WONG WAI HING AND ANOTHER v. HUI WEI LEE

CACV136/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. CACV 136 OF 2000

(ON APPEAL FROM HCA 2901 OF 1998)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from a judgment of Mr Justice Sakhrani given on 29 March 2000. In that judgment the judge dismissed the plaintiffs' claim against the defendant.

2. In the action the plaintiffs claimed an injunction to restrain the defendant whether acting by herself, her servants or agents from doing acts which might be summarised as constituting assault and intimidation. The plaintiffs also claimed damages and exemplary and, in the alternative, aggravated damages and consequential relief.

The facts

3. The 1st plaintiff is a Senior District Director of a well-known insurance company operating in Hong Kong. The 2nd plaintiff is his wife. She is a District Director also with the same company.

4. The defendant is a doctor practising in Hong Kong. She became a client of the 2nd plaintiff. At some stage, in late 1994 the defendant came to hear about the plaintiffs' investments in two Chinese restaurants in Canada. The plaintiffs had plans to open a third restaurant and the defendant expressed an interest in investing in that business. That was agreed. As a result the defendant contributed a total of C$150,000. It is unnecessary to say more of that investment other than the fact that for her investment of C$150,000, the defendant received 15 special shares in the company which was formed, which for convenience will be referred to as GYD, together with a promissory note for C$149,985 in respect of an interest free loan to that company for 5 years. The defendant has a number of complaints in respect of that investment. These are directed against the 1st plaintiff. It is said that the 1st plaintiff made a number of representations to induce the defendant to invest in GYD and that those representations were false. It is also said that after the defendant had complained, the 1st plaintiff agreed to purchase the defendant's investment at cost. There is no dispute that GYD has now been wound up. The defendant's complaints are now the subject of a separate action which will, no doubt, come on for trial in due course. For the purposes of this case, however, it is important to note that the judge found as a fact that the defendant felt that she had been cheated by the 1st plaintiff into making her investment and in not receiving shares with voting rights and access to monthly accounts.

Complaints by the defendant

5. The defendant first engaged solicitors to act on her behalf in respect of the investment in September 1996. They wrote to the 1st plaintiff alleging that fraudulent misrepresentations had been made to induce the defendant to make her investment. They also alleged that the 1st plaintiff had agreed to purchase back the defendant's shares and the promissory note by July 1996. Those allegations were denied by solicitors engaged by the 1st plaintiff.

The October 1996 events

6. A man named Chiu Chi Kwan became a patient of the defendant in August 1996. The defendant gave evidence that she had spoken to Mr Chiu about her investment in GYD and had told him that she had lost C$150,000. The defendant said that she had shown the 1st plaintiff's name card to Mr Chiu. Mr Chiu had told her that he would try to talk to the 1st plaintiff if he had the time and that the defendant had thanked him. The defendant said that she did not follow the matter up with Mr Chiu. That evidence was accepted by the judge.

7. It transpires that, as found by the judge, on 7 October 1996 two men, one of whom was Mr Chiu, went to the premises of the insurance company asking to see the 1st plaintiff. They did not see the 1st plaintiff because he was away. They did, however, see Miss Lau, who was the 1st plaintiff's secretary, and Mrs Connie Mo, who was the office manager. The judge accepted that the two men were impolite and rude and made threats that the police would come to the office and take away all the documents and computers and that the press would also come. More importantly, the two men said that some people would just disappear without any apparent reason, and as the judge said :

"This was also obviously intended to be conveyed to the 1st plaintiff. This was, in my view, calculated to extract from the 1st plaintiff the money said to be owing by him to the defendant under a threat that he might well disappear if he did not repay. Although neither the 1st nor the 2nd plaintiff gave evidence to the effect that they were frightened by this visit, I am satisfied that there was a reasonable apprehension of physical injury to the 1st plaintiff. This was, in my view, sufficient to constitute an assault on the 1st plaintiff. I am also satisfied that the tort of intimidation against the 1st plaintiff has been established."

8. The incident was the subject of a complaint by the plaintiffs' solicitors to the defendant's solicitors.

9. It should also be noted that the judge accepted that there were two telephone calls on 9 October 1996, which were made to the 2nd plaintiff in which the caller said he was looking for the 1st plaintiff. The judge accepted that the caller had said, in a fierce tone, that the 1st plaintiff had absconded and gone away very quickly. The judge accepted that this must have been worrying and unpleasant. But he held that they were not actionable wrongs as these did not constitute either assault or intimidation. Against that finding there has been no appeal.

10 and 11 October

10. For completeness it should also be recorded that on 10 October 1996, the defendant herself went to the premises of the insurance company and saw one of the Vice-Presidents of that company and allegedly made statements which were defamatory of the 1st plaintiff to that Vice-President. On the following day, the defendant telephoned the 2nd plaintiff and told her that the 1st plaintiff had sent two persons to her clinic to threaten her. She also told the 2nd plaintiff that the 1st plaintiff had defrauded her and that the whole world knew about it.

Engagement of Yue Hoi

11. After the autumn of 1996 nothing appears to have happened of significance until late 1997. The defendant's nurse, Li Yuk-ping, had worked with the defendant since 1994. The defendant had told Miss Li of her grievance at being cheated in the investment in GYD. Miss Li gave evidence that in late 1997 she had learnt from a patient that instructing a solicitor could be expensive. She had also heard that banks engaged debt collectors to collect debts and that it would be quicker and cheaper to employ a debt collector rather than a solicitor. It was her evidence, which the judge accepted, that she suggested to the defendant that she should use of the services of a debt collector. In this she corroborated the evidence of the defendant. Miss Li also confirmed that the defendant had seen an advertisement for a firm of debt collectors, Yue Hoi, in a newspaper. The defendant identified this as the Oriental Daily. Yue Hoi was contacted on the telephone and as a result Mr Kwong Ho-yin came to the defendant's clinic in early January 1998 and had a meeting with the defendant. During part of the time Miss Li was present. Miss Li recollected that Mr Kwong had guaranteed that only proper means would be used to collect the debt from the 1st plaintiff on behalf of the defendant.

12. It is important to note that the judge was, favourably impressed by Miss Li's evidence. He said :

"I was impressed with Li as a witness of truth. She was the one who suggested to the defendant that she should use a debt collection agency instead of a solicitor and the defendant accepted the suggestion. Li distinctly remembered that Kwong guaranteed the defendant that only proper means would be employed in collecting a debt."

13. Mr Kwong gave the defendant 2 documents : a letter of appointment and an agreement. They are in Chinese. Perhaps the most notable feature of these documents is the fact that they are headed Yue Hoi Financial Management Co. but do not have either an address or a telephone number thereon. The agreement is expressed to last for six months from 3 January 1998. By the agreement the defendant agreed to give Yue Hoi custody of the debt documents for that period and to authorise Yue Hoi to collect the debt for and on behalf of the defendant. There are two other clauses which should be referred to. Clause 3 when translated provides : "Party B agrees to collect the debt wholly by lawful means." and clause 9, as translated, provides : "In the course of Party B's debt collecting services, if any illegal means is used or if any criminal liabilities is incurred, Party A shall not be held responsible.".

The events of February 1998

14. Unfortunately, the way that Mr Kwong and his assistants went about their business does not reflect the undertaking which he gave the defendant.

15. On 9 February Mr Kwong and a Mr Chan Ming Fat went to the premises of the insurance company where the plaintiffs worked. Amongst other people, they spoke to the 2nd plaintiff. They were rude and impolite and used foul language. More importantly, however, they threatened to search the 1st plaintiff out at his home. The judge held that the threats by Mr Kwong and Mr Chan were obviously intended to be conveyed to the 1st plaintiff as well as to the 2nd plaintiff. He held that they would have caused a reasonable apprehension of physical violence. As such they amounted to an assault and an intimidation of both the 1st and 2nd plaintiffs.

13 February 1998

16. A few days later on 13 February 1998, Mr Kwong and Mr Chan returned to the insurance company's premises. They, again, asked to see the 1st plaintiff and, when told that he was not in Hong Kong, they asked to see the 2nd plaintiff. Mr Kwong had a pile of documents which he said was proof that the 1st plaintiff had done something wrong "outside his office". Mr Kwong threatened to send 15 young men to the office to cause a disturbance and that it would only cost $500 for bail money for each of them. Again the judge accepted the 2nd plaintiff's evidence in this regard and unhesitatingly came to the conclusion that what had occurred on 13 February 1998 constituted an assault on, as well as intimidation of, both the 1st and 2nd plaintiffs.

15 February 1998

17. The 2nd plaintiff was called back to the insurance company's premises on Sunday, 15 February 1998 because it had been discovered that somebody had sprayed the words "Wong Wai Hing repay money" in large Chinese characters in red paint. This was on the 17th floor lift lobby. Here the judge held that this was not an assault but it was an act of intimidation of the 1st plaintiff. He held that Mr Kwong and Mr Chan were responsible for the red paint.

20 February 1998

18. On this occasion there was no visit to the insurance company's premises. However, an unknown person, whom the judge said he was satisfied was either Mr Kwong or Mr Chan, telephoned Miss Lau, the 1st plaintiff's secretary and threatened to chop the 1st plaintiff, and if the 1st plaintiff did not repay the money to the defendant, the caller would go after the 1st and 2nd plaintiffs and would disfigure them. He threatened Miss Lau that he knew where both the plaintiffs and Miss Lau lived and that they should be careful when they went out in the street. This incident occurred two days after both Mr Kwong and Mr Chan had been arrested. Again the judge held that this incident constituted both an assault and an act of intimidation. On this occasion not only were the threats against both plaintiffs but also against Miss Lau.

Subsequent events

19. The writ in this action was issued on 26 February 1998 and the defendant gave an undertaking until trial or further order in terms that were contained in an order made by Sears J on 20 March 1998. For her part the defendant took proceedings against the 1st plaintiff in this action by High Court Action No. 3863 of 1998. The writ in that action was issued on 12 March 1998.

20. Mr Kwong and Mr Chan were subsequently released from their bail as the cases against them did not proceed when the prosecution offered no evidence.

21. Apart from the evidence that on 11 October two men had visited her clinic in Tai Po and had threatened her, the judge accepted the defendant's evidence. He rejected that part of her evidence relating to the visit to her clinic and said that he did not believe that the 1st plaintiff ever sent anyone to threaten the defendant or that he would resort to such tactics.

22. In making his findings, the judge found specifically :

"I believe the defendant and accept her evidence that she was concerned that Yue Hoi should collect the debt from the 1st plaintiff only by lawful means.

I accept that the defendant went through the letter of appointment and the clauses of the contract with Kwong and that she was assured by Kwong that only lawful means would be employed. On this matter, I also accept the evidence of Kwong."

Summary of the findings

23. The findings of the judge below are clear :

(1) The defendant had a genuine sense of grievance although in 1996 and 1998, and even still to this day, she does not have a legally established claim.

(2) The defendant only asked Mr Chiu to talk to the plaintiff. The acts which Mr Chiu committed on 7 October were outside the scope of his express authority and on the judge's finding were also not within the scope of any implied authority as they were not, in the judge's view, either necessary or incidental to the express authority which the defendant had given to Mr Chiu.

(3) The defendant's nurse Miss Li suggested the employment of a debt collector in late 1997.

(4) Debt collectors operated legally in Hong Kong; banks used them and Miss Li told the defendant as much.

(5) The defendant gave Mr Kwong specific instructions that only lawful means should be used to collect the C$150,000.

(6) The defendant was given an assurance by Mr Kwong that only proper and lawful means would be used.

24. In relation to point 4, there was no dispute as to the judge's findings. It might be said, however, that from time to time the appellants' submissions bordered upon the suggestion that debt collection was the preserve of triad elements and the like. It is noteworthy, though, that a few months after the judge gave judgment in this case, the Law Reform Commission of Hong Kong published a consultation paper by the Debt Collection Sub-Committee. This, too, reflected the judge's view that as such the employment of a debt collection agency was not the equivalent of employing wrongful means. At paragraph 1.6 of the Sub-Committee's report, it is said :

"The debt collection industry in Hong Kong comprises a wide spectrum of market operators, including large reputable international and local agencies, medium sized agencies, as well as some poorly managed and unscrupulous agencies which might have employed people with triad background."

The report goes on to say :

"The top end of the debt collection industry is run in a professional and ethical manner. These agencies usually have many years of experience and have a goodwill to protect. Strict policies are developed in matters of recruitment, training, supervision, and the handling of complaints. Stringent and detailed codes of practice for collection are also laid down for the collection staff, covering different aspects of debt collection including the manner in which telephone calls and personal visits should be conducted, the contents and signing authority of demand letters, the way in which payments made by debtors should be handled, and the obtaining and security of personal data."

25. It is true that the report suggests that possibly about 6 of the 30 active debt collection agencies were considered to be well-managed and sizeable with over 50 members of staff.

26. Implicit in the judge's findings is that he accepted that when the defendant sought and received assurances that there would be nothing illegal done, the defendant was acting honestly. Her evidence was that she was concerned on seeing reference in clause 9 of the agreement to criminal liabilities. It was that which caused her to question Mr Kwong. Her evidence was :

"... I made it so clear that no unlawful means should be employed, 'otherwise I would not need you to collect the debt for me.' And he said, 'Of course not, don't worry, we would not engage in anything unlawful.' At the time, when he spoke to me, he was rather gentleman-like, so I trusted him."

27. Again this aspect of the evidence appears to me to be important. The judge below was very much alive to this aspect of the evidence. The transcript shows that the judge was at this point very careful to make sure that the evidence was recorded accurately.

28. Moreover, our attention was drawn to a later passage at the end of the defendant's evidence when the judge himself asked questions of the defendant as to precisely what she understood Yue Hoi and Mr Kwong would do in order to collect the debt. No submission was made that the judge's conclusion that the defendant acted honestly could not be accepted.

29. On this aspect of the case, it must be remembered that the judge had the advantage of not only hearing the evidence but of seeing the witnesses. Undoubtedly, seeing the defendant give evidence must have been an important advantage which this court does not have. Equally, if not more so, seeing Mr Kwong in the witness box and the court being able to judge for itself such matters as whether Mr Kwong could give a gentleman-like appearance, such that his word that illegal means would not be used could be trusted, was another extremely important advantage which the judge had. Needless to say, his acceptance of Miss Li, the nurse, as a witness of truth is yet another factor which this court cannot view lightly.

30. When the judge came to his conclusion as to whether the defendant was liable in respect of the acts of assault and intimidation committed by Mr Kwong and Mr Chan, he said :

"But in this case, I am satisfied that the defendant's instructions to Kwong was that only lawful means should be used to collect CAD$150,000 with interest from the 1st plaintiff. I am also satisfied that she was given an assurance by Kwong that only proper and lawful means would be used. It was in those circumstances that she agreed to employ Yue Hoi. That being so, I cannot see how she can be liable for the wrongful and unlawful acts of Kwong and Chan Ming Fat.

...

In this case, the express authority of the agent was to collect the debt only by lawful means. The unlawful acts committed by Kwong and Chan Ming Fat were, in my judgment, outside the scope of the express authority. In my judgment, the unlawful acts were also not within the scope of the implied authority of the agent as they were, in my view, neither necessary nor incidental to the express authority.

On 7 October 1996 the acts of Chiu were also, in my judgment, outside the scope of the express authority. I am satisfied that the Defendant only agreed with him that he should talk to the 1st Plaintiff on the Defendant's behalf. In my judgment, Chiu's unlawful acts were also not within the scope of the implied authority as they were also, in my view, neither necessary nor incidental to the express authority."

Was the defendant liable for the acts of assault and intimidation?

31. The judge's findings of fact, except in one minor aspect, were not challenged on this appeal. The argument on the appeal turned on a question of law. The appellant's case on this appeal, when shorn of its embellishments, can be stated quite simply, that the various persons involved, namely, Mr Kwong, Mr Chan and Mr Chiu were acting as agents for the defendant to collect what the defendant considered was a debt due to her. The tortious acts of assault and intimidation were committed by those persons when they were acting as the defendant's agents and in the course of their employment. The tortious acts which were committed were done within the apparent authority of the various debt collectors. The defendant could not escape liability simply because there were private instructions only to act lawfully. Whatever arguments were put to the judge below, certainly the relevant authorities were not cited to him.

32. Liability for torts committed by others can arise in three situations. The first is where there is a relationship of master and servant. The second is in relation to an employer's liability, in certain circumstances, for torts committed by an independent contractor. Finally, there is the question which is paramount in this case as to whether a principal is liable for the torts committed by an agent.

Master and servant

33. Where the relationship of a master and servant (or employer and employee) exists, the master is liable for torts committed by the servant in the course of the employment. The nature of the tort is usually immaterial. In this case the judge clearly did not find that any of those who committed acts of assault or intimidation were servants or employees of the defendant. There was no appeal in that respect.

Independent contractors

34. The general rule is that an employer is not liable for the torts committed by an independent contractor who has been employed to do work on behalf of the employer. There are notable exceptions to this general rule. These include cases where there are non-delegable duties or statutory duties. Liability will also exist in relation to dangerous operations in the vicinity of a highway and also in respect of acts which are considered to be extra hazardous. None of these or any of the other recognised exceptions to the general rule of non-liability in respect of torts committed by an independent contractor are relevant in this case.

Vicarious liability for torts committed by agents

35. Atiyah in his work Vicarious Liability in the Law of Torts, 1967, said at page 99 :

"There is no more settled doctrine in the law of tort than that a master is liable for the torts of a servant committed in the course of his employment, but there is no more controverted proposition than that a principal is generally liable for the torts of an agent committed within the scope of his authority."

36. In an analysis of other textbook writers of the day and the authorities which were available as of that date, he discerned 3 different main theories in relation to whether a principal is liable for the torts of an agent.

37. First, there are those who assert that the law recognises a general principle of vicarious liability for the torts of an agent. Then there are those, comprising the majority of English writers who deny the relevance of the category of agents altogether. The third main theory is that, while there is no general principle of liability for agents there are certain exceptional cases, in particular those where one who delegates to another the function of representing him in the course of a transaction of a consensual, but not necessarily contractual, nature is liable for torts committed.

38. The conclusion which was drawn at page 110 of the work was that :

"Evidently the question is an exceedingly difficult one and no satisfactory solution has been arrived at in any Common Law jurisdiction. It seems, however, very hard either to explain or justify a general principle of liability for agents in the face of the clear and universally accepted general principle of no-liability for independent contractors. The law seems to have managed perfectly well so far without imposing any general liability of agents and it is difficult to believe that the practical advantage of imposing such liability would outweigh the difficulties which would inevitably follow from doing so."

39. From that it may be derived that it was Atiyah's conclusion that there was no general liability on the part of a principal for torts committed by an agent.

40. The root of liability for torts committed by others, of course, stems from Justinian's well-known maxim "Nam qui facit per alium, facit per se." This properly translated means "It is certain that he who acts through somebody else, acts himself." Although Blackstone did not refer to agency as such, reference was made in Commentaries 1 page 429 to the application of this maxim in relation to servants.

41. Indeed, many of the cases, and in particular the older cases, referred to a servant as an agent. A consideration of the cases, however, shows liability being imposed upon an agent who is not a servant only in special circumstances. As Dixon J said in Colonial Mutual Life Assurance Society Limited v. The Producers and Citizens Co-operative Assurance Company of Australia Limited (193) 46 C.L.R. 41 at 48 :

"In most cases in which a tort is committed in the course of the performance of work for the benefit of another person, he cannot be vicariously responsible if the actual tortfeasor is not his servant and he has not directly authorized the doing of the act which amounts to a tort. The work, although done at his request and for his benefit, is considered as the independent function of the person who undertakes it, and not as something which the person obtaining the benefit does by his representative standing in his place and, therefore, identified with him for the purpose of liability arising in the course of its performance."

42. An extensive review of the authorities and of the textbooks has led me to the conclusion that whilst there is no general principle of liability for agency that is because the term agent can be used to cover a variety of different situations. To a large extent each case must be considered separately to determine whether the agent is truly acting in an independent way such that his actions as a contractor might be truly viewed as independent of the principal, or whether his actions are so intimately representative of the principal that the principal cannot be divorced from them. In the latter case I consider that the law imposes liability on a principal for torts committed by an agent.

Vehicle drivers

43. A convenient starting point in the analysis of the liability of an agent might be that in relation to vehicles driven by non-servants.

44. It is a well-established basis of liability falling upon an owner of a vehicle if the driver is his agent. This is sometimes regarded as being a special situation. In the classic case of Ormrod v. Crosville Motor Services Limited [1953] 2 All. E. R. 753, Denning, L.J. said that if the vehicle was being used wholly or partly on the owner's business or for the owner's purposes, the owner is liable for any negligence on the part of the driver. The only escape for the owner of the vehicle is either to lend it or hire it to a third person to be used for purposes in which the owner has no interest or concern.

45. By parity of reasoning in the case of Thelma (Owners) v. University College School [1953] 2 Lloyd's Rep. 613, it was held in the Mayor's and City of London Court, that the governors of a school were liable for negligence of a cox, who was 16 years old, of an eight which rammed an umpire's launch prior to a race.

46. It is interesting however to observe that early cases, for example, Moreton v. Hardern (1825) 4B & C 223 might lead to the impression that mere ownership of a vehicle would render the owner liable as a principal. One cannot exclude the thought that, in more recent times, courts have been content to uphold arguments that agency existed, in the contemplation that claims might be met by insurers.

47. There are other instances where principals will be liable for acts committed by an agent, in particular those arising out of the ownership of land and in some instances the acts of a solicitor acting on behalf of a client. So, too, a landlord may be liable for distress levied by a bailiff or a broker particularly if he authorises any illegality.

48. In New Zealand, Richmond J made reference to what he termed the established law that certain types of ad hoc "agency" carried with it a similar vicarious responsibility on the part of a principal. See Credit Services Investments Limited v. Evans [1974] 2 NZLR 683 at 693 line 43.

49. There are cases in which it would appear that liability for physical torts committed by an agent would appear to be contemplated. One such case is Dyer v. Munday [1895] 1 Q.B. 742. In that case the defendant carried on the business of a furniture dealer selling furniture on hire purchase. His manager discovered that the person to whom a bedstead had been hired had fallen behind in his payments. As a result the manager went to premises where the bedstead was. He pushed his way in and proceeded to remove the bedstead. In doing so he assaulted the wife of the landlord. He was convicted of assault. The main defence appeared to be based upon an Act of Parliament which relieved a person from further civil liability if he had been fined or sentenced to imprisonment. Lord Esher M.R. went on to say, however, at page 746 that :

"The liability of the master does not rest merely on the question of authority, because the authority given is generally to do the master's business rightly; but the law says that if, in course of carrying out his employment, the servant commits an excess beyond the scope of his authority, the master is liable."

On this basis the Court of Appeal held that there was evidence to go before the jury upon which the employer could be held liable. This, however, was clearly a case of master and servant and the fact that the manager was also acting as agent does not provide a ready answer to the present problem. The general rule is that the master is answerable for every wrong of a servant, which is committed in the course of his service and for the master's benefit even though there is no express command : see Lord Macnaughten in Lloyd v. Grace Smith [1912] AC 716.

Torts connected with fraud

50. The special treatment of torts relating to fraud and those relating to the use of vehicles is recognised by Lord Wilberforce in Kooragang Limited v. Richardson & Wrench [1982] AC 462, particularly in the passages at page 472 to 473. That case involved the potential liability of the defendant for acts committed by a servant when acting entirely on his own account after he had been expressly instructed not to perform the work by his employer.

The Navarro case

51. Perhaps the broadest statement which would indicate a more general liability on the part of principals for torts committed by an agent is to be found in the case of Navarro v. Moregrand Limited [1951] 2 TLR 674. In that case, an estate agent had illegally asked for a premium when renting a flat. Somervell L.J. held, that the agent was acting within his ostensible authority to conduct the full business of letting the particular property. In doing so he had made the request.

52. At page 679 the reasoning of the judge was that the tenant was entitled to treat the demand by the agent as a demand by the landlord. That was so because the landlord had put the agent in a position where any person dealing with him would understand that the agent was demanding the premium on behalf of the landlord. It should be noted however that the claim was properly one in quasi contract rather than one in tort. If it had any similarity to a claim in tort it would be a claim similar to a claim in fraud.

53. At page 680 Denning L.J. said :

"But the judge inferred from those cases the converse proposition - namely, that if a servant or agent is not acting within his actual or ostensible authority, then he is not acting in the course of his employment. I do not think that that is correct : it is a confusion between the responsibility of a principal in contract and his responsibility in tort. He is only responsible in contract for things done within the actual or ostensible authority of the agent; but he is responsible in tort for all wrongs done by the servant or agent in the course of his employment, whether within his actual or ostensible authority or not. The presence of actual or ostensible authority is decisive to show that his conduct is within the course of his employment, but the absence of it is not decisive the other way. There are many cases in the books where a master has been held civilly responsible for his servant's wrongs, such as assault, false imprisonment, negligence, and so forth, when he has no actual or ostensible authority in that behalf."

54. The judge then cited the case of Dyer v. Munday which, as has already been noted, is a case involving master and servant. He also cited the judgment of Blackburn J in Williams v. Jones (1865) 3 H. and C. 602 at page 609. That, too, was a case of a master and servant and so, too, was the case in the House of Lords to which Denning LJ referred Century Insurance Company v. Northern Ireland Road Transport Board [1942] AC 509 at 519.

55. This passage was the subject of unusual criticism by Atiyah at page 173. He said :

"If DENNING L.J., was simply concerned to stress that it is not necessary to show any authority of any kind, whether actual or ostensible, for the specific act of the servant which amounts to a tort, then no objection can be taken to this passage, except that on this view it is simply unhelpful. If, on the other hand, the learned Lord Justice meant that a tort can be within the course of the servant's employment even though it is committed in the course of an unauthorised act, then it is, with respect, wholly unacceptable, and contrary to a multitude of authorities."

56. It is noteworthy here that even Atiyah is reading this passage as relating to servants. Whereas a servant is naturally an agent of his master when performing acts within the course of his duties, clearly an agent cannot always be equated with a servant because by very definition the degree of control which a master exercises over a servant is lacking when it comes to an agent over whom a principal does not have the same control as a master. Insofar as Denning L.J. was referring in general terms to liability in respect of such acts as physical assault and false imprisonment, in my view, he must have been referring to cases involving servants. No case has been drawn to our attention in which a principal, in respect of whom a relationship of master and servant was not present, was held liable for such torts as physical assault or false imprisonment. Cases which are cited as authorities for the responsibility of a principal for such torts invariably relate to cases of master and servant. See, for example, the cases in footnote 3 in para 163 in Halsbury's Laws of England 1(2) under the heading of "Tort Liability" in the section headed "Agency". Each one of the cases under the reference "assault" and "false imprisonment" relate to masters and servants.

57. Indeed, not only did Blackburn J at page 609 of the report of Williams v. Jones specifically make clear that he was dealing with the liability of a master for the negligence of his servant in setting fire to a shed by dropping a shaving which he had used to light his pipe, but he went on, at page 610, to stress one of the features that were important in respect of the relationship of master and servant was the fact that the servant was bound to receive and obey orders from the master. Blackburn J went on to say that the master, however, was not liable for negligence or tort of the servant, which is not in the course of the employment, for such negligence or tort cannot be considered as in any way the act of the master.

58. Even in relation to servants, Lord Wilberforce in the Kooragang case saw there were limitations as to the liability of the master. At page 473C he said :

"Emphasising, once again, that there is no question in this case of any 'holding out' of Rathborne by the defendants (if there were, the case would be wholly different), the plaintiff's argument involves the proposition that so long as a servant is doing the acts of the same kind as those which it was within his authority to do, the master is liable, and that he is not entitled to show that in fact the servant had no authority to do them. This is an extreme proposition and carries the principle of vicarious liability further than it has been carried hitherto. It is necessary, first, to consider whether it is supported by authority."

59. The judge came to the conclusion that since the servant was carrying out acts without any authority and not on behalf of his master but in his own interest without any connection with his master's business, it would be to take matters too far to make the master liable.

Transactions of a consensual nature

60. There appears to be a category of cases, referred to by Atiyah as the third theory, where vicarious liability is imposed on a principal who is not in a master and servant relationship but where the agent is acting in a representative capacity. These include those cases where an agent enters contracts on behalf of his principal : the agent can render that principal liable for misrepresentations made within the scope of his authority. There are, of course, as alluded to above, a number of examples where the principal has been held liable for the fraud of the agent.

61. The application of principles similar to that which renders a principal liable for the fraud of his agent in negotiating a contract led in the Colonial Mutual Life Assurance case to the conclusion that the principal was liable for defamation committed by the agent in the course of negotiating contracts of insurance. The case in question involved an agent who had defamed a rival company in the course of seeking business. Dixon J in a passage following that quoted above said :

"It may be, and probably is, outside his (the agent) province to go beyond soliciting and obtaining proposals and receiving premiums; but I think that in performing these services for the Company, he does not act independently, but as a representative of the Company, which accordingly must be considered as itself conducting the negotiation in his person.

...

If the view be right which I have already expressed, that the 'agent' represented the Company in soliciting proposals so that he was acting in the right of the Company with its authority, it follows that the Company in confiding to his judgment, within the limits of relevance and of reasonableness, the choice of inducements and arguments, authorized him on its behalf to address to prospective proponents such observations as appeared to him appropriate. The undertaking contained in his contract not to disparage other institutions is not a limitation of his authority but a promise as to the manner of its exercise. In these circumstances, I do not think it is any extension of principle to hold the Company liable for the slanders which he thought proper to include in his apparatus of persuasion."

Textbooks

62. Mention should be made of the American Restatement. In Agency, 2d Volume 1, the clear distinction is drawn between physical acts of agents where no liability is incurred by the principal and non-physical acts such as deceit and defamation even if physical harm ensues.

63. Para. 250 reads :

"Non-liability for Physical Harm by Non-Servant Agents

A principal is not liable for physical harm caused by the negligent physical conduct of a non-servant agent during the performance of the principal's business, if he neither intended nor authorized the result nor the manner of performance, unless he was under a duty to have the act performed with due care."

64. This is followed by the succeeding proposition.

65. Para. 251 reads :

"Liability for Physical Harm Caused by a Servant or a Non-servant Agent

A principal is subject to liability for physical harm to the person or the tangible things of another caused by the negligence of a servant or a non-servant agent:

(a) in the performance of an act which the principal is under a duty to have performed with care; and

(b) in the making of a representation which the agent is authorized or apparently authorized to make or which is within the power of the agent to make for the principal."

66. Other works such as Clerk and Lindsell on Torts recognise that both employees and independent contractors can be classified as agents but absent the relationship of master and servant, the question of authority of the agent to commit the act is considered paramount. That authority can be actual or ostensible. It is considered in that work that a person will be liable for wrongs which he has authorised and he may be liable for wrongs which he ratifies, but with the exception of fraud cases no special rules of tort peculiar to principal and agent exist.

The present case

67. The findings of the judge clearly negative any express authority or direction on the part of the defendant to Kwong, Chan or Chiu to commit the acts assault or intimidation of which complaint is made. The judge's findings are that such acts were specifically forbidden and Kwong undertook not to do any such act.

68. No question of recklessness can, on the judge's findings, arise in this case. The judge's findings expressly exclude any overt or tacit recognition by the defendant that Kwong or Chiu would commit such acts. The plaintiff's case was not framed in negligence nor was that matter raised either in the Notice of Appeal or in the course of argument. In any event, again on the judge's findings, it would not be possible to say that it was reasonably foreseeable that Kwong, Chan or Chiu or anybody else would commit acts of assault or intimidation. The judge recognised that debt collectors might employ such tactics, but he also appreciated that some debt collectors acted responsibly.

69. I consider that unless the judge's findings of fact were disturbed it would not be possible to come to the conclusion that the defendant, in engaging Yue Hoi and in permitting Chiu to discuss the matter with the plaintiffs, contemplated that they would act in any way other than properly.

70. It is unnecessary to go into the issues that would arise if a cause of action in negligence had been raised. Hence, I do not propose to do so. There are a number of aspects of the evidence that would need to be gone into. It suffices to say that even if negligence had been a live issue I am by no means convinced that the plaintiffs would succeed on the footing that the defendant had been negligent in employing Yue Hoi.

71. The plaintiff's allegation of liability on the part of the defendant is put on the basis that the acts which Kwong, Chan and Chiu committed were done in the course of doing that which they were employed to do. They were engaged to collect the debt on behalf of the defendant and any acts of assault or intimidation which they committed were done in the course of acting on behalf of the defendant.

72. In this respect the argument follows the reasoning of Gavan Duffy C.J. and Starke J. in the Colonial Mutual case: see page 46. However, the reasoning in that joint judgment was based primarily on the fact of the control that the insurance company had over its agent. Clearly the joint judgment approached the case on the basis that the position of the defendant insurance company in relation to the agent was akin to a master and servant relationship. However, the judges then went on to say that the matter could be looked at on the basis of the proposition that :

"... one is liable for another's tortious act 'if he expressly directs him to do it or if he employs that other person as his agent and the act complained of is within the scope of the agent's authority.' It is not necessary that the particular act should have been authorized: it is enough that the agent should have been put in a position to do the class of acts complained of (Barwick v English Joint Stock Bank; Lloyd v Grace Smith & Co.)

73. It must be noted that both cases cited as the basis for that were cases of servants. Furthermore, the bank manager in the Barwick case gave a guarantee which was precisely what he was employed to do, as was observed in the judgment of Lord Wilberforce giving the advice of the Privy Council in the Kooragang case at page 473G.

74. The wider holding of Dixon, with whom Rich J. agreed, was based on the proposition that " ... the agent represented the company in soliciting proposals so that he was acting in right of the company with its authority, it follows that in confiding to his judgment, within limits of relevance and reasonableness, the choice of inducements and arguments, authorized him on its behalf to address prospective proponents such observations as appeared to him appropriate.". Evatt J. and McTiernan J. disagreed with that conclusion.

75. In my view, liability is incurred by the defendant in this case. In so saying I do not regard this as a departure from the findings of fact by the judge.

76. The defendant had asked Yue Hoi to represent her. She was not specific as to the methods that would be employed by Yue Hoi and its employees, including Mr Kwong. It can only be inferred that they would use such tactics as persuasion, embarrassment and even harassment. As the judge himself noted harassment is not illegal. Thus approaches to the plaintiffs, their employers and their staff could be said to be part of the expected armoury of the debt collector. In acting as a debt collector, Yue Hoi and its staff were empowered to collect the debt. Yue Hoi and its staff were representing the defendant when the plaintiffs were approached and spoken to. In my view, therefore, Mr Kwong and Mr Chan were doing that which the defendant had asked them to do, namely, to use colloquial terms, make such a nuisance of themselves that the 1st plaintiff would pay Yue Hoi, who would receive the money on behalf of the defendant. In a general sense that was the task that they were engaged to do.

77. The contrast in this case is with the position in relation to Mr Chiu. He had only volunteered to speak to the plaintiffs. There was no engagement of him to do so - in the sense that he was not asked to act on the defendant's behalf to collect any money or enter any negotiations. In respect of Mr Chiu's conduct I consider that no liability arises.

78. The only question which remains, therefore, is whether the instructions and directions which the defendant gave, that only legal means were to be used, were sufficient to take Mr Kwong's and Mr Chan's conduct outside the scope of that which Yue Hoi and its servants had been engaged to do. The judge found that the defendant believed that her instructions would be carried out. There is no ground to dispute that. But what seems to be critical is whether the directions given by the defendant, to use only legal means, limited the sphere of employment i.e. the class of acts which could be done or merely regulated the conduct within that sphere i.e. the mode in which those acts could be done. Of course, the Colonial Mutual decision is itself an example of just such a case where the instructions were held by the majority not to be a limitation of authority. But there are many others. In this respect I would merely refer to paragraphs 5-26 onwards in Clerk and Lindsell on Torts 14th Edition and the cases cited. In my view, the undertakings given to the defendant were undertakings as to the mode of carrying out the debt collection, they did not restrict the sphere of employment or the class of acts which could be done.

79. Save in respect of the spraying of red paint, the torts here of intimidation and assault were torts which committed by word of mouth. They were not physical torts in the sense of involving physical contact. In my view the spraying of red paint at the plaintiff's place of work cannot on any footing be considered to be part of the work undertaken by the debt collector unless it is considered that once a debt collector is engaged, any tactics employed by him fall within what would be contemplated as a normal course of conduct by a debt collector. I would categorise the spraying of red paint as one of physical violence. Obviously if a triad is engaged, such tactics may be contemplated. But this is not such a case. I would therefore exclude the acts of spraying paint from those for which the defendant is liable.

80. In so excluding the physical acts perpetrated by the debt collectors the result would also be in keeping with the law as expounded in the American Restatement.

81. So too, would the conclusion that the defendant is liable for Mr Kwong's and Mr Chan's other acts be in line with the basis of the decision in the Navarro case. Somervell L.J. at the foot of page 679 said that the right way of looking at the case was in the eyes of the tenant (i.e. the person with whom the agent was dealing). The conclusion, which the tenant would have come to, was that the landlord was demanding the particular payment through the agent. Likewise Denning L.J. at page 681 similarly took the view that the landlord had entrusted the agent with the "full business of letting the property", in other words the agent was acting as the landlord's representative.

Injunction

82. Since the plaintiffs have succeeded in their action, they would, in the normal way, be entitled to an injunction. It is clear that at the outset of the case an injunction was a highly important remedy for the plaintiffs. Hence, the application for an interlocutory injunction. I see no grounds for depriving the plaintiffs of this important remedy. This may well prove to be a case where the halting of the acts complained of may prove far more significant than any damages ultimately awarded. It is true that there has been no sign of a recurrence of the actions of the debt collectors and that the defendant has, as was made clear in the evidence, taken all steps open to her to stop the debt collectors taking any further action. But it must be remembered that she had given an undertaking until trial. In my view, the appropriate course in these circumstances would be to give the defendant an opportunity of renewing the undertaking in that form or a form acceptable to the Court. If that were done, it would, in my view, be unnecessary to impose an injunction. I would say that the form of the injunction contained in the Notice of Appeal seems to me be too wide in so far as it relates to restraining physical acts of molestation and assault. There is only justification in restraining conduct where the assault and intimidation is constituted by threats made orally.

Exemplary damages

83. Although it is not necessary to deal with this, I would point out that in view of Lord Devlin's speech in the House of Lords in Rookes v. Barnard [1964] AC 1129, neither the pleadings nor the evidence in this case would justify an award of exemplary damages. The only basis for such damages could be that the defendant expected to make a greater profit from the tort than the damages which would be payable. That was not pleaded or proved. Furthermore, it is difficult to fit such an argument into the law of vicarious liability. That is not to say that aggravated damages could not in similar circumstances be obtained.

Result

84. I would therefore allow the appeal. In my view the matter should be remitted to the Court of First Instance for damages to be assessed in respect of the acts of intimidation and assault case.

Hon Keith JA :

85. The judge found that the Defendant had instructed Yue Hoi to use only lawful means to collect the debt, and that Kwong had assured the Defendant that only lawful means would be used. I suspect that I might have been more sceptical than the judge of the Defendant's assertion that she had had no idea of the methods which Yue Hoi were going to employ to recover the debt. Reputable debt collectors would be unlikely to have their letters of appointment and terms of business printed on documents which do not show their business address or telephone or fax numbers, and one wonders what the Defendant thought Yue Hoi would actually be doing for its fee of 35% of what it managed to recover. What legitimate pressure did the Defendant really think Yue Hoi could bring to bear on the Plaintiffs to settle the debt when her solicitors' attempts to recover the debt had already proved unsuccessful?

86. The fact of the matter is that it would have been perfectly open to the judge to conclude that the references in the agreement to

(a) Yue Hoi's obligation to collect the debt by lawful means, and

(b) the Defendant not being responsible if unlawful means were used,

were there simply to enable the Defendant to assert, if need be, that she had only wanted the debt to be recovered by lawful means. In other words, the judge could legitimately have concluded that the Defendant had realised that these references in the agreement were not to be taken at face value, and that the reality was that Yue Hoi was to have a free hand to use such means as would prove the likeliest to result in the recovery of the debt in the long run. After all, it would not have been difficult for the judge to be sceptical of the Defendant's assertion that she had had no reason to doubt that only lawful means would be used when the judge's finding that no-one had been sent to the Defendant's clinic on 11 October 1996 amounted to a finding that the Defendant had made up the whole visit.

87. However, although the findings which the judge made were benevolent to the Defendant, I do not think that there is any room for an appellate court to interfere with them. I think that this was a case in which how the witnesses gave their evidence was as important to the witnesses' credibility as the plausibility or otherwise of their versions of the events. Like Rogers V-P, I am impressed by the point that having seen Kwong give evidence the judge had been able to judge for himself how Kwong would have appeared to the Defendant, and whether the Defendant thought that Kwong was a man whose word on the means which would be used to recover the debt could be trusted. With some reluctance, therefore, I have put my strong scepticism of the Defendant's evidence to one side, and in determining this appeal I have proceeded on the assumption that the facts were as the judge found them to be.

88. Thus, on the facts found by the judge, the critical question was whether the Defendant was liable for the torts of assault and intimidation committed by Kwong and Chan on 9, 13, 15 and 20 February 1998, even those she had instructed Yue Hoi to use only lawful means to recover the debt and Yue Hoi had undertaken not to use unlawful means to do so. For the reasons given by Le Pichon JA (whose judgment I have read in draft), I would have been strongly inclined to conclude that the Defendant should have been held to be liable for those torts on the basis that she was in breach of the duty which she owed to the Plaintiffs to exercise reasonable care in the selection and appointment of a debt-collecting agency to recover the debt on her behalf, had the Plaintiffs' case been pleaded and argued on that basis. However, for the reasons given by Le Pichon JA, I have also concluded that the Defendant should have been held liable for the torts of Kwong and Chan on the basis that they were acting within the scope of Yue Hoi's authority when they committed the torts. The Defendant's instructions to Kwong that only lawful means were to be used, and Yue Hoi's undertaking that those instructions would be complied with, did not amount to a limitation on Yue Hoi's authority to act on the Defendant's behalf in the recovery of the debt; they amounted only to a promise by Yue Hoi (a promise more honoured in the breach than in the observance) as to how the Defendant's instructions would be carried out. Accordingly, I agree that the appeal should be allowed, and that the orders which Le Pichon JA proposes should be made.

Hon Le Pichon JA :

Introduction

89. The issue of law which arises is whether a person who employs an agent with whom there is no 'master and servant' relationship is liable for the tortious acts committed by the agent in the course of his employment.

90. Pared to essentials, the facts are these. Without having a legally established claim but genuinely believing that she was entitled to be repaid C$150,000 by the 1st plaintiff, the defendant employed a debt collection agency to collect this "debt" on her behalf. She knew nothing about this agency which had advertised its services in a popular Chinese newspaper. The contract provided that only legal means would be used. Remuneration was purely to be on a contingency basis: the agency would receive 35% of whatever amount it could recover on the defendant's behalf. Otherwise there would be no fee. Acts of intimidation and assault were committed by the agent in the course of carrying out the very task it was employed to do. Is the defendant liable for the tortious acts of her agent?

91. Before turning to the law, it may be helpful to set out the facts a little more fully.

The facts

92. The defendant is a medical practitioner. The plaintiffs are senior executives of a large insurance company. They had investments in Canada and the defendant contributed C$150,000 towards one of the businesses in 1995. The parties fell out and the defendant believed that she had been misled by the 1st plaintiff.

93. Her nurse knew about her grievance and in late 1997 suggested to the defendant that employing a debt-collector rather than a solicitor to collect what was due from the plaintiffs would be cheaper and quicker as she had heard that banks also employed debt collectors. (In fact in September 1996, the defendant had retained a solicitor demanding repayment of the debt from the 1st plaintiff who disputed his liability. That appeared to have been the extent of the solicitor's involvement.) The defendant took up her nurse's suggestion. She read an advertisement for debt collection services in the Oriental Daily placed by Yue Hoi Financial Management Company ("Yue Hoi") whom she contacted on the telephone. A Mr Kwong Ho-yin of Yue Hoi met with the defendant at her clinic in early January. He was provided with the documents relating to the defendant's claim which were in English. Although he could not read them, he took them back to Yue Hoi to be photocopied and also caused a letter of appointment and an agreement to be prepared. Both documents which contained standard terms were typewritten in Chinese although the name of Yue Hoi also appears in English in the letterhead. What is striking about both documents is that they contained no address or contact number (whether telephone or fax) for Yue Hoi.

94. By the letter of appointment, the defendant appointed and authorized Yue Hoi to act for her to collect the debt of C$150,000, principal together with interest, from the 1st plaintiff. It provided that the collection of debt would be dealt with by lawful means, and if any illegal means was used, the defendant "shall have nothing to do with it". Finally, the letter provided that the defendant agreed to pay Yue Hoi investigation charges "after collection of the debt" in accordance with the percentage set out in the agreement.

95. The accompanying agreement was expressed to be valid for a period of 180 days. It contained nine clauses, the fourth of which, relating to the payment of an annual consultation fee, was deleted. Clause 2 authorized Yue Hoi to collect the debt for and on behalf of the defendant. Clause 3 provided that Yue Hoi "agrees to collect the debt wholly by lawful means". Clause 9 further provided that :

"In the course of [Yue Hoi's] debt collecting services, if any illegal means is used or if any criminal liabilities is incurred, [the defendant] shall not be held responsible."

Clause 5 provided that the period of investigation of the case would be 180 days, and after collection of the debt, Yue Hoi would receive 35% of the proceeds as investigation charges and the balance returned to the defendant. The other clauses are immaterial for present purposes. The defendant signed the agreement as "principal" and Kwong signed on behalf of Yue Hoi as "agent" as was the case with the letter of appointment. Kwong's evidence was that the purpose of Clause 9 was to protect the client, presumably, from liability for the acts of the agent.

96. The judge found that the defendant's instructions to Kwong were that only lawful means were to be used and Kwong gave an assurance to that effect.

97. During the first visit made on 9 February to the office of the plaintiffs, Kwong produced the letter of authority from the defendant as well as other documents said to evidence the debt to indicate that the debt was being collected on the defendant's behalf. However, in carrying out the assignment, Kwong and his assistants committed various acts that constituted intimidation and assault. The acts of intimidation and assault took place on 9, 13, 15 and 20 February 1998. These are summarized in the judgment of the Vice-President and I do not propose to repeat them here. Suffice to say that the acts of intimidation and assault involved the use of foul language, threats to search the 1st plaintiff out at his home, threats to send 15 young men to the plaintiffs' office to cause a disturbance, the spraying of red paint in the lift lobby outside the plaintiffs' office to the effect that the 1st plaintiff "repay money", menacing phone calls and threats of physical violence including threats to disfigure and to "chop up" the plaintiffs. The judge found that the acts though not directly made to the plaintiffs were intended to be conveyed to the plaintiffs and would have caused a reasonable apprehension of physical violence.

98. For completeness, I should mention that in October 1996 a patient of the defendant by the name of Chiu Chi Kwan heard about her grievance and volunteered to speak to the 1st plaintiff on the defendant's behalf. In fact, the judge found that Chiu visited the plaintiffs' office and uttered threats that constituted an assault and intimidation against the 1st plaintiff. The plaintiffs' solicitors complained about these incidents to the defendant at the time so the defendant cannot but have known about them even if it was after the event.

99. On those facts, the judge held that the defendant was not liable for the torts committed by Kwong and his colleague Chan (both of whom were employees of Yue Hoi) or by Chiu.

Vicarious liability

100. Whether the defendant is liable turns on the scope of vicarious liability. This needs to be considered under three relationships: (1) master and servant; (2) independent contractors and (3) agents. But as Lord Wilberforce has remarked, vicarious liability outside the master and servant relationship appears to rest on an ad hoc judgment that for one reason or another the principal ought to pay: see Morgans v. Launchbury [1973] AC 127 at 135.

Master and servant

101. There would be no question but that the defendant would be liable for the tortious acts of intimidation and assault if the relationship between the defendant and Yue Hoi had been one of 'master and servant'. What Yue Hoi was employed to do was to collect the debt and the tortious acts were committed in the course of its employment. Even an express prohibition of wrongful conduct would make no difference if it was a mode of performing what the employee was employed to do.

"[T]here are prohibitions which limit the sphere of employment, and prohibitions which only deal with conduct within the sphere of employment. A transgression of a prohibition of the latter class leaves the sphere of employment where it was, and consequently will not prevent recovery of compensation. A transgression of the former class carries with it the result that the man has gone outside the sphere."

See per Lord Dunedin in Plumb v. Cobden Flour Mills Ltd [1914] AC 62 at 67. Although that was a workmen's compensation case, the same principles are applicable.

102. In Limpus v. London General Omnibus Co. (1862) 1 H&C 526, notwithstanding express instructions not to race with, or obstruct other omnibuses, the driver of the omnibus obstructed the plaintiff's omnibus and caused a collision. The defendants were liable for the damage caused to the plaintiff's omnibus. This is to be contrasted with a case where the express prohibition relates to the sphere of employment rather than the mode of carrying it out. Thus, in Kooragang Investments Pty Ltd v. Richardson & Wrench Ltd [1982] AC 462, although the employee performed acts of precisely the character for which he was employed by the employer, i.e. in making valuations, the employer was not liable because the employee had been expressly prohibited from carrying out valuations for a particular group which was not then a client of the employer.

103. The rationale for fixing the employer with liability notwithstanding an express prohibition of wrongful conduct is obvious: otherwise, the employer would only have to issue specific instructions not to be negligent in order to escape liability for the employee's negligence and that would defeat the public policy requirement that the master be responsible for wrongs done by his servants in the course of their employment. Riddick v. Thames Board Mills [1977] 1 QB 881 at 894.

104. As the relationship in question was not one of master and servant, it is necessary to consider whether liability attaches to the other types of relationship.

Independent contractors

105. The defendant's case is that she cannot be liable because although Yue Hoi was her agent, it was not an employee but an independent contractor and the general rule is that an employer is not responsible for the wrongdoing of an independent contractor. Whilst as a general proposition, that is correct, an employer is nonetheless liable in the following situations: (i) where he has authorised the wrongful act; (ii) for his own negligence; and (iii) where his duty is "to provide that care is taken", i.e. "non-delegable". These are not exceptions to the general rule since liability is not properly vicarious, the employer's liability being primary rather than secondary. His liability arises from breach of his own duty. See Daniel v. Rickett, Cockerell & Co. Ltd [1938] 2 KB 322 at 325. In these cases, the contractor will also be liable to the injured party but as a practical matter, he is often without assets, hence the importance of the employer's liability in the context of recovery of damages. In ascertaining whether or not the employer is liable, the real question is whether the employer himself was in breach of some duty which he himself owed to the plaintiff. D&F Estates Ltd v. Church Commissioners for England [1989] AC 177 at 208H-209C per Lord Bridge and Salsbury v. Woodland [1971] QB 324 at 347 per Sachs L.J.

106. The judge found that the illegal acts were not authorised by the defendant. Had they been, she would have been liable as joint tortfeasor. The situation in (i) above therefore does not arise on the facts of this case.

107. I now turn to consider (ii) above. Here, the questions that have to be addressed are whether :

(a) the defendant owed the plaintiffs the duty to take reasonable care; and

(b) if so, whether she had discharged that duty.

108. To recap, the salient features of this case are as follows: the defendant believed that she was entitled to be repaid C$150,000 by the 1st plaintiff. In September 1996, she had engaged solicitors to seek repayment. That yielded no result as the 1st plaintiff disputed liability and the matter was not pursued. In October 1996, Chiu who was a patient of the defendant offered to speak to the 1st plaintiff about 'debt' and in so doing uttered threats which were the subject of a complaint by the plaintiffs. More than a year later, the defendant resorted to different means to secure repayment and employed a firm of debt collectors to do the job.

109. It must have been within the contemplation of the defendant that in order to perform the contractual obligation the debt collector would have to communicate with the 1st plaintiff and somehow 'persuade' the 1st plaintiff into making payment. Since the defendant's efforts via solicitors to seek repayment had been rebuffed and given the Chiu incident, no reasonable person could possibly have taken the view that any tangible result could be achieved without the exertion of pressure in some form or another. Insofar as the likelihood of Yue Hoi exerting pressure is concerned, the arrangement for Yue Hoi's remuneration becomes significant. Yue Hoi was a business. Remuneration was solely result-based. Yue Hoi therefore had a stake in the 'debt' and had every incentive to produce the desired result. If it did not, it would stand to receive no compensation for its efforts.

110. Whilst the use of debt collection agencies is not in itself illegal, debt-collection activities very often involve the use of illegitimate means and that has tended to overshadow legitimate operations. As stated in the recent Consultation Paper issued by the Debt Collection Sub-Committee of the Law Reform Commission (para. 1.1), "there is sometimes only a fine line between lawful and unlawful debt collection activities." The more outrageous incidents are often reported by the media. It is fair to say that it is notorious that the gamut of tactics frequently resorted to in order to produce results include some form of harassment, intimidation, assault and threats and the public perception is that many of the operators do resort to illegal means. There is also a tendency to associate the agencies with the more unsavoury aspects of the activities of the unscrupulous ones. This perception is borne out by the overview of the debt-collection industry in Hong Kong given in the consultation paper. The industry comprises a wide spectrum of market operators, ranging from large reputable international and local agencies through medium sized agencies to the poorly-managed and unscrupulous agencies but duly a handful fall with the first category. Thus, of the 30 active operators, it is thought that no more than 20% or six are generally considered well-managed and sizable.

111. In determining the existence of a notional duty of care, a threefold test has to be applied:

"... the elements foreseeability and proximity as well as consideration of fairness, justice and reasonableness are relevant to all cases whatever the nature of the harm sustained by the plaintiff."

See per Lord Steyn in Marc Rich & Co. v. Bishop Rock Marine Co. Ltd [1996] 1 AC 211 at 235 E.

112. In the present case, based on the matters outlined above, a formidable case in negligence could have been mounted by the plaintiffs against the defendant. As regards the notional duty of care, insofar as the engagement of Yue Hoi was concerned, given that the line that has to be trodden between legitimate and illegitimate means by debt collection agencies is "fine" at the best of times (so that overstepping it is always a possibility), the fact that the majority of such agencies in Hong Kong are poorly managed and unscrupulous, the notoriety of the illegal means the more unscrupulous of the agencies resort to coupled with the financial inducement to Yue Hoi to produce results, in my view, the threefold test of foreseeability of damage, proximity, and fairness could easily have been satisfied. But the same cannot be said in relation to Chiu: there was no evidence to suggest that he was a debt collector by profession; he merely volunteered to 'speak' to the 1st plaintiff on the defendant's behalf. In his case, the plaintiffs would have had difficulty is satisfying the threefold test.

113. Had the plaintiffs put their case in negligence and if (as would be my view), they could have established the notional duty in relation to Yue Hoi's engagement on the facts as found by the judge, the defendant would unquestionably have been in breach of that duty. I say this for the following reasons.

114. Where the duty is to take reasonable care, the standard is determined objectively. The subjective intent and belief of the defendant as found by the judge are irrelevant. How that duty is discharged depends on the facts of the particular case. If technical skill or knowledge is involved, the ordinary man will discharge his duty by entrusting its performance to an apparently competent contractor. See, for example, Stennett v. Hancock & Peters [1939] 2 All ER 578 where a lorry owner had entrusted the repair of the lorry to a competent repairer, and Salsbury v. Woodland [1971] QB 324 where a house owner had employed a competent tree surgeon to fell a hawthorn tree in his garden. In the context of the present case, the duty upon the defendant was to exercise reasonable care in selecting and appointing a debt collection agency to act on her behalf.

115. As noted above, the process of selection adopted by the defendant was none other than looking up an advertisement in a popular newspaper. She knew nothing about them. The fact that there was nothing more than the telephone number in the advertisement was not of itself significant. However, when it came to the letter of appointment and the agreement, the absence of an address, telephone and fax numbers was, putting it at its lowest, highly unusual. I cannot think that a reputable agency would be coy about publicizing its address and contact details. The absence of such details signalled the need for careful scrutiny. There is also the very significant fact that the contractor was going to be remunerated purely on a contingency basis : no recovery, no fee. Yet no enquiries were made of Kwong regarding the credentials of Yue Hoi, such as its size, its clientele, how long it had been established and its modus operandi. Instead, the defendant blindly accepted Kwong's assurances when, looked at objectively, no reasonable basis existed for accepting them at face value.

116. In view of the fact that negligence was never pleaded and the case was never argued on that basis, regrettably, it would not appear to be open to me now to find (which I would have been disposed to do), that the defendant owed the plaintiffs a duty of care which she failed to discharge rendering her liable to the plaintiffs for the tortious acts committed by Yue Hoi through Kwong and Chan but not those committed by Chiu.

Agents

117. Is there vicarious liability for the acts of agents? The answer is less than straightforward since there is considerable overlap between the category of 'agent' with those of 'servant' and 'independent contractor'. Where the agent is also a servant, liability may be explicable by reference to the 'master and servant' relationship rather than the 'principal and agent' relationship although it not necessarily so in every case. What can be said with some certainty is that there are situations where such a liability has arisen and the principal held liable for the wrongful acts of its agents.

(i) fraud

118. A principal is liable for the fraud of his agent acting within the scope of his authority. This is the Lloyd v. Grace, Smith & Co. [1912] AC 716 line of cases. There, the managing clerk of a firm of solicitors was held out as authorised to transact the plaintiff's business on behalf of the firm. The plaintiff was induced through the fraud of the managing clerk to transfer property to the managing clerk who then dishonestly disposed of the property for his own benefit. In ascertaining the scope of the agent's authority, Lord Macnaghten cited with approval the definition of it given by Willes J in Barwick v. English Joint Stock Bank (1867) LR 2 Ex 259 at 266:

"In all these cases it may be said, as it was said here, that the master had not authorized the act. It is true he has not authorized the particular act, but he has put the agent in his place to do that class of acts, and he must be answerable for the manner in which that agent has conducted himself in doing the business which it was the act of his master to place him in."

119. Although the underlying relationship may be one of master and servant, the test of liability is authority, actual or ostensible, rather than course of employment. This approach was reaffirmed by the House of Lords in Armagas Ltd. v. Mundogas S.A. [1986] 1 AC 717 at 781E - 782E.

(ii) vehicle owners

120. The second category relates to the liability of vehicle owners for the negligence of the driver of the vehicle. In Morgans v. Launchbury and Others [1973] AC 127 at 135, Lord Wilberforce rejected the suggestion that special principles applied to vehicles which warranted a wider and vaguer test of vicarious liability. He held that in order to fix liability on the owner, it had to be established that the driver was using the car for the owner's purposes, under delegation of a task or duty. Lord Wilberforce went on to explain the basis of liability in these terms:

"'agency' in contexts such as these is merely a concept, the meaning and purpose of which is to say 'is vicariously liable,' and that either expression reflects a judgment of value - respondeat superior is the law saying that the owner ought to pay. It is this imperative which the common law has endeavoured to work out through the cases. The owner ought to pay, it says, because he has authorised the act, or requested it, or because the actor is carrying out a task or duty delegated, or because he is in control of the actor's conduct."

(iii) the Colonial Mutual case

121. Colonial Mutual Life Assurance Society Ltd v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd [1931] 46 CLR 41 is a case where the appellant had engaged R as a canvasser and agent under an agreement. R was not an employee but an independent contractor. The agreement expressly prohibited the agent from using language or writing anything respecting any person or institution "which may have the effect of reflecting upon the character, integrity or conduct of such person or institution, or which may tend to bring the same into dispute or discredit." The agent in attempting to obtain business for the appellant made defamatory statements concerning the respondent which was another assurance company.

122. Gavan Duffy CJ and Starke J (citing Barwick and Lloyd v. Grace, Smith & Co.) held that a person :

"... is liable for another's tortious act 'if he expressly directs him to do it or if he employs that other person as his agent and the act complained of is within the scope of the agent's authority.' It is not necessary that the particular act should have been authorized : it is enough that the agent should have been put in a position to do the class of acts complained of ..."

They went on to hold that since the class of acts which R was employed to do necessarily involved the use of arguments and statements for the purpose of persuading the public to effect the policies with the appellant and in pursuing that purpose he was authorized to speak, and in fact spoke, with the voice of the appellant, the appellant was liable for the defamatory statements made by R in the course of his canvass, though contrary to its direction.

123. Dixon J (with whose judgment Rich J agreed,) also found against the appellant. Recognizing that normally an independent contractor carries out his work not as a representative but as a principal, he nevertheless held that:

"... when the function entrusted is that of representing the person who requests its performance in a transaction with others, so that the very service to be performed consists in standing in his place and assuming to act in his right and not in an independent capacity ... in performing these services for the [principal, the agent] does not act independently, but as a representative of the [principal], which accordingly must be considered as itself conducting the negotiation in his person."

In such a situation, the effect was that the appellant :

"... in confiding to his judgment, within the limits of relevance and of reasonableness, the choice of inducements and arguments, authorised him on its behalf to address to prospective proponents such observations as appeared to him appropriate. The undertaking contained in his contract not to disparage other institutions is not a limitation of his authority but a promise as to the manner of its exercise. In these circumstances, I do not think it is any extension of principle to hold the [appellant] liable for the slanders which [the agent] thought proper to include in his apparatus of persuasion.

The wrong committed arose from the mistaken or erroneous manner in which the actual authority committed to him was exercised when acting as a true agent representing his principal in dealing with third persons."

124. Colonial Mutual appears to found liability on the principal and agent relationship. That approach has the support of Lord Selborne in Houldsworth v. City of Glasgow Bank and Liquidators (1880) 5 App. Cas. 317 at 326 and cited with approval by Lord Macnaghten in Lloyd v. Grace, Smith & Co. (at 734):

"... the principle on which those cases were decided was a principle not of the law of torts, or of fraud or deceit, but of the law of agency. 'The decisions in all these cases proceeded,' he said, 'not on the ground of any imputation of vicarious fraud to the principal, but because, (as it was well put by Mr. Justice Willes in Barwick's Case) "with respect to the question whether a principal is answerable for the act of his agent in the course of his master's business, no sensible distinction can be drawn between the case of fraud and the case of any other wrong." ' "

Although in the Armagas case Lord Keith expressed the view (at 780B) that dishonest conduct was governed, in the field of vicarious liability, by a set of principles and a line of authority of peculiar application, the Colonial Mutual case was not one of the authorities cited to the court. In any event, since Armagas was a fraud case, Lord Keith did not need to consider the basis of vicarious liability in cases not involving dishonesty. So despite Armagas, the Colonial Mutual case remains an authority to be reckoned with.

125. The present case so far as Yue Hoi is concerned appears to be on all fours with Colonial Mutual. On each of the occasions when either assault or intimidation was committed by Kwong, his presence was referable and explicable only by reason of the contract between the defendant and Yue Hoi. He was doing precisely the job that Yue Hoi had undertaken to do, namely, to collect the debt from the 1st plaintiff. The tortious acts were committed in the course of the agent's employment. Like the express prohibition contained in the agreement appointing the agent in Colonial Mutual, the provisions in the agreement that no illegal means would be used went to the mode of performance only. An agent is acting in the course of his employment so long as "what was done can be fairly described as a wrongful mode of carrying out the mandate." See Credit Services Investments Ltd. v. Evans [1974] 2 NZLR 683 at 694. Put differently, the presence of the prohibition did not have the effect of relieving the employer/principal from liability if what was done was the very act that the agent had been engaged to do.

126. The principle of law that can be distilled from that case is that a principal may be liable for the torts of his agent where the agent was not acting in an independent capacity but in a representative one standing in the place of his principal and the very service to be performed consisted in standing in the principal's place. The liability is therefore personal rather than vicarious. The function entrusted is that of representing the person who requests its performance, not merely in a transaction with others but is an activity where others can be seen to be closely affected. That which gives rise to liability must be done for and on behalf of another, which is not the same as saying simply that it is for his benefit or at his request. See per Eveleigh J in Nottingham v. Aldridge [1971] 2 QB 739 at 752C.

127. As I see it, Colonial Mutual is not distinguishable. There is no discernible, much less compelling, reason why it should not be followed. Applying those principles, liability arises for the acts of Yue Hoi but not for those of Chiu.

Conclusion

128. It follows that, in my judgment, the defendant is liable to the plaintiffs for the torts committed by Yue Hoi through Kwong and Chan under the Colonial Mutual principles. Accordingly, I would allow the appeal and set aside the judgment below. So far as damages are concerned, these need to be assessed and I would send the matter back to the trial judge for assessment. So far as injunctive relief is concerned, unless the defendant were to continue her undertaking in the terms contained in the order made on 20 March 1998, I would grant the injunction sought. I would also make an order nisi that costs be to the plaintiffs.

Hon Rogers VP :

129. The appeal will therefore be allowed. There will be an order nisi that the costs here and below in favour of the plaintiffs. Should the parties be unable to agree the form of order the matter will have to be restored to settle the order.