Kulandaivelu Pillai vs Ramaswami Naicker and Another

Oldfield, J.—The plaintiffs, here respondents sued the two defendants, and defendant being the petitioner in this Court for Rs. 400 in the

following circumtsances: Plaintiffs, it is not disputed, owed 1st defendant Rs. 400 and, it is proved, paid it to 2nd defendant, 1st defendant''s agent,

as such. 2nd defendant however did not account to 1st defendant for the money, misappropriating it. Ist defendant then obtained a decree for it

against plaintiffs who did not appear or plead discharge. On these facts the lower Court dismissed plaintiffs'' suit against 1st defendant, but gave a

decree against 2nd defendant; and the question in this revision petition is whether it was right in law in doing so.

It is clear that, if it was not, plaintiffs will have paid what they owed twice. But that result cannot affect the decision because it is entailed, not by

anything in the legal relation between the parties before me, plaintiffs and 2nd defendant, but by the failure of the former to take advantage in the

previous suit against them of the plea of discharge, which was open to them. It was no doubt suggested on their behalf during hearing of this

petition that they should now be allowed to make 1st defendant a party to it and claim a reversal of the lower court''s decree in his favour. But it

would have been useless to allow this in the absence of any possibility that their contention would succeed. The case must be dealt with as between

them and 2nd defendant alone on the issue whether in the circumstances they are entitled to recover from him in consequence of his failure to

account to his principal.

u/s 233, Indian Contract Act, in cases; where an agent is personally liable a person dealing with him may hold either him or his principal or both

of them liable. But it is not shown how under any provision of law or in virtue of any principle 2nd defendant was under any liability to plaintiffs in

respect of the money received by him from them. This was the basis of the decision in Ellis v. Goulton (1893) 1 Q.B. 350 Lord Esher and Smith

L.J. dealing with and rejecting seriatim the various heads of liability, which could conceivably be relied on; and so also, although the reasons are

given more shortly, in Bamford v. Shultleworth (1840) 11 Ad. & El. 926 and Steppens v. Badcock (1832) 3 B & Ad. 354 . Against these

authorities plaintiffs have relied first on the dictum of Blackburn J. in Pollard. Bank of England (1871) 6 Q.B. 623 and Taylor v. Metropolitan

Railway (1906) 2 K.B. 55 in which that dictum is quoted with approval. "" Where money has been paid under a mistake of fact to an agent, it may

be recovered back from him unless he has in the meantime paid it to his principal or done something equivalent to payment to him in which case the

recourse is against the principal only. "" But in the present case, as in Ellis v. Goulton (1893) 1 Q.B. 350 and the cases cited with it there was no

question of mistake, and absence of any being referred to explicitly in Stephens v. Badcock (1832) 3 B & Ad. 354; and the two cases last

referred to must be distinguished on that ground.

Plaintiffs however rely on the fact that these are not cases in which fraud or dishonesty on the part of the agent was relied on and have referred

to two of the headings under which the liability of an agent to refund money paid to him is classified in Bowstead on Agency, Article 125(b) and (c)

p. 421. But of these the first ""when the money is obtained by duress or by means of any fraud or wrongful act to which the agent is party or privy

is not relevant. For it is not alleged that plaintiffs made their payment to 1st defendant otherwise than in the ordinary course in discharge of what

they owed his principal; and the lower court was in fact inclined to find that he originally received the money honestly, failing to credit it correctly

only through inadvertance. As regards the other head of liability referred to ""when the money is paid under a mistake of fact or under duress or in

consequence of some fraud or wrongful act and repayment is demanded of the agent before he has in good faith paid the money over to or

otherwise dealt to his detriment with, the principal in the belief that the payment was a good and valid payment"" it is sufficient that as already

observed, there is here no question of mistake of fact; and there is none of duress or other misconduct on the part of the principal, to which alone

the learned author can be supposed to be referring since he has already dealt with cases of misconduct on the part of the agent. It is then

immaterial that a demand may be taken to have been made in the present case on the former before he paid the latter, since the other conditions

postulated are not fulfilled.

The plaintiffs'' reference to this authority in fact calls for notice, mainly because the second citation from it purports to be founded on the old

case of Cary v. Webster I. Str 480. That case actually decided only that a clerk receiving money for his principal and paying it ov.er to him

although without making any entry in his account, is not liable to the person who made the payment and the portion now relevant is only an

accompanying obiter dictum that if the clerk had not made the payment over, he or his principal would have been liable at the plaintiffs'' option. No

reason for this opinion is given and nothing later in the same sense has been shown; and it is therefore unnecessary to regard the decision, in spite

of the high authority of Lord Camden who gave it, as extending in any degree the two headings of liability, based on the misconduct of either agent

or principal above referred to. That failing, I follow the decision in Ellis v. Goulton (1893) 1 Q.B. 350 and the two cases mentioned with it. In the

absence of such misconduct in connection with the receipt of the money, of which refund is claimed the basis of those decisions, the absence of

privity between the agent and the person who paid him, would have been available equally whatever the circumstances in which the former retained

it. Shortly 2nd defendant received it as his principal''s money and plaintiffs, who could have pleaded against 1st defendant that he did so cannot by

their failure so to plead enable themselves to recover from him.

The petition must be allowed, the lower Court''s decree being modified as regards 2nd defendant by the dismissal of the suit against him with

costs throughout.