Lloyd vs Grace Smith & Company (1912)

Facts:
The appellant, who was a widow, owned two freehold cottages at Ellesmere Port.
The respondents were a firm of Liverpool solicitors of old standing and high
repute. The respondent's firm had acted as solicitors to the vendor on the sale of
the Ellesmere Port property and the appellant had become acquainted with the
firm in the course of this transaction.
On January 11, 1910, the appellant, being dissatisfied with the income derived
from this property, called at the office of the respondent's firm for the purpose of
consulting them on the matter. At the office she met one Sandles, who was the
respondent's conveyancing manager and managing clerk. Sandles conducted the
conveyancing work of the firm without supervision. He had authority to arrange
and negotiate sales of real property and to carry them out, and also to receive
deeds for safe custody. Sandles was unknown to the appellant, who believed him
to be a member of the respondent's firm. At this interview the appellant
discussed with him both the Ellesmere Port property and the Liverpool mortgage.
He said that she was not getting enough for her money and asked her to call
again and bring with her the deeds relating to the Ellesmere Port property and to
the mortgage.
On January 12 the appellant again called at the respondent's office, bringing the
deeds with her, and had another interview with Sandles. Acting on his advice she
instructed him to sell the cottages and call in the mortgage money. Sandles
suggested that the money should be invested in certain companies in which he
was interested and which he told her would produce 10 per cent., but nothing
was settled as to that.
Sandles returned with a clerk and produced two documents which he asked the
appellant to sign. These documents were not read over to the appellant and were
not explained to her. She signed them without reading them, believing that they
were something she had to sign before the sale could be proceeded with. These
documents were in fact a conveyance by the appellant to Sandles of the
Ellesmere Port property at the price of 540l. and a transfer by her to him of the
mortgage on the Liverpool property in consideration of the sum of 450l.
On the following day, January 13, Sandles mortgaged the Ellesmere Port property
to the Union Credit Bank to secure a loan to himself of 378l. and interest,
expressed in the mortgage as 550l., and he also gave notice to Rushworth of the
transfer to him of the mortgage on the Liverpool property and called in the
mortgage money.
Held:
Vicarious liability can extend to fraudulent acts or omissions if those were carried
out in the course of the employment or within the scope of the apparent
authority, albeit by an employee or a partner conducting the business of a type

which he had a right to conduct. The principal was liable for the fraud of the
agent because conveyancing is part of the ordinary business of solicitors. The
client had been invited by the firm to deal with their managing clerk. It was
irrelevant that the agent acted with a dishonest purpose for his own ends. His act
was of the class or kind of acts which fall within the ordinary business of
solicitors.
Vicarious Liability
Generally, a person is liable for his own wrongful acts and one does not incur any
liability for the acts done by others. In certain cases, however, vicarious liability,
that is the liability of one person for the act of another person, may arise. In
order that the liability of A for the act done by B can arise, it is necessary that
there should be certain kind of relationship between A and B, and the wrongful
act should be, in certain way, connected with that relationship.
The common examples of such a liability are:
(1) Liability of the principal for the tort of his agent;
(2) Liability of partners of each others tort;
(3) Liability of the master for the tort of his servant.
So Vicarious Liability deals with cases where one person is liable for the acts of
others. In the field of Torts it is considered to be an exception to the general rule
that a person is liable for his own acts only. It is based on the principle of qui facit
per se per alium facit per se, which means, He who does an act through another
is deemed in law to do it himself. So in a case of vicarious liability both the
person at whose behest the act is done as well as the person who does the act
are liable. Thus, Employers are vicariously liable for the torts of their employees
that are committed during the course of employment.
Reasons for vicarious liability
Several reasons have been advanced as a justification for the imposition of
vicarious liability:
(1) The master has the deepest pockets. The wealth of a defendant, or the
fact that he has access to resources via insurance, has in some cases had
an unconscious influence on the development of legal principles.
(2) Vicarious liability encourages accident prevention by giving an employer a
financial interest in encouraging his employees to take care for the safety
of others.
(3) As the employer makes a profit from the activities of his employees, he
should also bear any losses that those activities cause.
In the words of Lord Chelmsford: It has long been established by law that a
master is liable to third persons for any injury or damage done through the
negligence or unskilfulness of a servant acting in his masters employ. The
reason of this is, that every act which is done by servant in the course of his duty
is regarded as done by his masters order, and, consequently it is the same as if

it were masters own act.

Constituents Of Vicarious Liability
So the constituents of vicarious liability are:
(1) There must be a relationship of a certain kind.
(2) The wrongful act must be related to the relationship in a certain way.
(3) The wrong has been done within the course of employment.