Murad v Al-Saraj [2005] EWCA Civ 959 [2005] WTLR 1573

Facts

• The Murad sisters (claimants) entered a joint venture with Mr. Al-Saraj (defendant), who acted as their business partner.
• Mr. Al-Saraj was in a fiduciary relationship with the claimants, owing them duties of good faith and full disclosure.
• The defendant failed to disclose his personal financial interests relating to the joint venture.
• The claimants argued that this non-disclosure affected their decision to proceed with the partnership.
• The dispute centered on whether Mr. Al-Saraj had breached his fiduciary obligations and should account to the claimants for profits derived from the venture.

Issues

1. Whether Mr. Al-Saraj breached his fiduciary duties by failing to disclose his personal interest in the joint venture.
2. Whether non-disclosure of material information, absent fraud, amounts to a breach of fiduciary duty.
3. What remedies are available when a fiduciary profits from a breach of duty, specifically regarding the account of profits.

Decision

• The Court of Appeal found that Mr. Al-Saraj had breached his fiduciary duties by not disclosing material facts about his financial involvement.
• Non-disclosure, even if not fraudulent, was held to be a breach of fiduciary duty because it compromised the trust fundamental to the fiduciary relationship.
• The court required Mr. Al-Saraj to account for profits made from the joint venture, as those profits resulted directly from his breach.
• It was clarified that the remedy of account of profits is intended to prevent fiduciaries from benefiting from their wrongdoing and to restore the beneficiary to the position they would have been in if no breach had occurred.

Legal Principles

• Fiduciaries are required to act in good faith, avoid conflicts of interest, and disclose all material facts relevant to beneficiaries’ decisions.
• Breach of fiduciary duty may occur through non-disclosure alone, even absent fraud, if it undermines the relationship of trust and loyalty.
• The equitable remedy of account of profits compels a fiduciary to disgorge gains made as a consequence of breaching duty; this remedy is restorative, not punitive.
• The case confirms that strict standards apply to fiduciaries in joint ventures and business partnerships, ensuring high levels of openness and accountability.

Conclusion

Murad v Al-Saraj clarifies the strict disclosure and loyalty expected of fiduciaries, confirming that undisclosed personal interests leading to profit require full account of those profits, and highlights the centrality of trust and transparency in fiduciary relationships.