Equity Essay

The position of a fiduciary receiving bribes or secret profits has been determined in English Law, but whether to make the recipients of bribes and secret profits liable to their principals under a proprietary claims or a merely personal claim remains debatable. In this essay, both arguments that are in for and against the recipients of bribes and secret commissions being subject to proprietary liability will be discussed.

For a long period of time, people assumed that the law concerning bribes was settled by the decision of Lister & Co. v Stubbs, which suggested the claim to a bribe or secret commission was merely personal. In this case, the Plaintiffs, a manufacturing company, hired the defendant to purchase certain goods for business use. The Plaintiffs later discovered that the defendant was receiving secret commissions from the supplier, and then brought an action against the defendant, claiming to be entitled to the money received by the defendant, as the defendant breached his fiduciary duty. It was held that a bribe received by a fiduciary from a third party was not held on trust for the principal, because the relationship between the fiduciary and principal is that of debtor and creditor, not trustee and beneficiary. This decision remains controversial, as it is not consistent with the principle that the fiduciary must not be allowed to gain profit from his breach of duty, it allowed the fiduciary gain profits from his own misappropriation, which is unjust.

The above decision was disapproved in Attorney General for Hong Kong v Reid. In this case, the defendant was the Hong Kong Deputy Crown Prosecutor and then Acting Director of Public Prosecutions, therefore he is in a fiduciary relationship with the Hong Kong Government. He received a large amount of bribing money to obstruct prosecution of some criminals, and bought land in New Zealand with the bribe money. The Hong Kong government claimed the land was held on trust for them. It was held...