“A Number of Interesting Puzzles involving the Law of Agency”: VMS Enterprises Ltd v The Brexit Party Ltd

DOI10.3366/elr.2023.0812
Author
Pages83-89
Date01 January 2023
Published date01 January 2023
INTRODUCTION

The opportunity to analyse the principles of the Scots law of agency arises relatively rarely in the Scottish courts. It is therefore very gratifying to see a Scottish sheriff rising to the challenge in order to provide a comprehensive and meticulous analysis of the Scottish authorities. This took place in VMS Enterprises Ltd v The Brexit Party Ltd, before Sheriff S Reid in Glasgow Sheriff Court in July 2021.1

Sheriff Reid was surely correct to comment that “[t]he action raises a number of interesting puzzles involving the law of agency”.2 Not all of those interesting puzzles can be analysed here. Sheriff Reid's analysis of that most difficult of agency concepts, apparent authority, is not commented on here. The principles of that area of law are now relatively clear.3 Instead, this article will focus on Sheriff Reid's approach to the concept of agency. As illustrated below, the unusual facts of this dispute may have stretched our definition of agency to the limit.

FACTS

The pursuers are a company which supplies mobile advertising space in the form of vans and bikes carrying advertising boards and digital screens. The defenders are a political party registered with the Electoral Commission. The dispute centred around certain invoices issued by the pursuers which they argued had not been paid by the defenders. The defenders refused to pay because, they argued, the expenditure, which had been incurred by candidates, had not been approved in advance in accordance with the Party's internal procedures. The defenders also argued that the contracts with the pursuers engaging the pursuers' services were either void or unenforceable under the Political Parties, Elections and Referendums Act 2000.4

Sheriff Reid held that the Party had conferred express authority on candidates, as agents, to bind the Party in contractual obligations with third parties (such as the pursuers). Such authority was limited, however, allowing the candidates to incur expenditure only when the Party's procedures were followed (essentially involving the Party's prior approval of expenditure). Although the candidates lacked express authority in relation to the disputed invoices, the pursuers successfully established that the candidates possessed apparent authority in relation to them. The invoices were therefore payable by the Party.

THE SHERIFF'S APPROACH TO AGENCY

The Sheriff began his analysis of the law by noting that, as a general rule, agency involves two contracts and three parties: the first contract is an (agency) contract between principal and agent; and the second contract binds the principal and the third party (and is formed through the direct representation of the agent).5 The relationship between principal and agent is

…characterised in Scots law as contractual, and more often than not it is indeed constituted by a contract. But it need not be so. The contractual analysis should not be misunderstood as requiring the identification of a contract between principal and agent. Rather, the essential feature of the relationship is consent.6

The Sheriff's reluctance to analyse the principal/agent relationship as contractual is understandable. In a commercial context it is usually relatively easy to prove that a contract exists between principal and agent. Such contracts can be entered orally, and acceptance by the agent can be inferred from conduct. The situation giving rise to this dispute was not, however, a standard commercial situation. The candidate is not an actor whose main function is to bind the Party in contracts with third parties. The candidate's “commercial” function was limited to a small number of transactions with third parties like the pursuers. Although only limited information on this point was available from the case report, the relationship between the Party and the candidates seemed to rest on the Party's agreement to reimburse the candidate's election expenditure, up to a maximum amount. There are (at least) two possible legal analyses of this situation. Firstly, the candidates could have acted as agents for the Party, binding the Party in contracts directly with third parties (such as the pursuers). Secondly, the candidates could have contracted directly with the pursuers. No agency would be involved on this latter analysis. Any agreement between the Party and the
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