[PRIVY COUNCIL]

AND

[APPEAL FROM THE COURT OF APPEAL OF BERMUDA]

Agency - Estate agent - Conflict of interest - Agent acting for plaintiff and vendor of adjacent property - Purchaser offering to buy both properties - Agent failing to inform plaintiff of purchaser's agreement to buy adjacent property - Whether material information - Whether agent in breach of duty to plaintiff - Whether entitled to commission

The plaintiff instructed the defendants, a firm of estate agents, to sell his house and agreed to pay them a percentage of the selling price as commission. The owner of an adjacent house also instructed the defendants to sell that house. The defendants showed both houses to a prospective purchaser, whose offer to purchase the adjacent house was accepted. He then offered to buy the plaintiff's house. The defendants did not inform the plaintiff of the agreement to buy the adjacent house. The

plaintiff accepted the purchaser's offer. Sales of both houses were completed. The plaintiff then instituted proceedings against the defendants claiming damages for their breach of duty in failing to disclose material information to him and placing themselves in a position where their duties and interests conflicted. The defendants counterclaimed for their commission on the sale of the plaintiff's house. The judge awarded the plaintiff damages and declared that the defendants were not entitled to commission. The Court of Appeal of Bermuda allowed the defendants' appeal and gave judgment for them on their counterclaim.

On the plaintiff's appeal to the Judicial Committee: -

Held, dismissing the appeal, that since it was the business of estate agents to act for numerous principals, several of whom might be competing and whose interests would conflict, a term was to be implied in the contract with such an agent that he was entitled to act for other principals selling similar properties and to keep confidential information obtained from each principal and that the agent's fiduciary duty was determined by the contract of agency; that since the plaintiff knew that the defendants would be acting for other vendors of comparable properties and would receive confidential information from them, the agency contract could not have included terms requiring them to disclose that confidential information to him, or precluding them from acting for rival vendors, or from trying to earn commission on the sale of another vendor's property; and that, accordingly, although the purchaser's interest in acquiring both properties was material information which could have affected negotiations for the sale price of the plaintiff's house, the defendants were not in breach of their duty in failing to inform the plaintiff of the agreement to buy the adjacent house, which was confidential to the owner thereof, and the defendants' financial interest in that sale did not give rise to a breach of fiduciary duty (post, pp. 213D-E, 214C, E, 215C-F).

New Zealand Netherlands Society "Oranje" Inc. v. Kuys [1973] 1 W.L.R. 1126, P.C. and Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 C.L.R. 41 applied.

North and South Trust Co. v. Berkeley [1971] 1 W.L.R. 470 distinguished.

Per curiam. 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, and the plaintiff did not allege, nor did the judge find, any bad faith by the defendants (post, pp. 216G-217A).

Decision of the Court of Appeal of Bermuda affirmed.

The following cases are referred to in the judgment of their Lordships:

Dunton Properties Ltd. v. Coles, Knapp & Kennedy Ltd.(1959) 174 E.G. 723, C.A.

Hospital Products Ltd. v. United States Surgical Corporation(1984) 156 C.L.R. 41

Keppel v. Wheeler[1927] 1 K.B. 577, C.A.

Lothian v. Jenolite Ltd., 1969 S.C. 111

New Zealand Netherlands Society "Oranje" Inc. v. Kuys[1973] 1 W.L.R. 1126; [1973] 2 All E.R. 1222, P.C.

North and South Trust Co. v. Berkeley[1971] 1 W.L.R. 470; [1971] 1 All E.R. 980

The following additional cases were cited in argument:

Andrews v. Ramsay & Co.[1903] 2 K.B. 635, D.C.

Bray v. Ford [1896] A.C. 44, H.L.(E.)

Brickenden v. London Loan & Savings Co.[1934] 3 D.L.R. 465, P.C.

MacManus (Cec.) Realty Ltd. v. Bray(1970) 14 D.L.R. (3d) 564

Molstad & Co. Ltd. v. Fedoruk(1957) 7 D.L.R. (2d) 574

Price v. Metropolitan House Investment and Agency Co. Ltd.(1907) 23 T.L.R. 630, C.A.

Sykes v. Midland Bank Executor and Trustee Co. Ltd.[1971] 1 Q.B. 113; [1970] 3 W.L.R. 273; [1970] 2 All E.R. 471, C.A.

APPEAL (No. 6 of 1991), with leave of the Court of Appeal of Bermuda, by the plaintiff, Horace Brenton Kelly, from the judgment of the Court of Appeal of Bermuda (Blair-Kerr P., Roberts and Henry JJ.A.) given on 30 November 1989 allowing an appeal by the defendants, Margot Cooper and Helen Cooper (trading as Cooper Associates, a firm) from the judgment of Hull J. delivered on 14 November 1988 in the Supreme Court of Bermuda (Civil Jurisdiction), whereby he awarded the plaintiff $200,000 damages for breach of contract and made a declaration that the defendants were not entitled to commission on the sale of the plaintiff's property, and the defendants' counterclaim for commission was dismissed. The Court of Appeal set aside that judgment and entered judgment for the defendants on their counterclaim.

The facts are stated in the judgment of their Lordships.

David Oliver Q.C. and Robert Powell-Jones for the plaintiff. The defendants as estate agents acting for the plaintiff on the sale of his house owed him contractual and fiduciary obligations. They had a duty to disclose to him information they had obtained which was material to the sale price and a duty not to prefer their own interests to the plaintiff's by effecting a quick sale of the plaintiff's house and the other house to a common purchaser. The defendants were in breach of both those duties. The fact that the purchaser had agreed to buy the adjacent house was material information which should have been disclosed to the plaintiff. He was thus deprived of the opportunity of knowing all the circumstances when considering whether or not to accept the purchaser's offer. [Reference was made to Brickenden v. London Loan & Savings Co. [1934] 3 D.L.R. 465.] The purchaser's agreement to buy the other house was a fact which could have influenced a reasonable man in deciding whether or not to make a counter-offer.

The agent's failure to disclose a material fact is a breach of his contractual and fiduciary duties, which are not necessarily mutually exclusive. To analyse in contractual terms the obligation to disclose material facts is merely to translate into contract that which exists as the result of the fiduciary relationship of principal and agent. The contractual formulation of the agent's duties reflects the fiduciary nature of the relationship, from which the fiduciary duties are derived: see Bray v. Ford [1896] A.C. 44. An estate agent has (1) the contractual duty to tell his principal everything material to the sale of the principal's house and (2) a fiduciary duty of loyalty which requires him to disclose to the

principal that the agent is acting as agent in the sale of another house because of the agent's personal interest in earning commission on that sale.

An agent's confidential relationship with one principal does not absolve him from a duty of disclosure owed to another principal. Once the defendants knew that the purchaser was interested in acquiring both houses, they were under a duty to communicate that information to the plaintiff. By failing to disclose that information to the plaintiff, they placed their own interests above their obligations to him.

The amount recoverable is the same whether breach of contractual duty or breach of fiduciary duty is established, and it is not necessary for the plaintiff to prove loss. He should be compensated for the loss of the opportunity of seeking a higher price from the purchaser. The judge adopted the correct approach and properly awarded more than nominal damages. [Reference was made to Keppel v. Wheeler [1927] 1 K.B. 577 and Dunton Properties Ltd. v. Coles, Knapp & Kennedy Ltd.(1959) 174 E.G. 723.]

Where an agent is in breach of fiduciary duty, as a general rule he is not entitled to recover or retain his commission. The onus is on the agent to justify payment of his commission. Since the defendants were in breach of their fiduciary duties they were not entitled to commission on the sale of the plaintiff's house. [Reference was made to Andrews v. Ramsay & Co.[1903] 2 K.B. 635; Price v. Metropolitan House Investment and Agency Co. Ltd.(1907) 23 T.L.R. 630 and Keppel v. Wheeler [1927] 1 K.B. 577.] An agent may be deprived of his commission even though he has not acted dishonestly.

[Lord Keith of Kinkel. Their Lordships do not need to hear you in relation to the recovery of commission.]

Kenneth Rokison Q.C. and Geoffrey Bell Q.C. (of the Bermuda Bar) for the defendants. It is relevant to take into account (i) that the plaintiff represented himself, (ii) that he chose not to give evidence and (iii) that he chose to call the second defendant as his principal witness.

With regard to materiality the questions are (1) whether the information that the purchaser had agreed to buy the adjacent house was material and, if so, (2) whether the defendants were obliged to disclose that information to the plaintiff. Materiality is a question of fact. To be material, in the sense that the agent must disclose it, the information must be material to the transaction in question. An agent is not obliged to disclose every matter which might have influenced the mind of his principal whether it relates to the particular transaction or not.

The information was not material because the two purchases were independent transactions and one was not contingent on the other. The court can only draw inferences which arise from the basic facts, and it was not a reasonable inference that the purchaser wanted to buy the plaintiff's house because it was next to the other house. The judge erred in saying that the two transactions were connected, because there was no evidence to that effect and it was not a necessary inference. Dunton Properties Ltd. v. Coles, Knapp & Kennedy Ltd., 174 E.G. 723 can be distinguished because in that case there was evidence that the information

was material to the plaintiffs. The burden of proving that the information was material was on the plaintiff. The duty to supply information is merely part of the general duty of an agent to use his best endeavours in furthering the interests of his principal. It is not a duty of strict disclosure, unlike that of underwriters.

An agent is under no obligation to disclose to his principal information which comes to his knowledge not in his capacity as agent for that principal but as agent for some other principal. It would be uncommercial for an agent who is acting for several principals to be under such a duty. [Reference was made to Lothian v. Jenolite Ltd., 1969 S.C. 111.] An estate agent is likely to be selling properties on behalf of more than one principal, especially in a country like Bermuda. There is no authority establishing that an agent is under a duty to breach the confidentiality owed to one of his principals by disclosing information which might be of interest to another of his principals. [Reference was made to Bowstead on Agency, 15th ed. (1985), p. 147; Molstad & Co. Ltd. v. Fedoruk(1957) 7 D.L.R. (2d) 574; Cec. MacManus Realty Ltd. v. Bray(1970) 14 D.L.R. (3d) 564 and North and South Trust Co. v. Berkeley [1971] 1 W.L.R. 470.] If the defendants were under no duty to the plaintiff to disclose information obtained while acting as agents for the vendor of the adjacent house no question of conflict of duties or interests arises.

Where a breach of an agent's contractual duty to disclose information is alleged it is incumbent on the principal to prove his damage, and he must do so on a balance of probabilities. The plaintiff had to prove that if he had been given the information he would have sought a higher price, and that the purchaser would have been prepared to pay it. No evidence as to either element was adduced at the trial. Even if the court would have been entitled to make an assessment of the likelihood of the purchaser's willingness to pay a higher price in the absence of evidence from the purchaser, the plaintiff would in these circumstances have lost the chance of obtaining a higher price, and whatever higher price he would on the evidence have demanded would have to be discounted by reference to that chance. Here, in the absence of any loss suffered by the plaintiff, the trial judge was not entitled to speculate, and the damages awarded, in the event of any breach of duty being established, should have been nominal only. [Reference was made to Sykes v. Midland Bank Executor and Trustee Co. Ltd.[1971] 1 Q.B. 113.]

Oliver Q.C. in reply. The question is whether an ordinary person would consider it material for the plaintiff to know of the purchaser's interest in the other house in deciding whether or not to make a counter-offer to the purchaser. The defendants were under a duty to place the plaintiff in a position to make as full and informed a decision as possible. It was not incumbent on the plaintiff to prove that he would have made a counter-offer. The litigation presupposed that he would have done so.

The transaction in relation to the sale of the adjacent house was not outside the scope of the agency agreement between the defendants and the plaintiff. If an agent acting for a principal in relation to a transaction learns of some fact important to the transaction from an extraneous

non-confidential source, he is bound to disclose the information to his principal. It is not necessarily inconsistent with a continuing duty to disclose relevant information that the agent owes a duty of confidentiality to someone else. The agent's obligation to each principal overrides the confidence in which he received information.

19 October. The judgment of their Lordships was delivered by LORD BROWNE-WILKINSON.

This is an appeal from a judgment dated 30 November 1989 of the Court of Appeal of Bermuda (Blair-Kerr P., Roberts and Henry JJ.A.) allowing an appeal from a judgment of Hull J. dated 14 November 1988 of the Supreme Court of Bermuda (Civil Jurisdiction) awarding the plaintiff, Mr. Kelly, damages in the sum of $200,000, declaring that the defendants, a firm of estate agents trading as Cooper Associates, were not entitled to commission on the sale of the plaintiff's property, Caliban, and dismissing the defendants' counterclaim for such commission. In the Court of Appeal, the judgment below was set aside and judgment was entered for the defendants on their counterclaim.

The plaintiff was at all material times the beneficial owner of Caliban, a house in Tucker's Town in Bermuda, which was built on an oblong-shaped area of land measuring 2.85 acres fronting onto the ocean. Adjacent to Caliban to the west, but separated by a small ravine which prevented direct access from one property to the other, was a house Vertigo built on a similar shaped area of land measuring 2.742 acres also fronting onto the ocean. Vertigo belonged to a Mr. Brant. Although direct access between the two properties was not possible because of the ravine, both properties fronted onto the same beach which, though public, was not much used by outsiders. Access from one property to the other was possible along that beach or along the road.

Since about 1979, the plaintiff had been keen to sell Caliban and had employed a number of estate agents for that purpose, including apparently the defendants. By a letter dated 7 March 1983 the plaintiff formally appointed the defendants as agents to sell Caliban at a price of $3\5m. or such sum as the plaintiff might agree to accept, the defendants to be paid a commission of 5 per cent. of the selling price. Up to 1985, Caliban attracted limited interest and no offers acceptable to the plaintiff had been made.

At a date which is not identified in the evidence the defendants were also instructed by Mr. Brant as agents to sell Vertigo. Both Caliban and Vertigo were available for sale to those who did not have Bermudan status (i.e. to expatriates) with the consent of the Governor, but in practice the Governor did not permit an expatriate to purchase more than one property.

In April 1985 an American, Mr. H. Ross Perot arrived on the islands and approached the defendants with a view to purchasing property. The defendants had previously encountered Mr. Perot in 1983 when they had sought to negotiate a letting of Caliban to Mr. Perot but the negotiations had broken down.

On 19 April 1985 the defendants took Mr. Perot to view both Caliban and Vertigo. On 20 April, Mr. Perot made an offer of $2m. for Vertigo. On the same day he told the defendants that he was interested in making an offer for Caliban and asked the first defendant to sound out what would be the plaintiff's response to an offer in the range of $2m. to $2.5m. gross, i.e., the plaintiff to bear the agent's commission. The first defendant passed on to the plaintiff this indication of interest by Mr. Perot. The plaintiff responded by saying he was interested in selling at $2.5m. but would prefer that sum to be nett of commission. The first defendant told Mr. Perot of the plaintiff's response.

On 22 April Mr. Brant accepted Mr. Perot's offer of $2m. for Vertigo. On the same day Mr. Perot made an offer of $2.5m. gross for Caliban. On 23 April the second defendant took a letter to the plaintiff containing particulars of this offer by Mr. Perot for Caliban. On that occasion, the plaintiff asked her if she thought that Mr. Perot would increase the offer: she told him that her feeling was that he would not, but that certainly there was nothing to prevent the plaintiff from making a counter-offer.

At no time did the defendants tell the plaintiff of Mr. Perot's proposed purchase of Vertigo and it is this fact which has given rise to the present litigation.

Contracts for the sale of Vertigo were exchanged on 14 May 1985 and completed on 16 August. Contracts for the sale of Caliban were exchanged on 17 June 1985 and completion took place on 13 November. The purchaser of Caliban was expressed to be Mr. Perot's son, Mr. Perot junior; at one stage during the negotiation of the contract it was suggested that Mr. Perot's daughters would be the purchasers.

After completion, the plaintiff discovered that Mr. Perot and his family had bought both Caliban and Vertigo. He took the view that his agents, the defendants, should have told him of the Perots' interest in both properties, being material information relating to his sale of Caliban. He refused to pay the commission of $125,000 due to the defendants and proceedings were started by the defendants for its recovery. The plaintiff in turn started cross-proceedings against the defendants. The actions were consolidated, the plaintiff's action standing as the claim, the defendants' claim for the commission being the counterclaim. It is an unfortunate feature of this case that the plaintiff conducted this litigation in Bermuda (but not before the Board) in person. As a result the pleadings are confused and the evidence called by the plaintiff at the trial inadequate. The trial judge sensibly obtained the agreement of counsel for the defendants to the case proceeding on the basis of defined issues.

For present purposes the plaintiff's case can be summarised as follows. (1) The defendants were the plaintiff's agents for the sale of Caliban and as such owed him contractual and fiduciary duties to disclose to him all material matters concerning the sale so that he would be able to make an informed judgment as to what price to accept for Caliban. (2) The defendants were also under a fiduciary duty not to put themselves in a position where their duties to the plaintiff were in conflict with their own interests or those of any other of their clients.

(3) The fact that Mr. Perot had made an offer and agreed to buy Vertigo (subject to contract) was of the greatest materiality. The opportunity to buy two outstanding adjoining properties in that location was extremely rare and the Perots had the opportunity to acquire them both as a family compound. Therefore Caliban had a special value to the Perots. (4) In breach of their duties, the defendants failed to disclose that material fact to the plaintiff. (5) In breach of their fiduciary duties they put themselves in a position where there was a conflict between their duty to the plaintiff to inform him and their personal interest in ensuring that they obtained commission on both Vertigo and Caliban. (6) As a consequence (a) the plaintiff was entitled to damages for breach of contract and fiduciary duties; (b) the defendants, being in breach of their fiduciary duties as agents, were not entitled to their commission.

The trial judge found the fact that the Perots were negotiating to buy Vertigo was material since for all practical purposes Vertigo and Caliban were adjacent properties having "effective, if not exclusive, use of a common beach." Mr. Perot was interested in the properties on behalf of himself and his family. Although the two purchases were at no stage legally conditional the one on the other, the obvious inference was that the family was interested in acquiring houses side by side. The judge found that

"it was an unusual opportunity, to put it at its lowest, and that it is to be inferred from the evidence that it was one which was of particular interest to the Perot family."

The judge then held that, since the information was material, the defendants, as agents, were under a duty to disclose it to the plaintiff. He reached this conclusion notwithstanding the fact that the defendants had received this information as agents for Mr. Brant and that they owed accordingly a duty to Mr. Brant not to disclose the information to others.

As to conflict of interest, the judge held that the defendants had put themselves in a position where their self-interest in obtaining commission on both sales might (not did) conflict with their duty to the plaintiff. He exculpated the defendants from any bad faith.

The judge then went on to assess the damages at the figure of $200,000, being an increase of 8 per cent. on the actual sale price of $2\5m. He said that, although the actual loss was "necessarily a matter of surmise," the principle was that the plaintiff should be compensated for the difference between the price he would probably have got if he had known the full facts and the actual sale price. The plaintiff himself did not give evidence, so there was no evidence (as opposed to submissions) as to what the plaintiff would have done had he known the full facts. The only valuation evidence was from the valuer called by the defendants (who was not cross-examined) and who put the value of Caliban at between $2.1 and $2.3m.

Finally, the judge held that the defendants, although not guilty of bad faith, had acted in breach of their fiduciary duties and were therefore not entitled to be paid their commission.

On appeal, the Court of Appeal allowed the appeal. As their Lordships understand their reasoning, it was that the two sales were not legally interdependent and that there was no evidence to support the judge's finding that the Perots had a special interest in buying the two adjoining properties. They further held that there was no evidence to support the judge's assessment of damages and, since the defendants were not in breach of their duty, no ground for depriving them of their commission. The Court of Appeal therefore allowed the appeal, dismissed the plaintiff's claim and gave judgment for the defendants on their counterclaim.

Their Lordships are unable to agree with the Court of Appeal that the judge was not entitled to make a finding that it was a material fact that the Perot family were interested in buying Vertigo as well as Caliban. It is of course correct that at no stage was the purchase of either property made legally conditional upon the purchase of the other. But the fact that Mr. Perot was trying to buy both properties simultaneously, and that the family did in fact buy both properties, is quite sufficient ground on which the judge could draw the inference that the Perots might attach importance to acquiring both properties. The plaintiff called an expert estate agent who gave evidence that it was a matter of considerable significance to both vendors if there was one purchaser interested in acquiring both properties. Quite apart from this evidence, it is self-evident that, if a purchaser is interested in buying two adjoining properties, there is a special market in which the purchaser may, but not necessarily will, pay over the ordinary price to achieve his objective. Their Lordships therefore consider that Mr. Perot's interest in buying both the properties was a material factor which could have influenced the negotiations for the price at which Caliban was sold.

Was there any contractual duty on the defendants to disclose this material fact to the plaintiff? The judge started from the proposition in Bowstead on Agency, 15th ed. (1985), p. 147: "An agent is, in general, under a duty to keep his principal informed about matters which are of his concern." He then sought to reconcile this proposition with the fact that the defendants were also agents for Mr. Brant and it was in the course of that agency, not whilst acting as agents for the plaintiff, that the defendants had learned that Mr. Perot was interested in buying Vertigo. Since, as has throughout been common ground, the defendants were not at liberty to divulge to others information acquired as agents for Mr. Brant, the defendants could not tell the plaintiff the true position without breaching their duty to Mr. Brant. As their Lordships understand the judgment, the trial judge found this reconciliation primarily in the decision of Donaldson J. in North and South Trust Co. v. Berkeley[1971] 1 W.L.R. 470. He regarded that case as deciding that an agent for principal A who has chosen to act for another principal B on whose behalf he acquires information cannot be forced to divulge such information to principal A but can be held liable in damages to principal A for breach of duty.

In the view of the Board the resolution of this case depends upon two fundamental propositions: first, agency is a contract made between principal and agent; second, like every other contract, the rights and

duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. It is not possible to say that all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract. This fact is fully recognised in the introduction to chapter 5 of Bowstead on Agency, pp. 137-138: the rest of the chapter, including the proposition on which the judge relied, is dealing with the duties which will arise from the terms normally found in a contract of agency.

In a case where a principal instructs as selling agent for his property or goods a person who to his knowledge acts and intends to act for other principals selling property or goods of the same description, the terms to be implied into such agency contract must differ from those to be implied where an agent is not carrying on such general agency business. In the case of estate agents, it is their business to act for numerous principals: where properties are of a similar description, there will be a conflict of interest between the principals each of whom will be concerned to attract potential purchasers to their property rather than that of another. Yet, despite this conflict of interest, estate agents must be free to act for several competing principals otherwise they will be unable to perform their function. Yet it is normally said that it is a breach of an agent's duty to act for competing principals. In the course of acting for each of their principals, estate agents will acquire information confidential to that principal. It cannot be sensibly suggested that an estate agent is contractually bound to disclose to any one of his principals information which is confidential to another of his principals. The position as to confidentiality is even clearer in the case of stockbrokers who cannot be contractually bound to disclose to their private clients inside information disclosed to the brokers in confidence by a company for which they also act. Accordingly in such cases there must be an implied term of the contract with such an agent that he is entitled to act for other principals selling competing properties and to keep confidential the information obtained from each of his principals.

Similar considerations apply to the fiduciary duties of agents. The existence and scope of these duties depends upon the terms on which they are acting. In New Zealand Netherlands Society "Oranje" Inc. v. Kuys[1973] 1 W.L.R. 1126, 1129-1130, Lord Wilberforce, in giving the judgment of this Board, said:

"The obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between duty and interest, is one of strictness. The strength, and indeed the severity, of the rule has recently been emphasised by the House of Lords: Phipps v. Boardman[1967] 2 A.C. 46. It retains its vigour in all jurisdictions where the principles of equity are applied. Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship. As Lord Upjohn said in Phipps v. Boardman, at p. 123: 'Rules of equity have to be applied to such a great diversity of circumstances that

they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case.'"

In Hospital Products Ltd. v. United States Surgical Corporation(1984) 156 C.L.R. 41, 97, Mason J. in the High Court of Australia said:

"That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."

Thus, in the present case, the scope of the fiduciary duties owed by the defendants to the plaintiff (and in particular the alleged duty not to put themselves in a position where their duty and their interest conflicted) are to be defined by the terms of the contract of agency.

Applying those considerations to the present case, their Lordships are of the view that since the plaintiff was well aware that the defendants would be acting also for other vendors of comparable properties and in so doing would receive confidential information from those other vendors, the agency contract between the plaintiff and the defendants cannot have included either (a) a term requiring the defendants to disclose such confidential information to the plaintiff or (b) a term precluding the defendants acting for rival vendors or (c) a term pre- cluding the defendants from seeking to earn commission on the sale of the property of a rival vendor.

Their Lordships are therefore of opinion that the defendants committed no breach of duty, whether contractual or fiduciary, by failing to reveal to the plaintiff Mr. Perot's interest in buying Vertigo, since such information was confidential to Mr. Brant. Nor did the fact that the defendants had a direct financial interest in securing a sale of Vertigo constitute a breach of fiduciary duty since the contract of agency envisaged that they might have such a conflict of interest.

This decision is consistent with Lothian v. Jenolite Ltd., 1969 S.C. 111 and does not conflict with any of the other authorities to which their Lordships were referred. The failure of estate agents to communicate material information to their principals which was held to exist in Keppel v. Wheeler[1927] 1 K.B. 577 and Dunton Properties Ltd. v. Coles, Knapp & Kennedy Ltd.(1959) 174 E.G. 723 related to information received by the estate agents in their capacity as agents of the principal who was complaining and was therefore not subject to any duty of confidentiality owed by the agents to other persons.

North and South Trust Co. v. Berkeley[1971] 1 W.L.R. 470 raised quite a different problem. The plaintiff was insured under a policy which had been effected by brokers. The insured had made a claim against the

insurers. The brokers then accepted instructions from the insurers (i.e. a person having a contrary interest to that of the insured) to obtain a report from assessors. Having obtained such report, the brokers refused to disclose it to their original principals, the assured. Donaldson J. rightly held that this was a breach of duty by the brokers to their principals. In that case, there was nothing in the circumstances to justify the implication of any term in the agency between the assured and the brokers that the brokers should be free to act for the opposing party, the insurers.

Since, in the view of the Board, there was no general obligation in the contract to disclose to the plaintiff Mr. Perot's interest in Vertigo, the only question is whether, when the defendants became aware of Mr. Perot's interest in both properties, they came under some other duty to take some step to resolve the difficulty or cease to act. The only possible resolution of the difficulty would have been to obtain the consent of both Mr. Brant and the plaintiff to reveal Mr. Perot's interest to the other. Such a case was not pleaded or included in the judge's summary of the issues: the nearest the issues come to such a claim is that if a conflict of interest arose, the defendants "would inform [the plaintiff] of the conflict and, after due consultation with him, resolve it." The allegation does not disclose how the problem was to be resolved and in any event assumes that the difficulty can be solved by an agreement between the plaintiff and the defendants whereas the intervention and agreement of Mr. Brant would also have been necessary if any concrete step were to be taken. There was no evidence from Mr. Brant or as to his attitude. In the Board's view it is not open to the plaintiff on these pleadings to allege that Mr. Brant would have agreed to the plaintiff being told of the offer for Vertigo.

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 damages, the Board agree with the Court of Appeal that there was no evidence to support the judge's assessment. The plaintiff did not give evidence, so there is no evidence as to the attitude he would have adopted had he known the facts. There was no evidence as to what the Perots' attitude would have been if they had been asked for more than $2\5m. for Caliban. The only evidence as to the value of Caliban was that it was worth less than the $2\5m. in fact paid. In any event, the judge awarded the whole of his estimate of the increased price which would have been obtained whereas the correct measure of damage for a failure to disclose the material facts was the loss to the plaintiff of the chance of negotiating an increased price if he had had the information. Although the assessment of damages often has to be based on scanty evidence, in the opinion of the Board the evidence adduced by the plaintiff as to damage in this case was inadequate to prove any damage beyond the purely nominal.

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.

Their Lordships will humbly advise Her Majesty that the appeal ought to be dismissed. The plaintiff must pay the defendants' costs.

Solicitors: Clifford Chance; Frere Cholmeley.

S. S.