Secret Trust in UK Law

Wider policy considerations also support the respondents' case that bribes and secret commissions received by an agent should be treated as the property of his principal, rather than merely giving rise to a claim for equitable compensation. Secret commissions are also objectionable as they inevitably tend to undermine trust in the commercial world.

But it is inherent in conduct of the kind which we are required to assume in this case that, if it is to be successful, it is secret and hidden from most of the employees as well as the rest of the world. Once the employee has left his employment the subsequent revelation of the fraud can have no effect on the trust and confidence for, by definition, it has ceased anyway.

The concept of fraud in equity is much wider and can extend to unconscionable or inequitable conduct in the form of a denial or refusal to carry out the agreement to hold the property for the benefit of the third party which was the only basis upon which the property was transferred. This is sufficient in itself to create the fiduciary obligation and to require the imposition of a constructive trust.

A bribe is to be seen as something the fiduciary obtained by doing a wrong rather than by depriving the beneficiary of an opportunity.

The second matter is this. There is a clear and important difference between on the one hand a person misappropriating specific property with which he has been entrusted, and on the other hand a person in a fiduciary position who uses that position to make a secret profit for which he will be held accountable. Whether the former is within section 5, we do not have to decide. As to the latter we are firmly of the view that he is not, because he is not a trustee.

The agent and the third party are jointly and severally liable to account for the bribe, and each may also be liable in damages to the principal for fraud or deceit or conspiracy to injury by unlawful means. Consequently, the agent and the maker of the payment are jointly and severally liable to the principal (1) to account for the amount of the bribe as money had and received and (2) for damages for any actual loss.

The essential character of a bribe is, thus, that it is a secret payment or inducement that gives rise to a realistic prospect of a conflict between the agent's personal interest and that of his principal. The bribe may have been offered by the payer or sought by the agent. A bribe encompasses not just a payment of money but the conferring of any advantage or benefit, and may be an actual benefit or merely the promise of a benefit held out by the payer or an expectation of one 14.