Football agents: fiduciary duties

Imageview Management Ltd v Kelvin Jack [2009] EWCA Civ 63, an English Court of Appeal case, decided earlier this year, provided the Court with an important opportunity for analysis of the fiduciary duties of an agent.

In a clear and concise judgment, Lord Justice Jacob put the issue succinctly: “What if a footballer’s agent, in negotiating for his client, makes a secret deal with the club for himself on the side?”

The footballer in question was Kelvin Jack, Trinidad and Tobago’s international goal keeper.  He had instructed an agent, Mr Berry, to act for him in a proposed move to Dundee United.  Mr Berry operated through a company known as Imageview Management Ltd.  In the course of negotiations between Berry and Dundee United, and unknown to Jack, it was agreed that Dundee United would pay Imageview a fee of £3,000 for getting Jack a work permit. 

When Jack discovered what had taken place, he ceased paying commission to Imageview, and sought repayment of all commission already paid.  When he asked Berry why the payment had been concealed from him, Berry replied that “…it was none of your business.”

Berry was proved wrong.  The Court of Appeal held that no further commission was payable, and, in addition, all commission already paid to Imageview was to be refunded to Jack.  This draconian remedy illustrates the seriousness with which the law regards breaches of fiduciary duties.  In the words of Jacob LJ (at para 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.”

Jacob LJ draws on three significant cases on fiduciary duties: principally Boston Sea Fishing v Ansell (1888) 39 Ch. 339, but also Andrews v Ramsay [1903] 2 KB 635 and Rhodes v Macalister (1923) 29 Com Cas 19.  His analysis of these authorities illustrates that the rules against secret profits have long been established, and yet cases continue to arise of agents failing to understand the law in this area.  Significantly, it is clear that where the agent honestly believes that what he is doing is legal, this makes no difference: the draconian remedy of repayment of all commission remains the standard remedy.

How should the agent have acted?  He could, of course, have refused to enter into any sort of side deal with Dundee United.  Another possibility was open to him.  In the words of Lord Atkin in Rhodes (p. 29):

“The complete remedy is disclosure, and if an agent wishes to receive any kind of remuneration from the other side and wishes to test whether it is honest or not, he has simply to disclose the matter to his own employer and rest upon the consequences of that.  If his employer consents to it, then he has performed everything that is required of an upright and responsible agent.” Thus, had Berry disclosed the payment of £3,000 to Jack, and Jack had consented to receipt by Berry of this sum, Berry would have been able to retain it. 

This case was obviously one which caused the Court of Appeal no difficulty: the surreptitious nature of the agent’s activities left them in no doubt that repayment of the entire commission was the correct remedy.  However, Jacob LJ also took the opportunity to explore less clear cases, in which the agent may be permitted to retain some commission even though in breach of his fiduciary duty.  Again, in the words of Lord Atkin (Keppel v Wheeler [1925] 1 KB 577 at 592):

“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.” 

Clearly, cases in which the agent is held entitled to retain a proportion of his commission are likely to be extremely rare.  The onus will also lie on the agent to establish his right to retain it. 

Finally, it is worth highlighting Jacob LJ’s comment that the law in this area goes back a “…long, long way.”  The law of fiduciary duties of an agent in Scotland and England has been shaped by two Scottish appeals to the House of Lords: York Buildings Co v Mackenzie (1795) 3 Paton’s Appeal Cases 378 and Aberdeen Railway Co v Blaikie 1854 1 Macq 461.  The former case makes interesting reading, not least for the inability of a very large body of Court of Session judges to make up their minds during the course of two hearings.  Lord Monboddo, a favourite of this blogger, played an interesting role in York.  He changed his mind completely between the two Court of Session hearings.  He also did not find it problematic that he was sitting as a judge in the Court of Session case notwithstanding the fact that he had been the judge who had presided over the auction at which the breach of fiduciary duty had occurred.  Rather than seeing this as a difficulty, he took the opportunity to make interjections adding to the evidence of the witnesses in the case.  His role in shaping Scots commercial law has clearly yet to be fully investigated.       

 

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