FM Capital Partners Ltd v Marino & Ors

A claimant may appropriate settlement recoveries between concurrent claims where the separate claim is not obviously unsustainable. The court may accept a reasonable pro rata allocation without undertaking an unreliable assessment of incomplete claims.

A fiduciary’s bribe is held on constructive trust for the principal from receipt, even where the money is routed through a company controlled by the fiduciary. A claimant may elect between an account of profits and equitable compensation against an individual defendant, but the election need not be identical against defendants whose liabilities have different legal foundations, provided double recovery is prevented.

The judgment addressed consequentials following the claimant’s successful liability claims concerning bribery, secret commissions, breaches of fiduciary duty and dishonest assistance. Issues included allocation of settlements, interest, costs, permission to appeal, proprietary relief, election between remedies, the identity of the person entitled to an account of profits, quantification of equitable compensation and transfer of shares acquired with bribe money.

The principal questions were how recoveries should be allocated between completed and incomplete phases of litigation, whether money paid to controlled companies remained subject to a proprietary claim, and whether inconsistent remedies had to be elected consistently against all defendants.

1. Allocation. The claimant’s pro rata appropriation of settlement recoveries between concurrent claims was accepted. The court must do the best it can with the available material. It need not postpone allocation until an incomplete claim has been fully assessed. Following Barings Plc (In Liquidation) v Coopers & Lybrand [2003] P.N.L.R. 34 and Otkritie International Investment Management Ltd v Urumov [2014] EWHC 755 (Comm), the relevant threshold was whether the separate claim was obviously unsustainable. The claims passed that threshold. Costs attributable to recoveries were reduced to 70%, and outstanding agreed payments were brought into account.
2. Costs and appeal. The claimant was entitled to indemnity costs as the overall successful party. Costs were not reduced merely because some issues failed. The defendants were ordered to make payments on account of costs of US$1.5 million and US$1 million. Permission to appeal was refused.
3. Proprietary claim. The bribe money was impressed with a constructive trust for the claimant upon receipt. Routing the money through Ironfly or Leopard did not defeat the claim. The companies were not bona fide purchasers for value without notice. The reasoning in FHR European Ventures LLP v Mankarious [2015] AC 250 (SC) supported a distinction between a proprietary claim arising from the fiduciary’s bribery and knowing receipt.
4. Election. A claimant cannot obtain both an account of profits and equitable compensation against the same defendant for the same wrong. However, the election need not be consistent between defendants where their liabilities arise from different relationships, including fiduciary liability and dishonest assistance. The controlling principle is genuine inconsistency and the prohibition of overcompensation.
5. Accounts and compensation. The claimant was entitled to an account of Mr Ohmura’s own profits, but not profits received by Conquest Cayman where the identification between them was insufficient. The amount of equitable compensation remained to be assessed by an account because the judgment had not quantified the claimant’s liability to LAP. The claimant was entitled to transfer of shares acquired with bribe money and their fruits, without a deduction for the fiduciary’s skill or work.

This was a first-instance consequential judgment following the court’s liability judgment delivered on 11 July 2018. Permission to appeal was refused to both relevant defendants.