Beaman, J.:— This is a good example of the extent to which a case can be swollen out of all proportion to its true content and the matters proper to be heard, inquired into and decided. Give the books of one or two large firms to energetic attorneys to rummage over and they will provide counsel with endless instructions upon every sort of irregularity and suspicious circumstance appearing in those books however remotely bearing upon any general question to be answered in the case and the result unfortunately is an enormous waste of public time and labour, and the money of litigants. It is unfortunately almost impossible to check procedure of this kind. The Court, if it endeavours to curtail what appeared to be an unprofitable line of attack or defence leading nowhere, is always confidently assured by counsel that the matters to be disclosed will be found to have important bearing on one or other of the issues, and as at the time the Court is very much in the dark and the matters touched upon are so numerous and complicated, it is not easy to say definitely at any point that something of importance may not ultimately emerge. It is true that if the trial ended where it began, I should have had little hesitation in stopping a great deal of evidence which ultimately got upon the record; but if this be done during the course of the hearing, it is certain that the matter will be brought up in appeal and the learned Judges there being as much, if not more, in the dark than the trial Judge as to the possible outcome of such matter which has been properly rejected, will probably ex majore cautela say that the case ought not to have been decided before giving the parties an opportunity of laying all the evidence they had before the Court, if at all however remotely relevant. The truth is that in this as in so may other cases with which I have dealt on this side of the Court, the Judge is forced to accumulate a vast mass of evidence very little of which at the conclusion of the trial is found to be useful. Here, for example, I think it is safe to say that in arriving at a conclusion upon this case almost 99 percent of the evidence might be wholly neglected. Complications have been introduced and the course of the trial to that extent hampered and made more difficult by the way in which both the attack and the defence have shifted their ground.
2. The plaintiffs originally limited their case in substance to an allegation that the defendants by the custom of the market were insurers and were liable to them in any event for loss of their goods. The defence mainly rested at first upon the allegation that the firm of Damji Hirji, Muccadams, was not the agents of the defendants at all but the agents of the plaintiffs and inasmuch as the loss was entirely due to their negligence and fraud the defendants should not be held liable. Later they craved leave to add a plea that they had acted throughout as good, reasonable and prudent bailees. To this the plaintiffs replied with a long rambling addition to their plaint imputing, if not deliberately alleging, fraud of all sorts against the defendants. At the trial every allegation of fraud was withdrawn and the scope of the inquiry was again pro tanto contracted. But the plaintiffs then proceeded on the strength of one passage in their original plaint to open an entirely new line of attack, and set themselves to prove that the missing bales had not been lost at all after the failure of Damji Hirji, or by reason of any neglect or fraud on their part, but had in fact been duly sold and paid for and the defendants were therefore liable to account.
3. Now, if the defendants as commission agents for sale had really received the sale proceeds of the plaintiffs' goods and misappropriated them, that would be fraud and nothing else. As a direct line of attack, since fraud had been abandoned, this could no longer be pursued and the case opened by the plaintiffs endeavouring to prove the custom of the market under which every commission agent in the cotton business here is likewise an insurer. Twelve witnesses were examined upon this point and the evidence had not gone very far before it became perfectly apparent that these men were not speaking to any market custom in the ordinary sense of that term, but were merely giving their own opinions of their legal liabilities under their contracts with their up country constituents. I intimated more than once that I thought all this highly unprofitable; but it is risky to stop evidence upon an alleged custom merely upon such a ground as that I have indicated. I may add that I should have regarded any custom of the kind alleged so unreasonable in the face of the Statute law that even had it been proved to exist I should have refused to give legal sanction be it. This was the attitude adopted by the Court of appeal in the case of Blackburn v. Mason (1), where Lord Esher said that the custom set up by the defendant was so unreasonable that no Court would be likely to recognize it. Yet in spite of that he offered the defendant an opportunity if he wished to prove it of doing so. After the expression of that opinion however the defendant was well advised enough to drop the point. By way of rebutting the evidence of custom the defendants in turn called five witnesses and incidentally used them to prove affirmatively so much of the case of which the onus lay on them, viz., that they had acted as good and reasonable bailees. Also they had to prove that upon which they most particularly relied, viz., special agreement between themselves and the plaintiffs, by which the plaintiffs themselves agreed to the appointment of Damji Hirji as Muccadam for the course of business between themselves and the defendants. By way of rebutting the evidence adduced by the defendants to show that they had taken all reasonable care of the goods entrusted to them, the plaintiffs called three witnesses, whose evidence opened out very wide and practically interminable lines of inquiry. The gist and direction of this evidence was to show that in innumerable instances both the books of Damji Hirji and the books of the defendants were full of irregularities and suspicious entries, the accumulated effect of which was to show that even assuming whatever fraud had been committed had been the fraud of Damji Hirji alone, if the defendants had exercised reasonable care and prudence, the commission of that fraud to the detriment of the plaintiffs would have been impossible. The gist of the defendants' evidence, intended to show that they had exercised reasonable care and prudence, was the elaborate statement of the relative rights and obligations inter se according to the practice of this market of Muccadams and commission agents. The duties of each were stated with fair accuracy throughout and sharp lines of demarcation were drawn between the duties imposed by their contract upon each other and their resultant obligations towards each other and the up-country owner of the goods.
4. Such being the state of the voluminous evidence upon the record, I shall presently show, and show very shortly, that apart from one single question of fact of primary importance the whole of it is virtually negligible. The fact to which I allude is of course the alleged virtual appointment of Damji Hirji as Muccadam by the plaintiffs themselves. Even if it could be shown that the appointment of Damji Hirji as Muccadam was merely a term in the agreement to which the plaintiffs assented, I am not clear that it will necessarily follow from that the ordinary legal relations existing between the defendants and the plaintiffs would be materially affected. Everything would, in my judgment, depend upon who took the initiative in the matter. If, for example, the defendants had agreed to act as commission agents for the plaintiffs and at the same time had informed the plaintiffs that they meant to employ Damji Hirji as their Muccadam and the plaintiffs had accepted the agreement in that form, I do not see that it would have carried the matter any further than it has gone in numerous cases where a sub-agent has been appointed with the knowledge and even with the approval of the principal. It would then of course have been open to the plaintiffs, had they had any suspicion of Damji Hirji, to refuse to enter into the contract with the defendants so long as the defendants insisted upon employing Damji Hirji. But nothing of that kind has happened. If, on the other hand, the plaintiffs had made it an essential term of their contract with the defendants that the defendants should employ Damji Hirji and no one else as Muccadam for the receipt and custody of the plaintiffs' goods, the case would have been very different. For, then, it might fairly have been argued that whether Damji Hirji in such circumstances had become strictly in law a substituted agent of the plaintiffs for the custody of the goods, there could be no doubt but that the plaintiffs having forced the defendants to employ a named person and that person having betrayed his trust and dealt fraudulently with the plaintiffs' goods, it could hardly be said that result was attributable to the defendants or that the defendants were liable to make good any loss resulting therefrom.
5. Now, the evidence upon this point led by the defendants is, in my opinion, inconclusive and there is no satisfactory or solid ground upon which to base the conclusion that the plaintiffs themselves insisted upon the employment of Damji Hirji as Mucoadam. The defendants' case rests upon a great deal of antecedent probability, inferences drawn from one two virtually known and admitted facts and the statements contained in the letter of 10th February 1913, Ex. A in the case. Id this letter Lachmandas the plaintiffs' Bombay representative apprises the plaintiffs of the contract about to be entered into between himself and the defendants. It is only an abstract of the letter which Lachmandas wrote to the plaintiffs. But that abstract appears to indicate that the contract by a commission agent upon the usual terms was to be entered into between the defendants and the plaintiffs, the rate of the commission, the rate of the interest, the rate of insurance, and small details of that kind, all in the usual form were mentioned. Then follows the bare statement that the bales will remain with Damji Hirji. Even in that form, and assuming that the words I have just quoted were meant to be an integral part of the contract, it was as though the term were proposed by the defendants and not by the plaintiffs. Now, it must have been perfectly well-known to the plaintiffs' man that the defendants had no godowns of their own and no jethas.
6. It must have been perfectly well known to him that the defendants had no other Muccadam than Damji Hirji. Damji Hirji was an old business friend of the plaintiff they had many transactions together, and latterly each in turn had been advancing money to the other upon their respective goods. There was nothing, therefore surprising in the plaintiffs' man possibly by way of re-assuring his up-country principals, mentioning the fact that Damji Hirji was the defendants ordinary muccadam. The facts which I have just stated are amongst those which I call virtually admitted and known facts, from which the Court is asked to infer that the plaintiffs themselves would have insisted upon the employment of Damji Hirji. I think that it is pretty clear that Damji Hirji's man Shamji was the moving spirit in bringing about the contract between the plaintiffs and the defendants. The defendants wanted plaintiffs' business. The plaintiffs wanted another commission agent to advance money on their goods and Damji Hirji was a regular Muccadam of the defendants. It was therefore only natural that he should approach the defendants and suggest an extension of their business by offering to act as commission agents for the plaintiffs and this, I think no doubt is what happened.
7. The defendants have relied much at various stages of the case, upon the letter Ex. 1 of 11th December 1912, which according to the evidence of Gnerulal was actually seen by Shamji, a partner in Damji Hirji, and was sent by the defendants to the plaintiffs; broaching the matter of opening business relations with the defendants. The abstract of that letter is however so imperfect that it is impossible to say what its whole contents may have been. Nor are the words “we had conversation with Shamji” sufficient ground to infer that meant that Shamji had arranged the whole of the negotiations. In this state of the evidence I am entirely unable to hold that the defendants have proved what they thought so essential to be proved, viz., that the appointment of Damji Hirji as Muccadam was the plaintiffs' appointment and not the defendants'. Looking to the ordinary course of business in the market, it is undeniable that commission agents invariably appoint their own Muccadams and this is a matter in which an up-country owner as the original principal has no interest whatever. There might be a special agreement of the kind alleged but it would require much better proof than any which has been laid before me. It appears therefore that I have to deal with this case upon a very narrow ground and upon facts which are virtually admitted, subject of course to such exceptions as those indicated in parts of the plaintiffs' case where they deny altogether that 140 or 117 bales of theirs, as the case may be remained unsold on 30th September 1913, the date of Damji Hirji's insolvency.
8. The facts which I take to be proved beyond dispute are that pursuant to the agreement of 10th February 1913, the plaintiffs consigned 440 bales of Malkapur cotton to the defendants Nensukhdas Shionarayan who advanced upon those goods between 80 and 85 percent, of their value on railway receipts. These railway receipts were according to the usual course of business, handed to the defendants' Muccadam Damji Hirji, who took delivery of the goods and stored them in his godowns. Damji Hirji has accounted fat the sale of 300 of these bales to Nensukhdas Shionarayan, the defendants with the exception of a small dispute about a portion of the price of a lot of 100 bales alleged to have been sold to Hira, Maneck on 23rd September 1913. The remaining 140 bales are unaccounted for. On 30th September 1913, Damji Hirji failed, and the defendants allege that they recovered 23 bales out of the missing 140 belonging to the plaintiffs. The plaintiffs dispute this small item; but for the present I shall treat it as a fact that the defendant firm did recover 23 of the plaintiffs' missing 140 bales.
9. Now the relative rights and obligations of Muccadam and commission agents inter se may be thus briefly summarised. The business of a commission agent is virtually restricted to advancing up to the amount agreed upon the goods sent to Bombay and if he has no storage of his own, employing a Muccadam upon the usual Muccadamage terms. It is the Muccadam who has the custody of the goods, who gives samples to intending purchasers, who concludes bargains and who finally weighs out and delivers the goods. When this is done he must send the weighment receipt direct to the commission agent. All goods sold in this manner are sold in the name of the commission agent and not of the owner. The commission agent on obtaining the weighment receipt calls for payment either the same or at the latest the following day. This money he credits against the advances, interest and so forth. He charges a very small amount, ½ percent, for commission and a very low interest on his advances being somewhat under 6 percent per annum. It is his duty to apprise his up-country constituent of the fluctuations of the market and take his orders as to the minimum price at which he is content to have his goods sold. Finally, he has to make up the accounts. The Muccadam's liabilities are much larger inasmuch as he has the custody of the goods, and as I have mentioned has to look to all practical details of their disposal. His bills for eight annas per bale and other minor items of cartage are paid in the first instance by the commission agent and these are in turn charged to the up-country owner.
10. These then being in outline the principal duties of a Muccadam and a commission agent, respectively, it is clear that a commission agent has very little inducement to bestir himself regarding the actual safe custody of the goods. Noe has he any means of knowing what is going on, and very few means I should think of checking fraudulent practices by a Muccadam. That Damji Hirji's transactions, during the last period of his business, were thoroughly fraudulent, there can, I apprehend, be no doubt whatever. Cotton bales cannot be stolen and the only explanation given for this heavy loss of bales in Damji Hirji's charge is that he, either with or without the connivance of his direct principal, the commission agent, has sold a very large number of the bales, has falsified his accounts and misappropriated the proceeds. Thus in two instances, those of Joharmal Ramdin, who dealt in Bed-war cotton, and Ramdin Ramratan, who dealt in Malkapur cotton, the plaintiffs have shown from the books of Damji Hirji that in the first instance he sold 68 and in the second instance 116 more bales than he had received from these constituents. In other words, he mush have sold something like 184 bales belonging to other people in the name of these two men. I merely mention this in passing, although like so much in the case it was intended to show that the defendants were culpably negligent, in the business and played into the hands of Damji Hirji. I do not think it will ever have any direct bearing upon the decision.
11. This appears to me to turn upon the answer to the question of law and upon nothing else. That question is, under the circumstances I have described and in the absence of any special agreement such as that alleged by the defendants. Was the Muccadam, Damji Hirji, employed by the defendants, employed as sub-agent or substituted agent? There cannot, in my opinion be the very least doubt but that Muccadams employed in this market by commission agents are sub-agents and not substituted agents. Their contract is with the commission agent and not with the up-country constituents. It is true that it is very difficult to draw any clear and satisfactory distinction between the ground upon which sub-agents and substituted agents may be appointed. Section 190 of the Contract Act says that an agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or from the nature of the agency a sub-agent must be employed. That is an implied authority. He may of course have express authority. I am not in this case concerned with any express authority. It comes then to this, that where an agent is employed to conduct business and the custom of the trade empowers him in the conduct of such business to employ a sub-agent or where the nature of the business is such that he must employ a sub-agent, he has authority to do so. Now, if we turn to the case of a substituted agent, provided for in Section 194 of the Contract Act, we find it laid down that when an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him. Confining ourselves, again, to the case of implied authority here illustratively provided for, it will be seen to correspond in every case precisely with the implied authority under which an agent may lawfully appoint a sub-agent. In the ground and reason of appointment then I can discover no sharp distinction, as drawn by our legislature, between the resultant legal relations called into being between a sub agent and principal, and a substituted agent and principal and the review of the cases in England shows that no such clear-cut distinction has been insisted upon, much less maintained.
12. Take a group of cases at random, such as De Bussche v. Alt (2), New Zealand and Australian Land Co. v. Watson (3), Lockwood v. Abdy (4) and Blackburn v. Mason . It will be found, I think quite impossible to reconcile the decisions with any strict application of the principles laid down as distinguishing sub-agent and substituted agent in Sections 190 to 194 of the Contract Act. So far from that being the case and leaving out of sight for a moment any consideration of fraud which may have influenced the decision of the Courts, the case of De Bussche v. Alt was as dearly as any case could well be that of a sub-agent and not of a substituted agent. Yet the Court had no hesitation whatever in allowing the plaintiff to have recourse to the sub-agent and in holding that privity of contract had been established between them. The case of New Zealand and Australian hand Co. v. Watson is not so clear a case. The agent was employed on del credere terms, while the sub-agent was employed on different terms. But the case of Lockwood v. Abdy is as dearly a case of substituted agent under our law as could be desired; yet the Court had no difficulty in finding that the principal could not recover against such a substituted agent. In Blackburn v. Mason the defendant was clearly a sub-agent and not a substituted agent; but the issue was much confused by setting up a thoroughly unreasonable custom; and the Court dealt with him as if he was a principal dealing with an undisclosed principal. It would be easy to multiply cases of this kind, in which the case was of sub-agency under the definition of our law, and the English Courts held the sub-agent directly liable to the principal, and where the case was clearly a case of substituted agency the Courts had refused to give the principal redress against the substituted agent.
13. And the whole distinction in our law appears to turn upon the original agent naming the person he appoints to represent the principal for the whole or part of the business first entrusted to him. Whether this naming is to be to the agent or the principal is by no means apparent. I gather however that the naming should be to the principal himself so as to bring about privity of contract between them. In the case of a sub-agent no such naming is required and consequently no such privity of contract is in-law held to be established. But the distinction is fanciful rather than clear, whereas in cases of daily occurrence the sub-agent is perfectly well-known to the original principal; his appointment is as well-known; and the principal has assented thereto, if not expressly, tacitly by agreeing throughout. Nevertheless, observe what a serious difference there is between the legal consequences attendant upon the appointment of a sub-agent and a substituted agent. In the case of a sub-agent the principal has no right to obtain any remedy against him except in case of fraud or wilful wrong. In the case of a substituted agent the ordinary relations between principal and agent immediately come into being, and the principal can of course recover from him for any loss occasioned by his failure of duty.
14. Now, in the case with which I am dealing, and in every case of that kind it is I think as clear as anything well can be that the appointment of a Muccadam by a commission agent acting for an up-country constituent is an ordinary case of the appointment of a sub-agent, and it would make no difference whatever whether the up-country principal knows of the appointment or does not know of it; and if that be so, there would be virtually an end of this defence. It has been contended that the law of agency does not override the ordinary law of bailment and an agent who receives goods for sale and particularly an agent who advances money on them is in all legal respects precisely in the same position as a bailee or pledgee, when circumstances such as those with which I am dealing have arisen and brought about a heavy loss, yet it seems to me that there is a short answer to that, viz., that an agent for sale of goods, who has received goods from his owner and Has advanced money upon them, would doubtless be quasi pledgee did he retain the goods in his own custody and that then it would be open to him to show in the event of unavoidable loss that he had taken all reasonable and proper care of his principal's goods. But where loss has been occasioned and the goods have not been kept in the custody of the original bailee or agent but transferred by him to the custody of another person solely for the purpose of taking care of those goods and dealing with them in the various ways I have described, then I cannot see how any plea of reasonable care and prudence can be entertained to avert the consequences of fraud or negligence on the part of the person so entrusted with the goods. For the purpose of custody he must be a sub-agent, nothing more and nothing less than a sub-agent of the original bailee; and if the goods are lost through his fraud or through his carelessness, there being no privity of contract between him and the original owner, the right of the owner is against the original agent and not against the sub-agent; although did he so desire, where fraud is proved, he may have recourse to the sub-agent as well.
15. But the principal's right of having recourse to the sub-agent does not absolve the original agent from his liability. Nor can I discover how any amount of care and diligence on his part in the selection of his sub-agent can absolve him from liability to his principal. The fact remains that he has received goods which he was unable to keep himself and that he has entrusted them to some body else and that those goods have been lost. It is idle for him to plead that if this person really is his sub-agent he selected him with care or that his selection discharged him from all his obligations to take reasonable care of the goods entrusted to him. If he chooses to relieve himself of this responsibility by employing a sub-agent, it appears to me that he must do so entirely at his own risk and where the course of business is as careless, negligent and even fraudulent as it undoubtedly has been on the part of the sub-agent Damji Hirji, and as regards the first two epithets I think on the part of the defendants themselves in this case, I do not see how he can possibly hops to shelter himself behind the fact that he entrusted the goods to Damji Hirji and that Daaaji Hirji's credit at the time stood high in the market. The case would be quite different if Damji Hirji was a substituted agent and not a subagent. Then it is clear law that his original agent is under no further liability than to use due case and prudence in the selection of the substituted agent; and at the time that the defendants thus entrusted the goods to Damji Hirji there can be no question but that his reputation was so good and his standing so high in the market that it could safely be said that the defendants had taken all necessary and reasonable care in the selection.
16. To sum up, my view of the law governing the legal relations of the plaintiffs and the defendants in this suit is briefly this. A pledgee or an agent bailee, who has advanced money on the bail and thereafter entrusts the custody of the pledge or bail to a third person without making that person a substituted agent within the strict legal definition of that term, is not released from his ordinary legal liabilities to his bailor or pledgor should the goods be lost, merely because the person selected to hold possession and custody of the goods was a person in whom any one at the time might reasonably have reposed full confidence. In other words, if the goods are lost by the gross carelessness or actual fraud of the person selected to have the custody of them by the bailee or pledgee then such fraud or gross carelessness becomes in law by imputation the fraud or carelessness of the original bailee or pledgee. I do not see how in such circumstances the defendants can claim to be in a better position as regards the plaintiffs than Damji Hirji would have been had the plaintiffs availed themselves of their rights under S. 192, to have recourse to them. I am quite clear that statement of the law is correct in every point, and if it is, it virtually disposes of the entire defence.
17. The defendants, now that the bales have actually been lost and are known to have been lost through the gross carelessness or actual fraud of Damji Hirji, must be as accountable to the plaintiffs as Damji Hirji would have been and unless the last sentence in S. 192, giving a principal in cases of fraud or wilful wrong the right of recourse to the sub-agent, is read so as to exclude his normal right of recourse to his agent, the latter would survive, and the total effect of the section would be no more than to give the plaintiffs an option. In this case they have chosen to exercise that option against their original agent, inasmuch as the sub-agent has become insolvent and nothing can be recovered from him. In doing so they appear to me to be clearly within their legal rights. I should also advert to one consideration which was made the ground, now that I come to think of it, of considerable argument before the case ended. It was doubted at one time whether an agent could be made liable to his principal for the fraud of a sub-agent if that fraud was not committed in the interest of the principal. Such I think was the ground of the decision in Barwick v. English Joint Stock Bank (5). But later decisions, of which there are many in books, leave no doubt but that where it is an ordinary case of agency and the principal has lost through the fraudulent conduct of a sub-agent, his right of recourse to his own agent for recompense had been over and over again affirmed, such cases for example as Mathews v. Haydan (6), Stephens v. Badcook (7), Mutual Aid Permanent Benefit Building Society, In re, James, Ex parte (8) and Lloyd v. Grace, Smith & Co. (9) and I dare say many others. It was pointed out that not one of these cases was a case of bailment and that is perfectly true; but it appears to me that the general principle is exactly the same where the original bailee has chosen to confide the goods to the custody of a sub-agent of his own chose and those goods have been lost by the fraud or gross carelessness of the subagent; and I may add that upon the facts there cannot be any doubt whatever that the conduct of his business by Damji Hirji during the last year of the existence of that firm was tainted throughout by fraud and characterised by the grossest carelessness. Leaving aside the question of fraud, that gross carelessness would, upon the principle I have already stated, be imputed equally to the defendants.
18. The only outstanding questions would then be questions of account, which I think had better be dealt with in the first place by the Commissioner. I am not inclined to adopt the view pressed upon me by the plaintiffs and supported by elaborate and on the whole contradictory hypothesis that the missing 140 bales were not missing at all but were actually sold either to Volkart Brothers or in the names of Joharmal Ramdin and Ramdin Ramratan to other persons and the proceeds of those sales misappropriated by Damji Hirji. I think that the decision of this case ought to rest upon the acceptance of the general truth of the defendant's contention that of the 440 Malkapur bales consigned to them as commission agents by the plaintiffs 300 were actually sold before the failure of Damji Hirji on 30th September 1913. There is a small dispute as to the price of the lot of 100 bales so alleged by the defendants to have been sold to Hira Maneck; but that is a small matter and is one proper to be dealt with in the account. I take it further that of the 140 bales, 23 have actually been recovered by the defendants, and I desire the account to proceed on that footing. There will remain then 117 bales wholly unaccounted for and the commissioner will have to inquire into the market rates prevailing on that date and setting off the advances admittedly made by the defendants arrive at the total amount, if any, now due by the defendants to the plaintiffs. The defendants will of course be entitled to set off the advances they have made.
19. Had my finding upon this part of the case been against the plaintiffs and in favour of the defendants, I should have felt very great difficulty about disposing of the defendants' counterclaim. This rests upon an obiter dictum of Lord Holt in Coggs v. Bernard (10) and in all the test books the rule laid down in that obiter dictum is vouched for by a later authority, the case of Syred v. Carruthers (11). But for that single exception no case of the kind has, as I am aware, ever been brought in the English Courts since Coggs v. Bernard , and a moment's examination of the case of Syred v. Carruthers will show that it has no bearing whatever upon the rule of law for which it is given as an authority. It certainly seems to me that it would be a very hazardous enterprise for a pledgee who has lost his pledge although through no fault of his own, to seek recovery of the money he had advanced upon it founding the claim upon a substantive positive right as though there had been nothing more than an ordinary debt in the transaction. For, in all such cases the lender has insisted upon taking from the borrower property ex hypothesi of much greater value than the money advanced upon it, and the loss however occasioned even though the pledgee might be exonerated would also ex hypothesi never have occurred if the goods had been left in the owner's possession and under his control. In such circumstances I own I should feel very great difficulty in finding any ground of equity upon which the pledgee might recover the money he had advanced upon the valuable property which he has himself in some manner lost and is unable to restore to the owner.
20. Upon these grounds and on the terms of the foregoing judgment, I think the matter must now be referred to the Commissioner for taking an account between the parties on the basis of 800 bales having been sold, the first hundred to the Elphinstone Mills, the second hundred to the Coronation Mills and the third hundred to Hira Maneck; 23 bales having been recovered and sold as alleged by defendants and the remaining 17 being up to the present totally unaccounted for. The defendants are entitled to set off all the advances properly made and their charges as commission agents properly incurred and upon the return of the said account with the Commissioner's finding stating the result for or against the plaintiffs, a final decree can be made and the costs of this litigation apportioned. The counter-claim as a substantive counter claim will not survive although in the course of the accounting due effect will be given to it.
JUDGMENT
21. This is an appeal from a judgment of Beaman, J. The following facts are undisputed.
22. The plaintiffs consigned 440 bales of Malkapur cotton from Malkapur to the defendants in Bombay for sale on commission, and the defendants advanced against the bales 80 to 85 percent, of the then market value of the cotton. The railway receipts were handed to a firm of Muccadams, Damji Hirji & Co., who took delivery of the bales and stored them on their jetha at Colaba. Damji Hirji & Co. failed on 30th September 1913. At that date 300 of the plaintiffs' bales were accounted for by the defendants but the remaining 140 bales were missing and not accounted for. The defendants subsequently recovered 23 out of these 140 bales. The learned Judge finds, and it is not disputed, that Damji Hirji & Co.'s transactions were, towards the close of their business career, thoroughly fraudulent. The learned Judge remarks bales cannot be stolen and the only explanation given for the heavy loss of bales in Damji Hirji's charge is that he either with or without the connivance of his direct principal, the commission agent, sold a very large number of bales, falsified his accounts, and misappropriated the proceeds.
23. The only question in the case is whether the defendants are liable to the plaintiffs for the acts and defaults of Damji Harji & Co. The learned Judge's summary of the evidence as to the relative rights and obligations of Muccadams and commission agents inter se has been accepted as correct. It is as follows:
“The business of a commission agent is virtually restricted to advancing up to the amount agreed upon the goods sent to Bombay and if he has no storage of his own employing a Muccadam upon the usual Muccadamage terms. It is the Muccadam who has the custody of the goods, who gives samples to intending purchasers, who concludes bargains and who finally weighs out and delivers the goods. When this is done he must send the weighment receipt direct to the commission agent. All goods sold in this manner are sold in the name of the commission agent and not of the owner. The commission agent on obtaining the weighment receipt calls for payment either the same or at the latest the following day. This money he credits against the advances, interest and so forth. He charges a very small amount J percent for commission and a very low interest on his advances being somewhat under 6 percent, per annum. It is his duty to apprise his up-country constituent of the fluctuations of the market and take his orders as to the minimum price at which he is content to have his goods sold. Finally he has to make up the accounts. The Muccadam's liabilities are much larger inasmuch as he has the custody of the goods and, as I have mentioned, has to look to all practical details as to their disposal. His bills for 8 annas per bale and other minor items of cartage are paid in the first instance by the commission agent and these are in turn charged to the up-country owner.”
24. At the trial the plaintiffs' original contention was that the defendants as commission agents were insurers and they tried unsuccessfully to establish a custom to that effect. The defendants on the other hand contended that the plaintiffs were responsible for the defaults of the Muccadams as the custodians appointed by agreement with the defendants. The learned Judge held on the evidence that no such agreement was established and that the Muccadams were appointed by the defendants with the knowledge and approval of the plaintiffs. The defendants further contended that they had discharged their duty as bailees having taken as much care of the goods as a prudent owner would. The plaintiffs attempted to negative this contention by evidence that at least 100 of the remaining 140 bales had in fact been sold and their proceeds received. As however this involved a charge of fraud against the defendants and the plaintiffs had already expressly abandoned any such charge the learned Judge refused to entertain the contention. The same evidence was however relied upon at a later stage to support a contention that the defendants had negligently permitted a sale by Damji Hirji to Volkart Bros. of the 140 bales, the price being received, by Damji Hirji through the neglect of the defendants. The learned Judge held that it was not proved that there had been a sale of the plaintiffs' goods by Damji Hirji to Volkart Bros.
25. It has we think been satisfactorily demonstrated that the sale to Volkart Bros. of 155 bales was of bales held by the defendants at Damji Hirji's jetha for Ramdin Ramruttan and not for the plaintiffs. That sale was according to Darasha negotiated on 6th September. That the sale was on account of Ramdin is shown by Damji Hirji's book (Ex. 33). The bales sold to Volkart were weighed out on 9th September and were almost entirely paid for by Volkart Bros. on the 13th September (Ex. E). The plaintiffs however only wrote instructions to their man in Bombay on 8th September to get their remaining 140 bales sold at a profitable rate (Ex. 1) approving of a sale at Rs. 255. The previous limit of price had been Rs. 260/65 (Ex. 6). Those instructions would not arrive in Bombay till the 9th. There is therefore no reason for supposing that their 140 bales were included in the bales weighed out for Volkart Bros. on that day. On the contrary the plaintiffs' Bombay man wrote to the plaintiffs on 24th September that the 140 bales had not then been weighed out (Ex. 11). There is however evidence that the plaintiffs' bales had been sold or at all events that those on the spot believed that a bargain or bargains for their sale had been closed by Damji Hirji & Co. The plaintiffs writing to the defendants on 8th September (Ex. C) state that they had that day written to their man to sell the remaining 140 bales which must have been sold at a profit. The plaintiffs' Bombay man writing on 9th September stated that the defendants' man told him 140 bales had been sold at Rs. 255 (see Ex. K). On 17th September the plaintiffs wrote to defendants:
“All our bales have according to two telegrams from our Bombay shop been sold through your commission agency.”
26. This was never contradicted by the defendants. The letters above referred to are consistent with the evidence of the plaintiffs' Bombay servant Laxmandas that Rambux the defendants' man, told him that the remaining 140 bales had been sold. This witness also deposes that he gave Damji Hirji & Co., instructions for storing his master's bales, namely, that they should be kept separate and stored apart from the bales of others. He says he sometimes used to see that they were stored separately. It is therefore improbable, though in the monsoon they would be removed to a godown from open jetha, that Damji Hirji & Co., had made away with the plaintiffs' bales before 9th September, as Laxmandas would probably have noticed their absence at that time when he was full of care for the sale and weighing out of the bales. He then appears to have left Bombay and his place was taken by Harakchand. It would appear from Ex. 11 that the plaintiffs' Bombay representative, as late as 24th September, believed that the 140 bales were still in the godown of Damji Hirji & Co., ready to be weighed.
27. It seems certain however that they were no longer there on 30th September. Before discussing the law applicable to the conclusions above stated, it is necessary to find upon the important question whether Damji Hirji & Co., were appointed muccadams by or by agreement with the plaintiffs, The defendants' witness, Laxmandas Harakchand, Secretary of the Marwari Chamber of Commerce, states that the muccadam is chosen by the commission agent but sometimes the owners ask that a particular muccadam be employed, but if the commission agent does not approve he need not employ that muccadam. In view of this practice it would not be safe to infer from the letter of the plaintiffs' Bombay man of 11th February (Ex. A), stating in connexion with the terms offered by the defendants for doing business for the plaintiffs, that muccadami would remain with Damji Hirji & Co., anything more than an intimation of a decision which the defendants thought would please the plaintiffs and perhaps influence them in accepting the terms offered. The acceptance of these terms by the plaintiffs does not make them the principals of the muccadams. Damji Hirji & Co., must therefore be taken to be the lawfully appointed sub-agents of the defendants and the defendants are liable for the defaults of the muccadams to the extent indicated in Ch. 10, Contract Act. We will now consider how far that liability extends. It is contended for the plaintiffs that the defendants are liable for all acts of the muccadams done in relation to the plaintiffs' goods from the time when the muccadams first took charge of them till 30th September 1913, when it was found that 117 bales were missing. Under S. 182 an “agent” is a person employed to do an act for another, or to represent another in dealings with third persons, that is, the agent must be employed to do a particular act, or a particular class of acts, or to represent another in a particular class of dealings with third persons. Under S. 188 an agent, having authority to do an act, that is, an act of the nature contemplated in S. 182, has authority to do every lawful thing which is necessary in order to do such act, and an agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course, of conducting such business. Under S. 190 an agent may employ a sub-agent where by the ordinary custom of trade, a sub-agent may or from the nature of the agency, a sub-agent must, be employed. Under S. 192 where a sub-agent is properly appointed, the principal is so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his “acts”, as if he were an agent originally appointed by the principal. The “acts” for which the principal is responsible must be “acts” of the nature contemplated in S. 182, that is acts of the class which he is employed to do and such auxiliary acts as are contemplated in S. 188. S. 192 further provides: “the agent is responsible to the principal for the acts of the sub-agent.” There does not appear to be any reason why the “acts” for which the agent as principal of the sub agent is to be responsible to his own principal, should be “acts” falling under a more extended category than the “acts” contemplated in Ss. 182 and 188 and Cl. 1, S. 192. The concluding clause of S. 192 gives the agent's principal a right of action against the subagent, only where in performing “acts” of the nature contemplated in the section the sub-agent has committed fraud or wilful wrong. S. 238 provides that
“where misrepresentations made or frauds committed by agents are committed in matters which do not fall within their authority the principals are not affected,”
28. The term “principal” here would include an agent as principal, of a sub-agent as well as the agent's principal. The employment of the muccadam appears to fall under two categories: employment for the purpose of storage, and employment for the purpose of effecting sale and delivery. The two classes of employment are not necessarily concurrent. Employment for storage begins as soon as the muccadam gets delivery from the railway. Employment for sale and delivery only begins when the commission agent gives the muccadam instructions to find a buyer at a certain minimum price. A fraudulent disposition by the muccadam of cotton bales before he has been authorised to find a buyer for them would not be a fraud “in a matter within his authority.” but after he has been authorized to find a buyer, it would be a fraud “in a matter within his authority.” Whether such a fraudulent disposition by the muccadam would be possible without the connivance or negligence of the commission agent is doubtful. There is evidence however in this case that the defendants in the month of September did not insist on the customary precaution of receiving the sale proceeds of bales sold for Ramdin Ramrattan direct from the buyer but permitted the recovery of the money in the first instance by the muccadam. Nor is this the only instance in their business as commission agents of such neglect of the usual precaution. There appears to us to be evidence that the fraudulent disposition of the plaintiffs' bales, 117 in number took place after Damji Hirji & Co. had been authorized to find buyers for them. It has already been shown that authority must be taken to have been given by the defendants to Damji Hirji & Co., about the 9th September for the sale of the remaining 140 bales of the plaintiffs.
29. The witness Ambaram Vajeshankar, who was godown keeper to Damji Hirji & Co. in 1913, says he used to make reports in the evening stating what bales had gone out in the course of the day and his masters kept a book based on those reports which was called the balance book. In the balance book under date the 13th September appears an item of 72 bales of Malkapur cotton weighed out to Volkart Bros.—the plaintiffs' name ebeing mentioned. It does not appear that these 72 bales were ever received by Volkart Bros. This appears to indicate that 72 of the plaintiffs' bales were disposed of i.e, went out of the godown on 13th September, though the buyer's name is not correct. To make up 117, the number of the missing bales, 45, would be needed. This figure appears in Ex. 33, entry in the Ankra book of Damji Hirji & Co., under date 20th September, These bales appear in Volkart's documents, Ex. E, as 46 bales of Malkapur cotton, though the Ankra book of Damji Hirji & Co. refers to them as 26 bales of Bhodwad Tarachand Shivakram and 199 of La. Ra. (Lakhichand Ramchand). Ambaram says Lakhichand was a commission agent in Bombay and thinks that Tarachand Shivakram must be an up-country owner. He does not know if the bales bore marks. Bhodwad, it may be mentioned, is the next station but one to Malkapur. The document in Ex. E relating to these 45 bales states them to belong to Nensukh Shivnarayan, the defendants, and Volkart Bros., on payment for these bales received from Damji Hirji & Co., a receipt purporting to be signed by the defendants' firm. Having regard to the confusion produced by an examination of Damji Hirji's Ankra book, which shows in the case of Ramdin Ramruttan, one of the defendants' up-country constituents, 1,695 bales weighed out, which exceeds by 80 the number of bales received on their account (see Ex. A-12), while the number weighed in September to Volkarts under the contract of 6th September greatly exceeds, the 61 unsold bales spoken to by Mitharam the Ankra book entry does not import accuracy and it seems probable that the 45 bales above referred to were really, as represented to Volkarts, bales consigned to the defendants. As the defendants only received Malkapur cotton from Ramdin and the plaintiffs', our conclusion must be that the 45 bales belonged to the plaintiffs. If so this would show 117 bales disposed of by Damji Hirji & Co., in September after he receive instructions to sell.
30. We think therefore that the fraudulent disposition by Damji Hirji & Co., of the plaintiffs' bales took place after the instructions to sell the 140 bales and therefore in a matter within Damji Hirji & Co.'s authority. The defendants therefore are liable. The particular act was not authorized, still as the act was done in the course of employment which was authorized, the master is liable for the act of his servant: see Citizens' Life Assurance Company v. Brown (12). The defendants probably hoped to succeed in their case that Damji Hirji & Co. had been appointed by the plaintiffs. Apart from this point there seems no reason why they should not have paid the plaintiffs for their losses in the same manner as they paid Ramdin Ramrattan and as Lakhichand Ramchand paid his up-country constituents who lost bales through Damji Hirji & Co.'s default. Of the many English cases discussed at the hearing, Jobson v. Palmer (13) appears to us to support the defendants' case. Having regard to the facts and the decision in that case it may be contended that any paid agent for sale who properly employs a sub-agent is not liable to his principal for the sub-agent's default, if the default is a fraudulent disposition for the benefit only of the sub-agent. There is nothing in the decision inconsistent with the general understanding up to 1912 of the law laid down in Barwick v. English Joint Stock Bank . It does not however appear to be consistent with the law stated in Lloyd v. Grace Smith & Co. or with the legal conclusions deducible from Ch. 10, Contract Act.
G.P/R.K
31. Appeal dismissed.