Adams v. Morgan & Co., Ltd.  1 K.B. 751, C.A
The plaintiff sold his business to the defendants by a written agreement on 22nd August 1919. Pursuant to the written agreement, the plaintiff was to maintain possession and management of the business until the completion of the sale. Further, the plaintiff was to carry on the business on behalf of and for the benefit of the defendant from 31st December 1918. Finally, the parties agreed the plaintiff shall be indemnified for his expenses accordingly. The plaintiff consequently carried out the business in his own account and was consequently liable to pay supertax more than what he would have paid if he had not carried out the business in his own name on behalf of the defendant. The plaintiff sought to be indemnified in respect of supertax.
At the trial court, it was held that the defendant ought to indemnify the plaintiff for his supertax payment. Defendant appealed.
Whether or not the defendant (herein appellant) is liable to indemnify the plaintiff in respect of the expense incurred in paying the supertax.
Arguments of the Appellant:
That the supertax is only imposed on individuals and not on companies and therefore the defendants must be treated as if no super tax had been imposed on them.
That the defendant is liable to indemnify the plaintiff in respect of the expense incurred in paying the supertax.
The court reasoned that the plaintiff could not carry out the business of the defendant without incurring the super tax. Since the plaintiff only incurred the super tax while following the defendant’s instructions, and pursuant to the written agreement that the plaintiff would be indemnified accordingly, the defendant was thus liable to indemnify the plaintiff for personal expenses he incurred whilst acting on behalf of the defendant in running the business.