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UNDERSTANDING AGENCY: A PROXY POWER DEFINITION

Published online by Cambridge University Press:  23 April 2019

Rachel Leow
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Abstract

Existing definitions of agency are inadequate. In this paper, I offer a new definition of agency: a relationship is one of agency where the agent has a power to exercise at least one of the principal's own powers. I call this a “proxy power” for short. This definition brings with it three advantages. First, focusing on the agent's proxy power highlights the distinctive idea at the core of agency: that people can act through others at law, thereby expanding their legal personality in space. Second, that distinctive idea then helps identify the three reasons justifying when an agent has a proxy power: the principal's unilateral manifestation of will, the necessity of protecting the principal's interests, and where the principal is an artificial person who can only unilaterally manifest his will through an agent. Third, the definition vindicates prevailing intuitions about agency, and gives us a more transparent way to decide whether or one's invocation of “agency” is illegitimate or legitimate.

Keywords

Agency lawProxy powerActing through anotherLegal personalityPrivate lawCommercial law
Type
Articles
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The Cambridge Law Journal , Volume 78 , Issue 1 , March 2019 , pp. 99 - 123
Copyright
Copyright © Cambridge Law Journal and Contributors 2019 

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Footnotes

*

Assistant Professor, National University of Singapore.

This paper has had a long genesis, during which I received many helpful comments from colleagues and participants at various seminars and conferences. I am very grateful to my doctoral supervisor, Sarah Worthington, and my doctoral adviser, Nick McBride, for helping me develop my thoughts on this area. I am especially grateful to Michael Bridge, Timothy Liau, Francis Reynolds and the anonymous reviewer for their very helpful comments and suggestions. All errors remain mine.

References

1 Holmes, O.W. Jr, “Agency II” (1892) 5 Harv.L.Rev. 1Google Scholar, at 14.

2 Scott v Davis [2000] HCA 52, (2000) 204 C.L.R. 333, at [4], per Gleeson C.J.

3 Launchbury v Morgans [1973] A.C. 127 (HL) 135, per Lord Wilberforce. See also ibid., at para. [4], per Gleeson C.J.

4 Seavey, W.A., “The Rationale of Agency” (1920) 29 Yale L.J. 859CrossRefGoogle Scholar.

5 Since the agent has recently been described as the “proxy” of the principal: Investment Trust Companies (in liquidation) v Commissioners for HMRC [2017] UKSC 29, [2017] 2 W.L.R. 1200, at [48]. The use of the term “proxy” is not meant to limit the analysis only to the most common use of the idea of a “proxy” in the voting of shares.

6 See e.g. Müller-Freienfels, W., “Legal Relations in the Law of Agency: Power of Agency and Commercial Certainty” (1964) 13 Am.J.Com.L. 193Google Scholar. A valuable collection of essays illustrating some important differences between common law and civilian concepts of agency is Busch, D. and Macgregor, L. (eds.), The Unauthorised Agent: Perspectives from European and Comparative Law (Cambridge 2009)CrossRefGoogle Scholar.

7 E.g. for torts of misrepresentations, see Watts, P. (ed.), Bowstead & Reynolds on Agency, 21st ed. (London 2017)Google Scholar, paras. 8–176, 8–182. Now widened beyond the employment relationship: Various Claimants v Catholic Child Welfare Society [2012] UKSC 56, [2013] 2 A.C. 1; Cox v Ministry of Justice [2016] UKSC 10, [2016] A.C. 660.

8 Armagas S.A. v Mundogas Ltd. [1986] A.C. 717, 749–53, per Goff L.J., upheld on appeal at 779–83, per Lord Keith.

9 Investment Trust Companies (in liquidation) [2017] UKSC 29, [2017] 2 W.L.R. 1200.

10 E.g. Sale of Goods Act 1979, s. 21.

11 Watts, Bowstead & Reynolds on Agency, para. 1–027.

12 Ibid., at para. 1–027.

13 P. Watts, “Attribution and Limitation” (2018) 134 L.Q.R. 350, at 350. See also P. Watts, “The Acts and State of Knowledge of Agents as Factors in Principals’ Restitutionary Liability” [2017] Lloyds Maritime and Commercial Law Quarterly 386; and Watts, P., “Principals’ Tortious Liability for Agents’ Negligent Statements – Is ‘authority’ necessary?” (2012) 128 L.Q.R. 260Google Scholar.

14 Watts, “Attribution and Limitation”.

15 Ibid.

16 Munday, R., Agency: Law and Principles, 3rd ed. (Oxford 2016)Google Scholar, para. 1.02.

17 See ibid., at paras. 1.22–1.29.

18 Watts, Bowstead & Reynolds on Agency, para. 1–001.

19 Dowrick, F.E., “The Relationship of Principal and Agent” (1954) 17 MLR 24CrossRefGoogle Scholar, at 36. See also Hohfeld, W.N., “Some Fundamental Legal Conceptions as Applied in Judicial Reasoning” (1913) 23 Yale L.J. 16CrossRefGoogle Scholar.

20 Fridman, G.H.L., The Law of Agency, 7th ed. (London, Charlottesville and Toronto 1996), 11Google Scholar.

21 International Harvester Co. of Australia Pty Ltd. v Carrigan's Hazeldene Pastoral Co. [1958] HCA 16, (1958) 100 C.L.R. 644, 652. This definition was cited with approval in Scott [2000] HCA 52, (2000) 204 C.L.R. 333, at [227], per Gummow J.

22 E.g. Independent Trustee Services Ltd. v GP Noble Trustees Ltd. [2012] EWCA Civ 195, [2013] Ch. 91, at [104]; Fox, D., “Overreaching” in Birks, P. and Pretto, A. (eds.), Breach of Trust (Oxford 2002)Google Scholar.

23 Seavey, “The Rationale of Agency”, p. 858.

24 American Law Institute, Restatement (Third) of Agency (Philadelphia, USA, 2006)Google Scholar, §1.01.

25 McMeel, G., “Philosophical Foundations of the Law of Agency” (2000) 116 L.Q.R. 387Google Scholar.

26 Munday, Agency, paras. 1.22–1.29.

27 Ibid., at paras. 1.25–1.27.

28 Tesco Supermarkets Ltd. v Nattrass [1972] A.C. 153, 198–99; Meridian Global Funds Management Asia Ltd. v Securities Commission [1995] 2 A.C. 500, 506. See also Watts, Bowstead & Reynolds on Agency, para. 1–028, categorising the relationship as one of agency.

29 Peel, E., Treitel on the Law of Contract, 14th ed. (London 2015), 751Google Scholar.

30 Companies Act 2006, s. 9(5) (requirement for articles); Companies Act 2006, s. 18 (requirement for articles). These articles can either be chosen by the promoters of the company, or default articles will apply under statute for limited companies: Companies Act 2006, ss. 18(1)–(2).

31 Before the company is incorporated, agency analysis plays no role because the company does not exist and so it is thus not legally competent to be a principal. Neither does any concept of attribution of acts to a company, since under English law that concept is used only to describe the acts of a company qua company after incorporation, see e.g. Meridian Global Funds Management Asia Ltd. [1995] 2 A.C. 500, 506–07. It is only after the company is incorporated that agency analysis comes into play. Thus, the general rule is that acts done pre-incorporation do not bind the company after it has been incorporated. For further discussion of acts done pre-incorporation, see text to notes 63–65.

32 The Soblomsten (1866) L.R. 1 A. & E. 293.

33 Tronson v Dent (1853) 8 Moo. P.C. 419; Australasian Steam Navigation Co. v Morse (1872) L.R. 4 P.C. 222; Acatos v Burns (1878) 3 Ex.D. 282; Atlantic Mutual Insurance Co. v Huth (1880) 16 Ch.D. 474. Now confirmed by section 224(1) of the Merchant Shipping Act 1995 incorporating Article 6(2) of the International Convention on Salvage 1989.

34 Watts, Bowstead & Reynolds on Agency, para. 4–006. The common law historically also called cases where one person incurs expenses in taking steps to preserve the goods of another and then seeks reimbursement as cases of “agency of necessity”, but this practice was criticised by Lord Diplock in China Pacific S.A. v Food Corporation of India [1982] A.C. 939, 958. The reimbursement cases are often seen as performing some similar functions to the Roman doctrine of negotiorum gestio and now often dealt with in books on the law of restitution or unjust enrichment, e.g. Mitchell, C., Mitchell, P. and Watterson, S., Goff & Jones on the Law of Unjust Enrichment, 9th ed. (London 2016)Google Scholar, ch. 18, Section 4.

35 The Choko Star [1990] 1 Lloyd's Rep. 516.

36 Ibid., at pp. 523–24, per Parker L.J.; at pp. 525–26, per Slade L.J.

37 This point is elaborated on it greater detail at text to footnotes 90–94. It might also be suggested that such agency powers were recognised to compensate for a lack of a general concept of negotiorum gestio in English law, but it is difficult to explain why that justifies the creation of agency powers, especially since there are other cases dealing with reimbursement that do not involve the creation of agency powers, see footnote 34 above. I thank the anonymous reviewer for this suggestion.

38 E.g. Mental Capacity Act 2005, s. 5.

39 This is supported by a recent decision, UBS AG (London Branch) v UBS Ltd. [2017] EWCA 1567, at [92].

40 Angove's Pty Ltd. v Bailey [2016] UKSC 47, [2016] 1 W.L.R. 3179, at [7]–[9], per Lord Sumption.

41 E.g. B. Johnson & Co. (Builders) Ltd. [1955] Ch. 634, 644–45; Newhart Developments Ltd. v Co-Operative Commercial Bank Ltd. [1978] Q.B. 814, 819–20; Gomba Holdings UK Ltd. v Homan [1986] 1 W.L.R. 1301, 1306. See also Wee, M.S. and Tan, C.H., “The Agency of Liquidators and Receivers” in Busch, D., Macgregor, L. and Watts, P. (eds.), Agency Law in Commercial Practice (Oxford 2016)Google Scholar.

42 E.g. Angove's Pty Ltd. [2016] UKSC 47, [2016] 1 W.L.R. 3179, at [7]–[9], per Lord Sumption (agency coupled with an interest); Gomba Holdings UK Ltd. [1986] 1 W.L.R. 1301, 1304 (receiver).

43 E.g. Langton v Waite (1868) L.R. 6 Eq. 165; Peel, Treitel on the Law of Contract, p. 774.

44 In such cases, the act must be within the agent's actual or apparent authority. The presence of agency outside contractual situations means that an purely contractual explanation of agency rules cannot be correct, cf. Krebs, T., “Agency Law for Muggles: Why There Is No Magic in Agency” in Burrows, A. and Peel, E. (eds.), Contract Formation and Parties (Oxford 2010)Google Scholar.

45 Williams v Natural Life Health Foods [1996] B.C.C. 376 (QB), 381–82, per Langley J., reversed on appeal on different grounds: [1998] 1 W.L.R. 830 (HL). This cannot be based on “vicarious liability” since A typically assumes no personal responsibility for the accuracy of the statement and so A himself is not liable to the third party: Williams v Natural Life Health Food Ltd. [1998] 1 W.L.R. 830.

46 Kelly v Solari (1841) 9 M. & W. 54, 152 E.R. 24.

47 E.g. Portman Building Society v Hamlyn Taylor Neck [1998] 4 All E.R. 202 (CA).

48 E.g. the company cases of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd. [1964] 2 Q.B. 480 and the shipmaster cases in Tronson (1853) 8 Moo. P.C. 419; Australasian Steam Navigation Co. (1872) L.R. 4 P.C. 222.

49 If P is under a personal duty owed to a third party, the individual he appoints to perform that duty is not an agent on the proposed definition, since the individual does not exercise a power to exercise any of P's own powers. This situation is sometimes described as “vicarious performance”. Under English law, it might be plausible to describe the individual's act as being attributed to P, though identifying the relationship between P and that individual is often irrelevant for purposes of determining whether P himself breaches that duty, see e.g. Photo Production Ltd. v Securicor Transport Ltd. [1980] A.C. 827, 848, per Lord Diplock. If the individual fails to do it in the manner that is required, then P has breached his own personal duty, and is liable on that basis. P may also be liable under the doctrine of vicarious liability for any wrongs committed by the appointed individual, but the bases of liability are different in the two cases. In the former case, P's liability is for a breach of a duty which he personally owes, but in the latter, P is liable because (as conventionally understood) the liability of the appointed individual for committing the wrong is duplicated and attributed to P. I am very grateful to the anonymous reviewer for helping me clarify this point.

50 For criticism of the idea that there is a general rule that agents always drop out, see R. Stevens, “Why Do Agents ‘Drop Out’?” [2005] Lloyds Maritime and Commercial Law Quarterly 101.

51 Newborne v Sensolid (Great Britain) Ltd. [1954] 1 Q.B. 45, 51, per Lord Goddard C.J.

52 Williams [1998] 1 W.L.R. 830.

53 Which includes cases of negligent misrepresentation where there is an assumption of responsibility for the statements made: Hedley Byrne & Co. Ltd. v Heller & Partners Ltd. [1964] A.C. 465.

54 Smith v Hughes (1871) L.R. 6 Q.B. 597.

55 Standard Chartered Bank v Pakistan National Shipping Corporation [2002] UKHL 43, [2003] 1 A.C. 959, at [22].

56 Ibid., at para. [22].

57 Ibid., at para. [22].

58 See e.g. Watts, P., “Imputed Knowledge in Agency Law – Excising the Fraud Exception” (2001) 117 L.Q.R. 300Google Scholar, at 307.

59 Newborne [1954] 1 Q.B. 45. Cf. Kelner v Baxter (1866–67) L.R. 2 C.P. 174.

60 Newborne, ibid, at p. 51, per Lord Goddard C.J.; at p. 52, per Morris L.J. It was also held that no contract had been formed between the agent A and the third party, since A had not purported to undertake the obligation personally. This meant that no contract had been entered into with either P or A. This problem was later dealt with by statute under the now section 51 of the Companies Act, which treats such a contract or deed as being made with A, who is then personally liable under it.

61 E.g. Introductions Ltd. v National Provincial Bank Ltd. [1970] Ch. 199; In Re David Payne [1904] 2 Ch. 608; Rolled Steel Products (Holdings) Ltd. v British Steel Corporation and ors [1986] Ch. 246, 290–92.

62 Rolled Steel Products (Holdings) Ltd. [1986] Ch. 246, 295, per Browne-Wilkinson L.J.

63 Baroness Wenlock v River Dee Co. (1885) 10 App. Cas. 354.

64 Death of principal: Watts, Bowstead & Reynolds on Agency, para. 10–016; Watson v King (1815) 4 Camp. 272, 274; Drew v Nunn (1879) 4 Q.B.D. 661, 665, per Brett L.J.; Lodgepower Ltd. v Taylor [2004] EWCA Civ 1367; dissolution of principal: Watts, ibid., at para. 10–018; Salton v New Beeston Cycle Co. [1900] 1 Ch. 43; Selfe v Colonial Ice Co. (1894) 10 W.N. (N.S.W.) 153; Wellington Steam Ferry Co. Ltd. v Wellington Deposit, Mortgage and Building Association Ltd. (1915) 34 N.Z.L.R. 913, 916–17. The position is different if the company still exists, but merely goes into liquidation: Pacific and General Insurance Co. Ltd. v Hazell [1997] IrLr 65. In that case the liquidator generally becomes an agent of the company.

65 Insolvency Act 1986, s. 284(1).

66 P. Watts, “Contracts Made by Agents on Behalf of Principals with Latent Mental Incapacity: The Common Law Position” [2015] C.L.J. 140, at 141.

67 Watts, Bowstead & Reynolds on Agency, para. 8–210.

68 Ibid., at para. 2–011.

69 Changed by the Married Women's Property Act 1882. The latest statutory provision on this is in the Law Reform (Married Women and Tortfeasors) Act 1935, s. 1.

70 Manby v Scott (1659) 1 Levinz 4, 6; 83 E.R. 268, 269; Watts, Bowstead & Reynolds on Agency, para. 3–043.

71 Ibid., at para. 8–125.

72 Sale of Goods Act 1979, s. 21(1).

73 E.g. Re D'Angibau (1880) 15 Ch. D. 228, 246, per James L.J. Watts, Bowstead & Reynolds on Agency, para. 2–012 suggests that the rule is that the minor must have sufficient understanding to consent to the agency and do the act required.

74 Ibid., at para. 5–009.

75 Ibid., at para. 5–010; e.g. Ecossaise SS Co. Ltd. v Lloyd, Low & Co. (1890) 7 T.L.R. 76.

76 Watts, Bowstead & Reynolds on Agency, para. 5–008.

77 Ibid., at para. 5–010; e.g. De Bussche v Alt (1878) 8 Ch.D. 286.

78 Supported by Bath v Standard Land Co. Ltd. [1911] 1 Ch. 618.

79 E.g. ibid.

80 P.H. Winfield, Pollock on Contract, 13th ed. (London 1950), 45.

81 Ibid., at p. 45.

82 E.g. O.W. Holmes Jr, The Common Law (Boston 1881), 232.

83 E.g. Seavey, “The Rationale of Agency”, p. 863.

84 E.g. McMeel, “Philosophical Foundations”, p. 394.

85 E.g. Hohfeld, “Some Fundamental Legal Conceptions”, p. 46; Seavey, “The Rationale of Agency”, p. 863; McMeel, “Philosophical Foundations”, pp. 389–93; Watts, Bowstead & Reynolds on Agency, para. 1–006.

86 A classic example is the power of attorney. See Watts, Bowstead & Reynolds on Agency, para. 1–006.

87 Pole v Leask (1863) 33 L.J. Ch. 155, 161, per Lord Cranworth: “No one can become the agent of another person except by the will of that person.”

88 Springer v Great Western Railway Co. [1921] 1 K.B. 257, 268, per Scrutton L.J.; Prager v Blatspeil, Stamp & Heacock Ltd. [1924] 1 K.B. 566, 571, per McCardie J.

89 Sachs v Miklos [1948] 2 K.B. 23.

90 Prager [1924] 1 K.B. 566, 571.

91 Mental Capacity Act 2005, ss. 5, 8. Another such example involves the administrative receiver of a company, who is deemed to be the company's agent unless and until the company goes into liquidation: Insolvency Act 1986, s. 44(1).

92 Mental Capacity Act 2005, s. 5(1)(b).

93 Meridian Global Funds Management [1995] 2 A.C. 500, 506.

94 Which it is depends on the wording of particular statutes under which companies can be incorporated.

95 For a recent example, see UBS AG (London Branch) [2017] EWCA Civ 1567, at [91]–[100].

96 Watts, Bowstead & Reynolds on Agency, para. 1–020; e.g. the estate agent, as in Sorrell v Finch [1977] A.C. 728 (HL).

97 Watts, Bowstead & Reynolds on Agency, para. 1–020.

98 Ibid., at paras. 1–002, 1–020.

99 Colonial Mutual Life Assurance Society Ltd. v Producers and Citizens Co-Operative Assurance Co of Australia Ltd. [1931] HCA 53, (1931) 44 C.L.R. 41.

100 Angove's Pty Ltd. [2016] UKSC 47, [2016] 1 W.L.R. 3179, at [6]–[7].

101 Gaussen v Morton (1830) 10 B. & C. 731. See also Walsh v Whitcomb (1797) 2 Esp. 565, 170 E.R. 456 (power of attorney granted solely to enable the grantee to satisfy a pre-existing debt owed to the agent).

102 Watts, Bowstead & Reynolds on Agency, paras. 1–027, 4–006.

103 Ibid., at para. 10–007.

104 Angove's Pty Ltd. [2016] UKSC 47, [2016] 1 W.L.R. 3179, at [9].

105 Whether to sell the principal's property: Gaussen v Morton (1830) 10 B. & C. 731; Walsh v Whitcomb (1797) 2 Esp. 565, 170 E.R. 456, to sign a memorandum in writing on behalf of a bidder at an auction: Van Praagh v Everidge [1902] 2 Ch. 266, revsd on other grounds [1903] 1 Ch. 434, or to subscribe for shares: In re Hannan's Express Gold Mining and Development Co.: Carmichael's Case [1896] 2 Ch. 643.

106 Watts, Bowstead & Reynolds on Agency, para. 1–032. Although the relationships may coincide, e.g. Royal Brunei Airlines v Tan [1995] 2 A.C. 378.

107 In fact, the beneficiaries themselves do not have powers to transfer legal title to the property by virtue of their equitable ownership of the trust property, so the trustees cannot have a proxy power. See e.g. R.C. Nolan, “Equitable Property” (2006) 122 L.Q.R. 232; B. McFarlane and R. Stevens, “The Nature of Equitable Property” (2010) 4 J.Eq. 1.

108 Conaglen, M. and Nolan, R., “Contracts and Knowing Receipt: Principles and Application” (2013) 129 L.Q.R. 359Google Scholar, at 360.

109 Watts, Bowstead & Reynolds on Agency, para. 1–033.

110 Ibid., at para. 4–006; China Pacific S.A. [1982] A.C. 939, 958, per Lord Diplock.

111 Watts, Bowstead & Reynolds on Agency, para. 4–006.

112 See earlier note 34 above.

113 Watts, Bowstead & Reynolds on Agency, para. 1–021.

114 Ibid., at para. 1–021; see e.g. Ireland v Livingston (1872) L.R. 5 H.L. 395, 407–09; Robinson v Mollett (1875) L.R. 7 H.L. 802, 809–10.

115 Watts, Bowstead & Reynolds on Agency, para. 1–021.

116 See the brief treatment of the topic now in ibid., para. 3–043.

117 Married Women's Property Act 1882; now see Law Reform (Married Women and Tortfeasors) Act 1935.

118 E.g. Ormrod v Crosville Motor Services Ltd. [1953] 1 W.L.R. 1120, where the owner requested that a friend drive his car to meet him at Monte Carlo, where the owner and the friend were to go on holiday together.

119 Smith v Moss [1940] 1 K.B. 424.

120 See also Waugh v Waugh (1950) 50 S.R. (N.S.W.) 210, where the husband was driving the son's car when he injured his wife, a passenger in the car, through his negligent driving.

121 Launchbury [1973] A.C. 127, 137–38.

122 American Law Institute, Restatement (Third) of Agency, §2.03.

123 E.g. Freeman & Lockyer [1964] 2 Q.B. 480, 503, per Diplock L.J.