1904 V. KNEE C.J. 201. commission and their actual out of pocket expenses, out nothing more. Therefore I think that upon that ground, wholly HIPPISLEY apart from the broader ground upon which Mr. Salter relied, the plaintiff is entitled to recover the two sums of 11. 6s. 10d. and BROTHERS. 11. 8s. 7d., and to that extent the judgment of the county court Lord Alverstone judge must be reversed. Mr. Duke, indeed, contended that the Court ought to allow these discounts to the defendants upon the ground that the custom for auctioneers to take them was so general that the plaintiff must have known, or ought to have known, that they were in fact being received. Of course, if to the knowledge of the principal they were being received by the agent, the profit ceased to be secret and the question would not arise; but where there is no knowledge the agent ought to account, and it is only honest that he should conduct his business on the principle of his liability so to account. The two authorities cited by Mr. Duke were cases in which it was obvious that the principal knew that the agent was being remunerated by third parties; therefore they in no way conflict with the principle which I have endeavoured to lay down. Unfortunately there appears to prevail in commercial circles in which perfectly honourable men desire to play an honourable part an extraordinary laxity in the view taken of the earning of secret profits by agents. The sooner it is recognised that such secret profits ought to be disapproved of by men in an honourable profession, the better it will be for commerce in all its branches. The other claim made by the plaintiff, and in respect to which we did not call upon the defendants' counsel, was that in consequence of the defendants' conduct they were not entitled to retain the 201. which they had deducted from the gross proceeds for their commission, and in support of that claim Mr. Salter relied upon the judgment of this Court in Andrews v. Ramsay (1), where we held that a dishonest agent could not recover any commission at all. I desire, speaking for myself, to say that in this case I am satisfied that there was no fraud, but that what was done by the defendants was done under a mistaken notion as to what they were entitled (1) [1903] 2 K. B. 635. 1904 v. KNEE C.J. to do under the contract: they thought that by reason of the HIPPISLEY alleged custom they were entitled to deduct from the proceeds of sale the gross amounts of the advertising and printing bills. BROTHERS. That is enough to differentiate the present case from Andrews Lord Alverstone V. Ramsay (1), where we were dealing with an agent who acted with downright dishonesty. But Mr. Salter went further, and contended that if there has been a failure by the agent to account for a secret discount received, even though that failure may have been due to a bonâ fide mistake, he is not entitled to receive any commission or remuneration for his services from the principal. I am not prepared to go that length. If the Court is satisfied that there has been no fraud or dishonesty upon the agent's part, I think that the receipt by him of a discount will not disentitle him to his commission unless the discount is in some way connected with the contract which the agent is employed to make or the duty which he is called upon to perform. In my opinion, the neglect by the defendants to account for the discounts in the present case is not sufficiently connected with the real subject-matter of their employment. If the discount had been received from the purchasers the case would have been covered by Andrews v. Ramsay (1); but here it was received in respect of a purely incidental matter; it had nothing to do with the duty of selling. It cannot be suggested that the plaintiff got by one penny a lower price than he would otherwise have got. Therefore I come to the conclusion that, so far as the 201. commission is concerned, the plaintiff is not entitled to succeed. KENNEDY J. I am of the same opinion. Upon the general question with regard to the discounts received by the defendants on these bills I think the plaintiff is entitled to succeed. Out of pocket expenses were all that the auctioneers here were entitled to claim from the principal who employed them, and in fact they claimed what was not an out of pocket expense. It has been suggested that the meaning of the expression "out of pocket expenses" might be qualified by the knowledge of the principal that in some of the contracts into which the (1) [1903] 2 K. B. 635. 1904 v. KNEE BROTHERS. Kennedy J. auctioneers would necessarily enter they might possibly be allowed a discount. It appears to me quite impossible, as it HIPPISLEY would be unjust, to act upon such a suggestion. If a principal, when contracting for the services of an agent, is told that the agent is going to receive a profit out of the agency beyond the remuneration that the principal is to pay, there can be no possible harm in the agent receiving it; but, unless it has been, in this way, authorized by the principal, the receipt of such a profit is an indefensible act. I quite agree with my Lord that in this case the defendants were only doing what they honestly believed to be right having regard to a general practice; but I should be sorry to say that the practice itself is an honest one, if it is to be taken as extending to cases in which the fact that the profit will be received and kept by the agent is not brought to the knowledge of the employer. With regard to the 201. claim, I agree with my Lord that this is not one of the cases in which it would be just to deprive the agent of his agreed remuneration as well as of his secret profit. I feel it is difficult to lay down any definite rule upon the subject with confidence, but I would venture to suggest the following: that where the agent's remuneration is to be paid for the performance of several inseparable duties, if the agent is unfaithful in the performance of any one of those duties by reason of his receiving a secret profit in connection with it— and I here use that word "unfaithful" as including a breach of obligation without moral turpitude-it may be that he will forfeit his remuneration, just as in certain cases a captain of a ship might be held in the Admiralty Court to forfeit his wages as a result of misconduct in any branch of his duty as a captain; but where the several duties to be performed are separable, as to my mind they are in the present case, the receipt of a secret profit in connection with one of those duties would not, in the absence of fraud, involve the loss of the remuneration which has been fairly earned in the proper discharge of the other duties. Here the auctioneers were employed for a certain commission to act faithfully as auctioneers. If they had improperly by connivance sold to a purchaser at a lower price than they could fairly have got they would clearly 1904 V. KNEE Kennedy J. not have been able to recover their commission. There is HIPPISLEY nothing of this kind in the present case. But by the special terms of their contract they undertook, in addition to their BROTHERS. duty as auctioneers, that if the plaintiff would pay them their out of pocket expenses they would truly account to the plaintiff for those expenses. And it seems to me that it would be wrong to say that because the defendants failed in the performance of their duty properly to account for the out of pocket expenses, therefore they are not to have their commission, although they performed all their duty as auctioneers faithfully. RIDLEY J. I concur in the judgment of my Lord. Judgment of county court judge varied accordingly. Solicitor for appellant: G. F. Sutton, for Page & Thompson, Bristol. Solicitors for respondents: Guscotte, Wadham & Dawe, for Burges & Sloan, Bristol. J. F. C. [IN THE COURT OF APPEAL.] POWELL & THOMAS v. EVAN JONES & CO. Principal and Agent-Secret Commission-Sub-agent-Privity of Contract- Agents, who were employed for commission to procure an advance of money for their principals, employed for that purpose, with the assent of the principals, a sub-agent, on the footing that he should share the commission with them. The sub-agent was aware that the agents were acting in the matter for their principals. He succeeded in procuring the advance of the required amount by a company. Without the knowledge of the agents or their principals, the sub-agent received from the company a commission for introducing the business to them : Held, that, on the facts, there was evidence that the contractual relation of principal and agent had been established between the principals and the sub-agent; and, secondly, that, even if no privity of contract existed between them, the sub-agent stood in a fiduciary relation to the principals, and was therefore accountable to them for the commission which he had received from the company. On a claim in an action, to which the company was not a party, made by the principals against the sub-agent to recover commission received by him as aforesaid, it appeared that by the agreement between the company and the sub-agent further sums by way of commission on the transaction would become payable in the future to the sub-agent by the company : Held, that the Court must decline to make any further declaration of right with regard to such sums than that the sub-agent would become indebted in respect of them to the principals when and as he should receive the same. De Bussche v. Alt, (1878) 8 Ch. D. 286, and Lister & Co. v. Stubbs, (1890) 45 Ch. D. 1, followed. APPEALS from the judgment of Kennedy J. in an action tried by him without a jury. The action was brought by the plaintiffs, Powell & Thomas, against the defendants, Evan Jones & Co., to recover the sum of 14007., payable to the plaintiffs, as commission` on debentures to the amount of 70,000l. issued through the instrumentality of the Law Guarantee and Trust Society, under an agreement or commission note, dated August 7, 1902, which was in the following terms: "Messrs. Percy Powell C. A. 1904 Nov. 15. |