Tesco Stores Ltd v Simon Pook & Ors

A secret payment by a person acting as an agent for a party dealing with the agent’s principal is a bribe and secret commission. The principal need prove payment and secrecy; proof of the donor’s motive is unnecessary. The agent must account for the gross payment, including VAT, and holds it on trust for the principal. In civil proceedings, allegations of serious criminal conduct remain subject to the balance of probabilities, although the inherent improbability of the allegation may require stronger evidence. A senior employee who receives a bribe in breach of fiduciary duty has a positive duty to disclose it. An implied term may prevent an employee from exercising share options while committing a breach of contract entitling the employer to terminate.

Tesco claimed against a former employee, Simon Pook, and his company, Universal Projects (UK) Ltd, for repayment of money allegedly paid as a bribe by a company doing business with Tesco. Mr Pook contended that the money was a loan. He also counterclaimed for the value of share options which he attempted to exercise after suspension but before his dismissal.

The court determined whether the payment was a bribe, the applicable civil standard of proof, the amount recoverable, whether Mr Pook owed a duty to disclose his misconduct, and whether his share-option rights remained exercisable.

1. Bribe and motive. The payment was a secret commission and bribe. The court adopted the principle that a payment to a confidential agent, made secretly by a person dealing with the principal, constitutes a bribe. Tesco was required to establish only that a payment had been made by a third party dealing with Tesco and that it was secret. It was unnecessary to prove the donor’s motive or the agent’s corrupt intention.
2. Proof. The applicable standard was the balance of probabilities. The seriousness and inherent improbability of the allegation meant that stronger evidence was required, but it did not create a different standard. The false invoices, fraudulent VAT claims and unsatisfactory explanation established the allegation.
3. Account and trust. The payment was held on trust for Tesco. The recoverable amount was the gross invoice value, including VAT. VAT had been used as part of the false invoice arrangement and could not reduce the agent’s liability.
4. Share options. The option agreement was construed as containing an implied term that options were not exercisable while the employee was in a breach of contract sufficiently serious to entitle the employer to terminate. Mr Pook’s fraudulent invoices and bribes constituted gross misconduct. His counterclaim therefore failed.
5. Disclosure. A senior employee receiving a profit or bribe in breach of fiduciary duty is under a positive duty to disclose the breach. Mr Pook was sufficiently senior to owe that duty. Had Tesco been informed, it would have been entitled to dismiss him summarily; in any event, the option rights could not be exercised before termination.

The counterclaim was dismissed. The judgment also determined Tesco’s entitlement to account for the bribe and the gross amount received.