In our August 2010 ENSight (which can be accessed here) we reported on a judgment of the Western Cape High Court which dealt with a Principal Agent’s obligation to account to an Employer for the work that it had done on a building project, in order properly to assess the instructions issued by it to the Contractor.  The Principal Agent had argued that it had no duty to account as its mandate had been terminated, and refused to account. 

The Court made the following comment :

“If the agency agreement with the architect is terminated prior to the completion of the project, the principal, due to the nature of the architect’s duties in terms of the agreement, is entitled to full disclosure of all relevant instructions and decisions. The respondents as architects on the project thus have a duty to account to the [employer] for the work they did on the project as principal agent”.

The Court accordingly held that the Principal Agent was obliged to deliver such further explanation of its contract administration and the performance of its function as Principal Agent, as was reasonably required by the Employer, at no additional cost to the Employer.

The only agreement relied upon by the Employer in that matter was the JBCC Building Contract (the Principal Agent being a party to that agreement).  The Court however found that the duty to account in good faith to the Principal/Employer was one implied by law, and relying on the English Law held that that duty extended beyond the termination of the Agent’s mandate.

Of interest in relation to this duty is a recent decision of the English Court of Appeal in Fairstar Heavy Transport N.V. v Philip Jeffrey Adkins & Another [2013] EWCA Civ 886.  In that matter the Principal/Employer required the Agent to give it access to the content of emails relating to the Principal/Employer’s business affairs as conducted by the Agent, subsequent to the termination of the relationship.  Briefly : 

  • The Principal/Employer sought the information based on a proprietary (ownership) right.
  • The Agent argued that there was no proprietary right / right of ownership in information and for that reason the Principal/Employer was not entitled to the information.
  • The English Court of Appeal found that the Principal/Employer’s reliance on a proprietary right was a “distraction from the centrality of the agency relationship and its legal incidents”. In other words the ownership rights or entitlement to information held by the Agent were of no relevance in the context of the Principal/Employer’s right to access the information, which arose solely out of the Principal/Agent relationship. Based on the obligations inherent in the agency relationship, the Appeal Court ordered the Agent to make the information available to the Principal/Employer. 

COMMENT

The South African decision was one of a lower court and not the subject of an appeal to our Supreme Court of Appeal.   

In our view our Supreme Court of Appeal would not only follow the decision of the lower court, but would endorse the principle that the duty to account extends beyond the duty to make available all physical documents, and would be inclusive of the right to all information held by the Agent, thereby following the decision of the English Court of Appeal.

The decision of the English Court of Appeal was ultimately based on the nature of the relationship between the Principal/Employer and the Agent – the Principal/Employer’s right was essentially one of access rather than ownership.

Significantly, the South African court went even further than the English Court of Appeal in describing what fell within the ambit of the Agent’s duty to account, including “all that he knows and all that he has done in the execution of the mandate”. This would broaden the “information” required from the Agent and would include his knowledge of the matter, whether or not it was recorded in any format.

This approach opens the door for Principals/Employers to exercise their right to access all information held by their Agents, whether during or after the subsistence of the relationship. This right would prevail regardless of the Agent’s proprietary right over the information in its possession,  for instance copyright in the material/documents which might also be reserved in its favour in an underlying professional services agreement, or because the information constitutes intellectual property or know-how.

Thus, even where the Agent has a proprietary right in the information and/or documents which it generated during the course of its relationship with the Principal/Employer, the Agent would be obliged to give the Principal/Employer access to the information, free of charge. The Agent would, however, retain its remedies should the Principal/Employer misuse proprietary information.