FM Capital Partners Ltd v Marino & Ors

A director who secretly receives commissions generated from transactions undertaken for the company breaches the strict no-conflict, no-profit and loyalty duties, unless fully informed consent has been obtained. A third party dishonestly assists that breach where the assistance is more than minimal and, knowing or deliberately avoiding the relevant facts, the third party's conduct is dishonest by ordinary standards.

A civil bribe includes a secret inducement creating an actual or potential conflict in an agent’s loyalty. Neither a contractual relationship with the principal nor direct payment by the briber is essential. Unlawful-means conspiracy additionally requires an intention to injure the claimant. Foresight of probable loss is insufficient.

FM Capital Partners Ltd managed assets belonging to a Libyan sovereign wealth fund. It alleged that its chief executive and director, Mr Marino, and an external structured-products specialist, Mr Ohmura, participated in arrangements through which substantial undisclosed commissions were extracted from investments and shorter-term structured-product trades.

The Phase I trial concerned breach of directors’ and fiduciary duties, dishonest assistance, knowing receipt, bribery, unlawful-means conspiracy, limitation and the governing law of the claims against Mr Ohmura. A later Phase II trial was reserved for separate investment-loss and fee claims.

The central questions were whether the commissions were authorised, whether the defendants acted dishonestly, whether FMCP had suffered the loss required for conspiracy, and whether English or Swiss law governed the claims against Mr Ohmura.

1. The claim succeeded in part. Mr Marino was liable for breach of fiduciary duty, dishonest assistance and bribery in respect of every head advanced against him. Mr Ohmura was liable for dishonest assistance and bribery in respect of every head advanced against him. The remedies required further submissions.

2. The alleged pre-incorporation mandate neither conferred contractual authority over the relevant assets nor authorised personal introducer commissions. The commissions received through the directors’ private companies therefore engaged the strict no-conflict and no-profit rules and the duty of loyalty under sections 172, 175 and 176 of the Companies Act 2006. The directors also failed to disclose their interests and misconduct. Fully informed consent, board authorisation, shareholder ratification and unanimous informal consent were not established. Dishonest conduct in fraud of the company was incapable of authorisation or ratification.

3. The sole civil standard of proof was the balance of probabilities. Seriousness did not create a heightened standard, although inherent probability remained part of evaluating the evidence. Applying the dishonesty test in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67, both active defendants knew, or deliberately avoided recognising, the material facts. Their participation was also dishonest by the standards of ordinary decent people. Mr Ohmura’s assistance was more than minimal because he facilitated the transactions, concealed the directors’ participation and administered the commission payments.

4. The bribery claims succeeded. A payment made through a company may constitute a bribe where the defendant procures it. A contractual nexus between payer and principal is unnecessary. It is sufficient that the payment is made in dealings with the principal and creates an actual or potential conflict in the agent’s loyalty.

5. The conspiracy claim failed. Although unlawful acts, combinations concerning individual transactions and some loss were established, the defendants were not proved to have intended injury to FMCP. Foresight that FMCP would probably suffer some loss did not meet the required mental element, and FMCP’s loss was not inseparably linked to the defendants’ gains.

6. The claims against Mr Ohmura were governed by English law under article 4 of the Rome II Regulation. The relevant damage was FMCP’s non-receipt in England of commissions which, on its case, should have been paid there. The claims were not manifestly more closely connected with Switzerland. Deliberate concealment also postponed limitation under section 32 of the Limitation Act 1980.

This was a first-instance Phase I trial. By a direction of Andrew Baker J dated 20 December 2016, separate claims concerning the loss of capital protection and the extraction of other fees were reserved for a later Phase II trial.