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Report No. 166

1.7. The Concept of 'Implied Trust' and 'Breach of Trust on the part of Bribe-Takers.-

More important, the Constitution Bench evolved the concept of 'implied trust' and breach of trust on the part of bribe-takers. The following observations bring out the said concept:

"After all, all these illegally acquired properties are earned and acquired in ways illegal and corrupt - at the cost of the people and the State. The State is deprived of its legitimate revenue to that extent. These properties must justly go back where they belong to the State. What we are saying is nothing new or heretical. Witness the facts and ratio of a recent decision of the Privy Council in Attorney General for Hong Kong v. Reid, 1993 (3) WLR 1143. The Respondent, Reid, was a crown-prosecutor in Hong Kong. He took bribes as an inducement to suppress certain criminal prosecutions and with those monies, acquired properties in New Zealand, two of which were held in the name of himself and his wife and the third in the name of his solicitor.

He was found guilty of the offence of bribe-taking and sentenced by a criminal court. The administration of Hong Kong claimed that the said properties in New Zealand were held by the owners thereof as constructive trustees for the Crown and must be made over to the Crown. The Privy Council upheld this claim, over-ruling the New Zealand Court of Appeals. Lord Templeman, delivering the opinion of the Judicial Committee, based his conclusion on the simple ground that any benefit obtained by a fiduciary through a breach of duty belongs in equity to the beneficiary.

It is held that a gift accepted by a person in a fiduciary position as an incentive for his breach of duty constituted a bribe, and, although in law it belonged to the fiduciary, in equity he not only became a debtor for the amount of the bribe to the person to whom the duty was owed but he also held the bribe and any property acquired therewith on constructive trust for that person. It is held further that if the value of the property representing the bribe depreciated, the fiduciary had to pay to the injured person, the difference between that value and the initial amount of the bribe, and if the property increased in value the fiduciary was not entitled to retain the excess since equity would not allow him to make any profit from his breach of duty.

Accordingly, "it is held that to the extent that they represented bribe received by the first respondent, the New Zealand properties were held in trust for the Crown, and the Crown had and equitable interest therein. The learned Law Lord observed further that if the theory of constructive trust is not applied and properties interdicted when available, the properties "can be sold and the proceeds whisked away to some Shangri La which hides bribes and other corrupt moneys in numbered bank accounts" - to which we are tempted to add: one can understand the immorality of the bankers who maintained numbered accounts but it is difficult to understand the amorality of the Governments and their laws which sanction such practices - in effect encouraging them.

The ratio of this decision applies equally where a person acquires properties by violating the law and at the expense of and to the detriment of the State and its revenues where an enactment provides for such a course, even if the fiduciary relationship referred to in Reid is not present. It may be seen that the concept employed in Reid was a common law concept, whereas here is a case of an express statutory provision providing for such forfeiture. May we say in conclusion that "the interests of society are paramount to individual interests and the two must be brought into just and harmonious relation. A mere property career is not the final destiny of mankind, if progress is to be the law of the future as it has been of the past. (Lewis Henry Morgan: Ancient Society)."

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