#7023 - Lister V. Stubbs - Commercial Remedies BCL

Lister & Co. v Stubbs, (1890) 45 Ch. D. 1

Facts

The Plaintiffs, a manufacturing company, employed the Defendant, who was their foreman, to buy for them certain materials which they used in their business; and the Defendant, under a corrupt bargain, took from one of the firms of whom he so bought large sums by way of commission, a portion whereof he invested. The Plaintiffs brought an action against the Defendant to recover the moneys so paid to him, claiming to be entitled to follow such moneys into the investments thereof.

The Plaintiff company carried on the business of silk-spinners, dyers, and manufacturers at Bradford ; and the Defendant Stubbs , who was a foreman dyer in their employment, had for some years been entrusted by them and their predecessor in the business with the purchase at market prices of the stuffs which they used in the process of dyeing. Amongst other persons with whom he dealt were the firm of Varley & Co. , drysalters of Leeds , to whom he gave, on behalf of his principals, orders for large quantities of goods, and from whom he received, in consideration of these orders and without the knowledge of the Plaintiffs, large sums by way of commission.

STIRLING, J.:—

The question then is, under which head does the present case fall? Is this a case in which the suit is founded on a breach of duty or fraud by a person who was in the position of a trustee, or is it a case of cestui que trust seeking to recover money which was his own before any act wrongfully done by the trustee? It seems to me that the decision in Morison v. Thompson 14 , which I assume to apply, does not settle the question I have to decide. I assume that the money could be recovered as money had and received to the use of the Plaintiffs at law; but it seems to me that it is not a necessary consequence that the Plaintiffs in this case could follow the money. It is not true as a general proposition that in every case in which an action for money had and received will lie, the money can be followed in the hands of the defendant. Take a case in which an action for *10 money had and received would lie—money paid by a plaintiff to a defendant in pursuance of a contract for which the consideration totally failed. Take, for instance, the case of a deposit paid upon a contract by a vendor for the sale of real estate—a contract properly and honestly entered into. Suppose that in the course of the carrying it out it is discovered that the vendor had no title whatever to the property: then the purchaser would be entitled to rescind the contract; and the consideration having wholly failed, he would be entitled to recover the deposit, according to the authorities, as money had and received to his use. Suppose that in the meantime the vendor, believing himself to be honestly entitled to the money, had invested it in his business and had been making large profits out of it: it has never been held or suggested that the purchaser in that case could follow the money and claim the profits. In truth, what was decided in Morison v. Thompson 15 came to no more than this, that the plaintiff had a legal demand which he could assert in action for money had and received. No doubt the case might have arisen (as in Taylor v. Plumer 16 ) at law of following the money; but Morison v. Thompson was not that case, and no authority has been cited to me in which at law money received under such circumstances has been followed.

The true test appears to me to be that which was laid down by Lord Justice Cotton in the case of Metropolitan Bank v. Heiron 17 , in the passage in the judgment which I have read—is this a case of a cestui que trust seeking to recover money which was his before any act wrongfully done by the trustee? Suppose that the Plaintiffs, to apply the test, had handed over the money to the Defendant to be applied in payment for the goods which were purchased, and that he retained part of it. What was the wrongful act? The retention of it for his own use. Whose was the money before that? Plainly the money of the principal. It came into the hands of the agent clothed with a trust. That is not the present case. The Defendant simply gave orders to Messrs. Varley for goods which were supplied to the Plaintiffs and paid for by them. Those orders were, no doubt, given by the Defendant in the expectation that a commission would in course of time be paid *11 to him on the purchase-money; but there was not any legal obligation on the part of Messrs. Varley to pay it. If they had not paid it the Defendant would have been, so far as I see, without remedy in any Court of law.

It seems to me that it was money, not of the present Plaintiffs, but of Messrs. Varley , and that it could not have been laid hold of in the hands of Messrs. Varley by the Plaintiffs. Applying...