AG for Hong Kong v Reid - Detailed case brief, including page/paragraph references Topic: Trusts PDF

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Detailed case brief, including page/paragraph references
Topic: Trusts...

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AG for Hong Kong v Reid Area of law concerned:

Constructive Trusts

Court: Date: Judge: Counsel: Summary of Facts:

Mr Reid was Acting Director of Public Prosecutions. While he was in this position he accepted bribes and was arrested, pleading guilty. He was in breach of his fiduciary duty to the Crown. He was ordered to pay the Crown HK$12.4m, being the value of assets then controlled by Mr Reid which could only have been derived from bribes. Mr Reid has three freehold properties in New Zealand. These were found to have been acquired with the bribe money. The properties have increased in value. In NZ Mr and MRs Reid argued that part of the costs of the three NZ properties might not be derived from bribes.

Relief sought: Issues:

Relevant Statute(s): Procedural History: Plaintiff/Appellant’s arguments Defendant/Respondent’s arguments: Result: Judge’s reasoning:

A bribe is a gift accepted by a fiduciary as an inducement to him to betray his trust. When a bribe is offered and accepted, the property constituting the bribe belongs in law to the recipient. 3 at 45

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 as he committed a crime in paying the bribe. Top 4

As soon as Mr Reid received a bribe in breach of his duties he owed to the Government of Hong Kong, he became a debtor in equity to the Crown for the amount of that bribe. 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. 4 at 5

As soon as the bribe was received the false fiduciary held the bribe on a constructive trust for the person injured. Constructive Trust 4 at 13

Objection 1: if the fiduciary is in equity a debtor to the person injured, he cannot also be a trustee of the bribe. But there is no reason why not, as long as there is no double recovery. If the property has increased in value, the fiduciary cannot retain the value of the increase. 4 at 18

Objection 2: if there is a trust, then unsecured creditors will be deprived of their right to proceeds if the false fiduciary becomes insolvent. But unsecured creditors cannot be in a better position than their debtor. But authorities show that property acquired by a trustee in breach of trust belongs to the trust and not the trustee personally whether he is solvent or insovlent (think of Boardman) 4 at 25

If the property representing the bribe decreases in value the fiduciary must pay the difference because he should not have accepted the bribe or incurred the risk of loss. 4 at 35

Fawcett v Whitehouse: defendant Whitehouse intended to enter into partnership with the plaintiffs and negotiated a grant of a lease by a landlord ot the partnership. Landlord paid Whitehouse £12,000 for persuading the partnership to accept the lease. Whitehouse was found guilty of fraud, of ‘selling his intended partners’, and the money was held to be on trust for the partnership. 5 at 10

If a trustee mistakenly invests moneys which he ought to pay over to his cestui que trust and then becomes bankrupt, the moneys together with any profit which has accrued from the investment are withdrawn from the unsecured creditors as soon as the mistake is discovered. A fortiori if a trustee commits a crime by accepting a bribe which he ought to pay over to his cestui que trust, the briebe and any profit made therefrom wshould be withdrawn from the unsecured creditors as soon as the crime is discovered. 8 at 10

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