#6630 - Daraydan Holdings V. Solland International - Commercial Remedies BCL

Daraydan Holdings v. Solland International

Facts

Mr Khalid, the fifth defendant, extracted from Mr and Mrs Solland and their companies (the first to fourth defendants) about 1.8m between 1997 and 2001, which represented a 10% commission on receipts from contracts with the claimants for the luxurious refurbishment of properties in London and Qatar.

The proceedings against Mr and Mrs Solland and their companies have now been settled, and the issues for decision are whether Mr Khalid is accountable to the claimants, and in particular whether the claimants are entitled to an order that he holds the payments on constructive trust.

In January 1997, after discussions between (in particular) Mrs Solland, Sheikh Mohammed, Sheikh Sultan, and Mr Khalid, Cairns and Interiors entered into what became the first of several contracts between the claimants and Interiors and International for the refurbishment of properties owned by the claimants in England and in Qatar. It was followed by other contracts, under which more than 20m was paid by the claimants to Interiors or International. Mr and Mrs Solland procured the payment by Interiors or International to Mr Khalid (or his nominees) of 10% of payments made by the claimants to Interiors and International, and between 31 January 1997 and 22 October 2001 about 1.8m was paid to him by Interiors or International, or to Mrs Al-Attiya or to Mr Al-Attiya on his instructions.

In these proceedings the claimants claimed against all the defendants an account of all secret commissions, an order for restitution of the secret commissions, a declaration that they were received on resulting or constructive trust and that the claimants were entitled to trace, an account of profits, and damages for deceit or conspiracy to defraud.

Holding

In proceedings against the payer of the bribe there is no need for the principal to prove (a) that the payer of the bribe acted with a corrupt motive; (b) that the agent's mind was actually affected by the bribe; (c) that the payer knew or suspected that the agent would conceal the payment from the principal; (d) that the principal suffered any loss or that the transaction was in some way unfair: the law is intended to operate as a deterrent against the giving of bribes, and it will be assumed that the true price of any goods bought by the principal was increased by at least the amount of the bribe, but any loss beyond the amount of the bribe itself must be proved; (e) that the bribe was given specifically in connection with a particular contract, since a bribe may also be given to an agent to influence his mind in favour of the payer generally (eg in connection with the granting of future contracts).

The agent and the third party are jointly and severally liable to account for the bribe, and each may also be liable in damages to the principal for fraud or deceit or conspiracy to injury by unlawful means. Consequently, the agent and the maker of the payment are jointly and severally liable to the principal (1) to account for the amount of the bribe as money had and received and (2) for damages for any actual loss. But the principal must now elect between the two remedies prior to final judgment being entered.

Khalid acted in a fiduciary capacity

I am wholly satisfied that, on any application of the concept of fiduciary, Mr Khalid was a fiduciary who extracted very substantial payments from the Sollands and their companies in return for his influence in obtaining and carrying out the contracts. This is demonstrated by his own admissions; by statements made by the Sollands in these proceedings and in the adjudication proceedings; and by numerous documents. It is also confirmed by the evidence of Sheikh Sultan and Mr Dajani in these proceedings, and also by the evidence of Mr Meisterhans. Although it would make no difference to his liability whether it was he who solicited the payments, or Mrs Solland who offered them, there is no reason to doubt Mrs Solland's account that it was Mr Khalid who requested the payments, and no reason whatever to think that (as he contended) that it was Mrs Solland who volunteered to make the payments.

Constructive Trust

In Lister & Co v Stubbs 45 Ch D 1 it was alleged by the plaintiffs that their foreman had received secret commissions which he had invested in land and other investments. They sought interlocutory relief to prevent him dealing with the land and requiring him to bring the other investments into court. It was held that the injunction should be refused because the money was not that of the plaintiffs so as to make the defendant a trustee, but was money to which the plaintiffs would be entitled to claim in the action, ie "a debt due from the defendant to the plaintiffs in consequence of the corrupt bargain which he entered into", but (a) the money which he had received under that bargain could not be treated as being money of the plaintiffs "before any judgment or decree in the action [had] been made" (at pp 12-13, per Cotton LJ) and (b) the relation between them was that of debtor and creditor, and not that of trustee and cestui que trust.

It has been held by the Privy Council that Lister & Co v Stubbs was wrongly decided: Attorney General for...