Contract Law

Kelly v. Cooper

[1993] AC 205

Facts

The defendants were estate agents appointed to sell the plaintiff’s property in Bermuda.
They were simultaneously acting for the owner of a neighbouring property.
A purchaser showed interest in acquiring both properties.
The agents did not disclose to the plaintiff all confidential information obtained from the neighbouring owner or the full details of the purchaser’s negotiations concerning that property.
The plaintiff argued that the agents had breached their fiduciary duty by:
acting for competing principals;
failing to disclose information that might have strengthened the plaintiff’s bargaining position.
The agents argued that estate agency commonly involves acting for several sellers whose properties compete in the same market.

Whether an estate agent breaches fiduciary duty merely by acting for multiple competing sellers.
Whether the agent must disclose confidential information obtained from one principal to another principal.

An agent generally owes the principal duties of:
loyalty;
disclosure of material information;
avoidance of unauthorised conflicts;
confidentiality.
However, the precise scope of fiduciary duties depends upon the express and implied terms of the agency contract.
Where the commercial nature of the agency necessarily involves acting for multiple principals, the contract may impliedly authorise such representation.
An agent is not required to disclose one principal’s confidential information to another where doing so would breach the first principal’s confidence.

Estate agents ordinarily maintain listings for several properties at the same time.
Sellers appoint them knowing that they may also act for owners of comparable or competing properties.
If an estate agent were prohibited from acting for more than one seller in the same market, the ordinary estate-agency business model would become unworkable.
The Court therefore implied a contractual term authorising the defendants to act for multiple sellers.
That implied permission qualified the otherwise strict no-conflict rule.
The agents continued to owe each client honesty and proper performance.
However, they could not be required to disclose confidential information supplied by the neighbouring owner.
Such a requirement would force the agents to breach their duty to one principal in order to benefit another.
The plaintiff also failed to establish that the undisclosed information demonstrated a special willingness by the purchaser to pay more for the plaintiff’s property.
The case does not create a general exemption from fiduciary duties for estate agents.
It shows that those duties must be interpreted consistently with the known commercial context of the agency relationship.

The Privy Council held that the agents had not breached their duty.
Their contract impliedly permitted them to represent other sellers and preserve each seller’s confidential information.
Use this case for: an agent’s fiduciary duties may be qualified by an implied contractual term arising from the established nature of the agency business.