Supreme Court confirms proprietary claims against recipients of bribes

Posted on: August 6th, 2014

In the recent case of FHR European Ventures LLP and others v Cedar Capital Partners LLC [2014] UKSC 45 , the Supreme Court settled a long-running debate as to whether a principal has a proprietary claim against its agent for bribes or secret commissions it receives, or a merely personal claim.

Overruling its 152 year old decision in Tyrell v Bank of London (1862) 10 HL Cas, the Supreme Court held that a bribe or secret profit obtained by an agent is held on constructive trust for the principal. As such, the principal will have a proprietary claim to the bribe or its proceeds as against the agent, and also against third parties to whom the proceeds may be traced.

The decision is of great significance to fraud claims as it enables a principal’s claim to precede those of the unsecured creditors of the agent. It will also enable the principal to trace into the hands of recipients of funds, which is likely to be of great assistance to claimants in bribery cases where the defendant itself has no assets.