Die Jovis, 1° Martii 1951
Parliamentary
Archives,
HL/PO/JU/4/3/1010
Lord
Chancellor
Lord
Porter
Lord
Normand
Lord
Oaksey
Lord
Radcliffe
HOUSE OF LORDS
READING
v.
ATTORNEY-GENERAL (on behalf of
His Majesty)
Lord Porter
MY LORDS,
The Lord Chancellor, who is
unable to be present today, asks me to say
that he concurs in the
opinion I am about to deliver.
Lord Porter
MY LORDS,
This is an Appeal from an Order
of the Court of Appeal dated the 19th
May, 1949, affirming the
judgment of the Honourable Mr. Justice Denning
(as he then was),
and ordering that the Suppliant's Appeal from the said
judgment be
dismissed with costs to be paid by the Suppliant to the Crown
or
its Solicitor, such costs to be taxed by a Taxing Master.
In 1944 and 1945 certain sums,
all in Egyptian currency, amounting in all
to £E18,842.105,
equivalent to £19,325 4s. 8d. in sterling, and held by or
on
behalf of the Suppliant, were seized and taken into possession on
behalf
of His Majesty.
By Petition of Right presented
on the 1st November, 1946, the Suppliant
sought to recover these
sums or their sterling equivalent (allowance being
made for sums
released to him), as money had and received by His Majesty
to his
use.
The Respondent admitted that
these sums had been seized and taken
into possession on behalf of
His Majesty but alleged that they represented
part of the proceeds
of bribery and that the Suppliant was accountable
therefor to His
Majesty and received and held them in trust for His
Majesty.
Alternatively he claimed that the Respondent was entitled
to set them off
against the Suppliant's Claim.
The facts proved or agreed in
the Action are not in dispute and may
succinctly be stated
substantially in the form adopted by the Appellant in
his case and
are as follows : -
(A) In 1943 and 1944 the
Appellant was a Sergeant in the Royal
Army Medical Corps and
receiving pay at the rate appropriate to his
Rank. He was
employed as a Sergeant in charge of medical stores at
No. 63
General Hospital, Cairo.
(B) On the 14th March, 1944, he
dictated and signed a statement to
Lieutenant Brooks of the
Special Investigation Branch, Middle East,
that he had received
in all some £20,000 from a man named Manole
in the following
circumstances:
Some time about the beginning of
1943, when having coffee at
Alexandria whilst on leave, he was
asked by a man, who apparently
knew him but whom he did not know,
whether he would assist by
selling cases of whisky and brandy to
agents in Cairo for which he
would get a few pounds. The Appellant
expressed his willingness and
was told that someone would get into
contact with him outside the
2
hospital gates at Helmeih and
tell him what he had to do. About a
month later Manole met him
there, told him a lorry was coming at
a specified time to a place
which was pointed out to him. When
it arrived he was to board it
and take it to another spot which again
he was shown. At the
specified time and place a lorry duly arrived,
the Appellant then
boarded it and conducted it through Cairo to the
appointed spot,
where the contents were transferred to another lorry
but he was
unable to see of what they consisted. He then went home,
but by
arrangement met Manole later on the same day at a restaurant
in
Cairo and received from him an envelope which on examination
was
found to contain £2,000. This process was repeated on a
number
of occasions on which, as in the first, a lorry arrived
with cases the
contents of which were undisclosed, and after each
journey he was
given sums varying from £1,000 to £4,000.
(C) On the 20th March, 1944, his
statement was shown to the Suppliant
by Sergeant-Major Jones of
the Special Investigation Branch, and the
Suppliant acknowledged
that it was his statement and that it was true.
He also told
Sergeant-Major Jones that he had been dressed on each
occasion in
uniform, and on a later occasion showed Corporal Read of
the
Special Investigation Branch a number of different places in Cairo
as
points at which he had met or left the lorries which he had
accom-
panied from time to time.
The Appellant's Case also
alleges that at all material times it was obligatory
for all
service personnel in Cairo to wear uniform, except when engaged
in
sport or other specially excepted activity. I can find no
evidence to this effect
but regard the allegation as immaterial to
the decision which your Lordships
are asked to reach.
In these circumstances Denning,
J., held that the Crown was entitled to
the money in question. It
was, in his view, immaterial to consider whether
the method of
seizure was justified or not. Even if it was not, the Crown
had a
valid counterclaim and. avoiding a circuity of action, could thus
defeat
the Appellant's claim. " It is", he says, "
a claim for restitution of moneys
" which, in justice, ought
to be paid over." It was suggested in argument that
the
learned judge founded his decision solely upon the doctrine of
unjust
enrichment and that that doctrine was not recognised by the
law of England.
My Lords, the exact status of the law of unjust
enrichment is not yet assured.
It holds a predominant place in the
law of Scotland and, I think, of the
United States, but I am
content for the purposes of this case to accept the
view that it
forms no part of the law of England and that a right to
restitution
so described would be too widely stated. But. indeed,
this doctrine is not
of the essence of Denning, J.'s, judgment.
His reasoning is to be found in
the passage which succeeds that
quoted. He says: " In my judgment, it is
" a principle
of law that if a servant takes advantage of his service by
"
violating his duty of honesty and good faith, to make a prom for
himself,
" in this sense, that the assets of which he has
control, or the facilities which
" he enjoys, or the position
which he occupies, are the real cause of his
" obtaining the
money, as distinct from being the mere opportunity for getting
"
it, that is to say, if they play the predominant part in his
obtaining the
" money, then he is accountable for it to the
master. It matters not that
" the master has not lost any
profit, nor suffered any damage. Nor does it
" matter that
the master could not have done the act himself. It is a case
"
where the servant has unjustly enriched himself by virtue of his
service
" without his master's sanction. It is money which
the servant ought not to
" be allowed to keep, and the law
says it shall be taken from him
" and given to his master,
because he got it solely by reason of the position
" which he
occupied as a servant of his master." And again, " The
uniform
" of the Crown, and the position of the man as a
servant of the Crown were
" the sole reasons why he was able
to get this money, and that is sufficient to
" make him
liable to hand it over to the Crown." The learned judge
however
also says: " There was not, in this case, a fiduciary
relationship; and this
" man Reading was not acting in the
course of his employment." If this
means, as I think it does,
that the Appellant was neither a trustee nor in
3
possession of some
profit-earning chattel and that it was contrary to his
duty to
escort unwarranted traffic or possibly any traffic through the
streets
of Cairo, it is true, but, in my view, irrelevant. He
nevertheless was using
his position as a Sergeant in His Majesty's
Army and the uniform to which his
rank entitled him to obtain the
money which he received. In my opinion
any official position,
whether marked by a uniform or not, which enables
the holder to
earn money by its use gives his master a right to receive the
money
so earned even though it was earned by a criminal act.
" You have earned ",
the master can say, " money by the use of your
"
position as my servant. It is not for you, who have gained this
advantage,
" to set up your own wrong as a defence to my
claim."
Asquith, L.J., in the Court of
Appeal, points out that there is a well-
established class of
cases in which a master can recover whether or not
he has suffered
any detriment in fact, e.g., those in which a servant or
agent has
realised a secret profit, commission or bribe in the course of
his
employment, and that the sum recoverable is the amount of such
profit.
It is perhaps sufficient to refer in this connection to
Boston Deep Sea Fishing
& Ice Co. v. Ansell, 39
Ch.D. 339, and to quote the words of Bowen, L.J..
at page 367: "
It is true, as Mr. Justice Kekewich says, that the money
"
which is sought to be recovered must be money had and received by
"
the agent for the principal's use; but the use which arises in such a
case.
" and the reception to the use of the principal which
arises in such a case,
" does not depend on any privity
between the principal and the opposite
" party with whom the
agent is employed to conduct business—it is not that
"
the money ought to have gone into the principal's hands in the first
instance ;
" the use arises from the relation between the
principal and the agent himself.
" It is because it is
contrary to equity that the agent or the servant should
"
retain money so received without the knowledge of his master. Then
"
the law implies a use, that is to say, there is an implied contract,
if you
" put it as a legal proposition—there is an
equitable right, if you treat it
" as a matter of equity—as
between the principal and agent that the agent
" should pay
it over, which renders the agent liable to be sued for money
"
had and received, and there is an equitable right in the master
"
to receive it, and to take it out of the hands of the agent, which
gives
" the principal a right to relief in equity."
But it is said that this right
to recover is subject to two qualifications Ml) the
sum obtained
must have been obtained in the course of the servant's employ-
ment,
and (2) there must exist in the matter in question a fiduciary
relationship
between employer and employee.
It is often convenient to speak
of money obtained as received in the
course of the servant's
employment, but strictly speaking I do not think
that expression
accurately describes the position where a servant receives
money
by reason of his employment but in dereliction of his duty.
In
Attorney-General v. Goddard (1929) 98 L.J. (ns)
K.B. 743 the bribes given
to Sergeant Goddard were received by
reason of his employment but not
in the course of it, except in
the sense that his employment afforded the
opportunity by which
the gain was made. Just as in the often-quoted
instance of a
servant letting out his own services and the use of his
master's
horses for private gain, he is not acting in the course
of his employment,
he is taking advantage of the position which
his employment gives him and
for reward so gained he is answerable
to his master none the less, as
Attorney-General \. Goddard
(sup.) shows, though the obtaining of the
money is a criminal
act. It is true that the right of the master to demand
payment of
the money is often imputed to a promise implied from his
relationship
to the servant. I doubt whether it is necessary to raise such
an
implication in order to show that the money has been received to
the
master's use. but even if it were it may well be contended that
there
is no illegality in a servant promising to hand over to his
master any
sums he gains by use of his position. Nor would the
master be affirming
A2
4
any criminal
act committed by the servant in earning the sum claimed;
he would
only be saying that as between himself and the servant the
servant
could not set up his own wrong as a defence. Any third
party's claim
to the money would not be affected.
In this
aspect the making of the promise need not and should not in
my
view be referred to a point of time after the receipt of the bribe:
it may
well be ascribed to the time when the contract of
employment was entered
into.
As to the
assertion that there must be a fiduciary relationship, the
existence
of such a connection is, in my opinion, not an
additional necessity in order to
substantiate the claim ; but
another ground for succeeding where a claim
for money had and
received would fail.
In any case,
I agree with Asquith, L.J., in thinking that the words "
fiduciary
" relationship " in this setting are used in a
wide and loose sense and include,
inter alios, a case where
the servant gains from his employment a position
of authority
which enables him to obtain the sum which he receives.
My Lords, the
fact that the Crown in this case, or that any master, has
lost no
profits or suffered no damage is, of course, immaterial and
the
principle so well known that it is unnecessary to cite the
cases illustrating
and supporting it. It is the receipt and
possession of the money that matters,
not the loss or prejudice to
the master.
In general I find myself in
complete agreement with the views of the Court
of Appeal as
delivered by Asquith, L.J. I differ only as to the time to
which
the making of the implied contract is to be imputed. I should
indeed
have thought it unnecessary to add any observations of my own,
had
it not been for the interesting and closely argued contentions of
Mr.
Salmon tor the Appellant. As it is, I would nevertheless
dismiss the Appeal.
Lord Normand
MY LORDS,
I agree with
the Court of Appeal with the single reservation that I have
not
found a necessary to consider whether the Respondent would have
been
entitled to succeed in an action at law for money had and
received. On
that question I would have desired to hear further
argument had it been
necessary to decide it.
Though the
relation of a member of His Majesty's forces to the Crown is
not
accurately described as that of a servant under a contract of service
or as
that of an agent under a contract of agency, the Court of
Appeal has held
that he owes to the Crown a duty as fully
fiduciary as the duty of a servant
to his master or of an agent to
his principal, and in consequence that all
profits and advantages
gained by the use or abuse of his military status are
to be for
the benefit of the Crown. I respectfully think that these
are
unassailable propositions, and further that the Appellant
cannot be allowed
to propone as a defence to the Crown's claim his
own criminal conduct
either in accepting a bribe in breach of
military discipline or in participating
in an offence against the
municipal law of Egypt.
Lord Oaksey
My Lords.
I agree with
the judgment of the Court of Appeal except on one point.
I do not
think there is any difficulty in imputing to a servant an
implied
promise that he will account to his master for any moneys
he may receive
in the course of his master's business or by the
use of his master's property
or by the use of his position as his
master's servant. There is nothing illegal
5
in such a promise ; on the
contrary, in substance it is the basis for the equit-
able
principle that an agent is accountable for profits made in the course
of
his agency without the knowledge and consent of his principal,
and no
less accountable if the profits arise out of corrupt
transactions; an agent is
bound to know the law and therefore when
he enters into a contract of
agency he impliedly undertakes to be
accountable for any such profits.
It was further argued on behalf
of the appellant that the Crown would
not be entitled to property
stolen in what is called a " smash and grab "
raid in
which a servant of the Crown had shared some of the stolen
pro-
perty, and this is no doubt true, but the reason is that the
Crown could not
assert a right to receive stolen property knowing
it to have been stolen.
It was also argued that because
a master is not liable for damages caused
by a servant's use of
the master's property when not engaged on the master's
business it
follows that the master cannot claim the profits. This
argument
appears to me to confuse the obligations of a servant or
agent to his master
with the principal's or master's obligations
to third parties.
It may be that there are cases
in which a servant may use his master's
property in the servant's
hours of leisure and earn profits for which he is not
accountable
to the master. It would depend upon the facts and on the
degree of
user of the master's property, and the rule de minimis might
apply
in many cases.
But the appellant, who was a
soldier on active service in time of war, was
not an ordinary
servant and his use of his uniform and his real rank and
position
was, as Mr. Justice Denning (as he then was) and the Court of
Appeal
pointed out, the real cause of his obtaining the money in question.
The question—When is a
soldier on active service and in uniform not on
duty?—is one
which will depend upon the facts of the case. Whether he is
in
uniform or not he is always bound to act so as not to prejudice
order and
good discipline, and in my opinion he is never entitled
to appear in public
in uniform in order to earn money without the
knowledge and consent of
the Crown.
Lord Radcliffe
MY LORDS,
I agree that this appeal should
be dismissed, for I see no answer to what
has been said in the
judgment of the Court of Appeal.
(11621r) Wt.
8109—108 35 3/51 D.L./PA/19
