*339 Boston Deep Sea Fishing and Ice Company vAnsell

Court of Appeal

27 June 1888

[1886. B. 5330.]

(1888) 39 Ch. D. 339

Cotton , Bowen and Fry , L. JJ.

Kekewich , J.

1888 June 25, 26, 27

1888 Jan. 12, 13, 14, 26, 27, 28, 30, 31; Feb. 1

Principal and Agent—Master and Servant—Managing Director—Profitmade by Agent—Commission—Dismissal of Servant for Breach of Duty—Salary for current Period.

The promoter of the Plaintiff company agreed with the Defendantthat he should be employed as managing director of the intendedcompany for five years at a yearly salary. By the articles of associationit was provided that the Defendant should be managing director forfive years at the yearly salary mentioned in the agreement, payablequarterly. Afterwards the company by a written instrument adoptedthe agreement between the promoter and the Defendant.

The Defendant, on behalf of the company, contracted for the construc-tion of certain fishing-smacks, and, unknown to the company, took acommission from the shipbuilders on the contract. Several months af-

terwards the Plaintiff company at an extraordinary meeting passed aresolution dismissing the Defendant from his office on the ground ofother alleged acts of misconduct, which they were not able to substan-tiate in the action: being at that time ignorant of his receipt of thecommission from the shipbuilders.

The Defendant was a shareholder in an ice company and a fish-carry-ing company, which paid, in addition to the ordinary dividends,bonuses to shareholders who were owners of fishing-smacks and whoemployed the companies in supplying ice and carrying for them. TheDefendant employed these companies in respect of the Plaintiffs'smacks, and received bonuses as if the smacks were his own.

The Plaintiff company brought an action against the Defendant for an*340 account of commissions and bonuses received by him, and fordamages for alleged breaches of duty: and the Defendant counter-claimed for wrongful dismissal and for the salary for the quarterwhich had expired before his dismissal:—

Held, (reversing the decision of Kekewich , J.), that the receipt of acommission from the shipbuilding company was good ground fordismissal, although it was not discovered till after the dismissal hadtaken place; and although it happened several months previously,and might have been an isolated act:

That the Defendant must account to the Plaintiffs for the bonuses re-ceived from the ice and carrying companies, as they had been paid inrespect of the Plaintiffs' smacks; although the Plaintiffs could notthemselves have received the bonuses, not being shareholders of thecompanies:

That the contract between the Plaintiffs and the Defendant was con-tained in the agreement between the promoter and the Defendant as

adopted by the company, and was not modified by the articles of as-sociation; that the salary was consequently payable yearly and notquarterly; and therefore that the Defendant having been dismissed formisconduct was not entitled to any part of the unpaid salary for thecurrent year of his service.

If the Plaintiff company had not formally adopted the agreement by aseparate instrument, quære , whether the articles might not have beentaken as evidence that the parties had agreed to a modification of theagreement by making the payment of the salary quarterly.

THIS was an action brought by the Boston Deep Sea Fishing and IceCompany, Limited, and J. C. Garfit , against A. W. Ansell and J. Had-field under the following circumstances:—

By an agreement dated the 4th of August, 1885, the Defendant Ansellagreed to sell to the Plaintiff Garfit , as trustee for the Plaintiff compa-ny, which was then in process of formation, seven fishing-smacks for£9000, which smacks were to be delivered in thorough sea-going re-pair and fully equipped for immediate use in the deep sea fishing andtrawling business, and to pass the inspection of the purchaser's man-ager. Ansell was at his own expense to do such renewals and repairsas the surveyor should require, and should take 100 fully paid-upshares in the company, the balance of the purchase-money to be paidby instalments as therein mentioned. It was also agreed that, on theformation of the proposed company, Ansell engaged to become man-aging director thereof at a salary commencing on the 1st of Septemberthen next at the rate of £1 a week per smack until the 1st of January,1886, when his salary should be after the rate of £800 a year. AndAnsell agreed to reside at Boston or the neighbourhood, *341 and toremain in the service of the proposed company for a term of not lessthan five years, subject as thereinafter mentioned. It was providedthat Ansell should be at liberty to engage in any business and to be a

member of any company which was not prejudicial to the intendedcompany. And it was also agreed that Ansell should be allowed £5 percent. on all fish supplied or sold by the company to its customers, ex-clusive of fish sent to inland markets on commission, and in additionto his salary. But if Garfit should not be able to fulfil the agreement bybeing unable to float the company, or to pay for the smacks, Ansellshould be at liberty to terminate the agreement.

The company was incorporated under the Companies Act, 1862 , onthe 18th of August, 1885. By clause 60 of the articles of association theDefendant Ansell was named as one of the first directors of the com-pany. By clause 68 it was provided that no director should be disqual-ified by his office from contracting with the company either as ven-dor, purchaser, or owner, nor should any such contract or arrange-ment, or any contract or arrangement entered into by or on behalf ofthe company with any company or partnership, of or in which any di-rector should be a member or otherwise interested, be avoided, norshould any director so contracting, or being such member, or so inter-ested, be liable to account to the company for any benefit realized byany such contract or arrangement, by reason only of such directorholding that office, or of the fiduciary relation thereby established;but no such director should vote in respect of such contract orarrangement. Clause 73 gave power to the company to dismiss direc-tors by extraordinary resolution except as thereinafter provided. Byclause 75 it was provided that the Defendant Ansell should be the firstmanaging director of the company, and should continue to hold suchoffice for five years from the registration of the company, and shouldnot during that period be removable from his office otherwise than byhis own resignation, so long as he should while holding that office re-side in or in the immediate neighbourhood of Boston , and should givesuch an amount of superintendence and attention to the business ofthe company as might be necessary for the efficient management

thereof. Clause 76 provided that the salary of Ansell should be fromthe 1st of *342 September, 1885, until the 1st of January, 1886, at therate of £1 per week for each of the company's smacks, and from andafter the 1st of January, 1886, at the rate of £800 per annum, payablequarterly, and that he should while holding such office be entitled toa commission of 5 per cent. on all sales of fish, ice, and game sold bythe company to its private customers, exclusive of fish sent to inlandmarket towns on commission. By clause 77 the directors might, sub-ject to the two last preceding clauses, with the sanction of a generalmeeting, appoint and remove managing directors.

The first meeting of the board of directors was on the 27th of August,1885, but the agreement with Ansell was not then entered on the min-utes.

By an agreement dated the 8th of January, 1886, under the seal of thecompany, the agreement of the 4th of August, 1885, was adopted bythe company as if the company had been in existence at the datethereof.

The Defendant Hadfield was nominated surveyor and inspector, andreported on the smacks, receiving for his fees £25 19s. 6d.

In the autumn of 1885 Hadfield gave certificates to the effect that thesmacks had been surveyed and inspected by him, and were in sea-go-ing order and good repair: and the company accordingly paid or se-cured to Ansell the balance of his purchase-money.

In the month of August, 1886, the directors of the Plaintiff company,being dissatisfied with Ansell's conduct, caused an investigation of hisaccounts and management to be made, and as the result of such in-vestigation on the 13th of September they passed a resolution sus-pending him from the office of managing director.

On the 2nd of October an extraordinary meeting of the company washeld, and a special resolution was passed altering the articles of asso-ciation and dismissing Ansell from his office. This resolution was con-firmed on the 19th of October. The principal charges made againstAnsell were as follows:—

The company accused him of having acted dishonestly and in collu-sion with Hadfield in obtaining fraudulent certificates, and of repairingthe smacks in an insufficient manner, and making improper chargesfor the repairs.

*343

The Defendant was at the time of the formation of the company, andcontinued to be, a shareholder in the Hull Ice Company . This compa-ny, after declaring the ordinary dividend for its shareholders, was inthe habit of dividing its surplus profits as a bonus among the share-holders whom it supplied with ice rateably to the quantity of ice sup-plied. The Defendant Ansell used to procure the ice for his smacksfrom the company; and after the sale of them to the Plaintiff company,he, on the Plaintiffs' behalf, continued to procure ice from the samecompany.

The Defendant received bonuses in his character of shareholder in re-spect of the ice supplied to the smacks since the sale to the Plaintiffsto the amount of about £60.

The Defendant Ansell was also a shareholder in the Hull Steam Fish-ing and Ice Company (called in the argument the Red Cross Compa-ny), whose surplus profits were divided on the same principle, and itwas provided by the articles of that company that the shareholderswho were owners of smacks should employ the company's ships astheir carriers. The captains of the smacks belonging to the Plaintiff

company used to employ the Red Cross Company to carry their fishfrom the fishing grounds to London and Hull : and the Defendant inhis capacity of shareholder of the Red Cross Company received a con-siderable sum in bonuses from the last-named company in respect ofthese smacks.

The Defendant alleged that the directors of the Plaintiff companyknew of his connection with these two companies and made no objec-tion to his receiving the bonuses, which he claimed to retain as hisright. It appeared that there had been some question between Anselland the Hull Ice Company as to whether he was entitled to bonusesgiven in respect of the ice purchased from them, but Ansell had insist-ed upon receiving them. And on the 27th of May, 1886, the secretaryof the Red Cross Company had written a letter to the directors of thePlaintiff company saying that the bonuses could not be paid by theRed Cross Company to Ansell without the consent of the directors of thePlaintiff company. The directors do not appear to have taken any ac-tion on this letter, and Ansell replied to it by saying that he had theconsent of the directors to his receiving them.

A charge was also made against Ansell that he had made an *344 ex-cessive charge against the underwriters in respect of a smack calledthe Fishtoft , and also that he had demanded excessive fees from theapprentices; but these charges were not substantiated.

A more important charge against Ansell was as follows:—Shortly afterthe incorporation of the company the directors authorized Ansell tocontract with Earle's Shipbuilding Company to build certain smacks,and he accordingly entered into two contracts with the ShipbuildingCompany . Ansell received a commission of £1 per cent., amounting to£169 on the first of these contracts, and a present of £50 in respect ofthe second, without the knowledge of the Plaintiff company. The di-rectors did not discover the fact of his having received these sums till

after his dismissal; nor, indeed, till after the action had bee com-menced.

The present action was brought by the company against Ansell andHadfield claiming the commissions and other sums which Ansell hadreceived in breach of his duty to the company and damages for thealleged misconduct of the Defendants.

The Defendant Ansell put in a counter-claim claiming damages for hisunlawful dismissal and his salary up to the date of his dismissal.

The trial lasted several days and several witnesses were examined.The action came on for hearing before Mr. Justice Kekewich on the 12thof January, 1888.

Lawrance , Q.C., Barber , Q.C., and Warrington , appeared for the Plain-tiffs.

Warmington , Q.C., Crump , Q.C., and Vernon R. Smith , for the Defen-dant Ansell .

T. Hall , for Hadfield .

1888. Feb. 1. KEKEWICH, J.,

after stating the history of the transactions, in the course of which hecarefully examined the evidence as to certificates given by Hadfield ,expressed his opinion that there was no evidence of any dishonest ac-tion on the part of Ansell and Hadfield concerning them, and that *345Hadfield must be acquitted of all fraud and negligence in giving thosecertificates. He also held that Ansell did the repairs required by Had-field to be done, and made no improper charges in respect of them.

With respect to the bonuses received by Ansell from the Hull Ice Com-

pany and the Red Cross Company , his Lordship said:—What I under-stand to be the general law on the subject is this, that an agent cannotprofit by his employment—any profit made by an agent by reason ofhis employment belongs not to him, but to his principal. Now in thesecases Mr. Ansell received profit, not, as I view it, in his character ofagent of the company, but in another character, a character consistentwith his employment, unless it was prohibited by the terms of his em-ployment, which it was not. If that character ceased to exist as regardseither company he may have improperly received the bonuses. Butthat question does not affect the Plaintiff company. They could nothave received it in any event, and it is the essence of a title to relief ofthis kind that the principal should be able to claim as his, moneys thatwere received by the agent. It must be money ad and received by theagent to the principal's use. I have preferred to put first the questionof general law, but probably it might equally well be decided on thespecial agreement, that is to say, the agreement of the 4th of August,1885, which must be regarded as the agreement between Ansell andthe company, having been adopted afterwards by the company. Thatenables Ansell to carry on any trade not prejudicial to the interests ofthe company. It has not been suggested that what Ansell did in pur-chasing ice of the Hull Ice Company or sending fish to port by the RedCross Company was in any way prejudicial to the interests of the com-pany. If that had been so a further question might have been raised,under the special agreement or otherwise, but there is no evidence ofthat kind. On both of these grounds I think that he is entitled to retainthat bonus.

Then there is the further question: Did Ansell receive money by wayof commission from Earle's Shipbuilding Company in respect oftrawlers built for the Plaintiff company? Here, again, there is no ques-tion about the fact that he did receive—rather coyly, according to hisown account, in the first instance, not coyly *346 in the second—

something altogether like £219, more or less. Earle's Shipbuilding Com-pany built two sets of trawlers for the Boston Company , and on eachoccasion he received a commission, or rather received payment whichhe said was not a commission.

Now the story is that Earle's Company required somebody to look afterthe building of these smacks, to see that they were according to speci-fication, and built according to the requirements of the trade, or some-thing of that kind, and that they asked Ansell to undertake it. I canwell believe it was extremely important that somebody should watchthe building of those smacks, to look at them from time to time to seethat they were built not only according to contract, but in such a man-ner that they would be suitable for deep sea fishing. But the impor-tance was not to Earle's , but to the Boston Company , whose managingdirector Ansell was. He was performing his duty to his own companyin seeing that done. If it were necessary that somebody should do it,and he could not have spared the time, somebody else might havebeen appointed, but so long as he did it, he must have done it as theagent of the Boston Company . Then Mr. Ansell (I am bound to say nothis counsel) puts the receipt of this commission on two grounds,which I do not think ought to be called ingenious; they are not worthyof the name. He says in the first place that he was at this time paid £1per week per smack, and was not the salaried officer of the company.How he was paid seems to me not of the slightest importance. Thenhe says it was not the order of the company but his own. He knowsperfectly well that the smacks were ordered for the company, built forthe company, delivered to the company for the use of the company,but because the shipbuilding company in their prudence thought itdesirable to have individual liability instead of that of an incorporat-ed limited company, therefore Mr. Ansell wishes to ride off on thatand says that they were not the smacks of the company. I extremelyregret that the point was ever made, and I am bound to say that al-

though I decide it as a matter of law, and I do not feel disposed tomake any remarks on it beyond this, that the claiming it and insistingon claiming it, and the argumentative evidence given in support of it,went as far as anything to convince me that Mr. Ansell's moral charac-ter is not so high as *347 I have no doubt the directors thought it waswhen they engaged him as managing director.

[With respect to the alleged excessive claim against the underwritersof the Fishtoft , his Lordship held the charges entirely disproved, asalso certain disputed charges in respect of apprentices. He was also ofopinion that there was no ground for complaint against Ansell forwant of supervision or attention to the business of the company.

With respect to the terms of the contract between Ansell and the com-pany his Lordship held that they were to be found in the agreementof the 4th of August, 1885, and the agreement of the 8th of January,1886, by which the former agreement was adopted by the companyirrespective of the articles of association, and that by that contract thecompany had bound them-themselves to employ Ansell as managingdirector for the term of five years from the registration of the compa-ny at a salary of £800 a year. His Lordship then said:—]

There must be in such relation an implied contract on the part of theservant to do the work of his office honestly and with diligence, andthere must be under such circumstances a right on the part of the em-ployer to dismiss for fraud in connection with the office. I do notthink it is necessary to go into the question whether they might dis-miss him for immoral conduct or fraud outside the office; but, certain-ly, for anything connected with his employment such dismissalwould not be a breach of the contract but in the exercise of theirrights. If the fraud with Hadfield had been proved I should have hadno hesitation in holding that as a good ground for dismissal. I thinkthat probably some of the other cases alleged, if they had been

proved, even though small in themselves, might by a cumulativeprocess have been made sufficient ground for dismissal. That is whathas been argued by the Plaintiffs, and I am not at all disposed to dis-agree with them, but no number of suspicions will make a fact, and Itherefore hold the charges with one exception not to be proved. I donot think that the case is made out.

As regards the commission received from Earle's Company , that issaid to be sufficient ground for dismissal. I can well understand itsbeing held to be suspicious. I can well understand the *348 company,or the directors on behalf of the company, taking high ground, andsaying that they would have nothing more to do with the man; but,on the other hand, I observe that it is an isolated case, not necessarilybearing on the general conduct of the business of the company, and tosome extent at least remediable by the recovery of the amount re-ceived by Ansell . I think that after the best consideration I can give tothe point it would be going too far to say that the company were enti-tled to dismiss their five years' manager because they found out thatin one transaction, divided, no doubt, into two parts, he had receiveda commission which was not his, and which must belong to the com-pany.

I have come to the conclusion therefore that Mr. Ansell was not on the2nd of October liable to be dismissed. But as I wish to decide all ques-tions I must express my opinion on this last point which arises in thecase. I put the agreement aside, and consider that everything depend-ed on the special resolution, and I go back to the question how Mr.Ansell was dismissed. That he has been dismissed de facto is enoughfor the company, and I might leave it there, but I think I ought to dis-pose of this remaining point. The company could by special resolu-tion have altered their articles of association. Did they do it? To mymind they did not proceed in the proper way to do it. According tothe case of Imperial Hydropathic Hotel Company, Blackpool v.

Hampson it is at least questionable whether they could have alteredtheir articles of association at all with reference to Mr. Ansell's re-moval; but I am quite satisfied that they had no right to remove himby the same resolution. I thought at first they had only proposed toremove him at the second meeting after they had passed and con-firmed the resolution altering the articles of association, but on look-ing into it again I see that they actually passed the resolution remov-ing him on the 2nd of October at the first meeting, when non constatthat they ever could have the power, so that not only was the resolu-tion passed by a meeting not properly convened for the purpose, butpassed when, as a matter of time, the company had no power to passit. Therefore I think Mr. Ansell , either on the ground of the construc-tion of the contract, or on the ground of the way in which the legal*349 power of altering the articles has been exercised, is entitled tosay he was improperly dismissed. That leaves me to consider thepractical result, which I can do very shortly. Mr. Ansell was dismissedon the 2nd of October. It appears that he was paid a salary of £800 upto the 1st of July, and practically there was a quarter's salary due tohim. He is entitled to this £200, without doubt. I think it ought to car-ry interest. That will be a small sum, and I throw it into the damages.

[His Lordship gave judgment in the action for the Defendant Ansellexcept as regarded the commission received from Earle's Company,and for the Plaintiffs as regarded that, in each case with costs, and dis-missed the action against Hadfield with costs.

With regard to the counter-claim his Lordship gave Ansell his quar-ter's salary of £200 and a year's salary by way of damages, namely,£800, with the costs of the counter-claim. And he directed an accountof commission on sales to which Ansell was entitled under the con-tract.]

From this judgment the Plaintiffs appealed.

The appeal came on for hearing on the 25th of June, 1888.

Lawrance , Q.C., and Warrington (Barber , Q.C., with them) for the Ap-pellants:—

We do not rely on the charges against Ansell respecting Hadfield's cer-tificates, or the insurance on the Fishtoft . But we contend that thecompany had good ground for dismissing him on account of the com-mission received by him from Earle's Shipbuilding Company and thebonuses received by him from the Hull Ice Company and the RedCross Company .

With respect to his taking a commission from Earle's ShipbuildingCompany, Mr. Justice Kekewich held that it was a breach of duty onAnsell's part, and that we are entitled to an account of it; but he con-sidered that it was an isolated case, and that as it happened a longtime ago it formed no sufficient ground for dismissal. There is noground for such a conclusion. It is not clear that it was an isolatedcase, and if it was, the clear breach of duty is a good ground for dis-missal of a servant. It is true that we did not know of it at the time ofthe dismissal, but it is *350 well established that that fact makes nodifference. Nor does the lapse of time since the act was committedmake any difference. If we had known of it before we might havebeen held to have condoned it, but that was not the case here: Pearcev. Foster ; Ridgway v. Hungerford Market Company

Then as to the bonuses from the two companies; they were paid in re-spect of our ships, and therefore the money belonged to us, and it wasa breach of duty on Ansell's part to take them. It is true that we couldnot have received the bonuses ourselves, because our company wasnot a shareholder in those two companies; but the fact remains thatthey were earned by our ships. The receipt of them by the Defendanttherefore was a good cause of dismissal and we are entitled to an ac-

count of them. The counter-claim therefore ought to have been dis-missed.

With respect to Ansell's claim for a quarter's salary payable on the 1stof October, we contend in the first place that his dismissal took placeon the passing of the resolution of the 13th of September, when hewas suspended: and that event having been in the middle of the quar-ter, no quarter's salary became due. But, secondly, it is not true thatthe salary was payable quarterly. The contract between the companyand Ansell is to be found in the agreement of the 4th of August, 1885,and the 8th of January, 1886. The salary is there made a yearly salary,and there is no mention of its being payable quarterly. The clause inthe articles of association which made the salary payable, was onlybinding between the company and the shareholders: it was no part ofthe contract with Ansell . If therefore his dismissal dates from the 2ndof October, he is not entitled to anything; his salary did not becomedue till the end of the year, and he has lost all claim to it by his breachof duty: Goodman v. Pocock

Crump , Q.C., and Vernon R. Smith , for the Defendant Ansell :—

It may be that the Plaintiffs are entitled to an account of the commis-sion received from Earle's Shipbuilding Company , but it was a smallisolated matter, and was no ground for dismissal. *351 Every fault isnot a ground for dismissal; that is a question for a jury. And if the actcomplained of has happened some time ago it must be supposed tohave been condoned. The Plaintiffs never relied on this act as aground of dismissal, it was a mere after-thought. They rested the dis-missal, both at the time and in the action, on the transaction with Had-field and the insurance on the Fishtoft , which have been entirely dis-proved.

The bonuses from the Ice Company and the Red Cross Company fairly

belonged to Ansell . They could not have been received by the compa-ny, because it was not a shareholder; therefore he did not defraud thecompany of them. By Ansell's contract with the company, and byclause 68 of the articles of association, Ansell was at liberty to earndividends in other companies. There was no concealment in the mat-ter; the letter which the Red Cross Company wrote to the Plaintiffs onthe subject and Ansell's reply were entered in the letter-book, andwere known to the directors. Nor is it correct to say that Ansell wasacting as agent for the Plaintiffs in this matter. He bought the ice fromthe Ice Company and resold it to the Plaintiffs, which he was entitledto do under the articles. And as to the Red Cross Company , the cap-tains of the smacks were the persons who really employed the compa-ny's carriers to take home their fish. If Ansell acted wrongly in thismatter it was no ground for dismissal: Bentley v. Craven

With respect to Ansell's counter-claim, the dismissal, if justified, didnot take place till the 2nd of October, after the quarter's salary wasdue; the payments were always made quarterly, and that is sufficientto shew that the salary was intended by the contract to be so paid:Taylor v. Laird At all events he is entitled to the commission on saleswhich were effected before his dismissal.

Lawrance , in reply.

COTTON, L.J.:—

This is an appeal by the Plaintiffs in the action not only on the groundthat Mr. Justice Kekewich did not give them the full relief to whichthey are entitled on their statement of claim in *352 this action, butalso on the ground that he granted relief on the counter-claim to theDefendant Ansell , which he was not entitled to. It is necessary to statesome of the facts very shortly.

[After stating the facts his Lordship continued:—]

At the time when the company dismissed Mr. Ansell they did notknow what had been done by him as regards the contract with Earle'sShipbuilding Company , and it was not, I think, at all disputed that ifthere was any circumstance, though unknown to the company at thetime when they dismissed Mr. Ansell from his position, which wouldjustify them in so acting, it was immaterial whether that was knownat the time, and if it was known and established after the time the ac-tion was brought, then they could justify the dismissal by proof ofthat fact.

Mr. Ansell was dismissed, and I think his dismissal from the positionwhich he held must be taken to date from the meeting on the 2nd ofOctober, and not from the day in September when he was suspendedby the board, because suspension is very different from dismissal.When a man is suspended from the office he holds it is merely a di-rection, that so long as he holds the office and until he is legally dis-missed he must not do anything in the discharge of the duties of theoffice, and I cannot consider that the resolution by the general meet-ing to discharge him from his employment, from the position he held,can be taken to relate back. Then the Plaintiff company by Mr. Garfitbrought the action which, as against Mr. Hadfield , was dismissed, be-cause the matters charged to have been done by him in collusion withMr. Ansell were, in the opinion of the Judge, not proved, and we havenot had any appeal from that dismissal. But Mr. Ansell brought acounter-claim in which he alleged that he had been wrongfully dis-missed, and he claimed damages for that wrongful dismissal, and healso claimed £200 for the quarter's salary down to the 1st of October,and those the learned Judge granted him. Besides that he sought anaccount of com mission which was due to him, or which was said byhim to be due to him, for sales effected by the company, and, in myopinion, he is entitled to that under his agreement with the company,

because he is entitled to all commissions on all sales previous to thetime when he was dismissed.

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I think, in the first instance, it is desirable, although it is not the princi-pal contention here, to go to the relief which is sought by the Plaintiffsin their appeal. There is no appeal by the Defendant as regards thesum of £219 which was received by him from Earle's ShipbuildingCompany . Mr. Justice Kekewich considered that the Plaintiffs were en-titled to recover that sum from the Defendant, he having actually re-ceived that sum from Earle's Shipbuilding Company part of it as acommission of 1 per cent. on the contract price for the first sale of ves-sels, and £50 as a sum paid, a lump sum, in respect of the subsequentcontract which was entered into through Mr. Ansell . Therefore, oneneed not enter into it except so far as that transaction has to be consid-ered for the purpose of determining whether there was a wrongfuldismissal. That sum, I think, was received in May, 1886, and in re-spect of that sum we shall have to alter very considerably the orderwhich was made by the learned Judge. There must be a direction thatthat shall be paid, and in my opinion the company are entitled tohave interest at 5 per cent. as against their late manager since the timewhen that sum was received, which the judgment did not give them.

But there are two other matters in respect of which the Plaintiffs saythey ought to have obtained relief from the Judge. Mr. Ansell hadbeen engaged at Hull in the business of fishing, he had varioussmacks, and he was a partner or member of two incorporated compa-nies, one called, for the sake of distinction, the Ice Company , the othercalled, for the sake of distinction, the Red Cross Company , which was acarrying company. As regards what he got from both those compa-nies, the Plaintiffs seek relief. The way in which those companies pro-vided for the division of their profits was very much the same in one

respect, that is to say, they provided for this, that their membersshould have a division not exceeding a certain percentage by way ofdividend, and that the bonus was to be given them as consumingmembers; that is to say, as regards the Ice Company , the shareholdersin that company who bought the ice supplied by the company wereentitled to a bonus in respect of the profits gained by the company onthe transactions in which they were engaged with the company bybuying ice from them. Now before the sale to the *354 Plaintiff com-pany, Mr. Ansell had a fleet of smacks, and he had purchased the ice,which those smacks required to keep their fish until they could get itto the market, from the Ice Company , and he received from the IceCompany in respect of that transaction a certain bonus. After the Plain-tiff company had been formed, and after he had transferred his fleetof smacks to the company, he still continued to take from the Ice Com-pany the ice required for the purposes of those smacks. It was con-tended at one time by Mr. Vernon Smith that he really bought from theIce Company and then sold again to the Plaintiff company, but, in myopinion, the invoices which were put in evidence disprove that. Theywere invoices of ice as supplied not to him to be sold again to some-body else, but to be supplied to and on account of the very smackswhich he had formerly owned, and which he had sold to the Plaintiffcompany. In paragraph 24 of his statement of defence, he says that he“has been for some years past, and is, a shareholder in the Hull IceCompany, Limited , which after payment of a certain dividend dividesits surplus profits as a bonus among the shareholders whom it hassupplied with ice rateably to the amount of ice supplied to them, andbefore the sale of the said smacks to the Plaintiff company he pro-cured his ice for such smacks from the said Ice Company . Since suchsale he has on the Plaintiffs' behalf procured such ice from the said IceCompany , and supplied it to the Plaintiffs at the price charged to allcustomers.” There he says and admits that he procured it on behalf ofthe Plaintiff company. Then he says, “To save payment of the bonus

the Ice Company proposed to debit the Plaintiff company, and not thisDefendant, with the ice supplied, but this Defendant refused to allowthis to be done. The surplus profits payable to this Defendant as suchshareholder in respect of ice supplied to the Plaintiff companyamount to £60 or thereabouts.” Now Mr. Justice Kekewich consideredthat the Plaintiff company were not entitled to that £60, which Ansellreceived by way of bonus in respect of the ice supplied, since the ves-sels were no longer his but the vessels of the Plaintiff company, andhe does so on this ground, as I understand it, that the Plaintiff compa-ny could never themselves have been entitled to receive the bonusprofit, and, therefore, they cannot claim it from the Defendant, whowas *355 their agent, although he held him accountable for the sumwhich he received when he was their agent from the Earle's Ship-building Company. In my opinion that is not correct. The question isnot whether the company could directly have claimed this sum, butwhether, when their agent has received this profit in respect of a con-tract which he had entered into on behalf of the company as theiragent for goods supplied to the company, the company are not enti-tled as against their agent to claim that money. In my opinion theyare. It is a profit arising from a contract which he, on the part of thecompany, entered into in consequence of the supply to the companyby his order of a particular quantity of ice. It was said that he was en-titled under the articles to enter into contracts and business with thecompany. He was so, but that, in my opinion, did not justify him,when contracting on behalf of the company, to put into his own pock-et a profit obtained simply and entirely in consequence of the goodsbeing supplied under that order to the Plaintiff company. In that,therefore, I must differ from the view taken by Mr. Justice Kekewich .In my opinion, the Plaintiffs are entitled to that which they ask, and ifthey are not satisfied with the statement of the amount, an account asto the sums so received by him as bonuses from the Ice Company .

Then we come to another company, which was the carrying company.That was a company which had steam-vessels which went out fromtime to time to the fleet of fishing-smacks and brought home to theport the fish which had been caught by the vessels of the fleet. Thecontention raised by Mr. Smith was that there was no contract enteredinto by Mr. Ansell in respect of the carrying of fish home by the com-pany, but that the contract was made by the captains of the smacks. Inmy opinion that can make no difference, because even if there was nodirect contract by Ansell , and no direct order given by him to the cap-tains of the smacks, yet having regard to the articles of association ofthe carrying company, and to what had gone on before the sale of thesmacks to the company, and was apparently continued, we must holdjudicially that the transfer of the fish caught by the smacks whichwere once his, but which at the time when the fish was caught werethe smacks of the company, was done, if not by his *356 special direc-tions after the company was formed, at all events in continuance ofthe direction given by him before and under that contract which hehad entered into with the carrying company. In the carrying compa-ny's articles there is an article which throws on every one of thesmack-owners who is a member of the company the obligation andduty as between him and the carrying company, of sending all hisfish home by their vessels, because we find this in the 14th article:“Every member being a smack-owner shall by all possible ways andmeans support and maintain the company, and all the members shalland will form their respective fishing-vessels so entered in the compa-ny into a fleet, and each member undertakes that all the fish caughtby his respective entered vessels shall be carried to shore in the com-pany's vessels, and in no other manner.” So that there was a directcontract still existing between him and the company as regards hissmacks, “and for the due and faithful observance of this and the lastpreceding article each member undertakes to enter into a bond withthe company in the penal sum of £100.” And then there was an article

which gave these bonus profits only to those members who per-formed their obligations to the company. At this time it is true thatAnsell was not a smack-owner in reality, because the owners of thesmacks were the Plaintiff company and not Ansell , but he was actingas owner, and it was only as being owner, and representing himself tothe carrying company as being the owner, that he was entitled tothese bonuses in respect of the carriage of the fish. In my opinion, weshould allow ourselves to be deceived by words, and should not beguided by facts, if we were to believe that the captains joined whatfleet they pleased and then shipped on board whatever carrying ves-sels they thought fit. In my opinion, therefore, so far as any of thebonus profit which he has received from the carrying company is at-tributable to the fish caught in the smacks of the company, formerlyhis, and still worked in his name, he must account to the Plaintiffs onthe same grounds as those which I have dealt with in the matter of theIce Company .

Now we come to the counter-claim, and there is an appeal against theallowance of the counter-claim. What we have to consider first is this,had the company—although they knew it *357 not at the time whenthey dismissed the Defendant in October—a good ground of dis-missal? In my opinion, they had. I have stated that he was engagednot only by the Plaintiff Mr. Garfit , but that he agreed with the com-pany to be their general manager, and had authority given to himwith reference to the contract to be entered into with the Earle's Ship-building Company . Then when he was engaged in that contract, in re-spect of the matters of that very contract, he in one instance got a per-centage of 1 per cent. from the Shipbuilding Company , and, in the othercase, he insisted on getting that is the evidence and did get, a lumpsum of £50. It is suggested that we should be laying down new rulesof morality and equity if we were to so hold. In my opinion if peoplehave got an idea that such transactions can be properly entered into

by an agent, the sooner they are disabused of that idea the better. If aservant, or a managing director, or any person who is authorized toact, and is acting, for another in the matter of any contract, receives, asregards the contract, any sum, whether by way of percentage or oth-erwise, from the person with whom he is dealing on behalf of hisprincipal, he is committing a breach of duty. It is not an honest act,and, in my opinion, it is a sufficient act to shew that he cannot betrusted to perform the duties which he has undertaken as servant oragent. He puts himself in such a position that he has a temptation notfaithfully to perform his duty to his employer. He has a temptation,especially where he is getting a percentage on expenditure, not to cutdown the expenditure, but to let it be increased, so that his percentagemay be larger. I do not, however, rely on that, but what I say is this,that where an agent entering into a contract on behalf of his principal,and without the knowledge or assent of that principal, receives mon-ey from the person with whom he is dealing, he is doing a wrongfulact, he is misconducting himself as regards his agency, and, in myopinion, that gives to his employer, whether a company or an individ-ual, and whether the agent be a servant, or a managing director, pow-er and authority to dismiss him from his employment as a personwho by that act is shewn to be incompetent of faithfully discharginghis duty to his principal. It was said by Mr. Justice Kekewich that thiswas an isolated transaction, and, *358 therefore, in his opinion, it didnot give legal authority or power to the company to dismiss him. ButI cannot accede to that view. As far as we know it may have been anisolated transaction, but if we find at the very beginning of the em-ployment that this agent, whose duty it was not to receive anythingfrom the persons with whom he was dealing, did in fact do so, and infact kept the receipt secret for months after the money was received, Iam not satisfied that he did not do other things equally inconsistentwith his duty to his principals; and in my opinion the discovery ofthat fact—even if it was an isolated transaction, shewing that he

would put himself in a position not faithfully to discharge his duty,that he would put himself in a position to regard the interest of some-one else rather than that of his employer—did justify his employers indischarging him from the office which he held. It was urged before usthat it was a long time ago, and it was said, suppose this happenedeight years ago; supposing the act had been done eight years ago,would that in law have justified the employer in discharging him? Inlaw, I say yes. It is very true that if an employer was a reasonableman, and found that a servant who had served him faithfully foreight years, had, in the early time of his employment, done an actwhich was wrongful and which justified his dismissal, probably hemight have said: “This is a man who has been in my employ for years,and he has always behaved himself honestly in the discharge of hisduties, except in regard to this one transaction which took place sucha long time ago, and, therefore I do not insist on my legal right.” But,although a man would ordinarily act in that way, yet, in my opinion,that has no effect on the question whether the act is not of such a char-acter as to justify the employer in dismissing him when he finds itout. Of course if he knows of the act and still continues to employhim, it might have been held by Judges of fact or by a jury that he hadcondoned it and prevented himself from insisting on the legal right.But assuming that the act of misconduct was unknown, it cannot besaid that the mere fact that it happened eighteen months before, pre-vents the company from insisting upon their legal right to discharge aperson who has so misconducted himself. In my opinion, therefore, somuch of the order *359 as gives to Mr. Ansell on the counter-claimdamages for wrongful dismissal must be discharged.

Then we come to another question, which is of a somewhat differentcharacter. The Defendant claimed £200 for a quarter's salary down tothe 1st of October, and that was a question which gave considerabledifficulty, and upon which we had considerable discussion as to the

law bearing upon the matter. At first I understood that the contractbetween the company and Mr. Ansell was only a recognition, verbalor by resolution, of the agreement which was entered into early inAugust, before the incorporation of the company, with Garfit , actingon behalf of the company; but it appears that that is not the case. Onthe 8th of January, 1886, long after the company was formed, therehad been another agreement in writing entered into between Mr.Ansell and the company, which provided that the former agreementshould be adopted by the company, and be binding on the companyin the same manner, and be read and construed in all respects as if thecompany had been in existence at the date thereof. That being so, wemust read the agreement of August, 1885, just as if it was an agree-ment by the company, and not merely an agreement to be performedafter it was adopted by the company. It was said that Mr. Ansell had aright of action for the quarter's salary due on the 1st of October, andtherefore a right of action before his dismissal, and that therefore hehas not lost that right of action by the dismissal. That was foundedupon this, that, as a matter of fact, his salary, and the salary of otherofficials of the company, was paid quarterly, that being in accordancewith the articles, which provided that the salary should be paid quar-terly. But that article was not the contract between Mr. Ansell and thecompany, under which he agreed to serve the company, but it was amere contract between the shareholders and the company, and regu-lated the way in which the payment should be made, and the way inwhich the accounts should be kept. What we have to consider is notwhether, as a shareholder, he could have insisted on their performingthat agreement, but whether, under the contract by which he agreedto be managing director of the company, he had that right, and thenwe must look to the terms of the agreement, which was confirmed inthe manner I have *360 mentioned. The agreement says that he is tohave a salary after the 1st of January, 1886, at the rate of £800 a year.Now that to my mind is a contract for a yearly service and a yearly

payment, and although as a matter of fact he was paid quarterly, itwas not a payment under this contract, but a payment simply in ac-cordance with the directions given by the company's articles, and nota payment under this contract. Therefore, in my opinion, it cannot besaid that on the 1st of October there was a right in Mr. Ansell to suethe company under this contract of service with the company for£200, and the question does not arise as to what would have been theeffect if that had been the case. Nothing which I say must be consid-ered as expressing any opinion in favour of the view that if there hadbeen a quarter's salary then actually due for which he could havesued, his dismissal would have deprived him of that right. But thequestion is this: Can he sue for a proportionate part of the salary forthe current year? What he would have been entitled to if he continuedin their service until the end of the year would have been £800, but inmy opinion that would give him no right of action until the year wascompleted, and therefore the question which has been discussed be-fore us does not really arise. If that is the true construction of his con-tract with the company as managing director, by which he agreed tocome into the employ of the company, the authorities which were re-ferred to, and which were not disputed, would shew that, as regardsthe completed quarter of the current year, he cannot, having beenproperly dismissed, get any payment in respect of that. In my opin-ion, therefore, on that point also the judgment must be varied.

Then we come to another point, which is this. Under the contractwhich was to bind the company and the managing director, he wasalso to be allowed 5 per cent. on all fish and ice supplied or sold bythe company to its customers, exclusive of fish sent into the markets.That stands in a very different position from the salary of £800 a year.He had a right, in my opinion, to that percentage directly the saleshad taken place. Probably as a matter of account, and as a matter ofconvenience, it would be calculated at the end of the year, and then

paid to him; but I think he would be entitled to have the payment of*361 that percentage if he chose to sue for it whenever the sales tookplace. In my opinion the proper judgment Will be to dismiss thecounter-claim with costs, except so far as it seeks an account and reliefin respect of the commission on the sales of ice and fish; the costs ofthat portion of the counter-claim must be reserved, as well as the costsof the inquiry, to be dealt with when the inquiry has been completed.

Then we come to what ought to be done as regards the costs of the ac-tion. Upon the substantial point raised between the Plaintiffs and De-fendant, the Plaintiffs have succeeded. The real conflict undoubtedlyhas been upon the ground of the dismissal of Mr. Ansell —as towhether he was properly dismissed. But there were in the statementof claim charges made against Mr. Ansell , the Defendant, which werenot in the opinion of the Judge established, and he dismissed withcosts the Defendant, Mr. Hadfield , who was implicated, in the view ofthe Plaintiffs, in some of those transactions, the costs to be paid by thePlaintiffs. There is no appeal in respect of those matters. In my opin-ion the Plaintiffs ought to have the general costs of the action; but Ithink that, as regards the costs relating to the charges as to which theyfailed, the Plaintiffs ought not to have those costs. But it is a very dif-ferent question whether any costs should be given to the DefendantAnsell in respect of those matters. The Defendant had misconductedhimself, and I am of opinion that he was rightfully dismissed, andeven the Judge thought there were grievous suspicions raised by hisconduct, and therefore the proper order as regards that matter I thinkwill be this, that the company are to have the general costs of the ac-tion, except such costs as refer to the matters mentioned in paragraph19. As regards the costs of those matters, neither the Plaintiffs nor theDefendant are to have any costs.

BOWEN, L.J.:—

The Lord Justice has discussed at length the facts of this case, and inthe judgment which I am about to pronounce I shall not travelthrough them again, but shall confine myself to stating shortly whatseems to me to be the true view of the law of this case. I should notadd a word to the judgment to which we have *362 listened were itnot that we are differing from the judgment of the Court below.

I will, first of all, deal with what is the cardinal matter of the wholecase; whether the Plaintiffs were justified or not in dismissing theirmanaging director as they did. This is an age, I may say, when a largeportion of the commercial world makes its livelihood by earning, andby earning honestly, agency commission on sales or other transac-tions, but it is also a time when a large portion of those who movewithin the ambit of the commercial world, earn, I am afraid, commis-sion dishonestly by taking commissions not merely from their mas-ters, but from the other parties with whom their master is negotiating,and with whom they are dealing on behalf of their master, and takingsuch commissions without the knowledge of their master or principal.There never, therefore, was a time in the history of our law when itwas more essential that Courts of Justice should draw with precisionand firmness the line of demarcation which prevails between commis-sions which may be honestly received and kept, and commissions tak-en behind the master's back, and in fraud of the master.

In the present instance we have first of all to consider what was doneby the managing director, and, in the next place, if we find that themanaging director has taken and received a commission behind theback of his company and without the knowledge of his company, andkept it, we have to pronounce our opinion upon the question ofwhether or not in law that is an ample reason for his dismissal.

Now with regard to the facts relating to Earle's Shipbuilding Compa-ny, they stand beyond all dispute. The managing director has re-

ceived a profit, and he has received a profit which was unknown tohis own employers. Now does that bear upon the condition which isimplied in every contract of service or agency such as his—the condi-tion that he will faithfully and truly discharge his duty towards hisemployer, and that if he does not so discharge it, the employer is to beat liberty to elect whether he will determine the service, or in spite ofthe fault continue the erring servant in his employ? Mr. JusticeKekewich recognising, as it seems to me, the law generally as I havestated it, appears *363 to have considered that the Shipbuilding Compa-ny's case was an isolated case, and on that ground thought he was en-titled to say that, on the whole, there was no sufficient reason for dis-missing him. I think the view that if it is an isolated case it does notamount to such misconduct as would entitle the master to determinethe service, is a mistake. It seems to me to be a confusion between theduty of the Judge to draw inferences of fact, and the duty of the Judgeto pronounce a decision of law. There may be cases where the breachof confidence and good faith towards the master would not arise froma simple isolated act, but would be founded on the accumulation andrepetition of such acts, but those classes of cases are not cases of fraudat all, they are cases of isolated acts which, if they occurred singly,would not, in themselves, amount to a violation of the confidential re-lation or breach of the faithful service which the servant is bound torender. In that class of cases it is perfectly proper to consider whetheron the whole the conduct of the servant has been such as to amount toa breach of confidence, and if it has not, then the master will not bejustified in the dismissal. In such cases you might leave to the jury toconsider whether there had been such an accumulation, or such a rep-etition of the acts, as to give a ground for the determination of service;but in cases where the character of the isolated act is such as of itselfto be beyond all dispute a violation of the confidential relation, and abreach of faith towards the master, the rights of the master do not de-pend on the caprice of the jury, or of the tribunal which tries the ques-

tion. Once the tribunal has found the fact—has found that there is afraud and breach of faith—then the rights of the master to determinethe contract follow as matter of law.

Now, there can be no question that an agent employed by a principalor master to do business with another, who, unknown to that princi-pal or master, takes from that other person a profit arising out of thebusiness which he is employed to transact, is doing a wrongful act in-consistent with his duty towards his master, and the continuance ofconfidence between them. He does the wrongful act whether suchprofit be given to him in return for services which he actually per-forms for the third party, *364 or whether it be given to him for hissupposed influence, or whether it be given to him on any otherground at all; if it is a profit which arises out of the transaction, it be-longs to his master, and the agent or servant has no right to take it, orkeep it, or bargain for it, or to receive it without bargain, unless hismaster knows it. It is said if the transaction be one of very old date,that in some way deprives the master of his right to treat it as a breachof faith. As the Lord Justice has pointed out, the age of the fraud maybe a reason in the master's mind for not acting on his rights; but it isimpossible to say that because a fraud has been concealed for sixyears, therefore the master has not a right when he discovers it to actupon his discovery, and to put an end to the relation of employer andemployed with which such fraud was inconsistent. I, therefore, find itimpossible to adopt Mr. Justice Kekewich's view, or to come to anyother conclusion except that the managing director having been guiltyof a fraud on his employers was rightly dismissed by them, and dis-missed by them rightly even though they did not discover the frauduntil after they had actually pronounced the sentence of dismissal.

Then what follows from that with regard to the salary? As regards hiscurrent salary, it is clear and established beyond all doubt by authori-ties which we should not be justified in overruling, even if we desired

to do so, that the servant who is dismissed for wrongful behaviourcannot recover his current salary, that is to say, he cannot recoversalary which is not due and payable at the time of his dismissal, butwhich is only to accrue due and become payable at some later date,and on the condition that he had fulfilled his duty as a faithful servantdown to that later date. The authorities put the question beyond dis-pute, and principle also leads us to the same conclusion. He cannotsue in such a case on the original contract with the master, becausethe contract which his master has made is that he shall pay the salaryonly at the end of the current period which has not yet expired, andthe servant by his wrongful conduct has prevented himself from su-ing for that salary by non-performance of the condition precedent un-der the contract. He cannot recover therefore on the special contract,nor can he recover on a quantum meruit , because he cannot take ad-vantage of his own *365 wrongful act to insist that the contract is re-scinded. As regards himself the contract is still open, although he haschosen to break it. Some confusion always arises, as it seems to me,from treating these cases between master and servant as instances of arescission of the original contract. It is not a rescission of the contractin the sense in which the term ordinarily is used, viz., that you rele-gate the parties to the original position they were in before the con-tract was made. That cannot be, because half the contract has beenperformed. It really is only a rescission in this sense, that an act occurswhich determines the relation of master and servant for the future,and you may regard that determination in two ways; it is either a de-termination in conformity with the rights of the master which ariseunder the contract itself, there being, as I have said, in every contractof service an implied condition that if faithful service is not renderedthe master may elect to determine the contract, and the determinationtakes place on that implied condition; or you may regard it under themore general law, which is not applicable to contracts of service alone—you may treat it as the wrongful repudiation of the contract by one

party, being accepted by the other, and operating as a determinationof the contract from that time, that is, from the time the party who issinned against elects to treat the wrongful act of the other as a breachof the contract, which election on his part emancipates the injuredparty from continuing it further. It is not a rescission of the contract inthe ordinary sense in which the term is used in common law. It is forthat reason that it becomes plain beyond all doubt, as it seems to me,that the servant cannot sue on a quantum meruit any more than he cansue under a special contract. The only question, therefore, is whetherthe salary in question was current salary within the meaning of thepropositions which we have been discussing—was it money any por-tion of which had accrued due at the time of the dismissal, eventhough it had not been payable till afterwards? or was it a salarywhich had not accrued due at all? If it had accrued due, even al-though not payable till afterwards, it may be that a question wouldhave arisen. On that question I desire to express no opinion, as it doesnot necessarily arise in this case.

It seems to me that on the true view of the facts no portion of *366 thesalary in this case had accrued due before the dismissal of the manag-ing director. According to the original contract which was to beadopted by the company, he was to be paid at an annual rate. Thecompany was formed, and amongst its articles of association it pro-vides that the managing director is to be paid quarterly, and inas-much as the contract is one which was not necessarily within theStatute of Frauds , and might be made by parol only if the matter hadstood there, I think the existence of the articles of association at thetime when the managing director entered on his employment, and thefact that in the articles of association, which must have been known toall parties, there was contained a provision that the managing directorwas to be paid quarterly, might be some evidence for the jury or forthe Court from which they might reasonably conclude (if the matter

stood there) that in reality, although the original written contract con-tained no such express provision as to quarterly payment, neverthe-less the true terms on which he was serving were that he should bepaid quarterly. But the case, unfortunately for the managing director,does not stand there, because after the articles of association had beenframed, and after he had entered nominally on his duties, it wasagreed between him and his masters—the company—that he andthey should again reduce into writing the exact terms on which hewas to serve, and in reducing the terms into writing again they omit,and he omits, any provision for quarterly payment. It seems to me,therefore, that really one must look, and look only, to the agreement,which by arrangement between the parties themselves was to be tak-en as the final and express agreement between them, and the infer-ence in favour of the salary being payable quarterly, which otherwisewould have arisen, is displaced by the subsequent agreement. Thematter is not perhaps beyond all doubt, but that, I think, is the trueview of that article.

As to the sales, it seems to me, for the reasons which have been givenby the Lord Justice, his dismissal does not prevent him from being en-titled to any commissions on sales which had become due at the timeof his dismissal, because although in the ordinary course of the busi-ness of the company the commission on such sales would not be as-certained until the end of the current year, *367 the end of the currentyear has now expired, and I think on his dismissal they would be-come payable at once. I think he is entitled at his own risk, and sub-ject to the reservation which the Lord Justice has suggested as tocosts, to an account of the commission due on such sales, if any suchsales there be, as to which I know nothing.

That really disposes of the most important part of the dispute be-tween the parties. But I also wish to add one word on the subject ofthe bonuses which he claims to be entitled to retain as received from

the Hull Ice Company and the Hull Fishing Company , otherwise calledthe Red Cross Company . If that was a profit received by him, as itseems to me to have been, while he was agent, and arising out of theduty which he was employed to do for the company, it falls under thesame branch of law as the profits received in respect of the Shipbuild-ing Company . I have some little difficulty in following Mr. JusticeKekewich's judgment with regard to that. We may perhaps have an in-accurate note of it, but if Mr. Justice Kekewich is of opinion that it is theessence of a title to relief in such a case that the principal would havebeen able to claim as his own money, as between himself and the oth-er party to the business transaction, the money secretly received byhis agent, I do not think that is the law. It is true, as Mr. JusticeKekewich says, that the money which is sought to be recovered mustbe money had and received by the agent for the principal's use; butthe use which arises in such a case, and the reception to the use of theprincipal which arises in such a case, does not depend on any privitybetween the principal and the opposite party with whom the agent isemployed to conduct business—it is not that the money ought to havegone into the principal's hands in the first instance; the use arisesfrom the relation between the principal and the agent himself. It is be-cause it is contrary to equity that the agent or the servant should re-tain money so received without the knowledge of his master. Thenthe law implies a use, that is to say, there is an implied contract, if youput it as a legal proposition—there is an equitable right, if you treat itas a matter of equity—as between the principal and agent that theagent should pay it over, which renders the agent liable to be *368sued for money had and received, and there is an equitable right inthe master to receive it, and to take it out of the hands of the agent,which gives the principal a right to relief in equity.

For these reasons I fail to agree with the judgment of the learnedJudge in the Court below, and I think the judgment suggested by the

Lord Justice is the only possible one.

FRY, L.J.:—

I also feel myself quite unable to agree with the decision of thelearned Judge in the Court below, and as I differ from him, I proposeto add a few words to explain the grounds of my decision.

The main question of law to be determined in this case is, what wasthe real legal character of the dealings between the Defendant Anselland Earle's Shipbuilding Company ? With regard to the facts of that casethere is really no dispute. Mr. Ansell was appointed managing direc-tor of this company by an agreement entered into before the companywas registered, adopted by the company after its registration, and notmerely was he so appointed from its commencement but at the firstmeeting of the directors on the 27th of August he received express in-structions to arrange the terms of the building of four or five trawlers,which might be required, with Messrs. Earle . Thus authorized, bothas managing director and by the special resolution of the board, hegoes to Messrs. Earle , and he accepts an agreement from them to payhim a commission of 1 per cent. on the price to be paid by the compa-ny, of which he was managing director, to Messrs. Earle . A furthercontract was subsequently entered into in which it is said that Mr.Ansell exerted himself to beat down the prices of Messrs. Earle , but hehiggles and insists on a payment being then made to him, and afterdebate succeeds in obtaining £50 from them. Those are the broad andundisputed features of Mr. Ansell's dealing with Messrs. Earle . In myjudgment, the conduct of Ansell in so dealing was a fraud—a fraud onhis principals—a fraud, not according to any artificial or technicalrules, but according to the simple dictates of conscience, and accord-ing to the broad principles of morality and law, and I think it is theduty of *369 the Courts to uphold those broad principles in all casesof this description.

We were invited to consider the state of mind of Mr. Ansell ; whetherhe thought it wrong; in other words we are invited to take as the stan-dard for our decision the alleged conscience of a fraudulent servant. Idecline to accept any such rule as one on which the Court is to decidesuch questions.

Now, having come without hesitation to the conclusion that Mr.Ansell's conduct was fraudulent, the results appear to me to be veryplain. In the first place, it gives the company a right to recover, withinterest at 5 per cent., the money which Mr. Ansell received, and re-ceived, according to my view, in consequence of his position, for theuse of the company, and without disclosing to the company the fact ofthe receipt. I take that to be the undoubted right of a principal whohas been defrauded by his agent. In the second place it appears to meto deprive Ansell of any right to recover the £200 which, according tothe ordinary course of business between them, would have beenpayable to him as salary. That of course depends, not only on thequestion which I have already dealt with, but on the further inquirywhether the engagement to pay is to pay annually or quarterly. Now,like my learned Brother who preceded me, if the matter rested reallyon the contract of the 4th of August and the articles of association,which authorize the directors to confirm and carry into effect theagreement of the 4th of August with modifications, I should havebeen inclined to hold that there was evidence on which we might rea-sonably conclude that the directors had modified the original contractbetween Ansell and the company, and that it had been adopted withthe modification that the salary should be paid quarterly. But then wefind, that months after those articles have been executed and the com-pany registered, a formal instrument is entered into between Anselland the company, by which it is agreed that the original terms of theagreement of the 4th of August shall be the terms binding betweenthe company and him. The terms of the 4th of August were yearly

employment and a yearly payment. Therefore, notwithstanding thepractice of the company, which seems to me to be referable to the arti-cles *370 and to justify the quarterly payments as between the direc-tors and the shareholders, yet the relations between Ansell and thecompany are regulated by the agreement of the 8th of January, andthose were for a yearly payment. I think, therefore, that the £200,which in the ordinary course would have been paid on the 1st of Oc-tober, were really a portion of the current salary, and as such cannotbe recovered by a servant who has been dismissed for fraud.

The other conclusion at which I arrive is this; that the fraudulent con-duct of Ansell was in law ample justification for his dismissal; in otherwords, that when the master discovered the fraudulent conduct onthe part of the servant, that gave him a plain right to dismiss that ser-vant. I do not think that that proposition can for a moment be disput-ed.

Numerous arguments were addressed to us to induce us to come tothe conclusion that this conduct of Ansell's was not truly of the char-acter that I have described. [His Lordship then referred to some argu-ments based upon the view of the facts taken by Mr. Ansell , andwhich his Lordship held to be untenable, and continued:—] Again,Mr. Ansell has relied on the stipulation contained in the contract be-tween himself and Mr. Garfit that he might be allowed to carry on anybusiness of a nature not prejudicial to the interests of the company.But it is prejudicial to the interests of the company when a man whoseduty it is to buy at the lowest price enters into a bargain which makesit his interest to buy at the highest. In fact, all these points put for-ward are mere dust thrown in the eyes of the Court to endeavour toshut out the true nature of this transaction, which, I repeat, to mymind, and according to my view, is a grave and undoubted fraud.

But then it is said, and that is the view which weighed with the

learned Judge, that this is an isolated case. We have no other groundupon which we can conclude this to be an isolated case except the ab-sence of success on the part of the Plaintiffs in proving any other caseexcept that to which I shall shortly refer, and the oath of Mr. Ansellthat it is such. I do not feel judicially satisfied that it is an isolatedcase. Suppose it be, is that an excuse? Is a man to commit a grossfraud on his *371 master, to conceal that fraud, and then, when it isdiscovered, say, “Oh, this is an isolated case, and, therefore, you can-not dismiss me?” That is not, according to my view, the law of theland with regard to the relation of master and servant. I repeat, itseems to me the company were justified in law, as well as in morality,in discharging Mr. Ansell as a man who was not worthy of beingtrusted by them.

The only other questions to which I need refer are, shortly, with re-gard to two contracts between the Ice Company and the Red Cross Com-pany and Mr. Ansell . With regard to those, the only point I think it atall necessary to refer to is the ingenious argument of Mr. Vernon Smiththat with regard to the Red Cross Company there was no evidence ofthe contract made by Mr. Ansell . According to my view it is not nec-essary that there should be evidence of a contract by Mr. Ansell . Heundertook, with the Red Cross Company , to use all his influence topromote their interests by entering as many smacks as might be uponthe books of the company, and trading with them to as large an extentas he could. He was entitled to the bonus only on the terms of observ-ing that obligation, and he received the bonus. By his act, therefore—and he has told us, no doubt, the truth—he did influence business tothat company. Whether he influenced it by giving directions to thesmack masters, or in however indirect a way, is immaterial. He hastaken money upon the footing of bringing business to them, and afterthat it is impossible for us to say that he did not bring it.

With regard to the other points which have been dealt with by the

Lords Justices, I content myself by saying that I concur entirely ineverything that they have said.

COTTON, L.J.:—The order will be as follows:—

Representation

Solicitors for Plaintiffs: Collyer-Bristow, Withers, Russell & Hill ,agents for Millington & Simpson , Boston.Solicitors for Defendant Ansell: Bell, Brodrick & Gray , agents forJ. T. & H. Woodhouse , Hull.Solicitors for Defendant Hadfield: J. Cotton & Co. , agents for W.Brown , Great Grimsby.

“Discharge the order of Mr. Justice Kekewich except so far as it dismisses theaction as against Hadfield, with costs to be paid by the Plaintiffs, and exceptso far as it directs an inquiry on the counter-claim as to the commissions onorders and sales of fish and icc, and reserves the costs of the inquiry, An in-quiry as to the time when the £219 was received. An inquiry as to the profitsreceived from the Ice Company, and the profits received from the carryingcompany, the Red Cross Company, in respect of ice supplied by the order ofthe Defendant to the smacks of the company, and in respect of the fish cur-ried by the vessels of the carrying company from smacks of the Plaintiff com-pany, and an inquiry as to the sums received by him. Then an inquiry whenthose sums were received, and a certificate of the amount with interest at 5per cent. from the time when they were received. Then an order for paymentfourteen days after the date of the Chief Clerk's certificate.” (M. W.)

1. 23 Ch. D. 1 .

2. 17 Q. B. D. 536 .

3. 3 A. & E. 171 .

4. 15 Q. B. 576 .

5. 18 Beav. 75 .

6. 1 H. & N. 266 .

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