It has long been established that an agent cannot place himself in a position where his own interests conflict with those of his principal, and that that an agent cannot profit at the expense of his principal. But what is the risk where an agent has a private separate arrangement by which he may make a profit for himself which is collateral to his fiduciary duty to his principal?
This was the argument put forward by the defence in Imageview Management v Jack [2009] EWCA Civ 63. The Court of Appeal's decision highlights the stringency of an agent's duties.
The Facts
The facts are simple. Mr Jack, Trinidad's international goalkeeper, entered into an agency agreement with Imageview Management under which Mr Jack agreed to pay 10% (the commission) of his monthly salary if Imageview secured him a contract to play with a UK football club. Imageview negotiated a contract with Dundee FC. However, unbeknown to Mr Jack, Imageview also entered into a separate agreement with the club to obtain a work permit for Mr Jack.
Imageview argued that the side agreement was none of Mr Jack's business, and that it committed no wrong to Mr Jack because Dundee FC did not pay Mr Jack a lower fee as a result of the side agreement; the side agreement was no more than collateral.
The Decision
Rejecting Imageview's defence, the Court held that an agent's personal interests must come entirely second to the interest of his client. By undertaking to work for a principal, an agent must act 100% body and soul for him. The question is not whether or not Imageview made a secret profit which directly impacted on the money payable to Mr Jack, rather it was whether or not a conflict of interest arose.
In this case there was a clear conflict of interest. The circumstances were such that the existence of the side agreement to secure a work permit meant that it was possible that Dundee FC paid Mr Jack less. Moreover, it gave Imageview an interest in Mr Jack signing for Dundee FC as opposed to another club.
Imageview could have avoided being in breach of its duty by fully disclosing the existence of the side agreement and securing Mr Jack's consent. However, since it did not do so, it forfeited all right to any commission.
The court recognised that there can be cases of harmless collaterality, but this was not one of them. As Mummery LJ concluded: "In our age it is more important that it ever was for the courts to hold the precise and firm line drawn between payments openly, and therefore honestly, received by agents, and undeclared payments received by agents secretly, and therefore justly liable to all the legal consequences flowing from breaches of an agent's fiduciary obligations."
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