Agency; duties of an agent to their principal; disclosure of material facts.
Facts: The owner of a lease of 159 acres of crown land appointed Mengerson, a land agent, to sell the lease to the government of South Australia. Negotiations were conducted with the government over a period of time, but without reaching agreement on price. The owner of the land then gave Mengerson an option to purchase the land himself, for about £2 per acre. Shortly after being given this option, Mengerson discovered that the government would be willing to pay £5 per acre for the land. Mengerson did not tell the owner about this. Instead, he exercised his option to buy the land himself, and then immediately resold it to the government at a profit.
Issue: In failing to inform the owner of the land what he knew about the government's willingness to pay £5 per acre for the land, had Mengerson breached any duty owed to his principal?
Decision: Mengerson had breached a duty owed to his principal.
Reason: Mengerson's behaviour constituted a breach of the duty that requires an agent to disclose all material facts and circumstances to their principal. Because of this breach, the owner of the land was entitled to recover the difference between what Mengerson had paid him for the land, and what Mengerson had received for the land when he resold it.