Stuart Pemble reflects on a rare case where the courts considered the consequences of bribery on a construction project and whether a company can be held responsible for the actions of an employee.
Key point
- The Court of Session had no difficulty in holding a project management company vicariously liable for bribes accepted by one its employees
Ever since the Bribery Act 2010 hit the statute books, every construction and engineering contract which has crossed my desk has contained provisions (often quite detailed) dealing with the ramifications should any party make a bribe.
The drafting tends to deal with the contractual consequences which flow from one of the parties committing offences under the 2010 Act. However, what happens if one party acts in a manner that looks like bribery but, because of a lack of evidence to meet the criminal burden of proof (in criminal proceedings, the test is “beyond reasonable doubt”; in civil cases, the lesser hurdle of “on the balance of probabilities” has to be cleared), no Bribery Act offence has been committed?
Despite the 2010 Act having been on the statute book for some time, there is relatively little case law on it or bribery generally, which makes Lord Braid’s opinion in Oil States Industries (UK) Ltd v “S” Ltd [2022] CSOH 52 (a decision of the Outer House of the Court of Session, equivalent to the High Court in England and Wales) all the more important, especially since no criminal proceedings were brought against any of the parties.
The facts
In 2013, O (the pursuer) wanted a new office and production facilities in West Lothian. It employed the first defender S as project manager. In turn, and on S’s recommendation, O entered into a building contract with L (the second defender) to deliver the project. The project did not proceed well, something for which O blamed S. O claimed damages for beaches of contract by S of just under £12m.
More than £10m of that related to the allegation that the award of the building contract to L had been procured by bribes paid (in the form of cash and free building work worth up to £80,000 at a property owned by his sister) to G, who was at the time a project manager employed by S.
There was no evidence of cash having been handed over, but there was evidence of the building work having been carried out and paid for by L.
Lord Braid had to decide two questions: (1) did G receive a bribe and (2), if he did, was S vicariously liable for any damages to which O might be entitled?
Did G receive a bribe?
The judge broke this down into three parts. First, what is a bribe? Second, did the evidence show on the balance of probabilities that G received “benefits” from L? And third, did those benefits amount to bribery as a matter of law?
Having reviewed a number of Scottish and English authorities, including Airbus Operations Ltd v Withey [2014] EWHC 1126, Lord Braid stressed that there was no distinction between Scots and English law when it came to the treatment of bribery. A bribe is “a free-standing cause of action, distinct from any cause of action arising out of fraud” and, because a bribe involves a breach of a fiduciary duty of loyalty (by G) to a principal (O) with whom the bribe payer (L) wishes to do business, “once payment of the bribe is established, it is to be irrebuttably presumed that the recipient was influenced by its payment”.
The judge had no difficulty in deciding that there was “an abundance of circumstantial evidence giving rise to a legitimate (and unanswered) inference that… G… was influenced by bribery to award the contract to… L”. One of the key pieces of evidence were e-mails referring to G being given “sweeties” by L, with Lord Braid rather archly noting that sweeties was “likely to mean some form of financial inducement, rather than an expectation of confectionery”.
Nor did the judge find it difficult to decide that the payments were bribes as a matter of law. It was a question that “need not detain us long” since they fell “within the classic definition of bribery”. Even if they were categorised as payments to G from L to help L win the tender, they ought to have been disclosed to O (but were not). G owed a fiduciary duty of trust and confidence to O. He breached that duty by accepting bribes.
Was S liable for G’s actions?
The key question was not whether S also owed a fiduciary duty to O (although the judge held that it did because the terms of its appointment allowed it to make financial decisions in relation to the project, as well as negotiating and executing the building contract) but whether S was vicariously liable to O for G’s actions in accepting the bribes.
While acknowledging that, where a company was employed to provide services, it was possible for an employee to accept a bribe without the knowledge or approval of the directors, the judge stressed that it was also true that the company will be vicariously liable if the wrong committed by the employee was so closely connected with their employment that it would be just and fair to hold the employer liable (Lister v Hesley Hall Ltd [2002] 1 AC 215). G was authorised by S to perform the very services S had been employed by O to perform. As such, G’s “wrongful act was so closely connected with his employment that it is fair and just” to hold S liable.
The case is an important reminder to everyone in the construction industry to take bribery (and its consequences) incredibly seriously.
Stuart Pemble is a partner at Mills & Reeve
