Sinclair Investments Ltd versus Versailles Trade Finance Ltd - Essay Example

Equity and Trust ‘If a fiduciary, like the solicitor, in Boardman v Phipps (1966, p.45), acting honestly and in excellent faith becomes then the constructive trustee of that given profit, then the fiduciary acting dishonestly plus criminally accepts a bribe, or for that matter makes any profit from his scheming must also be treated as a constructive trustee’ (Wilson 2007, p. 44). Discuss, in light of the recent case of Sinclair Investments Ltd versus Versailles Trade Finance Ltd. Similarities between the two cases: Both these cases rely on the legal conflict that may occur when an individual in a fiduciary position does things that compromise their principles. The British law does not provide for a compromise for persons who have breached this section of agent law (Andrew 2006, p.17). However, there are cases that may proof to have exceptional circumstances. In such circumstantial instances, the court may provide or propose for a compensation for the accused party where the court sees fit as is the case of Boardman v Phipps. Both Mr. Cushnie and Mr. Boardman took actions that rely on knowledge that they acquired in their fiduciary positions and not in any other way. Both this cases contain an underlying notion that the actions of the fiduciary depend on the instigation by a scheming motive or a criminal intent. In both cases, the defendants claim that the appellants’ actions were purely self serving, criminal or not, done so as to cut them out of their rightful share of the profits they made in their capacity as fiduciaries (Andrew 2006, p.37). In contrast to Mr. Cushnie, Mr. Boardman seems to have sufficient proof that they benefited the principles they were serving as a result of their actions. Another difference is that there is sufficient evidence to proof that Mr. Cushnies actions were of a criminal intent unlike on Mr. Boardman’s account (Brian 2002, p.34). Contentious issues: The company, during the time when Mr. Boardman’s started his supposed breach of fiduciary trust in a bid to revive it was experiencing a downhill financial run. According to the evidence given, the younger Mr. Phipps asked that Mr. Boardman buy the shares with him. Mr. Boardman in all legal ways has an obligation to the younger Mr. Phipps. The older Mr. Phipps also claimed rights to the profits made by the defendant (Brian 2002, p. 66). He did this on the grounds that they had a supposed agreement to bestow him 5/18th of profits he made in his capacity as a trustee. Another issue of contention is at what point one can draw the line between confidential and public information. The actions of Boardman were clearly as a result of the information he had on the companies that he acquired while in service to them (Stephen 2011, p.48). Boardman clearly put himself in a position that causes him to have a conflict of interest. To begin with, all the transactions he claimed to have done for the board of trustees trace back to his personal assets (Perry 2008, p. 66). It is, however, prudent to note that if he had not engaged in the transactions the company would have seen worse days. He was a representative of trustees and to some extent their financial status had a direct effect on his income and situation of employment thereof. The circumstances of his approval to engage in the transactions are also foggy (Brian 2002, p.54). He claims that he got the trustees full approval while most of the letters he wrote to this effect do not contain convincing evidence as such. Also, the stages through which the negotiations went through have a hint of coercion on the plaintiffs account in regard to his position before purchasing the shares for instance one of his letters gives Mrs. Noble the condition that they had to vote with them (him and Mr. Phipps the younger) for them to proceed with the splitting of the company shares (Micklitz 2010, p.33). In Sinclair Investments Ltd versus Versailles Trade Finance Ltd case, the courts task is to determine whether the original investors or the banks are liable to assert claims over the profits made by Cushnie in regards to the Kensington property. In the laws of accounting, there exists a non-secured and partially secured and secured party. In a claim, for instance of bankruptcy of the secured party gets first compensation followed by the partially secured (Micklitz 2010, p.23). The non secured party will only get to claim compensation only if there are remnants. That said one can be sure that if either of these parties the bank or the investors have an insurance cover on the money they invest, then they stand to gain. The matter is becomes complex as a result of the role of Mr. Cushnie as a Fiduciary. There is always a clear conflict of interest whenever Cushnie makes the decision to sell the shares (Micklitz 2010, p.27). Whether the investors knew, that the investment scheme was a fraud is not a clear matter. This complicates the case even more because the court will be making rulings on what can be termed as “dirty” money. Seeing as Sinclair investment was running a ponzi scheme, the action of its director to sell shares and make profits cannot be clearly classified as one that is of best interest to the investment or to the individual director (Hesselink 2006, p.87). The court questions the pureness of the director’s actions in regard to the knowledge that he had before selling of the shares. He knew that the company and the scheme was about to collapse and that they were in deep dept. One may assert that he sold these shares to safeguard some of the monies. There is, however, another side of the coin that may imply that he sold the shares to save himself when the company collapsed. Again raising the question of public and private information, and whether there are any real limits to determine what information falls where. In regard to these two cases, the courts relied on previous rulings of the fiduciary breach of trust nature. For instance, Lord Denning uses the Fibrosa case (also a ruling by Lord Wright in a previous case) as the basis for his decision on the Boardman v Phipps case. In Sinclair Investments Ltd versus Versailles Trade Finance Ltd case, the ruling is in partial reference to Lister & Co v Stubbs case. These reference cases hold that, defendants could hold claim to the profits made by the appellants. However, they could only do this if the profits made were as a result of the appellant wrongfully taking or using opportunities, assets or monies belonging to the defendant (Ramjohn 2008, p.80). In establishing whether or not an action should be classified as wrong, further references have to be made for instance Regal (Hastings) v Gulliver (1967), and the court has to establish that there was indeed no approval obtained from the defendant in regard to the same. The court procedure: For further elaboration of the above paragraph, in cases where there exists some breach of fiduciary duties, the court must establish whether the appellant was doing so with criminal intent or not. This proves tricky because the intentions of the appellant are best known to him, not unless they are out rightly criminal like in the case of embezzlement, they will remain as such, noncriminal (Stone 2009, p.98). That done; the issue of profits comes in, in both these cases; there is clearly an earned profit for the plaintiffs. In the case where there was a bribe or fraud involved, the court should make it clear that receiving a bribe or engaging in fraudulent activities is a crime. In my opinion, the court should give a ruling for the defendant, if there is indeed evidence of a crime, to be allowed compensation (Elias 2002, p.89). This is because the plaintiff put the defendant at a non acknowledged risk whereby the integrity of the company they have invested in will come into question in regard to its criminal activities. I would extend this to the Sinclair Investments Ltd versus Versailles Trade Finance Ltd case. In view of these two cases, the highest level of court proceedings in England is reached. This is the appeal level. The fiduciaries and appellants in question sought an appeal because they were dissatisfied with the previous court decisions (Elias 2002, p.89). However, even in the court of appeal, the same legal statutes in regard to trust laws apply. A difference may only occur when it comes to the final ruling because it is likely to be given by different presiding Lords or judges. For instance, from the above paragraphs, it is clear that different judges make different case references. The inferences and associate interpretations are therefore subject to not only the individual judges understanding but also to previous rulings handled on the same fiduciary matters and the opinion of his peers. There was no sufficient evidence to prove that Boardman and the younger Mr. Phipps committed any crime in the dispensing of their services of reviving the company. In a case where there was a crime committed in this case receiving of a bribe as in Sinclair Investments Ltd versus Versailles Trade Finance Ltd, it is only fair in my opinion that the court not first determine beyond all reasonable doubt that the principle was not in any way aware of the fiduciaries actions prior to their occurrence (Hephaestus 2001, p.22). The agency law on the section of constructive trusts holds that the principle can impose a constructive trust over unauthorized gain. What then is unauthorized gain? It can be taking a bribe, scheming or breaking the law in some way to make secret profit. In conclusion, Fiduciary duties should be restricted to protecting the interests of the individuals they represent (Panico 2010, p.37). If the fiduciary acts in any manner likely to cause harm to the persons they represent or in breach of the rules of trust and equity, then they are liable for their actions and the results therein. However, if the fiduciary in his line of action maintains the trust of the individual he or she represent and does not put their interests in jeopardy he or she should be rewarded accordingly (Hesselink 2002, p.44). In a situation where there are profits acquired, on account of an individual’s assets but by the doing of the fiduciary, the individual has a right over those profits but under which terms is a personal decision of the individual and the fiduciary. If there is a breach of the said terms, and the individual seeks the intervention of the court, then the matter settles on the court’s term. I, therefore, hold that; a fiduciary acting dishonestly and criminally, who accepts a bribe, or for that matter makes any profit from their scheming, should be treated, as a constructive trustee’ Bibliography Andrew Burrows, E. M. J. E., 2006, Cases and Materials on the Law of Restitution. Harvard: Soule & Bugbee. Brian P. Block, J. H., 2002, Famous cases: nine trials that changed the law, NewYork:Wiley & Sons. Elias, G., 2002, Explaining constructive trusts, New York: Samuel Weiser. Hans-W. Micklitz, F. C., 2010, European private law after the Common Frame of Reference, Harvard: Soule & Bugbee. Hephaestus, B., 2001, English Trusts Law, New York :Hephaestus Books. Hesselink, M. W., 2002, The new European private law: Essays on the Future of Private Law in Europe, London:Kluwer Law International. Hesselink, M. W., 2006, Commercial agency, franchise and distribution contracts, New York: Samuel Weiser. Hudson, A., 2009, Equity and Trusts, NewYork:Wiley & Sons. (Hudson 2009, p. 56) Panico, P., 2010, International Trust Laws, Oxford: Oxford University Press. Perry, J. W., 2008, A Treatise on the Law of Trusts and Trustees, NewYork:Wiley & Sons. Ramjohn, M., 2008, Text, Cases and Materials on Equity and Trusts, Washington: American Psychological Association. Stephen Waddams, S. M. W., 2011, Principle and Policy in Contract Law: Competing Or Complementary Concepts, NewYork:Wiley & Sons. Stone, R., 2009. The Modern Law of Contract: Seventh Edition, Washington: American Psychological Association. Wilson, S., 2007, Todd & Wilsons Textbook on Trusts / Boardman v Phipps, NewYork:Wiley & Sons. Read More

 

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