Background
Mr. Kelvin Jack is an international goalkeeper from Trinidad and Tobago. Imageview Management Ltd (“Imageview”), a footballer’s agency, owned by Mr. Mike Berry, acted for Mr. Jack.
In July 2004 Mr. Jack decided that he wanted to play football professionally in the UK. Mr. Jack asked Mr. Berry to negotiate a deal with Dundee United on his behalf. It was agreed that Mr. Jack would pay Imageview 10% of his monthly salary if Imageview successfully made arrangements for him to sign with a UK club.
Mr. Berry subsequently spoke to his contact at Dundee United and negotiated a contract for Mr. Jack to play for the club for two years. At the same time he agreed that Dundee United would pay Imageview a fee of £3,000 for obtaining a work permit for Mr. Jack. Imageview obtained a work permit for Mr. Jack and Dundee United paid the £3,000 fee to Imageview. Mr. Berry did not tell Mr. Jack about this arrangement.
After one year had passed, Mr. Jack found out about the arrangement regarding the work permit. Mr. Jack stopped paying commission to Imageview.
Imageview sued Mr Jack for the unpaid commission.
Decision
At first instance the judge dismissed Imageview’s claim for unpaid commission on the basis that it had breached its fiduciary duty because the side deal with Dundee United created a clear conflict of interest.
Imageview appealed to the High Court, but the decision was upheld.
Imageview appealed to the Court of Appeal.
Fiduciary duties
Lord Justice Jacob stressed that the law imposed high standards on agents. An agent’s own personal interests came:
“entirely second to the interest of his client. If you undertake to act for a man you must act 100% body and soul, for him. You must act as if you were him. You must not allow your own interests to get in the way without telling him”.
An undisclosed but realistic possibility of a conflict of interest was a breach of an agent’s fiduciary duty of good faith to his principal.
Lord Justice Jacob said that Imageview would not have breached its duty if:
- it made full disclosure to Mr Jack by disclosing that, at the same time as negotiating with the club for Mr Jack, he was also negotiating for himself about getting a work permit for Mr Jack; and
- Mr Jack had not objected to this.
Imageview argued that there was nothing improper in an agent entering into a separate arrangement by which he made a profit for himself, provided that the separate arrangement was collateral to his fiduciary duty to his principal. Further, it argued that for there to be a conflict of interest there must be a sufficient connection in the arrangement between the agent and the third party and between the agent and the principal. Imageview submitted that in this instance there was not a sufficient connection.
Lord Justice Jacob agreed that there were circumstances in which a collateral agreement would not result in a breach of the no conflict rule. However, in this instance he held that Imageview had clearly used its connection with Mr Jack to obtain a benefit for itself; there had been a clear conflict of interest and Imageview had acted in breach of its duties to Mr Jack.
Monies recoverable by Mr Jack
In addition to holding that Mr Jack would not be required to pay any more commission to Imageview, the court also held that Mr Jack was entitled to:
- repayment of all commission already paid to Imageview (even that which was legitimately earned by the company); and
- payment of the £3,000 secret profit made by Imageview.
Comment
This case clearly show that courts will strictly uphold the duties imposed by the law on agents and that it is important that agents bear in mind the need to be transparent, and open and honest in all their dealings.
This type of situation could arise, for example, if a sales agent agreed with one of the principal’s customers (in return for payment by the customer) to assist with visual merchandising or an in-store promotion.
Conversely, principals can capitalise on situations where they find out that their agents are entering into parallel arrangements with the principal’s customers by claiming not only the secret profit earned, but also the commission paid to the agent.
Agents must be vigilant in order to avoid placing themselves in situations where there is a real possibility of conflict of interest; if they allow this to happen they risk losing any commission legitimately received on top of any secret profit. In order to avoid such situations an agent should make full disclosure to his principal and obtain his principal’s express written consent to his other business activities.
Written by Agentlaw Team
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