Accidia Foundation v Simon C Dickinson Ltd.

An agent’s actual authority is determined by construing the agency agreement, including proper implications, trade usage and the parties’ course of business. A claimed market practice cannot confer implied authority where it is unreasonable, uncertain or inconsistent with the express agreement, particularly where it permits an undisclosed commission or secret profit. Ratification of one transaction does not necessarily ratify a separate agreement imposing an unauthorised secret commission. A fiduciary who must account for an unauthorised profit may receive a just allowance for skill and effort, but the allowance is assessed cautiously and does not permit retention of the profit.

Accidia engaged Luxembourg Art Limited as its exclusive agent to sell a valuable drawing for an agreed net price, with commission of up to 10 per cent. Luxembourg Art involved Simon C Dickinson Limited in finding a buyer. Dickinson sold the drawing for US$7 million, paid US$6 million to Luxembourg Art and retained the difference as an undisclosed commission.

Accidia later discovered the sale price and brought proceedings seeking an account of the US$1 million profit. The issues included Dickinson’s capacity, the scope of Luxembourg Art’s authority, ratification of the sale and related agreement, fiduciary liability, and any allowance for remuneration and expenses.

1. Agency and construction. The sale agreement expressly showed that Dickinson acted as agent for an undisclosed principal, namely Accidia, as well as for itself in relation to its own obligations. The subsequent agreement was not the sale itself. It retrospectively authorised the sale and regulated the proceeds. Dickinson was not acting as the buyer’s agent in entering that agreement, despite the erroneous wording used.
2. Actual authority. Properly construed, the exclusive agency agreement authorised a sale for the agreed net price of US$5.5 million, together with Luxembourg Art’s commission of up to 10 per cent. It did not authorise a sale at an undisclosed higher price or a further secret commission for another selling agent. The requirement that the sale contract be between Accidia and the buyer reinforced that conclusion.
3. A custom or usage can support implied actual authority only if it is universally accepted, certain and consistent with the express agency agreement. An agent has no implied authority to rely on an unreasonable usage unless the principal had actual notice of it. The alleged net-return practice was not established as usual practice, and any such arrangement would require the fully informed consent of the principal.
4. Ratification. Accidia ratified the sale agreement by retaining the proceeds and refusing to rescind the sale after learning the relevant facts. It did not thereby ratify the separate agreement which permitted Dickinson to retain an unauthorised secret commission. The principle that ratification of part of a transaction may ratify the whole did not require Accidia to accept that burden as the price of affirming the sale.
5. Account and allowance. Dickinson was liable to account for the US$1 million profit made as Accidia’s agent and fiduciary. Although its conduct was not treated as surreptitious in the relevant sense, it was not automatically entitled to remuneration. It would nevertheless be inequitable for Accidia to retain the entire benefit of Dickinson’s work without payment. A just allowance was therefore fixed at US$200,000, reflecting a 10 per cent commission on the US$7 million sale less the US$500,000 already paid to Luxembourg Art. Dickinson could also deduct £2,500 for restoration, but not the other claimed expenses or third-party commissions.
6. Judgment was entered for Accidia for US$800,000 less £2,500, with compound interest from 10 August 2007. Costs and consequential matters were left for determination if not agreed.