If you found out that your employee or director has been receiving bribes or making secret profits, what civil legal recourse do you have? Or what if your employee or director has been paying bribes, what civil liability would you face? This is apart from any criminal charges or liability for corruption.
A summary of the principles have been outlined in Novoship (UK) Limited v Mikhaylyuk  EWHC 3586 (Comm) at -, per Christopher Clarke J (cited with approval in Eze v Conway & Anor  EWCA Civ 88):
104. In Industries and General Mortgage Co Ltd v Lewis  2 All ER 573 Slade J defined a bribe as follows (at page 575):
‘For the purposes of the civil law a bribe means the payment of a secret commission, which only means (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person’s agent.’
105. A bribe was defined even more succinctly by Leggatt J, as he then was, in Anangel Atlas Compania Naviera SA v Ishikawajima-Harima Heavy Industries  1 Lloyd’s Rep 167 at 171, as:
‘A commission or other inducement which is given by a third party to an agent as such, and which is secret from his principal.’
106. 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. There is no need to establish dishonesty or corrupt motives. This is irrebuttably presumed – Re A Debtor  2 Ch 367 at 376 (per Scrutton LJ – “the court ought to presume fraud in such circumstances”). 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. The motive for the payment or inducement (be it a gift, payment for services or otherwise) is irrelevant. In Fiona Trust v Privalov  EWHC (Comm) at para 73 Andrew Smith J contemplated that moonlighting for a person engaged in transactions with the principal might well give rise to a conflict between the agent’s interest and duty and that the reward for his services might count as a bribe.
107. The payments (or other benefits) do not have to be made directly to the fiduciary. Bribes may be paid to third parties close to the agent, such as family members or discretionary trusts, or simply to those whom the agent wishes to benefit. The test is whether the payment (or other benefit) puts the fiduciary in a real (as opposed to a fanciful) position of potential conflict between interest and duty.
108. The recipient of the bribe (or the person at whose order the bribe is paid) must be someone with a role in the decision making process in relation to the transaction in question e.g. as agent, or otherwise someone who is in a position to influence or affect the decision taken by the principal. There is, however, no need to show that the payer intended the agent to be influenced by the payment or whether he was in fact influenced thereby. There is an irrebuttable presumption as to both, and that the principal has suffered damage in the amount of the bribe – Hovenden & Sons v Milhof (1900) 83 LT 41 CA per Romer LJ at page 43; Industries & General Mortgage Co Ltd v Lewis (above) at per Slade J at pages 576 to 578; Mahesan v Malaysian Housing Society  AC 374 PC at pages 380E and 383A-C; Daraydan Holdings Ltd v Solland International Ltd  Ch 119, per Lawrence Collins J at para 53.
109. The payment need not be linked to a particular transaction – Daraydan Holdings v Solland International (above) at para 53; Fiona Trust v Privalov  EWHC (Comm) at para 73 (per Andrew Smith J). It is sufficient if the agent is tainted by the bribery at the time of the transaction between the payer of the bribe and payee’s principal. If that is so, the agent’s conflict of interest means that the principal has been deprived by the other party to the transaction of the disinterested advice of his agent and is entitled to a further opportunity to consider whether it is in his interests to affirm it. It follows that subsequent transactions may be tainted by payments linked to an earlier transaction between the parties, or by a payment not linked to any particular transaction. “If a secret payment is made to an agent, it taints future dealings between the principal and the person making it in which the agent acts for the principal or in which he is in a position to influence the principal’s decisions, so long as the potential conflict of interest remains a real possibility”: see Fiona Trust at para 73.
110. The underlying rationale for the strict approach taken by the cases is that a principal is entitled to be confident that an agent will act wholly in his interests.”
A principal can bring a civil claim against an agent who received bribes. The principal can claim for the amount of the bribe money: Sumitomo Bank Ltd v Kartika Ratna Thahir  1 SLR 735 (HC) (affirmed on appeal) at -; Beyonics Technology Ltd and another v Goh Chan Peng and others  SGHC 120 at ; Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan  1 SLR 847 at .
Damage is not the gist of the action; it therefore matters not whether the principal has suffered any loss, or that the principal could not have obtained for himself the money which the agent received: Sumitomo Bank Ltd v Kartika Ratna Thahir  1 SLR 735 (HC) (affirmed on appeal) at -.
The principal claim for the bribe money can under section 14 of the Prevention of Corruption Act notwithstanding that the agent who received the bribes had already been charged and paid a financial penalty up to the same amount for offences under section 13 of the Act: Carrefour Singapore Pte Ltd v Leong Wai Kay  SGHC 160.
The agent who received the bribes would hold the bribe money or any traceable proceeds on constructive trust for the principal: Malaysian International Trading Corp Sdn Bhd v Interamerica Asia Pte Ltd and Others  SGHC 198 at ; FHR European Ventures LLP and others v Cedar Capital Partners LLC  UKSC 45.
The significance of the agent holding the bribe money on trust for the principal is stated in FHR European Ventures LLP and others v Cedar Capital Partners LLC  UKSC 45, per Lord Neuberger at :
“If the bribe or commission is held on trust, the principal has a proprietary claim to it, whereas if the principal merely has a claim for equitable compensation, the claim is not proprietary. The distinction is significant for two main reasons. First, if the agent becomes insolvent, a proprietary claim would effectively give the principal priority over the agent’s unsecured creditors, whereas the principal would rank pari passu, ie equally, with other unsecured creditors if he only has a claim for compensation. Secondly, if the principal has a proprietary claim to the bribe or commission, he can trace and follow it in equity, whereas (unless we develop the law of equitable tracing beyond its current boundaries) a principal with a right only to equitable compensation would have no such equitable right to trace or follow.”
The principal can also bring a civil claim against the person who was paying bribes (the briber). He may recover damages for fraud (misrepresentation or dishonest assistance to a breach of fiduciary duties), under which he can recover the amount of actual loss sustained in consequence of his entering into the transaction in respect of which the bribe was given, and may rescind the contract entered into with the briber: Kartika Ratna Thahir v PT Pertambangan Minyak dan Gas Bumi Negara (Pertamina)  3 SLR 257 (CA) at , citing T Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd  AC 374 (PC), at 380; Panama and South Pacific Telegraph Co v India Rubber, Gutta Percha and Telegraph Works Co (1875) LR 10 Ch App 515, 527, 532-533 (cited in Hurstanger Ltd v Wilson and another  EWCA Civ 299 (CA) at ).
Daraydan Holdings Ltd and others v Solland International Ltd and others  EWHC 622 (Ch) at :
“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. But the principal must now elect between the two remedies prior to final judgment being entered: Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd  AC 374, 383. The third party may also be liable on the basis of accessory liability in respect of breach of fiduciary duty: Bowstead & Reynolds on Agency, para 8-221. The principal is also able to rescind the contract with the payer of the bribe.”
A summary of the principles on loss and claim for damages in bribery was stated in Fiona Trust & Holding Corporation & Ors v Skarga & Ors  EWCA Civ 275 (CA), per Lord Justice Longmore at :
“As Lord Templeman observed in AG for Hong Kong v Reid  1 AC 324, 330H “Bribery is an evil practice which threatens the foundations of any civilised society”. In English law remedies for bribery are extensive and draconian. Thus English law will permit a claimant employer or principal whose employee or agent has been bribed to recover:
i) the amount of the bribe from both the person bribed and the briber, regardless of the question whether any loss has been suffered by the claimant;
ii) the amount of any loss following the bribe, it being (probably) presumed both that loss has occurred in at least the amount of the bribe and that any subsequent transaction created by the employee or agent was caused by the bribe; and
iii) (perhaps more controversially) where the employee or agent is a fiduciary, the amount of any relevant profit made and received as a result of any such transaction following the bribery, causation from the bribery again being presumed.”
Lord Diplock in T Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd  AC 374 (PC), at 381, cited Hovenden and Sons v. Millhoff (1900) 83 L.T. 41 (CA) at 43:
“… if the agent be a confidential buyer of goods for his principal from the briber, the court will assume as against the briber that the true price of the goods as between him and the purchaser must be taken to be less than the price paid to, or charged by, the vendor by, at any rate, the amount or value of the bribe. If the purchaser alleges loss or damage beyond this, he must prove it”
“These rules refer to three of the elements in the tort of fraud, the motive, the inducement, and the loss occasioned to the plaintiff, but go on to say that the existence of the first two elements and of the third up to the amount of the bribe are to be irrebuttably presumed. This is merely another way of saying that they form no part of the definition of bribery as a legal wrong. To the extent that it is said that there is an irrebuttable presumption of loss or damage to the amount of the value of the bribe this is another way of saying that, unlike in the tort of fraud, actual loss or damage is not the gist of the action. But then to go on to say that actual loss in excess of the amount of the bribe can be recovered only if it is proved, is to produce a hybrid form of legal wrong of which actual damage is the gist of part only of a single cause of action.”
A principal can also be liable for its agent’s or employee’s bribes to a third party. Armagas Ltd. v. Mundogas S.A.  3 W.L.R. 640 (CA) (affirmed on appeal), Robert Goff LJ at 663-664:
“I shall however first of all consider the liability of the principal in damages, where his agent has without his authority, or indeed knowledge, bribed the servant of the third party to induce the third party to contract with his principal. It is now established that the claim against the briber for damages, which appears in origin to have been a claim for equitable fraud, should be regarded as a claim in damages in tort: see the Mahesan case  A.C. 374, 383, per Lord Diplock. Accordingly, the liability of the principal for the agent’s tort must depend upon the principles of vicarious liability, in so far as those principles are applicable in the case of an agent who is not a servant. Certainly, the principal cannot be liable unless the agent was acting in the course of his employment as such or (as is sometimes said) in the course of his authority. For an example where a principal was so held liable, we have the authority of the decision of this court in Hamlyn v. John Houston & Co.  1 K.B. 81. That was a case in which one partner was held liable in damages to the plaintiff for the conduct of another partner in bribing a servant of the plaintiff to communicate to him information concerning the plaintiff, where it was within his authority to obtain such information by legitimate means.
… I next ask myself, still putting on one side the fact that the plaintiffs were not incorporated until 12 June 1980, whether, where an agent has, in the course of his employment or authority, bribed the servant of a third party to induce the third party to contract with his principal, the third party is entitled to rescind the contract or, if it is too late to rescind, to bring it to an end. … a decision of the Supreme Court of Canada on the point,Barry v. Stoney Point Canning Co. (1917) 55 S.C.R. 51, a case which was not cited to the judge. In that case it was held by a majority of the Supreme Court that, where the agent acted in the course of his employment in making a bribe to the third party’s own agent, the third party could on this ground justify his repudiation of the contract with the bribing agent’s principal. The leading judgment of the majority was delivered by Anglin J. He said, at p. 80:
“Finally the fact that the agreement to split the commission was not made by the plaintiffs themselves, but by their agent Millman, is not an answer to the defendant’s assertion of his right to repudiate. What Millman did was done while purporting to act within the scope of his employment, and in the course of the service for which he was engaged by the plaintiffs; and it is immaterial that it may have been in his own interest as well as in, or even to the exclusion of, that of the plaintiffs. Lloyd v. Grace, Smith & Co. A.C. 716. The defendant’s agent was given the disqualifying adverse interest which made him incapable of binding his principal.”
Although this decision is not binding upon us, it constitutes strong persuasive authority; and I respectfully agree with it and adopt it.”
Vicarious liability for an employee’s or agent’s bribery can be determined by considering whether the agent undertook illegitimate means of a transaction that the agent was authorised to conclude by legitimate means. Petrotrade Inc v Smith & ors  1 Lloyd’s Rep 486, per Steel J at :
“21. It is common ground that Mr. Van der List and Mr. Tissot both had authority to enter into port agency contracts and to make provision for rebates or commissions. The arrangements that they effected with Mr. Smith can be categorised as the conclusion by illegitimate means of a transaction that they were authorised to conclude by legitimate means. It follows that Alpina is vicariously responsible as a matter of English law for the fraud involved in those illegitimate means: see Hamlyn v. Houston & Co.  1 KB 81:-
It is too well established by the authorities to be now disputed that a principal may be liable for the fraud or other illegal act committed by his agent within the general scope of the authority given to him, and even the fact that the act of the agent is criminal does not necessarily take it out of the scope of his authority. If the act done by the agent is within the general scope of the authority given to him, it matters not for the present purpose that it was directly contrary to the instructions of his principal, or even that it may have been an offence against society itself: per Collins M.R. at p.85.”