FHR Ventures LLP and others v Mankarious and others

Case No: A3/2011/3144 Neutral Citation Number: [2013] EWCA Civ 17 IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM CHANCERY DIVISION MR JUSTICE SIMON [2011] EWHC 2308 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Date: 29/01/2013 Before : THE CHANCELLOR LORD JUSTICE PILL and LORD JUSTICE LEWISON – – – – – – – – – – – – – – – – – – – – – Between : (1) FHR European Ventures LLP?(2) Kingdom Hotels International ?(3) Kingdom 5-KR-176, Ltd?(4) Fairmont Hotels and Resorts Inc?(5) Fairmont Dubai Holdings Dubai (Bermuda) Ltd?(6) Bank of Scotland PLC?(7) Uberior Ventures Ltd Appellants – and – (1) Ramsey Neil Mankarious?(2) Cedar Capital Partners LLC?(3) Cedar Capital Partners Ltd Respondents – – – – – – – – – – – – – – – – – – – – – (Transcript of the Handed Down Judgment of WordWave International Limited A Merrill Communications Company 165 Fleet Street, London EC4A 2DY Tel No: 020 7404 1400, Fax No: 020 7831 8838 Official Shorthand Writers to the Court) – – – – – – – – – – – – – – – – – – – – – Mr Christopher Pymont QC (instructed by Hogan Lovells International LLP) for the Appellants Mr Matthew Collings QC (instructed by Farrer & Co LLP) for the Second Respondents Hearing dates : 21/22 November 2012 – – – – – – – – – – – – – – – – – – – – – JudgmentLord Justice Lewison: 1. What is the appropriate remedy against an agent who has received a secret commission from the seller of property which his principal bought at a price negotiated on his behalf by the agent? That is the question raised by this appeal. The full facts may be found in the judgment of the trial judge, Simon J, whose judgment is at [2011] EWHC 2308 (Ch) [2012] 2 BCLC 39. Only a short summary is necessary for the purposes of this appeal. 2. In September 2004 the Monte Carlo Grand Hotel in Monaco was owned by Monte Carlo Grand Hotel SAM, a Monegasque company. Its share capital was owned by Monte Carlo Grand Hotel Ltd, a BVI company. The latter was interested in a discreet sale either of the hotel itself or of the company that owned it. Cedar Capital Partners LLC (“Cedar”) was a new business venture established a couple of months earlier by Mr Mankarious with the intention of providing consultancy services to the hotel industry. A number of the claimants were among his clients and contacts. Even before he established Cedar Mr Mankarious had learned of the wish of the ultimate owners of the hotel to sell it; and that they were looking for a price in excess of € 200 million. In August Mr Mankarious encouraged the relevant claimants (“the Investor Group”) to investigate the possibility of buying the hotel; and in the following month he prepared a memorandum for them that told them that the owners were offering the hotel for sale through Cedar on an off market basis. 3. On 24 September Monte Carlo Grand Hotel Ltd and Cedar entered into an agreement called an “Exclusive Brokerage Agreement”. The relevant terms of that agreement were as follows: “1.Term This Agreement shall be in place as an exclusive right to sell the Property for a period which commences as of the date hereof and terminates on 31/12/05 PROVIDED THAT it is understood and agreed that if the Owner sells the property to the Investor Group (as defined below) or any member thereof on or before 31/12/05 the fee referred to in article 3 below shall remain payable to Cedar. 2. Responsibilities Cedar’s sole responsibility during the term of the Agreement is to identify and introduce prospective purchasers. Cedar shall not participate in any negotiations with the Purchaser on behalf of the Owner … 3. Fee In consideration of the services of Cedar hereunder in securing the Purchaser, and provided that the Purchaser and Owner close on the sale of the Property, Owner agrees to pay Cedar a fee … equal to … €10 million. The fee shall be paid within 5 working days of receipt of funds from buyer. 4. Investor Group Cedar intends to introduce Owner to a purchaser which is a group consisting of a number of investors, which shall include, but not be limited to the following companies/individuals: [various of the claimants] (or any one or more entities related or affiliated with such parties (‘Investor Group’). … 6. Terms of Agreement of Sale and Purchase Owner acknowledges that Cedar shall have no involvement in the negotiation on behalf of the Owner of any terms relating to the sale of the Property. Owner acknowledges that Cedar intends to advise and be a member of the Investment Group purchasing the Property and pursuant to Paragraph 7 of this Agreement, Owner waives any conflict that may arise due to Cedar acting as a facilitator under this Agreement and as participating as part of the Investor Group … 7. Conflict of Interest The parties all understand that Cedar is only acting as a facilitator to introduce the Owner to the Purchaser. It is contemplated that Cedar will advise and be part of the Investor Group purchasing the Property. As part of the Investor Group, Cedar will be participating in the negotiations as a Purchaser. The parties all understand and waive any conflict of interest that may arise due to Cedar acting pursuant to this Agreement and Cedar’s participation as an advisor and member of the Investor Group. Cedar shall disclose its appointment hereunder to the investor group.” 4. Both Mr Pymont QC, appearing for the Investor Group, and Mr Collings QC, appearing for Cedar, emphasised that the agreement was not intended to be a corrupt payment or bribe. On the contrary, so far as Monte Carlo Grand Hotel Ltd was concerned it was entitled to expect Cedar to comply with its contractual obligation to disclose its appointment to the Investor Group. Mr Collings laid particular stress on the fact that the judge consistently described the fee as a commission. 5. Following the making of that agreement Cedar continued to advise the Investor Group, including negotiating the price. Ultimately a sale of the hotel to the Investor Group took place in December 2004 for which the Investor Group paid € 211.5 million. The sale took the form of a share purchase of the issued share capital of Monte Carlo Grand Hotel SAM. Cedar, through Mr Mankarious, had made limited disclosure of Cedar’s retainer by the sellers; but not enough to deprive the fee of €10 million payable under the Exclusive Brokerage Agreement of its character as a secret profit. 6. The Particulars of Claim alleged that following completion of the sale Monte Carlo Grand Hotel Ltd (the BVI company) paid Cedar €10 million “pursuant to” the Exclusive Brokerage Agreement. The Defence admitted that Monte Carlo Grand Hotel Ltd had paid Cedar €10 million. However, the judge made no finding about precisely when the payment had been made; nor did he find that the payment had been made out of the proceeds of sale themselves. 7. The main issue at trial was whether Cedar had made sufficient disclosure of its relationship with Monte Carlo Grand Hotel Ltd, so that it could be said that it had acted with the informed consent of the Investor Group. Simon J ruled (§ 103): “It follows that unless Cedar obtained the fully informed consent of [the Investor Group], it could not receive and retain the €10 million commission from the Vendors; and that if it did, it would hold the sum subject to a Constructive Trust…” 8. On the facts he held that there had been insufficient disclosure. He accepted the evidence of Mr Johnston (a representative of one of the participants in the Investor Group) that if he had been told of the size of Cedar’s fee he would not have agreed the fee structure that he did. He also made two further relevant findings. First (§ 102): “…in circumstances where Cedar were engaged to negotiate the best price, at the very least it was material that the vendor was in fact prepared to receive a net sum of €201.5 million from the sale. That was material to be known by Cedar’s principal and was not made known to them.” 9. Second (§ 106): “The fact that the commission was a flat fee is irrelevant. It meant little more than that the amount in respect of which the price paid by the Joint Venturers could be said to be too high was fixed at €10 million. It is unnecessary and unfruitful to speculate about what might have happened if the Joint Venture participants had been told about the payment of €10 million. At the very least it is likely that they could have used the information to their financial advantage in the course of negotiations.” 10. At the conclusion of his judgment he invited submissions on what form of order he should make. 11. It was on the subsequent hearing to decide the form of order that the current battle lines were drawn. On that occasion ([2011] EWHC 2999 (Ch)) the judge acknowledged that his use of the phrase “Constructive Trust” was unfortunate. Having heard submissions based principally on the decision of this court in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 [2012] Ch 453 he decided that the Investor Group were not entitled to a proprietary remedy against Cedar; but were only entitled to the personal remedy of an account in equity. What Sinclair v Versailles decided can be summarised for the time being as follows: “… a beneficiary of a fiduciary’s duties cannot claim a proprietary interest, but is entitled to an equitable account, in respect of any money or asset acquired by a fiduciary in breach of his duties to the beneficiary, unless the asset or money is or has been beneficially the property of the beneficiary or the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.” 12. The judge considered whether the secret commission fell within either of these two exceptions. He said: “As to (a), the question whether the sum of €10 million was or had been the property of the Claimants has not yet been decided. At present it appears that the sum was a secret and unauthorised commission which bypassed the Claimants. I do not accept that secret commissions are for present purposes to be characterised as assets of the beneficiary, cf the Sinclair case at [80]. As to (b), it is artificial to describe the Exclusive Brokerage Agreement as Cedar taking advantage of an opportunity which was properly that of their principals and that the relevant opportunity was the opportunity to purchase the Hotel for €201.5 million rather that for €211.5 million.” 13. It is against that ruling that, with the permission of Etherton LJ, the Investor Group appeals. Before coming to the question of remedy, it is important to stress what this appeal is not about. It is not about whether Cedar is accountable in equity for the amount of the commission. That was in issue at trial; but it is now accepted that Cedar is accountable in equity for the commission. There is therefore no challenge to the basic principle that a fiduciary is not entitled to profit from a breach of his fiduciary duty. The only issue before us is whether the Investor Group’s remedy against Cedar is a personal remedy or a proprietary one. Nor is the appeal about whether the court can, as a matter of discretion, create a proprietary interest or impose a constructive trust where none existed before. In some jurisdictions (notably Canada and Australia) this discretionary remedy is within the court’s armoury. But in this jurisdiction it is not; although some judges have suggested that one day it might be (see, for example Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 716 per Lord Browne-Wilkinson). 14. So the question before us is a narrow one: did the Investor Group acquire a proprietary interest in the commission paid to Cedar? Why, one might ask, does it matter? In some cases it matters because the fiduciary is insolvent; and the establishment of a proprietary remedy may mean that the profit is unavailable for distribution among his creditors. That is not suggested in the present case. But where that is the case the argument is in essence about priorities. In some cases it is said to matter because the secret profit has been invested in an asset that has itself increased in value. Where that is the case the argument is in essence about what counts as the profit that the defaulting fiduciary has made as a result of his breach of fiduciary duty. Sometimes it matters because the defaulting fiduciary no longer has the profit and the principal wishes to recover it from a third party into whose hands it has come. In this case Mr Pymont says that it matters because the Investors Group will have to pursue accounts and inquiries to discover what has happened to the fee and who has benefited from it. Those proceedings are likely to be more effective “in ensuring payment in full” if the Investor Group can establish a proprietary interest in the commission. So the argument here is really about following and tracing. 15. Sinclair v Versailles is a controversial decision. In the academic world it has its defenders (e.g. Prof Virgo: Profits obtained in breach of fiduciary duty: personal or proprietary claim? [2011] CLJ 502; Prof Sir Roy Goode QC Proprietary liability for secret profits – a reply (2011) LQR 493) and its critics (e.g. Mr Justice Hayton: No proprietary liability for bribes and other secret profits? (2011) Tru LI 3; Proprietary liability for secret profits (2011) LQR 487 and The development of equity and the “good person” philosophy in common law systems [2012] Conv 263; Lord Millett Bribes and Secret Commissions Again [2012] CLJ 583). That debate is a continuation of the debate about the correctness of Lister & Co v Stubbs (1890) LR 45 Ch D 1, the principal authority that Sinclair v Versailles followed and applied. Much of that academic literature is referred to and discussed by Lord Neuberger of Abbotsbury MR in Sinclair v Versailles (§ 80). In Australia, where the imposition of a remedial constructive trust is a discretionary remedy, Sinclair v Versailles has not been followed: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6. One of the grounds of appeal in the present case is that Sinclair v Versailles was wrongly decided. But that is a question for the Supreme Court, rather than for us. It is also fair to say that both the principal cases considered in Sinclair v Versailles are difficult to fit coherently into a neat set of rules, particularly in the light of the further cases cited to us. 16. Accordingly, the argument that Mr Pymont QC advances in this court is that the judge ought to have held that the Investor Group was entitled to a proprietary remedy against Cedar on one or both of the following bases: i) Cedar received the commission in substance out of the sale proceeds. The money paid by the Investor Group was money that the Investor Group had beneficially owned. It does not matter that the money was not paid directly to Cedar. Thus the payment of the commission falls within the first of the two exceptions referred to in Sinclair v Versailles. ii) As the agent of the Investor Group Cedar had a duty to negotiate the lowest price that the vendors were willing to accept. In practical terms the vendors were willing to accept €10 million less than the nominal purchase price. Accordingly the receipt by Cedar of the €10 million commission was a benefit that Cedar ought to have acquired on behalf of its principal but instead diverted to itself. Thus the receipt of the €10 million falls within the second of the two exceptions referred to in Sinclair v Versailles. 17. I have no difficulty in accepting Mr Pymont’s submission that this case is factually different from the facts considered in Sinclair v Versailles. In that case the connection between the breach of fiduciary duty and the profit was relatively remote. Mr Cushnie (the defaulting fiduciary in that case) made a profit by selling shares that he already owned before any question of relevant fiduciary duties arose. It was their value that was increased by reason of breaches of fiduciary duties. As Lord Neuberger MR pointed out the proprietary claim in that case was not a claim to funds in respect of which Mr Cushnie owed any relevant fiduciary duty, nor to any asset of the proceeds of any asset bought with those funds, nor to the proceeds of any right or opportunity which belonged to the principal. In our case the connection is much closer. But in Sinclair v Versailles the principal legal debate was whether this court should follow on the one hand its own previous decisions in Metropolitan Bank v Heiron (1880) 5 Ex D 319 and Lister & Co v Stubbs (1890) 45 Ch D 1 or, on the other hand, the decision of the Privy Council in A-G for Hong Kong v Reid [1994] 1 AC 324. Mr Miles QC for Sinclair submitted that Metropolitan Bank v Heiron and Lister & Co v Stubbs were wrong and that this court should follow A-G for Hong Kong v Reid. Lord Neuberger MR, with whom Richards and Hughes LJJ agreed, said (§ 73): “I would reject that contention. We should not follow the Privy Council decision in Reid [1994] 1 AC 324 in preference to decisions of this court, unless there are domestic authorities which show that the decisions of this court were per incuriam, or at least of doubtful reliability.” 18. Accordingly this court affirmed the correctness (or at least the binding nature unless overruled by the Supreme Court) of Metropolitan Bank v Heiron and Lister & Co v Stubbs. In Metropolitan Bank v Heiron the bank sued a former director. The allegation against him was that while he was a director he had taken a bribe from one of the bank’s debtors in order to procure a favourable compromise of the bank’s claim. The action was brought more than six years after the bribe had been taken; so the question was one of limitation. The claim failed. James LJ said: “If a man receives money by way of a bribe for misconduct against a company or cestui que trust, or any person or body towards whom he stands in a fiduciary position, he is liable to have that money taken from him by his principal or cestui que trust. But it must be borne in mind that that liability is a debt only differing from ordinary debts in the fact that it is merely equitable, and in dealing with equitable debts of such a nature Courts of Equity have always followed by analogy the provisions of the Statute of Limitations, in cases in which there is the same reason for making the length of time a bar as in the case of ordinary legal demands.” 19. Cotton LJ said: “Here the money sought to be recovered was in no sense the money of the company, unless it was made so by a decree founded on the act by which the trustee got the money into his hands. It is a suit founded on breach of duty or fraud by a person who was in the position of trustee, his position making the receipt of the money a breach of duty or fraud. It is very different from the case of a cestui que trust seeking to recover money which was his own before any act wrongfully done by the trustee. The whole title depends on its being established by a decree of a competent Court that the fraud of the trustee has given the cestui que trust a right to the money, and although no time will run in such a case till the cestui que trust knows of the fraud, yet a Court of Equity, whether by analogy or in obedience to the statute, will hold such a claim barred if the cestui que trust stands by and takes no proceedings for six years from the time when he became aware of the fraud.” 20. In Lister & Co v Stubbs Stubbs was a foreman employed by Lister & Co, a firm of textile manufacturers. Stubbs was entrusted with the task of buying at market prices dyestuffs used by Lister & Co. He placed large orders with Varley & Co who supplied dyestuffs. Varley & Co drew up monthly accounts of what they had supplied to Lister & Co and, based on the month’s sales, paid a secret commission to Stubbs. Stubbs invested part of the commission in property in York. The question was whether Lister & Co could assert a proprietary interest in that property. This court answered that question in the negative. Cotton LJ said: “The bargain was most manifestly corrupt; but does that make the money which the Defendant received in pursuance of that bargain the money of the Plaintiffs? Mr. Justice Stirling, in the course of his judgment, referred to my decision in the case of Metropolitan Bank v. Heiron. I think that I took a correct view in my judgment in that case; and in my opinion this is not the money of the Plaintiffs, so as to make the Defendant a trustee of it for them, but it is money acquired in such a way that, according to all rules applicable to such a case, the Plaintiffs, when they bring the action to a hearing, can get an order against the Defendant for the payment of that money to them. That is to say, there is a debt due from the Defendant to the Plaintiffs in consequence of the corrupt bargain which he entered into; but the money which he has received under that bargain cannot, in the view which I take, be treated as being money of the Plaintiffs, which was handed by them to the Defendant to be paid to Messrs. Varley in discharge of a debt due from the Plaintiffs to Messrs. Varley on the contract between them.” 21. Lindley LJ said: “The relation between Messrs. Varley and Stubbs is that of debtor and creditor—they pay him. Then comes the question, as between Lister & Co. and Stubbs, whether Stubbs can keep the money he has received without accounting for it? Obviously not. I apprehend that he is liable to account for it the moment that he gets it. It is an obligation to pay and account to Messrs. Lister & Co, with or without interest, as the case may be. I say nothing at all about that. But the relation between them is that of debtor and creditor; it is not that of trustee and cestui que trust. We are asked to hold that it is—which would involve consequences which, I confess, startle me. One consequence, of course, would be that, if Stubbs were to become bankrupt, this property acquired by him with the money paid to him by Messrs. Varley would be withdrawn from the mass of his creditors and be handed over bodily to Lister & Co. Can that be right? Another consequence would be that, if the Appellants are right, Lister & Co. could compel Stubbs to account to them, not only for the money with interest, but for all the profits which he might have made by embarking in trade with it. Can that be right? It appears to me that those consequences shew that there is some flaw in the argument. If by logical reasoning from the premises conclusions are arrived at which are opposed to good sense, it is necessary to go back and look again at the premises and see if they are sound. I am satisfied that they are not sound—the unsoundness consisting in confounding ownership with obligation.” 22. Bowen LJ agreed. 23. In Sinclair v Versailles Lord Neuberger MR undertook a close scrutiny of a number of cases that had been cited to the court. Mr Collings relied on a number of passages in a closely reasoned judgment: “Both the judgment below and the arguments before us focussed on cases where the courts have had to consider whether, where an agent or employee accepts a bribe or secret commission or the like, his principal or employer beneficially owns the bribe.” (§ 55) “[Keech v Sanford was] an orthodox, if rather strict, application of the principle that where a trustee takes advantage of an opportunity, which is really owned by the beneficiary, he holds the consequent proceeds for the beneficiary…” (§ 58) “In cases where a fiduciary takes for himself an asset which, if he chose to take, he was under a duty to take for the beneficiary, it is easy to see why the asset should be treated as the property of the beneficiary. However, a bribe paid to a fiduciary could not possibly be said to be an asset which the fiduciary was under a duty to take for the beneficiary. There can thus be said to be a fundamental distinction between (i) a fiduciary enriching himself by depriving a claimant of an asset and (ii) a fiduciary enriching himself by doing a wrong to the claimant.” (§ 80) “… there is a consistent line of reasoned decisions of this court (two of which were decided within the last ten years) stretching back into the late 19th century, and one decision of the House of Lords 150 years ago, which appear to establish that a beneficiary of a fiduciary’s duties cannot claim a proprietary interest, but is entitled to an equitable account, in respect of any money or asset acquired by a fiduciary in breach of his duties to the beneficiary, unless the asset or money is or has been beneficially the property of the beneficiary or the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.” (§ 88) “… previous decisions of this court establish that a claimant cannot claim proprietary ownership of an asset purchased by the defaulting fiduciary with funds which, although they could not have been obtained if he had not enjoyed his fiduciary status, were not beneficially owned by the claimant or derived from opportunities beneficially owned by the claimant. However, those cases also establish that, in such a case, a claimant does have a personal claim in equity to the funds.” (§ 89) 24. Mr Collings submitted that: i) Sinclair v Versailles clearly equates bribes and secret commissions and treats them in precisely the same way; ii) It also holds that there is a “fundamental difference” between (a) a fiduciary enriching himself by depriving the principal of an asset and (b) a fiduciary enriching himself by doing a wrong to the principal; iii) Since there is a fundamental difference between the two it is not possible for a single breach of duty to count as both; and the taking of a secret commission is plainly in the second of the two categories; iv) The “lost” or “diverted” opportunity cases are equally clearly in the first of the two categories. It follows that the taking of a secret commission or bribe cannot fall within that category; v) Thus in the case of a bribe or secret commission the principal can only claim a proprietary interest if he can show that the payment of the bribe or secret commission was made out of his own money. 25. Mr Collings thus accepted that in a case in which the principal could show that the fiduciary had acquired the principal’s own money or property he could properly be described as a constructive trustee of that property or money. Under the judge’s order for an inquiry it is still open to the Investor Group to allege and prove that the commission was paid with the Investor Group’s own money. But they have not yet done so. There are many cases that show this principle at work. These are cases in the first category where “the asset or money is or has been beneficially the property of the beneficiary”: Sinclair v Versailles (§ 88). But this did not mean that it was enough to show that once upon a time the asset or money had been the principal’s. What had to be shown was that (at least in equity) it was still the principal’s asset or money at the time when the fiduciary acquired it. 26. In Re Canadian Oil Works Corporation (Hay’s Case) (1875) 10 Ch App 593 the company was formed for the purpose of buying oil works. The sellers agreed with Hay that he should become a director of the company, and that they would provide him with the necessary qualification shares. A number of cheques were drawn on the company’s bank account to pay for the oil works. The sellers indorsed one of those cheques over to Hay and he paid it into his own bank account. Thus the funds travelled directly from the company’s bank account to Hay’s bank account. James LJ said: “It was never intended to be, and never did become, under the control or power of the vendors. … It never, in the contemplation of this Court, ceased to be the property of the company.” 27. Mellish LJ held that “if the creditor who received the payment is willing to make a deduction and discount from the sum he had received, that must be for the benefit of the master who is making the payment, and not for the benefit of the servant, who, without the consent of his master, has no right to receive any such profit.” He went on to say that in those circumstances the company was entitled to say that the cheque never became the property of the sellers, but remained the property of the company. Re Morvah Consols Tin Mining Company (1875) 2 Ch D 1 was a similar case. There the purchase price of a tin mine was to be satisfied partly in cash and partly in shares in the purchasing company. The seller agreed to give the buyer’s agent 600 of the shares that were part of the purchase price. Mellish LJ said that the benefit that the agent received must be treated as having been received for the benefit of the purchaser; and that the company was entitled to say: “Either these shares ought never to have had any existence or else you hold them only as a trustee for the company”. Bagnall v Carlton (1877) 6 Ch D 371 was a similar case, in which part of the purchase price paid by a company for the purchase of a colliery and ironworks was paid by the seller to Carlton and Grant who promoted the company. Cotton LJ said: “In my opinion, therefore, Carlton and Grant must be considered, when the company was formed by them for the very purpose of taking their contract, to be bound by the terms of the contract; they made it on behalf of and as trustees for the company, and they cannot retain for their own benefit any part of the price which the vendor was willing to give up in diminution of the ostensible price.” 28. These, then, are cases in which the principal’s own money or asset has ended up in the hands of the fiduciary. In the eyes of equity the money or asset has never ceased to be the property of the principal. Where, however, it was a mere matter of accounting between the fiduciary and the third party, equity was unable to take that view. It was on that ground that Hay’s Case was distinguished in Lister & Co v Stubbs (see Cotton LJ at page 13). 29. Given that in Sinclair v Versailles this court approved and followed Metropolitan Bank v Heiron and Lister & Co v Stubbs, we must do so too. Accordingly, in my judgment Mr Pymont’s appeal must fail unless he can successfully distinguish those two cases as well as Sinclair v Versailles. How does Mr Pymont distinguish them? 30. The first point that he makes is that the fee was only payable to Cedar on completion of the sale; and that it was payable within five working days after receipt of funds from the buyer. Thus Mr Pymont says that the irresistible inference is that Cedar was paid out of monies which came from the Investor Group. Accordingly for all practical purposes Cedar’s fee was funded by the Investor Group’s money; and that counts as the diversion or misappropriation of the Investor Group’s money. This argument, as I see it, is founded on the proposition that the monies paid by the Investor Group to Monte Carlo Grand Hotel Ltd never ceased to belong beneficially to the Investors Group. However, when the Investor Group paid Monte Carlo Grand Hotel Ltd in return for the shares in Monte Carlo Grand Hotel SAM, it must have been the intention of both parties that in return for the shares Monte Carlo Grand Hotel Ltd would acquire beneficial title to the sale price. In Westdeutsche Landesbank Girozentrale v Islington LBC the bank ran a similar argument but it failed. That case concerned interest rate swaps which, unknown to the parties at the time, were ultra vires the council and void. The bank argued (among other things) that where money is paid under a void contract the money is impressed in the hands of the payee with a trust in favour of the payer (see [1996] AC 669, 675). This argument was rejected. Lord Goff of Chieveley said (p. 698): “First, there is no general rule that the property in money paid under a void contract does not pass to the payee; and it is difficult to escape the conclusion that, as a general rule, the beneficial interest in the money likewise passes to the payee. This must certainly be the case where the consideration for the payment fails after the payment is made, as in cases of frustration or breach of contract; and there appears to be no good reason why the same should not apply in cases where, as in the present case, the contract under which the payment is made is void ab initio and the consideration for the payment therefore fails at the time of payment. ” 31. Lord Browne-Wilkinson said (p. 706): “It is said that, since the bank only intended to part with its beneficial ownership of the moneys in performance of a valid contract, neither the legal nor the equitable title passed to the local authority at the date of payment. The legal title vested in the local authority by operation of law when the moneys became mixed in the bank account but, it is said, the bank “retained” its equitable title. I think this argument is fallacious. A person solely entitled to the full beneficial ownership of money or property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all rights. Unless and until there is a separation of the legal and equitable estates, there is no separate equitable title. Therefore to talk about the bank “retaining” its equitable interest is meaningless. The only question is whether the circumstances under which the money was paid were such as, in equity, to impose a trust on the local authority. If so, an equitable interest arose for the first time under that trust.” 32. Lords Slynn of Hadley and Lloyd of Berwick agreed with Lord Browne-Wilkinson; and on this point so did Lord Woolf. Moreover, if Mr Pymont’s argument were correct it would surely have been deployed successfully in Lister & Co v Stubbs. Indeed counsel for Lister & Co did advance the argument that “the money in question was our own money received by the Defendant and we are entitled to take it from him” (see (1890) 45 Ch D 1, 11). That submission was roundly rejected. As mentioned, Cotton LJ said that it was not the money of Lister & Co. Mr Pymont says that this was a question of the evidence adduced in Lister & Co v Stubbs. He points to the decision of Lawrence Collins J in Daraydan Holdings Ltd v Solland International Ltd [2004] EWHC 622 (Ch) [2005] Ch 119 in which Lister & Co v Stubbs was distinguished. The active defendant in that case had been placing contracts on behalf of the claimants. He received a secret 10 per cent commission on the contract prices, which were inflated by 10 per cent in order to allow him his commission. Lawrence Collins J found that the evidence was that the “price was actually increased by the amount of the bribe and where the money was paid out of the money paid by the claimants for what they thought was the price.” It was on that basis that he distinguished Lister & Co v Stubbs. Whether this was an adequate ground for distinguishing Lister & Co v Stubbs may need to be considered in a case on similar facts. However, in the present case, as he accepts, Mr Pymont has no comparable finding. At best he has the benefit of a presumption that the price was increased; but as he stressed in oral submission it is no part of his case that the claimants are required to prove that; or, indeed, that they are required to prove that they have suffered any loss at all. I do not consider that, compatibly with Lister & Co v Stubbs, as approved by this court in Sinclair v Versailles, it is possible to accept Mr Pymont’s first argument. 33. Accordingly, in my judgment it cannot be said that any part of the payment by the Investor Group to Monte Carlo Grand Hotel Ltd remained the property of the former. I consider, therefore, that Newey J was correct in Cadogan Petroleum plc v Tolley [2011] EWHC 2286 Ch to say that it did not matter that an alleged bribe or secret commission had been paid from funds which could be tracked back to money which had once belonged to the principal. 34. Mr Pymont’s second point was that Stubbs was not a fiduciary with authority to negotiate the price of the dyestuffs he was charged with buying. His task was to buy them at market price. Thus, he argued, Lister & Co v Stubbs had no application to agents like Cedar whose task was to negotiate the best price it could. Stubbs might have broken his contract of employment, but he was not a true fiduciary. If this submission were correct it would mean that Lister & Co v Stubbs has been misunderstood for 120 years. But I do not think that it is correct. In the first place the market price is the price at which a buyer is prepared to buy and a seller to sell. If Stubbs had not received the commission from Varley & Co, the latter might have been willing to sell for less. Second, in deciding the case Cotton LJ applied the principle in Metropolitan Bank v Heiron, which was a case that undoubtedly concerned a fiduciary: in that case a company director. Lindley LJ discussed the case in terms of a liability to account, which is an equitable concept. Third, if the case had been about a breach of the contract of employment (e.g. a breach of an implied term of fidelity and loyalty) it would have been incumbent on Lister & Co to assert that they had suffered some loss. Fourth, the whole point of the case was an attempt to freeze the assets which Stubbs had bought with his secret profit. If the case had rested on the lack of fiduciary accountability that would have been a very short answer. I do not consider that compatibly with Lister & Co v Stubbs, as approved by this court in Sinclair v Versailles, it is possible to accept Mr Pymont’s second argument. 35. The third ground of distinction was that Mr Pymont said that Cedar’s duty was to enable the Investor Group to acquire the hotel as cheaply as possible. By accepting the commission from the seller, Cedar pocketed part of the very thing that should have enured to the benefit of the Investor Group. Thus Cedar diverted from the Investor Group the opportunity to acquire the hotel for up to €10 million less than the Investor Group in fact paid. It does not matter whether the opportunity can itself be characterised as “property”. Where a fiduciary diverts an opportunity that he ought to have procured for his principal, and profits from the diversion, a long line of cases shows that the court will impose a constructive trust over the profit. This is a proprietary remedy. This is not an argument that was advanced or considered in Lister & Co v Stubbs; and in Sinclair v Versailles this court expressly acknowledged that a constructive trust could arise where a “trustee [acquires] the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.” It is to those cases that I now turn. 36. I preface my observations by recording what Mr Collings said about them in general terms. In essence he made four points. First, he said he did not dispute the correctness of the long line of cases that showed that where an agent was engaged to purchase property on behalf of his principal but purported to acquire it on his own account, he held the target property thus acquired on a (true) constructive trust for his principal. Second, he said that in most of the cases what was in issue was liability; not the nature of the remedy if liability was established. That is true; but that may be because there was nothing to argue about. If liability was established, everyone knew what the remedy would be. Third, he said that it followed from this that one must approach with caution judges’ use of words like “trustee” in the context of cases deciding liability. Fourth, he said that the court must beware of artificially identifying an “opportunity” for the purpose of applying the principles. A relevant “opportunity” must have proprietary characteristics; the chance of obtaining a reduced price is not enough. Information is not property for these purposes; and, even if it is, information cannot be traced into property that has been acquired with the aid of that information: OBG Ltd v Allan [2007] UKHL 21 [2008] 1 AC 1 (§ 275 per Lord Walker of Gestingthorpe); Satnam Investments Ltd v Dunlop Heywood & Co Ltd [1999] 3 All ER 652. In this respect Mr Collings commended a further passage from the judgment of Newey J in Cadogan Petroleum plc v Tolley (followed by Simon J in our case) in which Newey J said: “There are undoubtedly authorities suggesting that proprietary claims can be made in respect of property obtained by the diversion of opportunities (in particular, maturing business opportunities) (see e.g. Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), at paragraphs 1342-1344, 1355 and 1356). I am not aware, however, of any case in which an opportunity to obtain a reduced price has been considered a relevant opportunity for this purpose. In any event, I do not think that a bribe or secret commission is to be viewed as the diversion of an opportunity to obtain a reduced price. In Sinclair, Lord Neuberger said that there is a “fundamental distinction between (i) a fiduciary enriching himself by depriving a claimant of an asset and (ii) a fiduciary enriching himself by doing a wrong to the claimant” and that “a bribe paid to a fiduciary could not possibly be said to be an asset which the fiduciary was under a duty to take for the beneficiary”. A bribe is to be seen as something the fiduciary obtained by doing a wrong rather than by depriving the beneficiary of an opportunity. Were the position otherwise, beneficiaries would (contrary to the view of the Court of Appeal in Sinclair) very frequently have proprietary interests in bribes and secret commissions since they could commonly be said to have been derived from opportunities to obtain a reduced price (or, where an asset is being sold, an increased one), and cases approved in Sinclair could have been expected to have been decided differently. As Lord Neuberger said in Sinclair (at paragraph 55), the money at issue in such cases “was not money which was part of the assets subject to [the fiduciary’s] duties, or derived from such assets”.” 37. I have grouped the cases for convenience; but the grouping comes with the well-known “health warning” in Lord Upjohn’s speech in Boardman v Phipps [1967] 2 AC 46, 123: “Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case.” 38. The first group of cases consist of cases in which the principal had actually instructed the agent to acquire or to negotiate the acquisition of property for him, but where the agent purported to acquire the target property on his own behalf. Since Mr Collings did not dispute the correctness of the cases in which the agent was held to hold the acquired property on (true) constructive trust for the principal, there is no need to analyse them in detail. In Lees v Nuttall (1829) 1 Russ & M 53 Lees employed Nuttall as his attorney to negotiate the purchase of land. However, Nuttall bought the land apparently on his own account for £1,100. Lees sued for a declaration that Nuttall was a trustee of the land and for an order that he should convey his interest to Lees. Sir John Leach MR “on the ground that Nuttall had been employed by the Plaintiff as his agent for the purchase of the estate, made a decree against Nuttall according to the prayer of the bill”. This is therefore a case in which the court required the fiduciary to transfer the acquired asset in specie. Sir John Leach’s decree was affirmed by Lord Brougham LC; but without reported reasons: (1834) 2 My & K 818. The importance of this case is that Lees had no pre-existing proprietary interest in the land. An obligation to transfer the land in specie indicates that the land was beneficially owned by Lees. So the proprietary interest can only have arisen on Nuttall’s acquisition of the land in breach of his fiduciary duty. 39. In Taylor v Salmon (1838) 4 My & Cr 134 Salmon had been engaged as Taylor’s agent for the purpose of acquiring a lease of mines from Lord Dunalley which would then be transferred to a company. It was alleged that Lord Dunalley knew that Salmon was Taylor’s agent. Salmon wrote to Lord Dunalley saying that he had induced a company to undertake the working of Lord Dunalley’s mines and proposed “for them” certain lease terms. Lord Dunalley agreed to those terms. However, the lease was drawn up in the name of Salmon. Taylor and his partners sued for a declaration that “as between themselves and Salmon” they were entitled to the benefit of the agreement between Salmon and Lord Dunalley. Lord Dunalley was willing to accept Taylor as sole lessee in trust for the company. Lord Cottenham LC said: “It was well observed at the Bar that, as Lord Dunalley does not object to granting the lease to the company, the question is not whether the Plaintiffs have made out their case, but whether the Defendant Salmon has made out a title to have the lease made to himself in preference to the Plaintiffs. I am, however, of opinion that the Plaintiffs’ evidence proves their own case and disproves that set up by the Defendant Salmon. If Salmon, at the time when he entered into the agreement with Lord Dunalley, was acting as the agent for the Plaintiff Taylor, in negociating for the lease, it is not material whether at that moment he intended that the agreement should be for the benefit of the Plaintiff or for his own; because in either case the Plaintiff would be entitled, as against him, to the benefit of the contract…” 40. The way that Lord Cottenham described the issue was in terms of “title”; that is to say proprietary rights. It is true that because Lord Dunalley did not object to granting the lease to Taylor the question whether he was bound by Taylor’s proprietary right did not arise. But whether an equitable proprietary interest binds third parties is usually governed by the settled principle that a bona fide purchaser for value of a legal interest takes free of the equitable proprietary interest. 41. In my judgment this group of cases shows that the principal can acquire a proprietary interest in an asset acquired by his agent, even though the principal had no pre-existing proprietary interest in the asset, and the asset was, in the first instance, acquired by the agent with his own money. 42. The next group of cases are cases in which the fiduciary was not specifically charged with acquiring particular property for his principal. So there was no identified target. However, in fact he acquired property which would have been of interest to his principal if the principal had known about it. In Carter v Palmer (1842) 8 Cl & F 657 Carter was Palmer’s agent. Palmer had granted a charge over his estate which, as it was later found, secured the sum of £7,712. Carter took an assignment of the charge for which he paid £2,400. The issue between the parties was whether Palmer was entitled to require the charge to be assigned to him on payment of £2,400; or on payment of £7,712. This, in turn, depended on whether Carter was liable at all. The question of liability was the main argument advanced on his behalf by Mr Pemberton (later Lord Kingsdown) and Mr Knight Bruce (later Knight-Bruce LJ). The House of Lords held that Carter was only entitled to be paid what he himself had paid for the assignment of the charge (together with interest). Lord Cottenham LC said that by virtue of his employment Carter was incapacitated from purchasing the security for his own benefit and “consequently that he is to be considered as having so purchased for the benefit of his former employer.” No other speech is reported. The importance of this case is that the decree that the House of Lords affirmed (subject to one immaterial alteration) the decree made in the court below. That decree ordered and decreed that Carter was “a trustee for [Palmer] as to the said securities and the sum due thereunder, save as to such portion thereof as [Carter] was thereinafter decreed to be beneficially entitled to”. That beneficial entitlement was, in effect, the price that he had himself paid to acquire the securities. Thus the result of the case was that Carter held on trust for Palmer a security interest in which Palmer had no pre-existing interest, and for which Palmer had not paid. 43. Cook v Deeks [1916] AC 554 is another such case. The facts, somewhat simplified, were these. The Toronto Construction Company Ltd was a building contractor. Deeks was one of its directors. The company had been the successful tenderer for a number of construction projects for the Canadian Pacific Railway. Deeks negotiated with the Canadian Pacific Railway for a contract for a new construction project, but on his own account rather than on account of the company. Deeks then formed a new company, the Dominion Construction Company, for the purpose of entering into the new contract, which it did. Lord Buckmaster LC, giving the advice of the Privy Council, said: “… men who assume the complete control of a company’s business must remember that they are not at liberty to sacrifice the interests which they are bound to protect, and, while ostensibly acting for the company, divert in their own favour business which should properly belong to the company they represent.” 44. The upshot was that Deeks was regarded as holding the contract on behalf of the company. Lord Buckmaster continued: “If, as their Lordships find on the facts, the contract in question was entered into under such circumstances that the directors could not retain the benefit of it for themselves, then it belonged in equity to the company and ought to have been dealt with as an asset of the company.” 45. Again this is not a case in which the principal had a pre-existing interest in the chose in action (i.e. the new contract) which came into existence as a consequence of the breach of duty. Nor did the Privy Council say that the opportunity itself “belonged” to the company. What “belonged” to the company in equity was the contract. On the other hand the Privy Council did not make any declaration of trust but ordered the taking of an account. On the face of it this would appear to be a personal remedy. But the account was ordered not only against Deeks and his co-directors but also against the Dominion Construction Company. Since the Dominion Construction Company was not itself a fiduciary, the order against it could only be justified on the basis that it was in knowing receipt of trust property. Thus the principal must have had a proprietary interest in the contract. 46. Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 was another case of entry into a contract by a former director of the company who had acquired knowledge of the potential contract while still a director. However, Roskill J found that it was unlikely that the company itself could have obtained the contract in question. Nevertheless the fiduciary was liable to account. What is of importance in that case is the relief actually ordered, which included a declaration that Cooley was a trustee for IDC of the profits of his contract. This, then, was a case in which the trust attached only to the profits made under the contract, rather than to the contract itself. 47. That case, among others, was applied by this court in Bhullar v Bhullar [2003] EWCA Civ 424 [2003] 2 BCLC 241. Bhullar Bros Ltd owned property in Huddersfield. Two of the directors of the company discovered that the next door property was on the market. They put in a bid for it which was accepted; and the property was transferred to a newly incorporated company called Silvercrest Ltd. At the conclusion of the trial of an unfair prejudice petition HHJ Behrens declared that Silvercrest Ltd held the property on trust for Bhullar Bros Ltd and ordered the directors to procure its transfer to Bhullar Bros Ltd at the price that Silvercrest Ltd had paid. His decision was affirmed by this court. Jonathan Parker LJ made two important points: “I agree … that the concept of a conflict between fiduciary duty and personal interest presupposes an existing fiduciary duty. But it does not follow that it is a prerequisite of the accountability of a fiduciary that there should have been some improper dealing with property ‘belonging’ to the party to whom the fiduciary duty is owed, that is to say with trust property.” (§ 27) “In a case such as the present, where a fiduciary has exploited a commercial opportunity for his own benefit, the relevant question, in my judgment, is not whether the party to whom the duty is owed (the company, in the instant case) had some kind of beneficial interest in the opportunity: in my judgment that would be too formalistic and restrictive an approach. Rather, the question is simply whether the fiduciary’s exploitation of the opportunity is such as to attract the application of the rule.” (§ 28) 48. The next group of cases are cases in which the fiduciary was held to be a trustee of a profit made in breach of his fiduciary duty, even though the principal did in fact acquire the target property. In Fawcett v Whitehouse (1829) 1 Russ & M 132 Knight & Co were the lessees of unprofitable ironworks. They were looking for someone to take the lease off their hands. In 1819 they granted an underlease of the ironworks on the same terms as their own lease to Fawcett and others. The new underlessees formed a partnership to work the mines. Two of the partners then sued the third partner, Whitehouse, alleging that at the time when they took the underlease Whitehouse had received £12,000 from Knight & Co, by way of premium for procuring responsible tenants for the ironworks. Lord Lyndhurst LC held that the court could not sanction the transaction; and said that: “as to two-thirds of the sum of £12,000 the Defendant must be considered a trustee for the partnership.” It is true that what was in issue was liability rather than the nature of the remedy; but Lord Lyndhurst undoubtedly used the language of trusteeship. There are two important points about this case. First, the partnership had acquired the very property that the partners intended to acquire, namely the underlease of the ironworks. So this was not a case in which the agent had himself acquired property which he should have acquired from the principal. Second, it was not a case in which the principal actually paid more by way of a capital sum that he might have done. As far as the report reveals, no capital sum was paid for the grant of the underlease. 49. In Tyrrell v Bank of London (1862) 10 HLC 26 Tyrrell was a solicitor. He and others promoted the incorporation of the Bank of London; and he acted as the bank’s solicitor and secretary. The Bank was offered the opportunity to buy property in the City; on part of which the Hall of Commerce stood. It was not then in a position to buy it. Tyrrell entered into an agreement with Read who had the right to buy the whole property under a contract for sale with the mortgagee. Tyrrell and Read agreed that they would be jointly interested in the purchase contract, apart from one small part of the property. Tyrrell’s interest was not disclosed to the Bank. The Bank ultimately agreed to buy the Hall of Commerce from Read, but not the remainder of the property comprised in Read’s purchase contract. That was acquired by Read but remained unsold. The Bank subsequently brought an action against both Tyrrell and Read. The relief claimed was an order that Tyrrell and Read should account to the Bank for the profits made by them respectively on the sale of the property to the Bank and also for an order that all necessary parties should convey the unsold part of the property to the Bank, on giving credit for the price that Read himself had paid for it. The Master of the Rolls dismissed the claim against Read. However, as against Tyrrell he made a declaration that Tyrrell was a trustee for the Bank of “all the interest acquired by him in the hereditaments” and that the Bank was entitled to the clear profit derived from the sale. He also ordered Tyrrell to convey to the Bank his interests in all the hereditaments acquired by him. His decision was reversed in part by the House of Lords. In essence the House of Lords held that while the Master of the Rolls was correct as regards the Hall of Commerce itself, which the Bank had actually acquired, he had gone too far in declaring Tyrrell a trustee as regards that part of the property that the Bank had not acquired. Lord Westbury LC stated the principle to be applied as follows: “The principle is that the solicitor shall not be permitted to make a gain for himself at the expense of his client. The client is entitled to the full benefit of the best exertions of the solicitor. The relation of solicitor and client involves, of course, the relation of principal and agent. The duties of the first relation include all those of the second and something more; and I prefer, therefore, to rest my opinion in this case on the obligations of a solicitor to his client…” 50. He did not, I think, identify what the “something more” was. Having surveyed the facts he concluded: “My Lords, there is no relation known to society, of the duties of which it is more incumbent upon a court of justice strictly to require a faithful and honourable observance, than the relation between solicitor and client; and I earnestly hope that this case will be one of the many which vindicate that rule of duty which has always been laid down, namely, that a solicitor shall not, in any way whatever, in respect of the subject of any transactions in the relations between him and his client, make gain to himself at the expense of his client, beyond the amount of the just and fair professional remuneration to which he is entitled. Therefore, my Lords, that in respect of the subject matter of the transaction carried on in this relation, Tyrrell the Appellant must be converted into a trustee for the Respondents, there can be no possibility of doubt. But the argument on the part of the Respondents, and the decree of the Master of the Rolls, have been, in one particular, carried further, and have involved the conclusion not only that Tyrrell shall be a trustee of that particular subject of the relation between him and his clients, namely, the property that he actually bought and conveyed to his clients, but that the principle shall be extended farther, to give the clients the benefit of property and the benefit of a contract with which the clients had no concern. Now, I must submit to your Lordships that in the particular mode in which that is effected by the decree of the Master of the Rolls, there has been an error, a departure from the true principles of equity. The foundation of the decree is the relation of solicitor and client, but that is constituted retrospectively by considering, first, what it was that the client took, and then, with respect to the property that was the subject of the transaction, the duties of the relation of trust and the obligation to account necessarily arise.” 51. His ultimate conclusion was that the Bank was entitled as against Tyrrell “to the benefit of the contract made by [Tyrrell] with Read so far as relates to the premises sold and conveyed to the [Bank]”. Lords Cranworth and Chelmsford agreed with this result. What is important about this case is first that the Bank acquired the property that it was interested in acquiring. It was not a case in which Tyrrell diverted an opportunity from the Bank by taking the target property himself. In so far as there was any opportunity diverted from the Bank it was the opportunity to acquire the target property at a lower price. The second important point is that the House of Lords granted the Bank a proprietary remedy over the contract that Tyrrell had made with Read so far as it related to the target property. In so far as there was an identifiable item of property that was capable of being the subject-matter of a trust, it was the chose in action consisting of the contract between Tyrrell and Read, rather than the more nebulous idea of an opportunity. Having reached the conclusion that Tyrrell was a constructive trustee of that contract so far as it related to the target property, it would then have been a simple matter to have traced its value into the relevant proceeds of that contract. In Sinclair v Versailles Lord Neuberger of Abbotsbury MR commented on that case as follows (§ 61): “The view of all three members of the Committee in the Tyrrell case was that a solicitor who bought a piece of land (which he knew that his client was interested in acquiring) (i) held that part of the land which his client then purchased on trust for his client (so that his client beneficially owned the profit which the solicitor made on that part), but (ii) did not hold the remainder of the land on trust for his client. In Attorney General for Hong Kong v Reid [1994] 1 AC 324, 333 Lord Templeman seems to have thought that his conclusion that a bribe accepted by an agent was beneficially owned by his principal was inconsistent only with Lord Chelmsford’s view. I find it hard to see how it is not also inconsistent with the view of all three members of the Committee in the Tyrrell case on point (ii).” 52. Thus Lord Neuberger MR recognised that so far as concerned the target property, Tyrrell did hold that part of the contract on trust for the Bank, with the consequence that the Bank “beneficially owned the profit”. 53. In Whaley Bridge Calico Printing Company v Green (1879) 5 QBD 109 Green owned a calico printing works that he had bought for £15,000. He and Smith entered into a sham contract for the sale of the works by Green to Smith for £20,000. A company was then formed to buy the works for £20,000; and the directors of the company were nominees of Green and Smith. Green and Smith agreed between them that Green would pay Smith £3,000 out of the purchase money. Bowen J held that if the money had been paid, Smith could have been compelled to pay over to the company his net profit. However, that money had not yet been paid and the question was whether the company could recover it from Green. Bowen J said: “In order to recover against Green, the company do not indeed require to prove that Green was fraudulent. It is enough to shew that this is a profit coming to their agent to the benefit of which they are entitled. It is not, perhaps, every contract which a cestui que trust, even under similar circumstances, could in this manner enforce. In many unexecuted contracts the principal could not substitute himself in the agent’s place, as the person for whose benefit the contract was to be performed, without altering substantially the character of the contract. But where nothing has to be done under the contract but payment of money to the agent, I think that the principal, under circumstances such as these, is entitled to stand in the agent’s shoes and compel a payment of money directly to himself.” 54. This, like Tyrrell, was a case in which the company actually acquired the target property. But it was granted a proprietary remedy against a chose in action (i.e. the contract between Green and Smith) which was created as part of the overall arrangements. 55. Having completed that review of the main authorities cited to us, I can return to the critical paragraphs in Sinclair v Versailles which I repeat for convenience: “a beneficiary of a fiduciary’s duties cannot claim a proprietary interest, but is entitled to an equitable account, in respect of any money or asset acquired by a fiduciary in breach of his duties to the beneficiary, unless the asset or money is or has been beneficially the property of the beneficiary or the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.” (§ 88) “a claimant cannot claim proprietary ownership of an asset purchased by the defaulting fiduciary with funds which, although they could not have been obtained if he had not enjoyed his fiduciary status, were not beneficially owned by the claimant or derived from opportunities beneficially owned by the claimant.” (§ 89) 56. Bearing in mind Lord Upjohn’s “health warning” (see § 37 above), I do not consider that in paragraph 88 Lord Neuberger MR can have intended to create two mutually exclusive categories of cases in which a proprietary interest can arise. Thus I do not consider that Mr Collings is right in submitting that once Cedar’s commission has been characterised as a secret commission it cannot also be characterised as a lost opportunity. The formulations in paragraph 89 on its face deals only with assets purchased by the defaulting fiduciary. That is not the case here, because Cedar purchased nothing. But the difference in language between the two formulation shows, if nothing else, how difficult it is to lay down prescriptive rules. 57. Although some cases have treated a business opportunity as an intangible asset (e.g. CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704, Lindsley v Woodfull [2004] EWCA Civ 165 [2004] 2 BCLC 131) I would be prepared to accept Mr Collings’ submission that an “opportunity” to acquire property at a reduced price cannot “belong” to anyone in the sense of literally amounting to a proprietary right in the opportunity itself. After all, you cannot assign it or transfer it; you cannot charge it; you cannot leave it by will. But Lord Neuberger, in speaking of “an opportunity or right which was properly that of the beneficiary” in paragraph 88 eschewed the language of proprietary ownership of the opportunity itself. It is true that in paragraph 89 he referred to opportunities “beneficially owned” by the principal; but he did not discuss further what that elusive concept might mean. Nor was the court referred to Bhullar v Bhullar in which this court decisively rejected the notion that it was necessary to identify some form of beneficial ownership of the opportunity itself. We have also seen that in Cook v Deeks the Privy Council did not say that the opportunity itself “belonged” to the company. What “belonged to it in equity” was the contract that came into existence as a result of the exploitation of the opportunity. 58. Accordingly, I do not consider that the question of tracing or following arises at the stage of the opportunity itself. It will arise once the court declares that an asset is held on constructive trust for the principal. It will then be possible to follow the asset held on constructive trust or to trace its value into identifiable substitutes. 59. In my judgment there is no need to enquire whether the opportunity to acquire the hotel at a lower price can be characterised as an opportunity separate from the opportunity to acquire the hotel at all. I do not, therefore, agree with Newey J in Cadogan Petroleum plc v Tolley that it is necessary to isolate the opportunity to acquire an asset at a lower price from the opportunity to acquire an asset at all. Nor is there any need to enquire whether the Investor Group can be said to have a proprietary interest, in the strict sense, in that opportunity. In my judgment the principle we must apply is that stated by Jonathan Parker LJ in Bhullar v Bhullar: is the fiduciary’s exploitation of the opportunity such as to attract the application of the rule? In the present case the exclusive brokerage agreement was part of the overall arrangement surrounding the purchase of the hotel. I cannot see that it is different in principle from the contract between Tyrrell and Read in so far as it concerned the target property (Tyrrell v Bank of London) or the contract between Green and Smith (Whaley Bridge Calico Printing Company v Green). In my judgment the exploitation of the opportunity by Cedar was such as to attract the operation of the rule with the consequence that Cedar held the benefit of the contract on a constructive trust for the Investor Group. Thence it is possible to trace into the money paid under that contract which Cedar likewise held on a constructive trust for the Investor Group. 60. I would allow the appeal. Lord Justice Pill: 61. As Lewison LJ has stated, at paragraph 13, the only issue is whether Investor Group’s remedy against Cedar is a personal remedy or a proprietary one. Did Investor Group acquire a proprietary interest in the commission paid to Cedar? As Lewison LJ adds, at paragraph 14, the argument is really about following and tracing. Consideration of the views of commentators and practitioners generally on the subject of constructive trusts in the law of England and Wales reveals passions of a force uncommon in the legal world. 62. The facts are not complicated: (a) While advising Investor Group in relation to the purchase by them of the Monte Carlo Grand Hotel, Cedar entered into an agreement with the owners of the hotel under which they were to receive a fee of €10 million from the owners for securing a purchaser for the hotel. (b) Cedar failed to notify Investor Group of that agreement and received that commission from the owners of the hotel when the hotel was sold to Investor Group in December 2004 for €211.5 million. (c) It would have been a negotiating advantage for Investor Group in the purchase had they known that Cedar were to receive a commission from the owners. (d) Whether Investor Group could have purchased the hotel at a lower price had they known of the commission is speculation. The payment to Cedar has been characterised as a secret commission. There was undoubtedly a conflict of interest and Cedar acted wrongfully in failing to disclose to Investor Group its relationship with the vendor. Consequential upon that conflict of interest, Cedar received money from the hotel owners. 63. In a long line of cases, consideration has been given as to “whether the circumstances under which the money was paid were such as, in equity, to impose a trust on the local authority [payee]. If so, an equitable interest arose for the first time under that trust” (Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, per Lord Browne-Wilkinson, at page 706). Mr Collings QC submitted that, when considering the cases, it must be borne in mind that in many of them the issue was on liability rather than remedy and, on occasions, it is not clear what remedy was granted. 64. At bottom, this is a question of public policy. There would be a case for deciding that whenever, as in the present case, the agent payee is a wrongdoer, the law, applying equitable principles, should grant a proprietary remedy to the principal. A principal shall stand in his agent’s shoes. 65. A distinction has, however, been drawn in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 [2012] Ch 453. I agree that Sinclair is binding on this court, as is Lister & Co v Stubbs (1890) 45 Ch.D 1, approved in Sinclair. 66. In Sinclair, Lord Neuberger MR stated, at paragraph 80: “There can thus be said to be a fundamental distinction between (i) a fiduciary enriching himself by depriving a claimant of an asset and (ii) a fiduciary enriching himself by doing a wrong to the claimant.” At paragraph 88, Lord Neuberger somewhat enlarged the first of those categories by including in it a situation where: “the trustee acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary.” 67. Lewison LJ has approached the case on the basis that it cannot be said that any part of the payment by Investor Group to the hotel owners remained the property of Investor Group (paragraph 33), and I respectfully agree. What Investor Group have been deprived of is the opportunity to have purchased the hotel for up to €10 million less than they paid for it. As between principal and agent, the situation appears to me no different from one in which the vendor had paid a bribe to the agent (which in this case he did not). 68. In holding for Investor Group, at paragraph 59, Lewison LJ has relied on the statement of principle of Bowen J in Whaley Bridge Calico Printing Company v Green (1879) 5 QBD 109 cited by Lewison LJ at paragraph 53. Lewison LJ has based his conclusion in favour of Investor Group on a finding that the agreement between Cedar and the hotel owners, under which the secret commission was paid, was part of “the overall arrangement surrounding the purchase of the hotel.” 69. I agree with that but the link between the money claimed to be subject to the trust and the claimant is less well knit than that in some of the cases cited. I do not find it easy to fit the current facts into the first of the categories specified by Lord Neuberger at paragraph 80 of Sinclair. By wrongful non-disclosure of his relationship with the vendor, the agent deprived Investor Group of the opportunity to obtain the property at a lower price. 70. To reach the conclusion Lewison LJ has, it is necessary to take a broad view of the first category, first, because the money paid to the agent was not the property of the principal. Secondly, it is far from certain that Investor Group’s loss of opportunity would have come to fruition in the saving of the money over which the beneficial interest is claimed to be held, or any part of it. Beneficial ownership of an opportunity is, as Lewison LJ states at paragraph 57, an “elusive concept”. 71. I see force in the conclusion of Simon J that the wrong to Investor Group required only a personal remedy. In Lister v Stubbs, Cotton LJ stated: “. . . there is a debt due from the Defendant to the Plaintiffs in consequence of the corrupt bargain which he entered into; but the money which he has received under that bargain cannot, in the view which I take, be treated as being money of the Plaintiffs . . .” 72. However, in making the classification as between Lord Neuberger’s two categories, I am influenced by the decision of the majority in the House of Lords in Boardman v Phipps [1967] 2 AC 46, a decision given, with respect, and for reasons given by the Chancellor in his judgment, little attention in Sinclair. In that case, the agent, a solicitor, obtained information which satisfied him that the purchase of shares would be a good investment and which gave him the opportunity to acquire those shares as a result of acting on behalf of the principal. The shares were in a company in which the beneficiary had an interest and the agent made a profit on them. Lord Cohen stated, at page 103A: “Liability to account must depend on the facts of the case.” At page 107D, Lord Hodson put the test broadly: “I agree with the learned judge and with the Court of Appeal that the confidential information acquired in this case which was capable of being and was turned to account can be properly regarded as the property of the trust. It was obtained by Mr. Boardman by reason of the opportunity which he was given as solicitor acting for the trustees in the negotiations with the chairman of the company, as the correspondence demonstrates. The end result was that out of the special position in which they were standing in the course of the negotiations the appellants got the opportunity to make a profit and the knowledge that it was there to be made.” 73. There remains the difficulty of linking a commission received from the vendor as a result of the sale of the property with the speculative loss, based on the loss of opportunity on the purchase that Investor Group claim. Lord Hodson’s approach does, however, encourage a broad view of Lord Neuberger’s first category in paragraph 80. 74. Notwithstanding my reservations, and having read the judgments of Lewison LJ and the Chancellor, I agree that the appeal should be allowed. The Chancellor: 75. The constructive trust is a feature of equity which arises in many different areas of the law. They include, among others, contracts for the sale of land, the perfection of imperfect gifts, gifts in contemplation of death (donatio mortis causa), testamentary secret trusts, mutual wills, common intention constructive trusts, fraud and undue influence, estoppel, specific performance, joint ventures, breach of trust, and breach of fiduciary duty. Although it may be said at the most general level that the constructive trust is a feature of equity to prevent or remedy unconscionable conduct, there is no generally accepted set of principles governing the existence of a constructive trust across all the different areas of the law where it is to be found. Moreover, in some cases the constructive trust is a true institutional trust arising by operation of law at a particular moment and creating a property interest in the beneficiary from that time. In other cases, it simply connotes an obligation in equity of wrongdoers, who were not or are not in fact trustees, to account as though they were. 76. The present case is about the existence of a constructive trust, which is a true trust, of a benefit acquired by a fiduciary in breach of fiduciary duty. Short of a decision of the Supreme Court that the law of England and Wales recognises a remedial constructive trust, as is to be found in other common law countries, such as Australia, New Zealand and Canada, this court must proceed on the basis that in this jurisdiction the constructive trust of a benefit wrongly obtained by the fiduciary in breach of duty is an institutional trust arising at the moment the benefit is received and under which the principal obtains an immediate beneficial interest. Similarly, short of an express decision of the Supreme Court to the contrary, I do not consider it would be right to view the constructive trust in this area, as at least one leading academic commentator has urged, as a mere fiction for making orders of the court that the defendant pay a sum of money to the claimant or transfers a particular right to the claimant. 77. The issue in the present case arises because the decision of the Court of Appeal in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347, [2012] Ch 453, to follow Lister & Co v Stubbs (1890) 45 Ch.D 1 (CA) rather than Attorney General for HK v Reid [1994] 1 AC 324 (PC) confirms that not all benefits wrongly obtained by a fiduciary in breach of fiduciary duty are subject to a constructive trust even though the fiduciary is still under a duty to account in equity. The problem is to identify when such a situation arises and specifically whether, as Simon J thought below, the facts of the present case are such a situation. 78. I am very grateful to Lewison LJ for not only setting out the facts but for his review of many of the more than 30 cases to which we were referred. I do not intend to repeat the facts of those cases where he has set them out. 79. As Lewison LJ has said, Sinclair Investments is a highly controversial decision. It has divided legal scholars and the common law world. Lord Neuberger MR referred to some of the academic literature in Sinclair Investments at paragraphs [82] and [83]. I think it would be fair to say, as reflected in all the leading textbooks, that prior to the decision in that case it was generally accepted by trust and equity practitioners and judges throughout the common law world that Reid would be followed in preference to Lister. Some have seen the academic protagonists in the early skirmishes after Sinclair Investments as falling into two broad groups: those with a particular trust and equity expertise and background, who were hostile to the decision, and those with a particular common law, especially commercial or restitution, expertise and background, who favoured the decision. That rather crude description and comparison, however, is not entirely accurate, and it devalues the important analyses of the increasingly numerous commentators on all sides of the debate both here and abroad. 80. The full Federal Court of Australia in Grimaldi v Chameleon Mining N L (No 2) [2012] FCAFC 6 has refused to follow the decisions in Sinclair Investments and in Lister. It held, following Reid, that a fiduciary who receives a bribe holds it on trust for his or her principal. It would be easy to dismiss the decision in Grimaldi on the short ground that Australian jurisprudence recognises the remedial constructive trust; and that was indeed one of the express reasons why the court in Grimaldi did not follow Sinclair Investments. That would, however, give less respect to the full reasoning in Grimaldi than it deserves. The Australian court gave important policy and other reasons for preferring the decision and reasoning in Reid. It is also worthy of note that Finn J, who delivered the judgment in Grimaldi, was the author of the well known magisterial work on Fiduciary Obligations (1977). Moreover, the law in England and Wales now differs on this matter not only from Australia, but also, as Finn J observed, New Zealand, Singapore, Canada and some jurisdictions in the United States. It also has to be borne in mind that, in addition to the United Kingdom’s overseas territories and crown dependencies, there are many current and former Commonwealth countries for which the final court of appeal is the Privy Council, which gave the decision in Reid and to which other countries look to provide a lead on specialist areas such as trust law and equity. 81. Having set out that background to the present case, I entirely agree with Lewison LJ that it is not the function of this court to enter into the debate about whether or not Lister or Reid or Sinclair Investments was correctly or incorrectly decided. At this level of the judicial hierarchy we are bound to accept the decision in Sinclair Investments on its facts and also the conclusion in that case that Lister was correctly decided and should be followed by the courts of England and Wales in preference to Reid. 82. That leaves this court with the task of applying the decision and the analysis in Sinclair Investments, and the case law which has not been overturned by or is not inconsistent with Sinclair Investments, to the facts of this case. In order to do so, it is necessary to provide some coherence to the large body of relevant case law, not all of which was considered or even mentioned in Sinclair Investments. 83. Lord Neuberger’s analysis in paragraphs [88] and [89] of Sinclair Investments divides into three broad categories the situations in which a fiduciary obtains a benefit in breach of fiduciary duty. The first category (“Category 1”) is where the benefit is or was an asset belonging beneficially to the principal (most obviously where the fiduciary has gained the benefit by misappropriating or misapplying the principal’s property). The second category (“Category 2”) is where the benefit has been obtained by the fiduciary by taking an advantage of an opportunity which was properly that of the principal. The third category (“Category 3”) is all other cases. According to the analysis and conclusion of Lord Neuberger, the situations in Categories 1 and 2 give rise to a constructive trust, but those in Category 3 do not. The issue in the present case arises out of the difficulty of ascertaining the borderline between Category 2 and Category 3. 84. The problem can be expressed in quite simple terms. It follows from the decision in Sinclair Investments that the facts of that case and the bribe and secret commission situations exemplified by the facts in Lister and Reid fall within Category 3. As a matter of ordinary language those were “opportunity” cases in the sense that the defendants in those cases wrongly obtained a benefit through the opportunity presented by their relationship to their principal. The cases, however, fall within Category 3 rather than Category 2 because the opportunity, in Lord Neuberger’s words, was not “properly that of the beneficiary” (paragraph [88]) and was not “beneficially owned by the claimant” (paragraph [89]). The question is what “opportunity” situations, apart from the precise factual situations in Sinclair Investments, Lister and Reid and those precisely analogous, fall within Category 3 rather than Category 2? The difficulty arises because the expressions “properly that of the beneficiary” and “beneficially owned by the claimant” are not to be found as legal expressions or tests in any of the reported cases. That is not surprising because opportunities are not a species of property capable of being held on trust. Moreover, in Bhullar v Bhullar [2003] EWCA Civ 424, which was not cited in Sinclair Investments, Jonathan Parker LJ, with whom the other members of the Court of Appeal agreed, expressly disapproved of those types of expressions and concepts. He said the following in relation to the rule, as formulated by Lord Cranworth LC in Aberdeen Railway Co v. Blaikie (1854) Macq. 461, 471, that “no fiduciary shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which may possibly conflict, with the interests of those whom he is bound to protect” (“the no-conflict rule”): “[28] In a case such as the present, where a fiduciary has exploited a commercial opportunity for his own benefit, the relevant question, in my judgment, is not whether the party to whom the duty is owed (the company, in the instant case) had some kind of beneficial interest in the opportunity: in my judgment that would be too formalistic and restrictive an approach. Rather, the question is simply whether the fiduciary’s exploitation of the opportunity is such as to attract the application of the rule. As Lord Upjohn made clear in Boardman v Phipps, flexibility of application is of the essence of the rule. Thus, he said [at [1967] 2 AC 46, 123]: ‘Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case.’ Later in his speech (at p. 125) Lord Upjohn gave this warning against attempting to reformulate the rule by reference to the facts of particular cases: ‘The whole of the law is laid down in the fundamental principle exemplified in Lord Cranworth’s statement [in Aberdeen Rly Co v Blaikie Bros] … But it is applicable, like so many equitable principles which may affect a conscience, however innocent, to such a diversity of different cases that the observations of judges and even in your Lordships’ House in cases where this great principle is being applied must be regarded as applicable only to the particular facts of the particular case in question and not regarded as a new and slightly different formulation of the legal principle so well settled. ‘” 85. The decided cases show that there are a number of different factual situations in which a benefit wrongly obtained by a fiduciary by misusing the opportunity presented by his or her relationship with the principal has been found to be held on constructive trust even though the benefit has been acquired by the fiduciary’s own assets and has come from a third party. There is the well-established line of cases where an agent appointed to acquire property for the principal appropriates it for himself or herself: see Bowstead and Reynolds on Agency (18th ed) 2-037 and the cases cited there. The joint venture cases, exemplified by Banner Homes Group plc v Luff Developments Ltd [2000] Ch. 373, where one of the joint venturers steals a march on the others, may be seen very broadly as governed by the same principle. 86. Then there is the well established line of authority under which constructive trusts have been held to bind directors who divert to themselves contracts or corporate opportunities which ought properly to be taken up, if at all, by their companies: see Underhill and Hayton on the Law of Trusts and Trustees (18th ed) paras. 27.39 ff and the cases cited there. In Bhullar, in which the court held that a property acquired (through a corporate vehicle) by directors in breach of duty to their company was held on constructive trust for the company, the court was clear that, in this type of case, it is not necessary for the company to show that it actually would have taken up the opportunity for itself. Jonathan Parker LJ said as follows in that case, at paragraph [41]: “At the material time, the company was still trading, albeit that negotiations (ultimately unsuccessful) for a division of its assets and business were on foot. As Inderjit accepted in cross-examination, it would have been ‘worthwhile’ for the company to have acquired the property. Although the reasons why it would have been ‘worthwhile’ were not explored in evidence, it seems obvious that the opportunity to acquire the property would have been commercially attractive to the company, given its proximity to Springbank Works. Whether the company could or would have taken that opportunity, had it been made aware of it, is not to the point: the existence of the opportunity was information which it was relevant for the company to know, and it follows that the [appellant directors] were under a duty to communicate it to the company.” 87. That observation by Jonathan Parker LJ is consistent with some leading authorities, which have not been overruled by Sinclair Investments, holding that, where the trustees in those cases breached the no-conflict rule or otherwise made an unauthorised personal profit from the fiduciary relationship, they held that benefit on constructive trust whether or not, if there had been no such breach of duty, the benefit could have been obtained or would have been obtained by the trust itself. It is sufficient to mention two of the best known, namely Keech v Sandford (1726) Sel.Cas Ch 61 and Phipps v Boardman [1967] 2 AC 46 (HL). 88. In Keech v Sandford the court ordered the trustee to assign the new lease to the infant beneficiary even though the landlord was not prepared to renew the original lease to the infant. On the assumption, which I made at the outset of this judgment, that a constructive trust is not simply fictional language for orders of the court for the transfer of money or rights but is a true institutional trust then the only basis for the result in Keech v Sandford was that the new lease was held by the trustee on a constructive trust from the moment it was acquired by the trustee. As I read paragraph [58] of Lord Neuberger’s judgment, he accepted Keech v Sandford as falling within his Category 2. 89. Phipps is the leading modern authority on the fiduciary’s obligation of exclusive loyalty, particularly the no-conflict rule. The plaintiff was a beneficiary under the trusts of a will. The first and second defendants were respectively the solicitor to the trustees and another beneficiary. The trust fund included a minority shareholding in a private company. The first and second defendants were dissatisfied with the way in which the company’s business was being managed and considered that it would be advantageous to acquire the outstanding shares and reorganise the company’s business. The shares could not be purchased by the trust, however, without the permission of the court since they were not an authorised investment. Accordingly, the first and second defendants decided to buy the shares for themselves and with their own money. They did not obtain the consent of all the trustees and, although they honestly believed otherwise, they did not in fact obtain the informed consent of all the beneficiaries. They bought the outstanding shares in the company and improved its business to their own financial advantage as well as that of the trust which continued to have a significant shareholding in the company. The shares had been purchased by the first and second defendants at various prices up to £4 10s a share. Between the time the shares were acquired in various tranches at various times by them and the commencement of the proceedings capital distributions amounting to £5 17s 6d per share had been received. The evidence was that, even after those distributions, the shares were worth more than £2 each. 90. The House of Lords upheld the decision and the essential reasoning of Wilberforce J. In broad and summary terms, he found that the first and second defendants owed fiduciary duties to the trustees and were in breach of the no-conflict rule and made an order which, among other things, (1) declared that those defendants held their shares (or rather the proportion of them reflecting the proportionate beneficial interest of the plaintiff under the trust) as constructive trustees for the plaintiff and (2) ordered an account of the profits made by those defendants from the shares. 91. Lord Neuberger referred in paragraph [70] of Sinclair Investments to the observation of the trial judge (Lewison J, as he then was) that it was unclear whether the remedy granted in Phipps was proprietary or personal. Lord Neuberger also expressed his agreement with Lewison J that the question whether it should be proprietary or personal was never argued in Phipps and apparently did not matter. We have had the benefit of research by Mr Pymont QC, which demonstrates that Wilberforce J did indeed make a formal declaration of a constructive trust. Wilberforce J’s judgment is reported at [1964] 1 WLR 993 and [1964] 2 All ER 187. Both reports state that the writ claimed (1) a declaration that first and second defendants held 5/18ths of 21,986 ordinary shares of £1 each in the company, or alternatively 5/18ths of the following holdings in the company, namely, 2,925 shares, 14,567 shares or 4,494 shares (or some one or more of such holdings) as constructive trustees for the plaintiff; (2) an account of the profits made by them from those holdings; and (3) an order that they should transfer to the plaintiff the shares which they held as constructive trustees for him and should pay to him 5/18ths of the profit. The report in the All England Law Reports records (at [1964] 2 All ER p. 208H) that Wilberforce J made the declaration in (1) and ordered the account of profits in (2). That Wilberforce J made the declaration is supported by the express statements in the House of Lords to that effect by Lord Cohen (at [1967] 2 AC p. 99C) and Lord Guest (at [1967] 2 AC p. 112G). 92. The misunderstanding in Sinclair Investments about the declaration appears to have arisen as a result of the abbreviated record of Wilberforce J’s order in the report in the Weekly Law Reports (at [1964] 1 WLR p. 1018). It is misleading because it omitted reference to the declaration made by Wilberforce J, corresponding to the first head of the claim in the writ, but included reference to adjournment of the third head of relief, presumably until it had been worked out precisely how many shares should be transferred (corresponding to the percentages in the declaration) and after the taking of the account. 93. The declaration of a constructive trust was made in Phipps even though, as I have said, the shares could not have been purchased for the will trust without the sanction of the court since they were not an authorised investment under the testator’s will. Furthermore, one of the trustees said in evidence that he would not consider the trustees buying the shares under any circumstances. Wilberforce J said that, as was clear from Keech v Sandford and Regal (Hastings) Ltd v Guilliver [1967] 2 AC 134, those impediments to any purchase of the shares by the trustees made no difference: [1964] 1 WLR at 1017. The same point was made in the House of Lords: [1967] 2 AC at 95G (Lord Cohen) and 117G (Lord Guest). 94. Phipps was plainly an “opportunity” case within Lord Neuberger’s Category 2. Indeed, in the House of Lords both Lord Cohen and Lord Hodson emphasised the misuse of “the opportunity” which presented itself to the first and second defendants. Lord Cohen said (at pp. 102G-103B): “This is an attractive argument, but it does not seem to me to give due weight to the fact that the appellants obtained both the information which satisfied them that the purchase of the shares would be a good investment and the opportunity of acquiring them as a result of acting for certain purposes on behalf of the trustees. Information is, of course, not property in the strict sense of that word and, as I have already stated, it does not necessarily follow that because an agent acquired information and opportunity while acting in a fiduciary capacity he is accountable to his principals for any profit that comes his way as the result of the use he makes of that information and opportunity. His liability to account must depend on the facts of the case. In the present case much of the information came the appellants’ way when Mr. Boardman was acting on behalf of the trustees on the instructions of Mr. Fox and the opportunity of bidding for the shares came because he purported for all purposes except for making the bid to be acting on behalf of the owners of the 8,000 shares in the company. In these circumstances it seems to me that the principle of the Regal case applies and that the courts below came to the right conclusion.” 95. Lord Hodson said (at p. 107D): “I agree with the learned judge and with the Court of Appeal that the confidential information acquired in this case which was capable of being and was turned to account can be properly regarded as the property of the trust. It was obtained by Mr. Boardman by reason of the opportunity which he was given as solicitor acting for the trustees in the negotiations with the chairman of the company, as the correspondence demonstrates. The end result was that out of the special position in which they were standing in the course of the negotiations the appellants got the opportunity to make a profit and the knowledge that it was there to be made.” 96. For my part, whether or not there was argument in Phipps specifically on the issue whether the relief should be personal or proprietary, the fact that Wilberforce J made the formal declaration of a constructive trust and that his order in that respect was upheld by the House of Lords lends importance to the case as a relevant authority. The jurisprudential setting for the grant of the declaration was the cases in Category 2 which had been decided by that time, including those mentioned in this judgment, and specifically including Keech v Sandford to which Wilberforce J referred in his judgment. In terms of the coherence of the law, it is relevant that counsel in Phipps and Wilberforce J regarded it as obvious that, if there was a finding of breach of trust by the defendants, the shares acquired in breach of trust would be held on constructive trust for the beneficiaries. Wilberforce J (later Lord Wilberforce) was one of the most respected equity jurists, some would say the pre-eminent equity judge in the common law world, of his time. In the House of Lords Lord Cohen, who was one of the majority, had been an outstanding Chancery practitioner and a highly distinguished Chancery judge. The only question in the House of Lords was, as Lord Guest said at p. 114G, whether the appellants were constructive trustees of the shares. He said expressly at p. 117D: “Applying these principles to the present case I have no hesitation in coming to the conclusion that the appellants hold the Lester & Harris shares as constructive trustees and are bound to account to the respondent.” 97. There are also cases which establish that, even if the principal has successfully utilised an opportunity, a benefit obtained by the fiduciary from that same opportunity may be held on constructive trust if it was wrongly obtained by the fiduciary in breach of duty to exploit the opportunity solely for the benefit of the principal. Fawcett v Whitehouse (1829) 1 Rus & M 132, which again was not cited in Sinclair Investments, was such a case. The facts are set out in the judgment of Lewison LJ. The report of the case contains the following note of the Vice-Chancellor’s judgment taken by the shorthand writer: “It appearing upon the evidence that Whitehouse was in truth the person who originated the contract with Knight & Co. on the part of Fawcett and Shand, and it appearing also upon the evidence he represented, that he stood on so particular a footing of connection with Knight & Co. that he could have obtained better terms from them than any stranger could; and that he further represented, on the day when the agreement between Knight & Co. and Fawcett, Shand, and himself was signed, that he had obtained the best terms possible, I am of opinion upon these grounds, and considering the situation in which he stood, that he was not at liberty to take to his own profit any part of that consideration which Knight & Co. were willing to pay to get rid of the business, but that he was bound to obtain the best terms possible for the intended partnership, consisting of Fawcett, Shand, and himself, and that all he did obtain will be considered as if he had done his duty and had actually received the £12,000 for the new partnership, as upon every equitable principle he was bound to do. I am of opinion, therefore, that this is what must be called in a court of equity a fraud on the part of the Defendant. It was in fact selling his intended partners for £12,000; and when he received the money, Fawcett became entitled to one third and Shand became entitled to another third of it. Shand is now entitled to his £4000, and Fawcett having communicated his interest in the former partnership to four other persons, they with him are entitled to the other £4000.” 98. Another example is Tyrrell v The Bank of London (1862) 10 HLC 26, the facts of which are summarised in the judgment of Lewison LJ. Lord Neuberger in Sinclair Investments concentrated on the significance of the House of Lords’ treatment of the unsold portion of the land. What is clear, however, is that the House of Lords affirmed the decision of the Master of the Rolls insofar as it stripped Tyrrell of the profit he made, pursuant to his contract with Read, on the land that was in fact sold by Read to the Bank. As the Lord Chancellor, Lord Westbury said at 48: “…the Respondents are entitled, as against the Appellant, to the benefit of the contract made by the Appellant with Read, so far as relates to the premises sold and conveyed to the Respondents, and, therefore, take an account of the monies paid by Tyrrell in respect of the agreement dated the 8th of February 1855, and of the monies properly expended by Tyrrell in respect of the said hereditaments, including all costs, charges, and expenses properly incurred by him, and all payments properly made by him in relation to the premises, and ascertain the value of the unsold property comprised in the contract between Read and Tyrrell, but not sold to the company, as the same property stood at the date of the contract of the 5th of May 1855, and deduct one-half of such last-mentioned value, when so found, from the sum total of the monies found to have been paid and expended by Tyrrell, as aforesaid, and declare, that the difference between the balance thus obtained, and the sum of £32,250, being one moiety of the purchase money paid by the Respondents under the agreement of the 5th of May 1855, is a debt due from the Appellant, Tyrrell; to the Respondents, and became and was such debt on the 11th of August, the day of completion of the contract, and ought to be now paid, together with interest thereon at five per cent., computed from the said 11th of August 1855, up to the time of the payment unto the Respondents; and decree the same accordingly.” 99. It is to be noted that the land sold to the Bank was never owned by Tyrrell. Nor was Tyrrell paid by the Bank. The Bank paid Read and Read subsequently paid Tyrrell. 100. That review of situations within Category 2, as a matter of established case law which has not be overruled by Sinclar Investments, is the necessary backdrop for an attempt to distinguish between Category 2 and Category 3. It shows that the mere fact that the fiduciary obtains the benefit from a third party, or obtains a benefit that could never be or would never be obtained by the principal, or that the principal has obtained what he or she wanted or intended from the opportunity, is not necessarily a bar to a constructive trust of the benefit wrongly obtained by the fiduciary by taking advantage of the opportunity. Those are all features of bribe and secret commission cases. The challenge raised by Sinclair Investments and Reid, therefore, is to identify other features which make the difference between Category 2 and Category 3. It is a very considerable challenge because neither of those cases gives any clear guidance. 101. So far as concerns Sinclair Investments, I have already mentioned the language used by Lord Neuberger in paragraphs [88] and [89] (“opportunity or right which was properly that of the beneficiary” and “opportunities beneficially owned by the claimant”) to describe the situations within Category 2. Those descriptions throw no light on what is within Category 2 beyond the cases and principles I have reviewed. 102. The facts in Sinclair Investments were, in the context of this area of the law, highly unusual. Very briefly summarised, Cushnie was the principal shareholder of VGP. In breach of his fiduciary duties as director of TPL he misused money given by traders to TPL on trust for proper trading purposes. The money was used, instead, to finance a fraudulent investment scheme run by VTFL, VGP’s wholly owned subsidiary. VTFL reported an uninterrupted increase in turnover and profit over several years. VPG was in due course listed on AIM and then the London Stock Exchange. VGP’s share price steadily increased. Before the fraud was discovered Cushnie sold some of his VGP shares at the top of the market for £28.69 million. The assignee of TPL’s rights sued on the basis that there was a constructive trust of Cushnie’s profits on the sale of his VGP shares, the value of which had been boosted by VTFL’s fraudulent trading. In terms of precedent, the unusual factual feature of the constructive trust claim was that Cushnie made the profit from selling his own property, that is to say shares in a listed company which he had acquired perfectly lawfully and long before any breach of fiduciary duty. Unlike all the other Category 2 reported cases, and indeed even Lister and Reid, Cushnie had not, in exploiting the opportunity offered by his fiduciary position, obtained any new asset from anyone let alone any property of TPL. There was no question of his own pre-existing shareholding in VGP being held on constructive trust for TPL. Sinclair Investments was not, therefore, a secret commission or bribe case at all. There was no precedent, or at any event no direct precedent, for extending the constructive trust to the profits made on the sale of the fiduciary’s own property, particularly where the profit was made from a shareholding in a company (VGP) in respect of which the principal (TPL) had no beneficial interest at all. Doubtless the analysis in Sinclair Investments reflects the way the case was argued by Counsel (as confirmed in paragraph [55] of Lord Neuberger’s judgment), but it is difficult to see why it was necessary in the light of the existing authorities I have mentioned to re-visit Lister and Reid in order to reject the claim to a constructive trust in Sinclair Investments, whether on grounds of precedent or policy. 103. So far as concerns Lister, whatever one may think about the merits of the decision, the judgments of the Court of Appeal are notable for their absence of any analysis of the decisions in the Category 2 cases which were already established authority at that time, including, in particular, Fawcett. Perhaps that was not surprising since Lister seems to have been treated as an urgent (certainly, very swift) appeal from an interlocutory decision. The Court of Appeal relied on one case, Metropolitan Bank v Heiron (1880) 5 Ex. D 319, and distinguished one other, Hay’s Case (1875) LR 10 Ch App 593. Indeed, rather remarkably, Cotton LJ did not even refer to his own judgment in Bagnall v Carlton (1877) 6 Ch. D 371 (if only to distinguish it), which he himself described (at p. 406) as a case about secret profit. I refer further to that case below. 104. So far as concerns the facts of Lister, Mr Pymont has emphasised that Stubbs was an employee and not a director owing fiduciary duties and, indeed, there is no express mention of breach of fiduciary duty anywhere in the judgments in the Court of Appeal. He has emphasised Stubbs’ limited role and absence of discretion in agreeing prices, and that there was no evidence or indeed allegation that the goods were purchased at less than market value. He has also emphasised that the accounting between Stubbs and the suppliers was carried out monthly on goods that were supplied from time to time over the previous month. Other, and perhaps more important features, are that it is not clear that there was any enforceable contract between Stubbs and the suppliers. Nor was there any evidence or assertion by Lister that, if it had known of the bribe or secret commission being received by Stubbs, it would have been placed in a more commercially advantageous position. 105. The facts of the present case are in some important respects materially different from those in Sinclair Investments and Lister. Clause 3 of the Exclusive Brokerage Agreement (“the Commission Agreement”) provided that Cedar’s €10 million fee was to be paid within 5 working days of the vendor’s receipt of the purchase price for the hotel. Mr Collings QC said that the commission paid to Cedar could not be identified as the claimants’ money since, as a matter of law, their money ceased to be identifiable as their property the moment it was paid into the vendor’s bank account. In a practical sense, however, it is plain that in reality the claimants’ money funded the commission paid to Cedar. Unlike Sinclair Investments and, possibly, Lister, in both temporal and causative terms Cedar’s receipt of the commission was the direct and immediate consequence of its breach of fiduciary duty. 106. Furthermore, as Simon J found in paragraph [102] of his first judgment, the obligation of Cedar, which was the exclusive negotiator for the claimants, was to negotiate the best purchase price for them, that is to say the lowest possible price. In that context, it was material that the vendor was in fact prepared to receive a net sum of €201.5 million from the sale (i.e. allowing for Cedar’s €10 million commission). That fact was not, however, made known to the claimants. Critically, Simon J made a finding of fact in paragraph [106] of his first judgment that: “at the very least it is likely that they could have used the information to their financial advantage in the course of their negotiations.” 107. If the claimants had known of the Commission Agreement, they might have deferred contracting to purchase the hotel until the Commission Agreement lapsed under the terms of clause 1 after 31 December 2005 and then negotiated the price with the vendor on the basis that the vendor was by that time free of an obligation to meet an expense of €10 million. Furthermore, there was direct evidence that, if the claimants had known of the Commission Agreement, they would have changed their own fee arrangements with Cedar. In paragraph [67] of his first judgment, Simon J quoted the following evidence of Mr Johnston of the fourth claimant Fairmont Hotels and Resorts Inc. (“Fairmont”): “I was definitely unaware that [Mr Mankarious] was receiving a fee from the seller. I would not have agreed to our fee structure had I been aware.” 108. Simon J continued: “68. His evidence was that this was the first time that he was aware that Cedar was being paid a fee by the vendors. I am entirely satisfied that if Mr Mankarious had told Mr Johnston on 5 October 2004 that Cedar was receiving a fee from the Vendors, Mr Johnston would have immediately wanted to know how much it was He struck me as likely to have been much more alert to the implications of such a fee than the BoS employees were.” 109. If they had known of the Commission Agreement, therefore, the claimants would have had the opportunity to reduce their fee to Cedar, thereby reducing the cost to them of purchasing the hotel. 110. Do those facts bring the present case within Category 2 rather than Category 3? In my judgment, on the findings of the judge in the light of the evidence, they bring the case within Category 2. On the basis of existing case law, that conclusion reflects both principle and precedent. It reflects principle because the Commission Agreement, and the fact that it was not disclosed by Cedar to the claimants, diverted from the claimants the opportunity to purchase the hotel at the lowest possible price, that is to say a price lower than the price they ultimately agreed to pay. That point remains a good one even if the claimants cannot show that the vendor would in fact have been willing to accept an amount precisely €l0 million less or indeed any specific amount less than the price actually paid by the claimants. 111. It is also consistent with precedent since it is difficult to see any meaningful difference between, on the one hand, the position of Cedar and, on the other hand, that of Tyrrell in relation to the profit made by him on the sale of the land to the Bank. By direct analogy with Tyrrell the benefit of the Commission Agreement in the present case was held on trust for the claimants. 112. It is consistent with the relief against Whitehouse in Fawcett in respect of payment of the £12,000 commission received by him for procuring the grant of the lease to his principals. 113. It is also consistent with the approach in Re Morvah Consols Tin Mining Company (McKay ‘s Case) (1875) 2 Ch. D 1, another case which was not cited in Sinclair Investments, and whose facts are recited in Lewison LJ’s judgment. There was an appeal in that case from the Vice-Warden of the Stannaries to the Court of Appeal. The Vice-Warden said (see p. 3) that there could be no doubt that the stipulation for the benefit of the agent (McKay) of the purchasing company was prejudicial to the company since ” [t]he effect of it was to increase the price paid for the mine for the benefit of the purchaser’s agent by shares representing £3,000 of capital”. In the Court of Appeal, which dismissed the appeal by the agent, Mellish LJ said (at p.5) that the decision of the Vice-Warden was “perfectly correct”, and Brett J, with whom James LJ entirely agreed, said the following (at p. 8) reflecting the approach of the Vice-Warden: “In truth, therefore, the company was made to believe that they were paying to Hammon, and that he was receiving from them, a particular sum as the purchase-money for his property, though in truth Hammon was only to receive a part of that purchase-money, and the company were made to pay these shares to Fisher or McKay for, in fact, deceiving the company.” 114. The same point, and the observation of the Vice-Warden, could apply mutatis mutandis in the present case to the belief of the claimants in paying the purchase price to the vendor. That particular point is not undermined by the fact that the shares allotted to McKay were the property of the company and so McKay’s Case falls within Category 1. 115. To the same effect is the following observation of Cotton LJ In Bagnall v Carlton (1877) 6 Ch. D. 371, which was also not cited in Sinclair Investments and whose facts are recited in Lewison LJ’s judgment: “In my opinion, therefore, Carlton and Grant must be considered, when the company was formed by them for the very purpose of taking their contract, to be bound by the terms of the contract; they made it on behalf of and as trustees for the company, and they cannot retain for their own benefit any part of the price which the vendor was willing to give up in diminution of the ostensible price.” 116. For those reasons, this case falls within Category 2, and so I would allow the appeal. It throws into clear relief, however, the very considerable difficulties inherent in the analysis in Sinclair Investments and the decision in Lister in marking the borderline between cases in Category 2 and those in Category 3. This has made the law more complex and uncertain and dependant on very fine factual distinctions. If the law is to be made simpler and more coherent, but Sinclair Investments and Lister correctly represent the law, then that suggests a need to revisit the very many longstanding decisions in Category 2 cases and to provide an overhaul of this entire area of the law of constructive trusts in order to provide a coherent and logical legal framework. If that can be done at all by the courts, rather than Parliament, it can only be accomplished by the Supreme Court. That indicates a need for informed debate and ultimately determination by the Supreme Court: (1) whether Sinclair Investments was right to decide that Lister is to be preferred to Reid; (2) in terms of constructive trusts and proprietary relief for breach of fiduciary duty, what are the principles to distinguish opportunity cases within Category 2 and those within Category 3; (3) what is the true jurisprudential nature of the constructive trust in this (and by necessity other) areas of the law, including whether it is – or should be – an institutional trust at all or something else. In considering those matters, there are important issues of policy, and the relative importance of different policies, to assess, including deterring fraud and corruption; the ability to strip the fiduciary of all benefits, including increases in the value of benefits, acquired by breach of duty, and vehicles or third parties through which those benefits have been channelled; the importance attached to the protection of those to whom fiduciary duties are owed; and the position of other creditors on the fiduciary’s insolvency who may be prejudiced by a constructive trust or proprietary relief in favour of the fiduciary’s principal but who, in the absence of such a trust and relief, would benefit from increases in value of assets acquired by the fiduciary’s fraud, corruption or wrongdoing. It will also be necessary to bear in mind the international perspective applying to this area of trust law and equity, to which I have referred earlier in this judgment. 117. For the reasons I have given, I would allow this appeal.