The liability of an agent of a disclosed principal in a contractual transaction with third parties
Thursday, 18 June 2009 01:15 OLA BAKARE, ACIArb.

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Samuel Osigwe v. Privatisation Share Purchase Loan Scheme Management Consortium Limited & Ors (2009) 3 NWLR (Pt. 1128) 378- A Review of the Supreme Court’s decision determining the liability of an agent of a disclosed principal in a contractual transaction with third partiesÂ

Modern commercial law practice owes its lifeblood, in part, to the concept of Agency; a concept which has been rightly described as lying “at the very heart of the subject (commercial law) and without it modern commerce would not exist.”  The traditional Common Law of Agency is founded on the maxim qui facit per alium facit per se meaning ‘he who acts through another acts himself’. The full amplitude of the principal/agent relationship arises where one party, the principal, authorises another party, the agent, to act on his behalf and the agent consents to so act. From this authority directly conferred on the agent stems the agent’s power. This may either be actual or apparent authority where the principal has by its conduct given the indication that the agent has authority for such matters.The recent case of Osigwe v. Privatisation Share Purchase Loan Scheme Management Consortium Ltd & Ors is a re-statement of the general principle that an agent acting on behalf of a disclosed principal incurs no personal liability in respect of transactions entered into with third parties which falls within the scope of his authority. This is the law in Nigeria as well as other Common Law jurisdictions of the world.FactsThe Appellant instituted a class action for himself and on behalf of persons who had registered to purchase shares in public companies under the Privatization Share Purchase Loan Scheme (PSPLS) against the Respondent for themselves and as representatives of all financial intermediaries engaged in the PSPLS Scheme. The claim was instituted before the Investment and Securities Tribunal.The allegation of the Appellant at the Tribunal was that he and the parties represented suffered damage as a result of a breach committed by the Respondent in respect of certain provisions of the Investment and Securities Act (ISA) and the rules and regulations issued by the Securities and Exchange Commission (SEC) pursuant to the ISA 1999 [specifically by not filing the appropriate statements with SEC. The Appellant sought for the suspension of the share acquisition scheme or an order directing the Respondent to comply with the provisions of the ISA and the rules and regulations made under it.Upon a notice of preliminary objection filed by the Respondents challenging the competence of the action against them, the Tribunal in its ruling, held that the Respondents were not necessary parties because they were agents of a disclosed principal and did not fall within the exceptions to the general rule. The Tribunal accordingly struck out the Respondents’ names.The Appellant, being dissatisfied with the decision of the Tribunal, appealed to the Court of Appeal which dismissed the appeal. The appellant consequently appealed to the Supreme Court.Issues before the Supreme Court and judgmentThe main issue for determination by the Supreme Court is whether the lower court was right in upholding the decision of the Tribunal which struck out the Respondents from the proceedings on the ground that as agents of a disclosed principal, they were not necessary parties to the proceedings. The submission of the learned counsel for the Appellant was that the Common Law principle that limits the liability of an agent of a disclosed principal does not apply in a case where the Respondents are accused of breaches of statutory duties and requirements and thus the statutory provision envisaged the responsibility of the respondents regardless of their agency status. On their parts, the Respondents’ counsel submitted that as agents of a disclosed principal, the Respondents are not necessary parties in the suit. Upon consideration of these submissions the Supreme Court unanimously dismissed the appeal. Musdapher, JSC in his lead judgment succinctly captures the legal position as follows: “Again, it is clear from the appellant’s pleading that each of the respondents herein are merely agents of the BPE solely appointed for the registration of would be purchasers of the shares of the public companies to be privatized. The respondents also by the pleading of the appellant, are unmistakably agents of a revealed principal and as agents, they cannot be liable under all the circumstance of this case. See Okafor v. Ezenwa (supra) ... An agent acting on behalf of a known and disclosed principal incurs no personal liability.…”The above decision is not any way in isolation. The Supreme Court had reached the same conclusion in the case of James v. Mid-Motors (Nig.) Co. Ltd. (1978) 11 N.S.C.C. 536 at 548 where the court per Aniagolu, JSC made a brilliant exposition of the law on the point while His Lordship made reference to the judgment of the House of Lords in Houlsworth v. City of Glasgow Bank (1874-1900) ALL ELR. Page 333 which had being the locus classicus on this Common Law position.CommentsThe reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any sizable business, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business. These problems are increased if the business is a corporation, because it is then a fictitious legal person and, as such, it can only act through human agents. Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses. When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i.e. the fact of the agency was revealed and the identity of the Principal revealed. But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound. Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority.