| AGENCY — Secret commission — Side deal — Footballer’s agent making negotiation with football club on principal’s behalf — Agent making undisclosed deal with club on own behalf in connexion with obtaining work permit for principal — Whether breaching agent’s fiduciary duty to principal — Whether principal entitled to unpaid agency fees — Whether agent entitled to return of fees already paid or to account of fee received by agent from club
Imageview Management Ltd v Jack [2009] EWCA Civ 63; [2009] WLR (D) 56
CA: Mummery, Dyson, Jacob LJJ: 13 February 2009
An agent when negotiating with another person on behalf of his principal breached the fiduciary duty which he owed to his principal if at the same time he made with the other person an undisclosed side deal for his own benefit and there were a real possibility of conflict of interest. In such a case the agent was required to account to the principal in respect of the secret commission so received and was not entitled to receive any agency fees from the principal.
The Court of Appeal so held when dismissing the appeal of the claimant, Imageview Management Ltd, from the judgment of Underhill J who on 23 May 2008 had allowed the appeal of the defendant, Kelvin Jack, a professional footballer, and dismissed the claimant’s cross-appeal from the decision of Mr Recorder Walker in the Central London County Court on 2 January 2008 to allow the claim for unpaid agency fees due under a contract whereby the claimant had agreed to act as the defendant’s agent in negotiating a contract for him to play for Dundee United Football Club. The defendant denied liability on the ground that, in negotiating a secret side commission for itself from the club in connexion with obtaining a work permit for principal, the claimant had breached its fiduciary duty to him, and counterclaimed repayment of the agency fees already paid and an account of the secret fee.
JACOB LJ said that if the agent had told his client that when negotiating for his client he was also going to make a deal with the club for himself about getting a work permit for the client, and if the client had had no objection, there would have been no problem. Instead, the agent had made a secret deal. Despite long-standing authority as to an agent’s duty of fidelity where there was a realistic possibility of a conflict of interest, such as Boston Deep Sea Fishing v Ansell (1888) 39 Ch D 339, the claimant submitted that Hippisley v Knee Bros [1905] 1 KB 1 demonstrated that an agent could legitimately try to make a profit “on the side” which was not regarded as so serious that his entire commission became repayable, provided that the agent/third party arrangement were “not sufficiently connected” with the principal/agent relationship or were “purely incidental” to it. The better way to look at it would be to ask whether the agent was faced with a realistic possibility of a conflict of interest, rather than whether there was a “secret profit … directly impacting on the moneys payable to the principal” as David Steel QC had done in The Peppy [1997] 2 Lloyds Rep 722, 729. It was the conflict of interest which ought to bring his conscience into play. There could be cases of harmless collaterality, or where there was just an honest breach of contract such as Keppel v Wheeler [1927] 1 KB 577. But this was simply not such a case. This was a case of a secret profit obtained because the claimant was defendant's agent. And there was a breach of a fiduciary duty because of a real conflict of interest. That in itself would be enough, but there was more: the profit was not only greater than the work done but was related to the very contract which was being negotiated for the defendant. Once a conflict of interest was shown the right to remuneration went in its entirety. That strict rule was there as a real deterrent to betrayal. So the defendant was not liable to pay the claimant and more agency fees and was entitled both to recover all the fees he had already paid and to an account of the whole of the secret profit made by the claimant.
DYSON LJ agreed.
MUMMERY LJ gave a concurring judgment.
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