SECRET OF PROFIT UNDER THE LAW OF AGENCY

Once an agent received a secret profit, the law presumes that he has been affected by the

payment to the detriment of his principal. Moreover, this does not have the necessity to
prove dishonest action or improper use of position of the agent. If the principle knows
about the extra profit and agree to it, then only the agent is entitled to keep the profit.
Therefore, the profit is no longer as a secret. Hence, if the profits are secret, then the
principle can take action against the agents.
The principal may sue the agent and the third party giving the bribe for damages for any
loss he may have sustained through entering into the contract. As in the case of Mahesan
v Malaysian Government Officers co-operative Housing Society Ltd, the appellant was
a director and secretary of the respondent co-operative society.
In the section 168, if an agent deals on his own account in the business of the agency,
without first obtaining the consent of his principal and acquiring him with all material
circumstances which have come to his own knowledge on the subject, the principal may
repudiate the transaction. Another section involve is 169, if an agent without the
knowledge of his principle which he or she had deals in the business of the agency on his
own account instead of on account of his principle. Whereby, the principle is entitled to
claim from the agent any benefit which may have resulted to him from the transaction.
In the fact of the case, he brought land at the price of $944,000 from the vendor who had
earlier paid $456,000 for it. The appellant knew of this act. However, he failed to inform
the society. The society discovered the fact only after the sale was done and discovered
the appellant had received $122,000 as a secret commission from the vendor. As a result,
the Privy Council held that the respondent could recover either bribe or the amount the
actual loss suffered by it as a consequence of entering into contract.
The principal has the right to recover to bribe or secret profit not only to the extent where
in a transaction an agents sells at a price higher than was set by him. In the case of Tan
1 Secret profit can defined as a bribe retrieved from 5 th August, 2015 from
http://www.lawteacher.net/free-law-essays/contract-law/secret-profit-can-bedefined-as-a-bribe-law-essay.php

Kiong Hwa v Andrew S.H. Chong, 2the defendant was the managing director of house
agency company. The plaintiff has brought a flat from that company. The plaintiff later
authorized the defendant as his agent to seek the flat for $45,000. However, the defendant
sold the flat for higher price in $54,000. The difference of $9.000 was credited to the
company. In the principle of law, the court held that the plaintiff was entitled to recover $
9,000 from the defendant as the defendant has breached his duty as agent.
As in the case of the Andrews v Ramsay and Co, where the principal successfully
recovered both the commission paid to the agent plus the secret commission received by
his agent from a third party. The plaintiff directed the defendant to sell the property and
agreed to pay him commission of 50 pounds. The defendant received 100 pounds from a
purchaser as deposit for the property. The defendant paid 50 pounds to the plaintiff and
kept the other 50 pounds in payment of his commission with the plaintiffs knowledge.
However, the plaintiff learnt that the defendant had also received another 20 pounds as
commissions from the purchaser. He sued his agent to recover this 20 pounds and also the
50 pounds he had paid the defendant initially. Whereby, the court held that he could
recover both of them.

2 Law of agency (business law) retrieved from 5 th August, 2015

fromhttp://zulamirulaiman.blogspot.com/2014/09/law-of-agency-businesslaw.html