Rights and Duties Flashcards
What are the principal’s rights / agent’s duties?
The fiduciary duty only applies to the agent. The duties on the part of the principal are much less expansive.
In this particular area there have been many Scottish appeals to the HL.
“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.”
York Buildings Co v Mackenzie (1795) 3 Paton’s Appeal Cases 378, per Lord Chancellor Loughborough, 398-399
So an agent is a party to a contract with a principal where he must act entirely in the interest of his principal. This gives us an indication of the very high standards that an agent has to adhere to (specific duties to follow):
What is the agent’s fiduciary duty?
The agent has a fiduciary duty to his principal. The quote below explains this as:
"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." - Imageview Management Ltd v Jack [2009][ This case involved a footballer who wanted to move to Dundee United. He instructed a football agent called Berry to act for him. Berry was acting through the company called Imageview. In the course of negotiations between Berry and Dundee United, it was agreed that Dundee United would pay Berry £3k for getting the footballer a work permit. The footballer was unaware about this. When he found out he wasn't very happy, refused to pay the agency fee and asked for a return of the agency fees. The Court held that the footballer had a right to know so Berry had to give the £3k to the footballer and also had to return the fee.
So this shows that with serious breaches, the agent must return everything that he has earned to the principal. (This is not breach of contract damages - it is really penalising the agent very strongly).]
The practical implications of this duty means that the agent has to account to the principal for any benefits/advantages. In whatever form benefits are received - he has to account to the principal for these. If this is breached the principal can seek an accounting (hand over of benefits). You can do not seek damages for loss here - principal is seeking the disqualification of the benefit the agent received.
L. Macgregor: ‘An agent’s fiduciary duties: modern law placed in historical context’ (2010) Edin L R 121
‘100% body and soul: the ability of an agent to act for a competitor of his principal’ (2013) Edin LR 71
So there is a fiduciary relationship between principal and agent.
Imageview Management Ltd v Jack [2009] EWCA Civ 63; [2009] 1 Lloyd’s Rep 436, per Lord Justice Jacob, at para 6.
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What are the practical implications of an agent’s fiduciary duty?
The practical implications of the agent’s extensive fiduciary duty are as follows. The agent must:
⁃ 1) account to the principal for any benefits received from third parties, in whatever form they are received, Neilson v Skinner & Co (1890)
⁃ 2) not disclose any information which is confidential to the principal, Liverpool Victoria Friendly Society v Houston (1900)
⁃ 3) 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, see the highly significant case McPherson’s Trustees v Watt (1877)
4) not accept any secret commission or bribes, see: Imageview Management Ltd v Jack [2009] 1 Lloyd’s Rep 436 with comment, FHR European Ventures LLP & Ors v Mankarious & Ors [2011]
McPherson’s Trustees v Watt (1877)
⁃ Dealings between a solicitor and a client. The solicitor sets up a sale of 4 houses for the trust that he is working for. The trusts are his brothers. The price and terms are sorted and the sale is concluded. The trust subsequently finds out that the buyer of the houses is actually the solicitor and this fact was kept secret from the client. There is a clear conflict of interests here. The trustees seek reduction of the missives of sale because the agent of the brother was also agent to the trustees. His concealment of the fact he was purchasing for himself was fatal to the validity of the transaction/transfer of the properties.
Rosetti and Anor v Diamond Sofa Co Ltd [2012]
About acting for competitors – look up.
Imageview Management Ltd v Jack [2009] 1 Lloyd’s Rep 436
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FHR European Ventures LLP & Ors v Mankarious & Ors [2011]
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What happens when there is a fiduciary breach?
Where there is a fiduciary breach, the remedy is very strict - the agent must disgorge all the profit made and the commission for that transaction (and possibly even previous transactions) must be returned. This means that it applies even if the agent is acting honestly (i.e. if the agent honestly believes they are acting in the best interest of the principal they can still breach this fiduciary duty)
What is the agent’s duty of good faith?
The agent holds a duty of good faith to his principal at common law (Bell, Principles, s.222). The agent’s fiduciary duty is more extensive than the duty of good faith (good faith generally not requiring a party to put the interests of another before his own). It is unlikely that the duty of good faith adds protection for the principal not already provided by fiduciary duties.
What is the commercial agents duty of good faith?
The “commercial agent” falling within the definition within the Commercial Agents (Council Directive) Regulations 1993 (reg 2(1)), also holds a duty of good faith towards his principal, see reg 3.
What is the agent’s duty to follow instructions?
The agent must follow the principal’s instructions both at common law and under the Commercial Agents Regulations, reg 3(2)(c). If no express instructions are given, the agent must follow the custom of the trade or use his or her best judgement.
What is the requirement of the agents skill and care?
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.
⁃ Copland v Brogan 1916 SC 277
Copland v Brogan 1916 SC 277
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What is the agents duty to keep accounts?
Such accounts need not be written – a verbal accounting is possible.
