Law Report: Crown claim interest in bribe: Attorney-General for Hong Kong v Reid and others - Privy Council (Lord Templeman, Lord Goff of Chieveley, Lord Lowry, Lord Lloyd and Sir Thomas Eichelbaum), 1 November 1993

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A fiduciary who accepts a bribe in breach of his duty holds the bribe in trust for the person to whom the duty is owed, and the fiduciary is accountable not only for the original amount of the bribe but also for the increased value of property representing the bribe since a fiduciary must not be allowed to benefit from his own breach of duty.

The Judicial Committee of the Privy Council allowed an appeal by the Attorney-General from decisions of the Court of Appeal of New Zealand and Mr Justice Pennington in the High Court of New Zealand, and decided that three New Zealand properties which represented bribes accepted by Charles Warwick Reid were held in trust for the Crown.

Mr Reid, a New Zealand national, joined the legal service of the Government of Hong Kong and became crown counsel, deputy Crown Prosecutor and ultimately acting Director of Public Prosecutions. During his career, he accepted bribes in breach of the fiduciary duty he owed to the Crown. He pleaded guilty to offences under the Prevention of Bribery Ordinance, was sentenced to eight years' imprisonment and ordered to pay the Crown HKdollars 12.4m (NZdollars 2.5m). No part of that sum had been paid.

Three freehold properties in New Zealand were acquired with moneys received as bribes. Two were conveyed to Mr Reid and his wife, Judith Margaret Reid, and one to his solicitor, Marc Molloy. The three properties had increased in value and the total value of assets in New Zealand derived from bribes exceeded NZdollars 2.5m. The Attorney General sought to renew caveats against the title of the three properties to prevent dealings with the property, pending the hearing of proceedings to claim the properties on a constructive trust.

David Oliver QC, and Stephen Kos, of the New Zealand Bar (Herbert Smith) for the Attorney-General; Antony White (Simons Muirhead & Burton) for Mrs Reid.

LORD TEMPLEMAN said that a bribe was a gift accepted by a fiduciary as an inducement to him to betray his trust. A fiduciary was accountable for a secret benefit which consisted of a bribe. The money or property constituting the bribe belonged in law to the recipient. Equity, however, insisted that it was unconscionable for a fiduciary to obtain and retain a benefit in breach of duty. The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom the duty was owed.

In the present case, as soon as Mr Reid 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.

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

It had been assumed that the law on the subject of bribes was definitively settled by Lister & Co v Stubbs (1890) 45 ChD 1. That decision was not consistent with the principles that a fiduciary must not be allowed to benefit from his own breach of duty, that the fiduciary should account for the bribe as soon as he received it, and that equity regarded as done that which ought to be done. No harm could result if the decision was not followed.