claims against the estate of Stephen Voice, including claims for rent, loans, damage to property, consumption of alcoholic drinks and a 25 per cent share of the proceeds of Voice’s divorce settlement. The defendant counterclaimed for repayment of money paid by Voice and for sums paid to the claimant by Voice’s former wife.

The central issues were whether the documents relied on by the claimant were genuine, what sums were due under the parties’ arrangements, and whether the claimant had breached contractual and fiduciary duties by negotiating Voice’s financial settlement while accepting undisclosed payments from Voice’s former wife.

1. The claim and counterclaim. The claim was dismissed in its entirety. Judgment was given on the counterclaim for £695,000, £225,000 and £15,000. Interest and costs were reserved for further submissions.
2. Factual findings. The agreement under which the claimant was to receive 25 per cent of Voice’s divorce settlement was genuine. The claimant received £695,000 towards the £696,250 entitlement. The additional tenancy agreements, promissory notes and acknowledgments relied upon by the claimant were not genuine or did not create separate enforceable liabilities. Any entitlement relating to rent, damage, drinks and modest loans was subsumed within the 25 per cent arrangement.
3. Fiduciary breach. The claimant owed contractual and fiduciary duties to act for Voice and in Voice’s interests in negotiating with Voice’s former wife. Agreeing with her to limit the settlement to £2.5 million created a clear conflict with the duty to maximise Voice’s settlement.
4. Consequences. Applying the principles restated in Imageview Management Ltd v Jack [2009] EWCA Civ 63, and supported by Andrews v Ramsay [1903] 2 KB 635 and Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119, the claimant forfeited all remuneration under the arrangement. He had to repay the £695,000 already received, without credit for accommodation, services, loans or other benefits provided. He also had to pay the £225,000 secret commission and the £15,000 payment received from Voice’s former wife.
5. Evidence. A claim made only after the alleged debtor’s death required careful scrutiny, while leaving the civil standard of proof unchanged. The court also applied the rule concerning the need to challenge a witness’s account in cross-examination before inviting a finding that it was deliberately untrue, as discussed in Markem Corp v Zipher Ltd [2005] RPC 761 and Browne v Dunn (1894) 6 R 67.