Chapter 13 Interactive flashcards of key cases

Chapter 13 Interactive flashcards of key cases

A stockbroker acting as agent for his principal was instructed by his principal to purchase 600 shares in a company. The stockbroker already owned 600 of these shares, which he transferred to his principal.

The stockbroker’s conduct placed himself in a position whereby his duty to his client (principal) conflicted with his own personal interest. The principal was entitled to rescind the entire transaction even though the shares had by then decreased in value.

Reid (the agent) was working as a customs officer. In breach of his fiduciary duty to the Crown (the principal), he accepted bribes, with which he purchased a number of properties.

The Privy Council held that a gift accepted by a person in a fiduciary position as an incentive for his breach of duty constituted a bribe and, although in law it belonged to the fiduciary, in equity he not only became a debtor for the amount of the bribe to the person to whom the duty was owed but also held the bribe and any property acquired therewith on constructive trust for that person.

A solicitor, acting as agent for the trustees of an estate, attended annual general meetings of a company in which the estate held a small interest. The solicitor thereby obtained information about the company from which he concluded that its shares were undervalued. The trustees of the estate did not wish to purchase more of the shares. The solicitor, using his own personal money, then purchased a controlling interest in the company. The solicitor made a substantial personal gain from this investment. The estate also benefited from the increase in the value of the shares it held.

The House of Lords held that the solicitor must account to the estate for the personal profit he had made because the information he acquired whilst attending the company’s annual general meetings belonged to the estate. It did not matter that he was acting in good faith nor that his actions also produced a financial benefit for the estate.

An auctioneer advertised for sale certain goods belonging to his principal. He paid a reduced trade price for the advertising but charged his principal the full non-trade rate.

The court held that he had committed a breach of his fiduciary duty to his principal not to make a secret profit but as he had acted without fraud and as the advertising contract was incidental to, and severable from, the primary contract of sale of goods, he was still entitled to his commission for the sale of his principal’s goods.

A football agent negotiated the transfer of a player. His fee was to be 10 per cent of the player’s salary. At the same time, the agent agreed a separate deal with the club for arranging a work permit for the player. This separate deal was not declared to the player. When the player eventually found out that his agent had made a secret profit, he stopped paying him the agreed 10 per cent of his salary.

The law imposes high standards on agents whose personal interests come second to the interests of their clients. If an agent undertakes to act for a man, he has to act for him as if he were him and not allow his own interest to get in the way without telling the client. The Court of Appeal held that in making an undisclosed private deal with a football club to obtain a work permit for a foreign footballer, a football agent had acted in breach of his fiduciary duty to the footballer. The footballer did not have to pay any more fees to the agent and was entitled to the repayment of commission already paid as well as the fee received by the agent for the secret deal.

Back to top