When and Why a Bribe is Held on a Constructive Trust: The Method of Reasoning Towards an Equitable Remedy

Abstract

When a fiduciary receives a bribe there are some types of occasion when the bribe is held on a constructive trust for his principal, and some when it is not. This paper identifies those types of occasion on the basis of general principles concerning how courts reasons towards the grant of an equitable remedy for a breach of an obligation arising in equity’s exclusive jurisdiction. The concept of “an equity” plays a central role in those principles. The receipt of a bribe by a fiduciary is itself a breach of the obligation not to obtain a benefit from an unauthorised use of the fiduciary position, and, when the bribe takes the form of an item of property, immediately generates an equity for that property to be held on a constructive trust. However there can be reasons why such an equity to a constructive trust does not result in the court ultimately giving relief in the form of a constructive trust. The decision of the UK Supreme Court in FHR European Ventures LLP v Cedar Capital Partners LLC oversimplifies the situation by holding that whenever a bribe is received it is held on a constructive trust, and can result in a proprietary remedy.

Keywords: Equity, fiduciary obligations, legal reasoning, equitable remedies, appropriate remedy

JEL Classification: K10, K30