AG Hong Kong: Appellant
Reid: Respondent

Facts: Reid joined the legal service of the Government of Hong Kong and rose ultimately to the position of Acting Director of PUblic Prosecutions. Reid breached the fiduciary duty entailed by this position by accepting bribes in return for the obstruction of prosecution in certain cases. Reid pled guilty to an offence of bribery, was sentenced to 8 years in prison and ordered to pay a sum of HK$12.4M to the Crown. No part of the sum has been paid.

At trial and at the C.A., it was assumed that three New Zealand properties owned by the respondent were purchased with the bribe money, and that these properties may be used for repayment.
Reid is appealing the caveats filed against these properties (by the appellant) for the purpose of claiming them.
Issue: Can a fiduciary acting criminally profit from his wrongdoing?
Held: No.
Reasoning:
  • The money or property constituting an offered and accepted bribe belongs in law to the recipient. However, equity dictates that it is unconscionable for a fiduciary to obtain and retain a benefit in breach of duty.
  • A fiduciary who has received a bribe is responsible for both the original amount of the bribe and for the increased value of property representing the bribe. Once the bribe is received, the false fiduciary holds it on constructive trust for the person to whom the duty is owed.
  • Assumption that the law on the subject of bribes was settled in Lister & Co. v. Stubbs (1890) 45 Ch.D. 1: a bribe cannot be said to be the money of the plaintiffs. However, this is not consistent with the principles that a fiduciary may not benefit from his own breach of duty, and that equity dictates that the bribe is held on constructive trust for the person injured. Sumitomo Bank Ltd. v. Kartika Ratna Thahir [1993] 1 S.L.R. 735: stated that the judgment in Lister was wrong and would lead to "undesirable and unjust consequences".
  • Also, Sir Peter Millett ("Bribes and Secret Commissions"[1993] R.L.R. 7) stated that "[The fiduciary] must not accept a bribe. If he has done so, equity insists on treating it as a legitimate payment intended for the benefit of the principal; he will not be allowed to say that it was a bribe".
  • Phipps v. Boardman [1967] 2 A.C. 46: equity is strict with regards to the conduct of a fiduciary and the imposition of constructive trust on property obtained by virtue of the office of the fiduciary.
Ratio: "A fiduciary acting dishonestly and criminally who accepts a bribe and thereby causes loss and damage to his principal must also be a constructive trustee and must not be allowed by any means to make any profit from his wrongdoing."