Agent’s Duties
Cases
Henderson v Merrett Syndicates Ltd
[1994] UKHL 5
Lord Goff House of Lords
“So far as Hedley Byrne itself is concerned Mr. Kaye reads the speeches as restricting the principle of assumption of responsibility there established to cases where there is no contract; indeed, on this he tolerates no dissent, stating (at p. 706) that “unless one reads Hedley Byrne with deliberate intent to find obscure or ambiguous passages” it will not bear the interpretation favoured by Oliver J. I must confess however that, having studied yet again the speeches in Hedley Byrne [1964] A.C. 465 in the light of Mr. Kaye’s critique, I remain of the opinion that Oliver J.’s reading of them is justified. It is, I suspect, a matter of the angle of vision with which they are read. For here, I consider, Oliver J. was influenced not only by what he read in the speeches themselves, notably the passage from Lord Devlin’s speech at pp. 528-529 (quoted above), but also by the internal logic reflected in that passage, which led inexorably to the conclusion which he drew. Mr. Kaye’s approach involves regarding the law of tort as supplementary to the law of contract, i.e. as providing for a tortious liability in cases where there is no contract. Yet the law of tort is the general law, out of which the parties can, if they wish, contract: and, as Oliver J. demonstrated, the same assumption of responsibility may, and frequently does, occur in a contractual context. Approached as a matter of principle, therefore, it is right to attribute to that assumption of responsibility, together with its concomitant reliance, a tortious liability, and then to enquire whether or not that liability is excluded by the contract because the latter is inconsistent with it. This is the reasoning which Oliver J., as I understand it, found implicit, where not explicit, in the speeches in Hedley Byrne. With his conclusion I respectfully agree. But even if I am wrong in this, I am of the opinion that this House should now, if necessary, develop the principle of assumption of responsibility as stated in Hedley Byrne to its logical conclusion so as to make it clear that a tortious duty of care may arise not only in cases where the relevant services are rendered gratuitously, but also where they are rendered under a contract. This indeed is the view expressed by my noble and learned friend Lord Keith of Kinkel in Murphy v Brentwood District Council [1991] 1 AC 398, 466, in a speech with which all the other members or the Appellate Committee agreed. ”
Chaudry v Prabhakar
[1989] 1 WLR 29, [1988] 3 All ER 718
Court of Appeal Stuart Smith LJ
‘When considering the question of whether a duty of care arises, the relationship between the parties is material. If they are friends, the true view may be that the advice or representation is made on a purely social occasion and the circumstances show that there has not been a voluntary assumption of responsibility.’
Stocker LJ
‘in my view, in the absence of other factors giving rise to such a duty, the giving of advice sought in the context of family, domestic or social relationships will not in itself give rise to any duty in respect of such advice.’
May LJ
‘I for my part respectfully doubt whether counsel’s concession in the instant case was rightly made in law. I do not find the conclusion that one must impose on a family friend looking out for a first car for a girl of 26 a Donoghue v Stevenson duty of care in and about his quest, enforceable with all the formalities of the law of tort, entirely attractive.’
Boardman v Phipps
[1966] UKHL 2
House of Lords
Lord Hodson
MY LORDS,
“The proposition of law involved in this case is that no person standing in a fiduciary position, when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position and by reason of the opportunity and the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person.
I take the above proposition from the opening words of the speech of Lord Wright in Regal (Hastings) Ltd. v. Gulliver and Others [1942] 1 All.E.R. 378 where he states the proposition in the form of the question which he answered as had all the members of your Lordships’ House in such a way as to affirm the proposition.
It is obviously of importance to maintain the proposition in all cases and to do nothing to whittle away its scope or the absolute responsibility which it imposes.
The persons concerned in this case, namely, Mr. Thomas Boardman and Mr. Tom Phipps are not trustees in the strict sense but are said to be constructive trustees by reason of the fiduciary position in which they stood.
As Lord Selborne pointed out in Barnes v. Addy 9 Ch. Appeals page 244 at page 251: ” That responsibility” (viz. that of trustees) ” may no doubt be ” extended in equity to others who are not properly trustees, if they ” are found either making themselves trustees de son tort, or actually ” participating in any fraudulent conduct of the trustee to the injury ” of the cestui que trust. But, on the other hand, strangers are not to be ” made constructive trustees merely because they act as the agents of ” trustees in transactions within their legal powers, transactions, perhaps ” of which a Court of Equity may disapprove, unless those agents receive ” and become chargeable with some part of the trust property, or unless ” they assist with knowledge in a dishonest and fraudulent design on ” the part of the trustees.”
There is no question of fraud in this case; it has never been suggested that the Appellants acted in any other than an open and honourable manner. If, however, they are in a fiduciary position they are as trustees bound by duty, succinctly stated by Lord Cranworth, L.C. in Aberdeen Railway v. Blackie [1854] 1 Macqueen 461 at page 477: ” And it is a rule of universal application that no one having such ” duties to discharge shall be allowed to enter into engagements in which ” he as or can have a personal interest conflicting or which possibly ” may conflict with the interests of those whom he is bound to protect.”
Mr. Boardman’s fiduciary position arose from the fact that he was at all material times solicitor to the Trustees of the will of Mr. Phipps senior. This is admitted although counsel for the Appellants has argued, and argued correctly, that there is no such post as solicitor to trustees. The Trustees either employ a solicitor or they do not in a particular case and there is no suggestion that they were under any contractual or other duty to employ Mr. Boardman or his firm. Nevertheless as a historical fact they did employ him and look to him for advice at all material times and this is admitted.
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Each case must depend on its own facts and I dissent from the view that information is of its nature something which is not properly to be described as property. We are aware that what is called ” know-how ” in the commercial sense is property which may be very valuable as an asset. I agree with the learned judge and with the Court of Appeal that the confidential information acquired in this case which was capable of being and was turned to account can be properly regarded as the property of the trust. It was obtained by Mr. Boardman by reason of the opportunity which he was given as solicitor acting for the Trustees in the negotiations with the chairman of the company, as the correspondence demonstrates. The end result was that out of the special position in which they were standing in the course of the negotiations the Appellants got the opportunity to make a profit and the knowledge that it was there to be made.
…………………………..There was no such relationship here but the position of an agent is relevant and the expression ” self-appointed agent” used by the learned judge is a convenient way to describe someone who, assuming to act as agent for another, receives property belonging to that other so that the property is held by the self-constituted agent as trustee for such other.
Such a case was Lyell v. Kennedy (1889) 14 App. C. 437 H.L. Thus the learned judge found that the Appellants were in the same position as if they had been agents for the trustees in the technical sense for the purpose of using the trust shareholding to extract knowledge of the affairs of the company and ultimately to improve the company’s profit-earning capacity.
Keech v. Sandford 1726 Select Cases in Chancery and K.B. 61 was a case in which it was impossible for the cestui que trust to obtain the renewal of a lease, nevertheless the trustee was held accountable for renewal obtained by him. Similarly in Regal v. Gulliver [1942] 1 All.E.R. 378, from which some of your Lordships have cited passages, the directors of Regal were held accountable to the company for the profit they made in acquiring shares when the opportunity fell to them as directors of the company not withstanding the fact that it was impossible for Regal to take the shares owing to lack of funds.
……………………As Keech v. Sandford shows the inability of the trust to purchase makes no difference to the liability of the Appellants, if liability otherwise exists. The distinction on the facts as to intention to purchase shares between this case and Regal v. Gulliver is not relevant. The company (Regal) had not the money to apply for the shares upon which the profit was made The directors took the opportunity which they had presented to them to buy the shares with their own money and were held accountable. Mr. Fox’s refusal as one of the trustees to take any part in the matter on behalf of the trust, so far as he was concerned, can make no difference. Nothing short of fully informed consent which the learned judge found not to have been obtained could enable the Appellants in the position which they occupied having taken the opportunity provided by that position to make a profit for themselves.
Likewise it is no answer to the Respondent’s claim that there was no contract of agency and that the Appellants were at all times acting for themselves without concealment and indeed with the encouragement of one of the trustees, namely, Mr. Fox.
If they received confidential information from Lester & Harris in their capacity as representing the trustees it matters not whether or no there was a true agency.
I refer again to the passage from Lord Wright’s judgment in Regal v. Gulliver at page 392 when he speaks of ” an agent, a director, a ” trustee or other person in an analogous fiduciary position ” and, as an illustration, says that the most usual and typical case of this nature is that of principal and agent.
The relevant information is not any information but special information which I think must include that confidential information given to the Appellants which is so fully detailed in the judgment of Wilberforce, J.
There is a passage in Aas v. Benham (supra) in the judgment of Bowen L.J. which I think is of assistance although the learned Lord Justice was dealing with partnership not trusteeship: he was explaining some observations of Cotton L.J. in Dean v. MacDowell 8 Ch. D. 345. These were ” Again, if ” he ” (that is, a partner) ” makes any profit by the use of any property of ” the partnership, including, I may say, information which the partnership ” is entitled to, there the profit is made out of the partnership property “.
………..It cannot, in my opinion, be said that the purchase of shares in Lister & Harris was outside the scope of the fiduciary relationship in which Mr. Boardman stood to the trust.
The confidential information which the Appellants obtained at a time when Mr. Boardman was admittedly holding himself out as solicitor for the trustees was obtained by him as representing the trustees, the holders of 8,000 shares of Lister & Harris. As Russell, L.J. put it ” the substantial ” trust shareholding was an asset of which one aspect was its potential use ” as a means of acquiring knowledge of the company’s affairs or of negotiating allocations of the company’s assets or of inducing other shareholders to part with their shares “.
Whether this aspect is properly to be regarded as part of the trust assets is, in my judgment, immaterial. The Appellants obtained knowledge by reason of their fiduciary position an they cannot escape liability by saying that they were acting for themselves and not as agents of the trustees. Whether or not the trust or the beneficiaries in their stead could have taken advantage of the information is immaterial, as the authorities clearly show. No doubt it was but a remote possibility that Mr. Boardman would ever be asked by the trustees to advise on the desirability of an application to the court in order that the trustees might avail themselves of the information obtained. Nevertheless, even if the possibility of conflict is present between personal interest and the fiduciary position the rule of equity must be applied. This appears from the observations of Cranworth, L.C. in Aberdeen Railway v. Blackie (supra).
It is said that the Appellants never had the necessary facts pleaded against them to raise the question of conflict of interest so that they did not have the opportunity of dealing with allegations which would be relevant thereto:
I cannot see what further facts were relevant to be raised other than those to which reference has been made in the judgments in the court below and in the speeches of your Lordships. The question whether or not there was a fiduciary relationship at the relevant time must be a question of law and
the question of conflict of interest directly emerges from the facts pleaded, otherwise no question of entitlement to a profit would fall to be considered.
No positive wrong-doing is proved or alleged against the Appellants but they cannot escape from the consequences of their acts involving liability to the Respondent unless they can prove consent. This they endeavoured without success to do for, although they gave the Respondent some information,
that which they gave was held by the learned judge to be insufficient and there is no appeal against his decision on this point.
I agree with the decision of the learned judge and with that of the Court of Appeal which, in my opinion, involves a finding that there was a potential conflict between Boardman’s position as solicitor to the trustees and his own interest in applying for the shares. He was in a fiduciary position vis-à-vis the trustees and through them vis-à-vis the beneficiaries. For these reasons in my opinion the appeal should be dismissed; but I should add that I am in agreement with the learned Judge that payment should be allowed on a liberal scale in respect of the work and skill employed in obtaining the shares and the profits therefrom.”