Keogh v Dalgety and Company Limited [1916] HCA 69

Keogh v Dalgety and Company Limited [1916] HCA 69 - HCA 1916 case summary — Zoe

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chaser," of the third part. The general effect of the agreement was that, subject to the sanction of the Supreme Court of Victori and in order to effect a compromise of all disputes between t execntrix and the defendants they should consent to a sale of Warrana property by the executrix to the plaintiff (who was son of the testator) for £180,000; that when the sanction of the Court should have been obtained the defendants should release all their securities over the property and the executrix should transfer it to the purchaser; that the defendants should retain all the titles to the land until the mortgages next to be mentioned should have been given by the purchaser, and that, if the mortgages should not be given, the purchaser should secure the debt of £180,000 with interest at 5 per cent. per annum to the defendants by mortgage or other security ; that subject to such sanction the defendants should use their best endeavours to obtain for the purchaser a first mortgage on usual and reasonable terms on the whole of the land of Warrana for such amount as they could obtain at a rate not exceeding 5 per cent., and the purchaser should execute such mortgage and pay the mortgage money to the defendants in partial discharge of th debt, but should not be personally liable to the mortgagee for prin- cipal or interest ; that after such first mortgage was obtained the purchaser should give the defendants a second mortgage over the land and a first mortgage over the stock and plant in forms already - agreed upon to secure the balance of the £180,000, also without personal liability. The first and second mortgages on the land were to be for concurrent terms of five years: and upon completion of these arrangements the defendants were to release the testator's estate from all claims. It was further stipulated that during the term of the mortgages the plaintiff should only draw from the income of - Warrana by way of salary £600 a year, and that, after payment of - that sum and the working expenses of the station and interest, the surplus profits should be accumulated and placed to a snspense account with the defendants, and at the end of the five years should _ be paid to them in reduetion of the mortgage debt. The agreement was carried out in its entirety. Before examining the nature and effect of this agreement and -

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the obligations which it imposed upon the defendants, I will say a few words as to the principle on which the doctrine that an agent or other person occupying a fiduciary position cannot make a secret profit from his employment or trust is founded. That doctrine is not an esoteric doctrine which none but initiates are capable of under- standing, but the simple rule expressed in the eighth commandment, and which is enforced by giving to the principal what is his own, not, as suggested in argument, by giving him a windfall, or punishing the agent or trustee for misconduct (see Morison v. Thompson (1) ). To take the simplest case, that of an agent who makes a secret profit on a sale or a purchase effected by him for his principal. In the case of a sale, whatever the purchaser pays in order to obtain the property sold, belongs, in reason as well as in law, to the vendor principal, and this is equally the case whether part of the price is paid by way of secret commission or by way of direct bribe to the agent, who cannot legally intercept any part of it. The agent has, therefore, received money which belongs to his principal and must pay it over to him. For this reason, and for this reason only, an action lay at common law to recover it as money received for the use of the principal. So, in the case of a purchase, the purchaser principal is entitled to the benefit of all that the vendor gives as consideration for the purchase money. Thus, in Archer's Case (2) (which at first impression seems an extreme case) it was held that a guarantee which the promoter of a company gave to a director in order to induce him to become a director, and which was a step in bringing about the sale, should be regarded as part of what he gave as consideration for the purchase, and that the company, for whom its director was agent, was consequently entitled to the benefit of it. Tf the benefit which the agent has intercepted is not a sum of money, the appropriate remedy is not an action for money had and received but a suit asking for such relief as will give the principal his own. In no case, however, can the principal claim more than his own, which, as I have said, is awarded not by way of punishment of a delin- quent, but by way of giving the principal what was always his. In the case of a sale the vendor principal is entitled to all that is paid by the purchaser for what he, the vendor, sells, and to no more. ()) LR. 9 Q.B., 480. (2) (1892) 1 Ch., 322.

At a glance

Court

Decision date

Before

Source

Judgment (82 paragraphs)

Cited By (2)