Case: Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288
Outcome: considered
Notwithstanding that the relationships of principal and agent and seller and buyer are mutually exclusive, the one being a fiduciary relationship, the other a "commercially adverse relationship": Bowstead &amp; Reynolds on Agency at [1-032] (18 th ed, 2006); the distinction between them in cases where sales or purchases have been effectuated by an intermediary can be a fine one not easy to draw: see Atiyah, The Sale of Goods at 28 (10 th ed, 2001). Unsurprisingly, courts have emphasised that decided cases are for the most part of limited assistance given the quite fact (and agreement) specific nature of the inquiry to be made: see eg Fraser-Ramsay (New Zealand) Ltd v De Renzy (1912) 32 NZLR 553 at 575; see generally, Dal Pont, Law of Agency at [2.3] (2 nd ed, 2008); the more so when, as in the present matter, the contract in question (whether of agency or sale) is an oral one: cf Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288 at [30] - [31] . 51 (i) As an agent for sale ordinarily acts on behalf of its principal: but cf in relation to a broker selling in its own name: Bailey &amp; Co Ltd v Balholm Securities Ltd [1973] 2 Lloyd's Rep 404 at 408; Jackson Securities Ltd v Cheesman (1986) 4 NSWLR 484 at 489-490; is it apparent from the facts that the seller has actually conferred on the intermediary an authority to negotiate and/or to sell on the seller's behalf thus bringing into existence direct contracts between the seller and the third party buyer: Mercantile International Group plc at [30]-[34]? 52 (ii) Often interlocking factors of some significance are (a) by whom is the sale price to the third party set? and (b) how is the intermediary remunerated/rewarded for the sale to the third party? If the intermediary is remunerated by commission pre-arranged with the seller this will ordinarily indicate an agency relationship: eg Weiner v Harris [1910] 1 KB 285; although in exceptional circumstances a buyer for resale may be paid what is described, or is misdescribed, as a commission: eg Gannow Engineering Co Ltd v Richardson [1930] NZLR 361 ; Jackson v Royal Bank of Scotland [2000] EWCA Civ 203 at [17] - [18] . In the absence of fully informed consent, it would be a breach of fiduciary duty for an agent to profit on the sale of its principal's property by, for example, marking up the principal's stipulated sale price and retaining the difference. That an intermediary so acts may itself be indicative that the parties relationship was that of seller and buyer for resale and not agency for sale: Ex parte White; In re Nevill (1870) LR 6 Ch App 397. Nonetheless, a principal may agree to an agent deriving its remuneration from a mark-up on the price the principal stipulates it is to receive from the sale: eg Ex parte Bright; In re Smith (1879) 10 Ch D 566. In Mercantile International Group plc in circumstances in which the agreements between the parties pointed unambiguously to an agency relationship, it was held that that conclusion was unaffected by the circumstances that the principal knew that the intermediary charged more to purchasers than it confirmed to the principal; the principal did not mind nor care to know the detail of the matter, but was satisfied to get the price it stipulated; and the principal was content that the intermediary should keep for itself an undefined margin, it obtaining no remuneration by way of commission or otherwise from the principal: at [5] and [36]. 185 The evidence, in my view, simply cannot sustain a conclusion that Farmlink acted on TVO's behalf in a "representative": cf Bowstead &amp; Reynolds at [1-001]; Colonial Mutual Life Assurance Society at 48-50; or "fiduciary": cf Restatement of Agency , Second , SS1.01; capacity in selling its cherries. Farmlink was a purchaser buying for the purposes of resale. It is significant in this that (i) the parties agreed in advance the prices at which TVO would sell its cherries they were not simply indicative prices (I will refer below to the significance in this of purchase discounts); (ii) while the consignments were into markets with which TVO had some, albeit rudimentary knowledge, they were simply two of the overseas markets into which TVO cherries were consigned by exporters in the 2003/2004 season; (iii) Farmlink, in contrast, was knowledgeable about, and experienced in, those two markets at that time: cf Witt at 18-19; (iv) TVO did not assume responsibility for the export or the costs associated with the export this was at Farmlink's expense: cf Witt at 18-19 and Farmlink, not TVO, bore responsibility for misadventures happening to the cherries after delivery to it; (v) TVO was not in a position to exercise practical control over Farmlink (other than by refusing orders); (vi) TVO was unaware of Farmlink's price; (vii) while Mr Hannaford doubtless understood that Farmlink would obtain its own return on the sales (howsoever this was done), there was nothing unusual about his having no interest in that matter as his relationship with Farmlink did not otherwise point to an agency relationship: cf Mercantile International Group plc at [5] and [36]; and (ix) TVO happened to know the Singapore buyer was a company with which Mr Koh was associated but did not know the identity of the Hong Kong buyer. In short, having regard to the context in which they dealt with each other, the relationship they formed in the making and filling of orders was that of seller and buyer for resale. The contrary inference that TVO appointed Farmlink its agent for sale is neither a reasonable, nor the most probable, deduction from the known facts.