Agency, losses from breach of fiduciary duty

The case Northampton Regional Livestock Centre Co Ltd v Cowling [2015] EWCA Civ 651; [2015] PLSCS 197 concerned the sale of commercial property. The company that owned the site instructed agents, who were practicing in partnership together, to find a purchaser for it. The partner who handled the sale introduced a buyer who, unbeknown to anyone else, had promised to pay him a third of any uplift in value on any subsequent sale.

Completion of the sale to the buyer took place six months later. During that period, a third party came forward unexpectedly. It took the site off the buyer’s hands for a price that was well above the rate that the market considered sensible. As a result, the agent became entitled to a substantial payment from the buyer. In due course, questions were asked and litigation ensued.

The court ruled that the agent had not obtained fully informed consent for his actions from the company and was, as a result, in breach of his fiduciary duty to his client. Consequently, he was liable to return the fee paid by the company in connection with the original sale, and to account to the company for the commission received from the buyer as well.

At the Court of Appeal Lord Justice Tomlinson observed that, if vicarious liability of a firm for acts done by a partner acting in the ordinary course of the business of the firm were to be confined to acts authorised in every particular, the reach of vicarious liability would be short indeed. The court considered whether the wrongful conduct could fairly and properly be regarded as having been done by the partner while acting in the ordinary course of the business of the partnership.

The firm had authorised the agent to handle the sale for the company. Therefore, the case fell squarely on the side of the line that attracts vicarious liability and the agent’s partner was jointly and severally liable to account to the company