Relief for Bribes in Equity

Speaker: Associate Professor Rebecca Lee (University of Hong Kong, Faculty of Law )

As Lord Templeman remarked in AG of Hong Kong v Reid [1994] 1 AC 324 at 300, ‘bribery is an evil practice which threatens the foundations of any civilised society’.  After the UK Supreme Court decision in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] 1 AC 250, it is now settled, at least in English law, that a fiduciary who receives a bribe in breach of fiduciary duty holds that bribe on constructive trust for his principal.  This paper examines the other relief that may be available where a bribe is involved in the fiduciary’s breach of fiduciary duty.

First, the briber who profits by dishonestly inducing or assisting a breach of fiduciary duty may be liable as an accessory.  The exact measure of relief, however, remains unclear.  In particular, judicial opinions differ on the nature of the accessory’s liability and the proper causal criterion required to hold him liable.  In Novoship (UK) Ltd v Nikitin [2014] EWCA Civ 908, [2015] QB 499, for example, where a bribe was involved, the English Court of Appeal held that an account of profits is available against a dishonest assister even if the principal suffered no loss and the fiduciary made no gains from his breach.  It also held that common law rules of causation may apply to limit recovery from certain accessories.  This paper reviews how this controversial decision conflicts with subsequent cases such as Akita Holdings Ltd v Attorney General of the Turks and Caicos Islands [2017] UKPC 7, [2017] AC 590 and Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43 and considers whether the moral indignation expressed by Lord Templeman justifies the relief.

Second, the fiduciary’s principal has a right to rescind a transaction between himself and a third party which was completed in connection with a bribe received by the fiduciary, even though the fiduciary is not a party to the resultant transaction, so long as the counterparty to the transaction has knowledge of the conflicted fiduciary’s wrongdoing: Logicrose v Southend United Football Club Ltd [1988] 1 WLR 1256 at 1261 per Millett J; Ross River Ltd v Cambridge City Football Club Ltd [2008] 1 All ER 1004 at [205] per Briggs J.  Drawing upon Millett J’s observation in Logicrose that there is a close parallel between bribery cases and dishonest assistance cases, this paper explores the possibility of analysing bribes involving multi-parties based on the accessory liability framework, particularly in light of recent English cases such as UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567, [2017] 2 Lloyd’s Rep 621 and Conway v Prince Eze [2018] EWHC 29.  It also considers the possible conceptual difficulties of such an analysis and its implication for the nature and scope of the doctrine of dishonest assistance.


Undue Influence as Constructive Fraud

Speaker: Professor Rick Bigwood (TC Beirne School of Law, University of Queensland)

Undue influence has long been branded as a species of ‘equitable’ or ‘constructive’ fraud — as comprising a ‘breach of the sort of obligation which is enforced by a … Court of conscience’. Specifically, such fraud has been said to involve ‘the victimisation of one party by the other’, which in turn implies that what occurred inter partes to produce the transaction of which complaint is subsequently made was ‘“an unconscientious use of the power arising out of the circumstances and conditions” of the … parties’. While some modern courts have distanced themselves from conceptualizing undue influence in terms of ‘a vague “public policy”’, in favour of an ‘actual victimization’ approach, five members of the High Court of Australia in Thorne v Kennedy recently asserted that, for undue influence to be established, proof of victimization ‘is not always required’. In this paper, I present and assess three curial approaches to the setting aside of inter vivos transactions on the ground of ‘undue influence’: the ‘public-policy approach’, the ‘actual-victimization approach’, and the ‘impaired-consent approach’. I argue for a return to the public-policy approach, whereby the ‘fraud’ involved must be seen as ‘constructive’ in the fullest possible sense of that term, or else a credible rational rejection of that approach in favour of a properly theorizedactual-victimization approach that absorbs the impaired-consent approach.


The Abuse of Organisational Forms: Trusts and Companies Compared

Speaker: Associate Professor Lee Pey Woan (Singapore Management University, School of Law)

The express trust and the company are distinct organisational forms widely employed in the commercial context. An important reason for their popularity lies in their ability to facilitate asset partitioning, which allows one to ringfence a pool of assets against one’s personal creditors by designating those assets for a specific enterprise or purpose. The ability to segregate assets in this way is generally beneficial and desirable as it incentivises productive activities by facilitating the efficient allocation of risks and reducing monitoring and transaction costs. However, the use of trusts and companies as asset protection devices has raised questions of legitimacy when they are employed principally to shield assets from trade creditors, former spouses and tax commissioners. Such abuses may take the form of equitable fraud where those entrusted with power over assets act disloyally or for improper purposes or otherwise act unconscionably, or they may take the form of fraudulent designs in concealing or disguising the true nature of a legal relationship. This paper considers the interaction of the doctrines developed to counteract such abuses of trusts and corporate structures. It seeks to understand the reasons that underpin the divergent doctrinal developments in the two contexts and considers how, if at all, these developments should cohere and complement in the quest for an optimal solution.


Equitable Fraud and the ‘Equitable Jurisdiction of the Common Law Courts’

Speaker: Associate Professor Tham Chee Ho (Singapore Management University, School of Law)

Suppose B owes a debt of money to A, such debt being repayable upon the giving of a written demand by A. A equitably assigns the debt to C, and notice of the assignment is given to B. Despite the notice of assignment, A serves a written demand of payment to B, and B tenders payment to A, without making any further inquiries of C as to whether A was authorized to accept such paper on C’s behalf. A then accepts the tender of payment, notwithstanding that C had not directed A to do so, and absconds with the monies tendered by B in breach of her duties to C as assignor, leaving no traceable residue in her wake.

In these circumstances, it is possible to characterize B’s acts to have been a form of ‘equitable fraud’ on C, and B may be made liable in equity to C. B may have committed the equitable wrong of dishonest assistance, given that B’s act of tendering payment to A would have been a necessary causal step in order for A to breach her duty to C as assignor, namely, to preserve the debt that had been assigned, until such time as C required A to reduce it into possession. C’s interests may, therefore, be protected to an extent by reason of an equitable remedy arising within the court’s equitable jurisdiction.

C may have, however, another remedy – one derived from the ‘equitable jurisdiction of the common law courts’. Within this jurisdiction, before the administrative changes effected by the Supreme Court of Judicature Act 1873 came into force, the English common law courts could bar a defendant to an action at law from pleading the facts as would otherwise support a substantive defence to the action. So barred, the action would then proceed to judgment by default, and a judgment debt would then arise in favour of the claimant.

This procedural ‘remedy’ is of particular interest in cases where the causal link establishing the assistive effect of B’s actions cannot be demonstrated. In this paper, an attempt will be made to review this common law remedy as a matter of English law, and it will suggest that it may have languished in the shadows for quite long enough.


Estoppel, Misleading Conduct and Equitable Fraud

Speaker: Professor Elise Bant (University of Melbourne, Melbourne Law School)

The ancient doctrines of equitable fraud now cohabit an environment in which statute is a growing presence. The doctrines of estoppel and statutory regimes that regulate misleading conduct provide striking examples of the increasingly complex ways in which equitable fraud and statute interact. This paper will consider a series of cases which highlight the powerful gravitational influence that statute can bring to bear on such ancient equitable principles, guiding their operation and development in quite distinct ways, and causing their divergence from traditional limitations. The paper offers the opportunity to consider the value and dangers of an increasingly integrated common law, equitable and statutory legal framework.