Title by Estoppel
Cases
King v. Walsh
[1932] I.R. 80
KENNEDY C.J. :
The claim in this action was for the return of a certain motor car, or for its value and damages for its detention. The action was tried by O’Byrne J. without a jury on the 6th February, 1931, when the learned Judge gave judgment for the defendant and dismissed the action with costs. The plaintiff has appealed against the order and judgment given for the defendant, and asks that judgment be entered for him or for a new trial.
The plaintiff, who carries on business under the well known trade name of “R. E. Grady,” deals in motor cars, and last year had for sale a second-hand Armstrong-Siddeley touring car of a recent model. The defendant, a member of the Bar, saw the car and was disposed to buy it. About the 20th of August last, the plaintiff allowed the defendant to take the car for a week’s trial. The defendant extended the trial to the 2nd September, when he returned the car. He explained the delay by illness, and no claim arises in this action on foot of detention upon that occasion. The defendant stated that he was satisfied by the trial and had decided to buy the car. The bargain was made on the 2nd September, when the price was fixed at £220, and an agreement was concluded for the purchase on the terms of:(1), the payment of a deposit of a sum of £100 on the 10th of September; (2), the payment of the balance of the price by six or twelve monthly instalments, as the defendant should decide; (3), the transaction to be carried out by means of a hire purchase agreement. The arrangement was confirmed by letter of the 2nd September, 1930, from the plaintiff to the defendant. On the same day (2nd September, 1930), the defendant signed a proposal form for carrying out the hire purchase agreement, and handed it to the plaintiff.
The proposal signed by the defendant was in the form of an application to a Guarantee Corporation to enter into an agreement on the following lines. The Corporation was to buy the car from the plaintiff at the agreed price of £220, and then to let it on hire to the defendant with an option to purchase by six monthly payments to be made by way of rental on hire.
The arrangement having been confirmed by the plaintiff by letter, and the defendant having signed the proposal form, the plaintiff immediately got the car into order, and on the 6th September the defendant went to the plaintiff’s place of business and, having promised to bring or send the deposit of £100 on the following Wednesday, the 10th September, was permitted by the plaintiff to take the car, in which, on the same day, he drove down to the County Kerry, where he stayed until Sunday, the 14th September, when he drove to Thurles and remained there for a week, and then returned to Dublin, where he arrived late on the evening of the 22nd September.
He failed to perform his promise to pay the deposit of £100 according to his agreement with the plaintiff.
On Saturday, the 13th September, the plaintiff (having ascertained the defendant’s address in Kerry) wrote him at that address a letter expressing surprise that he had not heard from the defendant with reference to the deposit
“at foot of your purchase,” which was to have been paid on the 10th September, and requesting that a cheque for the amount be sent him “without further delay.” This letter did not contain a request for the return of the car. The defendant stated in his evidence that this letter was posted on from Kerry, and he did not get it until his return to Dublin on the 22nd September. On the 15th September, the plaintiff not having received a reply to his letter of the 13th (though he could not have expected a reply on that day) instructed his solicitor, Mr. Lane Joynt, and Mr. Joynt wrote the letter of the 15th September and delivered it by hand at the defendant’s residence in Dublin. In that letter Mr. Joynt called on the defendant to return the car to the plaintiff by noon on the following day, the 16th September, or pay the £100 deposit, and to call at the same time and complete the hire purchase agreement, failing which a writ would be issued. Knowing that the defendant was in the country, the plaintiff and his solicitor must be taken to have known that the requirement of that letter could not be complied with. The defendant said he did not get this letter until his return to Dublin on the evening of the 22nd September, and the trial Judge so found as a fact and the finding has not been questioned.
The originating summons in the action was issued on the 18th September.
On the morning of the 23rd September, the defendant met the plaintiff in the street. The defendant, instead of an apologetic attitude for his default in respect of the deposit, appears to have taken up the attitude of the aggrieved party and complained of the action of the plaintiff in putting the matter in the hands of his solicitor and, without making any offer to pay the deposit or carry out his agreement, brought the car back later in the day and left it at the plaintiff’s place of business. The plaintiff alleges that it had been driven about 2,000 miles and had been somewhat damaged.
On the 24th September Mr. Joynt wrote to the defendant asking him to call at his office for the purpose of being served with the originating summons, which had been issued on the 18th September, and also invited the defendant to make a “reasonable offer of settlement for the detention and depreciation of the car.” On the 25th September the defendant saw the plaintiff and reopened the matter, handing him a post-dated cheque for the deposit which the plaintiff said he would submit to his solicitor. On the following day the cheque was returned to the defendant by Mr. Joynt in a covering letter making certain stipulations as to the basis on which the purchase would now be carried out and asking for settlement of the claim for damages for detention. No compromise was made, and the originating summons was served on the 1st of October.
The learned trial Judge, upon the evidence which I have summarised, found that the letters of the 13th and 15th of September did not reach the defendant until the night of the 22nd of September, and that the defendant returned the car to the plaintiff within about half an hour after the interview on the morning of the 23rd September, findings which have not been questioned, and he held that the defendant removed the car on the 6th of September with the consent and approval of the plaintiff, and that the defendant returned the car at the first reasonable opportunity after the plaintiff’s demand for such return reached him. So finding, he was not satisfied that the defendant had at any time wrongfully detained the car against the will of the plaintiff.
In my opinion, no tenable case has been made against the decision of the learned trial Judge. It is not open to question that when the defendant took the car on the 6th September he did so in pursuance of an agreement with the plaintiff to enter into a hire purchase contract for the ultimate acquisition of the car. He was therefore in lawful possession of the car with the consent of the plaintiff pursuant to the agreement. That lawful possession could have been ended and converted into an unjust detention by termination of the agreement by rescission or otherwise followed by a demand for a return of the car refused by the defendant. It is clear, particularly from the letters of the 2nd and 13th of September, and the oral evidence, that the date named for payment of the deposit, the 10th of September, was not made, either originally or afterwards, of the essence of the contract, nor was it stipulated that, failing payment of the deposit, the car was to be returned on that day. If there had been such a stipulation for the return of the car, I should have invited discussion of the question whether a specific demand and refusal other than the bringing of the action would have been necessary to sustain an action of detinue, a question which I reserve for some future occasion when it arises. See Hern and Stub’s Case (1). But on the facts of the present case, the possession continued lawful after the 10th of September under the still subsisting agreement, until the position should be altered by some effective, lawful act, coupled with a demand for its return: Cullen, Allen & Co. v. Barclay (2).
Assuming that the letter of the 15th of September was, in terms, such a demand as would satisfy the legal requirement for the purpose of making the possession of the car by the defendant an unlawful detention, it has been argued on the authority of the Nisi Prius ruling in Logan v.Houlditch (1), that the demand was well and sufficiently made in law by leaving the letter of the 15th of September at the Dublin residence of the defendant, notwithstanding that the plaintiff and his solicitor knew that he was not in residence there at the time but was travelling in the country. I cannot accept it that such delivery of the letter at the defendant’s flat was as a matter of law the making of a demand upon the defendant, until such date as it is shown that the letter actually reached him. If the case cited decided any such thing (I do not think it did) I should refuse to follow it, as against justice and reason.
In my opinion the originating summons was precipitatedly issued. It raised one specific cause of action which, and no other, has been fought out, and that cause of action was in my opinion unsustainable.
I regret the result because I believe that the plaintiff has a grievance for which there was legal redress if he had sought it. But this appeal must be dismissed with costs.
FITZGIBBON J. :
This action was brought to recover damages for the detention of a motor car, and O’Byrne J., who tried the action, dismissed it, because he “was not satisfied that the defendant had at any time wrongfully detained the car against the will of the plaintiff.”
There is no dispute about the facts. The plaintiff is an agent for the sale of motor cars, carrying on business under the old and well-known name of Robert E. Grady, in Dawson Street. In August, 1930, he had a secondhand Armstrong-Siddley car for sale, and the defendant entered into negotiations for purchasing it. On August 20th or 21st the defendant was permitted to take the car on a week’s free trial, and on August 29th the defendant wrote to the plaintiff from Duncannon, Co. Waterford, where he was then stayingwith the car”I have decided to buy her. I think she is all you represent her to be. I cannot, however, give you £225 for her or anything approaching that figure. However, we can discuss this when I return.” On September 2nd the defendant called at the plaintiff’s establishment, and signed a proposal for the purchase of the car for £220 on the hire purchase system, to be discharged by a deposit of £100 down and the balance by “six months extended payments.” The proposal provided for “immediate delivery.” The plaintiff overhauled the car, insured it, and put on a new tyre, the expenses of which came, with the insurance, during the”week’s free trial,” to about £10. On the 6th of September the defendant was permitted by the plaintiff to remove the car, on an undertakingwhich was not keptto bring or send the deposit of £100 on the following Wednesday, September 10th. The plaintiff, who was anxious about his deposit, called at the defendant’s Dublin address, and learned that the defendant was out of town. On Saturday, September 13th, he wrote to the address in Kerry which had been given to him as that which would find the defendant. In that letter he expressed surprise that the deposit had not been paid by the defendant in accordance with his agreement, and requested a cheque without further delay. No reply was received, and the defendant says that this letter arrived at Waterville after his departure, and that he did not get it until his return to Dublin on September 22nd. On September 15th the plaintiff consulted his solicitor, Mr. Lane Joynt, who wrote on his behalf a formal demand for the return of the car by noon on the following day, or in the alternative payment of the £100 deposit, and intimating that in the event of default a writ would be issued. As no reply was received, the summons was issued on September 18th. The defendant’s story, which O’Byrne J. believed, is that he arrived home late on September 22nd, having driven down to Waterville from Dublin on September 6th, spent the period from September 6th to September 14th at Waterville, and the period from September 14th to September 22nd in meandering home to Dublin via Adare and Thurles. On arrival at his home he says that he found the plaintiff’s letter of September 13th and the solicitor’s letter of the 15th, and that the latter contained the first intimation to him of a demand for the return of the car. On the morning of September 23rd, he met the plaintiff in the street, when he says he was on his way to call upon him. He returned the car that day. He did not pay or offer to pay the deposit. On September 24th plaintiff’s solicitor wrote suggesting that the defendant should call at his office in order to avoid the necessity for public service of the writ, and saying that any reasonable offer of settlement would be placed before the plaintiff. The defendant did not reply to this letter, but for the second time went direct to the plaintiff behind the back of his solicitor, and handed him a post-dated cheque for £110,with an offer to enter into a formal hire purchase agreement. The plaintiff declined to accept the cheque and returned it on the advice of his solicitor, Mr. Lane Joynt, who made a counter offer on behalf of his client which was not accepted, and the action proceeded.
O’Byrne J. found as facts:
“1. That during the entire of the first period (viz., from August 20th or 21st to September 2nd) the defendant had possession of the car with the consent and approval of the plaintiff.
2. That the defendant removed the car on the second occasion with the consent and approval of the plaintiff.
3. That the defendant returned the car on this occasion at the first reasonable opportunity after the plaintiff’s demand for such return reached him.”
The first two findings are based on the express statements of the plaintiff himself, and there is not a shadow of a suggestion to the contrary. The third finding is based upon the evidence of the defendant, which was believed by the learned Judge, and must be accepted by this Court as there is no evidence to contradict it.
I regard it as absolutely settled law, accepted as such for some centuries, that to sustain a claim for damages for the mere detention of a personal chattel which has come lawfully into the possession of the defendant by delivery or bailment, there must have been a demand for it by the plaintiff from the defendant, and a refusal by the defendant to deliver or to redeliver it. Cullen, Allen & Co. v. Barclay (1) in our former Court of Appeal declares this law in the most unmistakable language. “An action of detinue does not lie against a bailee of goods until demand made by the bailor, after the determination of the bailment and before action brought.” That was an action for detinue of 450 sacks. There were alternative claims in contract, but the jury found against one alleged contract, and that damages in respect of another were covered by a sum paid into Court, and the case is reported solely upon the question of the necessity for a demand before action brought. The defendant alleged that no demand had been made upon him until the writ was issued and that he then tendered the sacks to the plaintiff. Dowse B., who tried the case, refused a direction, the jury found that the defendants had detained the sacks, and Dowse B. entered judgment for the plaintiffs, reserving liberty to the defendant to move to have the verdict entered for him on the whole case, if the Court should be of opinion that he should have directed a verdict for the defendant upon the count in detinue. A conditional order was obtained, the cause shown by the plaintiffs was allowed by the Common Pleas Division, whose reasons for doing so were not forthcoming in the Court of Appeal, and the defendant appealed. The Court of Appeal, Sir Edward Sullivan M.R. and Deasy and FitzGibbon LL.JJ., by a unanimous judgment, reversed the order appealed from, and entered verdict and judgment for the defendant upon the ground stated concisely in the head note which I have quoted. “We are of opinion,” said Sir Edward Sullivan (1),”that the defendant is right in his contention, as we think that a demand of the sacks before action was necessary, and that there was no evidence of any such demand. The nature of an action of detinue, as it rests upon the authorities, is clear enough.” “When the defendant failed to perform his contract, it is difficult to see how he at once became a wrongdoer in reference to the detention of the sacks, which he never was asked to send back. Assuming that an action of contract could have been maintained for not delivering the sacks, with or without the potatoes in them, that is no reason in law for making the mere omission to send back the sacks a tortious act, when no request had ever been made for their delivery” (2).Deasy L.J. s.(3):”I do not think there is any evidence in the case of a demand of a return of the bags; and I think such a demand was necessary, in order to sustain the count in detinue.” FitzGibbon L.J. (4):”There being no count in contract, can the count in detinue be supported on the evidence? I think that this question can be tested by ascertaining the mode of pleading in the old action of detinue in cases of special bailments. If a count alleging a special bailment of goods, to be re-delivered on a certain day, would be sufficient as a count in detinue, if it merely alleged that that day had passed, and that the goods had not been redelivered on the appointed day, the count here would be a sufficient statement of the cause of action existing on the facts; but if it was formerly necessary, in such a count, further to allege that, after the day named, a demand of the goods had been made, and if without such a demand there would not have been an unjust detainer of the goods, as distinguished from a breach of the contract to return them, here also a demand was necessary. Now, from the case referred to by the Master of the Rolls, which is to be found in Brownlow’s Entries, p. 186, it appears that a demand after the time fixed by the terms of the bailment is necessary. It is apparent, I think, from that case that though a plaintiff could bring his action for breach of contract without any demand, he could not bring an action of detinue until, by a demand of, and a refusal or neglect to return, the goods, the breach of contract was turned into a wrongful detainer.”
That was no new law, nor was it a fortuitous rediscovery in 1881 of a principle which had lain concealed in Brownlow’s Entries since 1654. Not only in other compilations of Entries, but in the precedents of Declarations in Detinue sur bailment framed by the predecessors of Messrs. Bullen and Leake, Wentworth, “On Pleading,”vol. 7, p. 635, Chitty, “On Pleading” (5th edn.), vol. 2, pp. 593-4, and others, are to be found averments to the effect that: “the defendant hath not as yet delivered the said goods or any of them to the plaintiff although he was afterwards, to wit on, etc., at, etc. [venue] aforesaidrequested by the said plaintiff so to do but hath hithertowholly refused, so to do and hath detained and still doth detain,” etc.; and in the chapter on Forms of Action, (vol. i., chap. 2, § iv., p. 141), Mr. Chitty says: “In the case of a special bailment, it is proper to declare, at least in one count, on the bailment, and to lay a special request.” It was decided by Willes C.J. in Kettle v. Bromsall (1), “A declaration in detinue should state a request on the defendant by the plaintiff to deliver,” etc., and Sergeant Williams in his note to Wilbraham v. Snow (2) says (referring, it is true, to the date at which he wrote), “it is a common learning that when the goods came into the defendant’s possession by delivery or finding, the plaintiff must demand them, and the defendant refuse to deliver them up, in order to constitute a conversion.”
These obsolete technicalities need no longer be observed in pleading, but they are of vital importance, as showing what facts must be proved to sustain the action. See, for instance, the observations of Collins L.J. in Turner v.Stallibrass (3). The modern license which permits claims to be put forward in loose statements in popular language has not altered the essentials necessary to create a legal liability, or abolished the necessity of proving the facts which constitute the cause of action; and there is a note to the declaration in Chitty to which I have already referred, vol. ii., p. 595, which might have proved useful in the present case, if anyone had consulted it. “When a defendant has in his possession personal property, formerly of the plaintiff, and it be doubtful whether a contract by the defendant for the purchase thereof can be proved, it is advisable to insert a count in debt for goods sold, and another count in detinue for the chattel,in order that the plaintiff may recover on one ground or the other; and many other cases may occur, in which this joinder of action may be advisable.”
In 1911 the Court of Appeal in England, in Clayton v.Le Roy (1)an action for detinue of a watchaffirmed the law in terms indistinguishable from those employed thirty years previously by our own Court of Appeal in Cullen, Allen & Co. v. Barclay (2). Fletcher Moulton L.J. (3),after stating that the point “may seem a very technical one,” gives his reasons for holding that it is a point of substance, that there must be “some definite act or deliberate withholding as necessary preliminaries to the arising of this cause of action.” “The plaintiff must establish that at the moment of the issue of the writ he was in a position to bring an action of detinue; in other words, that there had been a wrongful denial of the plaintiff’s title to the watch” (4). “The mere fact that there was evidence pro and con on such a point would not be enough; it is necessary to find as a fact that there was a demand and refusal before the issue of the writ. If there is evidence of a demand and refusal, the tribunal may, of course, conclude that there was one in fact.” Farwell L.J., after declining to interfere with the decision on market overt which Scrutton J. had decided against the defendant, said (5):”The other question is one of considerable interest, and, upon the authorities which have been cited to us, I think that certain propositions are indisputable. Whether an action is one of detinue or trover, proof that the detention is wrongful and amounts to a conversion forms the gist of the action; there must be an element of wrong; the mere fact of possession of the article is not enough to support the action,” and then he quotes Bramwell B. in Burroughes v. Bayne (6): “‘The result is you must in all cases look to see, not whether there has been what may be called a withholding of the property, but a withholding of it in such a way as that it may be said to be a conversion to a man’s own use.'” Vaughan Williams L.J. dissented, not as to any of the “indisputable propositions,” but because he held that the facts proved amounted to a refusal by the defendant to deliver up to the plaintiff a chattel which the plaintiff had demanded of him.
I have dealt with this question at, I fear, undue length, because there appeared to be some tendency on the part of the plaintiff to challenge what appears to me to be established law of great importanceas shown by Fletcher Moulton L.J. in Clayton v. Le Roy (1)to commercial interests.
Mr. Rearden, admitting the necessity for a demand and refusal to constitute his client’s cause of action, relied upon Mr. Lane Joynt’s letter of September 15th, as a demand. I think that, notwithstanding the alternative which it offered, it was, in form, a sufficient demand. But in my opinion a demand, to be effective, must be brought to the knowledge of the person of whom it is made. I cannot accept Mr. Rearden’s contention that the demand was made when the letter containing it was dropped into the post, or when it was delivered at the defendant’s residence in Dublin when he was in Kerry. Mr. Rearden cited a case of Logan v. Houlditch (2) in support of his argument. That was a nisi prius decision of Lord Kenyon, and it must never be forgotten that such rulings are only upon the admissibility of evidence, and do not amount to decisions as to the effect to be given to the evidence when admitted. In that case a demand for the return of the chattel in respect of which detinue was brought, had been served at the house of the defendants, of whom there were two. There was a dispute whether it had in fact been actually served on one of the defendants in person. Lord Kenyon ruled that service of a written demand at the defendant’s residence was evidence of the making of a demand. He did not decide the fact, but left the evidence to the jury. I see no reason to question the ruling. In the present case, I should have been prepared to tell a jury that proof of delivery of Mr. Lane Joynt’s letter at the defendant’s residence was prima facie evidence, upon which, if uncontradicted, they could find that a demand for the return of the car had been made. But when the defendant swears, and is believed, that he was absent from home without any knowledge of, or intention to avoid, a demand for the return of the car, and that it came to his knowledge for the first time at 10 or 11 p.m. on September 22nd, I think that no demand was in fact made until then. I think that the finding of O’Byrne J. that the defendant returned the car at the first reasonable opportunity after the plaintiff’s demand for such return reached him, is borne out by the evidence, and accordingly that he was right in holding that there was no wrongful detention. There could be no wrongful detention or withholding until the defendant was aware of the demand, and, as the demand was not brought to the knowledge of the defendant until after the issue of the writ, the cause of action was not complete, for want of a refusal by the defendant, when the writ was issued.
No case was made that the defendant was keeping out of the way to avoid service of a notice demanding the return of the car, and there was no application to amend the pleadings by alleging that possession of the car had been obtained by a fraudulent pretence of intention to purchase it. The car was in fact returned and accepted by the plaintiff, and his claim is, not for use or hirage of the car, nor for damages for breach of contract to purchase the car, or to redeliver the car or pay £100 on a named day, September 10th, but solely for wrongful detention after demand made.
In my opinion the evidence does not establish a demand in fact before action brought, and negatives a refusal to redeliver before the writ was issued, and for these reasons I think that the decision of O’Byrne J. was right, and that this appeal should be dismissed.
MURNAGHAN J. :
Mr. Rearden does not dispute the proposition that, in an action of detinue, the plaintiff must prove a demand and a refusal before the issue of the writ. In Clements v.Flight (1) Pollock C.B., speaking of detention, says: “And this is the meaning ascribed to the word in Bulstrode, 308, by Haughton J., who says, that request and refusal,contradixit et adhuc contradicit, is the point in an action of detinue, but not in trover, in which conversion is the point, and request and refusal evidence only.” In conformity with this the Court of Appeal in Ireland in Cullen, Allen & Co. v. Barclay (2) laid down that, where goods were delivered to a bailee, detinue did not lie until after a demand made upon the bailee after the determination of the bailment.
The demand in the present case was made by letter, dated September 15th, addressed to the defendant’s residence in Dublin, although it was known that the defendant was absent, and was, or had been, a few days previously in Kerry. Mr. Justice O’Byrne held that the defendant complied with the demand in a reasonable time by delivering the car on September 23rd, as the letter did not in fact reach him until September 22nd.
The plaintiff’s argument is that the demand was made prior to September 18th, when the summons was issued, and that there was detention after that date. It is sought to support this contention by alleging a rule of law that a demand is sufficient if made by letter at the defendant’s residence, and for this counsel cited Logan v. Houlditch (1).I approach this case bearing in mind the words of Denman C.J. in Small v. Nairne (2). These are his words:”I am tempted to remark, for the benefit of the profession, that Espinasse’s reports, in days nearer their own time, when their want of accuracy was better known than it is now, were never quoted without doubt and hesitation; and a special reason was often given as an apology for citing that particular case. Now they are often cited as if counsel thought them of equal authority with Lord Coke’s reports.” The case, as reported, may be explained as meaning no more than this: that a letter delivered to a person’s residence must be assumed to have reached him in ordinary course unless the contrary is shown. In the present case the Judge expressly accepted the defendant’s evidence that he did not receive the demand until after the summons was issued, and that he complied with the demand within a reasonable time.
In my opinion the appeal must be dismissed.
Summers v Havard
[2011] EWCA Civ 764 [2011] 2 Lloyd’s Rep 283, [2011] EWCA Civ 764
Arden LJ:
This is an appeal against the order of HHJ Chambers QC dated 20 September 2010; the judge was sitting in the Mercantile Court of the Cardiff District Registry of the High Court of Justice. The principal provision in the order with which this appeal is concerned was the entry of judgment against Mr Havard, the appellant, for £120,740 plus interest. This sum constituted the value of motor cars which the judge found that a company called Halfway Car Sales Limited, Halfway had sold to Mr Havard without authority and in circumstances where Mr Havard was not entitled to rely on section 2 of the Factors Act 1889. Section 2 of the Factors Act is headed “Powers of Mercantile Agent with Respect to the Disposition of Goods”. Subsection (1) reads:
“Where a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.
I need not read further in section 2 of the 1889 Act.
Mr Havard and the respondent, Mr Summers, are dealers in used cars. They each consigned cars for sale to Halfway in Llanelli on terms which so far as material provided for the seller (that is, as the case may be, Mr Havard or Mr Summers) to receive back the price which they had paid for the vehicle and that any profit would then be shared between whichever of them was the seller and Halfway. During the relevant period Halfway was in serious financial difficulty. The judge found that both Mr Havard and Mr Summers were aware of Halfway’s financial difficulty and that they each in the course of 2007 provided loans to Halfway by what he termed “kite flying”. The judge defined this in paragraph 10 of his judgment as involving the passing of cheques between accounts which permit drawings against uncleared effects and thus facilitate by careful timing the operation of a de facto overdraft. I need not go further into that matter for the purposes of the point with which this judgment is concerned.
In December 2007 Halfway’s bank ceased to provide banking service to it and Halfway stopped trading. On the advice of his accountant Mr Havard removed all of his cars and a number of cars which he believed belonged to other dealers, including Mr Summers, and he took them to his own premises. He then invited Mr Summers to attend his premises to identify his cars. Mr Summers identified some 36 other vehicles belonging to him which Mr Havard contended he had legitimately and in good faith purchased from Halfway in a number of sales. The judge found that all but three of these sales took place after September 2007, so in the three month period September to December 2007. The judge found that the sales were trade sales to Mr Havard and thus at lower prices than would have been achieved in ordinary retail sales and in so doing that Halfway had exceeded its authority as the agent of Mr Summers by making quick trade sales in an effort to keep itself solvent. There is no appeal on the authority point. The judge also found that Mr Havard had acted in bad faith in making the purchases, and I will come back to that matter. In his evaluation of the witnesses the judge did not find Mr Summers to be a particularly frank witness. In addition, he did not consider that Mr Havard was a good witness. Again, he considered that he should not readily accept the evidence of Mr Bonner-Evans, who ran Halfway who was called to give evidence, except where Mr Bonner-Evans’ evidence was persuasive. There was one matter in which the judge appears to have accepted Mr Bonner Evans’ evidence. Mr Bonner-Evans gave evidence that he did not inform Mr Summers of the trade sales made to Mr Havard because he, Mr Bonner-Evans, did not think that Mr Summers would authorise them and admitted that when he made the trade sales he did so because he needed the money to keep Halfway trading, stating that he was robbing Peter to pay Paul, a phrase that was used in other contexts in the course of the trial. The judge found that it was no part of Halfway’s apparent authority to make sales in these circumstances. With respect to the questions with which we are concerned, the central question was whether Mr Havard either knew or was to be treated as not having known in terms of paragraph 38 of the judge’s judgment. The judge there said that the central question in this case is what the defendant (that is Mr Havard) either knew or is to be treated as having known). The judge set out the key parts of Mr Havard’s evidence. He held at paragraph 51 of his judgment:
“…I have no hesitation in rejecting the assertion that Mr Havard had no reason to believe that Halfway did not own the cars that are in question in this case.”
On the basis of the evidence of Mr Havard the judge found that Mr Havard was unquestionably on notice that the sales were not made in the ordinary course of Halfway’s business and that Mr Havard had deliberately refrained from making further inquiries, and for those reasons he had not acted in good faith.
“51. Given the Defendant’s own evidence, I have no hesitation in rejecting the assertion that Mr Havard had no reason to believe that Halfway did not own the cars that are in question in this case.
52. I think it obvious both that a significant number of the cars in question were not sold in the ordinary course of Halfway’s business and that the Defendant was on clear notice that this was so and deliberately refrained from making inquiry. He did not inquire because his evidence shows that he as good as knew the situation and did not care. I further find that, having such notice, the Defendant was not acting in good faith.”
Of the 36 cars alleged to have been properly sold to Mr Havard by Halfway the judge found that 33 had been improperly sold and made an order for the payment of damages in conversion in favour of the respondent, Mr Summers.
The matter was then the subject of an application for permission to appeal to this court and limited permission was given by Patten LJ on paper, limited to two points. The two points are in substance whether the judge was wrong in law to treat as determinative the fact that the sales were not in the ordinary course of Halfway’s business and in that connection attention is drawn to section 2 of the Factors Act 1889; and secondly whether or not the judge was wrong to conclude that Mr Havard had not acted in good faith. When this matter was called on for hearing, the court made it clear to Mr Edwin Glasgow QC, who appears for the appellant with Mr Gwydion Hughes, that it wished to hear argument first on the question of good faith and accordingly it is that matter with which this judgment is concerned, the court having indicated that it did not wish to hear Mr Mark Anderson QC, who appears with his junior, Mr Stephen Reed, on behalf of the respondent.
I am going to read the ground of appeal dealing with good faith: “The learned judge erred in finding that when the appellant bought cars from Halfway he did not do so in good faith (see paragraph 52 of the judgment) within the meaning of that expression used in section 2(1) of the Factors Act 1889, given the weight of the evidence before him”. Mr Glasgow has made it clear that he is not seeking to disturb findings of primary fact but has made submissions that the conclusion which the judge reached on good faith was wrong in law.
I am now going to turn to the appellant’s submissions and I will take firstly the submissions from the skeleton argument and then the submissions that were developed in front of us. The appellant’s case is based both upon the question of ordinary course of business and on the question of good faith, but I am dealing with the second question in this judgment. The appellant submits that what the judge was looking for was the extraordinary features of the sales by Halfway which might have placed Mr Havard on notice that there was something wrong about those sales. It is submitted that on the evidence before the judge there was nothing unusual about the sales which would take them out of the ordinary business of a mercantile agent. Then there were submissions made in that regard with which I am not at this stage concerned, but it is said that the sales were in ordinary business hours and at the place of business and were consistent with the course of business that had developed between Mr Havard and Halfway over several years and that they were entirely conventional sales acts. As to good faith it is submitted on behalf of Mr Havard that the expression is not defined in the 1889 Act and would appear to mean honestly, whether negligently or carelessly or not. The evidence, it is submitted for Mr Havard, was that at all stages he did act in good faith. The loans were made in an attempt to assist with Halfway’s cash flow and Mr Havard did everything that he could to satisfy himself that there was nothing improper about the sale of the 36 cars. His evidence was that he had obtained hire purchase and outstanding finance checks on each car that he bought and that was all in reality he could have done. So it is said that the judge should not have found that he should have made further enquiries about the cars and that there was no more Mr Havard could have done. There was nothing about the facts and circumstances of the sale of the 36 cars, it is said, which could justify the inference that Mr Havard had a suspicion that something was wrong, and on that particular point we were reminded by Mr Glasgow of the authorities to the effect that mere suspicion that something is wrong is not enough to give rise to a finding of bad faith. In particular we were taken to Navulshaw vBrownrigg [1852] 2 De G, M & G 441 (under an earlier Factors Act) where it is said that:
“To deprive the pledgee of the protection of the Act, he must be fixed with knowledge that the agent is so acting as above stated, and no mere suspicion will amount to notice; nor will the knowledge that the agent has power to sell the goods constitute notice that he has not power to pledge them.”
So it said on behalf of Mr Havard that the finding by the judge that he was on notice of a defect in Halfway’s authority was not supported by the evidence.
I will deal first with the submissions of the respondent in writing before I come back to Mr Glasgow’s argument orally to us today. In written submissions it is said on behalf of Mr Summers that attention should be drawn to the scale of purchases of cars and loans that were made in the material period September to December 2007 and Mr Gwydion Hughes, who also addressed us following Mr Glasgow, accepted that there had been a volume of business of about £1m in the material period and that there had been many hundreds of cars sold. Also, by the end of 2007 the business which Mr Havard had with Halfway was his main business. In addition he had had previous forecourt businesses, as it was put. In written argument it is said on behalf of Mr Summers that the sale of cars was determined by the cash flow needs of Halfway and that the amount of sales was determined by whatever Halfway needed to stay afloat. Therefore the sales could not have been in the ordinary course of business of a mercantile agent. It is also said that some of the sales were actually shown in the records as loans or, in one case of a paying-in slip, was re-categorised as a loan and that cheques were also made out to Mr Havard, showing that he did in fact receive monies from Halfway. It is also said that the evidence in the trial showed that he sometimes bought cars without checking whether they were physically present. Indeed he accepted in his own evidence that at the late stages some were actually purchased without the hire purchase checks to which he had previously referred. The question of whether the trading was in the ordinary course of business it is submitted on behalf of Mr Summers to be determined in the course of all the circumstances of the case and on Mr Summers’case that there was sufficient to make the transaction unusual.
I now turn to the oral submissions that we have had today. Mr Glasgow, who did not appear at the trial, accepts that when considering the question of good faith, the court is entitled to look at all the circumstances of the case and the court is not, therefore, restricted to circumstances which directly pertain to the ordinary course of business of a conventional mercantile agent. The gravamen of Mr Glasgow’s oral submissions on the question of good faith have rather been directed to the way the judge dealt with the evidence of the defendant. The position is that the material paragraphs of the judgment dealing with good faith start at paragraph 31 and go through to paragraphs 51 and 52, which I have already set out in this judgment. The first few paragraphs deal with the evaluation of witnesses and I do not think I need set those out because I have already summarised them. However, I would set out paragraphs 35 to 50:
“35. Halfway was the Claimant’s agent. It was an implied term of that agency that Halfway should do what it reasonably could to obtain a proper market price for the vehicles entrusted to it for sale. In his evidence the Defendant said, ‘it would make no sense for a dealer to sell to another dealer the day after’ the vendor had acquired the vehicle. He then looked at Schedule C1 and said, in respect of the vehicles that had come in from the Claimant the day before ‘I certainly wouldn’t have sold my cars for that profit’.
36. In his evidence Mr Bonner-Evans said, ‘I sold trade to get the money in so I was ‘robbing Peter to pay Paul”. He also said that he did not think that the Claimant would have approved had he known that a sale was a trade sale. A little later, he continued, ‘I never told [the Claimant] that I had done it because I either knew that he didn’t approve or didn’t know if he would approve’.
37. It was no part of Halfway’s agency to be able to rob the Claimant by quick under value sales to pay other creditors nor could Halfway have had any apparent authority to do so.
38. The central question in this is what the Defendant either knew or is to be treated as having known.
39. It seems to me that the answer is to be found in the evidence of the Defendant taken both alone and in conjunction with some of that of Mr Bonner-Evans.
40. I start with that which the Defendant asks me to believe as constituting his defence.
41. First I think it to be clear that, while not opining on the numbers in question, the Defendant was well aware that Halfway acted for other principals than himself in the way that I have set out.
42. The Defendant told me that he had no idea how many cars the Claimant had on Halfway’s forecourt. When shown his ‘purchases’ from Halfway as listed for September to November 2007 (TBA/44-46) including the purchases from the Claimant he said, ‘I thought that all these purchases were part exchange and/or purchases that Halfway owned themselves…I was always led to believe that these part exchanges in respect of my vehicles or that they were Halfway’s own stock’.
43. Against these assertions, one looks to the background as stated by the Defendant.
44. The Defendant said, ‘I think we all knew from the minute Mr Bonner-Evans started that he was in trouble. The man who turned up first would get a cheque. He had to keep his stock up to create a flow. I was worried that he would go into liquidation’.
45. The Defendant described how, on advice from his accountant, from August 2007 onwards he caused stickers to be put into tax discs on his vehicles on Halfway’s forecourt stating that they belonged to him in order that they could not be treated as Halfway’s property.
46. The Defendant’s evidence continued, ‘I knew he was up to skulduggery and bouncing. Never instances let down. From the minute we met I thought he was robbing Peter to pay Paul’.
47. The next answer he gave was, ‘it never occurred to me that I might be buying cars that belonged to others’.
48. Asked as to the position on 2 November 2007 he said, ‘I didn’t ask him, ‘are these all yours?’ No. Why should I have? If he sold me them vehicles in part exchange or vehicles which he can no longer afford to stock, I’m skint. I rejected 10 to 15. How could I know there was a risk? I suspected that he was robbing Peter to pay Paul. I didn’t know that he was selling to produce cash. He told me ‘Here’s a part exchange – one of yours – I’ve got a trade vehicle’.
49. Later the Defendant said, ‘Bonner was always in trouble from the day he was born. I always knew that. Of course I knew there was a risk there. Until mayhem – bounced cheques’.
50. The asserted background to these statements was that from early September 2007 onwards the Defendant made frequent loans to Halfway which, regardless of whether or not they were kite flying, were self-evidently a material source of a cash flow which it was to be assumed the bank was unwilling to provide.”
Mr Glasgow is particularly concerned with the quotations from the defendant’s evidence (that is, the evidence of Mr Havard) set out at paragraphs 44, 46, 47, 48 and 49. Since the judge has handed down his judgment transcripts of the evidence have been prepared and it is quite clear that in the case of each of those quotations which constitute the totality of the quotations from the evidence of Mr Havard at the trial, what the judge has done is précis a number of answers and put them into quotation marks without any sign that they are in fact not necessarily sequential and without their context. In my judgment this is not a way in which a quotation from a defendant’s evidence should be set out. If it says, “The defendant said …”, and then there is text in quotation marks, one would read that as meaning that that which appears between the quotation marks is a direct quotation from the defendant. However, we have had the benefit of being taken through the transcript by Mr Glasgow and we have seen the full context in which these statements appeared. It was clearly helpful that we should have been taken to those paragraphs, although at the end of the day Mr Glasgow very properly accepted that the judge’s summary, although it was a précis, was not in fact unfair and that the judge’s very short extracts from the evidence did reflect what Mr Havard had said.
Therefore there was evidence at the trial of three particular matters to which I will draw attention. In relation to paragraph 46 the defendant is quoted as having used the expression “skulduggery” and we can see at the bottom of page 107 to 108 of the transcript that Mr Havard had in fact said in the course of quite a long answer:
“We knew that he was up to skulduggery, we knew that he’d bounced cheques on us, we knew he’d be in the situation where he’d bluff and store things for a couple of weeks, but generally, and Dick will tell you this, he’s dealt with him for longer than I have in the last 20 years, he’s never ever sort of let anybody down, but there could be instances where we knew exactly what was happening.”
That is part of his answer at page 107 to 108. Although he is using what might be said to be a royal “we”, Mr Havard did say that he knew that there was skulduggery. He then goes on in his answer:
“So, Halfway could continue to trade in this period. Yes, and I suppose from the minute that I’ve met this man, I’ve always been in the situation where I believed he was robbing Peter to pay Paul. I still believe that up to his demise he was robbing Peter to pay Paul.”
The reference to “demise” is, as I understand it, a reference to the demise of Halfway, not of Mr Bonner-Evans. So in the course of that there is an expression of “robbing Peter to pay Paul”. It is unfortunate that the judge does not go on to say that there are of course circumstances in which a business can properly use monies which it receives, for which it is going to have to account to a client whose property has been sold, in the course of its own business and then account to the client for the amount due to him. In other words, when it receives money, let us say, belonging to Peter a company does not necessarily – or even usually – have to keep that money in a separate drawer to use it to pay Peter and may in some circumstances use it to pay Paul. That was a point of which the judge was well aware because he himself raises it at page 109 and asks counsel to deal with that point.
We were also taken to the transcript which dealt with the other quotations given by the judge in his judgment but in each case, as I have explained, Mr Glasgow accepted that the end result of what the judge set out, albeit that it was presented as a straight quotation, was not unfair and, as I say, it was helpful to see what Mr Havard had said in context.
The position is that since this court is hearing this matter on appeal it is not concerned with the question of whether the judge’s finding was one which he was compelled to make or indeed a question of whether it was a finding which this court would itself have made. The question for this court on an appeal of this kind is whether or not the judge was entitled to make the findings of fact which he made. As I pointed out to Mr Glasgow in the course of his submissions, this court does not interfere with findings of primary fact by a judge on the basis of oral evidence unless it is clear that the judge is plainly wrong, then it has a duty to intervene. If it was a conclusion which the judge could properly and fairly make then that conclusion would stand, even though it is not the conclusion that this court would itself have come to.
I therefore turn to state my conclusions. As already indicated and as Mr Glasgow fairly agreed the court has to look at all the circumstances of the case in determining whether or not the conditions of section 2 of the 1889 Act, including the condition of good faith, was made out. In his judgment the judge had found that Mr Havard was aware that Halfway acted for other principals apart from himself and that he knew that some of the vehicles on Halfway’s forecourt belonged to other people (see paragraph 42). Mr Havard said in his evidence that he carried out checks – hire purchaser and outstanding finance checks – but he accepted that these checks would only show whether or not there were hire purchase payments outstanding or whether the cars had been reported as stolen or damaged; I assume therefore it was some form of insurer’s record or police record that he consulted. This is my observation and not the judge’s, but (insofar as we have been taken to the transcript) he did not give evidence that he had asked Halfway who owned the cars or where they had come from, or whether there had been a discussion of that nature. Mr Havard knew that Halfway was in trouble financially. Indeed, Mr Havard had put stickers on the cars which he owned so that they would not be treated as Halfway’s cars. He knew that Halfway was up to “skulduggery” and that in his words it was robbing Peter to pay Paul. He also knew that he was lending money which was, one must assume, because Halfway’s bank were not prepared to lend him money in the ordinary way. He also said that he knew that there was a risk involved (see paragraph 49 of the judgment), meaning a risk that Halfway might go under. In those circumstances it is not impossible to conclude that there are circumstances in which, from the point of view of Halfway, there would be a risk of Halfway misusing property belonging to other principals.
In all those circumstances, in my judgment, the judge was entitled to hold that Mr Harvard knew that some of the cars in Halfway’s possession did not belong to Halfway and also that Mr Havard was on notice and that he deliberately refrained from making enquiries. The judge held in strong terms that Mr Havard as good as knew about the situation but did not care. The judge went on to find that the vehicles were not sold in the ordinary course of Halfway’s business. That was a contentious finding on the other ground on which permission to appeal was given. As I read the judge’s judgment, the judge relied on that particular factor as part of his finding of a lack of good faith. He was using it as part of the grounds for coming to the conclusion that there was not good faith for the purposes of section 2.
In my judgment the judge was entitled to come to that conclusion on the evidence before him and the findings which he made that if a person deliberately refrained from making enquiries he was not acting in good faith in the sense in which that term is used in section 2 and is explained in the skeleton argument. In those circumstances in my judgment the appeal on that ground must be dismissed. Mr Glasgow fairly accepts that the appeal must wholly fail on that basis.
Lord Justice Carnwath:
I agree. Patten LJ gave permission on what were in effect two grounds, first that the judge applied the wrong test to determine whether the car sales were made in the ordinary course of business as a mercantile agent, and secondly that he applied the wrong test in deciding whether the appellant had acted in good faith. It is necessary for the appellant to succeed on both points if the appeal is to be upheld. I prefer to say nothing about the first ground, save that I am not surprised that Patten LJ granted permission. On the second point, as my Lady has made clear, on analysis there is nothing special about the definition of good faith under the Factors Act and there is no basis for saying that the judge did not apply the right test. What the case amounted to was a contention that in applying the right text he did not have sufficient material to support his conclusions. While I agree with my Lady that the judgment could in certain respects have been rather more fully and clearly expressed, I have no doubt that there was material to support that finding.
Lord Justice Wilson:
I agree with both judgments.