M.P.M.R.M.N. Ramanathan Chettiar vs K.R.S.V. Muthiah Chetty and Others

Abdur Rahim, J.—There were two brothers belonging to the Nattukottai Chetti community, namely, Narayana Chettiar and Muthia Chettiar,

The plaintiff is the son of the former and defendants Nos. 4 to 6 are sons of the latter. The two brothers carried on money-lending business in the

name of M.P.M.R.M. They had business in various places. Narayana Chettiar died fifteen years ago, and Muthia Chettiar died about ten years

previous to the suit. At the time of the latter''s death, plaintiff and defendants Nos. 4 to 6 were all minors and the family was undivided. The first

defendant in the suit is the maternal uncle of defendants Nos. 4 to 6. He was appointed as agent by the mother of these defendants to manage and

took after their share in the family property and the business. The second defendant, who is the maternal uncle of the plaintiff, was similarly

appointed by the plaintiff''s mother. The suit was instituted by the plaintiff, who attained majority in 1911, for a decree directing defendants Nos. 1

and 2 to render an account to him of their management of the affairs of the family of the plaintiff and the defendants during his minority and for other

reliefs.

The first question that arises is whether the suit is maintainable. It is to be noted that the mothers of plaintiff and defendants Nos. 4 to 6, who

appointed defendants Nos. 1 and 2 as agents, have not been made parties. It is contended by the learned Advocate-General on behalf of the

appellant (plaintiff) that defendants Nos. 1 and 2 must be treated as trustees de son tort and as such liable to account to the plaintiff. His argument

is that the guardians of the plaintiff and defendants Nos. 4 to 6 occupied the position of trustees and defendants Nos. 1 and 2 having intermeddled

with the estate of the minor and having received the properties of the minor are liable to account to him. He has cited a number of rulings, but it is

sufficient to point out that all those rulings relate to the liability either of trustees, or of persons accountable as trustees, for intermeddling or for

being connected with breaches of trust of the trust property. The leading authority on the point is the case of Barnes v. Addy [1874] 9 Ch. App.

The other cases cited by the Advocate-General, Mara v. Browne [1896] 1 Ch., 199, In re Barney, Barney v. Barney [1892] a Chan. 265,

simply follow the principle laid down in that case at page 251. There, Lord Selborne states the principle in these words:

Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility.

That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees

de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But on the other hand, strangers are

not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions

perhaps of which a Court of equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or

unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. Those are the principles, as it seems to me, which

we must bear in mind in dealing with the facts of this case. But on the other hand, if persons dealing honestly as agents are at liberty to rely on the

legal power of the trustees and are not to have the character of trustees constructive imposed upon them, them the transactions of mankind can

safely be carried through and I apprehend those who create trusts do expressly intend, in the absence of fraud and dishonesty, to exonerate such

agents of all classes from the responsibilities which are expressly incumbent, by reason of the fiduciary relation, upon the trustees.

And Lord Justice James added:

I have long thought, and more than once expressed my opinion from this seat, that this Court has in some cases gone to the very verge of justice in

making good to cestui que trust the consequences of she breaches of trust of their trustees at the expense of persons perfectly honest, but who

have been, in some more or less degree injudicious. I do not think it is for the good of cestui que trust, or for the good of the world, that those

cases should be extended.

The learned Advocate-General admitted that there is no authority for the proposition, that an agent appointed by the guardian of a minor is liable

to account to the minor as if he was a trustee de son tort, because he received property belonging to the minor. On the other hand, there is a ruling

of this Court which seems to be opposed to such a proposition: Chidambaram Chetty v. Pichappa Chetty ILR (1907) Mad. 243. There, it was

held that an agent appointed by the administrator of an estate as such cannot be proceeded against on such contract of agency by the person

entitled to the estate, and it makes no difference that the administrator obtained the grant as the attorney of the mother and guardian of the person

entitled.

The learned Advocate-General, however, drew our attention to a passage in the judgment to the effect that no claim was made against the

defendant on the ground of his possession of property belonging to the plaintiff, and he argued that where such an agent is in possession of the

property, the law makes a difference. But we do not think that in the absence of any clear authority, it would be safe to hold that an agent

appointed by the guardian of the minor is liable to account to the minor for his acts as an agent on the principle applicable to trustees or persons

intermeddling with the trust estate. If there were any force in the contention of the appellant, one might reasonably expect that there would have

been some authority forthcoming in support of it. It would be unsafe to extend the rule laid down with respect to trustees de son tort to the persons

in the position of agents of the guardian of the minor. Under the ordinary law an agent is liable to the principal. The state of accounts between an

agent and a principal, and the liabilities of the agent to the principal, would be on a very different footing from the account which a trustee or a

person intermeddling with the trust estate has to render to the cestui que trust. Besides, as mentioned above, in this case, the mothers who

appointed defendants Nos. 1 and 2 agents have not been made parties, and any decree in this case would not exempt the agents from their liability

to their principals. The conclusion of the learned Subordinate Judge on this point is right.

The second point relates to a sum of Rs. 14,000 and odd which the plaintiff paid to the first defendant on behalf of defendants Nos. 4 to 6. The

Subordinate Judge has found that this was settled by arbitration and the question cannot be re-opened. On the other hand the case of the plaintiff is

that it is a matter of stated and settled accounts and if he is able to show errors in the account, he is entitled to reopen the question. Exhibit III

makes it clear that the settlement was made by arbitrators or mediators. Such a settlement is not liable to be reopened, except on the ground of

fraud which is not alleged in this case.

The appeal fails on all the points and must be dismissed with costs.

Ayling, J.

I agree.