Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd

An introducing broker may owe fiduciary duties to clients where they repose trust and confidence in it, even though the broker lacks authority to contract on their behalf. A failure to disclose the broker’s remuneration may breach that duty where the clients have not given informed consent.

However, the broker’s own fiduciary breach may prevent recovery of substantial damages or restitution for a counterparty’s breach of contract if the award would enable the broker to profit from that breach. A contractual obligation to disclose trading information may still be enforceable, but the broker may recover only nominal damages.

Medsted introduced wealthy clients to Collins Stewart, later renamed Canaccord Genuity Wealth (International), for trading in CFDs and other financial products. Collins Stewart paid Medsted agreed shares of commissions and funding rebates.

Medsted alleged that Collins Stewart breached their agreement by trading secretly with introduced clients and withholding the information needed to calculate Medsted’s remuneration. The court also considered which contractual terms governed, whether Medsted owed fiduciary duties to its clients, whether particular clients had been introduced through Medsted, and whether Medsted could recover debt, damages, restitution or a quantum meruit.

1. Contractual terms. The parties’ terms were determined objectively. Collins Stewart accepted Medsted’s introducing agreement by conduct because its dealings with introduced clients and its regular payment of commissions and rebates were sufficiently explained only by acceptance of those terms. A provision for signatures did not itself reserve a right to sign before being bound. The later acceptance of Collins Stewart’s terms was conditional upon a non-circumvention agreement; since none was signed, the parties remained bound by Medsted’s terms.
2. Non-circumvention and disclosure. The solicitation clause principally restrained post-termination solicitation and did not prevent Collins Stewart from trading with clients during the agreement. Independently of the precise contractual form, however, the parties’ agreement required Collins Stewart to disclose trading information concerning introduced clients so that Medsted could calculate its commission and rebates. Collins Stewart breached that obligation by concealing the relevant accounts and trades.
3. Fiduciary duty. An introducing broker may owe fiduciary duties despite lacking authority to affect the client’s legal relations with the financial institution. The clients relied on Medsted to introduce them to a regulated institution and reposed trust and confidence in it. Medsted breached that duty by failing to disclose the split of charges and its remuneration. The clients had not given informed consent.
4. Implied terms. No term requiring Medsted to disclose the split was implied. Although such a term might arguably satisfy the business-efficacy or obviousness tests, the parties’ express discussion on 13 May 2009 showed how the arrangement was to operate and justified caution before implying a contrary term.
5. Relief. The concealed trading caused loss because Collins Stewart’s breach disabled Medsted from claiming its contractual remuneration. Nevertheless, the court would not assist Medsted to profit from its own breach of fiduciary duty. Medsted therefore recovered only nominal damages. No debt was due because Collins Stewart had not received the relevant commission or rebates on the requested terms, and any restitutionary or quantum-meruit claim failed for the same reason.
6. Only certain corporate clients connected with Mr Komninos or Ioannis were treated as introduced through Medsted. Clients introduced directly by Mr Komninos were not treated as Medsted introductions merely because he had previously acted as a sub-introducing broker.

Not stated in the judgment.