Court case[1912] AC 716

The respondents were a firm of solicitors. Their managing clerk, who conducted the firm's conveyancing business without supervision, was consulted by the appellant, Mrs Lloyd, a widow, who owned two cottages and money secured on a mortgage and wanted to realise them. The clerk advised her to sell the cottages and call in the mortgage money, and induced her to sign two documents which she believed were necessary for the sale but which were in fact a conveyance of the cottages and a transfer of the mortgage to the clerk himself. He then disposed of the property and the money for his own benefit. Mrs Lloyd sued the firm for the loss.

The House of Lords held the firm liable. Lord Macnaghten, with whom the other Lords agreed, held that the clerk was acting within the scope of his employment and the apparent authority with which the firm had clothed him: he was held out as the firm's representative in conveyancing matters, and the fraud was committed in the very course of that business. It was immaterial that the fraud was committed for the clerk's own benefit and not for the benefit of the firm; the earlier view, derived from a dictum in Barwick v. English Joint Stock Bank (1867), that a master is liable for his servant's fraud only when committed for the master's benefit, was rejected.