De Bussche v Alt (1878) 8 Ch D 286

Material Facts:

The plaintiff gave out his ship to G & Co to sell for a minimum cash price of $90,000. Owing to experiencing difficulties with the sale, and with the plaintiff’s consent, G & Co gave out the ship to the defendant to sell with the same instructions as they received from the plaintiff. The defendant purchased the ship himself and resold it on credit for $160,000 without the knowledge of the plaintiff principal. When the plaintiff discovered the acts of the defendant, he brought an action against the defendant to recover the profits made by the defendant as his sub-agent.

Issue:

Whether or not the plaintiff is entitled to recover the profits made by the defendant.

Arguments of the Plaintiff:

1.       That an agent cannot profit from the agency without the consent of his principal.
2.       That the defendant’s claim that he discharged himself from the agency is not supported by any evidence.

Arguments of the Defendant:

1.       That he terminated the agency relationship by becoming a purchaser.
2.       That he is an agent of G & Co and not the plaintiff, and thus not answerable to the plaintiff.

Holding:

The plaintiff is entitled to recover the profits made by the defendant.

Ratio Decidendi:

On the contention by the defendant that he was not an agent of the principal, the court acknowledged that whilst there is a legal maxim that “a delegate cannot delegate”, contemporary business exigencies may allow an agent to delegate to a sub-agent with the consent of the principal. The sub-agent then becomes an agent of the principal as if the principal had appointed him. The court also found that the principal was not aware that the defendant had terminated his agency and became the purchaser, making the termination invalid. Accordingly, and pursuant to the principle that every agent must account for all profit that he makes out of a transaction, the plaintiff was entitled to recover the profits made by the defendant on the sale.