Dolphin Capital Partners Limited v DCI Advisors Limited

Fully-informed consent to a fiduciary benefit requires disclosure of the benefit with sufficient specificity. The court determines whether consent was given as a matter of fact, including by inference from disclosure followed by the principal’s non-objection. Materiality and counterfactual behaviour do not replace the requirement for full information.

The scope of disclosure depends on the fiduciary relationship and its contractual terms. Knowledge communicated to a principal’s solicitor may potentially be imputed to the principal, but the issue is fact-sensitive and ordinarily unsuitable for summary determination.

The claimant investment manager sued for unpaid fees and damages after the defendant client purported to terminate their Investment Management Agreement. The defendant counterclaimed for repayment, an account of profits and equitable relief, alleging that the claimant had obtained a secret benefit through a call option connected with the sale of a resort.

The defendant applied for reverse summary judgment and sought to strike out parts of the claim. The central issues were whether the call option had been disclosed to the defendant’s board, whether disclosure to the defendant’s solicitors could supply fully-informed consent by imputation of knowledge, and whether parts of the pleaded case were legally unsustainable.

1. Summary judgment. The defendant’s reverse summary judgment application was dismissed. The claimant had a real prospect of establishing at trial that the call option was disclosed at the defendant’s board meeting before execution of the sale documentation. The conflicting witness evidence and documentary omissions created a material dispute of fact.
2. Fully-informed consent. An agent or fiduciary ordinarily bears the burden of establishing that the principal gave fully-informed consent to the relevant benefit. Consent may be inferred from disclosure of the existence and nature of the benefit followed by the principal’s decision to proceed without objection. The benefit must be disclosed with proper specificity. Materiality and hypothetical counterfactual conduct do not answer this strict inquiry.
3. Scope of fiduciary duty. The scope of the duty is moulded by the nature of the relationship and, in particular, by the governing contract. Where the principal knows that the fiduciary will receive remuneration from a counterparty or third party, the duty to disclose the full terms or amount may be reduced or negated, but the result still depends on the scope of the principal’s objectively ascertained consent, as explained in Medsted Associates v Canaccord Genuity Wealth International [2019] EWCA Civ 83.
4. Imputation of knowledge. The court declined to determine whether disclosure to a solicitor can legally suffice to establish the principal’s fully-informed consent. The answer depends on the solicitor’s role, the importance of the information within the engagement, the likelihood of onward transmission and the surrounding facts. The issue therefore could not be resolved summarily. Parks of Hamilton (Holdings) Ltd v Colin Campbell [2914] CSIH 36 did not require determination of the English-law position.
5. Strike out and other claims. The claimant’s debt claim and the defendant’s restitutionary counterclaim raised triable issues. Allegations of apparent authority, constructive knowledge, express consent and deemed consent were liable to be struck out, but the plea that the solicitor represented itself and the pleaded case concerning disclosure at the board meeting could proceed. No separate compelling reason justified refusing summary judgment merely because a proposed Part 20 claim might later be brought against a former director.