Broker wins commission claim against investment company

A firm of brokers have won a commission claim against an investment company that started to bypass it by approaching its clients directly.

The case involved Medsted Associates Ltd and Canaccord Genuity Wealth (International) Ltd (2019).

Medsted had introduced several investors to Canaccord under a set of agreed terms. Medsted then alleged that Canaccord had done business directly with one or more of the investors it had introduced, thus depriving it of its commission.

It issued proceedings seeking to recover that lost commission, alleging that Canaccord had breached a non-circumvention clause in their agreement.

The judge found that Canaccord had breached the agreement. However, he went on to find that because the introduced investors were not paying a commission to Medsted, they must have assumed that it was receiving payment from Canaccord.

He held that Medsted therefore owed fiduciary duties to the introduced investors, which it had breached by failing to tell them how the commission and funding charges were calculated.

He described the commission paid to Medsted as "secret commissions" and concluded that it should only be awarded nominal damages.

The Court of Appeal has overturned that decision.

It held that the investors had known that Medsted was being paid commission by Canaccord and there was no question that any extra commission was being paid over and above what they had agreed: what they had not known was merely the amount of that commission.

There was no fiduciary duty on Medsted to disclose to its clients the actual amount of commission it received.

The judge's decision not to award any damages was premised on his conclusion that the relevant payments were "secret commissions," but commissions which were known could hardly be described as "secret".

There was no basis for refusing to compensate Medsted in full. 

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