Mr. Rew, a solicitor in partnership with Messrs. Hughes and Masterman, received 280 De Beers shares from Mr. Rhodes in August 1891, allegedly as collateral security for a loan.
Mr. Rew fraudulently misappropriated the shares.
Mr. Rhodes had previous dealings with the firm, indicating an ongoing client relationship.
ISSUE
Whether Messrs. Hughes and Masterman, as partners in the firm, are liable for the loss incurred by Mr. Rhodes due to Mr. Rew's fraudulent actions.
JUDGEMENT
The court found that Messrs. Hughes and Masterman were liable for the loss because Mr. Rhodes was justified in assuming that Mr. Rew had authority from the firm to receive the shares.
LEGAL ANALYSIS
The court held that previous transactions between Mr. Rhodes and the firm established a pattern where the firm acted on behalf of Mr. Rhodes in negotiating loans and handling securities.
The court distinguished the case from Cleather v. Twisden, where it was held that taking custody of bonds payable to bearer was beyond the ordinary scope of a solicitor's business, noting that the circumstances here were different.
It is argued that Mr. Rew did not hold the shares for the defendants Moules, nor did he have authority from them to do so.
The court finds no evidence of express authority from the Moules for Mr. Rew to receive and hold the shares on their behalf.
The court concludes that the Moules are not liable for the shares, and the firm, including Messrs. Hughes and Masterman, has not discharged itself from liability.
COMMENTARIES RATIO
It is not incumbent on the party seeking to charge the firm for the wrongful act of a partner to show that the particular act is within the usual course of dealing or practice of others carrying on a similar business; what is essential is that the act must be shown to have been done by a partner in the ordinary course of the business of the particular firm.