Bribery and legal remedies

It is not a surprise that there is general public concern at the reaction of the courts to the cases of VAT bribery (admitted and alleged). Corruption within the government structures is the worst kind of breach one can imagine and it is equal to breaches by lawyers, notaries, accountants and financial services providers. Why? Because all these are offices of trust, where the public assumes high levels of honesty and integrity and, therefore, expects harsh punishment for breach: fast, direct and effective remedies, leaving no space for compromise and ambiguity because we are dealing with the clearest cases of wrongdoing with a risk of destabilising the state and society in general. In the criminal law field we find that these sort of cases, where there is a breach of public trust, draw increased punishments and so the surprise of the public to what they perceive as weak sentencing is all the greater.

In our legal system, the criminal courts and remedies are distinct from the civil courts and remedies. The former seeks to punish and rehabilitate while the latter seeks to compensate a victim in economic terms. There are some cases where the criminal courts can deal with the civil remedy and the more we unify these roles the more efficient and effective the solution. It avoids having to go through two proceedings. Unfortunately, this dual proceedings rule is prevalent and we see that in the VAT bribery cases, some criminal cases are over (subject to an appeal, if filed), and the government is now considering the next set of proceedings under the civil law to recoup what it lost as a result of the wrongdoing.

When someone causes damage to anyone else, the victim can sue to recoup the damages and be placed in the same position he was in before the harm was done. So, if the government lost €10 million as a result of the negligent or unlawful acts of people, be they government officials or private businessmen, the government can sue under the Civil Code and seek damages from anyone involved. The government has a contract of employment with its employees but no contract with the merchants. The law will therefore support an action based on breach of contract with the public employees. This will not be available against the merchants, so the law provides an action for damages based on what the law calls "delict" or "tort", which are basically other words for wrongdoing. Different rules apply to each type of action but the result is the same: compensation for the victim to place the victim in the position prior to the loss. The government will recoup the €10 million but will that achieve justice?

In 2004, the government introduced very important rules into the Civil Code to deal with breaches of fiduciary duties. These will apply to the public servants who are all fiduciaries as their engagement is to protect the interests of the public. Fiduciary duties are duties of honesty, loyalty and accountability. They are rules prohibiting conflicts of interest and undisclosed and unauthorised self gain or self dealing.

If there is a breach of fiduciary duties the civil remedies are harsher and more extensive. Instead of limiting the remedy to compensating the victim and making sure the victim is placed in the same position he was in before the loss, the remedies in breaches of fiduciary duty also extend to making sure that the defaulter does not make any gain. The defaulter must therefore also return any gain, profit, benefit and the like to the victim.

The famous case in this context is one of a public servant in Hong Kong who was bribed a sum of, say, 10 and bought a villa with it which was worth, say, 50 by the time he was caught. He had to pay back the 10 (the bribe) but could not keep the villa and had to give up the extra 40 (the benefit, being the villa) to the government. And the rule applies no matter how many times the same money is reinvested and churned around from asset to asset and no matter how many years pass until discovered.

The breach flows through all the assets as they change and the government remains entitled to all the benefits gained, even if they are much more than the amount of the bribe. And what if there is a loss in investment of proceeds of bribery? Then the damages rule just places the victim into the position he was. So a fiduciary in breach of his duties always gets the "worst of all worlds": pay for all the losses and give up all the gains.

The rule also applies to any property or benefit that has been passed into the hands of a third party who is not in good faith: an accomplice. The accomplice is treated as a fiduciary as well and the same remedies apply to him insofar as benefit has been passed on to him.

This is the only way to ensure that no one gets the benefit of his own mischief and justice prevails because every person pays his proper dues and the victim is not hindered in his remedies by technical civil law rules which applied prior to 2004. When a person is classified as a fiduciary in relation to property and gains, he automatically has legally enforceable duties towards the victim - the beneficiary - irrespective of contract, tort or similar rules of law.

These important amendments were enacted by the government with the support of the opposition and so there is wide consensus on their goal. They empowered the courts to defend the public interest through rules far beyond what existed at the time. I am sure these provisions, when applied, will be exactly what the public expect on the civil law level. The courts must, of course, apply these rules effectively and efficiently if we are to get the benefit, as a society, of what our the government enacted in 2004.

As has been commented by others already, we need to continually see how our laws are working and if they are defective or do not give the expected outcome, then we must be diligent and immediately amend the laws to make sure we do not allow dishonesty and corruption to proliferate. This to the state is like cancer to the body and, in a democratic state, the courts are the doctors: they must exercise the powers given to them by the law to heal the problem. Like our doctors with our health, they have a grave responsibility.

Dr Ganado is a lawyer by profession.