Agency Law

Agency LawThe origins of the doctrine of necessitous intervention by someone who is in a legal relationship with the defendant lie in the principle of agency of necessity, where an agent went beyond his or her authority by intervening on behalf of the principal in an emergency. Because of the circumstances of necessity, particularly the impracticability of the agent communicating with the principal, the courts were prepared to treat the agent as though he or she had the necessary authority to do what was reasonably necessary to save the principal's property. If an agency of necessity was established, the agent would be reimbursed for the expense incurred in rescuing the principal's property. The doctrine of agency of necessity was initially relevant only in respect of the carriage of goods by sea, where the master took action to save the ship or cargo in an emergency. It was then extended to those cases which concerned the carriage of goods by land. This is illustrated by The Great Northern Railway Co. v. Swaffield where the plaintiff railway company had transported a horse to a station on behalf of the defendant . When the horse arrived there was nobody to collect it, so the plaintiff sent it to a stable. A number of months later the plaintiff paid the stabling charges and then sought to recover what it had paid from the defendant. The plaintiff's claim succeeded even though this involved the extension of the doctrine of agency of necessity to include carriers of goods by land. There was an agency of necessity because the plaintiff was found to have had no choice but to arrange for the proper care of the horse. The doctrine of agency of necessity was then extended beyond cases involving carriage of goods to other cases in which the plaintiff had been forced by an emergency to act beyond his or her existing authority. This extension of the principle was recognised in Prager v. Blatspiel, Stampand Heacock Ltd. and Heacock Ltd., although the element of emergency was not established on the facts . In Prager the defendant, who was a fur merchant, bought and dressed skins on behalf of the plaintiff to be delivered to Romania. The outbreak of the First World War made it impossible for the defendant either to send the skins to Romania or to communicate with the plaintiff. The defendant then sold the skins. When the plaintiff eventually asked the defendant to transport the skins to him, the defendant argued that it had been forced to sell the skins because they were deteriorating, making it necessary that the skins were sold forthwith. On the facts of the case it was held that the defendant was not an agent of necessity, simply because, since the skins were dressed, they were in no danger of deteriorating. But it was accepted that if the skins had been deteriorating rapidly the defendant would have been authorised to sell them by virtue of an agency of necessity.

McCardie, J., showed that the doctrine could apply to this kind of situation and might, for example, have entitled the defendants to reimbursement of storage charges and other precautions to preserve the furs. But on the facts there was no compulsion on the defendants to sell -- that is, there was no danger, as deterioration, to create a commercial necessity for this sale -- and, which is a separate point, the defendants had not been motivated by their honest conception of the best interests of the owners but rather by considerations of their own convenience and advantage .

This case shows not only that the doctrine extends to land-based bailments but also that it serves purposes other than restitution. In particular, if he has been compelled to sell the goods, an agent of necessity has a defence to an action in tort; if he has had to make a contract (as for repair or storage or even to borrow money) the outsider will be in direct contractual relationship with the agent's principal; and, if he expends money on the safety of the goods, he will have a claim for reimbursement. Our concern is with this third consequence, the agent of necessity's right to reimbursement of his outlay. We have already seen that in Prager, McCardie, J., would have allowed recovery of storage charges. He relied for that on Great Northern Railway v. Swaffield . The railway was to deliver a horse to Sandy station for the defendant. There was nobody to collect it when it arrived. The defendant's servant did not appear till after the railway had incurred a stabling charge of 1s.

6 d. He refused to pay the charge and finally left without the horse. Over the following days the defendant took an increasingly intransigent position. The stabling charges rose to ?17. The railway then decided to pay the bill and deliver the horse. It then reclaimed the sum paid. The claim was upheld on the analogy of the maritime cases, especially Gaudet v. Brown, Cargo ex Argos . The railway had had to take these reasonable steps to see that the defendant's horse was safely looked after. The principle underlying the doctrine of agency of necessity has now been extended beyond those cases where there was a pre-existing relationship of principal and agent to where there was any form of pre-existing legal relationship, such as the relationship of bailor and bailee. This was recognised in The Winson, where the plaintiff, who was a professional salvor, had entered into an agreement to salvage the defendant's cargo of wheat after its ship had been stranded on a reef. The cargo was salvaged and taken to Manila where it was stored under cover to ensure that it did not deteriorate. The plaintiff informed the defendant that it was going to put the wheat into storage and the defendant did not object. The plaintiff then sought to recover the storage expenses from the defendant. Since the storage was not covered by the salvage agreement, the plaintiff could not sue under the contract. However, once the wheat had arrived in the Philippines the relationship between the parties was one which was founded on a gratuitous bailment. Consequently, the plaintiff argued that, in storing the wheat, it was acting as an agent of necessity. The plaintiff's claim for restitution of the storage expenses which had been incurred succeeded before the House of Lords, because the plaintiff's conduct was considered to have been reasonable. But Lord Diplock, who gave the leading judgment, stressed that the plaintiff should not be characterised as an agent of necessity, since he considered that the notion of agency should be confined to where the agent was deemed to have authority to create contractual rights and obligations between the principal and a third party. He did not regard the term as being appropriate where the plaintiff's claim was for reimbursement, as it was here. Despite this change in terminology, it is still important to draw a distinction between those cases in which a stranger has intervened in circumstances of necessity and those in which the plaintiff who intervened has a pre-existing relationship with the defendant. The change in terminology in respect of the latter doctrine emphasises that the preexisting relationship between the parties need not have been an agency relationship. Lord Diplock did suggest that the conditions which need to be satisfied before an agency of necessity is established will not necessarily have to be satisfied before the plaintiff obtains reimbursement from the defendant. Consequently, for example, restitution will not be denied simply because the plaintiff was in fact able to communicate with the defendant, it being sufficient, as occurred in The Winson itself, that, despite the communication with the defendant by the plaintiff, the defendant had failed to give any instructions to the plaintiff as to what to do with the wheat. Where there is a pre-existing legal relationship between the parties, restitution may be awarded by reason of necessity if certain conditions are satisfied, as was recognised in The Choko Star . However, as Lord Diplock recognised in The Winson, the key issue for the courts to determine is whether the plaintiff's conduct was reasonable, so the fact that one of these conditions is not satisfied does not mean that the plaintiff's conduct must automatically be considered to have been unreasonable.

1.There must be an actual and definite commercial necessity for the plaintiff to intervene having regard to the particular circumstances of the case . It was for this reason that an agency of necessity was not established in Sachs v. Miklos where the defendant had agreed to store the plaintiff's furniture free of charge . After a considerable time the plaintiff had not reclaimed the furniture and, since the defendant wished to rent out the room where it was stored, the defendant attempted to contact the plaintiff. Despite numerous attempts to make contact, the defendant could not find the plaintiff and so he sold the furniture. The plaintiff then returned to claim his furniture and, when he discovered that it had been sold, he sued the defendant in conversion. The defendant argued that he was an agent of necessity but the Court of Appeal held that this had not been established, simply because there was no need for the furniture to be sold. Similarly, in Munro v. Willmott the defendant sold the plaintiff's car which had been left on his premises for a number of years . Again the defendant was not characterised as an agent of necessity because the sale of the car was not required as a matter of real urgency but was done simply for the defendant's convenience. It would have been different in both cases if the plaintiff's property had been perishable, such as fruit and vegetables, so that there was a commercial necessity for the property to be disposed of, otherwise it would have perished.

2.It must have been practically impossible to obtain the defendant's instructions about what should be done in time . Restitutionary relief may, however, still be awarded where the plaintiff asks the defendant for instructions and the defendant fails to respond .

3.The burden is on the plaintiff to show that he or she was acting in good faith in the best interests of the defendant . It follows that the plaintiff's action must have been reasonable and prudent in the particular circumstances of the case and must have been taken to protect the interests of the defendant, otherwise it will smack of officiousness .

The problem with the action for reimbursement in circumstances of necessity where there is a pre-existing legal relationship between the parties is whether it really forms part of the law of restitution. The difficulty arises from the requirement that there must be a pre-existing relationship, whether it be agency or bailment or whatever. The effect of the doctrine is that the plaintiff's authority under this relationship is extended to include the reaction to the emergency . This suggests that the doctrine is part of the law governing the pre-existing relationship, such as contract, rather than the law of restitution, with the consequence that, if the plaintiff has a remedy, it will be contractual rather than restitutionary . Whilst this may be true in most cases, there is still a role for the doctrine to apply within the law of restitution. This will particularly be the case where, as in The Winson, the pre-existing relationship between the parties is not contractual but arises, for example, from a gratuitous bailment or where the previous contractual relationship may have ended. In these circumstances the law of restitution intervenes to impose an obligation on the defendant by operation of law to ensure that the defendant does not receive enrichment without reimbursing or remunerating the plaintiff.

In China Pacific S.A. v. Food Corporation of India, The Winson, the House of Lords applied these same cases so as to allow the plaintiffs, who were professional salvors, to recover the charges incurred by them in storing the defendants' cargo of wheat after saving it from the stranded ship in which it was being carried. But in this case their Lordships took the opportunity to make an adjustment of terminology. They said that the words 'agency of necessity' should not be used except to denote the circumstances in which the facts would allow a contractual relationship to be created between the agent's principal and the outsider. The phrase should not be used where the only issue was restitution in respect of such steps as had been reasonably necessary to preserve the owner's goods .

These two groups of cases -- those between strangers and those extending a pre-existing contractual relationship -- can be perceived as different applications of a single principle. That is to say, a pre-existing relationship appears to be no more than one way, albeit the most common, of satisfying prerequisites of a restitutionary claim which can be satisfied, more rarely, by facts other than such a relationship. The notion of an agency of necessity could not be applied except where there was a pre-existing relationship on which to build. The consequent isolation of the relationship cases will not really be diminished if the phrase 'agency of necessity' is displaced by a new analysis in which the right to reimbursement is seen to be correlative with a duty to keep safe. For the duty element will not easily be found without a pre-existing relationship between the parties. Where a stranger intervenes, the duty upon him is moral, not legal.