Lintrose Nominees Pty Ltd and Others v King [1995] 1 VR 574
Agency; duties of the agent; good faith; conflict of interest.
Facts: Lintrose Nominees wished to sell some strata title units that it owned. It entered into an arrangement for John Hopkins & Co, a real estate agent, requiring John Hopkins to find a buyer for the strata title units at the asking price. Sometime later, King appointed John Hopkins as his agent for investment advice. Without disclosing that it was also acting for Lintrose Nominees, John Hopkins advised King to purchase one of the Lintrose units. He did so. On discovering the facts, King wished to avoid the contract.
Issue: Was King entitled to avoid the contract in these circumstances?
Decision: The court held that he was entitled to avoid the contract.
Reason: John Hopkins, as King's agent, had breached the duty to avoid an undisclosed conflict of interest. Tadgell J said (at 576):
"The guiding principle is that the agent is not allowed to put his duty as agent in conflict with his own interest. If the agent sells his own property to his principal, without disclosing that he is vendor, his conflict of interest is evident: he will be tempted to derogate from his duty to do his best for his principal."
The court held that the same rule applies when an agent is selling the property of one principal to another principal, because an agent cannot conscientiously serve two principals. Tadgell J reasoned (at 576):
"The temptation for the agent to favour one at the expense of the other exists just as surely as if the agent were to put the interest of a single principal in conflict with his own."