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Colonial Cases

China Navigation Co. v. Francis, 1877


China Navigation Co. v. Francis

Supreme Court for China and Japan
Goodwin A.C.J., 15 February 1877
Source: The North China Herald, 22 February 1877




Shanghai, Feb. 15th.

Before C. W. GOODWIN, Esq., Acting Chief Judge.


   Me. WAINEWRIGHT represented the [plaintiffs.

   Mr. HANNEN appeared for the defendant.

   In this case, His LORDSHIP delivered the following


   In this case two several sums are claimed by the plaintiffs in two different characters, the larger one in the capacity of a private firm, the smaller as general agents for the China Navigation Company.  The case in which the larger sum is involved must be considered first.  With regard to this sum the defendant may be considered in the position of a bailee who has received goods to manage or do something with - either the 5th or 56th class of bailee in Lord Holt's celebrated division of the several kinds of bailment.  This was the view taken by counsel on both sides.  Only it is contended for the defendant that he was a gratuitous bailee (the 6th class), while it is admitted in the statement of the case that he was indirectly benefited by the employment of the plaintiffs'' money in the way therein described.  But on the whole I do not see that it matters whether he be considered to have acted gratuitously or not, so far as the degree of care which he was bound to exercise is concerned.

   With regard to a bailee for reward (the 5th class), Lord Holt lays it down that though a bailee or factor is to have a reward for his management, yet he is only to do the best he can, and if he be robbed it is a good account.  While with regard to the purely gratuitous bailee who has undertaken to manage goods (6th class), it is held that the owners entrusting him with the goods is a sufficient consideration to oblige him to careful management.  In either case it appears that what is called ordinary diligence is required, and nothing more.  Supposing then that the moneys lost in this case had been abstracted by a thief (other than the defendant's own servant) in the absence of proof or want of ordinary diligence in keeping them, the defendant could not, I think, be held answerable.

   But the case being that the defendant's own servant is the thief, the real question upon which the decision must turn, is that of the liability of a master for the actions of his servant.  The principle is very broadly laid down by textwriters that the master is ordinarily liable to answer in a civil suit for the frauds and negligences, the tortuous or wrongful acts of his servant, if these acts are done in the course of his employment in his master's service.  And this, says Judge Story, is founded upon public policy and convenience, for in no other way could there be any safety to third persons in their dealings either directly with the principal or indirectly with him through the instrumentality of agents.  In every such case the principal holds out his agent as competent and fit to be trusted, and thereby in effect he warrants his fidelity and good conduct in all matters within the scope of his agency.  But the generality of the principle is greatly diminished by the interpretation out upon the words "the scope of course of his agency."  For, to quote again the words of Story,

Although the principal is thus liable for the torts or negligence of his agent, yet we are to understand the doctrine with its just limitations, that the tort or negligence occurs in the course of the agency.  For the principal is not liable for the tort or negligence of his agent in any matters beyond the scope of the agency, unless he has expressly authorised them to be done, or he has subsequently adopted them for his own use or benefit.  Hence it is that the principal is never liable for the unauthorized, the wilful, or the malicious act or trespass of his agent."

   The leading case quoted on this subject is that of "McManus v. Cricket," where the master was held liable in an action of trespass for the wilful act of his servant in driving his master's chariot against the plaintiff's chaise, the master not being present, and not having in any manner directed pr assented to the act of his servant.  The result of the several cases which are grounded on this decision seems to be that a master is not answerable for the trespass, much less the felonious act of his servant, even when committed in a certain sense in the course of his employment, or while in other respects fulfilling the ordinary functions of his employment, provided the master do not authorize the act of wrong-doing.  In the case of "Sharrod v. London & North-Western Railway Co., " (which was not quoted, I believe in the argument), where some sheep had been run over and killed by an express train, drawn by an engine driven by a servant of the company who had directions to drive at a certain  rate per hour, - and it was held that the Company were not liable to an action of trespass, although the injury was caused by the direct act of their servant, as they did not order him to drive over the sheep, nor was his doing so the necessary or probable consequence of executing the orders of the Company.  I giving judgment, Lord Wensleydale remarks -

"Our opinion is that in all cases where a master gives the direction and control over a carriage, or an animal, or chattel, to another rational agent, the master is only responsible in an action in the case for want of skill or care of an agent - no more;"

and further,

"this is the simple case of an act done by the servant in the course of his employment, not specifically ordered by the master, and though the injury by such an ac t be direct so far as relates to the servant, we have recently held that a master would not be responsible in trespass."

   In accordance with the principle here stated are the cases Foster v. Essex Bank (American), Grant v. Norway and Coleman v. Riches, where employers were held not liable for fraudulent or felonious acts of their servants, although these acts arose out of the employments in which they were engaged and were rendered possible by the fact of their being engaged in such employments.  The cases of Finucane v. Small and Giblin v. MacMullen assume the principle that a master is not liable for the direct fraud of his servant unless negligence be shown.

   I think therefore that the question in the present case is reduced to this - Whether there was such negligence in the defendant's procedure as will render him liable for the fraudulent act of his servant, which though it was rendered possible by the employment in which the servant was placed, and it might be said in some sense to be done in the course of his employment, was certainly beyond the scope of his employment, and in no way authorized by the defendant.

   Now the case as stated says nothing of negligence, nor does it in my opinion afford ground for the inference that less than ordinary care was used.  It appears that no suspicion whatever had attacked to Shaw during the three years that he had managed the business of Francis & Co.  He had been trusted with and dealt faithfully with very large sums of the plaintiffs' money.  It is not easy to imagine how a fraud of the kind which he ultimately practised could have been guarded against by any system of checks, and defendant seems to have taken not less care of the plaintiffs'' property than he did of his own in Shaw's hands.  It was requisite from the nature of the business that Shaw should have the actual control of the money, and I believe it is admitted that the plain tiffs were fully cognizant of this.  Under these circumstances I can see no reason to infer that the defendant fell short of that ordinary diligence which was incumbent upon him, in dealing with the plaintiffs'' property; and I am led to decide that the defendant is not liable to the plaintiffs in the sum of Tls. 6,073.30 claimed by them.

   The smaller claim of Tls. 57.18, made by the plaintiffs as general agents of the China Navigation Company, seems to me to stand upon very different grounds from the other.  It appears that in the course of their business as agents for the company, Messrs. R. Francis & C. had to make certain payments on account of brokerages to shippers, and they from time to time rendered accounts of their payments to the general agents and debited the company with them.  The Company was debited by Francis & Co. through the sub-agent Shaw with certain brokerages to the  to the amount of Tls. 57.18, alleged to have been paid to certain shippers on shipments made in 1875, but which in fact were never paid by Shaw.  Now I cannot see what ground Francis & Co. can have for refusing to rectify their accounts by striking out this debit, or in other words to repay the Tls. 57.18 they have improperly got from the plaintiffs.  They would otherwise, so far as appears on the face of the case, be taking advantage of the fraud perpetrated by their servant, and would be gainers by it.  The sub-agent Shaw may or may not have contrived to pocket the sum himself, but he at any rate neglected to pay it, and it is impossible to say that the plaintiffs can in their general account with Francis & Co. be debited with it. On this claim therefore I must give judgment for the plaintiffs.

   As the more important part of this decision is in favour of the defendant, and it is agreed that costs should abide the event, the costs should be paid by the plaintiffs.  Had the smaller sum alone been sued for, the plaintiffs even if successful would have had in such a case as the present no costs beyond costs of court.


The North China Herald, 10 January 1878


We understand that the decision in the case of the China Navigation Co. v. R. Francis, - which was tried here before the Supreme Court last February, and decided by Mr. Goodwin in favour of the defendant - has been reversed, upon appeal, by the Privy Council.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School