Reading v Attorney-General

Mar. 1. Lorp Porter. My Lords, the Lord Chancellor, who
is unable to be present today, asks me to say that he concurs in
the opinion that I am about to deliver.

[His Lordship stated the facts and continued:] 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 appel-
lant's claim. '' The claim here is'', he says (18), "' for restitu-
'* tion 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 recognized 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

(8) (1890) 45 Ch. D. 1. (11) [1941] A. C. 1, 29.
(9) 2 J. & H. 609. (12) [1943] A. C. 31, 62.
(10) (1808) 1 Camp. 527. (18) [1948] 2 K. B. 268, 275.

1951

READING
v.
ATTORNEY-
GENERAL.

514

ee. ob:
1951

READING
OF
ATTORNEY-
GENERAL.

Lord Porter.

HOUSE OF LORDS (1951 |

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's a prin-
'' ciple of law that if a servant, in violation of his duty of honesty
''and good faith, takes advantage of his service to make a profit
''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 (14): '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: ': This man Reading was 'not acting in the
"" course of his employment: and there was no fiduciary relation-
'" ship in respect of these long journeys nor, indeed, in respect of
"his uniform '',. If this means, as I think it does, that the appel-
lant was neither a trustee nor in 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

(14) Ibid. 276,

4

A. C. AND PRIVY COUNCIL.

'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
claims?

Asquith, L.J., in the Court of Appeal, points out (15) 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 realized 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 connexion to Boston Deep Sea Fishing
& Ice Co. v. Ansell (16), and to quote the words of Bowen, L.J.:
"It is true, as Kekewich, J., 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: (1.) the sum obtained must have been obtained in
the course of the servant's employment, and (2.) there must exist
in the matter in question a fiduciary relationship between
employer and employee. 4 .

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

(15) [1949] 2 K. B. 282, 286. (16) 39 Ch. D. 339, 367-8.

515

He Lice (3)
1951

READING
(x
ATTORNEY-
GENERAL.

Lord Porter.

516

H. L. (#.)
1951

READING
Vv.
ATTORNEY-
GENERAL.

Lord Porter.

HOUSE OF LORDS (1951 |

in dereliction of his duty. In Attorney-General v. Goddard (17)
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 Toss, as Attorney-General v. Goddard (17) 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.A No would the master be affirming
any criminal act committed by the servant in earning the sum
claimed ;the 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.v 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 connexion is, in my opinion, not an addi-
tional 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. (18), in
thinking that the'words "' fiduciary relationship '' in this setting
are used in a wide and loose sense and include, inter alia, 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 thé 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."

(17) 98 L. J. (K. B.) 748. (18) [1949] 2 K. B. 282, 286.

A. C. AND PRIVY COUNCINL.

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 interest-
ing and closely argued contentions of Mr. Salmon for the
appellant. As it is, I would nevertheless dismiss the appeal.

Lorp Normanno. My Lords, I agree with the Court of Appeal
with the single reservation that I have not found it necessary to
consider whether the Crown 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.

Lorp OaxsEy. 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 in such a promise; on the contrary, in substance
it is the basis for the equitable principle that an agent is account-
able 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.

[1951] A. C. 35

517

1a ABE (@0)))
1951

READING
Vv.
ATTORNEY-
GENERAL.

Lord Porter.

518

a(S We (02%)
1951
READING
Vv.
ATTORNEY -
GENERAL.

Lord Oaksey.

HOUSE OF LORDS [1951]

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 property, 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 thirtl 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 Denning, J., 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 faets
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.

Lorp Rapvouirre. 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.

Appeal dismissed.