## Facts

- Reading, a sergeant in the Royal Army Medical Corps, was stationed in Cairo while serving in the British Army.
- While in service, he arranged with civilian smugglers to escort trucks carrying goods through Cairo while wearing his military uniform.
- The uniform and apparent official status enabled the trucks to pass checkpoints and avoid interference.
- Reading received substantial payments for providing these escorts.
- Authorities found large sums of cash in his apartment and in Cairo bank accounts; Reading admitted the funds came from the escort scheme.
- Military authorities impounded the money and refused to return it.
- Reading sued to recover the impounded funds, arguing they were his personal property earned privately and that the Crown had not suffered financial loss.
- The Crown contended the money was obtained because of Reading’s military employment and use of the King’s uniform, so Reading was bound to account for it.

## Issues

1. Whether a servant who profits by misusing his employer’s position, facilities, or symbols of authority must account to the employer for those profits.
2. Whether the employer’s right to recover such profits depends on proof of employer loss or foregone profits.
3. Whether profits obtained “by virtue of” employment (rather than from a mere opportunity associated with employment) belong in equity to the employer.

## Decision

- The King’s Bench Division dismissed Reading’s claim for return of the impounded money.
- The court held the money belonged to the Crown because Reading obtained it through a breach of duty by exploiting his military position and uniform.
- The Crown’s entitlement to the profits did not depend on showing any pecuniary loss.
- The court treated the remedy as requiring Reading to account for (disgorge) gains improperly obtained through misuse of his position.
- On later appeal in the same dispute, the House of Lords affirmed the principle that such profits obtained by abuse of position must be surrendered to the Crown.

## Legal Principles

- A servant or agent owes a duty of honesty, good faith, and loyalty and must not retain secret profits made through a breach of that duty.
- If the servant’s position, facilities, or symbols of authority are the real cause of obtaining the money (not merely the occasion), the servant is accountable to the master for the gain.
- Disgorgement is available even when the master cannot prove financial loss or that the master would otherwise have earned the profit.
- Profits from genuinely independent activities not causally dependent on the servant’s position are treated differently from profits that depend on misuse of the employer’s status or assets.

## Conclusion

The court required an army sergeant to surrender payments received for escorting smugglers because the profits were obtained by misusing his uniform and official status, and equity compels a servant to account for gains acquired through a breach of loyalty regardless of whether the employer proves loss.


Reading v. Regem, [1948] 2 K.B. 268 (K.B.D. 1948)