A breach of fiduciary duty lands an agent, and his partner, who was innocent of any wrongdoing, with an expensive bill

The law on vicarious liability in the context of partnerships is concerned with the responsibility of firms to third parties for wrongful acts done by a partner while acting in the ordinary course of the partnership business, or acting with the authority of his partners. In such cases, section 10 of the Partnership Act 1890 provides that the firm is liable to the same extent as the partner in question. Northampton Regional Livestock Centre Co Ltd v Cowling [2015] EWCA Civ 651; [2015] PLSCS 197 concerned the sale of a cattle market, which fell into disuse following the foot and mouth crisis. The company that owned the site instructed agents, who were practicing in partnership together, to find a purchaser for it. The partner who handled the sale introduced a buyer who, unbeknown to anyone else, had promised to pay him a third of any uplift in value on any subsequent sale. Completion of the sale to the buyer took place six months later. During that period, a third party came forward unexpectedly. It took the site off the buyer’s hands for a price that was well above the rate that the market considered sensible. As a result, the agent became entitled to a payment from the buyer in the sum of £744,000. In due course, questions were asked and litigation ensued. The trial judge ruled that the agent had not obtained fully informed consent for his actions from the company and was, as a result, in breach of his fiduciary duty to his client. Consequently, he was liable to return the fee paid by the company in connection with the original sale, and to account to the company for the commission received from the buyer as well. The question for the Court of Appeal was whether the trial judge had been right to exonerate the agent’s partner from liability for the breach of fiduciary duty. The trial judge concluded that the agent’s partner had not authorised the defaulting partner’s wrongful act and the Court of Appeal agreed. However, authority is not the touchstone for partnership liability. Lord Justice Tomlinson observed that, if vicarious liability of a firm for acts done by a partner acting in the ordinary course of the business of the firm were to be confined to acts authorised in every particular, the reach of vicarious liability would be short indeed. So the court must consider the connection between the wrongful conduct and the acts that the partner was authorised to do – and, in particular, whether the wrongful conduct can fairly and properly be regarded as having been done by the partner while acting in the ordinary course of the business of the partnership. The firm had authorised the agent to handle the sale for the company. He was undertaking the very task that the firm had been instructed to perform, and for which it was being paid, as opposed to embarking on a frolic of his own, and, for the purposes of vicarious liability, it will suffice if the transgressor was authorised to do acts of the kind in question. Therefore, the case fell squarely on the side of the line that attracts vicarious liability and the agent’s partner was jointly and severally liable to account to the company. Allyson Colby is a property lawyer