Posted on: October 19th, 2016
Whilst there are circumstances in which a fiduciary can lose its right to remuneration, a recent case has considered whether that principle extends to the profit share of a partner in a partnership or as a member of a LLP.
In Hosking v Marathon Asset Management LLP, an arbitrator had held that a partner was liable to a LLP for breaches of contractual and fiduciary duties in relation to the potential commencement of a new business. As well as being ordered to pay equitable compensation of £1.38 million, the partner in question was ordered to return 50% of the profit share he received during the relevant period in which the breaches had occurred. This amounted to an additional sum of over £10 million.
The partner appealed to the High Court under the Arbitration Act 1996, arguing that the principle did not apply to a profit share of a partner or a LLP member. However, the Court disagreed, confirming that forfeiture was an appropriate remedy in the circumstances.
The decision has wide implications for partnerships and LLPs and highlights the scope of the potential relief available when fiduciaries have breached their duties.