#7024 - Ag Of Hong Kong V. Reid - Commercial Remedies BCL

Attorney-General for Hong Kong v Charles Warwick Reid

Facts

The first respondent Mr. Reid, a solicitor and New Zealand national, joined the legal service of the Government of Hong Kong and became successively Crown Counsel, Deputy Crown Prosecutor and ultimately Acting Director of Public Prosecutions. In the course of his career the first respondent, in breach of the fiduciary duty which he owed as a servant of the Crown, accepted bribes as an inducement to him to exploit his official position by obstructing the prosecution of certain criminals. The first respondent was arrested, pleaded guilty to offences under the Prevention of Bribery Ordinance and was sentenced on 6 July 1990 to eight years' imprisonment and ordered to pay the Crown the sum of H.K.$12·4m., equivalent to N.Z.$2·5m., being the value of assets then controlled by the first respondent which could only have been derived from bribes. No part of the sum of H.K.$12·4m. has been paid by the first respondent.

Among the first respondent's assets are three freehold properties in New Zealand. The trial judge's finding that the Attorney-General for Hong Kong had established an arguable case that each of the three properties was acquired with moneys received by the first respondent as bribes has not been challenged…. For present purposes this appeal proceeds on the assumption that the freehold New Zealand properties were purchased with bribes received by the first respondent and are held in trust for the first respondent subject to the claims of the Crown in these proceedings.

Holding

Equity considers that as done that ought to have been done; fiduciary must not get the benefit of increase in value

When a bribe is offered and accepted in money or in kind, the money or property constituting the bribe belongs in law to the recipient. Money paid to the false fiduciary belongs to him. The legal estate in freehold property conveyed to the false fiduciary by way of bribe vests in him. Equity, however, which acts in personam, insists that it is unconscionable for a fiduciary to obtain and retain a benefit in breach of duty. The provider of a bribe cannot recover it because he committed a criminal offence when he paid the bribe. The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed. In the present case, as soon as the first respondent received a bribe in breach of the duties he owed to the Government of Hong Kong, he became a debtor in equity to the Crown for the amount of that bribe. So much is admitted. But if the bribe consists of property which increases in value or if a cash bribe is invested advantageously, the false fiduciary will receive a benefit from his breach of duty unless he is accountable not only for the original amount or value of the bribe but also for the increased value of the property representing the bribe. As soon as the bribe was received it should have been paid or transferred instanter to the person who suffered from the breach of duty. Equity considers as done that which ought to have been done. As soon as the bribe was received, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured.

When a bribe is accepted by a fiduciary in breach of his duty then he holds that bribe in trust for the person to whom the duty was owed. If *332 the property representing the bribe decreases in value the fiduciary must pay the difference between that value and the initial amount of the bribe because he should not have accepted the bribe or incurred the risk of loss. If the property increases in value, the fiduciary is not entitled to any surplus in excess of the initial value of the bribe because he is not allowed by any means to make a profit out of a breach of duty.

Comments on Lister v. Stubbs

It has always been assumed and asserted that the law on the subject of bribes was definitively settled by the decision of the Court of Appeal in Lister & Co. v. Stubbs (1890) 45 Ch.D. 1.

Citing Lister v. Stubbs:

'is that of debtor and...