Adamson v Jarvis

Facts

• The plaintiff was an auctioneer.
• The defendant instructed him to sell certain cattle, representing himself as entitled to do so.
• The auctioneer sold the cattle in the ordinary course of his business.
• The cattle in fact belonged to a third party.
• The true owner sued the auctioneer for conversion and recovered damages.
• The auctioneer sued the defendant for indemnity in respect of those damages and his costs.

Issue

1. Whether an agent who innocently commits a wrong while acting on his principal's instructions may recover the resulting loss from the principal by way of indemnity.

Held

• The auctioneer was entitled to be indemnified. Best CJ held that where one person employs another to do an act which the employer appears to have a right to authorise, and that act turns out to be injurious to the rights of a third person, the person employed is entitled to an indemnity from his employer. The auctioneer had acted in good faith, without knowledge that the goods were not the defendant's, and had done exactly what he was asked to do.

Ratio Decidendi

Where a person requests another to act and that other acts honestly and in reliance on the request, the law implies a promise by the requesting party to indemnify him against the consequences. The agent's good faith is the condition of the indemnity; an agent who knows the act is wrongful cannot claim it.