Master British Army sergeant compelled to disgorge profits earned by abusing his position and uniform; establishes fiduciary duty to account for gains made by reason of one’s position. with this comprehensive case brief.
Reading v. Regem is a cornerstone case in the law of fiduciary obligations and the remedies that follow from their breach. Decided at the highest level in the United Kingdom (reported in the House of Lords as Reading v. Attorney-General), it articulates the principle that a fiduciary or employee must account to the principal for any profit obtained by reason of the fiduciary position, irrespective of whether the principal suffered any loss or the profit was made in the ordinary course of assigned duties. The case powerfully illustrates the equitable doctrine of disgorgement: the law’s insistence that trust and loyalty be enforced not by compensating loss alone, but by stripping wrongful gains.
The facts—an army sergeant using his uniform and apparent authority to escort smugglers through checkpoints—offered a clean vehicle for the House of Lords to reaffirm that profits flowing from the misuse of the badge of office, property, or position belong in equity to the principal. For law students, Reading synthesizes classic agency and fiduciary principles and foreshadows modern developments on bribes and secret commissions, later reflected in cases like Attorney General for Hong Kong v Reid and FHR European Ventures v Cedar Capital.
[1951] AC 507 (House of Lords)
Sergeant Reading served in the British Army and was stationed in Cairo during and after World War II. He entered into a side arrangement with local smugglers, agreeing to ride in their vehicles while wearing his army uniform so that the vehicles could pass checkpoints and avoid searches. His uniform and status as a British soldier conveyed official authority and effectively insulated the smugglers from interference. In return, Reading received substantial payments. Egyptian police discovered large sums of cash in his possession, which he admitted were received for providing these escorts. The British authorities seized the money. Reading sought to recover it, claiming it was his, while the Crown (through the Attorney-General/Secretary of State) asserted that Reading had obtained the money solely by abusing his official position and property (the uniform), in breach of his duty of loyalty, and that he must account for those profits to the Crown. The matter proceeded through the English courts, culminating in the House of Lords’ decision (reported as Reading v. Attorney-General).
Whether a fiduciary/servant (an army sergeant) who obtains money by exploiting his official position and uniform, although outside the scope of his assigned duties, must account to his principal (the Crown) for those profits and can be required to disgorge them to the principal.
A fiduciary or employee must not profit from his position without the informed consent of the principal. Any benefit obtained by reason of the fiduciary relationship—i.e., by using the principal’s property, authority, or position—is held for the principal, even if the principal suffers no loss and even if the profit was not made in the course of performing authorized duties. Equity will require an account of profits and may impose a constructive trust over the gains so obtained.
Yes. The Crown was entitled to the money. Because the sergeant’s profits were obtained by reason of his position and through misuse of his uniform and apparent authority, he was bound to account to his principal. The money was recoverable by the Crown, and Reading could not retain it.
The House of Lords emphasized the core fiduciary duty of loyalty: a fiduciary must not place himself in a position where his personal interests conflict with his duty, nor may he profit from his fiduciary position unless the principal gives informed consent. The sergeant’s ability to earn the payments was inextricably linked to his official status and the uniform provided by the Crown. The uniform was not a mere incidental; it was the instrumentality by which he conferred apparent official protection and thereby obtained the money. It was therefore profit made by reason of his position, not by virtue of any independent trade or skill unrelated to his role. The court rejected the argument that because the activity fell outside the scope of his assigned duties, the fiduciary obligation did not attach. The test is not whether the acts fell within the job description; it is whether the opportunity and profit arose from the fiduciary position or the use of the principal’s property/authority. Nor did it matter that the Crown could not show pecuniary loss. Equity focuses on stripping wrongful gain, not compensating loss. Moreover, public policy reinforced the result: to permit an official to retain profits derived from the abuse of office and insignia would undermine public trust and the integrity of the service. The appropriate remedy was an account of profits and restitution to the Crown, conceptualized in equity as a constructive trust or money had and received for the Crown’s use.
Reading v. Regem entrenches the disgorgement remedy for breach of fiduciary duty: if a fiduciary profits because of the position itself, the gains belong to the principal irrespective of loss. It clarifies that misuse of the symbols or incidents of office (e.g., uniform, title, access, or authority) suffices to trigger fiduciary accountability, even when the profit-making acts are outside the fiduciary’s assigned tasks. The case is frequently cited alongside Regal (Hastings) v Gulliver, Boardman v Phipps, Attorney General for Hong Kong v Reid, and FHR European Ventures v Cedar Capital as foundational authority for the no-profit rule and proprietary remedies (constructive trusts) over bribes and secret commissions. For students, it exemplifies how equity polices loyalty by focusing on causation (“by reason of position”) and gain-stripping rather than fault or loss.
No. Reading confirms that the fiduciary’s duty is one of loyalty with a no-profit rule. The principal may demand an account of profits obtained by reason of the fiduciary position even absent any demonstrable loss. The remedy is gain-based disgorgement, not loss-based compensation.
No. The decisive question is whether the profit was obtained by reason of the fiduciary position or through use of the principal’s property or authority. In Reading, the profits were earned outside assigned tasks but were still attributable to the misuse of the soldier’s uniform and official status.
Equity provides an account of profits and may impose a constructive trust over the gains, giving the principal a proprietary claim. The principal may also frame the claim as money had and received. Reading recognizes these remedies and allows the principal to recover the money found in the fiduciary’s possession.
Yes, if the principal gives fully informed consent before the profit is made. The fiduciary must disclose the relevant facts and obtain authorization. In Reading, there was no consent; the profits were clandestine and obtained by abusing the symbols of office.
Reading provides early authority for treating profits derived from abuse of position as belonging in equity to the principal. Later cases, such as Attorney General for Hong Kong v Reid and FHR European Ventures v Cedar Capital, build on this by confirming that bribes and secret commissions received by fiduciaries are held on constructive trust for the principal.
No. The fiduciary’s wrongdoing does not prevent the principal from reclaiming profits made by abusing the fiduciary position. The principal’s claim is not based on the illegal contract but on equitable duties of loyalty and the proprietary character of the gains.
Reading v. Regem powerfully demonstrates equity’s approach to enforcing fiduciary loyalty: it focuses not on compensating the principal’s loss but on stripping the fiduciary of any gain causally connected to the fiduciary position. By anchoring liability in the misuse of official authority and property, the decision ensures that fiduciaries cannot profit from the very trust reposed in them.
For students and practitioners, the case remains a touchstone in analyzing when profits are obtained “by reason of” fiduciary status and in choosing appropriate remedies—account of profits and constructive trust. Its influence persists across public and private fiduciary contexts, underscoring that the integrity of fiduciary relationships is protected by robust, gain-based relief.