Mr H was a ‘belonger’ (a citizen of the Turks and Caicos Islands) and appointed as a government minister in 2003, remaining in government until 2008. There was a policy entitling a belonger to apply for a conditional purchase lease over Crown Land subject to certain conditions which, if met, entitled the belonger to purchase the freehold title at a discounted rate, in this case of 50% of the open market value.
In 2004, Mr H applied for a lease and in setting the sale price the government relied on a 1998 valuation of the land resulting in a discounted price of $75,200. Unknown to the government, Mr H had obtained a private valuation of the unimproved land at $500,000 and after commencement of development valuation at $1.2m apportioning $600,000 to the value of the bare land. Before buying the land, Mr H transferred the right to the appellant (A) (a company owned by himself and his brother). A acquired the freehold title at the discounted price. Development continued with UD$3.9m charged on the property. Following further development, the property with improvements was valued at $4.25m.
The Respondent (R) issued proceedings against A for, alternatively, unjust enrichment or unconscionable receipt. The relief sought was alternatively US$174,800 being the difference between the price paid and what would have been paid on the undisclosed valuation or a declaration that the property was held on constructive trust for the payment of sums due, an account of benefits received by A and restitution with interest.
The court found for R on those facts and identified the relevant asset as the land itself being a ‘mixed asset’ as described in Foskett v McKeown  WTLR 667,  1 AC 102. The court ordered for an account, R being entitled to 69.92% of (a) the current value of the unimproved land, (b) the current value of the improved land ‘insofar as the improvements are attributable to the defendant’s use of the land’ and (c) ‘the benefit received by the defendant by reason of its use of the land for the purposes of raising finance’.
A appealed to the Court of Appeal on grounds that the court had erred in applying the rules relating to mixed funds and that, having elected not to assert a proprietary remedy by seeking return of property, the only benefit for which A was accountable was the difference in value and the amount paid. Rs supporting the court order but in addition re-stated the claim with reference to principles of knowing receipt. The appeal was dismissed.
In this appeal, A argued that:
- (i) The asset transferred in breach of fiduciary duty was the property itself and A thereby became a constructive trustee of the Property in the limited sense explained in Williams v Central Bank of Nigeria  AC 1189.
- (ii) The property was not a ‘mixed asset’ nor was the amount of the underpayment a traceable asset.
- (iii) A was under personal liability for benefits received from the transaction, but not a trustee of that benefit.
- (iv) Although an account of profits may form part of the remedy for knowing receipt, there must be a causal relationship between the breach and profit. The breach here is not the sale but failure to disclose. The profit from that was the purchase at undervalue, no more. The profits from use of the land was authorised.
- (v) A should only pay the amount of the underpayment with interest.
R agreed the asset subject to the constructive trust is the land, not the amount of the underpayment and argued that:
- (i) A holds the land on trust for the government and itself in proportions determined by reference to the amount of the underpayment and the sum that it paid for transfer.
- (ii) Whilst it may not have been strictly accurate to describe the land as a ‘mixed asset’ the rules in Foskett v McKeown can be applied by analogy.
- 1) Having acquired Mr H’s right to buy the property at the discounted price, with full knowledge of his breach of fiduciary duty, A is in principle liable to account to R in the same way as him.
- 2) The liability of a fiduciary to account for a profit made from his position does not depend on whether the principal has in fact been damaged or benefited, but from the mere fact of a profit having been made (Regal (Hastings) Ltd v Gulliver (Note)  2 AC 134 applied).
- 3) Appeal should be dismissed.