Summary

The burden of proof lay on the agent to show that his principal had given full informed consent to an arrangement between the agent and a third party, including the fact that the third party would be making a payment to the agent, and if the agent could not discharge the burden he would not be allowed to keep the payment.

Facts

The claimant, 'A', claimed that the defendants were liable, inter alia, to account for sums paid to them by a newspaper, when acting as her public relations consultants. The second defendant, MCA, which was the company through which the first defendant ('C') acted, counter-claimed for several sums totalling £4,970, by way of unpaid commissions. A became pregnant with octuplets and through a solicitor friend contacted the News of the World. No agreement was concluded but a financial offer was made, including a fee for an initial interview of £50,000. C was engaged on oral terms which included a commission of 20% on earnings from contracts arranged by him. C then negotiated terms with the News of the World, which included the payment to MCA of the commissions which it was contractually entitled to receive from A (£10,000 on the first payment). C also negotiated a separate contract with the News of the World to offer public relations advice and consultancy in relation to the newspaper's part in the breaking of the story. The fee for this was £15,000. A's case was that C, or MCA, was the agent for her when C spoke to the newspaper and agreed to perform services for the News of the World in return for a fee. She argued that therefore MCA could not keep the £15,000 fee for itself but was accountable for it to its principal. A also claimed for a commission paid by the Sun to MCA for an interview with her sister and £200 for an error made in calculating a commission (this was agreed). MCA counter-claimed for several sums by way of commission to which it said it was entitled but which A had not paid. A claimed to have paid in cash.

Held

(1) This was a case where, under the law of agency, a payment received by an agent from a third party might be one which the agent was not allowed to keep for himself, notwithstanding that the agent had no consciously improper motive in accepting it, and notwithstanding that the agent might have believed - possibly correctly - that there would be no damage to the interests of his client from what he had agreed to do for the third party (Anangel Atlas Compania Naviera SA v Ishikawa-Harima Heavy Industries Co Ltd (1990) 1 Lloyd's Rep 166). (2) There was an important exception to this principle which was that, if the principal knew about the arrangement between the agent and the third party, including the fact that the third party would be making a payment to the agent, and if the principal gave a "fully informed consent" to the agent receiving the payment, then the principal could not demand that the agent should account to him for the payment. (3) The evidential burden of proof of establishing that he had told A about the £15,000 fee from the newspaper fell on C and he had not discharged it. (4) Despite the fact that C had acted honestly and in good faith and no conflict arose between MCA's duty to A and its interests under its relationship with the newspaper, MCA was not entitled to retain the payment from the newspaper. (5) The principle in Anangel (supra) did not apply only where the receipt from the third party was infected by the sort of dishonesty normally associated with the pejorative word "bribe". (6) A's claim against MCA succeeded. (7) There was no justification for the claim for the commission in respect of A's sister's interview. (8) A had failed to prove that she had paid the disputed commissions and MCA succeeded on its counterclaim.

Claim and counterclaim successful.