Case 1 - Creation and termination of the management relationship; powers of the manager

Summary

Case

John is a professional investment manager. Sam decides to make use of John's services after learning that he is a skilful manager. In John's office, Sam signs a document granting John full investment powers over a capital value of €2,000,000. The terms of the document indicate that John's powers are to be irrevocable for the term of five years. These powers enable John, inter alia, to buy and sell any kind of asset, including immovables. The document also provides that John will credit all the income produced by the managed capital to Sam's bank account. It stipulates that John will be entitled to deduct an annual fee, calculated as a percentage of the capital value of the managed assets. Sam then writes a cheque payable to John for €2,000,000.

Alternative 1

In the second year of their relationship, Sam reads in a newspaper that John is implicated in the international trafficking of stolen works of art. He does not know whether the allegations are true but he decides to terminate their relationship. He communicates this to John. He demands restitution of the managed assets, as well as a full account of the investments that have been made. Upon John's refusal, Sam sues, asking for: (a) a judicial declaration that the relationship is terminated; (b) a remedy enjoining John from entering into any further transaction related to the assets; (c) a full audit of the previous period; (d) restitution of the managed assets; and (e) damages.