Secret commission received by a trustee is held on trust (FHR European Ventures v Cedar)

A fiduciary must not make a profit out of his trust or place himself in a position where his duty and interest may conflict. In FHR European Ventures v Cedar Capital Partners the Supreme Court held that a bribe or secret commission accepted by an agent is held on trust for his principal. The principal therefore has a proprietary claim, not merely a claim to equitable compensation for its value. The court explained that a proprietary claim gives priority over the fiduciary's unsecured creditors and allows the principal to trace and follow the money in equity. A trustee is the clearest example of a fiduciary. Oskar's £15,000 commission was received through his position and without informed consent, so he held it on trust from receipt. The beneficiaries can trace it into the shares bought with it and claim those shares, including their increase in value, ahead of his unsecured creditors. Liability to account does not depend on the trust having suffered loss or on proof of dishonesty.

Why A is wrong: The no-profit rule does not depend on loss to the trust; the profit itself must be given up.

Why B is wrong: FHR rejected the view that the principal has only a personal claim; the commission is held on trust.

Why C is wrong: A good outcome for the trust does not excuse an unauthorised profit made from the fiduciary position.

Why E is wrong: Liability to account for an unauthorised profit is strict and does not require dishonesty.