Summary
An agent who acts for more than one principal must disclose the nature and extent of any commission or other interest to each principal, unless one principal is authorised to receive disclosure for the others. The agent bears the burden of proving fully informed consent. Disclosure that a commission exists, or that it is a flat fee, is insufficient where the amount is material, exceptional and not ascertainable by customary usage or simple enquiry.
An agent who receives an undisclosed commission must account for it, may lose contractual remuneration relating to the conflicted transaction, and may have the agency terminated. An equitable allowance for skill and effort is exceptional and must not encourage fiduciary disloyalty.
Factual background
The claimants were participants in a joint venture which acquired the Monte Carlo Grand Hotel. Cedar Capital Partners and Mr Mankarious acted for the prospective purchasers while also acting for the vendors under an exclusive brokerage agreement providing for a €10 million commission.
The claimants alleged that the commission was undisclosed and received in breach of fiduciary duty. The defendants contended that the payment had been disclosed, that consent had been given, and that they were entitled to contractual or restitutionary remuneration for work performed.
The issues included the sufficiency of disclosure, whether BoS could receive disclosure on behalf of the other principals, the consequences of breach, and whether a binding consultancy contract had been concluded.
Held
Fiduciary duty and conflict. Cedar owed fiduciary duties separately to BoS, Fairmont and Kingdom. Its receipt of a vendor commission conflicted with its duty to negotiate the purchase price for those principals. The fact that the commission was fixed, or that the principals might have benefited from the transaction, did not remove the conflict.
Informed consent. The exception to the no-profit and no-conflict rules requires the agent to prove the principal’s fully informed consent. The disclosure must identify all material circumstances, including the nature and extent of the agent’s interest. Telling BoS that Cedar would receive a fee did not disclose the exceptional €10 million amount. The Investment Memorandum and the discussions on 22 September and 4 October were insufficient.
Disclosure had to be made to each principal. BoS was not authorised, expressly or impliedly, to receive disclosure for Fairmont or Kingdom. Fairmont was not told that Cedar received a vendor commission, and Kingdom was never told of the brokerage arrangement.
Consequences. Cedar held the €10 million on constructive trust for the claimants and could not claim contractual remuneration for work connected with establishing the joint venture and acquiring the Hotel. The claimants were entitled to terminate the agency. No equitable allowance was appropriate because Cedar had opportunities to disclose the material terms and its conduct risked encouraging fiduciary disloyalty.
The commercial terms of the consultancy arrangement were sufficiently settled for a binding contract to arise, despite further terms and a formal document remaining outstanding. Cedar could therefore recover remuneration for unrelated work on three other hotels. On the evidence, the counterclaim was allowed in the sum of £227,497 plus VAT. It was unnecessary to decide the alternative quantum meruit issue.
The court’s approach to earlier authorities
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Appeal route
- This judgment [2011] EWHC 2308 (Ch) High Court (Chancery Division)
- Appealed to[2013] EWCA Civ 17Outcomeappeal allowed (unanimous)
- Appealed to[2014] UKSC 45Outcomeappeal dismissed unanimously
Key cases cited
18 authorities cited.
- Phipps v Boardman (Boardman v Phipps) [1967] 2 AC 46
- Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
- Imageview Management Ltd v Jack [2009] EWCA Civ 63
- Wilson & Anor v Hurstanger Ltd [2007] EWCA Civ 299
- JOHNSON v (1) EBS PENSIONER TRUSTEES LIMITED (2) GORDON MICHAEL O’SHEA [2002] Lloyd's Rep PN 309
- Ross River Ltd & Anor v Cambridge City Football Club Ltd [2007] EWHC 2115 (Ch)
- Regalian Properties Plc v London Dockland Development Corpn [1995] 1 WLR 212
- Guinness plc v Saunders (Guinness plc v Ward) [1990] 2 AC 663
- PAGNAN S.p.A. v. FEED PRODUCTS LTD. [1987] 2 Lloyd's Rep 601
- New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 1 WLR 1126
- Phipps v Boardman (Boardman v Phipps) [1964] 1 WLR 993
- HINDMARSH AND ANOTHER v. BRIGHAM & COWAN, LTD. (1943) 76 Ll L Rep 141
- Rhodes v Macalister (1923) 29 Comm Cas 19
- Andrews v Ramsay & Co [1903] 2 KB 635
- Bray v Ford [1896] AC 44
- Aberdeen Railway Co v Blaikie (1854) 1 Macq. 461
- Bristol and West BS v Mothew
- Dunne v English LR 18 Equity Cases 524
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Cases citing this case
3 later cases · 1 positive · 1 neutral · 1 caution
Most senior citing decisions:
- Expert Tooling and Automation Limited v Engie Power Limited [2025] EWCA Civ 292 applied
- Reader v SPIE Ltd & Anor [2021] EWHC 1221 (QB) considered
- Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB) distinguished
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