1931 Present: Drieberg and Akbar JJ.

SENEVIRATNE v. SENEVIRATNE.

361-D. C. Colombo, 32,685.

Principal and agent-Agent's authority to bind principal by bond-Payment of debt due to agent-Conflict of interest.

An agent is not entitled, under the authority given to him by a power of attorney, to enter into a mortgage bond for the purpose of paying himself a debt due to him from the principal.

IN this action the plaintiff sued the defendant, alleging three causes of action. As a first cause of action it was stated that the defendant went to England' to prosecute his studies in 1919, having appointed plaintiff his attorney and that the defendant requested him to advance such sums of moneys which may be necessary for him. The plaintiff accordingly advanced to the defendant a sum of Rs. 14,393.94 till 1924. To liquidate this sum, the plaintiff as attorney of the defendant borrowed a sum of Rs. 15,000 from a Chettiar. The mortgagee put the bond in suit against the plaintiff and the defendant. At the trial the defendant pleaded that he was not bound on the bond. By agreement, judgment was entered against the plaintiff alone on the bond, and his right to sue the defendant on this liability reserved. The plaintiff pleaded as a first cause" of action that he was compelled to pay the creditor a sum of Rs. 20,316, which he claimed from the defendant. As a second

cause of action, that he was entitled to recover the said sum of Rs. 14,393.94. On the third cause of action, the plaintiff claimed a further sum of Rs. 2,723.95. The defendant traversed the averments in the first and second causes of action and counterclaimed a sum of Rs. 5,300 on the third cause of action. The learned District Judge held in favour of the plaintiff on the first and third causes of action.

H. V. Perera, for defendant, appellant.-An agent can only act in the interest and for the benefit of the principal and should not place himself in such a position that his duty and interest clash. This is an action by the agent for an indemnity. A right of indemnity arises only in respect of matters within the scope of the agent's authority and contracts which the agent enters into on behalf of, and for the benefit of, the principal: (Storey on Agency, § 341; Boustead on Agency, p. 134, Art 48; Bentley v. Craven 1[(1853) 18 Beav. 75.]; Westrop v. Solomon 2[19 L. J. C. P. 1.]).

Keuneman (with him Croos Dabrera) for plaintiff, respondent.-An indemnity could be claimed by the agent if the transaction to bind the principal with a third party was within the power of attorney.

The plaintiff had a right to mortgage both from the power of attorney and the actual relationship that existed between the plaintiff and defendant.

A creditor who is also the agent of the debtor can exercise all the vigilance that an ordinary creditor could exercise.

H. V. Perera, in reply.-The power of attorney did not entitle the plaintiff to mortgage defendant's property for the purpose of raising a loan in order to pay himself a debt due from the defendant. An agent has no right to substitute another creditor for himself on more onerous terms without the sanction of the principal.

The agent's authority is only to bring the principal into contractual relations with third parties (Anson on Contracts, pp. 385, 391).

An agent in his personal capacity cannot contract with the principal under cover of the power of attorney. Such a contract would be outside the contract of agency and would require the usual elements of an ordinary contract (Offer and Acceptance V., 1, 2; 1 Halsbury 147, 148; Tetley v. Shand 3[25 L. T. 658.]; Solomons v. Pender 4[(1865) L. J. Exchequer 95.]).

October 14, 1931. AKBAR J.-

The plaintiff and defendant are brothers. In his plaint the plaintiff alleged three causes of action. As the first cause of action he stated that the defendant went to England to prosecute his studies in the year 1919 having