Duties of the Agent

Question 1

Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995]

Answer 1

Agent’s CONTRACTUAL DUTIES
Agent has to perform the terms of the contact between him and his principal, if there is a contract between them (may not be one, as agency can be a gratuitous relationship.

Here, COLMAN J, repeating what is already well settled:
“Although in modern commercial transactions agencies are almost invariably founded upon a contract between principal and agent, there is no necessity for such a contract to exist”.

Question 2

Shiells v. Blackburne (1789)

Answer 2

Duty to EXERCISE DUE SKILL AND CARE

Example of an old case which took the view that standard of care expected is subjective and that which the agent effected towards his own affairs.
Here, agent acting for a principal who was importing goods entered the goods in the wrong category of goods with the customer - goods forfeited - but Agent had made the same mistake in relation to his own goods.
Held; in these circumstances the agent wasn’t liable to the principal because he had exercised the same degree of care in relation to his own affairs.

But modern cases have prefered a more objective approach.

Question 3

Keppel v. Wheeler [1927]

Answer 3

Duty to EXERCISE DUE SKILL AND CARE

Here, estate agent instructed to find a purchaser for a property - found potential piurchaser, vendor accepted offer subject to contract - later on, Agent received higher offer from another potential purchaser, but bona fide thinking he’d already fulfilled his duty to the principal, failed to disclose this higher offer to him.

Held; breach of duty by the agent and vendor entitled to recover as damages the difference between the two offers from Agent - on the basis of an OBJECTIVE test – reasonable care by the agent.
Despite acting in good faith, held that agent’s judgment was unreasonable.
Thus, together with Heath v Parkinson, a move away from the subjective / own affairs approach in Shiells v Blackburne.

Question 4

Heath v. Parkinson (1926)

Answer 4

Duty to EXERCISE DUE SKILL AND CARE

Estate agent employed by a lessee to find a purchaser of some leasehold premises -
premises subject to covenant prohibiting the carrying on of any business other than that of a music cellar, without the consent of the lessor.
Agent received an offer from a tailor and agent received assurance from lessor that he would consent to tailor’s business on premises, but concealed this from his principal (lessee), incuding him to accept a lower offer.

Held; agent wa NOT entitled to any commission on the transaction here because he was in breach of duty to exercise due skill and care to the lessee.
Again - OBJECTIVE approach
( + Keppel v. Wheeler)

Question 5

Chaudry v. Prabhakar [1989]

Answer 5

Not really an agency case because actual contract in question made directly between principal and third party - but C of A treated with agency aspects - doubtful.

Woman buying car - got help of defendant, who wasn’t in motor trade but claimed to have expertise in cars - Told him she wanted car not previously involved in accident - he advised her to get car, which turned out to have been involved in an accident - sued him in negligence.

C of A held defendant liable
Said that STANDARD OF CARE expected of agent is an OBJECTIVE TEST OF REASONABLE CARE, but measured against the STATUS OF THE AGENT.
Ddefendant was judged against the standard of someone who claims to have that degree of expertise in cars as he did.

Thus an OBJECTIVE TEST but one which must be considered IN LIGHT OF THE PROFESSIONAL STANDING AND CLAIMS MADE BY THE AGENT MADE BY THEIR OWN EXPERTISE (so subjective limb per se)

Question 6

Balsamo v. Medici [1984]

Answer 6

Who to sub-agents owe their duties to?

Italian selling car in London - employed local agent to find purchaser - agent appointed sub-agent to collect purchase monies - but he was deceived and lost money.
Q: did the sub-agent owe the duty of care to the principal?
Held; sub-agent did NOT because he hadn’t been appointed by the principal, and thus any duties he owed were only to the agent and not to the principal.
Authority for proposition that a sub-agent, not appointed with the authority of the principal does not owe any duty of care to the principal, but only to the agent that appointed him.

Question 7

Henderson v. Merrett Syndicates Ltd. [1995]

Answer 7

In the Lloyd’s Insurance Market, people who underwirte insurance contracts are called ‘Names’ - Names entrust ‘Member’s Agents’, who in turn, use ‘Managing Agents’ who actually enter into contracts on behalf of the Names, as sub-agents.

Here, managing agents had handled the funds of the Names negligently.
No privity of contract with the Names; they had a contract with the member’s agents but not with the Names themselves.

But, H of L held; managing agents were directly liable in tort to the Names - breach of duty to exercise skill and care, even though they were the Names’ SUB-AGENTS - held; sub-agents owed a Hedley Byrne + Caparo style duty of care to the principal.

Distinguished from Balsamo v Medici – on basis that, at Lloyds, everybody understood that the member’s agents would not be transacting business directly, but through managing agents, whereas in Balsamo v Medici the principal was unaware of the fact that the agent had appointed a sub-agent.

Shows that the nature of all agents’ duties will not always be the same – need to look at the industry, relationship between the parties, knowledge, how things normally get done etc. - no ‘one size fits all’ package

Question 8

Forsikringsaktiselskapet Vesta v. Butcher [1988]

Answer 8

An agent who discharges his duties negligently is concurrently liable in both tort and contract.

Question 9

John McCann & Co. v. Pow [1975]

Answer 9

Agent has DUTY TO ACT PERSONALLY
Basic principle here is that the agent has to act personally and if he chooses to exercise his duties through a sub-agent or someone else, he is still liable to the principal on whatever transaction he enters into.
(See also Balsamo v Medici; Henderson v Merret Syndicates)

Here, estate agent brought in another agent to find a purchaser for a property - this other agent wasn’t a sub-agent, just someone else involved in transaction.
Held; this other agent not entitled to claim commission on this transaction because he had not been authorised by the principal, and agent had no authority to appoint him.

Question 10

De Bussche v. Alt (1878)

On liability of sub-agents

Answer 10

Principal appointed agent to sell ship on his behalf - agent appointed a sub-agent to sell the ship (without authority).
Sub-agent unable to find a suitable buyer, so he bought it himself at the principal’s minimum price, then re-sold for large profit.
Held; there was direct privity of contract between the principal and the sub-agent and therefore sub-agent was liable to account for the principal for the profit.

Professors Reynolds and Watts B&R: - court found privity here on basis that princiapl ratified agent’s appointment of sub-agent - but “such will not readily be implied” - said that the influence of this case has waned.

“However, where such authority does exist, the duty of the appointing agent to his principal is normally no more than to exercise due care in making the appointment”

• Does not change general rule that agent cannot delegate to sub-agent, without authority from the principal.
• But agent may delegate his authority, however, where can be presumed from the circumstances and conduct of the parties that agent was intended to have power to delegate his authority.
• May also be possible for agent to delegate authority where it is necessitated by unforeseen circumstances.

Question 11

Solley v Wood (1852)

Answer 11

Exception to agent’s duty to act personally.

Agent may delegate authority if it is usual in the trade or profession to which the agent belongs to delegate authority, providing it is not an unreasonable practice nor inconsistent with the terms of the agent’s contract with the principal.

Question 12

Allam & Co Ltd v Europa Poster Services Ltd [1968]

Answer 12

Exception to agent’s duty to act personally

An agent may delegate his authority where the act is purely ministerial and does not require confidence and discretion.

Question 13

Harry Parker Ltd. v. Mason [1940]

Answer 13

Agents’ GENERAL DUTY TO ACCOUNT to the principal for any money they receive in the course of their agency. (Normally, agent will have right to deduct commission from monies being accounted for).

Seems that this duty continues even if contract made by the agent is an illegal one, but not if the agency itself is illegal.
Here, old law on betting - could only bet for cash on the racecourse, not off it, but could maintain a credit account with a bookmaker.
This rule was widely evaded by many bookmakers, who employed agents to go around collecting cash bets employ agents who went around collecting cash bets – criminal offence - the agents would often
pocket the bet in the hope that punter would lose and the bookmaker would have no clue they had even made a bet.

In this case, against one of these agents for an account of money received.
Claim failed because the agency ITSELF was an illegal one.

Question 14

Yasuda Fire and Marine Insurance Co. of Europe Ltd. v. Orion Marine Insurance Underwriting Agency Ltd. [1995] 3 All E.R. 211, 219

Answer 14

Agent has a duty to maintain records of his agency so that he knows what he has to account to the principal for.

Question 15

Bristol and West Building Society v. Mothew [1996]

Answer 15

LJ MILLET
“The expression `fiduciary duty’ is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties…In this sense it is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty”.
In a PQ, cite Lord Millet first and foremost, before pinpointing the exact fiduciary duty in question.

Fiduciarty duties different from common law ones - stem from the trust and confidence between the parties.
Attract equitable remedies.

Question 16

Hospital Products Ltd. v. United States Surgical Corporation (1984)

(Australia)

Answer 16

Fiduciary duty arises whenever there is a relationship of principal and agent between the parties.

Here, Australian agents of US healthcare company - sold its products on AUS market.
US company sued when it found out the Australian company was manufacturing and selling products in competition with theirs, for breach of fiduciary duty (of fidelity)
Q: at the relevant time, was the Aus company acting as the US company’s agent, or as principal in own right?

High Court of Australia held; was acting as agents and therefore in breach of fiduciary duty - follows that fiduciary oblgiations won’t arise if a party is acting as a principal in his own right.

Question 17

Fiduciary Duty in respect of Bribes

Answer 17

If the third party bribes the agent, in order to obtain better terms in his contract with the principal, the principal has three potential remedies:

(1) A claim against both the agent and the third party for the amount of the bribe against the agent (this is a restitutionary claim)
(2) The principal can rescind the contract that’s been the subject of the bribe, provided that rescission is still possible (only available if court can put the parties back into the position they were in before the transaction was entered into)
(3) The principal has a claim in damages against both the agent and the third party for his loss on the transaction (if he can demonstrate that the transaction caused him a loss) – through a claim in the tort of deceit.

Question 18

Mahesan v. Malaysia Government Officers’ Co-operative Housing Society Ltd.

Answer 18

The 3 remedies avaialble to a principal in the event an agent accepts a bribe are in the ALTERNATIVE, not cumulative.

Here, Malaysian Govt. society agent to acquire some land in Penang, for accommodation for civil servants - he was bribed by third party to buy land at inflated price (which he knew of) - persuaded principal to pay this amount.
Q: could principal claim against agent for the bribe, their loss on transaction or both?

JCPC held; these claims were in the alternative – didn’t have a claim for both and had to elect between the two claims.

Not been the subject of a following case, and so not binding in English law necessarily.

Question 19

Professor Tettenborn

Answer 19

Critical of JCPC reasoninig in Mahesan v. Malaysia Government Officers’ Co-operative Housing Society Ltd.

Argues that correct position should be that the principal can to recover both the bribe AND his loss on the transaction, and if that results in over-compensation of the principal then that’s the agent’s problem – because the law is deliberately penal here.

The case stands, but only JCPC.
Note, Bowstead & Reynolds do not disapprove of it, however.

Question 20

A-G for Hong Kong v. Reid [1994]

Answer 20

Deputy DPP of Hong Kong accepted bribes from people so he wouldn’t prosecute them.
He invested bribes in land in New Zealand which substantially increased in value.
Q: could HK Govt trace into this land and claim it to be theirs, thus taking advantage of the profit which Reid had made out of this investment?
JCPC held; YES, as profits made as a result of the bribe, they were held on constructive trust for the principal (the govt.) - proprietary right.
Right to trace in the bribe.

Question 21

FHR European Ventures LLP v. Cedar Capital Partners LLC [2014]

Answer 21

UKSC confirmed A-G for Hong Kong v Reid was correct.

Question 22

Industries and General Mortgage Co. v. Lewis [1949]

Answer 22

What constitutes a bribe?

SLADE J:
“A bribe means the payment of a secret commission, which means:

(i) the person making the payment makes it to the agent of the other person with whom he is dealing;
(ii) he does so knowing that that person is acting as the agent of the other person with whom he is dealing; and
(iii) that he fails to disclose to the other person with whom he is dealing that he made that payment to the agent

Those three are the only elements necessary to constitute a bribe for civil purposes”
Added that for civil law purposes, ‘proof of corruptness or corrupt motive is unnecessary’.
Criminal sancitons dealt with by Bribery Act 2010.

Question 23

Hovenden and Sons v Millhoff (1900)

Answer 23

What constitutes a bribe?
Cite alongside Slade J in Industries and General Mortgage Co. v. Lewis [

ROMER LJ
“The court will presume in favour of the principal, and as against the briber and the agent bribed, that the agent was influenced by the bribe; and this presumption is irrebuttable”.
Essentially saying strict liaiblity.

Question 24

De Bussche v. Alt (1878)

Answer 24

Agent has duty NOT TO TAKE SECRET PROFITS - this is a profit taken by the agent which IS NOT the product of a bribe by the third party. - an undisclosed profit for himself, but there’s no improper involvement by the third party.

Case where sub-agent made profit on re-sale of ship and it had been found that he had direct privity of contract with the principal, because principal had ratified his agent’s appointment of the sub-agent.
Held; sub-agent was liable to account for his secret profit.

Strict rule - so doesn’t matter if it didn’t cause principal any loss or principal could not have made the profit.

Question 25

Turnbull v. Garden (1869)

Answer 25

Principal requested agent to purchase a cavalry uniform for his son - agent acquired one at a discount, but tried to charge the principal the full sum (i.e. without the discount).
Held; agent was not entitled to do this – trying to make a secret profit.
Example of agent exploiting his position.

Question 26

Andrews v. Ramsay & Co. [1903]

Answer 26

Principal instructed estate agent to sell his house for £2500 - agent found a purchaser willing to pay £2100 – who paid a deposit of £100.
Agent handed over £50 to the vendor (the principal), who permitted him to keep the other £50.
Then transpired that agent had also received a further side commission of £20 from the purchaser.
Principal brought an action to recover the additional £50 he had originally let him keep.
Held; agent was also not entitled to keep this commission because he had not acted honestly, in failing to disclose his secret profit from the purchaser.

Thus, because agent took a secret profit, he not only had to account for that profit to his principal, but ALSO is not entitled to any commission from his principal.

Question 27

Lucifero v. Castel (1887)

Answer 27

Agent was appointed to purchase a yacht for his principal.
However he bought the yacht for himself and then sold it to his principal at a profit, unbeknownst to the principal he was buying the agent’s own property.
Held; agent had to pay his profit back to the principal – this was the case even though the principal could never have earned this profit himself.

Strict rule against secret profits, even if it doesn’t cause principal any loss.

Question 28

Spector v. Ageda [1973]

Answer 28

DUTY OF FIDELITY

Lender lent money with compound interest – this was unlawful - lender also didn’t have necessary money lending licence.
Solicitor for lender, knowing there was some doubt as to the enforceability of the loan began to act for borrower as well (both sides) - didn’t inform borrower of the likely unenforceability - complex facts - solicitor was also somehow party to the loan.

(MEGARRY J - because solicitor was
acting for borrower, she owed borrower the NORMAL DUTY that a solicitor owes client, and that meant that not only did she have to put her skill at the client’s disposal, but also any relevant knowledge that she had.
Her relevant knowledge here was that the loan was of doubtful enforceability.
Thus, held; solicitor in breach of duty of FIDELITY towards the borrowers.

+ in ordinary circumstances a solicitor ought to refuse to act for a person in relation to a transaction where the solicitor is himself a party or has an interest.

Question 29

McPherson v. Watt (1877)

Answer 29

Agent engaged to sell a piece of property - agent contratted to sell it to his own brother - made no disclosure to the principal about the relationship between them.

Held; agent in breach of DUTY OF FIDELITY + duty of full disclousre etc.

Question 30

Fullwood v. Hurley [1928]

Answer 30

Agent engaged to sell hotels - acting on commission on behalf of a vendor, but was also seeking to claim commission under an agreement with the purchaser.

Held here; if acting for the vendor of a hotel as he was here, he could not also claim commission from the purchaser.

Part of DUTY OF FIDELITY
“No agent can accept an engagement inconsistent with his duty to the first principal from a second principal, unless
- makes FULL DISCLOSURE to each
- obtains consent to each
- if making two contracts for double commission, does in clearest possible terms and with all infor provided to principals.
DUTY OF FULL DISCLOSURE.

Question 31

Harrods, Ltd. v. Lemon [1931]

Answer 31

Principal can WAIVE the breach by the agent, affirming the transaction agent has entered into.

Property transaction - part of agent company acted for vendor - another part of company acted for purchaser - made an unfavourable survey on the condition of the house, reducing the price.
Agent discovered it was acting for both sides - suggested to vendor that they ask purchaser to obtaian independent survey.
Vendor refused suggestion and completed the sale, at a reduced price, thereby waiving the breach and affirming the transaction
Agent was thus entitled to claim compensation in the normal way.

Question 32

Kelly v. Cooper [1992]

Answer 32

Agent was acting for the vendors of two neighbouring properties - came accross information which would have been of use to one principal, but its discloure detrimental to the interests of the other.

JCPC held; she was NOT liable for failing to disclose it - no breach of fiduciary duty.
- The fiduciary duty which she would normally owe (no conflict etc.) was impliedly excluded in the circumstances, due to the NATURE OF ESTATE AGENCY.

Held; it view of the highly peculiar position of estate agents, it was appropriate in this case to imply a term into the contract between client and agent to the effect that the latter was entitled to act for other principals selling competing properties, provided that he kept confidential the information obtained from each of those principals, even though that information might well have been material to the client.

JCPC!

Question 33

Hilton v Barker Booth and Eastwood [2005]

Answer 33

Property developer instructed solicitors - he had agreed to purchase land, on which he was going to develop flats - was going to sell developed flats to another person, who was the client of the same solcitiors.
Solicitors did not disclose their conflict, nor that their other client (the purchaser) was a convicted fraudster and bankrupt.

C of A acknowledged solicitors’ breach of duty, but said there was implied exclusion to their duty of disclosure as owed duty to other cleint to keep that info confidential.

H of L reversed – held; solicitors could not properly act on both sides of transaction and had duty to inform developer they could not act for him, and that he should seek advice from other solicitors
BUT: just because solicitors would be breaching duty of confidentiality to other client by disclosing his info, did NOT exonerate them from liaiblity for breach to developer - doesn’t get them off!
Held; solicitors own fault for putting themselves in a position where they had two irreconcilable duties.

Question 34

Soulos v. Korkontzilas (1997)

Answer 34

Property tranasction - estate agent acted for purchaser - Vendor advised agent that he would accept $265,000 - Agent failed to disclose this fact to the purchaser, and instead purchased the property himself.

Held; breach of duty of fidelity.
Where an agent purchases for himself when he was engaged to do so on behalf of his principal, if agent profited, principal may elect between an account of profits or equitable compensation, OR the court (as it did here) may impose a CONSTRUCTIVE TRUST over the property, in favour of the principal.

Constructive trust will be rare - must show :
- a legitimate reason for seeking a proprietary remedy;
- that the assets in agent’s hands resulted from his agency activities.
- no factors to render the imposition of a constructive trust unjust,
Held; these factors were established on the facts.

Question 35

Nordisk Insulinlaboratorium v. C.L. Bencard, Ltd. [1953]

Answer 35

A general principle that the agent has to KEEP CONFIDENTIAL his principal’s affairs and not disclose them to third parties, OR make use of confidential information for his own benefit.
However, the DUTY OF CONFIDENTIALITY only arises if the information comes to him in his capacity as an agent - here it didn’t!

Agent had been the agent of the plaintiff company before WW2.
During the war, agent acted as the manager of its business in England.
Held; agent was able, without breaching its fiduciary duty, to use information acquired in that capacity because at that point in the chain of events, it was not actually acting as an agent.

Question 36

Boardman v. Phipps [1967]

Answer 36

About trustees - so not an agency case - but always cited for difuciary duty of confidentlaity.

Trustees used some information which came to their attention in their capacity as trustees about some shares that the trust owned, in order to make a profit for themselves.
H of L held; they were liable to account to the trust for the profit they had made, even though there was no loss to the trust as a result of what they did.