Elements of the cause of action. “[A] bribe consists in a commission or other inducement, which is given by a third party to an agent as such, and which is secret from his principal” (per Leggatt J. in Anangel Atlas Compania Navieva Saturday v Ishikawajima-Harima Heavy Industries [1990] 1 Lloyd’s Rep. 167 at 171).

The claimant must plead and prove the following:

  • payment or other inducement;
  • made (or promised) to an agent of the other person with whom the briber is dealing;
  • who is known to the briber to be an agent; and
  • that the payments are unknown to the principal.

(See generally Hovenden and Sons v Millhoff (1900) 83 L.T. 41; Industries and General Mortgage Company Ltd v Lewis [1949] 2 All E.R. 573; Mahesan v Malaysian Govt. Officers’ Co-operative Housing Society Ltd [1979] A.C. 374; Att. Gen. for Hong Kong v Reid [1994] 1 A.C. 324.) For other general principles see Duraydan Holdings Ltd v Solland International Ltd [2005] Ch. 119 (at paras 53-54), in which it was held that in proceedings against the payer of a bribe that there is no need for a claimant to prove that:

  • the payer of the bribe acted with a corrupt motive;
  • the agent’s mind was actually affected by the bribe;
  • the payer knew or suspected that the agent would conceal the payment from the principal;

the principal suffered any loss or that the transaction was in some way unfair: the law is intended to operate as a deterrent against the giving of bribes, and it will be assumed that the true price of any goods bought by the principal was increased by at least the amount of the bribe, but any loss beyond the amount of the bribe itself must be proved; or

the bribe was given specifically in connection with a particular contract, since a bribe may also be given to an agent to influence his mind in favour of the payer generally (e.g. in connection with the granting of future contracts).”

There are two main tests of whether a payment amounts to a bribe:

  • Conflict of interests: whether the payment or other benefit resulted in the agent having a personal interest which conflicted (or might have conflicted) with his duty to the principal: Petrotrade Inc. v Smith [2000] 1 Lloyd’s Rep 486 at para. 17; Logicrose Limited v Southend United Football Club Limited [1988] 1 W.L.R. 1256, 160F-H. A principal is entitled to have his agent’s disinterested advice; a bribe undermines that entitlement.
  • Secrecy: whether the payment or other benefit was kept secret from the principal. See, for example, Logicrose at 1262, quoting Chitty L.J. in Shipway v Broadwood at p.373: “The real evil is not the payment of money, but the secrecy attending it.”

In Imageview Management Ltd v Jack [2009] 1 Lloyd’s Rep 436, the Court of Appeal recently underscored in strong terms the centrality of the conflict of interest test. The Court rejected an argument that a payment by a football club to an agent was a “harmless” collateral payment and emphasised that the strict non-profit rule was necessary as a matter of policy “as a real deterrent to betrayal” (at para.50).

What constitutes a bribe/secret commission. A secret commission or bribe need not be a payment. The principles in relation to secret commission/bribery apply to bribes in other forms, for example gifts, an arrangement to pay or other inducements (in Amalgamated Industrials Ltd v Johnson & Firth Brown Ltd, The Times, April 15, 1981 an offer of employment was treated as a bribe). The key to the determination of the question as to whether or not a payment or other inducement constitutes a bribe is to ask whether the making of it puts the agent into a position where his duty to his principal and his interest (in receiving the payment) conflict (Anangel v IHI, above; Meadow Schama and Company v Mitchell and Company Ltd (1973) 228 E.G. 1611; Barry v The Stoney Point Canning Co. (1917) 55 C.R. 51).

It is not necessary that the bribe actually induces a contract. The focus is not on the outcome of the payment but on the fact that it is made with a view to perverting the judgment or conduct of the recipient (Petrotrade Inc v Smith [2000] 1 Lloyd’s Rep. 486.

Who may be sued. Both the agent and the briber are jointly and severally liable to the principal. In relation to the payer of the bribe it should be noted that a third party briber is regarded as a party to the agent’s breach of duty even where: (i) he thought that the agent would tell or had told the principal of the payment (Shipway v Broadwood [1899] 1 Q.B. 369 at 373; Grant v Gold Exploration and Development Syndicate Ltd [1900] 1 Q.B. 233 at 248-250; and Taylor v Walker [1958] 1 Lloyd’s Rep. 490 at 509-513); or (ii) he was not aware of the agent’s interest in the transaction but he did know that the agent did not intend to disclose the dealing to the principal (Logicrose Ltd v Southend United FC [1988] 1 W.L.R. 1256 at 1260-1262).

Remedies. A principal may choose between two distinct remedies, both against the agent, and the third party briber:

  • restitution of the amount of the bribe or secret commission; or in the alternative
  • damages in deceit for any loss suffered by the principal as a result of the fraud.

(Mahesan v Malaysian Govt Officers Co-operative Housing Society Ltd [1979] A.C. 374; Bowstead & Reynolds on Agency, 19th edn (London, 2010), arts 49 and 96; Petrotrade Inc v Smith, above). It now appears that a claimant may also be able to sue for an account of profits from the briber and the agent: see Fyffes Group Ltd v Templeman [2000] 2 Lloyd’s Rep, 643, Toulson J.; Ultraframe v Fielding [2006] F.S.R. 17, Lewison J. at paras 1589-1594 (see further Goff & Jones at para. 33-002). The Nineteenth Edition of Bowstead & Reynolds On Agency (art.96) suggests that a briber’s liability may now be better classified under the head of accessory liability (as clarified in Brunei v Tan etc.). It should be noted that in Fyffes the remedy of account of profits from the briber was not in fact profits. He found that it was highly probably that the claimant would have entered into a service agreement with the third party even if the relevant fiduciary had not been dishonest.

The recent Court of Appeal case of Imageview v Jack (above) also dealt with the circumstances in which a fiduciary who has acted in breach of fiduciary duty and against whom an account of profit is ordered may be given an allowance for skill and effort. Four points were emphatically restated in the judgment: (i) it must be inequitable for the beneficiaries to take the profit from the fiduciary without paying for the skill and labour; (ii) the power to grant such an allowance to fiduciaries is to be exercised sparingly out of concerns not to encourage fiduciaries to act in breach of fiduciary duty; (iii) such an allowance is unlikely to be allowed where the fiduciary duty has been involved in surreptitious dealings; and (iv) the burden is on the fiduciary to convince the court that an accounting of his or her entire profits was in appropriate in the circumstances (paras 52 and 56). See also Rahme v Smith and Williamson Trust Corp Ltd (Administrators of the Estate of Stephen John Voice) [2009] EWHC 911 (Ch).

Prior to the Court of Appeal decision in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (In Administration) [2011] EWCA Civ 347 there had been widespread support for the view that under English law unauthorised profits acquired by fiduciaries in breach of fiduciary duty are held upon constructive trust for the principal: following the Privy Council decision in Attorney General for Hong Kong v Reid [1994] 1 A.C. 324; see also Daraydan Holdings Ltd V Solland International Ltd [2005] Ch. 119; and Ultraframe at para. 1490. So bribes have been held to be trust property for the purposes of a knowing receipt claim: Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch). However, in Sinclair Investments the Court of Appeal declined to follow the Privy Council decision in Reid and instead followed five previous decisions of the Court of Appeal and upheld the First Instance decision of Lewison J. ([2010] EWHC 1614 (Ch)) that unauthorised profits made by a fiduciary, otherwise than by acquiring and exploiting property formally owned (or treated as owned) by the principal itself, give riser only to a personal obligation to account rather than a constructive trust. This means that such unauthorised profits cannot be traced e.g. into proceeds of sales nor can a proprietary claim be asserted to such proceeds. See in particular paras 72 to 92 of the judgment of Neuberger L.J.

The restitutionary claim is available against the third party briber although he has paid, rather than received the bribe, on the basis that the principal “is entitled to treat the benefit obtained by a promised to the agent as part of the consideration which should have been received by the principal (if he is a vendor) or as excess consideration provided by the principal (if he is a purchaser)” (per Millett J. in the Logicrose case, above). It has been suggested that the restitutionary liability of a third party derives from the imposition of a constructive trust for “dishonest assistance” in the agent’s breach of fiduciary duty—but this was not followed in the Petrotrade case, above.

The remedy in deceit for damages is clearly preferable if the amount of the loss exceeds the bribe, or if the property acquired with it has decreased in value; obviously, also, against an agent who never in fact received the bribe.

Note that the principal cannot recover under all heads and must elect prior to judgment which remedy to take (Mahesan case, above).

If a contract has been concluded with the third party briber, the principal may rescind it about initio, alternatively it may be terminated for the future (Panama & South Pacific Telegraph Co v India Rubber, etc., Company (1875) L.R. 10 Ch. App. 515; Armagas Ltd v Mundogas S.A. (The Ocean Frost) [1986] A.C. 717).

The agent who takes a bribe may forfeit his right to any remuneration or commission (Meadow Schama and Company v Mitchell and Company Ltd (1973) 228 E.G. 1511), and lose his right to an indemnity (Stange & Co v Lowitz (1898) 14 T.L.R. 468; Nicholson v Mansfiled & Co (1901) 17 T.L.R. 259); a principal may also be justified in dismissing him without notice (Swale v Ipswich Tannery Ltd (1906) 11 Com. Cas. 88; Baston Deep Sea Fishing & Ice Company v Ansell (1888) 39 Ch.D. 339).

Defences. It is a defence that the principal knew of the payment, or would have known if he had thought about it. The principal must have sufficient knowledge to understand the implications of the arrangement so a partial disclosure will be insufficient (Bartram & Sons v Lloyd (1904) 90 L.T. 357). The burden of proving that the principal knew is on the agent/third party (Jordy v Vanderpump (1920) 64 S.J. 324) and therefore this must be specifically pleaded in the defence. It is not a defence that there was no dishonesty. The principal in Anangel (above) also applies where there has been no improper conduct or motivation on the part of the agent (Allwood v Clifford [2002] E.M.L.R. 3).

The pleading of and evidence as to a market practice for commissions to be payable may be relevant to the issue “secrecy”: Secretary of State for Justice v Topland Group Plc [2011] EWHC 983 (Q.B.), King J.

Payments made after the conclusion of the transaction will not be regarded as bribes unless it appears that such gifts were expected or arranged at the outset, or were made to influence future transactions (Smith v Sorby (1875) 3 Q.B.D. 552; Hough v Bolton (1885) 1 T.L.R. 606).