In FHR European Ventures LLP and others v Mankarious and others  EWHC 359 (Ch), the court considered an application involving various issues relating to the grant of equitable relief including breach of fiduciary duty, constructive trust, tracing, account of profits and knowing receipt. The case concerned the sum of €10 million received by a company after they were engaged by the claimants to negotiate the purchase of a hotel.
After the Supreme Court upheld a decision in the same proceedings that a secret commission received by an agent was to be treated as the property of the principal, the High Court has considered the claimants’ ability to trace the monies into assets acquired by the defendants.
The court held that the defendants had breached their fiduciary duties to the claimants. The defendants, as constructive trustees, were liable to account to the claimants from sums paid to them derived from the trust monies.
The defendants were also liable to account on the grounds of knowing receipt. For the purposes of establishing knowledge, a recipient could not escape liability if he knew all the relevant facts but not the legal consequences. Therefore, lack of knowledge as to the remedies available as a result of the constructive trust was not relevant to the question of liability
The judgment provides a useful illustration of the process of tracing in practice. It confirms that, where the recipient of trust monies holds more than one account at a bank, trust monies paid into any one account should not be treated as being mixed with funds in the recipient’s other accounts. Where funds have been mixed, the presumption in Re Hallet will generally apply.