Bank wins on conflict of interest
LEGAL UPDATE:BRIBERY, DISHONESTY, breach of fiduciary duty and claims for the forfeiture of salary and bonuses all featured in a decision from the High Court (Chancery Division) in the UK on May 23rd last.
Bank of Ireland and Bank of Ireland (UK) plc were in large part successful in their action against Syed Jaffery, a former head of business banking in the UK who had been summarily dismissed in May 2011, and against Pritpal Gill.
The bank’s key allegations against Mr Jaffery were that he put himself in a position where his personal interest conflicted with his duty to the bank, that he had secret interests in projects financed by the bank’s lending, that he took bribes, and concealed his alleged wrongdoing from the bank. Mr Gill was joined in the proceedings to answer claims of assisting Mr Jaffery in breaches of fiduciary duty and bribery.
The court found Mr Jaffery had a secret interest in one project and was promised an interest in a second. Mr Jaffery knew he was receiving an interest in one project and would be investing in another – while at the same time encouraging the bank to make loans to those involved. This meant the loans were obviously for his personal benefit, and their promotion and the provision of references put him “in a hopelessly conflicted position”.
The bank had sought an order requiring Mr Jaffery to repay his salary and bonuses for some five years, in addition to disgorging his profits or paying compensation. Mr Justice Vos refused, finding this would be unfair in that the breaches of the bank’s code and employment terms had to be looked at in the context of his employment as a whole. The breach of trust had been in respect only of specific transactions. In other respects he appeared to have been a valuable and diligent employee.
One of the legal complexities was that while BoI Ireland had transferred the relevant loans to BoI (UK) plc, that did not operate so as to transfer any claims against Mr Jaffery under his employment contract, raising the issue of the duty of an employee to a subsidiary.
In a finding that will be of interest to corporate entities, Mr Justice Vos said: “It seems to me obvious that if the employee of a parent is required by that parent to work for one of its subsidiaries as a banker handling loans and dealing with its financial affairs, the employee must owe fiduciary duties as much to the subsidiary in connection with the financial affairs that the employee is required to handle, as he would to the parent employer in connection with its own financial affairs.”
In his defence, Mr Jaffery claimed to have been victimised for being a “whistleblower”. Mr Justice Vos found there was insufficient evidence to conclude the bank knew Mr Jaffery was a “whistleblower” before the summary dismissal in May 2011.
Mr Shatter could do worse than read this judgment in the light of his draft scheme on the Criminal Justice (Corruption) Bill 2012.
Claire Callanan is a partner in Beauchamps solicitors