Agents' Disbursal of Funds in Breach of Instructions

Abstract

This article argues that, where an agent disburses a principal’s funds in breach of instructions, the principal is prima facie entitled at common law to bring a restitutionary claim against the agent for a refund of the moneys so disbursed. Such a claim is merely a manifestation of a general inference at common law of a right to a refund where the recipient of a payment (or other transfer) has failed to meet the undertakings attached to the payment. The right to a refund is quite independent of any implied promise there may also be on the part of the payee to put the payer in the position it would have been in had the undertakings been met. It is therefore no defence that, had the undertakings been met, the claimant would have suffered a loss. But the refund right is fragile in other respects. It must be asserted promptly after the claimant knows the conditions have been broken; and, even where the claimant does not know of the breach it may, for a range of reasons, become too late to invoke it. In so far as agents are subject to parallel duties to account at equity for misapplied funds, the relevant principles are not markedly different. These principles of the common law were not addressed in Target Holdings Ltd v Redferns and AIB Group (UK) Plc v Mark Redler & Co Solicitors. In the result, the reasoning in these cases was seriously fl awed, even though the ultimate outcome in each can be justifi ed. Not only does the reasoning deployed in them damage the law of agency, it threatens serious and unjustified constriction of the law’s responses to breaches of contract in general.