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Lloyd's Law Reporter


[2010] EWHC 3058 (Ch), Chancery Division, 26 November 2010, Mr Justice Vos

Agency - Commission taken by sub-agent without consent of principal - Whether principal consented or ratified - Custom - Measure of damages

AF engaged LAL, an art dealer, to sell a valuable drawing on behalf of AL. LAL asked SCD to find a buyer from amongst its clients, which it did. At that point: AF entered into an agreement with LAL giving LAL authority to sell; SCD agreed to sell the drawing to the buyer; and LAL and SCD entered into an agreement confirming their mutual understanding of the purchase. The drawing was sold in accordance with the practice of the art market to sell on the basis of a "net return price", under which the actual sale price was known only by SCD and the buyer. The sale price was US$6 million, and SCD returned only US$5 million, thereby taking commission of US$1 million. AF sought to recover that sum from SCD. Vos J held as follows. (1) SCD had acted for AF and not for the buyer. (2) LAL had not been authorised by AF to enter into a "net return price" agreement with SCD, and there was no custom in the market which gave rise to implied authorisation. Any custom would have been unreasonable, in that it permitted the making of a secret profit. What was required was the full and informed consent of AF. (3) AF did not ratify the agreement between LAL and SCD even though it ratified the sale agreement. (4) SCD was liable to account to AF for its profit, although - in the absence of knowing wrongdoing - it was able to retain US$200,000 for its services.

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