The Governor and Company of the Bank of Ireland and another v Jaffery and another  EWHC 1377 (Ch)
The Bank of Ireland brought claims, primarily for breach of fiduciary duty, bribery, fraud and dishonest assistance against one of its employees Mr Jaffery (“J”) and an agent of some of the Bank's customers Mr Gill (“G”).
The Bank entered into a series of loans with BVI registered ?companies, ultimately owned by Panamanian trusts (the “Customers”) for whom G acted as agent. It was alleged that J had secret interests in the Customers’ projects financed by the Bank’s lending, had taken bribes and concealed this alleged conduct from the Bank. It was also alleged that G assisted J’s breach of fiduciary duty, as outlined above, and also paid bribes to J by way of providing interests in certain projects and a loan to J’s wife (which was not repaid) totalling £35,000.
J denied having any interest in the Customers to whom loans had been made, and denied taking any bribe or improper benefit from his connection with G. G also denied bribing J or providing him with any benefits for his assistance in relation to the loans.
In deciding the case, Vos J unpicked a number of complex factual disputes between the parties and also considered a number of legal issues. For instance, whether the Bank was entitled to forfeit five years of J’s salary and bonus, whether G was liable to the Bank for dishonestly assisting the breach of fiduciary duty and whether G did bribe J.
The judgment was made for the Bank in part. However, the Bank’s claim that it was entitled to forfeit J’s salary and bonuses was dismissed. In reaching this decision, Vos J considered Imageview Management Ltd v Jack  EWCA Civ 6 which had held that in circumstances of breach of fiduciary duty an agent will generally forfeit any right remuneration. However, unlike Imageview (in which the agent’s breach of fiduciary duty related to the sole subject matter of the agency) Vos J found that outside of those transactions involving the Customers, J had otherwise acted as a diligent employee of the Bank. Therefore, although the Bank should be compensated for his breaches of duty, it would be unfair to deprive J of his salary and bonuses in their entirety.
In relation to the allegations made against G concerning dishonest assistance, G had denied liability, even if J was found to have acted in breach of fiduciary duty, on the basis that he had not behaved dishonestly. However, Vos J rejected this argument, finding that the “vice in a breach of fiduciary duty is that the agent is secretly putting himself in a position in which his interests conflicts with those of his principal”. Consequently, Vos J found that G had acted dishonestly by procuring J’s assistance in relation to the grant of loans in favour of the Customers.
Vos J considered the bribery allegations in light of the principles outlined in Fiona Trust & Holding Corporation v Yuri Privalov  EWHC 3199 (Comm). Adopting this test, Vos J found that the £35,000 loan was not in fact a bribe as it had been the parties’ intention that it would be immediately repaid. However, by granting benefits to J in relation to one of the projects referred to above, Vos J did conclude that the principles outlined in Fiona Trust had been satisfied and G had bribed J to this extent.
It is well established that a person in a fiduciary position is not allowed to put himself in a position where his personal interests conflicted with this duty. However, Vos J’s judgment provides helpful clarity concerning the circumstances in which forfeiture of an fiduciary salary can be sought. In Imageview forfeiture of salary and benefits was permitted as the breach of trust was fundamental to the relationship between the parties. However, in light of Vos J’s judgment, if the breach of trust is not central to the relationship between the parties it appears unlikely that forfeiture will be permitted.