Sinclair ([insofar] as it relied on or followed Heiron and Lister) was partially overruled in July 2014 by the UK Supreme Court in FHR European Ventures LLP v Cedar Capital Partners LLC.
Mr Cushnie was the director, transferred the money to another company he owned called Versailles Trade Finance Ltd, which was meant to engage in the factoring business.
Instead, Versailles fraudulently used the money partly simply to pay ‘profits’ to traders, but also was stolen by Mr Clough, or circulated around other companies so as to appear that genuine business was taking place.
On behalf of creditors such as Sinclair, Trading Partners Ltd (now run by the liquidator) claimed a proprietary interest in Mr Cushnie’s profits from the sale of shares under a constructive trust.
Lewison J held that the Court of Appeal decisions in Metropolitan Bank v Heiron [2] and Lister & Co v Stubbs[3][a] had not been overruled in England, and still remained binding.
[16] In this case, the banks and receivers had acted in good faith, even though they might have properly sought legal advice about whether there was a proprietary interest in the mixed fund.
However, one should also keep in mind the Supreme Court's decision in FHR European Ventures LLP v Cedar Capital Partners LLC, where bribes or secret commissions accepted by an agent will be held in trust for his principal.
Sinclair has been viewed as a controversial decision[19]—especially in its conclusion that a proprietary interest did not arise, as proprietary rights carry priority in an insolvency, which is of central importance in a pyramid scheme such as that operated by Mr C.[20] It is also argued that it will no longer be as easy to strip a recipient of a bribe or the profits made from it, or to trace it into the hands of third parties.
[23] It should be borne in mind, however, that Sinclair ([insofar] as it relied on or followed Heiron and Lister) was (partially) overruled in July 2014 by the United Kingdom Supreme Court, in FHR European Ventures LLP v Cedar Capital Partners LLC.