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HAMLYN v JOHN HOUSTON & CO

[COURT OF APPEAL]

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HEARING-DATES: 19 November 1902

19 November 1902

CATCHWORDS:

Partnership - Principal and Agent - Scope of Authority - Tortious Act of one Partner - Liability of Firm

- Bribing Servant to disclose Employer's Secrets - Partnership Act, 1890 (53 & 54 Vict. c. 39), s. 5.

HEADNOTE:

Where it was in the course of the business of the defendants, a firm of grain merchants, whichconsisted of two partners, to obtain by legitimate means information in regard to contracts made or

tendered for with brewers or with buyers of grain by competing firms, and one of the partners obtained

such information by bribing a clerk of the plaintiff, a competitor in business, to break his contract of service

by dishonestly and improperly communicating to him knowledge obtained in the course of the clerk's

employment:-

Held, that both the partners were responsible in damages to the plaintiff for the action of one of them

as aforesaid, on the ground that it was within the general scope of the authority given to him as a partner to

conduct the business of the firm.

INTRODUCTION:

APPLICATION for judgment or a new trial in an action tried before Kennedy J. and a jury.

The action was brought to recover damages against the defendants, in substance, for having induced a

clerk in the plaintiff's employ to break his contract of service with the plaintiff by disclosing confidential

matters with regard to the plaintiff's business, whereby damage was occasioned to the plaintiff.

The plaintiff and the defendants were grain merchants. The defendants' firm consisted of one Houston,and one Strong, who by arrangement between them left the conduct of the business to Houston. It was a

term of the clerk's employment by the plaintiff that he should not divulge the secrets of his employer

relating to his business. It appeared that Houston had induced the clerk by bribes to give him information

with regard to the names of plaintiff's customers, and contracts made, or tendered for, by the plaintiff, and

to allow him to have possession of one of the plaintiff's books containing entries concerning contracts. In

answer to questions left to the jury by the learned judge they found as follows. 1. Houston didinduce and procure the plaintiff's clerk to break his contract of service with the plaintiff by dishonestly

and improperly communicating to Houston knowledge obtained by him in the course of his employment in

the plaintiff's office in regard to secret and confidential matters of his employer's business. 2. Damage was

thereby occasioned to the plaintiff to the amount of 750l. 3. Houston so acted in order to obtain advantage

in business for the defendant firm, and believing the action to be for the interest of the defendant firm. 4. It

was in the course of the business of the defendant firm to obtain by legitimate means information in regard

to the contracts made or tendered for with brewers and with buyers of grains by competing firms. 5. The

moneys paid by Houston to the clerk were paid for or in consideration of the information which the clerk

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obtained for him as before mentioned. 6. The said moneys were the moneys of the defendant firm. 7. The

defendant firm profited by what Houston did.

Upon these findings the learned judge entered judgment for the plaintiff for 750l.

COUNSEL:

E. Tindal Atkinson, K.C., and G. Spencer Bower, for the defendants. The action being against the firm,

the question really is whether the defendant Strong is responsible as a principal for what the defendant

Houston did, as being within the scope of the authority given by one partner to another. The provisions of

the Partnership Act, 1890, s. 5, shew that the test whether a partner is responsible for an act done by another

partner is whether the act is done "for carrying on in the usual way business of the kind carried on by the

firm": see also s. 7 of the Act. To procure information as to the secrets of a rival firm by bribing their clerk

cannot be said to be an act done for carrying on in the usual way business of the kind carried on by thedefendants. This is not an action brought to recover money or some other subject-matter in the defendants'

possession, of which the plaintiff had been deprived through the action of Houston, as to which different

considerations might apply; it is an action to recover damages from both the defendants in respect of

Houston's acts, which must therefore

be shewn to be in law the joint acts of the defendants. This is not a question of an agent employingunlawful means in pursuit of some lawful object within the general scope of his authority. The end

proposed was in itself wrongful, namely, the procuring - it might be called stealing - of information which

was really the private property of some one else. A charge of illegal conspiracy might have been maintained

in respect of what was done. It is impossible to suppose that it was really in the usual course of defendants'

business to obtain information as to the secrets of rival firms; and, even if it was within the scope of

Houston's authority to obtain information, if possible, as to the contracts and tenders made by the plaintiff

by legitimate means, it does not follow that it was within the scope of his authority to obtain such

information under circumstances in which doing so really amounted to stealing it. It may be within the

scope of a partner's authority to obtain money for the purposes of the firm; but it would not therefore be

within the scope of his authority to steal money. The case is not like one in which an agent makes a

fraudulent representation in the course of a transaction which it was clearly in the ordinary course of thebusiness of his principal to carry out. Cases of this kind may be divided into three classes, in two of which

the principal is responsible for the acts of the agent, while in the third he is not. The first is where theobject, which the agent has in view, is within the general scope of his authority, and is lawful; and the

means employed by him, though exceeding his authority as between himself and his principal, are lawful.

The second is where the object, which the agent has in view, is within the general scope of his authority,

and is lawful; and it may be obtained either by lawful or unlawful means, and the agent has used unlawful

means. The third is where the object which the agent has in view is in itself unlawful. Here the object which

the agent or partner had in view was unlawful and wrongful, namely, procuring information as to thesecrets of a rival firm, information which was really their property, and the means employed were unlawful.

In Dyer v. Munday n(1) the criminal act was merely

n(1) [1895] 1 Q. B. 742.

incidental to the object in view, which was lawful. In this case the object itself was unlawful.

[They also cited Limpus v. London General Omnibus Co. n(1) ; Poulton v. London and South WesternRy. Co. n(2) ]

Ruegg, K.C., and Montague Shearman, for the plaintiff, were not called upon to argue.

PANEL: COLLINS M.R., ROMER and MATHEW L.JJ

JUDGMENTBY-1: COLLINS M.R

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JUDGMENT-1:

COLLINS M.R: The decision of the learned judge in this case was, in my opinion, right. The defendant

Strong appears to have been a sleeping partner in a firm consisting of himself and the defendant Houston,

or, at any rate, he delegated the transaction of the whole of the firm's business to Houston. The jury have

found that it was in the course of the business of the firm to obtain by legitimate means information inregard to contracts made or tendered for with brewers and with buyers of grains by competing firms. What

Houston did for the purpose of obtaining information, which, according to the finding of the jury, it was

within the scope of his authority to obtain by legitimate means, was to bribe the clerk of the plaintiff, who

was a competitor in business, to give him access to documents belonging to the plaintiff; indeed, it wouldappear that he actually had possession of one of the plaintiff's books for a time. It was argued for the

defendants that this action by Houston was so completely outside the scope of the authority given to him

that the defendants' firm cannot be responsible for it in an action brought against them by the plaintiff for

damages thereby occasioned to him. The defendants' counsel have endeavoured to frame a definition with

regard to what is and what is not within the scope of an agent's authority so as to render his principal liable.

They suggested that, where the end sought to be obtained by the agent is in itself illegal, and the means

employed to accomplish it are illegal, it cannot be said that the action of the agent is within the scope of the

general authority given to him to conduct a business, but that it is otherwise where the end and the means

employed are legal, or where the end is legal and the means of obtaining it may be legal or illegal. Tryingthis case by the test so suggested, was the end

n(1) (1862) 1 H. & C. 526.

n(2) (1867) L. R. 2 Q. B. 534.

to be obtained here in itself illegal? The defendants' counsel say that it was, but it does not appear to

me to be so. According to the finding of the jury it was part of the defendants' business to obtain

information as to the contracts and tenders of competitors in business, and, the more secret these matters

were, the greater was the value of that information to the defendants' firm. The jury have in effect found

that it was within the scope of the authority given to Houston to obtain such information by legitimate

means, and I do not see that there was anything illegal in so obtaining it. It is too well established by the

authorities to be now disputed that a principal may be liable for the fraud or other illegal act committed by

his agent within the general scope of the authority given to him, and even the fact that the act of the agent iscriminal does not necessarily take it out of the scope of his authority. If the act done by the agent is within

the general scope of the authority given to him, it matters not for the present purpose that it was directly

contrary to the instructions of his principal, or even that it may have been an offence against society itself.

The test is that which is applied to this case by the learned judge. Was it within the scope of the authority

given to Houston to obtain this information by legitimate means? If so, it was within the scope of his

authority for the present purpose to obtain it by illegitimate means, and the defendants are liable. That is the

law as expressed in the Partnership Act, 1890, and as laid down by decisions previous to that Act, in which

it has been held that a principal is liable for the fraud or other wrongful act of his agent if committed within

the scope of his employment. This doctrine does not appear to rest upon the notion of the principal's

holding out the agent as having authority. The grounds upon which it seems to rest, as explained in casessuch as Barwick v. English Joint Stock Bank n(1) , appear to be that the principal is the person who has

selected the agent, and must therefore be taken to have had better means of knowing what sort of a person

he was than those with whom the agent deals on behalf of his principal; and that, the principal havingdelegated the performance of a certain class of

n(1) (1867) L. R. 2 Ex. 259.

acts to the agent, it is not unjust that he, being the person who has appointed the agent, and who will

have the benefit of his efforts if successful, should bear the risk of his exceeding his authority in matters

incidental to the doing of the acts the performance of which has been delegated to him. For these reasons I

think this application must be dismissed.

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JUDGMENTBY-2: ROMER L.J

JUDGMENT-2:

ROMER L.J: concurred.

JUDGMENTBY-3:MATHEW L.J

JUDGMENT-3:

MATHEW L.J: I agree. A little confusion has been introduced into this case by the reference made to

the criminal law. It is not suggested that Houston's partner would be liable criminally; the question is onlyone of civil liability. The rule of law applicable is perfectly plain. The question is whether the action of

Houston was within the scope of his authority for the purpose of making the firm liable. I think the jury

were entirely warranted in finding that Houston was authorized to obtain information as to the contracts

and tenders made by competing firms by legitimate means. He did obtain such information by illegitimate

means. It being within the scope of his authority to procure the information, it is immaterial for the present

purpose whether the acts which he committed in order to procure it were fraudulent or even criminal or not,

and his partner is responsible for those acts.

DISPOSITION:

Application dismissed.

SOLICITORS:

Solicitors for plaintiff: Wood & Wootton.

Solicitor for defendants: C. T. Wilkinson.

E. L.

(c)2001 The Incorporated Council of Law Reporting for England & Wales

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