AAH Pharmaceuticals Ltd v Birdi & Ors

Summary judgment may be given in a fraud case where the material facts are admitted or follow inexorably from the evidence, and no alternative findings could realistically arise at trial. An employee does not owe fiduciary duties merely because of the employment relationship. A fiduciary duty arises where the employee’s particular obligations place him under a duty of single-minded loyalty, including where he receives secret profits or money belonging to the employer. Knowing receipt turns on whether the recipient’s knowledge makes retention of the benefit unconscionable. A company’s directing mind and will may be identified by examining beneficial ownership, control of assets, instructions, representation and the absence of any genuine alternative management.

The claimant sought summary judgment for £2,072,280.26 against its former commercial development manager and two Panamanian companies beneficially owned by him. The money had been diverted through undisclosed arrangements with a supplier, resulting in payments to the companies.

The employee admitted breach of contract and made substantial interim payments, but disputed liability in fiduciary duty, unjust enrichment and conspiracy. The companies denied liability for knowing receipt, dishonest assistance, unjust enrichment and conspiracy. The central issues were whether the employee owed a fiduciary duty, whether the facts justified summary judgment despite allegations of fraud, and whether he was the companies’ directing mind and will.

1. Summary judgment. The court applied the requirement of a real, rather than fanciful, prospect of success. The court need not accept unsupported factual assertions without analysis, and a fraud claim may be determined summarily where the evidence is admitted, clear and incapable of producing any other findings. The approach in Wrexham Association Football Club Ltd v Crucialmove Ltd [2006] EWCA Civ 237 was applicable. (paras [14]–[20])
2. Fiduciary duty. Employment alone does not create a fiduciary relationship. However, an employee who receives secret profits or money belonging to the employer is under a fiduciary obligation to account. More generally, the question is whether the employee’s particular duties placed him in a position where he had to act solely in the employer’s interests. The employee’s senior role, access to confidential information and sole responsibility for the relevant supplier arrangements established that duty. (paras [22]–[28])
3. Unjust enrichment. The payments resulted from the supplier’s admitted mistake that the companies were connected with the claimant. The employee’s resulting enrichment was unjust because he had engineered that mistaken belief and had no entitlement to the money. (para [29])
4. Knowing receipt and dishonest assistance. Applying BCCI v Akindele [2001] Ch 437, retention was unconscionable on the employee’s knowledge. He was the companies’ sole determining mind and will, having regard to his beneficial ownership, control of their bank accounts, instructions concerning the payments, representation of the companies and the absence of any genuine alternative management. The claims against the companies therefore succeeded. (paras [34]–[38])
5. The court made no finding on the conspiracy claims because the issue whether one person could conspire with companies of which he was sole beneficiary required further argument and was unnecessary to the result. Judgment was entered for the claimant for the full sum claimed, with interest and costs to be dealt with separately. (paras [30]–[32], [39]–[41])