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Like old soldiers some old cases, wrongly decided, never die; unfortunately they do not simply fade away either. As with Humpty Dumpty after his great fall, someone will always be found to try to put the pieces back together again. Lister v Stubbs1is such a case; Metropolitan Bank v Heiron2is another. Both, believed to be dead and buried, were misguidedly brought back to life again in Sinclair v Versailles.3In Lister v Stubbs the Court of Appeal4held that, where a fiduciary receives a bribe or secret commission, he does not hold it on trust for his principal; the relationship between them is that of debtor and creditor, not trustee and beneficiary. Metropolitan Bank v Heiron has the dubious distinction of being the only case relied on by the Court of Appeal in Lister v Stubbs.
Lister v Stubbs has long been the subject of widespread academic criticism. The case was concerned with a bribe, but its reasoning was not so limited. More than 40 years ago Professor Donovan Waters, later the distinguished author of Trust Law in Canada, described the case as "that old enfant terrible of restitution". It has had a remarkably chequered history. It survived for more than a century. But in 1994 in A.G. for Hong Kong v Reid5the Privy Council6held unanimously that it was wrongly decided as a matter of English law. Last year in Sinclair v Versailles7the Court of Appeal8followed Lister v Stubbs and said that "there was a real case for saying that Reid was unsound". The resurrection of Lister v Stubbs has proved short lived. Within a few months, in Grimaldi v Chameleon Mining NL (No.2),9the Full Federal Court of Australia considered and convincingly rejected both Lister v Stubbs and Sinclair v Versailles and, following Reid, held that a fiduciary who receives a bribe does indeed hold it in trust for his principal.
Sinclair v Versailles has re-ignited passionate academic debate whether a bribe or secret commission received by a fiduciary or profit10made by him by exploiting the fiduciary relationship is held in trust for his principal. The...