Agency; duties of the agent; duty of good faith; secret profits.
Facts: Gulliver and others were directors of Regal (Hastings) Ltd (RHL). As directors, they were able to acquire shares in a subsidiary company being formed by RHL. They immediately resold these same shares at a substantial profit. RHL brought an action to recover the profits made by the directors.
Issue: Was RHL entitled to claim the profit that the directors had made on the resale of the shares?
Decision: RHL was entitled to recover the profits the directors had made, even if the directors had not acted dishonestly.
Reason: Persons in a fiduciary position are not allowed to enter into transactions in which they have a personal interest that conflicts with the interests of those they are meant to protect. If a director of a company (or an agent) acquires any property or money as trustee, they must account for it - that is, disclose the profit and hand it over. Lord Russell of Killowen said (at 386):
“The liability arises from the mere fact of a profit having … been made. The profiteer, however honest and well -intentioned, cannot escape the risk of being called upon to account.”