International Law

Football and fiduciaries

By Eoin

What if a footballer’s agent, in negotiating for his client, makes a secret deal with the club for himself on the side?

This is how Jacob LJ opened Imageview Management Ltd v Jack [2009] EWCA Civ 63 (18 December 2008). It concerns the bung, which is almost as endemic in football as referees, the offside trap, and angry managers. Bungs are secret payments that are sometimes part of football transfers; taking one is against the rules of football; the question in Imageview Management Ltd v Jack is whether the agent breached his duties to his client as well. The duties in question are fiduciary duties, weighty duties of loyalty owed by trustees, directors, agents, and so on.

The leading Irish case on such duties is McMullen v McGinley [2005] 2 IR 445, [2005] IESC 10 (15 March 2005). Fennelly J for the Supreme Court discussed Hodginson v Simms [1994] SCR 377, (1994) 117 DLR (4th) 161, 1994 CanLII 70 (30 September 1994) and Mothew v Bristol & West Building Society [1997] 2 WLR 436, [1996] 4 All ER 698, [1996] EWCA Civ 533 (24 July 1996) and approved the following comments of Millett LJ in Mothew defining the notion of fiduciary duties:

A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. …

That relationship once established, one of the classic breaches of fiduciary duties consists in taking a secret profit; as Fennelly J put it in McMullen, a fiduciary “could commit a breach of that relationship by taking advantage of it for his personal benefit, as by making a secret profit”.

The question in Imageview Management Ltd v Jack, therefore, was whether the agent was a fiduciary who had breached his fiduciary duties to his client. I’ll let Robert Goddard take up the story:

UK: England and Wales: agents’ fiduciary duties - a reminder from the Court of Appeal

In Boston Deep Sea Fishing v Ansell (1888) 39 Ch. D. 339, a company director secretly received commission from shipbuilders with whom an order had been placed on the company’s behalf. The Court of Appeal found him in breach of fiduciary duty. More recently, in Imageview Management Ltd v Jack [2009] EWCA Civ 63, the Court of Appeal reiterated the strictness of the fiduciary duties to which agents are subject in a case concerning a football agent. The agent was liable for a payment he received from a football club. The payment was received without the knowledge of the agent’s client (the footballer). One of the judges, Mummery LJ, expressed a regret (at para. [65]):

… that it is still necessary, in the 21st century, to remind agents of what was said by the greatest of all the judges, Bowen LJ in Boston Deep Sea Fishing [v Ansell (1888) 39 ChD 339] at pages 362-363, about conflicts of duty and interest and the necessity for transparency in the dealings of agents, if confidence in them is to continue. In our age it is more important than it ever was for the courts to hold the precise and firm line drawn between payments openly, and therefore honestly, received by agents, and undeclared payments received by agents secretly, and therefore justly liable to all the legal consequences flowing from breaches of an agent’s fiduciary obligations.

Note: Section 176 of the Companies Act (2006) provides that a director must not accept a benefit from a third party conferred by reason of his being a director or his doing (or not doing) anything as a director.

Update (17 February 2009): the case has been reported by the ICLR as part of its WLR(D) service: see here.

For Ireland, compare Head 9(3)(f) of Part A5 of the proposed General Scheme of a Companies Bill proposed by the Company Law Review Group.

So, will this see the end of bungs? I hope so. And then, we’ll have to solve the conundrum of the offside rule!

Full post as published by Cearta on February 19, 2009 (boomark / email).