H. C. OF A. 1907. REID V. MACDONALD. [ISAACS J.-If the work done for the other person is outside the scope of the agency between the master and his servant, the master is only entitled to claim damages because the servant did not give his whole time to his master's business. He referred to Dean v. MacDowell (1); Trimble v. Goldberg (2). HIGGINS J. referred to Bowstead on Agency, 3rd ed., p. 139.] If MacDonald did not actually consent to the appellant taking the position of consulting engineer, he caused the appellant to believe that he did consent, and induced him to act on that belief, and he cannot now be allowed to say that he did not consent: Pickard v. Sears (3). [Counsel also referred to Great Western Insurance Co. v. Cunliffe (4).] Duffy K.C. and Davis, for the respondent MacDonald. The appellant gained the shares through his character or position of servant of MacDonald or incidentally to the execution of his duty as such servant, and therefore MacDonald is entitled to them. It is not necessary that they should have been gained in the course of his employment: Story on Agency, sec. 207; Lewin on Trusts, 11th ed., p. 303; Thompson v. Havelock (5); Diplock v. Blackburn (6); Tarkwa Main Reef Limited v. Merton (7); North American Land and Timber Co. Ltd. v. Watkins (8). [ISAACS J. referred to Morison v. Thompson (9). HIGGINS J. referred to Parker v. McKenna (10).] The foundation of this action is purely equitable, appellant being a constructive trustee. The position which the appellant took as consulting engineer was not inconsistent with his being MacDonald's agent. MacDonald did not know the appellant had taken it until afterwards. A man may be the general agent of one and particular agent of another person at the same time: Encyclopædia of Laws of England, vol. vIII., p. 255. [GRIFFITH C.J. referred to Aas v. Benham (11). ISAACS J. referred to Smith v. Lay (12).] (1) 8 Ch. D., 345. (8) (1904) 1 Ch., 242; (1904) 2 Ch., 233. (9) L.R. 9 Q.B., 480. (10) L.R. 10 Ch., 96, at p. 118. (11) (1891) 2 Ch., 244. (12) 3 Kay & J., 105. 1907. REID There was not necessarily anything illegal in the appellant H. C. OF A. being at the same time MacDonald's servant and consulting engineer of the company. The appellant must negative every hypothesis on which the contract could be legal: Clarke v. Pitcher (1); Hutchinson v. Scott (2); Waugh v. Morris (3); Thwaites v. Coulthwaite (4). Mitchell K.C. in reply. A man cannot act as agent for two parties to a transaction without the knowledge of both: Story on Agency, sec. 31; Farnsworth v. Hemmer (5). [ISAACS J. referred to Rice v. Wood (6).] Whatever may have been the position with regard to promoting the defendant company, it was entirely without the scope of MacDonald's business that the appellant should act as consulting engineer of that company and superintend the supply of machinery by MacDonald. [The following authorities also were referred to during argument:-Carter v. Palmer (7); Lindley on Partnership, 6th ed., p. 322; Russell v. Austwick (8); Clegg v. Clegg (9); Shallcross v. Oldham (10); Lord Norreys v. Hodgson (11); Baring v. Stanton (12); Scott v. Brown, Doering, McNab & Co. (13): Gedge v. Royal Exchange Assurance Corporation (14); Sharp v. Taylor (15); Beeston v. Beeston (16); Bridger v. Savage (17); Lister & Co. v. Stubbs (18); Tenant v. Elliott (19); Farmer v. Russell (20); Thomson v. Thomson (21); Sykes v. Beadon (22).] GRIFFITH C.J. This is an action brought by the plaintiff, the respondent, claiming the benefit of a secret profit which he alleges to have been made by the appellant, the defendant, while in his service and engaged in his business, and obtained by reason (12) 3 Ch. D., 502. (13) (1892) 2 Q. B., 724. (14) (1900) 2 Q.B., 214, at p. 220. (15) 2 Ph., 801, at p. 818. (16) 1 Ex. D., 13. (17) 15 Q.B.D., 363. (18) 45 Ch. D., 1. (19) 1 B. & P., 3. v. MACDONALD. Sept. 27. 1907. REID V. MACDONALD. Griffith C.J. H. C. OF A. of his employment. There is no doubt about the law applicable to such a case. It is stated as clearly as anywhere, I think, by Bowen L.J. in the case of the Boston Deep Sea Fishing and Ice Co. v. Ansell (1), in the passage quoted by the learned Chief Justice of Victoria from whose decision this appeal is brought. I will read the passage:-" Now, there can be no question that an agent employed by a principal or master to do business with another, who, unknown to that principal or master, takes from that other person a profit arising out of the business which he is employed to transact, is doing a wrongful act inconsistent with his duty towards his master, and the continuance of confidence between them. He does the wrongful act whether such profit be given to him in return for services which he actually performs for the third party, or whether it be given to him for his supposed influence, or whether it be given to him on any other ground at all; if it is a profit which arises out of the transaction, it belongs to his master, and the agent or servant has no right to take it, or keep it, or bargain for it, or to receive it without bargain, unless his master knows it." The element of secrecy is twice referred to by the Lord Justice in that passage. He also refers to the fact that the profit arises out of the business which the agent was employed to transact. It is necessary therefore in every case to inquire whether the profit arises out of the business which the agent or servant is employed to transact for the master or principal. The plaintiff's case is put in this way in his statement of claim. He says that he was a manufacturer of ice refrigerating and cold storage machinery and plant, carrying on business in Sydney in his own. name, and in Adelaide as the Adelaide Ice and Cold Storage Company, and that the defendant Reid was an engineer experienced in connection with ice refrigerating and cold storage machinery and plant. Then he alleges that he, the plaintiff, engaged the defendant to be the general manager of his Adelaide business. The agreement was in writing and I will refer to it presently. The plaintiff says that throughout the engagement part of the duty of the defendant as the plaintiff's employé was to use his ability and influence in the formation of syndicates or companies for ice (1) 39 Ch. D., 339, at p. 363. 1907. REID บ. MACDONALD. Griffith C.J. refrigerating and cold storage purposes, and to assist the plaintiff H. C. of A. in procuring that such syndicates or companies when formed should purchase the requisite machinery and plant from the plaintiff, and also, if necessary or expedient in order to facilitate any such purpose, to prepare and supply plans and specifications for, and to supervise the erection of, such machinery and plant. That is the plaintiff's statement of what the defendant was to do for the him as his servant. Then he says, par. 10, that, during the term of his employment, the defendant in pursuance of his duty promoted or assisted in forming the defendant company, which was a company for ice refrigerating and cold storage purposes, and that, as part of the negotiations for such promotion or formation, and in order to facilitate the purchase by the company of its machinery and plant from the plaintiff, the defendant agreed with some persons acting as a syndicate for the formation of the defendant company, or with some trustee or trustees for such company, to prepare and supply to the company plans and specifications for such machinery and plant and to supervise the erection thereof. All this is alleged to have been done by the defendant as part of his duty to the plaintiff. The statement of claim goes on to say (par. 11) that the defendant did this work for the company as agreed and that, without the plaintiff's knowledge or authority, the defendant, whilst engaged in and about the matters referred to in paragraphs 10 and 11, acquired a benefit on his own behalf, that benefit being 2,000 fully paid up shares in the defendant company. At the trial the learned Chief Justice was of opinion that the case turned upon the actual express terms of an extension of the defendant's original agreement of service, which extension was made verbally. The version of the conversations given by the plaintiff differed from that given by the defendant, and the learned Chief Justice thought that given by the plaintiff was the correct one, and he thought that upon that view of the facts the case was brought within the recognized rule as above quoted. my opinion, there is no substantial conflict between the versions given by the plaintiff and defendant as to any material fact. This case may be determined, I think, upon uncontroverted facts appearing from the correspondence and a long course of action. In VOL. IV. 101 H. C. OF A. I will refer only to uncontroverted facts in the reasons on which I found my conclusions, my judgment. 1907. REID v. MACDONALD. Griffith C.J. The defendant was originally engaged under a contract under seal, dated 3rd March 1903, which took effect for a term of three years from 28th July 1902. By paragraph 5 of the contract the defendant undertook zealously, faithfully, and skilfully to devote his whole time and ability to the efficient carrying out of his duties as general manager for the plaintiff for the term of three years, during the first year at Adelaide, during the second and third years in such State or States in Australia as the plaintiff might in writing desire or direct" to the end and intent that the interest and businesses of .. (the plaintiff) shall by (the defendant) be in every respect not only well and truly conserved and fostered but in every legitimate manner be further improved and extended to the utmost of the ability and influence of the defendant." The defendant accordingly entered into the service of the plaintiff at Adelaide, where he superintended his refrigerating and cold storage machinery business, and, in the discharge of his duties, he endeavoured to promote the plaintiff's interest in every way he could. He assisted in getting up various businesses carried on by other persons who became good customers of the plaintiff and bought machinery from him. Amongst other things were mentioned a rabbitfreezing plant, an egg-freezing plant, and it was contemplated to establish an ice skating rink in Adelaide. As a good deal of reliance was placed upon that episode both by the learned Chief Justice in the Supreme Court and by learned counsel, I will say a few words about it. It occurred to the defendant that it would be a good thing, for the purpose of finding an outlet for the plaintiff's works, to establish an ice skating rink. He found a building not very far from the plaintiff's works, of which it was possible to get a lease at a low rent, which was said to be eminently suitable for the purposes of a skating rink, and to which the necessary machinery could be conveyed from the plaintiff's works without setting up separate works at the rink itself. But, in order to carry out the scheme, it was necessary to get an option of a lease of the premises from the owners, and it was necessary to acquire |