The Gazette 1946-49

GAZETTE

DECEMBER 1988

C i r c ums t a n c es

There are a number of circum-

stances in wh i ch the rights arise.

The principal is normally under a

duty to reimburse and indemnify the

agent for all liabilities incurred while

acting within the scope of the

authority conferred by the principal.

The expenses and liabilities must

have been

actually

arisen.

The principal does not have to

i n d emn i fy t he agent aga i nst

imaginary liabilities.

The principal must reimburse and

i ndemn i fy the agent n o t w i t h-

standing the fact that the principal

could not be made personally liable

for the expenses or liabilities.

The agent does not have to be

legally

ob l i ged to meet t he

expenses and liabilities.

principal is obliged to indemnify

and remunerate an agent not only

for expenses legally incurred but

also for some expenses wh i ch the

agent was morally

(but not legally)

obliged to incur.

Rhodes -v- Fielder,

Jones and Harrison

is a case in

point. The client instructed his

solicitors not to pay counsel's fees.

Counsel would not have been

entitled to sue for the fees but it

would have been a matter of

professional misconduct for the

solicitors not to have paid the fees.

Lush J. held that the principal (the

client) was obliged to indemnify the

agent (the solicitors) for the fees

which it paid to the third party (the

counsel) notwithstanding that it

was not

legally

obliged to do so.

The agent's normal rights to

reimbursement and indemnity may

be extended and enlarged by a

custom existing in the particular

trade in which that agent operates.

If it can be established that there

is a custom that agents are re-

imbursed and indemnified in that

particular trade in a way wh i ch is

not normal in other trades and that

custom is reasonable then the

agent is entitled to the rights which

are customary in that trade.

such a custom can be established

but it is found to be an un-

r easonab le c u s t om t h en t he

principal will only be entitled to

reimburse and indemnify the agent

where the principal knew of the

custom.

An agent is entitled to

be reimbursed for expenses or

indemnified for liabilities incurred

while acting within the scope of

implied authority.

Decided case law supports the

proposition that an agent who

mistakenly (but reasonably) makes

a payment to a third party is entitled

to reimbursement and indemnity.

If an agent is entitled to be

indemnified in respect of the

expenses of litigation then the

scale of reimbursement is that of

cost on a common fund basis and

not simply party and party.

Re s t r i c t i ons

(a) Ag e n ts

Agents generally have the rights of

reimbursement and indemnity but

del credere

agents do not have

these rights.

(b) S i t u a t i o ns

In general, an agent is entitled to be

both reimbursed and indemnified

but there are situations where the

agent can lose these rights.

An agent has no rights to

reimbursement or indemnity where

the agency agreement expressly or

impliedly excludes it.

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