Last December
2015, the football federation for North America, better known as CONCACAF initiated
a Court action in the United States of America, to reclaim millions of dollars
purported to have lost through a “kick-back” scheme orchestrated by their
former office bearers. Jeffery Webb, former president of CONCACAF was convicted
for money laundering while Enrique Sanz who as of December was not charged yet,
were both instrumental in the engagement of a travel agency called Cartan Tours.
It was alleged that more than $40 million were steered towards Cartan Tours
purportedly for travel services of CONCACAF staffs. This suit will be closely watched as
it is the first of many expected from the recent FIFA scandal.
As a
matter of fact, claims by sports organisations against corrupt practices are
not uncommon. For example, in Ross River
Ltd v Cambridge City Football Club Ltd [2007] EWHC 2115 (Ch), the Court
decided that in a situation where contract succeed based on a secret payment or
bribe received by an agent or representative, the principal will have his right
to rescission.
That
CONCACAF expose’ is unfortunately, a series of embarrasing explosive news in the
world of football. FIFA’s former President Sepp
Blatter himself is facing investigations for misuse of funds. The recent
news where Michel Platini was banned
from all football activity for a total of eight years due to a corruption
investigation highlights the need for integrity in Sports. It is reported that
Platini had accepted an unauthorised payment from the-then FIFA president, Sepp Blatter who is also currently
banned. The exact words used by the ethics
committee are “Mr Platini failed to act
with complete credibility and integrity, showing awareness of the importance of
his duties and concomitant obligations and responsibilities.”
Nonetheless
the efforts by CONCACAF warrants a review of the position of law in Malaysia. In
the local context of Malaysia, how would such corruption cases in Sports be
dealt with? Can an ala-CONCACAF kind of action be taken by a sports
organisation in Malaysian Courts? What would the cause of action be?
Trust
Laws is the obvious cause of action with reference to Tracing and Constructive
Trust. We would however suggest that there are elements of sports law which has
to be taken into account too.
In an
action under the Law of Trusts, we will draw strength from the case of Attorney General of Hong Kong v Reid [1993]
3 WLR 1143. Anthony Reid was the Crown Counsel of the Hong Kong Government.
Reid had taken bribes and amongst his ‘investment’ from this corrupt income,
were properties purchased in New Zealand. Apart from the eight years of
imprisonment imposed on him, the Court also ordered him to pay a total of
HK$12.4 million, being the total value of his assets alleged to have been
acquired from the bribes. Reid, holding pubic office and carrying the trust of
the Government in prosecution matters, was deemed to be a fiduciary by the Court.
It is
generally known that a fiduciary that receives any unauthorised profit out of
his duty towards his principal would hold the property or profit on trust for
the respective principal or rather, the victim. It was held that the moment Reid
breach his duties in return for the bribe; he immediately owed the Government
of Hong Kong a fiduciary duty.
However,
the principle from the case of Lister v
Stubbs (1890) 45 Ch D 1 would automatically convert Anthony Reid into a debtor
to the Crown for the bribe money he obtained. Is Reid a debtor or a fiduciary? Interestingly the Privy Council in Reid’s
case, overturn Lister v Stubbs.
Briefly,
Stubbs was appointed by his master, the firm Lister & Co to buy goods from
Varley & Co. Stubbs subsequently accepted bribes and invested in properties
apart from other investments. Alongside the bribe money, the plaintiff in that
case also sought to claim for the properties in which Stubbs invested in. Unfortunately
for the plaintiff in Stubb’s case, the Court was of the view that the
relationship between the plaintiff and the defendant was more of a debtor and
creditor relationship. The Court could not agree that trust existed in such a
situation. The Court observed that the beneficiary should not be entitled to a
proprietary right simply because it is not their legal right to receive more
than what is necessary in trust. Most importantly, the beneficiary may not have
suffered any financial loss due to the bribery.
The Privy Council, in overturning Stubbs,
applied Constructive Trusts on Reid's properties in New Zealand and effectively permitted the AG (Hong
Kong) to forfeit the assets which Reid had purchased with the
bribe money mentioned above. The thrust of the Privy Council decision stems
from the position it took, that Reid is in fact a fiduciary when acting for the
Hong Kong government.
In Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400, Lord Justice Millett held that
there are two situations that may result in constructive trust; by operation of
law and in cases where the Defendant is implicated in fraud. In most cases, it
would fall under the latter category. For example, constructive trust will
arise where unauthorised profit is made out of the party’s fiduciary position
or even, in situations where a contract has been entered into by or on behalf
of the fiduciary as a consequence of fraud.
Furthermore
in El Ajou v Dollar Land Holdings Plc
[1994] 2 All ER 685 it was held that when a party receives money or trust
property because they breached their duty towards their fiduciary, they will
hold the money or property in trust.
Should
the CONCACAF-like corrupt case occurs in Malaysian Sports Organisations, cases
like AG (HK) v Reid would be apllicable. However, what is crucial here in terms
of sports law, is the requirement of integrity in sports. Most sports
organisations enforce the element of integrity very strongly. One example is the
ASEAN Football Confederation (AFC) whereby a dedicated team is formed to
maintain and enforce integrity in Asian football. That team oversees and
investigates any suspicion of breach of integrity which includes match fixing,
kickbacks and corrupt practices. A few footballers and sports officials have
fallen foul of this integrity code by AFC and has either been suspended or
permanently banned from football. It seems that integrity is no more a mere punch
line of sports politics but it is in fact becoming essential to maintain the sanctity
of sports.
If
corrupt practises goes on in Sports, be it on the field or the boardroom of the
organisation; the reputation of Sports would be dented. There is no doubt that
integrity plays an extremely important role in sports. Participants,
spectators, sponsors as well as the public and media will often judge a sports
organisation based on the level of integrity they portray to have.
Therefore,
if integrity in sports is constantly enforced and if corrupt
practices/kickbacks are weeded out, actions taken by CONCACAF may not be
necessary anymore. The sports integrity movement in recent years is a positive
preventive step to prevent corrupt practices in sports.
In
addition to all the above discussion, it is submitted that more steps ought to
be taken in order to eliminate all possible corrupt practices. Basic steps like
advertising or promoting ethics in sports, issuing anti-corruption measures,
setting stricter in-house rules, getting the Governmental bodies to work
closely with sports organisations or even allow media to spread awareness.
Considering the fact that the media are often the “eyes and ears of the public”
and with such transparency available, it would be beneficial to sportsmen, the
public and the government.
The
future of good clean sports should start with powerful integrity mechanism in
all sports organisation. Once the mechanism is effectively enforced, sports
organisations will severely minimize the CONCACAF debacle and FIFA scandal.
Recourse to law and activation of cases such as Reid’s case ought to be the
last resort for any sports organisation. In time, sports must learn to clean
itself and develop its own internal rule of law to weed out corrupt practices.
Richard Wee
Janessa Kok
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