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Court of Appeal rejects timing and informed consent defences in bond bribery case

30 January 2023. Published by Suzan Kurdi, Of Counsel

In a recent decision, the Court of Appeal decided in Trafalgar Multi Asset Trading Company Limited (in liquidation) v James David Hadley and others1  that pleaded defences to a bribery claim were so fanciful as to entitle the claimant to summary judgment. In particular, the court rejected arguments that there could be viable defences in relation to timing or that there had been informed consent. This analysis necessarily involved detailed consideration of the authorities relating to bribery.

The factual context

The claimant was the trading arm of an investment fund. Its investment manager was Victory Asset Management (VAM), which was owned by a Mr Hadley. It was common ground that Mr Hadley owed the claimant the obligations of a fiduciary.

In March and June 2016, Mr Hadley arranged for the claimant to invest in bonds issued by CGrowth Capital Bond Limited (CGrowth). This investment was facilitated by CGrowth's introductory agent Platinum Pyramid Limited (PPL) whose owner and director was a Mr Thwaite. A term of the bond purchase agreements was that 100% of the proceeds of the bonds were to be paid over to three borrowing companies. 

In 2015, prior to the bond purchase agreements, and unbeknownst to the claimant, PPL and CGrowth agreed that (i) PPL would receive 29% of all bond subscription monies paid by the claimant as commission and (ii) only 70% of the bond proceeds would be paid over to the borrowing companies, the balance being retained by PPL. 

PPL and CGrowth's previous arrangements were clearly inconsistent with the terms of CGrowth's bond purchase agreements with the claimant.

Five days after the claimant invested in CGrowth's March bonds, Mr Hadley received £100,000 from PPL. At around the same time, Mr Hadley agreed to sell VAM to PPL. Mr Hadley received a further payment of £400,000 five days after the claimant invested in CGrowth's June bonds. The fact of the payments was common ground.

The parties' position

The claimant's case was that the parallel transaction to sell VAM to PPL created a conflict of interest as Mr Hadley was set to gain financially from the sale of VAM. The claimant also asserted that the payments totalling £500,000 were bribes and were made from the traceable proceeds of the March and June bonds.  In essence, the claimant's case was that when negotiating the claimant's investment with CGrowth, Mr Hadley was obliged to act solely in the best interests of the claimant. Instead, he was at the same time seeking to personally benefit from the sale of VAM to the agent of CGrowth with whom he was negotiating the CGrowth contracts. Put simply, Mr Hadley had put himself in a position where the personal benefits he stood to gain from the sale of VAM to PPL (and the financial incentives received from PPL) conflicted with his fiduciary obligations to the claimant. 

The defendants asserted that these payments were a deposit for the anticipated sale of VAM to PPL, that the March and June bonds were legitimate and commercial transactions and that no conflict of interest arose. In any event, the defendants relied on two defences. The first was that the March bonds were agreed before any negotiations had commenced regarding the sale of VAM such that there was no inducement, which would be a necessary ingredient for bribery (the timing defence). The second was that the fact of the sale and that a deposit would be payable had been disclosed to the claimant, who had not objected (the informed consent defence).

The claimant sought summary judgment on both defences, or alternatively strike out on the basis that neither had any realistic prospect of success. At first instance, the judge allowed the defences to proceed to trial. The claimant appealed.

Principles applicable to bribery

The Court of Appeal summarised the principles applicable to bribery thus:

  • The essential character of a bribe is that it is a secret payment or inducement that gives rise to a realistic prospect of a conflict between the agent's personal interest and that of his principal: Novoship (UK) Limited v Mikhaylyuk [2012] EWHC 3586 (Comm). 
  • The payee of the bribe or secret commission must owe a duty to provide honest and disinterested advice or recommendations: Wood v Commercial First Business [2022] Ch 123. 
  • The principal must be confident that the agent will act wholly in his interests: Ross River Ltd v Cambridge City Football Club [2008] 1 All ER 1004, Airbus Operation Limited v Withey [2014] EWHC 1126 (QB). 
  • If the agent is tainted by the bribery at the time of the transaction between the payer of the bribe and the payee's principal, then the payee's conflict of interest means that the principal has been deprived of the disinterested advice of his agent and is entitled to a further opportunity to consider whether it is in his interests to affirm it. Subsequent transactions are also tainted by the bribe. Novoship (UK) Limited v Mikhaylyuk [2012] EWHC 3586 (Comm), following Fiona Trust v Privalov [2010] EWHC 3199 (Comm).
  • It does not matter whether the profit is given to the fiduciary in return for services which he performs for the third party or whether it is given on any other ground: Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch D 339.
  • Equally, it does not matter whether the payer and the recipient are aware that they are committing a legal wrong: Ross River Ltd. Nor does it matter whether the recipient's mind has actually been affected: Logicrose v Southend United [1988] 1 WLR 1256.

The Court of Appeal was of the view that the payments of £500,000 received by Mr Hadley which were, at least arguably, funded by the undisclosed commissions paid to PPL by CGrowth, were bribes unless the claimant had given informed consent to the payments. The Court did not consider the timing defence to be realistic as it seemed clear that the sale of VAM was proceeding in parallel to the March bond investment and had tainted the June bond investment.

Principles applicable to informed consent

Fully informed consent is only available as a defence where full disclosure of everything material about the proposed transaction has been made to the principal such that the principal may decide whether or not to proceed. 

The burden of providing full disclosure lies on the agent and it is not sufficient for him/her merely to disclose that he/she has an interest or to make such statements as could or should put the principal on enquiry. Nor is it a defence that, had he/she asked for permission it would have been given: Dunne v English (874) LR 18 Eq 524, Hurstanger v Wilson [2007] 1 WLR 2351. 

What is material is to be assessed on the basis of whether it might (not would) have affected the principal's decision. What is required will therefore depend upon the facts of any given case.

Application to the facts

Whilst the claimant had been told of a potential sale of VAM to PPL and that a deposit might be paid, the claimant had not been told of the commission arrangements, or that the claimant's money would or might fund the deposit and other payments (or putting it at its lowest, PPL's financial ability to purchase VAM would or might be enhanced if the claimant invested in CGrowth's bonds). Without knowing of the commission arrangements, the claimant could not reach a fully informed view on whether or not to invest in CGrowth's bonds. It follows that full disclosure was not given and the informed consent defence was not available. The appeal was therefore allowed.


The issue before the court was whether there was a realistic prospect of arguing that (i) the financial benefit Mr Hadley stood to gain from the claimant's investment in the CGrowth bonds did not give rise to a conflict of interest and if so (ii) the claimant had provided informed consent. The court answered both questions in the negative.

The consequence of the conflict of interest and the lack of informed consent resulted in PPL being treated as having paid, and Mr Hadley as having received, £500,000 in bribes. It is notable that this conclusion does not derive from any suggestion that either PPL (through Mr Thwaite) or Mr Hadley acted dishonestly, or knew or suspected that they were doing anything untoward. It was also unnecessary to show whether or not Mr Hadley had actually been induced or influenced by the payments in his dealings with the claimant. 

1[2022] EWCA Civ 1639