FM Capital Partners Ltd v Marino & Others: High Court Reinforces Strict Liability for Breaches of Fiduciary Duties and Accessory Liability in Secret Commissions

Introduction

FM Capital Partners Ltd (FMCP) brought a series of claims against Francesco Marino and Yoshiki Ohmura (collectively referred to as the Defendants) at the England and Wales High Court's Commercial Division. The case centered around alleged breaches of fiduciary duties, dishonest assistance, bribery, and conspiracy to injure, all linked to the management and investment of assets belonging to Libya Africa Investment Portfolio (LAP), a sovereign wealth fund. FMCP, originally formed as a joint venture between Mr. Marino, Mr. Bessot (Chief Investment Officer), and LAP, asserted that critical directors engaged in clandestine activities that disadvantaged LAP’s asset portfolio.

Summary of the Judgment

Mrs Justice Cockerill delivered the judgment on July 11, 2018, finding that both Mr. Marino and Mr. Ohmura were liable for serious breaches of fiduciary duties and accessory liability in relation to secret commissions (bribes) received at the expense of LAP's assets managed by FMCP. The court upheld all primary claims, including breach of fiduciary duty, dishonest assistance, bribery, and conspiracy to injure, and addressed auxiliary claims such as knowing receipt and proprietary interests.

Analysis

Precedents Cited

The judgment referenced key cases and statutory provisions to underpin its findings:

Re H (Minors) [1996] AC 563 - Addressed the balance of probabilities in civil standards of proof.
Re S-B [2009] UKSC 17 - Clarified that the civil standard of proof remains the balance of probabilities regardless of the seriousness of allegations.
OBG v Allan [2008] UKHL 19 - Emphasized the high threshold for demonstrating intent in tortious conspiracies.
FHR European Ventures [2014] UKSC 45 - Established that secret commissions are held on trust for the principal.
Petrodel Resources Ltd v Prest [2013] UKSC 34 - Discussed piercing the corporate veil to hold individuals accountable.

Legal Reasoning

The court's reasoning revolved around the strict obligations of directors under fiduciary duties. Directors are legally bound to act in the best interests of the company and its shareholders, avoiding conflicts of interest and not profiting from their positions without consent. The Defendants, through their respective companies Ironfly and Conquest, received significant secret commissions derived from LAP's investments. These payments were undisclosed and unauthorized, constituting clear breaches of their fiduciary responsibilities.

The judgment also delved into the principles of dishonest assistance and knowing receipt under English law. Dishonest assistance requires that the accessory (Mr. Ohmura) knew that their actions assisted a breach of duty, thereby compounding the principal wrongdoers' (Mr. Marino and Mr. Bessot) misconduct. Knowing receipt involves the recipients’ awareness that the received assets were tainted by breaches of fiduciary duty.

Regarding bribery, the court interpreted the elements required under English law, distinguishing between contractual exemptions and criminal liability. The Defendants’ actions fit squarely within the definition of bribery as they involved secret payments intended to secure wrongdoing in managing LAP’s assets.

Impact

This judgment serves as a stern reminder to fiduciaries and their associates about the paramount importance of transparency and adherence to ethical standards in asset management. It reinforces the High Court's commitment to holding individuals accountable for personal gains at the expense of their fiduciary obligations. Future cases involving secret commissions or similar breaches will likely reference this judgment when evaluating accessory liability and the bounds of bribery within corporate governance.

Complex Concepts Simplified

Fiduciary Duties

Fiduciary duties are legal obligations held by individuals in positions of trust, such as company directors, to act in the best interests of another party, typically the company and its shareholders. These duties encompass loyalty, avoiding conflicts of interest, and not profiting from one's position without proper authorization.

Dishonest Assistance

Dishonest assistance refers to a situation where a third party knowingly aids someone in breaching their fiduciary duties. To establish liability, it must be proven that the assistant was aware that their actions contributed to the breach and acted dishonestly.

Knowing Receipt

Knowing receipt occurs when a recipient knowingly receives assets that are traceable to a breach of fiduciary duty. The recipient must be aware, or have reason to be aware, that the assets were received in a manner that violates fiduciary obligations.

Bribery

In the context of this case, bribery involved the giving or receiving of secret commissions (payments) intended to influence business decisions dishonestly. Under English law, bribery includes any improper advantage given to secure wrongdoing or to influence decision-making unlawfully.

Agency Without Authority

Agency without authority is a legal concept where an individual conducts business on behalf of another without having the proper authorization. This often involves a breach of trust and can lead to liability for wrongful acts performed under the guise of agency.

Conclusion

The High Court's decision in FM Capital Partners Ltd v Marino & Others underscores the judiciary's unwavering stance on enforcing fiduciary responsibilities and penalizing unauthorized personal gains. By establishing that both primary wrongdoers and their accessories can be held liable for secret commissions and related misconduct, the judgment sets a significant precedent in corporate law. It emphasizes the need for transparency and strict adherence to fiduciary duties, ensuring that directors and their associates act solely in the best interests of those they serve.

Moving forward, companies must implement robust governance frameworks to prevent such breaches and ensure that all transactions are conducted with full disclosure and integrity. Legal professionals will likely cite this case in future disputes involving fiduciary breaches and accessory liabilities, further reinforcing its impact on the legal landscape.