FM Capital Partners Ltd v Marino & Ors

Equitable compensation for dishonest assistance may reflect the full loss caused by the assisted breach. A contractual entitlement to fees does not prevent application of the rule that a fiduciary who has acted dishonestly cannot retain remuneration arising from the transaction.

Recoveries are collateral where they arise from an independent proprietary claim without concurrent or overlapping liability. Such recoveries need not be brought into account. Recoveries relating to the same or overlapping liability must be credited.

Equitable compensation is distinct from common-law damages. Compound interest may be awarded against a non-fiduciary dishonest assistant who dishonestly helped to misapply fiduciary assets.

The claimant sought consequential directions following an earlier judgment in which the third defendant had been found liable as a dishonest assistant. The issues concerned the basis on which equitable compensation should be assessed, the effect of recoveries from other parties, and whether interest should be simple or compound.

The court considered whether the claimant’s liability to the underlying claimant should be recoverable in full, whether notional additional fees should be deducted, whether particular recoveries were collateral, and whether the account should be taken by a Master.

1. Assessment. The primary basis of assessment was appropriate. The court had already found liability and was not required at the quantum stage to determine precisely how the claimant’s liability to the underlying claimant might have been pleaded. The earlier finding that loss was less than the full commissions concerned the alternative basis of loss.
2. Remuneration. The court applied Imageview v Jack, [2009] 1 Lloyd's Rep. 436. Although the present case involved a contractual fee structure, the relevant feature was the dishonest breach of fiduciary duty. The notional fees were therefore not brought into account.
3. Alternative basis. The court concluded that the underlying claimant would probably have sanctioned a market-standard introducer’s fee. There was no evidential basis for reducing the resulting gain by a possible bonus payment. This issue was academic because the primary basis governed.
4. Recoveries. Applying the collateral-benefit analysis discussed in Tiuta International Ltd v De Villiers Surveyors Ltd, [2017] UKSC 77, and Swynson Ltd v Lowick Rose LLP, [2017] 2 WLR 1161, now reported at [2018] AC 313, recoveries from the third party’s traceable proceeds were collateral. They arose from an independent proprietary claim and involved no concurrent or overlapping liability. Recoveries from another defendant were likewise collateral. Any recoveries from the principal wrongdoer concerned the same or overlapping liability and had to be credited.
5. Interest. Equitable compensation and damages are distinct. Following Novoship v Nikitin, [2015] QB 499, and Central Bank of Ecuador v Conticorp SA, [2015] UKPC 11, compound interest could be awarded against a non-fiduciary dishonest assistant. The defendant had dishonestly assisted fiduciaries to misapply assets, so the discretion was exercised in favour of compound interest.
6. No further directions were required. The parties were invited to submit an order reflecting the findings and completing the interest calculations.

First-instance decision on consequential and quantum issues following an earlier judgment in the same proceedings. No appellate decision is stated in the judgment.