Friday, 8 November 2013

Jersey: Bribes held on constructive trust - Royal Court follows Reid in preference to Lister

In Sinclair Investments (UK) Ltd. v Versailles Trade Finance Ltd. [2011] EWCA Civ 347 the English Court of Appeal declined to follow AG for Hong Kong v Reid [1994] AC 324, an opinion of the Judicial Committee of the Privy Council, and instead applied one of its earlier decisions (Lister v Stubbs [1890] 45 Ch D 1). The effect was to limit the circumstances in which a proprietary claim could be made in respect of asset or money acquired by a fiduciary in breach of duty.

Jersey's Royal Court (Samedi division), at the end of October in Lloyds Trust Company (Channel Islands) Ltd. v Fragoso [2013] JRC 211, considered whether it should follow Lister in preference to Reid. It declined to do so and ordered that a trust fund with a bank, into which the proceeds of bribes had been paid, was held on constructive trust. Commissioner Clyde-Smith stated: "...  there are important reasons of policy for this Court to follow Reid, namely the need to deter fraud and corruption and to have the ability to strip fiduciaries who have channelled their illicit funds through this jurisdiction of all benefits" (para. 28).

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