Bribes Without Cash and Fiduciary Duties in Joint Ventures: Glenn v Watson establishes that non‑monetary inducements can be bribes and that JV fiduciary duties arise where one party controls third‑party relationships

Introduction

This judgment arises out of high-value property investment ventures between Sir Owen Glenn (a New Zealand businessman and philanthropist) and Eric Watson (a New Zealand investor resident in London). Two projects are central:

• Project Edsel: an affordable housing deal with the London Borough of Barking & Dagenham (LBBD), executed alongside Hutchison Whampoa’s investment vehicle.
• Project Spartan: a broader real estate platform intended to pursue ground rents, affordable housing and residential portfolios alongside Long Harbour (the business of William Astor and James Aumonier).

The claimants were Sir Owen and Kea Investments Ltd (Kea), then a trust asset of the Corona Trust, later owned directly by Sir Owen. The principal remaining defendant was Eric Watson (Novatrust and Spartan settled during trial). The Court (Nugee J) tried an ambitious suite of issues: deceit, breach of fiduciary duty, “secret commissions”/bribery, Quistclose trust, knowing receipt, affirmation/ratification, and the practical allocation of settlement monies.

Two landmark points stand out:

• Non‑monetary benefits—including assistance to an agent’s child to obtain a legal training contract—can constitute a bribe/secret commission where they pose a realistic possibility of conflict with the agent’s duty of loyalty.
• Fiduciary duties can arise between joint venturers when one party controls critical third‑party relationships intended to be exploited for the joint venture’s benefit; failure to disclose one’s own interests in the transactions constituted a breach.

Summary of the Judgment

• Project Edsel
  • No fiduciary duty owed by Mr Watson to Sir Owen or Kea in relation to Edsel; the relationship was arms‑length and did not cross the threshold for fiduciary duties (despite social closeness).
  • Kea not entitled to share in the “B carry” (management performance fee) under the Edsel Term Sheet, properly construed; the B interest belonged to Mr Watson’s side.
  • No breach of trust/Quistclose trust proprietary claim over the £7,045 used to subscribe for the B interest; by the time of closing, the money moved on the agreed footing as a loan into Copperstone/SPV for the Edsel investment.
  • Affirmation did not arise; but the claims failed on their own merits.
• Project Spartan
  • Deceit: The Court found that misrepresentations induced Kea’s execution of the July 2012 Spartan agreements. Central misstatement: that £22.5m would buy out Mr Watson’s “existing partner’s” 50% stake in a pre‑existing Spartan business; the business did not exist in that form and the “partner” did not hold rights across all verticals (affordable housing, residential fund).
  • Secret commission/bribe: Mr Watson’s efforts to procure a legal training contract for Kea director Peter Dickson’s daughter constituted a non‑monetary inducement (a bribe), creating a real possibility of conflict and rendering the agreements voidable.
  • Fiduciary duty (Spartan): Mr Watson owed Kea (but not Sir Owen personally) a fiduciary duty because he controlled critical third‑party relationships (Long Harbour and the “South Sea”/LHRF rights) intended for the JV’s benefit. He breached that duty by failing to disclose his personal interests—both the £12.5m “goodwill” value flow to his entities and his vendor position in the LHRF 40% sale to Newco.
  • Affirmation defence failed: Neither the autumn 2012 developments nor Harlaw/Harneys’ 2013 oversight amounted to informed affirmation of the misrepresented structure.
  • Nevis injunction breach: The “Second” and “Third” Kea loan agreements were executed after Kea’s director knew of a Nevis injunction; the agreements were set aside for want of authority/improper purpose and Spartan could not enforce them.
• Remedies and related principles
  • Rescission: The July 2012 Spartan agreements (and dependent later instruments) were voidable and set aside for deceit, bribe/secret commission and fiduciary breach. A later consent order with Novatrust/Spartan confirmed rescission inter se, but the Court’s findings establish the position as against Mr Watson.
  • Knowing receipt: On the facts found (deceit; injunction breach; undisclosed interests), any receipt of Kea’s money by Mr Watson would be “unconscionable,” satisfying Akindele. (Proof of tracing through Munil is deferred to later procedural steps.)
  • Equitable compensation: Available in principle for the shortfall after accounting for sums recovered from Spartan/Novatrust, standing in lieu of full restitution where the counterparty cannot repay.
  • Interest: The Court declined (at this stage and on the pleadings) to award an 8% compound rate; the appropriate equitable rate tied to returns on proper trustee investments is to be addressed later. 3% over base is the conventional modern reference point but remains to be finalised.
  • Allocation of settlement monies: Consistent with Townsend and Keyser Ullman, a claimant may appropriate sums recovered from one defendant only to the extent the “separate” claims would likely have succeeded; the trial judge must assess those claims rather than accept a unilateral appropriation that bypasses overlapping liability.

Analysis

Precedents Cited and How They Shaped the Result

• Fiduciary duties outside settled categories
  • Bristol & West BS v Mothew: Core articulation of fiduciary loyalty duties; the Court used this to anchor the duty of single‑minded loyalty and full disclosure.
  • Ross River v Waveley Commercial; John v James; Murad v Al‑Saraj: Emphasised that fiduciary duties in joint ventures are fact‑sensitive and may arise when one venturer controls assets/relationships to be exploited for the joint benefit. The Court used this to distinguish Spartan (duty) from Edsel (no duty).
  • Longstaff v Birtles: Exemplifies fiduciary obligations persisting around negotiations in certain relationships; here, inapplicable to Edsel given the arms‑length dynamic and reliance on Kea’s own advisers.
  • Sheikh Al Nehayan v Kent and Gestmin/Ocean Frost: Used for caution about witness recollection and the need to test oral testimony against contemporaneous documents; a major methodological thread in the decision.
• Secret commission / bribe
  • Logicrose v Southend United; Imageview Management v Jack: The “realistic possibility of conflict” test. Nugee J extended its application to a non‑cash benefit (a training contract for an agent’s daughter), holding that the benefit’s monetary form is not determinative; the question is the realistic possibility of conflict with duty.
  • Daraydan v Solland; Fiona Trust v Privalov; Otkritie v Urumov: Confirm strict rules (irrebuttable presumption of inducement; trivial benefits exception). The Court applied them and rejected any “de minimis” defence: a training contract is a substantial career gateway and not trivial.
• Deceit and inducement
  • Hayward v Zurich: Presumption of inducement once a material false statement and entry into the contract are shown. The presumption—especially strong in fraud—supported rescission of Spartan agreements.
• Quistclose trusts, tracing and proprietary responses
  • Barclays Bank v Quistclose; Twinsectra v Yardley: The Court reaffirmed that a Quistclose/resulting trust arises when money is advanced for a specific purpose, to be returned if the purpose fails. Here, by closing, Kea’s funds had been advanced as a loan into the Edsel structure; the £7,045’s use was within the agreed purpose and promptly reimbursed; the proprietary claim failed.
  • Foskett v McKeown: Vindication of proprietary rights is strict, but requires that the trust money purchases the asset. The Court explained why the £7,045 did not give Kea the B interest.
• Knowing receipt
  • BCCI (Overseas) v Akindele: The single test—recipient’s knowledge making retention unconscionable—was satisfied on the Court’s findings of deceit and injunction breach; tracing through Munil is to be resolved later.
• Interest and compensation
  • Tate & Lyle v GLC; Challinor v Bellis; Reinhard v ONDRA: Modern approach to interest: courts ordinarily use broad‑brush market benchmarks (often BBR + 3%) rather than bespoke fact‑specific “what this claimant would have done” evidence. The Court applied that approach and deferred a final interest rate determination.
• Allocation of settlement proceeds when suing multiple defendants
  • Townsend v Stone Toms; Banque Keyser Ullman v Skandia (No 2); Barings plc v Coopers & Lybrand: A claimant may appropriate settlement monies from D1 to “separate” claims only if those claims are sustainable and likely to have succeeded; where claims overlap, the court must assess the “true value” of what was recovered so the claimant does not double‑recover against D2. The Court signalled a hands‑on, fact‑based apportionment consistent with these authorities.

Legal Reasoning in Depth

1) Fiduciary duties: when do they attach in a JV?

The Court drew a clear line between Edsel and Spartan:

• Edsel: No fiduciary duty. The parties were commercial co‑venturers; Sir Owen relied on Mr Miller/Mr Dickson and external advisers, not on Mr Watson to act with single‑minded loyalty. The “friendship” and the informal “we have a small stake in the carry” email did not change that character. The Court underlined that a contractual “good faith to agree long‑form” clause is not a fiduciary commitment; it is a loyalty to the bargain, not to the counterparty’s interests.
• Spartan: Duty owed to Kea. Watson controlled the relationships with Long Harbour and the structuring of Newco (“South Sea”), which Kea’s money would purchase. Kea depended on him to negotiate rights to be exploited for their joint benefit. Applying John v James, Ross River, that control over third‑party relationships for joint exploitation created a fiduciary obligation to disclose personal interests and avoid secret profits. Watson breached by (i) failing to disclose that ~£12.5m “goodwill” value would flow to his entities, and (ii) his vendor interest in the LHRF sale to Newco. Duty was not owed to Sir Owen personally on Spartan, because he had no involvement or control in Spartan’s negotiation phase and relied on Kea’s officers, not Mr Watson, to protect the trust’s interests.

2) Deceit: how the misrepresentations worked

The Court meticulously compared presentations, term sheets and emails to demonstrate a deliberate pattern:

• The “existing Spartan business” myth: The 29 March/1 April decks told Mr Miller/Sir Owen that Spartan was a 50/50 business already owning a basket of rights/opportunities across ground rents, affordable housing and the residential fund. That was untrue: Mr Richardson (Watson’s “existing partner”) held only ground rent assets and a Homeground share—not the affordable or residential fund rights.
• £22.5m “buy‑out of partner’s 50%” anchor: This price point simultaneously:
  • cast the overall valuation at £45m;
  • suggested Watson’s 50% stake being contributed in kind was worth the same; and
  • concealed the truth that Watson expected to buy out Mr Richardson’s ground rent interest for materially less and to apply a large balance to clean up Watson’s personal loan (the Berryblue loan) and other matters (e.g., American Apparel).
• After M&G: When the M&G sale overtook events, the “goodwill element” (~£12.5m) re‑appeared as the price for Newco (“South Sea”). The Court found Mr Leahy told Kea’s lawyer that Newco would be owned by Park “and another”—expressly identified as Watson’s “partner”—so the goodwill cash would look like a buy‑out of a third‑party owner, even though the plan was that the net value would flow to Watson’s own vehicle (Munil). Steps taken with EH&P/Munil to create optics (an EH&P nominee as “Holder 2”) were cited as corroboration.
• Other false or unjustified statements further buttressed the £45m valuation and the entry price:
  • false “current offers on the table to securitize at 25‑28x,” elevating ground rent economics;
  • misleading securitization capability claims (“can securitize at 25–30x” and “likely to securitize at 26x”);
  • false Project Royal equity need of £23–25m (true equity c. £35m);
  • inflated affordable housing pipeline (without real support for “substantial longer‑term” expansions beyond the 3‑year window discussed).

On inducement, the Court applied Hayward v Zurich’s presumption: the misstatements were material and Kea entered the deals; Watson did not rebut the presumption. The structure of the pitch (especially the “buy‑out of partner” story) was designed to induce.

3) Secret commissions (bribery) without cash

A pivotal element is the Court’s square conclusion that Watson’s sustained attempts to secure a legal training contract for Kea director Peter Dickson’s daughter were an inducement amounting to a bribe/secret commission:

• The legal test is not confined to cash; the question is whether the benefit creates a realistic possibility of conflict with the agent’s duty to the principal (per Logicrose, Imageview).
• A training contract is a substantial benefit. Even an offer may suffice. The Court rejected “de minimis” and emphasised the practical significance for the principal’s agent.
• Strict rules apply: No need to show actual influence; an irrebuttable presumption arises and renders the contract voidable at the principal’s election. The July 2012 agreements were voidable on this ground as well.

4) The Edsel B interest and the Quistclose trust

Kea argued that £7,045 of its £5.3m funding, used at closing to subscribe for Streamside’s “B interest” (carry participation) in Atlantic 1, was held on Quistclose trust and therefore the B interest (or its proceeds) belonged to Kea. The Court rejected this for several reasons:

• By closing, the £5.3m had been advanced to Copperstone/Streamside as a loan to implement the agreed Edsel investment; the specific‑purpose trust had shifted into the agreed transactional purpose, removing the “return if purpose fails” limb.
• The £7,045 was promptly reimbursed by Watson’s bank; there was no unjust enrichment by Watson at the trust’s expense.
• Even had there been a breach, Foskett’s strict proprietary vindication would not have mapped neatly to the B interest, which was primarily a contractual carry entitlement negotiated long before and not “acquired with” the £7,045.

5) Affirmation and ratification

The defence that later awareness and actions amounted to affirmation failed:

• Messrs Miller and Dickson were never fully informed of the true “destination” of the goodwill cash at the time of the July agreements; the 2012–2013 materials were at best ambiguous and crafted to remain so; the revised Business Plan did not transparently disclose that the £12.5m would go to Watson entities.
• Harlaw/Harneys’ 2013 oversight and the Auckland meeting did not amount to informed affirmation; the Court stressed the need for full knowledge of material facts before any affirmation can be implied.
• The 2014 California/Nevis settlement did not ratify Kea’s transactions vis‑à‑vis Mr Watson; it released claims against Messrs Miller and Dickson but did not preclude rescission against other parties.

6) Knowing receipt

Given the findings of deceit, fiduciary breach and injunction‑breaching loan agreements, any receipt of Kea’s funds by Mr Watson that can be traced would be unconscionable (Akindele), satisfying the knowledge element. The technical question of tracing the “Munil Money” through Swiss/Liechtenstein structures is to be handled in the stayed claim against Munil.

7) Interest and equitable compensation

The Court was clear on two points:

• Equitable compensation is available in principle to plug any shortfall after rescission/restitution against Spartan—reflecting the Nocton line of authority. The 8% compound rate was not permitted on the pleadings and is inconsistent with the broad‑brush approach to equitable interest (proper trustee investment returns).
• Interest will be determined later, but the Court signalled that the modern practice is to use benchmark rates (often BBR+3%) rather than claimant‑specific “what we would have done” returns. Interest under s.35A SCA 1981 (simple) and equitable interest (compound) remain in play.

8) Allocation of settlement proceeds (Townsend/Keyser Ullman)

Where a claimant settles with one defendant (D1) and continues against another (D2), the court polices double recovery. The Court endorsed an approach requiring:

• assessment of whether “separate” claims against D1 were sustainable and likely to succeed; if so, the claimant may appropriate the settlement to those first, crediting only any excess to overlapping claims; and
• where claims overlap, the judge must assess the “true value” of what was recovered to ensure the claimant does not recover more than once.

Impact of the Decision

• Secret commissions reach non‑monetary benefits: Corporate and transactional actors must treat non‑cash inducements (internships, introductions, placements, prestige appointments) as potential bribes if they create a realistic possibility of conflict for the counterparty’s decision‑maker. Policies and training should be updated to cover “benefits in kind.”
• JV fiduciary duties triggered by control of third‑party relationships: Where one venturer controls negotiations or gatekeeping with a key third party whose rights will be bought with JV money, fiduciary duties to disclose personal interests may attach—even absent a formal agency. Sponsors and originators must put all interests on the table.
• Term sheets are not talismans: Courts read term sheets against the “matrix” and contemporaneous communications. Loose language (e.g., “net equity”) will be confined to its commercial context; a bare good‑faith clause does not import fiduciary loyalty.
• Documentary truth beats polished recollection: The Court leaned heavily on emails, drafts and contemporaneous explanations over witness statements, citing Gestmin and Ocean Frost. Executives should assume their emails will be the primary evidence.
• Affirmation requires full knowledge: Post‑contract conduct and later approvals do not amount to affirmation where the counterparty has not disclosed material facts (e.g., where the “destination” of monies remains obscured).
• Interest expectations: Claimants seeking above‑benchmark rates must plead and prove why—courts will default to benchmark returns for trustee investments rather than bespoke assumed performance.
• Multi‑defendant settlements: The judgment emphasises the need for forensically sound allocation. Claimants cannot “park” a settlement against non‑overlapping claims without showing those claims would likely have succeeded.

Complex Concepts Simplified

• Fiduciary duty in a JV: Not every JV creates fiduciary duties. They arise where one party agrees to act (or practically must act) for the other’s benefit in a way that requires loyalty—e.g., where one party controls negotiations with a third party for the JV’s benefit.
• Secret commission (bribe): Any undisclosed benefit to the agent (or offered to them), monetary or not, that creates a realistic conflict with the agent’s loyalty to the principal, voids the contract at the principal’s option—no need to show actual influence.
• Quistclose trust: A special trust when money is advanced for a specific purpose; if that purpose fails, the money results back to the payer. Once the money is used for the agreed purpose (e.g., a loan into the SPV), the Quistclose structure ends.
• Knowing receipt: A recipient of trust property (or property in which the claimant has a subsisting equitable interest) is liable if their knowledge makes it unconscionable to retain it. The focus is the recipient’s conscience (Akindele), not formal categories of knowledge.
• Equitable compensation vs damages: Equitable compensation fills the gap where restitution cannot be made good, particularly for fiduciary wrongs. It is distinct from common law damages and sits alongside proprietary and personal claims.
• Affirmation/ratification: A principal cannot be treated as having “affirmed” an induced transaction unless they had full knowledge of material facts; partial or obscured disclosures are insufficient.
• Allocation of settlement monies: When you settle with D1 and pursue D2, you may appropriate the settlement to separate, non-overlapping claims—but only if those claims would likely have succeeded. Overlaps must be netted off.
• Interest: Courts usually award (i) simple interest under s.35A SCA (debt/damages), and (ii) compound equitable interest (trust/fiduciary cases), guided by market benchmarks (often BBR+3%) rather than bespoke projections.

Conclusion

This decision is a significant contribution to the modern law of commercial equity. It establishes that:

• Secret commission law reaches beyond money: meaningful non‑cash benefits that create a realistic possibility of conflict are bribes, rendering contracts voidable at the principal’s election.
• Fiduciary duties can arise within a JV where one venturer controls access to and negotiation with key third parties whose rights will be purchased for the JV’s benefit. Failure to disclose personal interests in the JV’s acquisitions is a fiduciary breach.
• Deceit findings will rest overwhelmingly on contemporaneous documentation; courts will not be swayed by crafted narratives inconsistent with the record.
• Technical trust doctrines (Quistclose, Foskett tracing, Akindele knowing receipt) remain powerful but are applied with rigorous attention to the actual path of funds and the timing/purpose of each step.
• Rescission’s consequences (restitution, equitable interest, equitable compensation) must be calibrated with care, and allocation principles prevent double recovery in multi‑defendant litigation.

For corporate sponsors, trustees, and deal originators, Glenn v Watson is both a warning and a guide: disclose personal interests fully in JV structures, avoid any “benefits in kind” to counterparties’ decision‑makers, and assume that emails and drafts will be the decisive evidence. For litigators, it is a roadmap on deceit, fiduciary breach, secret commissions, and the equitable toolkit (restitution, tracing, equitable compensation) calibrated through modern interest and allocation doctrines.