Keogh v Dalgety and Company Limited

In *Keogh v Dalgety and Company Limited*, the plaintiff, William Monahan Keogh, brought an action against the defendant company, Dalgety & Co. Ltd., alleging that the company had acted as his agent in procuring a loan and had made a secret profit from this arrangement. The dispute arose from a complex agreement concerning the sale of a station property, Warrana, from the estate of the plaintiff's deceased father to the plaintiff. This agreement involved the defendant company, which held significant debts secured against the property, the executrix of the estate, and the plaintiff. As part of the compromise, the plaintiff was to purchase the station for £180,000, with the defendant company agreeing to use its best endeavours to obtain a first mortgage for the plaintiff on the property, not exceeding 5% interest, to discharge part of the debt.

The legal issues before the High Court of Australia were whether the defendant company, in its role of obtaining a first mortgage for the plaintiff, acted as his agent and, if so, whether it was entitled to retain a commission of 0.5% per annum it received from the first mortgagees. This commission was paid to the defendant company in consideration for guaranteeing the principal and interest of the £100,000 loan, a fact not disclosed to the plaintiff at the time. The plaintiff sought to recover this commission as a secret profit made by his agent.

A majority of the High Court, comprising Isaacs, Gavan Duffy, and Rich JJ., held that the defendant company did act as the plaintiff's agent in procuring the loan and owed him the ordinary duties of an agent. They reasoned that the commission received by the company was a secret profit made in the course of its agency and was therefore recoverable by the plaintiff. The dissenting judges, Griffith C.J. and Barton J., took the view that the defendant company's fiduciary obligation did not extend to precluding it from entering into an independent agreement with the mortgagees to guarantee the loan, and that any recoverable amount would be limited to the actual profit derived from that agreement, not the full commission.

The High Court, by a majority, varied the decision of the Supreme Court of Victoria. The majority found that the plaintiff was entitled to the full amount of the secret profit, £2,500, and not merely to have it adjusted within the accounts between him and the defendants as ordered by the lower court.