Part 1 Chapter 3

Relations between a Principal and Agent

Contents

1â Introduction

The purpose of this chapter is to provide an overview of the legal obligations that an agent owes to his principal. These include, for example, the duty to carry out contractual obligations; the duty to obey the principal’s instructions; that the agent must not exceed his authority; the performance of contractual duties; that the agent must exercise due care and skill; the duty not to allow any conflict of interest; the fiduciary duties, not to take a bribe or make a secret profit; and the duty to account. The chapter then outlines the rights of an agent, before moving on to discuss the implications of a disclosed agency, a situation where the third party knows of the existence of the principal, and of an undisclosed agency, a situation where the agent acts for a principal who is not disclosed to the third party. Finally, the chapter deals with termination of the agency.

2â Duties of an agent

An agent acting for a principal is subject to a wide range of legal obligations, which are imposed either expressly within an agency agreement or impliedly. The duties owed by an agent to his principal have been classified into two very wide categories, those that arise from the contract between the two parties, and those that arise in equity, which has a strong influence over the duties

of agents.1 The duties imposed on an agent were succinctly summarised in Armstrong v. Jackson by McCardie J, who stated:

The position of principal and agent gives rise to particular and onerous duties on the part of the agent, and the high standard of conduct required from him springs from the fiduciary relationship between his employer and himself. His position is confidential. It readily lends itself to abuse. A strict and salutary rule is required to meet the special situation. The rules of English law as they now exist spring from the strictness originally required by Courts of Equity in cases where the fiduciary relationship exists.2

(a)â To obey the principal’s instructions

One of the most obvious duties of an agent relates to his obligation to perform the instructions or directions provided by the principal. The operation of this duty was illustrated in Turpin v. Bilton,3 a case that concerned a claim made against an insurance broker who breached his principal’s instructions to arrange for the insurance of the plaintiffs’ ship, which subsequently became lost at sea. The court held that the agent was liable for not following the principal’s instructions.4 An agent is not required to follow the instructions of his principal if they would be void under the common law or under primary legislation.5 Watts noted that:

An agent who has been authorised to act illegally, but has not yet acted, plainly has no rights against the principal to so act. Any contract conferring such a mandate would itself be unenforceable for illegality. Not only would the principal have its normal power to withdraw its mandate, but there could be no liability on an unenforceable agreement. Equally, a principal could not oblige an agent to act illegally. Where terms as to illegal conduct can be severed from a contract of agency, the respective positions of the principal and agent will be governed by the remainder of the contract.6

There have been two significant recent cases on the effect of illegality of an agent’s conduct, Stone & Rolls Ltd v. Moore Stephens (a firm)7 and Safeway Stores Ltd v. Twigger.8 In the first case, Mr. Stojevic, the beneficial owner and sole directing mind of Stone and Rolls Ltd (‘Rolls’), had used Rolls as a vehicle for defrauding banks, and the principal victim of the frauds (‘the claimant’)

1R. Munday, Agency: Law and Principles (Oxford University Press, Oxford, 2010) 149.

2[1917] 2 KB 822, 826.â 3â (1843) 5 Man. & G 455.

4Also see Dufresne v. Hutchinson (1810) 3 Taunt. 117 and Williams v. Evans (1866) LR 1 QB 352, as cited in Munday, above, n. 1, at 151.

5See, e.g., Cohen v. Kittell (1889) 22 QBD 680 and Cheshire & Co. v. Vaughan Bros & Co. [1920] 3 KB 240.

6P. Watts, ‘Illegality and agency law: authorising illegal action’ (2011) 3 Journal of Business Law 213, 216.

7[2009] UKHL 39; [2009] 1 AC 1391.

8[2010] EWCA Civ 1472.

31 2â Duties of an agent

primary legislation, including, for example, the Sales of Goods and Services Act 1982.

(c)â To perform contractual obligations

Where there is an explicit contract between a principal and an agent, the duties and responsibilities of both parties are regulated by this agreement. In this situation, the obligations imposed on the agent are very strict; there is little scope for the obligations to be varied and if the instructions from the principal are not carried out by the agent, he will be liable for damages. However, if the instructions provided by the principal to the agent are in vague terms, the agent may not be held liable if ‘he acts on a reasonable interpretation of them’.13 Nonetheless, if the instructions are unclear, the agent is required to ask the principal to elucidate the instructions.14 Bradgate took the view that ‘an agent acting under a contract is contractually obliged to perform his duties undertaken under that contract and is liable for breach of contract if he fails to perform’.15 The impact of this rule was illustrated in Turpin v. Bilton, where an action was brought against an insurance broker for not insuring the plaintiff ’s ship. It was alleged that the broker failed to insure the ship as requested by the principal, which was subsequently lost at sea.16 The court held that the broker was financially accountable for the monetary value of the ship. Another case that illustrates this point is Bertrom, Armstrong & Co. v. Godfray.17 In this case an agent was instructed by the principal to sell shares ‘when the funds should be at 85 per cent, or above that price’. Sir John Leach, MR stated that:

When an agent acts under a general authority he is bound to act for his principal as he would act for himself; when he acts under a particular authority, and for a special purpose, he has no discretion. If he thinks fit to accept such a commission, he must perform that commission according to his duty.18

An agent is generally not allowed to delegate his obligations, unless the principal has agreed for this act of delegation to occur. This is commonly referred to as delegatus non potest delegare; according to Mortimer ‘even where a person in a fiduciary position is authorised to delegate, he cannot authorise sub-delegation unless his power of delegation specifically allows for that’.19 It is important to note, however, that this maxim is only a ‘prima

13See Ireland v. Livingstone (1872) LR 5 HL 395.

14European Asian Bank AG v. Punjab & Sind Bank (No. 2) [1983] 2 All ER 508.

15Bradgate, above n. 11.â 16â (1843) 5 Man. & G 455.

17 (1830) i Knapp 381.â 18â (1830) i Knapp 383.

19A. Mortimer, ‘Trustees and investment management: Part 2’ (1994) 3 Private Client Business 160, 164. Also see Alan W. Eccles ‘Legislative comment: investing in the future’ (2006) 5 Scots Law Times 23, 25–6.

facie rule which can be overridden if the enabling legislation so permits’.20 Furthermore, the agent is permitted to delegate the execution of his duties provided he has the consent of the principal. This issue arose in the decision of Court of Appeal in De Bussche v. Alt.21 In this case, the agent was employed to sell a ship in the Far East, delegated this role to a sub-agent, who purchased the ship for herself and then sold it for a large profit. The court decided that there was privity of contract between the principal and sub-agent, who was therefore under a contractual obligation to remit her financial gain to the principal.22 Thesiger LJ took the view that the maxim delegatus non potest delegare has a twofold application. First, an agent is prevented ‘from establishing the relationship of principal and agent between his own principal and a third person’ and secondly, ‘an agent cannot, without authority from his principal, devolve upon another obligations to the principal which he has himself undertaken to personally fulfil’.23 There are, however, a number of exceptions to this rule, including ‘exigencies of business’Â .24 Thesiger LJ went on to state:

[Such an exception] may and should be implied where, from the conduct of the parties to the original contract of agency, the usage of trade, or the nature of the particular business which is the subject of the agency, it may reasonably be presumed that the parties to the contract of agency originally intended that such authority should exist, or where, in the course of the employment, unforeseen emergencies arise which impose upon the agent the necessity of employing a substitute.25

(d)â Not to allow any conflict of interest

An agent is under a strict obligation not to allow his interests to conflict with those of his principal. This is a fiduciary duty owed to the principal. This point has been emphasised by the courts on numerous occasions. For example, in

Aberdeen Railway Co. v. Blaikie Bros, Lord Cranworth stated:

It is a rule of universal application that no one, having [fiduciary] duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interest of those who he is bound to protect.26

20Allingham v. Minister of Agriculture [1948] 1 All ER 780, DC.

21(1878) 8 Ch. D 286.

22A. Tettenborn, ‘Principals, sub-agents and accountability’ (1999) 115 Law Quarterly Review (Oct.) 655, 657. Also see G. McCormack, ‘Conflicts of interest and the investment management function’ (1999) 20(1) Company Lawyer 2, 5.

23(1878) 8 Ch. D 286, 310.

24P. Dobson, and R. Stokes, Commercial Law (7th edn, Sweet and Maxwell, London, 2008), 455.

25(1878) 8 Ch. D 286, 310–11.

26(1854) 1 Macq. 461, 471, HL, cited in Bradgate, above n. 11.

Dowrick noted that the judges:

did not pretend to be giving effect to what they might presume to have been the common intention of the parties in the particular case, nor did they seek for the elements of a valid contract between the parties before enforcing these rules. On the contrary, the judges imposed these duties and disabilities on agents generally … only if it happens in a particular case of agency that the parties expressly or tacitly agree on these very duties, and there exists a contract between them, do these incidents acquire the character of contractual terms.27

The operation of this rule was illustrated in McPherson v. Watt.28 In this case, Watt, who was an advocate, was instructed to sell a property by his principal. He did not disclose to his principal that he had in fact arranged for his brother to purchase the house for himself. Unsurprisingly, the principal refused to complete the contract.

The purpose of the rule is also to promote a better level of conduct between the agent and principal, a point emphasised in Rhodes v. Macalister: ‘the more that principle is enforced the better for the honesty of commercial transactions … it cannot be repeated too often to commercial men– that in matters of agency they must act with strict honesty’.29 In Rhodes, the agent acted on the instructions of his principal to find someone who would be willing to sell mineral rights to the principal and informed the principal that suitable properties could be found for between £8,000 and £10,000. The agency agreement specified that provided the agent was able to find a seller willing to sell for less than £19,000, he was entitled to keep the difference. The agent located a seller of suitable properties for £6,625 and claimed the difference. However, the agent had negotiated with the seller for an additional commission based on the sale. Banks LJ took the view as follows:

[w]hat was [the agent’s] position and what was his duty[?] Of course, as long as he was acting for the vendors of these properties only he was perfectly entitled to suggest to them that they should fix a price which would include a commission to himself, and he would be perfectly justified in receiving that commission or putting forward the price to an intending purchaser as the only price which he could persuade the vendors to give, so long as that was his real opinion. But the moment he accepted the position of agent for the intending purchasers his entire position in law changed. He could no longer consistently with his duty, unless he disclosed the facts, act as agent for the vendors to procure purchasers with the result of some commission or payment to himself. He could not retain that position consistently with his duty to the purchasers of obtaining these properties at as low a price as he possibly could … the moment he accepted the position of agent to procure these properties as cheap as possible for the intending purchasers his interest and duty conflicted, and he could no longer act honestly towards the intending purchasers without disclosing to them that in that figure

27F. Dowrick, ‘The relationship of principal and agent’ (1954) 17(1) Modern Law Review 24, 31.

28(1877) 3 App. Cas. 254.â 29â (1923) 29 Com. Cas. 19, 28.

course of the separate agency to sell that house and, consequently, the facts could not be disclosed to the plaintiff for then the defendants would be in breach of duty to … the owner of ‘Vertigo’.36

Nolan took the view that:

The logic of the judgment is that the contract between broker and client is the foundation of their relationship. It is, practically speaking, inconceivable that the contract should oblige the broker to disclose to that client information imparted to the broker in confidence by another client. The fiduciary relationship between client and broker must ‘accommodate itself’ to the terms of the contract between them, so that the fiduciary duties to which the broker becomes subject never include a duty to make disclosure of information to a client, where such disclosure would involve breach of a duty of confidentiality owed to another client.37

Therefore, the estate agents could not be prevented from acting for other principals.38

(e)â Not to make a secret profit

It is a very strict rule of agency that an agent or trustee must not make a secret profit. This was illustrated in Boardman v. Phipps.39 In this case, a will trust had a very large holding of 8,000 shares in a private company. The trustees of the trust were the elderly widow, the testator’s daughter and an accountant; Boardman was their solicitor. The trustees were unhappy with the company’s accounts and Boardman and one of the testator’s sons were appointed proxies under proxy forms signed by the daughter and the accountant and attended the company’s annual general meeting. Shortly afterwards, Boardman and the son decided to purchase 22,000 £1 shares in the company. This would have enabled them to control the company and make a repayment of capital to the shareholders. The accountant agreed with this decision and the daughter was informed of it, but not the elderly widow. During the discussions to buy the shares, Boardman and the son made use of the information they had received at the company’s annual general meeting, and were further able to gain a comprehensive awareness of the financial assets of the company in their role representing the trustees. After the negotiations, Boardman and the son agreed to purchase 14,567 shares and the transaction proved to be very profitable. Boardman then wrote to the beneficiaries of the trust, including the daughter and another son of the testator who had hitherto known nothing of the negotiations (the plaintiff), outlining the negotiations and asking them whether they had any objection to his personal interest in the purchase. The plaintiff brought an action claiming an account of

36I. Brown, ‘Divided loyalties in the law of agency’ (1993) 109 Law Quarterly Review (April) 206, 207.

37R. Nolan, ‘Conflicts of duty: helping hands from the Privy Council?’ (1994) 15(2) Company Lawyer 58, 59.

38For a more detailed commentary on the decision by the Privy Council, see Brown, above n. 36.

39[1967] 2 AC 46.

It is important to note that the fiduciary duties owed by an agent to his principal do not arise from the agency agreement, but are based on trust. For an agent to be in breach of a fiduciary duty, there is no need for the agent’s behaviour to be dishonest, but his behaviour must be deliberately intentional and involve an element of falseness. An agent is under a duty not to place himself in a situation where his interests conflict with those of the principal. This rule has been confirmed by the judiciary on numerous occasions and has been described as one of an agent’s most important obligations.44 For example, Lord Cairns LC stated emphatically in Parker v. McKenna:

Now, the rule of this Court, as I understand it, as to agents, is not a technical or arbitrary rule. It is a rule founded upon the highest and truest principles of morality. No man can in this Court, acting as an agent, be allowed to put himself into a position in which his interest and his duty will be in conflict.45

Lord Cranworth LC adopted a similar robust approach toward this duty in

Aberdeen Railway Co. v. Blaikie Bros, quoted above.46

(g)â Not to take a bribe

Agents are also under a duty not to accept bribes or a secret commission.47 If an agent does accept a bribe or secret commission, he will be in breach of a fiduciary duty and must account for it to the principal.48 In Wilson v. Hurstanger Ltd, the court considered if a secret commission amounted to a breach of duty by the agent.49 In this case, the defendants (the principals) borrowed £8,000 to pay off the debt on their mortgage, the agent broker’s fee of £1,000 and to use the remainder for their own personal use. The lender agreed to pay the broker an arrangement fee and a commission of £240. The defendants defaulted on their mortgage payments and in the following court proceedings the defendants counterclaimed that the loan agreement was void or voidable because of the payment of a commission. In relation to the issue of a secret profit, the court held that the payment was not a secret commission.

A bribe has been defined as a ‘secret profit’,50 or a ‘commission or other inducement which is given by a third party to an agent … which is secret from the principal’.51 Slade J stated that the definition of a bribe in a civil law context

44B. Markesinis and R. Munday, An Outline of the Law of Agency (Butterworths, London, 1992) 109.

45(1874) LR 10 Ch. App. 96, 118. See M. Conaglen, ‘Public-private intersection: comparing fiduciary conflict doctrine and bias’ (2008) Public Law (Spring) 58, 62.

46{1854) Macq. 461, 471. Other cases that have adopted a similar stance include Bentley v. Craven (1853) 18 Beav. 75, 76 and Oliver v. Court (1820) 8 Price 127.

47A bribe was famously defined in Industries and General Mortgage Co. Ltd v. Lewis [1949] 2 All ER 573, 575.

48Munday, above n. 1 at 68.

49[2007] EWCA Civ 299; [2007] 1 WLR 2351, CA (Civ Div).

50Bradgate, above n. 11, at 202.

51Anangel Atlas Compania Naviera SA v. Ishikawajima-Harima Heavy Industries Ltd [1990] 1 Lloyd’s Rep. 167, 171.

has three important aspects: first, ‘that the person making the payment makes it to the agent of the other person with whom he is dealing’; secondly, ‘that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing’; thirdly, ‘that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person’s agent’.52

Lord Romer in Hovenden and Sons v. Millhoff stated that:

If a gift be made to a confidential agent with the view of inducing the agent to act in favour of the donor in relation to transactions between the donor and the agent’s principal and that gift is secret as between the donor and the agent– that is to say, without the knowledge and consent of the principal– then the gift is a bribe in the view of the law.53

The courts have also determined that it is irrelevant whether the bribe influenced the activities or decisions of the agent.54 In Rhodes v. Macalister, Bankes LJ took the view that:

There seems to be an idea prevalent that a person who is acting as agent or servant of another is committing no wrong to his employer in taking a commission or bribe from the other side, provided that in his opinion his employer or principal does not have to pay more than if the bribe were not given. There cannot be a greater misconception of what the law is, or what the duty of a servant or agent towards his master or principal in reference to such matters is, and I do not think the rule can too often be repeated or its application more frequently insisted upon.55

This was illustrated in Boston Deep Sea Fishing and Ice Co v. Ansell.56 In this case, Ansell was employed as Boston Deep Sea Fishing’s managing director over a five year period. He was also secretly a director of a boat-building company and placed several orders with the boat-building company in exchange for bonuses and a financial commission for an additional contract he made with that company. Boston Deep Sea Fishing brought an action against Ansell for an account of the secret commission and bonuses received by him and the court held that acceptance of the bonuses and commission was grounds for dismissal and that Ansell must account to the company for the money received.57

In Lister v. Stubbs, the plaintiffs, who were a manufacturing company, employed the defendant to purchase certain types of material the plaintiffs used for their business. Under a ‘corrupt bargain’, the defendant took large sums by way of commission from one of the firms from which he purchased

52Industries and General Mortgage Corp. v. Lewis [1949] 2 All ER 573, 575.

53(1900) 83 LT 41, 43.

54See, e.g., Hovenden and Sons v. Millhoff (1900) 83 LT 41 and Anangel Atlas Compania Naviera, above n. 51.

55(1923) 29 Com. Cas. 19, 20.

56(1888) 39 Ch. D 339.

57This decision was later approved in Sinclair v. Neighbour [1967] 2 QB 279.

may be subject to criminal proceedings for payment of a bribe under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906, or the Prevention of Corruption Act 1916. Under Public Bodies Corrupt Practices Act 1889, section 1(1):

Every person who shall by himself or by or in conjunction with any other person, corruptly solicit or receive, or agree to receive, for himself, or for any other person, any gift, loan, fee, reward, or advantage whatever as an inducement to, or reward for, or otherwise on account of any member, officer, or servant of a public body as in this Act defined, doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which the said public body is concerned, shall be guilty of a [criminal offence].67

Under Prevention of Corruption Act 1906, section 1:

If any agent corruptly accepts or obtains, or agrees to accept or attempts to obtain, from any person, for himself or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do, or for having after the passing of this Act done or forborne to do, any act in relation to his principal’s affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal’s affairs or business; or

If any person corruptly gives or agrees to give or offers any gift or consideration to any agent as an inducement or reward for doing or forbearing to do, or for having after the passing of this Act done or forborne to do, any act in relation to his principal’s affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal’s affairs or business; or

If any person knowingly gives to any agent, or if any agent knowingly uses with intent to deceive his principal, any receipt, account, or other document in respect of which the principal is interested, and which contains any statement which is false or erroneous or defective in any material particular, and which to his knowledge is intended to mislead the principal

he shall be guilty of a [criminal offence].68

It was generally accepted by a majority of commentators that these laws were ineffective and were inconsistent with the Organisation of Economic Co-operation and Development’s Bribery Convention 1998.69 These deficiencies resulted in the publication by the Law Commission of a consultation paper in 2007,70 which resulted in the introduction of the Bribery Act 2010. The Act was designed to be ‘the toughest anti-corruption legislation in the world’.71 The Bribery Act 2010 criminalises bribery under three categories: general bribery

67Public Bodies Corrupt Practices Act 1889, s.1(1).

68Prevention of Corruption Act 1906, s.1.

69See, e.g., T. Pope and T. Webb, ‘The Bribery Act 2010 (Legislative Comment)’ (2010) 25(10)

Journal of International Banking Law and Regulation 480.

70Law Commission, Reforming Bribery, Consultation Paper No. 18532 (London, 2007).

71B. Breslin, D. Ezickson and J. Kocoras, ‘The Bribery Act 2010: raising the bar above the US Foreign Corrupt Practices Act (2010) 31(11) Company Lawyer 362.

offences; bribery of foreign public officials; and the failure of commercial organisations to prevent bribery.72 In particular, section 1 of the 2010 Act provides that a person is guilty of bribery if he ‘offers, promises or gives a financial or other advantage to another person, and that person intends the advantage (i) to induce a person to perform improperly a relevant function or activity, or (ii) to reward a person for the improper performance of such a function or activity’;73 or if he ‘offers, promises or gives a financial or other advantage to another person, and the person knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity’.74

Furthermore, an agent is under a duty not to exploit or take advantage of his position for a personal gain. One of the leading and seminal cases here is Keech v. Sandford,75 which involved the lease of Rumford Market, which was developed by a trustee for the advantage of a minor. Just before the lease was due to terminate the trustee requested the renewal of the lease on behalf of the trust estate. The landlord declined as he was dissatisfied with the guarantee for the rent, which resulted in the trustee personally renewing the lease. Later, the minor sought an assignment of the lease and a percentage of the profits. King LC stated that:

I must consider this as a trust for the infant; for I very well see, if a trustee, on the refusal to renew, might have a lease to himself, few trust-estates would be renewed to cestui que use; though I do not say there is a fraud in this case, yet he should rather have let it run out, than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease: but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew to cestui que use.76

Therefore, the underlying principle of this case is ‘one of public policy. It reflects a desire to dissuade parties from unscrupulously using their fiduciary position to their own personal advantage.’77

(h)â To account

An agent is under a duty to account to the principal for the property of the principal in his possession, or if he receives goods or money from or on behalf of

72D. Aaronberg and N. Higgins, ‘The Bribery Act 2010: all bark and no bite…?’ (2010) 5 Archbold Review 6.

73Bribery Act 2010, s.1(2).

74Ibid., s.1(3). For an excellent commentary on the offences created by the Act see S. Gentle, ‘Legislative comment: the Bribery Act 2010, Part 2: the corporate offence’ (2011) 2 Criminal Law Review 101.

75 (1726) Sel. Cas. Ch. 61.â 76â Ibid. 62.

77Markesinis and Munday, above n. 44, at 117. For an excellent discussion of this case see A. Hicks, ‘The remedial principle of Keech v. Sandford reconsidered’ (2010) 69(2) Cambridge Law Journal 287 and R. Lee, ‘Rethinking the content of the fiduciary obligation’ (2009) 3 Conveyancer and Property Lawyer 236.

his principal.78 This duty has been described as a personal duty.79 It has been argued by some commentators that the duty to account arises due to the agent’s fiduciary position.80 However, case law suggests that this is not always the position.81 In terms of this duty, an agent who accepts money or goods for his principal must keep them isolated from the agent’s own property. In Foley v. Hill, Lord Cottenham LC stated:

So it is with regard to an agent dealing with any property; he obtains no interest himself in the subject-matter beyond his remuneration; he is dealing throughout for another, and though he is not a trustee according to the strict technical meaning of the word, he is quasi a trustee for that particular transaction for which he is engaged; and therefore in these cases the Courts of Equity have assumed jurisdiction.82

It is possible for the agency agreement to contain clauses as to how the money will be held.

This duty also requires an agent to keep and deliver a full set of accounts to the principal. In Yasuda Fire and Marine Insurance Company of Europe Ltd v. Orion Marine Insurance Underwriting Agency Ltd, Colman J said:

That obligation to provide an accurate account in the fullest sense arises by reason of the fact that the agent has been entrusted with the authority to bind the principal to transactions with third parties and the principal is entitled to know what his personal contractual rights and duties are in relation to those third parties as well as what he is entitled to receive by way of payment from the agent. He is entitled to be provided with those records because they have been created for preserving information as to the very transactions which the agent was authorised by him to enter into. Being the participant in the transactions, the principal is entitled to the records of them.83

In this case, the defendant had acted as an underwriting agent for the principal under several agreements. The court held that because the defendant had acted as an agent, he was under a duty to provide financial records to the principal and that, therefore, the principal was entitled to inspect the records of the underwriting agent following the termination of the agency agreement.84 This approach can be traced back to the decision in Turner v. Burkinshaw, where Lord Chelmsford took the view that ‘it is the first duty of an agent … to be constantly ready with his accounts … this must mean that the agent must be ready to render his accounts when they are demanded’.85

84For a more detailed discussion of this case see E. Fennell, ‘Yasuda Fire & Marine Insurance Co. of Europe Ltd v. Orion Marine Insurance Underwriting Agency Ltd and another’ (1995) 3(4) Journal of Financial Regulation and Compliance 391. Also see S. Honeyball and D. Pearce,

‘Contract, employment and the contract of employment’ (2006) 35(1) Industrial Law Journal 30.

85(1867) LR 2 Ch. App. 488.