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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Stupples v Stupples & Co (High Wycombe) Ltd [2012] EWHC 1226 (Ch) (09 May 2012) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2012/1226.html Cite as: [2012] EWHC 1226 (Ch) |
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CHANCERY DIVISION
The Rolls Building, London, WC4A 1NL |
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B e f o r e :
____________________
Robert Frank Stupples |
Claimant |
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- and - |
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Stupples & Co (High Wycombe) Ltd |
Defendant |
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Seb Oram (instructed by Blandy & Blandy LLP) for the Defendant
Hearing dates: 18-20 April 2012
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Crown Copyright ©
HHJ David Cooke:
"1.1 The Company has offered and the Consultant has accepted engagement, on the terms set out in this Agreement, to provide development and investment advisory and consultancy services ("the Services") to the Company in relation to those jobs… listed on Schedule A hereto… ("the said jobs")
1.2 In particular subject to clause 5.1 the Consultant shall use his best endeavours to complete the jobs listed on Schedule A hereto. The Consultant shall use best endeavours to arrange that any spin off agency work … therefrom shall be given to the Company and that the development and investment business of the Company be maintained improved and extended… and in particular but without limitation will use best endeavours to ensure that the Schedule A … jobs remain with the Company and are not terminated by the clients
3.1 The Consultant shall provide Services… from 1 November 2004… for a period of 3 years …unless terminated during such period
(a) by either the Company or the Consultant giving the other not less than one month's notice to expire at the end of the second year; or…
(c) in accordance with clause 16 … [ie for breach]
5.1 The Consultant may with the Company's agreement … hand over certain jobs to others to handle in the Company's office without affecting the Consultant's fees, and in any event the Consultant shall begin an orderly handover of the jobs which are likely to exceed the length of this agreement.
5.3 Success fees shall be payable notwithstanding termination under clauses 3 or 16 hereof… during the subsistence of this agreement or afterwards…
17.1 The Consultant covenants with the Company that… he shall not directly or indirectly… for the period specified in clause 17.2:…
17.1.2 in relation to the Restricted Services [defined in the share sale agreement as, broadly, all the types of services provided by Stupples & Co]… solicit or canvass, accept orders from or otherwise deal with any person… who:
(a) was a client of the Company at any time during the period of this agreement…
And with whom the Consultant had personal dealing in the course of the Company's business…
17.2 The covenants in clause 17.1 shall apply for the period of one year from the expiration date [defined as the end of the period for which Services were to be provided]
17.3 The Consultant… shall not at any time after the expiration date directly or indirectly…:
17.3.2 interfere or seek to interfere with the continuance of the supply of goods and services to or by the Company (or the terms of any such supply)
24.2 Subject to the Consultant having fully complied with this agreement, if the client terminates the Company's contract for any of the said jobs otherwise than due to any act or default or omission on the part of the Consultant and if the Consultant enters into a new contract directly with the client to carry out the job the Consultant shall be entitled to retain the full benefit of the new contract and the Company will not object thereto on the grounds of breach of the provisions of clause 17 hereof…"
i) An invoice for £20,000 in relation to the Hypnos acquisitionii) An invoice for £34,555 in relation to the Hypnos sale, and
iii) An estimated fee of £4,737.68 in connection with an unrelated project
plus VAT in all cases. It is accepted that these amounts are correctly calculated, and would be due but for the matters pleaded by way of defence and counterclaim.
"11. In repudiatory breach of the First Agreement… and/or in breach of fiduciary duty, at a time or times unknown to the defendant but which it believes to have been around the end of 2004 and/ or March 2007, and without the defendant knowing, the claimant approached Hypnos and proposed to them a private fee arrangement by which he would receive a fee of £25,000 in respect of work that he would undertake for Hypnos…
12 Further or alternatively in repudiatory breach of the terms of the First Agreement… and of the Second Agreement… and/or in breach of fiduciary duty, in or around early 2009 and without the defendant knowing, the claimant through a company owned and controlled by him, Old Regency Securities Ltd ("ORS") approached Hypnos and proposed to it that he should provide them with services for reward. The claimant encouraged Hypnos to disinstruct the defendant…"
In each case, particulars are given, which I will not set out. The defendant was alerted to the alleged attempt to disinstruct it in 2009 when in May of that year Mr Garvey asked Mr Stupples for a copy of the agreement setting out fees agreed between Stupples & Co and Hypnos, but Mr Stupples by mistake sent him a copy of a draft agreement, which had been prepared by him, for the Hypnos project to be taken over and completed by his company Old Regency Securities Ltd ("ORS"). Mr Garvey later met Mr Goodman, the financial director of Hypnos, who was seeking to renegotiate the fees payable, and, on Mr Garvey's evidence, told him of the earlier approach by Mr Stupples for a separate personal fee of £25,000. Additional information emerged in the course of disclosure and both written and oral evidence, on which the defendant relies.
"Now I am quite clear that if an agent in the course of his employment has been proved to be guilty of some breach of fiduciary duty, in practically every case he would forfeit any right to remuneration at all. That seems to me to be well established. On the other hand, there may well be breaches of duty which do not go to the whole contract, and which would not prevent the agent from recovering his remuneration; and as in this case it is found that the agents acted in good faith, and as the transaction was completed and the appellant has had the benefit of it, he must pay the commission."
"Despite the warning given by Fletcher Moulton L.J. in In re Coomber; Coomber v. Coomber [1911] 1 Ch 723, 728, this branch of the law has been bedevilled by unthinking resort to verbal formulae. It is therefore necessary to begin by defining one's terms. The expression "fiduciary duty" is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. Unless the expression is so limited it is lacking in practical utility. In this sense it is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty…[he then distinguished duties of skill and care arising at common law and in equity and went on]
This leaves those duties which are special to fiduciaries and which attract those remedies which are peculiar to the equitable jurisdiction and are primarily restitutionary or restorative rather than compensatory. A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary."
"In the circumstances, it is not necessary to consider in any detail the judge's assessment of damages and the right of the defendants to commission…
As to the defendants' claim for commission, even if a breach of fiduciary duty by the defendants had been proved, they would not thereby have lost their right to commission unless they had acted dishonestly. In Keppel v. Wheeler [1927] 1 K.B. 577 the agents admitted an honest breach of fiduciary duty by mistake and yet were entitled to their commission. In the present case the plaintiff did not allege, nor did the judge find, any bad faith by the defendants. Even on the view the judge took therefore there was no ground for depriving the defendants of their commission."
"It is said that the defendants ought not to be called upon to hand over the £50 to the plaintiff because the plaintiff has had the benefit of their services. The principle of Salomons v. Pender (1865) 3 H&C 639 seems to me to govern the case, and it is, in my opinion, amply sufficient to do so. In that case it was held that an agent who was himself interested in a contract to purchase property of his principal was not entitled to any commission from the principal…
I think, therefore, that the interest of the agents here was adverse to that of the principal. A principal is entitled to have an honest agent, and it is only the honest agent who is entitled to any commission. In my opinion, if an agent directly or indirectly colludes with the other side, and so acts in opposition to the interest of his principal, he is not entitled to any commission."
"We are not of course here concerned with the case of an agent who has procured a sale to himself or to a company in which he is interested, so that he has placed himself in a position where his interest conflicts with his duty to his principal; nor are we concerned with a case where an agent has received a secret commission from the purchaser, an act which has been regarded as per se dishonest…
I am satisfied that, in informing the prospective purchaser before informing their vendors, the respondents, the appellants did indeed commit a breach of duty to the respondents… But there is no question here, in my judgment, of any dishonesty or bad faith on the part of the appellants…
In these circumstances, having regard to the decision of this Court in Keppel v Wheeler, I can see no basis for depriving the appellants of their commission."
and Purchas LJ concurring said:
"In these circumstances it is not possible to allege realistically that [the agent] acted in any way other than under an honest mistake of his position and of the facts. This seems to me to distinguish this case from those cases where an agent receives an undisclosed commission or bribe and falls clearly within the sort of breach contemplated in the judgment of Atkin LJ, and clearly accepted by Bankes and Sargant LJJ [in Keppell v Wheeler] as being grounds for a claim for damages for breach of contract, but falling short of a breach of the fiduciary relationship which would disentitle the agent from his commission."
"If the Court is satisfied that there has been no fraud or dishonesty upon the agent's part, I think that the receipt by him of a discount will not disentitle him to his commission unless the discount is in some way connected with the contract which the agent is employed to make or the duty which he is called upon to perform. In my opinion, the neglect by the defendants to account for the discounts in the present case is not sufficiently connected with the real subject-matter of their employment. If the discount had been received from the purchasers the case would have been covered by Andrews v. Ramsay; but here it was received in respect of a purely incidental matter; it had nothing to do with the duty of selling. It cannot be suggested that the plaintiff got by one penny a lower price than he would otherwise have got."
Retaining the discount clearly was a breach of fiduciary duty as it amounted to a secret profit. But the remedy was limited because it was held that the breach was in relation to a matter purely incidental to the main function of the auctioneer's employment, to sell the goods. Had it been more closely connected with that employment, for example a payment by the purchaser, the commission would have been lost.
"Having regard to the decision in Andrews v. Ramsay & Co it is clear that the defendant is not entitled to charge any commission in all the cases where he has credited a price to the plaintiffs other than that received by him from the customer. But I am asked to say that he is to have no commission in any case where he acted properly under his agency as well as in the cases where he acted improperly. Having regard to what is said in Andrews v. Ramsay & Co, I feel there is a difficulty about the matter, but the conclusion I have come to is this, that the doctrine there laid down does not apply to the case of an agency where the transactions in question are separable, as I think they are in this case, and does not entitle the principal to refuse to pay commission to his agent in cases where he has acted honestly because there are other cases in which the agent, acting under the same agreement, has acted improperly and dishonestly. I think, therefore, that in this case in every instance where the transaction is one in which the defendant has acted within the terms of his contract, and has credited his principals with the full amount received by him from the customer, the commission ought to be allowed, but in all the instances in which he has acted dishonestly it should be disallowed."
This in my view goes no further than that if the agent has acted in a number of matters and is in breach of fiduciary duty in some but not others, the circumstances may be such that they can be treated as separate. It does not show that an agent who is found to have acted in breach of fiduciary duty in relation to a particular matter may nevertheless retain his commission in that matter.
"[6] … The law imposes on agents high standards. Footballers' agents are not exempt from these. An agent's own personal interests come 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 interest to get in the way without telling him. An undisclosed but realistic possibility of a conflict of interest is a breach of your duty of good faith to your client…
[after citing from the judgments of Bowen and Cotton LJJ in Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch D 339, [1886–90] All ER Rep 65 he continued]
[12] In those days the courts were apt to use the word 'fraud' for a breach of an agent's fiduciary duty. These days such use can perhaps inflame matters and detract from the debate. The term used does not matter, it is the breach of duty which does. This appears best from the judgment of Fry LJ ((1888) 39 Ch D 339 at 368–369, [1886–90] All ER Rep 65 at 75):
'In my judgment, the conduct of Ansell in so dealing was a fraud—a fraud on his principals—a fraud, not according to any artificial or technical rules, but according to the simple dictates of conscience, and according to the broad principles of morality and law, and I think it is the duty of the Courts to uphold those broad principles in all cases of this description.
We were invited to consider the state of mind of Mr. Ansell; whether he thought it wrong; in other words we are invited to take as the standard for our decision the alleged conscience of a fraudulent servant. I decline to accept any such rule as one on which the Court is to decide such questions.'
[13] It is evident that the court felt it necessary to state the principles forcefully—witness Bowen LJ's reference to the 'large portion' of agents he thought were doing undisclosed side deals for themselves.
[14] The effect of Ansell's breach of duty was that he had to account for the commissions received and that he was not entitled to outstanding salary which otherwise would have been due. That clearly governs Imageview's claim for outstanding commission which would otherwise have been due.
[15] Note also that it did not matter whether or not Ansell thought he was doing wrong. So also here. It does not matter whether Mr Berry thought it was all right to make the side deal, as he may have done if a practice of side deals exists in the world of football agents...
[16] Fifteen years on from Boston Deep Sea Fishing and Ice Co v Ansell there was the case of Andrews v Ramsay & Co ... It was because this case was the principal authority upon which the judge based his decision that Scott Baker LJ gave permission for this second appeal, saying that there was a question of principle as to whether it should be followed. We have had more authorities cited. And a search reveals that Andrews v Ramsay & Co has been regularly cited down the years. Never, so far as I can see, has it been doubted…
[36] Mr Lopian submitted that Hippisley v Knee Bros demonstrated that an agent could legitimately try to make a profit 'on the side' which was not regarded as so serious that his entire commission became repayable. Mr Lopian fastened on the phrases 'in some way connected', 'not sufficiently connected' and 'purely incidental matter' in Lord Alverstone CJ's judgment and 'several duties to be performed' in the judgment of Kennedy J…
[44] I accept Mr Lopian's submission that there can be cases of harmless collaterality. And that there can be cases where there is just an honest breach of contract such as Keppel v Wheeler. But this is simply not such a case. This is a case of a secret profit obtained because Mr Berry/Imageview was Mr Jack's agent. And there was a breach of a fiduciary duty because of a real conflict of interest. That in itself would be enough, but there is more: the profit was not only greater than the work done but was related to the very contract which was being negotiated for Mr Jack. Once a conflict of interest is shown, as Atkin LJ said in the last passage quoted, the right to remuneration goes…
[46] I would also observe this: that none of the cases relied upon by Mr Lopian involve a direct conflict of interest between that of the agent and of his principal: they do not involve any question of a breach of fiduciary duty arising from such a conflict. Nor do any of the cases involve a secret payment to the agent from the very party with whom the agent is dealing on his principal's behalf. It is in such cases that the Andrews v Ramsey principle applies with its full rigour."
"…I am writing to confirm the matters we discussed in connection with the end of your 3 year consultancy agreement that expires at the end of this month…
… the Wantage development is one of two major instructions that overhang the end of your consultancy and we agreed you will continue to handle this instruction as an ad hoc consultant…
The disposal of the Hypnos site and the acquisition of a new facility is the other major instruction that will overhang the end of your consultancy and here we agreed that the existing fee arrangement will continue in respect of the disposal… but... fees relating to any [acquisition] will be shared 50/50…"
"I have been shown your email to Bob [Stupples] of 15 December… the picture you paint is wholly misleading.
…I am unhappy with the way the transaction has moved but that is a criticism of the property market and not Bob. He has as before my total support in this project…
…your email has brought to the surface something that I think is now clearly unfair- and that is your sharing arrangements. Bob has worked now for over four years on this project since 'retiring' without earning… I understand he will only benefit from one third of your fee whereas he is doing all the work. I would like you to know I feel it is time for you both to sit down and revise your historical arrangements with something that rewards him more for his efforts. "
What Mr Garvey was not told was that Mr Stupples had drafted this letter to be sent by Mr Keen (p332), though he no doubt suspected some involvement. Mr Garvey said that Mr Keen had asked him to write it, though when Mr Keen was asked he was clearly unfamiliar with the letter and could only say that he had 'probably' done so but "I honestly don't remember", and he had 'possibly' discussed the content with Mr Stupples beforehand. He said he did not remember the letter, and it may have been that the draft went to Mr Goodman rather than himself. It was put to him that his involvement with this letter and those surrounding it was 'nominal', to which he responded "Totally". To the suggestion that it was more likely Mr Stupples had asked if he could send a letter in his name, Mr Keen said "Possibly, I can't remember".
"…I feel I must take some positive action and therefore with great regret would be obliged if you could accept this letter as terminating your instructions forthwith.
Bob will be instructed to handle the new sale of the site from now on…
Thank you for your help in the past but I am sure you realise that this rather quaint and historic arrangement you have with Bob is not commercially attractive to us."
"…This letter is coming from me not [Bob]… I do wonder bearing in mind the amount of extra work he has put into it, whether or not we should re-look at our arrangements with Stupples & Co…as you know we have re-marketed the site and are looking for a reduction in fees bearing in mind the drop in value and the current economic climate."