Introduction

It is not necessary in satisfying the test for civil bribery (i.e. that a secret commission has been paid) to show that the payer paid the secret commission to obtain some benefit or to induce the recipient to enter into a contract for or on behalf of the principal they represent. However, it is often the case that bribes have been paid specifically to induce an agent to enter into a contract on behalf of his agent, and usually on terms which are significantly more unfavourable when compared to those which the principal would have agreed, if indeed the principal would have agreed to any such contract at all.

As the decision in The Attorney General of the Turks and Caicos Islands v Star Platinum Island Limited and Others[1] demonstrates, the Courts, at least in the Turks & Caicos Islands, appear willing to assist a principal that has entered into agreements tainted by the payment of bribes, by allowing the principal to rescind such agreements. Furthermore, although any monies paid to the principal under the rescinded contract must be repaid under the established principles of restitution, the principal will be entitled to set off the value of the bribe(s) against any restitutionary payment.

The Facts

The nine defendant companies in Star Platinum were all beneficially owned and controlled by Dr Cem Kinay, a Turkish businessman who sought to develop a tourist resort on a small island within the Turks and Caicos Islands known as Joe Grant Cay. Dr Kinay purchased around 200 acres of land on Joe Grant Cay from the Crown on which to construct a hotel. An additional 500 acres of land on Joe Grant Cay, which was required for other aspects of the development such as villas and a golf course, was to be leased from the Crown under Commercial Conditional Purchases Leases, which provided the leasee with an option to purchase the land upon the fulfilment of certain conditions.

Dr Kinay entered into negotiations with representatives of the Turks and Caicos Islands Government (TCIG) in December 2006, having first been informed of the opportunity to develop Joe Grant Cay by the then Chief Minister, Michael Misick. On 9 January 2007, Dr Kinay arranged for a payment of $500,000 to be made to Michael Misick. It is worth noting that the payment was not made openly, directly from one individual to another. Rather, it was paid by Turks Development LP, a company controlled by Dr Kinay, into the client account of Chalmers & Company, a law firm run by Michael Misick's brother. Furthermore, the payment was made from funds borrowed from a bank.

Although no contracts between TCIG and the defendant companies were entered into until midway through 2008, certain key decisions in respect of the development were taken by representatives of TCIG from May 2007. Ultimately, the defendant companies were granted the following:

  • freehold title in 200 acres of Crown land for $3.2 million (a fraction of the value attributed to the land by the Government's own Chief Valuation Officer);
  • three separate leases over a combined area of more than 500 acres, with options to purchase the majority of that land (again at prices far lower than the value attributed to the land by the Chief Valuation Officer); and
  • a Development Agreement, which provided the defendant companies with the right to undertake the development, and (by way of an annexed development order) various concessions on taxes and duties.

In July 2008, a Commission of Inquiry under the leadership of Sir Robin Auld was established to investigate allegations of corruption amongst officials within TCIG. The Commission reported in 2009 that there were grounds to believe serious corruption had taken place in respect of a number of transactions. Following the Commission of Inquiry’s report, the Attorney General commenced proceedings against the Star Platinum companies seeking a declaration that by reason of the termination of the Development Agreement (which had been terminated on the basis of the Star Platinum companies' failure to comply with its obligations) the leases granted by the Crown had also terminated. The Attorney General also sought a declaration that the transfer of freehold title be set aside on the basis of bribery, relying, amongst other things, on the $500,000 payment.

The Star Platinum companies admitted that the payment of $500,000 had been made, but denied that the payment was a bribe, asserting instead that it had been a political donation to the political party which had been in power at the time.

The Decision

Although the Star Platinum companies' defence had been struck out during the proceedings for failure to comply with the Court’s procedural orders, the Attorney General elected to proceed by trial, which entailed having to prove the case by reference to evidence or admissions. Accordingly, Mr Justice Martin, in giving his judgment, noted that it was proper to take into consideration the contents of the defence.

Having reviewed the facts, the vast majority of which had been admitted in the Star Platinum companies' defence, Martin J concluded that there was a "very strong probability that the [payment of $500,000] was paid as a bribe in order to ensure that the Defendant companies obtained the benefit of the proposed development". In reaching this conclusion, the Judge specifically addressed the way in which the monies had been paid, and the fact that the payment had been made from borrowed funds, observing that this was inconsistent with a genuine political donation. Martin J also noted that only four months after the payment had been made, Cabinet had approved the Star Platinum companies as developers of Joe Grant Cay and subsequently authorised the grant of development rights.

The Judge proceeded to consider what the Star Platinum companies had acquired in return for the payment of the bribe, and concluded that there was a very strong probability that Michael Misick had ensured the grant of development rights and of leasehold and freehold interests in Crown land at an undervalue as a result of the payment.

The result of Martin J's finding that the transfer of freehold had been induced as a result of the payment of the bribe, was that the Attorney General was entitled to rescind that transfer. This was in addition to allowing the Attorney General to recover either the amount of the bribe, or damages resulting from the bribe (but not both). The Judge also found that the Star Platinum companies were liable for damages arising out of their breaches of the Development Agreement and that the leases entered into pursuant to the Development Agreement had been determined upon its termination.

Martin J considered whether the Attorney General was liable to repay the $3.2 million that had been paid by the Star Platinum companies upon purchasing the freehold title, which he described as "the customary restitution of the sum paid". However, he deducted from this the outstanding sum owed by the Star Platinum companies to the bank which had lent the monies for the transfer, and which had taken a charge over the property to secure repayment of that amount. The charge meant that the defendants could not restore what had been given to them under the transfer and a deduction was appropriate to take account of that diminution in value. Martin J was satisfied that the damages for which the Star Platinum companies were liable to pay to the Attorney General were comfortably in excess of the remaining amount that would be payable on a restitutionary basis and therefore ordered that the transfer be set aside without any payment being required from the Attorney General.

Rescission of agreements tainted by corruption

The decision in Star Platinum illustrates the principle that those agreements entered into on behalf of a principal, as a result of bribery, will be liable to be set aside. There is obvious logic behind this approach: an agent that has been induced to enter into such agreements will not have been acting in the best interests of his principal (a fact of which the contracting party will be aware), and the principal should therefore not be bound by the agent’s actions.

It is worth noting that upon establishing that there has been a payment of a bribe, an irrebuttable presumption will arise that the agent was influenced by the bribe (Shipway v Broadwood[2]). Accordingly, any dealings between the briber and the principal in which the agent was involved will be considered to have been tainted by the bribe and will be liable to be set aside.

Where monies have been paid under those contracts which are to be rescinded, the courts will usually order that the recipient repay those monies so as to return the parties to their pre-contractual positions. This is unless the recipient can show that it has not been enriched by the rescission, for example by showing that the asset which was recovered by way of rescission has reduced in value (such as the reduction in the value of the property in Star Platinum by virtue of the charge that had been registered), or by setting-off other liabilities from the amount that would otherwise be repayable.