Imageview Management Ltd v Jack

An agent who takes an undisclosed benefit from the other party to a transaction which the agent is negotiating for the principal breaches the duty of fidelity where there is a realistic possibility of conflict between the agent’s interest and the principal’s interest. Full disclosure and the principal’s consent avoid that breach.

The consequence is strict. The agent forfeits unpaid remuneration, must repay remuneration already received, and must account for the secret profit. These consequences do not depend on proof that the principal suffered loss or received no benefit. An allowance for the fiduciary’s skill and labour is exceptional, lies on the fiduciary to justify, and will ordinarily be refused for surreptitious dealing.

A professional footballer engaged Imageview Management Ltd to negotiate a contract with Dundee United. The agency agreement entitled Imageview to ten per cent of the player’s monthly salary and required it to act in his best interests.

While negotiating the playing contract, Imageview made an undisclosed agreement with the club to obtain the player’s work permit for £3,000. The fee was related in part to the length of the playing contract. The player later ceased paying agency fees and sought repayment of fees already paid and recovery of the side payment.

Recorder Walker found that the arrangement breached Imageview’s fiduciary duty. Underhill J upheld that decision. Imageview brought a second appeal, principally contending that the work-permit arrangement was collateral and that it should retain remuneration or receive an allowance for its work.

1. Appeal dismissed unanimously. Imageview’s undisclosed agreement with Dundee United was not a private collateral arrangement. It was made while Imageview was negotiating the player’s contract and created a realistic possibility that its own financial interest would conflict with the player’s interest.

2. An agent owes a stringent duty of fidelity. The agent must not receive a benefit from the other side of a transaction without full disclosure to, and consent from, the principal. It is enough that the agent’s interest creates a realistic possibility of conflict; the principal need not prove loss. The court applied the principles in Boston Deep Sea Fishing v Ansell (1888) 39 Ch. D. 339, Andrews v Ramsay [1903] 2 KB 635 and Rhodes v Macalister (1923) 29 Com. Cas. 19.

3. There may be an honest and genuinely collateral matter which does not affect an agent’s earned commission. That qualification did not assist Imageview. Its profit arose from its position as the player’s agent, was related to the very contract it was negotiating, and gave it an incentive not to seek a better financial result for the player. The court rejected a test confined to whether the secret profit directly affected money payable to the principal.

4. The breach disentitled Imageview to further agency fees and required it to repay the fees already received. The player’s receipt of the benefit of the playing contract did not alter that result. Imageview also had to account for the £3,000 secret profit.

5. An allowance for a fiduciary’s skill and effort in earning a profit is discretionary and sparing. Imageview had not discharged the burden of showing that an allowance was equitable. Its conduct was surreptitious, and the work-permit work was not a service for which the player had expected to pay or from which he obtained a financial benefit. No deduction from the secret profit was allowed.

• Court of Appeal (Civil Division): By [2009] EWCA Civ 63, dismissed Imageview’s second appeal unanimously.
• High Court of Justice, Queen’s Bench Division: Underhill J upheld Recorder Walker’s conclusion that the undisclosed side agreement breached Imageview’s fiduciary duty.
• Recorder Walker: Held that the work-permit agreement was the player’s business, not a separate private arrangement of the agent.