Steve hires Nicole as an agent to sell a piece of property owned by

Steve. Steve states that the price to be obtained must be at least

$30,000. Nicole discovers that because a shopping mall is planned for
the area of Steves property, the fair market value of the property was at
least $45,000 or higher. Nicole forms a real estate partnership, Nichan
Realty, with her cousin Johan and enters into a contract on Steves
behalf to sell the property to Nichan Realty for $32,000. Nicole does
not declare her interest in Nichan Realty. Nichan Realty later sells the
property to an investor for $55,000.
Discuss what action (if any) Steve could take against Nicole.
ANSWER
ISSUE :

Has Nicole, the Agent, breached her duties to Steve, the Principal, in
relation to the sale of Steves property to Nichan Realty, the third party,
and if so, what remedies are available to Steve?

LAW :

The general duties owed by an Agent to a Principal are:

Follow the Principals instructions. Failure to follow instructions might
make the agent liable for damages to the principal. (Latimer 2014, 8-150,
page 639)
Use reasonable care diligence and skill. Standard is that which a
reasonable person would expect an agent of the type in question to exercise
in the circumstances. (Latimer 2014, 8-160, page 639)
To act in person. Usually an agent has to act in person as the principal has
contracted for the personal qualities of the agent unless there is an express
or implied authority to delegate to another person. (Latimer 2014, 8-170,
page 639)
In addition to these duties, An agent owes what are referred to as Fiduciary
duties to the principal.
Duty to act in the Principals interest. (Latimer 2014, 8-180, page 640)

Principals interest must be given priority over the agents own interest and
there must be no conflict of interest, as principal has placed his/her trust
and confidence in the agent.
In Mcpherson v Watt (1877) 3 App Cas 254, two ladies
appointed an agent to sell their property. The agent wanted to own
it for himself, but was unwilling to do so openly. He therefore
bought the property using his brothers name. When this was
discovered by the principals, specific performance of the contract
was not allowed by the courts because of the undisclosed conflict
of interest.
Duty not to make secret profits (Latimer 2014, 8-180, page 641)
In these kinds of circumstances, the agent is obliged to make full disclosure
to the principal and the onus of proof rests with the agent to show that the
price obtained is a fair and adequate one. They must also show that the
principal was fully aware of all the facts of the transaction and had given
consent to it.
Regier v Campbell-Stuart [1939] All ER 235
Mrs Regier, a prospective buyer of property (PRINCIPAL), instructed
Campbell-Stuart, a real estate agent (AGENT) to find her a property in
London suitable for conversion into apartments, one of which her son and
his family would live in.
In due course, the agent found a suitable property which had been on the
market for some time, with an asking price of 2,000. The agent proceeded
to buy the property at that price. The agent bought the property in the
name of his brother-in-law, who at trial stated that he did not pay the price
and did not own the property. A fictitious transfer of the property then took
place to put the property in the agents name for 4,500.
As the new owner of the property, the agent then offered the property to
Regier for 5,000. The agent declared to the principal his ownership in the
property. The principal accepted the offer of sale of the property.
Some 8 months later the true facts came to the attention of the principal.
The defendant, having concealed the true nature of the transaction from
the plaintiff by fraud, had acted in breach of his duty as agent and was
liable to account to the plaintiff for all profits obtained by him without
her knowledge and consent in his capacity as agent for her.
See also Lunghi v Sinclair [1966] WAR 172 where Lungi had a block of
land he wished to sell. He employed Sinclair as a real estate agent to sell
it on his behalf. Lunghi eventually sold the land to Sinclairs wife who it
eventually was discovered was a partner in Sinclairs real estate firm.
Lungi sold to Mrs Sinclair for $400, and she sold it soon after for $1,300.

It was held that Sinclair had a direct or indirect interest in the transaction
and should have made full disclosure of this to Lunghi. In addition, it
was held that Sinclair was under a duty to disclose the true value of the
property and the profit made by Mrs Sinclair was in fact a secret profit
that should go to the principal, Lunghi.
APPLY TO THE FACTS :
It appears from the facts that there is no question as to the existence of an
agency relationship. Steve has expressly entered into an agreement with
Nicole to sell, on his behalf, a piece of property. She had Express Actual
Authority and Implied Actual Authority to carry out that instruction.
There is no doubt that the property has in fact been sold.
The facts of the question do not raise any issues relating to the agent
exceeding the limits of her authority.
The main question to be resolved here is whether or not Nicole has
breached any of her duties to Steve in the process of carrying out those
instructions and exercising her Actual Authority.
Nicole did follow the principals instructions (sell the property for at
least $30,000) and she appears to have acted in person.
However, Nicole (the agent) has a duty to act in the best interests of
Steve (the principal). There should be no conflict of her (the agents)
interests with the principals interests. As in MacPherson v Watt, where
the agent was found to have an undisclosed conflict of interest, this
undisclosed conflict of interest meant that the contract for sale of land
was not binding. In applying the MacPherson case, by Nicole not
disclosing her direct interest in Nichan Realty (the third party buyer), it
could result in the contract for the sale of Steves property being set aside
and not binding on the parties.
In addition, as in Regier v Campbell-Stuart, facts of which are similar in
many respects to this situation, the secret profit made had to be accounted
to, given to the principal. The profit would not have been made but for the
agents breach of duty. Nicole, the agent, must show that Steve, the
principal, was fully aware of all the facts of the transaction in relation to
the sale of the property to Nichan Realty and had given consent to it.
The case of Lunghi v Sinclair also has application to this matter. As agent
Nicole was under a duty to make full disclosure to Steve because of her
direct interest in the transaction and to inform him of the true value of the
land. In addition, the profit made by Nichan Realty on the resale of the
land should go to the principal Steve.

CONCLUSION :
Nicole as agent for Steve has breached her duties to act in good faith, to
have no conflict of interest, and not to make a secret profit. The remedy
that is probably available to Steve, since the party that bought the property
from Nichan Realty was not involved in the agency relationship, is that
Nicole has to give to him the profit made on Nichan Realtys sale of the
property, ie. $23,000.

Reference list;
Latimer, Paul. 2014. Essential Australian Business Law. 2nd edition. CCH Australia
MacPherson v Watt (1877) 3 App Cas 254
Regier v Campbell-Stuart [1939] All ER 235
Lunghi v Sinclair [1966] WAR 172