FM Capital Partners Ltd v Marino & Ors

The Commercial Court (Cockerill J) held at Phase I that the claimant FM Capital Partners Ltd (FMCP) had established liability in respect of the payments at issue arising from structured-product transactions and notes issued by Julius Baer. The judge found that Mr Marino breached statutory directors' duties (ss.171-177 CA 2006 in particular ss.172, 175, 176 and 177) by receiving undisclosed commission payments taken from LAP's assets, and that he had acted dishonestly. Mr Ohmura was held liable for dishonest assistance and bribery in relation to a number of the payments because he either knew or was wilfully blind to the directors' breaches and actively assisted the routing and concealment of commissions.

The court rejected Mr Marino's principal defences based on (i) a pre‑incorporation "April Mandate" said to authorise personal introducer fees, and (ii) arguments of prior authorisation/ratification and relief under s.1157 CA 2006. The April Mandate was found not to cover the JB assets or the commissions in issue. Swiss law did not displace English law: the place of damage was held to be England and the Rome II Article 4(1)/(3) inquiry pointed to English law as the governing law.

Accordingly the court made findings of liability for breach of fiduciary duty, dishonest assistance and bribery against Mr Marino and findings of dishonest assistance and bribery against Mr Ohmura in respect of the payments considered at Phase I. The judge also found that FMCP had suffered some compensable loss, although not necessarily the full quantum of the payments claimed.

Background and parties. FM Capital Partners Ltd (FMCP) was the joint-venture vehicle (majority owned by Libya Africa Investment Portfolio, "LAP") managed by Mr Marino and Mr Bessot. LAP funds were invested in a sequence of structured products issued or managed by Julius Baer (GAIN, AMFC+, TRAC, TRAC+). Payments described as "amortization", "distribution" or introducer fees were routed to companies controlled by the defendants: Ironfly and Leopard (associated with Mr Marino and Mr Bessot) and Conquest (associated with Mr Ohmura). FMCP alleges these payments were secret commissions that reduced LAP's assets dollar-for-dollar.

Nature of the Phase I proceedings. The trial was limited to issues concerning the contested payments (the JB Notes commissions and the Structured Product Trades). Phase II, deferred, will address alleged wider losses (including loss arising from the forfeiture of capital protection on GAIN) and other fee extractions.

Relief sought. FMCP sought declarations and proprietary and personal remedies (account of profits, equitable compensation, damages and proprietary remedies) against the defendants for conspiracy to injure, dishonest assistance, knowing receipt, bribery and breaches of directors'/fiduciary duties in relation to the payments.

Issues framed by the court. The court set out and decided factual and legal issues including: authenticity and effect of the April Mandate; whether payments were authorised or disclosed; whether the defendants breached statutory directors' duties (ss.171-177 CA 2006); whether third parties (in particular Mr Ohmura) were liable for dishonest assistance or knowing receipt; whether payments constituted bribery (secret commissions to an agent "as such"); the proper law of the claims (Rome II Article 4) and Swiss-law issues as necessary; and limitation.

Evidence and procedure. The trial involved factual witnesses (FMCP's Mr Eltriki and Mr Ohmura) and experts (structured products and Swiss law). Both Mr Marino and Mr Bessot did not give live evidence; Mr Marino declined to rely on his witness statements. The judge considered documentary material, experts' joint memoranda and the PwC/BDO investigations.

Court's reasoning and findings. Key findings were: (i) the April Mandate did not authorise personal introducer commissions for the JB assets and was not apt to displace FMCP's role; (ii) FMCP's contractual documentation (NAA, FMCP SAA, IMAs and the TPMAA) and contemporaneous conduct pointed to FMCP being the recipient/manager of fees and that the JB Notes and many structured trades fell within FMCP's remit; (iii) Mr Marino accepted or received significant undisclosed payments routed through Ironfly and Leopard and failed to disclose them to FMCP or LAP, in breach of s.175 (no-conflict), s.176 (no-profit) and s.177 (duty to disclose), and he acted dishonestly; (iv) Mr Ohmura, who signed or negotiated many bank-side documents and who routed payments via Conquest, knew or was wilfully blind that payments were being made from LAP assets to benefit FMCP directors and assisted in concealment and distribution; (v) FMCP established liability in breach of fiduciary duty, dishonest assistance and bribery as summarised in the summary of conclusions; (vi) English law was the governing law (Rome II Article 4) because the damage was sustained in England; (vii) limitation did not bar FMCP's claims against Mr Ohmura because of deliberate concealment under s.32 Limitation Act 1980.

Subsidiary legal findings and context. The judgment reviews civil standards of proof (Re S-B, Re J, Otkritie) and applies the modern dishonesty test (Ivey). The court emphasised that fiduciary no-conflict/no-profit rules operate irrespective of benefit to the principal, honesty of the fiduciary, or fairness of the transaction, absent fully informed authorisation. The judge also analysed Swiss law issues and concluded they did not displace English law for the claims against Mr Ohmura.

At first instance the court found in Phase I that FM Capital Partners had established liability in respect of the contested secret commissions and structured-product payments. In particular: (i) Mr Marino breached his statutory and fiduciary duties (ss.171-177 CA 2006, notably ss.172, 175, 176 and 177), acted dishonestly and is liable for breach of fiduciary duty, dishonest assistance and bribery in respect of the payments examined in Phase I; (ii) Mr Ohmura was liable for dishonest assistance and bribery in respect of the payments examined in Phase I because he either knew or was wilfully blind to the directors' breaches and actively assisted their concealment and distribution of commissions; (iii) the April Mandate did not authorise the challenged payments; (iv) English law governs the claims (Rome II Article 4) and limitation did not bar FMCP's claims against Mr Ohmura because of deliberate concealment. The court therefore found the claimant's principal Phase I causes of action established against the defendants as summarised in the judgment (see paragraph 582 and the postscript on remedies), and directed further submissions on remedies and quantification in light of those findings.