Agency

Question 1

Zedra Trust Co (Jersey) Ltd and anor v The Hut Group Ltd

Answer 1

1. The claimants sold the entire share capital of a company to the defendants
2. The defendants paid a price for this
3. That price included an amount for the tax provision which the company would have to pay
4. That was as yet undetermined which meant the price could fluctuate
5. The claimants had a right to require the defendants to instruct auditors that would audit the provision of tax
6. The auditors had to check whether the provisions for tax were correct
7. The auditors said that there were £18,000 too much
8. The defendants received this report but passed on only the results and not the calculations
9. The claimants had a right to challenge the auditors and therefore wanted to see the calculations and report
10. The claimants took the defendants to court as they wanted the defendants to provide the full report
11. According to them, by instructing the auditors, the defendants were acting as the claimant’s agents
12. The court held that there was no agency relationship here
13. In this case, the agreement between the claimant and defendant did not give the defendant authority to contract on the claimant’s behalf

Question 2

Tinnevelly Sugar Refining Co Ltd v Mirrlees Watson & Yaryan Co Ltd

Answer 2

1. Concerned a contract for the supply of machinery between the defenders and D&B
2. The machinery was provided, but it was defective
3. The pursuers raised the action on the basis that D&B were acting as their agents
4. On the date of the contract, the principal (the company) did not exist
5. Because they did not exist, there could not be a contract of agency
6. It did not have capacity at the date of the contract

Question 3

Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd

Answer 3

1. “An “apparent” or “ostensible” authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed upon him by such a contract … The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract” (per Lord Diplock LJ)

Question 4

Armagas v Mundogas

Answer 4

1. The vice president of Mundogas agreed to a three-year ship charter
2. Armagas knew that this vice president was not authorised to agree to such a contract
3. They claimed that although he did not have apparent authority, he did have apparent authority to communicate his authority
4. The court rejected this argument
5. Representation must come from the principal and not the agent
6. You can’t have a self-authorising agent

Question 5

London & Quadrant Housing Trust v Stokes

Answer 5

1. A fraudulent scheme was carried out by two employees of the housing trust
2. As tenants died, the employees would offer the houses to people who would otherwise not be entitled to an offer
3. They would benefit from the deposit and other similar payments
4. The employees lacked authority to offer these houses
5. But they did have apparent authority
6. The housing trust tried to argue that the reliance on this authority was unreasonable
7. However, the court held it was perfectly reasonable to rely on two employees of a housing trust
   held it was perfectly reasonable to rely on two employees of a housing trust

Question 6

Thomas Hayman & Sons v American Cotton Oil Co

Answer 6

1. McNair & Co were the agents of an American company
2. They had advertised that they were their agents
3. McNair started having financial issues
4. The court held that reliance in this case was unreasonable

Question 7

Kelly v Fraser

Answer 7

1. Jamaican Privy Council case
2. Fraser was the chief executive of a company
3. He was within the pension policy from that employer but also held a pension from a previous employer
4. He discussed this with his new employer and the employees designated to the pension scheme
5. They allowed the transfer and confirmed the transfer
6. The trustees had to have given their authority and they hadn’t
7. The employees had acted outwith their authority
8. It was discovered that an unauthorised transfer had occurred
9. If Fraser had known it was unauthorised, it would have been likely he had contacted the trustees and they would’ve authorised
10. This meant there was a loss of possibility
11. The third party would suffer a loss if the principal denied authority

Question 8

First Energy (UK) Ltd v Hungarian International Bank Ltd

Answer 8

1. Jamison was a senior manager with the Hungarian International Banks
2. He agreed a credit facility with First Energy
3. First Energy knew he was not authorised and Hungarian International Bank did not hold him out as having such authority
4. Jamison sent a letter indicating that the bank had approved the facility
5. It was held that Jamison had apparent authority to communicate information, including the head office’s approval of the transaction
6. Hungarian International Bank was bound to honour the facility

Question 9

Tinnevelly Sugar Refining Co v Mirrlees Watson & Yaryan Co Ltd

Answer 9

1. The principal must have been in existence at the time the agent purported to enter into the contract on the principal’s behalf
2. “First of all, where there is no principal there can be no agent, there having been no Tinnevelly Company at the date of the contract, Darley & Butler were not agents of that company in entering into the contract”

Question 10

Boston Deep Sea Fishing v Farnham

Answer 10

1. The plaintiff was an English company who were acting as agents for a French shipping firm
2. A vessel belonging to the principal was harboured in England when the war broke out and France was taken over by Germany
3. The dispute was regarding whether the English firm who carried out business under the name of the parent firm were liable to pay taxes on the extremely profitable ventures they took during the war years
4. It was held that the English agents were not liable to pay taxes
5. There could not be an effective legal ratification by the French, as at the time of the tax assessment, they were to be considered as an alien enemy and incompetent to be the principal of the tax payers as it could not have itself performed the act
6. The principal must have possessed the capacity to enter into the contract at the time the agent purported to enter into the contract on the principal’s behalf

Question 11

Keighley Maxted v Durrant

Answer 11

1. The agent had received authority from the principal to buy corn subject to a maximum price
2. The agent was unable to buy at that price, and bought at a higher price, intending the transaction to be a joint speculation by the principal and him
3. After the transaction, the agent informed the principal of the purchase, and the principal, happy with the agent’s actings, purported to ratify the contract
4. When the agent failed to take delivery of the goods, the principal was sued by the seller
5. The principal was found not liable for failing to take delivery of the goods because he was not a party to the contract
6. Because the agent had not intended to enter into the contract on the principal’s behalf, ratification was not possible
7. A contractual relationship had been formed only between seller and agent
8. The agent must have entered into the contract as an agent

Question 12

Goodall v Bilsland

Answer 12

1. If the act must be done within a certain time limit, and the agent performs it within this time limit, the ratification must also be within this time limit
2. “I do not doubt that if within the appealing days Mr Kyle had obtained the objectors’ authority to proceed with the appeal, which he had lodged without authority, such ratification would have met the initial defect; but it is a totally different proposition that a ratification long after the time for appealing has expired will draw back to the date of the unauthorised act as in a question with third parties. We are not concerned here with questions as between the principal and the agent; because as between these parties it does not, so far as I see, matter how long after the unauthorised act the ratification was obtained; but where the element of a time limit and the interests of third parties enter into the question totally different considerations may apply”

Question 13

Bolton Partners v Lambert

Answer 13

1. What happens if the principal ratifies after the third party has withdrawn?
2. Because ratification is retrospective, the withdrawal is ineffective

Question 14

Forman & Co Pty v The Liddesdale)

Answer 14

1. A ship was stranded on the way from Glasgow to Australia
2. The ship owner was the principal
3. The agent asked the principal what to do
4. The principal told him to fix the ship, but only so much as was required
5. The agent decided the ship needed refurbishing
6. This was outside of authority
7. The principal took possession of the ship again and used it
8. This was a sort of implied ratification of the agent’s actions
9. The owner did not pay for the repairments
10. The repairers claimed that the principal had ratified the actions
11. The principal had not made an informed choice
12. The principal was not aware of the extent of the repairs that had been done
13. He could not have ratified something he was unaware of
14. The principal in ratifying must make an informed choice

Question 15

Gray v Braid Logistics

Answer 15

1. The managing director of a company was dismissed
2. The decision to dismiss the managing director was unauthorised
3. The managing director knew of this and decided to resign instead of being dismissed to keep his benefits
4. Thereafter the board ratified the dismissal
5. Ratification is retrospective
6. In this case, it would be very unfair to the managing director
7. Ratification may not be possible if it would cause unfair prejudice to a third party

Question 16

Cheshire Mortgage Corporation Limited v Grandison

Answer 16

1. Cheshire lends money and takes mortgages over land
2. Two fraudsters claimed to be owners of a house in Edinburgh
3. The fraudsters instructed solicitors
4. The solicitors thought they were the real owners of this house
5. A pretended mortgage was signed by the fraudsters
6. As a result, Cheshire thought they had security over the house
7. As soon as the funds were transferred, the fraudsters disappeared
8. Cheshire had lost funds, and they had no security over the house
9. They brought a claim against the agents
10. They claimed the agents had warranted not only the authority of the principals but also their identity
11. The court held that was too wide an application of the warrant of authority

Question 17

Stewart v Shannessy

Answer 17

1. Shannessy was the agent of two companies
2. He wanted to employ a subagent
3. He entered into negotiations with a man called Stewart
4. Shannessy drafted a contract on behalf of one of the companies, but signed the contract himself
5. Stewart works but is unpaid
6. He brings a claim against Shannessy
7. Stewart claimed he was in a contract with Shannessy himself
8. Shannessy claimed that he was clearly the agent
9. There is a presumption in law that if you sign a contract personally without making it clear that you are the agent that you have entered into the contract and are liable
10. Shannessy had to pay the wages himself
11. He had entered into the contract himself

Question 18

Ruddy v Monte Marco & ors

Answer 18

1. The defender was the director of multiple companies
2. He engaged the pursuer to do different tasks for different companies (like cleaning)
3. He paid the pursuer in cash
4. The pursuer was injured whilst performing tasks
5. The pursuer brought a claim against the director
6. The defender claimed there was a contract between the pursuer and the company
7. The test was: whose financial reputation did the pursuer rely on?
8. The pursuer had trusted the director and not an unnamed company
9. He was clearly relying on the financial reputation of the director (he got paid in cash)
10. The pursuer could claim directly against the director

Question 19

Bennett v Inveresk Paper Co

Answer 19

1. Bennett got their UK domestic agents to purchase paper from Inveresk
2. The agents did not disclose that they were acting as agents
3. Bennett brought a direct claim against Inveresk
4. The court held that despite the fundamental principle of contract law (privity of contract), in this circumstance, a principal could appear after the contract and sue
5. The identity of the parties is irrelevant

Question 20

Meier v Küchenmeister

Answer 20

1. After disclosure, the third party may choose to sue the principal, but must elect the principal or agent
2. Once elected, the decision is final

Question 21

Halifax v DLA Piper

Answer 21

1. Halifax offered to buy a building in Glasgow from a non-existent client (a consortium which was never formed) through a solicitor
2. Halifax brought a claim against the lawyers saying they had entered into a contract with them
3. There was never an intention to buy the house from the lawyers
4. The lawyers acted for a syndicate, but there was no intention that the solicitor should be personally liable
5. If the principal is an unincorporated association, which has no legal capacity and so cannot contract, then the parties cannot have intended that the principal is a party to the contract

Question 22

York Buildings Co v Mackenzie

Answer 22

1. “A person who is an agent for another, undertakes a duty in which there is confidence reposed. He undertakes a duty which he is bound to execute to the utmost advantage of the person who employs him. An agent may be employed by any one or more persons, and such an agent may purchase. Brokers purchase every day, but they can take no advantage by it. The bargain must be perfectly fair and equal, at the best price, because they are placed in a situation in which they are bound, in the first instance, to act against their own advantage, and for the advantage of their employers; and if they sacrifice that interest and advantage, with a view of profiting and taking the interest of it to themselves, the purchase will be liable to be set aside, the advantage will not come to themselves, and the breach of confidence will not avail them” (per Lord Chancellor Loughborough)

Question 23

Imageview Management Ltd v Jack

Answer 23

1. “The law imposes on agents high standards … An agent’s own personal interests come entirely second to the interest of his client. If you undertake to act for a man you must act 100%, body and soul, for him. You must act as if you were him. You must not allow your own interest to get in the way without telling him. An undisclosed but realistic possibility of a conflict of interest is a breach of your duty of good faith to your client” (per Lord Justice Jacob)

Question 24

Neilson v Skinner & Co

Answer 24

1. The agent must account to the principal for any benefits received from third parties, in whatever form they are received

Question 25

Liverpool Victoria Friendly Society v Houston

Answer 25

1. The agent must not disclose any information which is confidential to the principal

Question 26

McPherson’s Trustees v Watt

Answer 26

1. The agent must not enter into any transactions which would place him or her in a position of conflict of interest vis-à-vis the principal. Transactions between agent and principal will be scrutinised carefully and may be void

Question 27

Imageview Management Ltd v Jack

Answer 27

1. The agent must not accept any secret commission or bribes

Question 28

McPherson’s Trs v Watt

Answer 28

1. The trustees wished to sell three houses which they owned 2. They instructed solicitors to carry this out 3. The solicitor agreed to sell these houses to his brother 4. The brother then sold two of them to the solicitor 5. In this case, the agent wasn’t acting solely for the benefit of his trustee 6. He was acting for his own benefit

Question 29

Rosetti v Diamond Sofa Co Ltd

Answer 29

1. The agent acted for other manufacturers but said that they would not clash or compete 2. They were not competing for the same end consumers 3. The principal sued their agent for breach of this duty 4. The defence was that in this industry, it was quite clear that the agent would represent multiple sellers 5. You have to expressly contract out of this duty

Question 30

Imageview Management Ltd v Jack

Answer 30

1. Jack was a footballer 2. He wanted to play football in the UK 3. He instructed an agent to get him a club in the UK 4. If the agent found him a club, he would pay him 10% of his salary 5. The agent found Dundee FC 6. The footballer needed a work permit to move to the UK and work 7. Dundee FC agreed that the agent would apply for the permit and the club would pay him £3,500 for that 8. This was a secret payment from the third party to the agent 9. Jack was unaware of this payment 10. Jack refused to pay the commission 11. His agent sued him for unpaid commission 12. Jack said his agent was in breach of his fiduciary duties

Question 31

Copland v Brogan

Answer 31

1. The agent must perform the agency contract using the skill and care reasonably expected from a reasonably competent and careful member of the particular profession

Question 32

Robertson v Foulds

Answer 32

1. There is a duty not to delegate, unless permissible according to the custom of the trade

Question 33

Milne v Ritchie

Answer 33

1. Where the agent has entered into a contract in excess of his or her authority and this leads to a loss on the part of the principal, the principal may recover that loss from the agent

Question 34

Wells v Devani

Answer 34

1. If the parties fail to agree a term identifying the event or trigger point at which the putative agent is entitled to the payment of a fee for services rendered to the principal, this will not preclude the recognition of a binding and enforceable agency agreement

Question 35

Walker, Fraser & Steele v Fraser’s Trs

Answer 35

1. The agent is entitled to commission where the contract was ‘brought about, or materially contributed to’ by his or her actings

Question 36

Parks v Esso Petroleum Company Ltd

Answer 36

1. The agent must negotiate or negotiate and conclude a contract for the principal

Question 37

King v Tunnock

Answer 37

1. King was an agent for Tunnock for 38 years 2. Tunnock’s bakery business was decreasing 3. They shut down their bakery 4. King was no longer required to be an agent 5. They had terminated the agency relationship and provided no compensation 6. A French rule that provided an agent with two years’ commission was followed