31 October 2013

[2013] JRC 211

Jersey Royal Court (Samdi Division) (J A Clyde-Smith, Esq., Commissioner and Jurats Le Cornu and Morgan)

The proceeds of a bribe taken by an agent in a fiduciary position were held on constructive trust for the principal.

This case concerned the beneficial ownership of funds held by a Jersey trustee purportedly on trust for a Mr Fragoso and his family.   The trustee became concerned that the funds it held had been paid as a bribe by an English company to Mr Fragoso when he was an official in the government of Mozambique.  The Trustee sought directions as to whether, in the circumstances, it held the trust moneys for the government of Mozambique.  Mr Fragoso did not appear and his family disclaimed all interest in the moneys.  The advocate appointed to represent minor and unborn beneficiaries accepted that those beneficiaries could not, in the circumstances, have an interest in the moneys.  

The Royal Court held the moneys were held on trust for the government of Mozambique.  The court declined to follow the decisions of the English Court of Appeal in Lister v Stubbs and Sinclair Investments (UK) Limited v Versailles Investments Limited.  It followed instead the decision of the Privy Council inAttorney General for Hong Kong v Reid.  Commissioner Clyde-Smith describedReid as ‘of the highest degree of persuasiveness.’  He held that the court should follow Reid for the important policy reason of deterring the taking of bribes by trustees and other fiduciaries.      

However, the judgment did not address the nature of the constructive trust which might or might not arise in respect of a bribe taken by a fiduciary, perhaps because there does not appear to have been any substantial adversarial argument.  

The decision is of considerable interest not least because this is another area (Hastings-Bass being the other) where the Jersey Royal Court has refused to follow the English courts.  It also shows that the debate over whether bribes accepted by a fiduciary are held on constructive trust is far from settled.