Conway & Anor v Eze

Bribery and secret-commission rules apply only where the recipient occupies a relationship engaging the law’s fiduciary rationale. An introducing intermediary may receive commission from both parties where he acts as a salesman on his own behalf and has no relevant agency relationship with either party. If the rules do apply, an undisclosed promise of payment is sufficient: actual payment, corrupt motive and proof that the agent was influenced are unnecessary.

A true secret commission makes the principal’s contract voidable at common law, subject to bars such as affirmation and inability to make counter-restitution. The equitable discretion applicable to breach of fiduciary duty or dishonest assistance does not replace that common-law right. Contract damages remain subject to causation, remoteness and reasonable mitigation.

The claimants agreed to sell their London property to the defendant for £5 million. The defendant paid a £500,000 deposit, but failed to complete after contracts had been exchanged. The claimants sought damages, including the reduced price achieved on resale and the cost of bridging finance.

The defendant contended that the contract was void or voidable because the claimants had promised a £75,000 fee to Richard Obahor, whom he said was his agent, without disclosing the arrangement to him. He also disputed the damages. The central issues were whether Obahor was in a relationship engaging the law on bribes or secret commissions, what consequences would follow if he was, and the proper assessment of loss.

1. Contractual validity. The contract was valid and enforceable. The defendant had instructed Obahor to progress the transaction, and Obahor acted as an introducing intermediary who initially acted on his own behalf. The defendant relied on Richard Howarth for oversight and advice, while Obahor’s role was principally ministerial and coordinative.
2. Agency and fiduciary relationship. The law on bribes and secret commissions is directed against the deprivation of a principal’s disinterested advice. The relevant relationship must be assessed from the facts as they actually were. Obahor did not initially act as the defendant’s agent. He presented a pre-packaged transaction for which he sought commission, and there was nothing inherently improper in his receiving commission from both parties. His later authority to progress the signed contract did not create a real conflict between interest and duty.
3. Obiter on the payment agreement. If Obahor had been a fiduciary, the undisclosed promise of £75,000 would have been a secret commission. The promise was enough; actual payment, corrupt motive and proof of influence were unnecessary. The claimants could not rely on an expectation that Obahor would disclose the arrangement.
4. Obiter on remedies. In a true bribery case the principal has a common-law right to rescind, subject to affirmation and counter-restitution. The equitable discretion to refuse rescission in cases of breach of fiduciary duty or dishonest assistance does not displace that right. On the assumed facts, rescission would in any event have been granted.
5. Authority and apparent authority. Even if Obahor’s actual authority had been terminated by breach of duty, the solicitors had apparent authority to act on his instructions to exchange contracts. The contract was therefore not void for want of authority.
6. Damages. The claimants were entitled in principle to the difference between the contract price and the proper resale price, transaction costs, reasonable bridging-finance costs and other losses caused by the breach. Bridging finance was a not-unlikely consequence of failure to complete a sale intended to fund the purchase of another home. The claimants failed to mitigate by accepting a resale arrangement whose prolonged completion period substantially reduced its real value. Recovery was therefore limited by reference to a reasonable sale completing by the end of October 2016. The court allowed or disallowed individual heads of loss as set out in its detailed assessment and left final figures for further agreement or submissions.

First-instance decision. No prior appellate decision is stated in the judgment.