Title Issues
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.
Cases
Hanley v. ICC Finance Ltd.
[1995] IEHC 5; [1996] 1 ILRM 463
Kinlen J
It would appear that ICC Finance Limited purchased the Volvo 440 motor vehicle from Huet Motors (Dublin) Limited for the sum of £12,260, inclusive of VAT on the 23 May, 1991. It was then leased for a fixed three month period from the 24 May, 1991 to Tipperary Rent-a-Car Limited. That purchase and lease were entered into with a further agreement between the ICC Finance and Huet Motors (Dublin) Limited that at the end of the aforesaid three month lease period, Huet Motors (Dublin) Limited would repurchase the vehicle at an agreed price of £9,305.78 exclusive of VAT. This arrangement was one of seventeen similar company arrangements in respect of other vehicles which ICC Finance Limited and Huet Motors (Dublin) Limited entered into in or about the month of May, 1991. These lease/rental agreements were registered with the Irish Credit Bureau.
At the end of the three month leasing period with Tipperary Rent-a-Car Limited, the vehicle was not bought back as agreed by Huet Motors (Dublin) Limited. Instead a new contract was entered into between ICC Finance Limited and another company by the name of Fleetlink Limited, which was an associate company of, and wholly owned by, Huet Motors (Dublin) Limited. The agreement with Fleetlink Limited was for a lease of the aforesaid vehicle for a fixed period of twelve months from the 28 January, 1992 and again there was an agreement with Huet Motors (Dublin) Limited that it would buy back the aforesaid vehicle at a fixed price of £6,665.20 exclusive of VAT at the end of the lease period.
The tax book of the vehicle was initially retained by ICC Finance. However, a Mr McCarthy, who was both a director of Huet Motors (Dublin) Limited and Fleetlink Limited, requested the tax book so as to tax the vehicle. The tax book was given to him for the purpose of having the vehicle taxed. Fleetlink Limited is a company which leased vehicles and hired vehicles for short periods to third parties. It was not in the business of retailing cars to the public. Huet Motors (Dublin) Limited went into liquidation and the liquidator advised the Defendant company of the names and address of the persons whom he believed were in possession of the various vehicles, the property of the Defendant company. Appropriate enquiries were made and it was discovered that the persons whose names were furnished either were not in possession of the vehicle or were not resident at the address given and supplied by the liquidator. It has been the experience of the Defendant company that where a person is notified that the Defendant company wants the vehicle in question returned because of failure to pay the rentals, or for some other breach of the agreement between the Defendant company and a lessee, invariably the vehicle is not returned and it becomes very difficult for the Defendant company to obtain possession of the vehicle. Because of this experience the Defendant company has adopted the practice of repossessing the vehicles which it owns and at the same time advising the local gardai, where the vehicle is repossessed, of such repossession. That was the practice adopted in this case. The Defendant company did not consent to Fleetlink Limited parting with possession of the said vehicles to anyone, not alone Huet Motors (Dublin) Limited, for the purpose of selling same to an innocent third party. The Defendants say they did not intend to cause any embarrassment to the Plaintiff and if in fact they did, they are prepared to write to his employers or superiors advising them of the circumstances surrounding the matter and the reason for the Defendant company repossessing the vehicle. It is accepted by the Defendant company totally, that the Plaintiff herein was, and is, an unfortunate and innocent party, and a party who acted in good faith in the purchase of the vehicle in question from Huet Motors (Dublin) Limited.
It seems clear that both parties here acted in good faith and were innocent of any wrongdoing, although the Defendant, with its experience, might be regarded as acting in a fairly cavalier manner. As a result of discovery it would appear that there was a series of post-dated cheques paid to the Defendant that were drawn on the account of Huet Motors (Dublin) Limited, and not on the account of Fleetlink Limited, during the time when the alleged lease to them was in existence. It is reasonable to assume that the Defendant knew that the vehicle was in the possession of Huet Motors (Dublin) Limited or leased to them. When I said that the behaviour of the Defendant was a little cavalier, I do think that it might have checked the corporation file. The Court is satisfied that the vehicle was at all relevant times in the possession of Huet Motors (Dublin) Limited, who was a mercantile agent. It would appear that it was indulging in leasing, at least on one occasion, to a wholly owned subsidiary to provide a system of cash flow. Huet Motors (Dublin) Limited was in possession of the vehicle and in possession of the tax book. Although in fact they did not have a legal title by virtue of the provisions of Section 25 of the Sale of Goods Act, 1893 and of the Factors Acts (and particularly S 2(1) of the Factors Act, 1889), they could and did give a good title to the vehicle.
Section 25(1) of the Sale of Goods Act, 1893 provides:-
“Where a person having sold continues or is in possession of the goods . . . the delivery or transfer by that person . . . of the goods . . . under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the sale.”
I am impressed by the reasoning of the English Court of Appeal in Worcester Works Finance Limited v Cooden Engineering Company Limited [1971] 3 ALL ER 708.
In the circumstances I am satisfied that the learned Circuit Court Judge was correct in the decision he reached. It does seem to me that the Defendant here could have retained the tax book and indeed been registered. I assume that it was not registered, because, it does not like to admit to an ultimate purchaser that there have been several registered owners.
I was referred to Staffs Motor Guarantee Limited v British Wagon Company Limited [1934] 2 KB 305; and Astley Industrial Trusts Limited v Miller (Oakes third party) [1968] ALL ER 36 and Chalmers “Sale of Goods” 18th edition at p 295. While clearly the ICC Finance was not involved in any fraudulent transaction, it was, as I have found, cavalier in its approach and it, I have no doubt, has caused much strain and distress to the Plaintiff.
While the Staffs Motor Guarantee Limited v British Wagon Company Limited would seem to support some of the Defendant’s submissions, I would prefer the reasoning in the Worcester Works Finance Limited v Cooden Engineering Company Limited, [1971] 3 ALL ER 708.
The Civil Bill claims, inter alia, mandatory injunction directing the Defendant to deliver up possession of the said motor vehicle to the Plaintiff.
The Plaintiff makes a bald claim for damages but does not indicate whether this should be negligence, conversion or detinue. Each of these would be a separate head of damage and should be specifically pleaded. What is one to make of the bald claim for “damages”? The only plea in the endorsement of claim which would help to answer this question is in paragraph 5. It sets out that the Defendant has converted the said motor vehicle to its own use. Therefore, this case should be decided on the basis of a claim for conversion, not a claim in detinue (which entitles one to the return of the vehicle and damages) or a claim in negligence.
I would wish to be addressed on what losses, if any, should be awarded as damages in a claim based on tort of conversion. I would refer to McGreggor on damages 14th ed paras 1087 — 1089 and particularly to the quotation from Denning LJ (as he then was) where he says:-
“It is an action against him because he has had the benefit of the goods. It resembles, therefore, an action for restitution rather than an action of tort. But it is unnecessary to place it in any formal category”.
The author goes on to say that:-
“Looked at from this angle the Plaintiff could always recover beyond his proved loss to the extent of the benefit conferred on the Defendant by his use of the goods but it would seem that for Denning LJ this same result could have been arrived at in an action of conversion as much as in one of detinue.”
In England detinue is gone by statute.
Detinue can include damages from the moment of detention to return of the chattel and special damages (Bullen and Leake, 10th Edition, p 317). Damages must be assessed at the date of judgment, not at the date of refusal which is a normal proof of detinue (see Rosenthal v Alderton & Sons Limited, 1946 KB 374, CV Stacks v Mikloo, [1948] 2 KB 23 and MacMahon and Binchy Law of Torts, 2nd ed p 531).
I find the proposition by Denning LJ of subsuming these two distinct torts into a claim for restitution very attractive. It seems to me that the trial Judge should look at all aspects of the case and decide the relevant periods and the nature of damage having regard to all the particular circumstances of each individual case. The matter should be clarified by statute.
Proceedings had been instituted by the Plaintiff against the Defendant for defamation. I was asked to postpone making any Order until that matter had been determined. I had indicated that I would not make any Order until I had been fully addressed on the nature of the claim mentioned in the Civil Bill and what were the appropriate parameters of such a claim which I believed to be based on conversion. I was open, of course, to argument because in fact detinue constitutes negligence. When the defamation action came to Court it was settled. And that included damages arising in the present case. The Plaintiff is in fact in possession of the vehicle. In the circumstances and by consent I am dismissing the appeal and awarding the Plaintiff costs in both Courts, with a certificate for Senior Counsel for the appeal.
Fitzpatrick v. Criminal Assets Bureau
[1998] IEHC 40; [2000] 1 IR 217
THE RELEVANT LEGAL PRINCIPLES
(i) Ownership
(a) Louisville Limited asserts ownership of the Mercedes car and in the case of the Criminal Assets Bureau it asserts that it is entitled to a declaration that Mr Bolger is the beneficial owner of that car. The date upon which such claims to ownership are asserted is the date on which the Mercedes car was seized. Of course, if the certificate of the Criminal Assets Bureau dated the 18th September, 1997 was properly executed by the seizure of the car allegedly owned by Mr Bolger on that date, then the ownership of such property passed, by way of involuntary alienation, to the Criminal Assets Bureau.
(b) Before considering the issue of where ownership in the car lay, it is worth considering what is meant by “ownership”: this is particularly so when part of Louisville’s case appears to rely on a presumption of ownership being ownership of a rather special kind. In Austin’s Jurisprudence Volume 2 at page 177, Austin defined ‘ownership’ as the right to indefinite user, the right of unrestricted disposition and the right of enjoyment unlimited in duration. It is generally accepted that that definition of what constitutes the bundle of rights known as “ownership” has not stood the test of time and that in modern society the ownership of chattels personal, such as motor cars, is restricted by law both as to user and disposition. A definition which is seen as more appropriate temporally is that of Sir Frederick Pollock who defined ownership as
“the entirety of the powers of use and disposal allowed by law .”
(Pollock, First Book of Jurisprudence, at page 179 )
26. The power of use embraces the right of exclusive enjoyment and the right of maintaining and recovering possession from all other persons. The power of disposal includes the right of destruction of the goods, the right to alter the goods and the right to alienate or transfer ownership in the goods: all these rights are regarded as comprising the “bundle of rights” which together merge into one general right of ownership in goods. The idea that such rights (as I have enumerated above) are not to be viewed as ‘free standing’ or separately existing but as merged in one general right of ownership is central to the analysis of ownership by both Austin ( Jurisprudence, 5th Edition, at page 789 ) and Markby ( Elements of Law, 6th Edition, Ss 309, 314, 321, 323 )
(c) Sections 62 of the Sales of Goods Act, 1893 defines “property” as meaning:-
“The general property in goods and not merely a special property”.
27. The learned authors of Chalmers Sale of Goods 13th Edition, observed at page 184 that:-
“the essence of sale is the transfer of the ownership or general property in goods from seller to buyer for a price”. (Emphasis added)
28. The authors go on to observe that, in English law, a distinction has been made between the general property in goods and a special property and in same goods; they note that this distinction has often been expressed by distinguishing between “the” property in goods and “a” property in the same goods. While his judgment in the Court of Appeal was a dissenting one, Lord Justice Bowen in Bardick -v- Sewell 1884 13 CHD 159 at page 175 made this distinction saying in relation to a pledgee of goods:-
“He has not got ‘the’ property he has ‘a’ property only.”
Thus, in the Sale of Goods Act, 1893 , a reference to “the property” in goods (as opposed to a reference to “a property” or “special property” in the goods) is a reference to the ownership of those goods.
Section 17 of the Sale of Goods Act, 1893 provides that:-
(1) Where there is a contract for the sale of specific or ascertained
goods the property in them is transferred to the buyer at such
time as the parties to the contract intend it to be transferred.
(2) For the purposes of ascertaining the intention of the parties regard shall be had to the terms of the contract and the conduct of the parties and the circumstances of the case.
29. Section 18 of the 1893 Act sets out the rules of the ascertainment of the intention of the parties as to when the property in the goods is to pass. Rule 1 provides that unless a different intention appears:-
“Where there is a unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.”
…….
CONCLUSIONS
(I) In my opinion, the property in the Mercedes 250 passed to Louisville Limited on the 6th September, 1996 when Peter Bolger agreed to purchase the car from Evolution Limited for Louisville Limited. The contract was one for the sale of specific goods in a deliverable state and Sections 17 and 18 of the Sale of Goods Act, 1893 provide that, in the absence of a contrary intention, property passed when the contract was made. While the property in the car passed to Louisville Limited I am not satisfied from the evidence which I have heard (and have summarised above) that Peter Bolger had the actual authority of Louisville Limited to enter into the contract on their behalf, neither do I believe that there is any sufficient or reliable evidence that the act of purchasing the car could be said to be an act within the ostensible authority of Peter Bolger. There is no evidence that Louisville Limited by words or actions represented to Evolution Limited that Peter Bolger had authority to act on its behalf. The only reference to Louisville in the transaction was a request of Peter Bolger to Jason Duffy to “put the car in the name of Louisville Limited”. I am equally satisfied that the post-agreement user of the car made by Peter Bolger and Michael O’Leary, and all references to the car by either or both of them, did not amount to a ratification by Louisville Limited of the agreement. Equally the filling out of a proposal form or the payment of a sum of money as insurance premium relating to the car out of the funds alleged to be the property of Louisville in itself did not constitute ratification. I am satisfied therefore, that following the transaction of the 6th September, 1996 the property in the car had passed to Louisville Limited; I am also satisfied that by reason of the failure of Peter Bolger to have actual or ostensible authority on Louisville’s behalf to purchase the car, Louisville Limited had a voidable contract. It was a contract which Louisville Limited had neither ratified or repudiated when there was a purported execution on foot of the Criminal Assets Bureau certificate on the 18th September, 1997. However, I do not accept the submission that the absence of any authority and ratification had the effect, as at the date of the execution of the certificate, of vesting the property in the car in Peter Bolger; it did not, the property in the car was then vested in Louisville Limited.
(ii) At the date of the seizure of the car, the property in the car was that of Louisville Limited. Louisville, however contend that they are in any event entitled to rely on a presumption of ownership which they say flows from Section 140 subsection 2 of the Finance Act, 1992 . Given my determination as to the ownership of the car at the date of its seizure, my conclusions on this submission may be unnecessary but nonetheless I set them out hereunder for completeness. It seems to me that subsections (1) and (2) of Section 140 should be read together, and that the evidential benefits afforded by subsection (2) were more than likely benefits intended to exist in relation to the prosecution of an offence to which subsection (1) referred. I accept that subsection (2) does not refer to the presumption as being one which arises upon or in relation to the prosecution of an offence, but it is unlikely that the presumption was intended to be “free-standing” and to exist outside the four corners of chapter 4 of part 2 of the 1992 Finance Act and the proceedings contemplated by that part of the 1992 act. Even if I am wrong in this conclusion, it does seem to me that the presumption must have a temporal limit, and if the certificate or document which particularises ownership has a date, then the presumption of ownership cannot be said to relate other than to ‘ownership’ as at that date. Even if this view is also incorrect, and the presumption of ownership arising by reason of Section 140(2) is not limited to the circumstances of the prosecution of offences referred to in subsection (1), and is not limited in time, it does appear clear that it is limited by the wording of Section 130 insofar as that section defines “owner” as, in effect, the person “by whom the vehicle is kept”. Thus, if Louisville Limited claim that they are the owners of the vehicle by reason of the presumption of Section 140(2), it is an ownership which may amount to little more than a special property in the vehicle as opposed to the property in the vehicle.
(iii) Even if I find that Louisville Limited is the legal owner of the car, Counsel for the Criminal Assets Bureau urge that I should not accept as credible the evidence of Peter Bolger and that I should hold that in fact the consideration for the purchase of the car was provided by Peter Bolger and that Louisville holds the car on a resulting trust for Peter Bolger. I have already enumerated those matters which, it is suggested, I should have regard to in coming to a conclusion as to whether I should or should not accept the evidence of Peter Bolger. I should say at the outset that I do not regard Peter Bolger’s somewhat cavalier manner (which I do not excuse) in filling out insurance forms or in making returns to the Companies’ Office as particularly relevant or helpful in an assessment of his credibility. Neither do I regard his constant use of the words “my car” and other possessive pronouns as critical to the assessment of that credibility. Equally, Mr Bolger’s disregard of the formalities of company law is not persuasive in determining whether or not any credit or weight should attach to his evidence. Finally, I should say that I have not had regard to the different accounts given by Mr Peter Bolger as to his business relationship with George Mitchell in coming to a conclusion as to his credit worthiness.
33. Having carefully considered and assessed the evidence which Peter Bolger gave, I am unable to accept that evidence. I should now state why I have formed this view in relation to his evidence. Mr Bolger is a person who stands convicted of fraudulent trading and forgery. The conviction was the verdict of a jury at Southwark Crown Court in England in a trial which commenced on the 13th March, 1995. On the 3rd April, 1995 Mr Bolger failed to turn up for the resumed hearing of that trial. He was subsequently convicted in his absence and then sentenced in his absence to a term of three years imprisonment together with a five year disqualification from acting as a director. Peter Bolger had in fact returned to Ireland; he said that he had been unwell during the course of the trial and upon his return to Ireland was diagnosed (he said) as suffering from a strangulated hernia. He stated that he had consulted two doctors who advised him not to travel back to the United Kingdom for the resumption of his trial (a Dr Tanner and a Dr O’Sullivan). Extradition proceedings were brought against Mr Bolger and were unsuccessful in September 1996. Peter Bolger says he instructed his Solicitors and Barristers to appeal against his conviction and sentence and he swore that he was innocent of the charges upon which he had been convicted. I regarded it as somewhat surprising to say the least that no corroborative evidence was lead to establish the state of Peter Bolger’s health as at April, 1995 when he did not return to face the resumed hearing of his trial, or to establish the existence in fact of an appeal against his conviction and sentence. I regarded it as surprising that witnesses who were amenable to be called were not called on matters of importance and I inferred (in the absence of explanation as to why such witnesses were not called) that such witnesses would not or could not corroborate what Peter Bolger had said under oath as to his ability to return to the United Kingdom to stand trial or as to the status of his appeal against conviction and sentence. Equally, I was somewhat concerned that no corroborative evidence had been called to support Mr Bolger’s allegation that Trecom Holdings Limited had ‘agreed’ to invest the proceeds of the Mercedes 180 in Louisville Limited although I noted Mr Bolger’s evidence that Mr Arngrimsson was unwell. The failure to adduce corroborative evidence on this aspect was of concern but did not of itself compel me to reject Mr. Bolger’s evidence. Another of the reasons why I viewed Mr Bolger’s evidence with some degree of suspicion was the fact that in his account of his involvement in the Trecom transaction with the Longs, the canned beef contract, the purchase of each of the cars and his consultancy work, one common denominator was present throughout namely, cash, which never saw the safety or the inside of a bank. I found it somewhat incredible that a bona fide businessman would carry around large quantities of cash for prolonged periods of time as Mr Bolger did, apparently on behalf of his companies Trecom Holdings Limited and Louisville Limited without lodging those monies to the safety of bank accounts in the names of such companies. I could infer that his conduct was an atavistic throwback to those times when it was common for people to distrust banks and to keep their money under the floor boards of their homes. However, such an inference in this case would avoid what I believe to be the correct inference namely that Peter Bolger dealt in cash because to do otherwise would be to expose himself personally to the scrutiny of the Revenue Commissioners. Apart from the foregoing, I find Peter Bolger’s differing accounts of the purchase of his first car (the Mercedes 200) impossible to reconcile and the changing stories can only be consistent with an attempt to “reduce” the amount of cash which he, Peter Bolger, provided to purchase that car. As to the other two cars purchased, I did not have (apart from Mr Bolger’s evidence which I do not accept) any satisfactory evidence that cash sums involved in these transactions were provided by either of Mr Bolger’s companies (Trecom or Louisville). I do not accept Mr Bolger’s evidence that Louisville Limited or Trecom provided company monies in the purchase of either the second or third cars; I believe that the monies provided for these purchases were, in substance and in fact, the monies of Peter Bolger. While it is true that his house was in the name of himself and his wife and that he had purchased the Mercedes 200 in his own name, it is also fair to observe that, following his conviction in the United Kingdom and the Judgment of the Revenue Commissioners obtained against him, there was very good reason for him to ensure that as few assets as possible appeared to be owned by him personally. In summary, I reject the evidence of Mr Bolger as to the manner in which the purchase of the three Mercedes cars were financed; I believe that the finance for the purchase of all of these cars was in fact provided for by Mr Bolger out of his own monies and that neither Trecom Holdings Limited or Louisville Limited provided any of the monies to purchase any of the cars. In such circumstances, the Mercedes 250 car, the legal ownership of which had vested in Louisville Limited, was on the 18th September, 1997 held by Louisville Limited on a resulting trust for Peter Bolger. In such circumstances the Criminal Assets Bureau is entitled to a declaration that the third named Respondent was the beneficial owner of the said vehicle bearing registered number 95 D 42525 immediately prior to its seizure on 18th September 1997. As to the claim of Louisville Limited, I will make an order dismissing that claim.
Mallett & Son (Antiques) Ltd -v- Rogers
[2005] IEHC 131 [2005] 2 ILRM 471
Quirke J
DECISION
The basic rule as to the transfer of title to personal property is that no one can give a better title than his own; he can give possession but not a title which is not vested in him. That is the doctrine “nemo dat quod non habet”.
Section 12 of the Sale of Goods Act, 1893 (as amended by s. 10 of the Sale of Goods and Supply of Services Act, 1980) provides inter alia as follows:
(1) In every contract of sale, other than one to which subs. (2) applies, there is
(a) an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and, in the case of an agreement to sell, he will have a right to sell the goods at a time when the property is to pass,
(b) an implied warranty that the goods are free, and will remain free until the time when the property is to pass, of any charge or encumbrance not disclosed by the buyer before the contract is made and that the buyer will enjoy quite possession of the goods except insofar as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed.”
The Act draws a distinction between an agreement to sell and a sale. Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property and the goods is to take place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell. An agreement to sell becomes a sale when the time elapses and the conditions (subject to which the property in the goods is to be transferred) are fulfilled.
Where there is an agreement to sell the property remains with the seller until some act or event completes the sale and causes the property to pass.
In the instant case the defendant entered into an agreement with Mr. Synge whereby he agreed to sell a bookcase to the plaintiff. The sale was to be completed when the defendant delivered the bookcase to the plaintiff and the latter paid the sum of STG£80,000 to the defendant.
On 30th January, 2000, the defendant delivered the bookcase to the plaintiff and on 3rd February, 2000, the plaintiff paid to the defendant the sum of STG £80,000 in purported completion of the contract for sale.
However, on 3rd February, 2000, the defendant did not have a right to sell the bookcase to the plaintiff because he did not own the bookcase. It was the property of Lord Roden. It had been stolen from Lord Roden. The defendant had no title to the bookcase. Therefore no title to or property in the bookcase passed from the defendant to the plaintiff. There was an agreement for sale but the sale was not completed.
The consideration for the sale was the title to the bookcase (in return for the sum of STG80,000).The title to the bookcase never passed from the defendant to the plaintiff. The consideration for the sale failed wholly and the plaintiff is entitled to the return of the sum of STG£80,000.
The contract for the sale by the defendant to the plaintiff of the bookcase was a contract for sale to which s. 12(1) of the 1893 Act (as amended) applied.
It was therefore subject to an implied condition on the part of the defendant that the defendant had the right to sell the bookcase at the time when the property in the bookcase was intended to pass from the defendant to the plaintiff.
Mr. Ralston argues that Mr. Synge knew or ought to have known from the circumstances of the transaction that the defendant had not yet acquired the bookcase at the time when the plaintiff agreed to purchase the bookcase from the defendant.
He appears to be relying upon the provisions of subs. (2) of s. 12 of the Sale of Goods Act, 1893 (as amended) which provides as follows:
“In a contract of sale, in the case of which there appears from the contract or is to be inferred from the circumstances of the contract an intention that the seller shall transfer only such title as he or a third party may have, that is,
(a) an implied warranty that all charges or encumbrances known to the seller shall have been disclosed to the buyer before a contract is made,…”.
This sub-section is concerned with the intention of the parties at the time of the contract for sale.
On the evidence adduced in these proceedings it has been unequivocally established that, at the time of the contract for sale it was the intention of the defendant to pass good title to the bookcase to the plaintiff for STG£80,000 and the intention of the latter to purchase it from the defendant on that basis. The evidence also disclosed that it was the intention of the defendant to purchase the bookcase from Messrs. Eacrett and Daly on the same basis.
No evidence has been adduced which would suggest that at the time of the contract for sale it was the intention of the defendant to “transfer only such title as he or a third party may have” in the bookcase to the plaintiff. Nor can it be inferred from the circumstances of the contract that such was the intention of either of the parties.
I believe Mr. Ralston’s reliance upon the decision of the High Court (Henchy J.) in Anderson v. Ryan [1967] I.R. 34 is misplaced.
In that case a Mr. Davis agreed to purchase a Sprite Motorcar. He paid for it by exchanging his own motorcar (a Mini) for the Sprite.
At the time of that transaction the person who purported to sell the Sprite fraudulently misrepresented that he had title to the vehicle. In fact it had been stolen.
The court was required to deal with a subsequent dispute as to the ownership of the Mini. Henchy. J. observed (at p. 38) that:
“Therefore, the central question which decides the points raised under both s. 12 and s. 30 and s. 21 is; ‘did the defendant have a good title to the car when he sold and delivered it to the plaintiff?’ To decide this question one must go back to the circumstances under which the original owner, Mr. Davis, parted with the possession of the car. As I have said, he exchanged it for the Sprite. The inducement for him to do so was not alone the desirability to him of the exchange but also the representation by the other party that the Sprite was his property. That was a false and fraudulent representation as to an existing fact. The contract of exchange was, therefore, a voidable contract. Since Mr. Davis intended to pass the ownership of the Mini, the person who got the car in exchange acquired a title to it, but it was a voidable title, that is, voidable at the option of Mr. Davis. It would have been different if Mr. Davis had parted with the Mini as a result of larceny by a trick, for then no title would have passed…there is no evidence that there was any immediate sale of the Mini between the fraudulent exchange and the sale to the defendant. In fact, all the likelihood is that the car was sold to the defendant by or on behalf of the person who effected the fraudulent exchange. One looks then to see what title, if any, such person conveyed to the defendant. The answer is to be found in s. 23 of the Act, which is as follows:
‘ When the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.’ It is clear from the evidence that Mr. Davis had not avoided the title of the person who sold the car to the defendant at the time of that sale, and it has not been suggested that the defendant bought otherwise than in good faith and without notice of the sellers defect of title.”
The position in the instant case is wholly different. In this case Messrs. Eacrett and Daly did not have a voidable title to the bookcase. They had no title to it. The defendant, accordingly, never had any title to the bookcase. At all times material to this case the title to the bookcase was vested in the estate of Lord Roden.
It follows that the plaintiff is entitled to repayment of the sum of STG£80,000. being monies paid to the defendant upon a consideration which has wholly failed.
It has been fairly and candidly acknowledged on behalf of the defendant that at the time when he agreed to sell the bookcase to the plaintiff the defendant knew that the express purpose for which the plaintiff required the bookcase was to carry out expensive restoration work upon the bookcase in order to put it on view and to sell it.
It has also been acknowledged that the plaintiff spent the sum of STG£31,533.00 on the restoration of the bookcase and that this expenditure was reasonable in the circumstances.
The bookcase has now been returned to its owner and the plaintiff is at a loss of STG£31,533.00.
It had not been disputed on behalf of the defendants that this loss has been a direct consequence of the defendant’s (albeit unwitting) breach of contract.
Prima facie the plaintiff is entitled to recover damages from the defendant in respect of any loss or damage which it has sustained as a result of the defendant’s breach of contract. This is so provided that such losses would reasonably have been within the contemplation of both parties at the time when they made the agreement.
At that time both parties knew, or ought to have known that if the contract failed then any sums expended by the plaintiffs towards restoring the bookcase would be lost. The plaintiff’s financial loss of STG£31,533.00 has flowed directly from the failure of the contract and, prima facie, it is entitled to recover its loss by way of damages from the defendant (See Hadley v. Baxendale [1854] 9 EX 341 and Mason v. Burnighan [1949] 2 K.B. 545).
It has been argued on behalf of the defendant that the loss sustained by the plaintiff in restoring the bookcase was caused or contributed to by the plaintiff’s negligence in failing to check the authenticity of the bookcase before its purchase or before it had been fully restored.
Having considered the evidence of Mr. Synge and in particular the evidence of Mr. Julian Radcliffe who is the proprietor of the Art Loss Register I am satisfied that in January 2000 it was not the practice of reputable dealers in antique furniture and paintings to consult the Art Loss Register before purchasing furniture.
Mr. Fintan Daly had taken the bookcase to Messrs Sotheby’s for the purpose of valuation on the 9th December, 1999. The bookcase was valued by Sotheby’s which is an internationally renowned firm which specialises in the sale and purchase of fine art and furniture.
Messrs Sotheby’s offered to take the bookcase to London and put it up for sale there. Their letter containing this offer did not suggest that an authenticity check should be carried out in respect of the bookcase.
This is by no means conclusive as to practice in 1999 (since Sotheby’s were merely conducting a valuation on the bookcase). However it tends to support the testimony of Mr. Synge and Mr. Radcliffe as to the practice at that time and at the beginning of 2000 and it is that testimony which I accept on that issue.
In the circumstances then I am not satisfied that the defendant has discharged the onus which rests upon him to show that the plaintiff has been guilty of negligence of the kind which would have caused or contributed to its losses.
It follows therefore that the plaintiff is entitled to recover the sum of STG£31,533.00 by way of damages from the defendant.
The plaintiff has also claimed interest arising out of the failure of the defendant to make good the plaintiffs losses between the date when the plaintiff first claimed damages and the date of trial.
The award of interest in these circumstances is discretionary and I do not in the circumstances of this case consider that it should be an appropriate exercise of the court’s discretion to direct payment of interest.
There must therefore be judgment for the plaintiff in the sum of STG£111,533.00.
Roche Ireland Ltd -v- O’Mahoney & Anor
[2010] IEHC 491 Laffoy J
4. The issues
4.1 The primary issues, in my view, which arise on the pleadings and on the facts are the following:
(a) whether the plaintiff is in lawful possession of the material which emanated from the O’Mahony lands and which was incorporated into the Roche premises in the course of the landfill remediation works and landscaping or, alternatively, whether Mr. O’Mahony as the owner of the O’Mahony lands has a claim against the plaintiff for return to him of the said material or to be compensated to its value; and
(b) whether, in making and repeating the communications that the plaintiff acted wrongfully in acquiring, using and retaining that material, the defendants have been, or if they continue to make or repeat such communications will be, liable under any of the torts invoked in the statement of claim, thus entitling the plaintiff to the ancillary injunctive relief it seeks.
4.2 There is a myriad of peripheral issues arising from other allegations made by Mr. O’Mahony in relation to the plaintiff’s conduct. I propose focusing on what I have identified as the primary issues but, as regards the peripheral issues, I think it is appropriate to record the following findings from the evidence.
……
6. Ownership/lawful possession of the material
6.1 As regards the legal principles which govern the issue of entitlement to possession and ownership of the disputed material, that is to say, the subsoil and topsoil from the O’Mahony lands, unfortunately, the relevant principles are identified to a limited extent only in the pleadings and in the submissions made at the hearing, which is understandable because Mr. O’Mahony was not legally represented. While to the lay person the principles may be difficult to understand, having regard to the history of this matter, and, in particular, the conduct of Mr. O’Mahony, which has clearly arisen from a grievance he harbours against the plaintiff, I will endeavour to summarise them in terms from which he will appreciate their implications.
6.2 To recapitulate, the plaintiff’s case is that as a result of the plaintiff having paid TAL and Martins for the works they carried out on the Roche premises and TAL and Martins, in turn, having purchased the material from Milltown, and either having paid for it or accepted liability for payment, the plaintiff, having no knowledge of the provenance of the material or any dispute in relation to it, was a bona fide purchaser for value of the material, lawfully took possession of it and is lawfully in possession of it. As I have recorded, what the plaintiff seeks is a declaration that it is in lawful possession of the material and that it has no liability to Mr. O’Mahony arising from its acquisition. Mr. O’Mahony has pleaded that the defendants are the owner of the O’Mahony lands, that the material was removed from the O’Mahony lands without the defendants’ knowledge or consent, that the plaintiff was at all times aware of the ownership and source of the material, that the defendants are the true and lawful owners of the material and are entitled to its return or to be compensated for its true value. So, the plaintiff is claiming to be in lawful possession of the material and Mr. O’Mahony is claiming ownership and an entitlement to possession. Although the wrong which the defendants allege against the plaintiff is not spelt out in the pleadings, the defendants’ claim must be based in tort for detinue or conversion of the material by the plaintiff.
6.3 The authorities relied on by the plaintiff in its written submission in support of the proposition that the plaintiff was a bona fide purchaser for value without notice of the material and, therefore, was unaffected by the rights of Mr. O’Mahony as owner of the O’Mahony lands all relate to issues concerning land as such (AIB v. Finnegan [1996] 1 ILRM 401; Gannon v. Young [2009] IEHC 511 and Kingsnorth Finance Trust Co. Ltd. v. Tizard [1986] 1 WLR 783). However, as the reference to detinue and conversion in the preceding paragraph indicates, in my view, the legal principles which are applicable to the situation which has arisen here in relation to the material are the legal principles governing possession and ownership of goods. The crucial factor, in my view, is that the material, the topsoil and the subsoil, had been severed from the O’Mahony lands when the plaintiff’s contractors agreed to acquire it. It follows that the relevant legal principles mainly derive from the Sale of Goods Act 1893, as amended by the Sale of Goods and Supply of Services Act 1980 (the Act of 1893). It is with a considerable degree of diffidence that I propose outlining these principles, which were not explored at the hearing. However, the principles, which I will outline and apply, are well established. In circumstances in which the defendants are not legally represented and Mr. O’Mahony has no legal training, having considered the matter carefully, I have come to the conclusion that it is not in his interest to invite further legal argument in this matter, which would merely give rise to further legal costs in circumstances in which the legal position is quite clear.
6.4 Even at common law the material severed from the land would have been regarded as a chattel or goods rather than as land. In Sligo Corporation v. Gilbride [1929] I.R. 351, in which the plaintiff was seeking injunctions to restrain the defendant from removing a wall and to direct the plaintiff to restore it, in the Supreme Court, Kennedy C.J. stated (at p. 362):
“If the ownership of the wall is actually in the plaintiffs, the action is in substance one for damages for trespass and trover and conversion of the stones in the wall, and the injunction is sought as ancillary to that right of property.”
Fitzgibbon J. was of a similar view stating (at p. 366):
“The real cause of action is one of trespass to the plaintiffs’ wall – assuming it to be theirs – and trover and conversion of the materials with which the wall was built”
Moreover, consistent with the decision of Gavan Duffy P. in Scully v. Corboy [1950] I.R. 141, the material comes within the definition of “goods” in s. 62 of the Act of 1893, which defines that term as including “emblements, industrial growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.
6.5 Although as I have stated at the outset, it is not clear in whom the title to the O’Mahony lands is vested, it is not in dispute that Mr. O’Mahony is either alone or jointly with his wife, who was in Court throughout the hearing, or through the medium of the second defendant, the owner of the O’Mahony lands. During the hearing, Mr. O’Mahony indicated that he had evidence of his title in Court. However, he was not asked to produce it. For present purposes, I am assuming that he has good title to the O’Mahony lands either solely or as aforesaid. As such, before the material was severed from the land, he owned it. When the material was severed by Milltown he remained the owner of it, subject to the rights, if any, of Milltown. A fundamental principle of our law of property, whether land or goods, like so many other fundamental rules, is known by its Latin tag: the rule nemo dat quod non habet. What the rule means is that no one can give a better title to property than his own. However, at common law that rule is subject to exceptions. Moreover, while, in the case of goods as defined in the Act of 1893, the rule was repeated in s. 21 of that Act, it is subject to the exceptions set out in succeeding sections thereof, including s. 25(2). Section 25(2) provides:
“Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.”
In s. 62(2) of the Act of 1893 it is provided:
“A thing is deemed to be done ‘in good faith’ within the meaning of this Act when it is in fact done honestly, whether it be done negligently or not.”
6.6 The facts relevant to the application of s. 25(2) to the plaintiff, in my view, are the following. Mr. O’Mahony agreed in principle to sell the lands to Milltown and he allowed Milltown into possession of the lands. Milltown severed the material from the lands while in possession and, accordingly, was in possession of the material, although it remained in the ownership of Mr. O’Mahony until the sale to Milltown would be completed. Milltown sold the material to TAL and Martins, who used it in the landfill capping and landscaping works on the Roche premises in fulfilment of their respective contractual obligations to the plaintiff. TAL paid, or acknowledged the obligation to pay, for the material Milltown sold to it. While it is not clear on the evidence what position Martins has adopted in relation to payment to Milltown, I am assuming it has adopted a position similar to that adopted by TAL. The plaintiff paid TAL and Martins for the works in which they used the material, thereby paying for the material. The plaintiff got actual possession of the material.
6.7 Having regard to those facts, two questions arise in the application of s. 25(2), namely:
(a) Did Milltown get possession of the material with the consent of the plaintiff?
(b) Did the plaintiff receive the material, which was incorporated into the Roche premises, in good faith and without notice of any lien or right of Mr. O’Mahony as the owner of the O’Mahony lands from which the material was severed?
6.8 In relation to the first question, I am satisfied on the evidence that Milltown got possession of the material with the consent of Mr. O’Mahony. It is stated in the letter of 27th November, 2007 from Mr. O’Mahony’s then solicitors and it is pleaded on behalf of Mr. O’Mahony in his counterclaim that Mr. Murphy/Milltown was given possession with a view to doing preliminary works in aid of the development of the O’Mahony lands. It was in the course of that work that the material was severed from the O’Mahony lands. Mr. Murphy’s evidence was that Mr. O’Mahony knew that the topsoil was going to the plaintiff and he was not challenged on that in cross-examination by Mr. O’Mahony, although the thrust of Mr. O’Mahony’s evidence was that he did not know that the material was going off the site. On the basis of the totality of the evidence, I think it is probable that Mr. O’Mahony did know that Milltown was disposing of the material. In any event, I am satisfied that Milltown severed and had possession of the material with the consent of Mr. O’Mahony before the sale to TAL and Martins.
6.9 In relation to the second question, in outlining the factual background earlier, I have referred to the contacts between Mr. O’Mahony and Mr. Liddy, the then managing director of the plaintiff in 2006 and 2007. In April 2007, Mr. O’Mahony notified Mr. Liddy on two separate occasions of his intention to sell the O’Mahony lands. Subsequently, a meeting was held on 4th July, 2007 between Mr. Liddy and Mr. O’Mahony and, on the basis of Mr. Liddy’s evidence, I am satisfied that he agreed to the meeting as a courtesy to a neighbour. At the time, while the proposed development on the O’Mahony lands was of some concern to the plaintiff, the concern was not enough to induce the plaintiff to get involved in the O’Mahony lands. Subsequent to that meeting there were two e-mails from Mr. O’Mahony to Mr. Liddy in July 2007, in the second of which, dated 29th July, 2007, Mr. O’Mahony advised Mr. Liddy that he had “three joint venture proposals for the development of the site and four bids for the outright sale of the site” and that, if he did not hear from Mr. Liddy, there would be little point in keeping him advised of further negotiations with third parties. That was the end of the contact between Mr. Liddy and Mr. O’Mahony until the end of November 2007.
6.10 A meeting arranged at short notice was held between Mr. Liddy and Mr. O’Mahony on 3rd December, 2007. At that stage, Mr. Liddy was not aware of the letter of 27th November, 2007 from Mr. O’Mahony’s solicitors, as the plaintiff’s company secretary was out of the office and it had not been brought to his attention. In any event, Mr. Liddy’s evidence was that Mr. O’Mahony told him that Milltown had been allowed on to the O’Mahony lands on condition that a contract would be signed within three weeks but that on 26th November, 2007 the contract had been returned unsigned. Mr. Liddy’s evidence was that he was completely surprised by Mr. O’Mahony’s statement that Milltown had taken the material illegally. Mr. Liddy’s evidence was that Mr. O’Mahony’s suggestion that the plaintiff return the material came as a real shock to him and was completely unexpected. He passed the problem on to the plaintiff’s legal advisers at that stage.
6.11 A director of TAL, Mr. Martin Hamill, also testified. His evidence was that he was aware that Milltown was doing preparatory work on the O’Mahony lands and was stripping the site. When TAL approached Milltown to purchase the material, he was not aware that Milltown was not the true owner of the soil. On the basis of the evidence of Mr. Hamill, I am satisfied that TAL agreed with Milltown in good faith to purchase the material and received it without any notice of any lien or other right of Mr. O’Mahony in respect thereof.
6.12 Similarly, on the basis of the evidence of Mr. Liddy, I am satisfied that the plaintiff dealt with TAL honestly and in good faith and from the perspective of the plaintiff the material was incorporated into the Roche premises without notice of any lien, right or equity of Mr. O’Mahony in respect thereof. Having regard to what had transpired between the plaintiff and Mr. O’Mahony before September 2007, and the circumstances which prevailed in September 2007, although honesty, as opposed to reasonableness, is the test of good faith under the Act of 1893, in my view, it was reasonable for the plaintiff, acting by Mr. Liddy and other employees of the plaintiff, and for TAL to assume that Milltown had authority to sell the material.
6.13 In summary, having found that Milltown got possession of the material with the consent of the plaintiff and that both TAL and the plaintiff received the material in good faith and without notice of lien or other right of Mr. O’Mahony, by operation of s. 25(2) of the Act of 1893 the plaintiff obtained good title to the material which was incorporated in its premises as against Mr. O’Mahony and is entitled to retain possession thereof. The plaintiff has no liability to the defendants in respect of the material.
6.14 While it is clear that Mr. O’Mahony feels aggrieved that the sale to Milltown fell through after Milltown had sold the material to TAL which was used in fulfilling TAL’s contractual commitments to the plaintiff, he must appreciate that, in the circumstances of the events of September 2007 which I have outlined, the law protects the plaintiff, which acted honestly in its dealings with TAL which, in turn, acted honestly in its dealings with Milltown. It was Mr. O’Mahony who allowed Milltown to go into possession of the O’Mahony lands and to do the pre-development works which created the material and thus facilitated the sale of the material by Milltown to TAL. Whatever, if any, redress Mr. O’Mahony has arising out of the failure of Milltown to complete the acquisition of the O’Mahony lands and from the sale by Milltown of the material can only be pursued against Milltown. It is not a matter for the Court in these proceedings.
Anderson v. Ryan. [1967] IR 34
Henchy J. 35
HENCHY J. :
In the month of January, 1965, an advertisement appeared in a Dublin evening paper for the sale of an Austin-Healey (Sprite) motor-car. A Mr. Edwin Davis saw it and, being interested in cars, he telephoned a number indicated in the advertisement. As a result, two men called to his house with the Sprite. It happened that Mr. Davis had an Austin (Mini) motor-car. The two men seemed to take a fancy to the Mini, as Mr. Davis did to the Sprite, and the upshot of the negotiations was that it was agreed to exchange the Mini for the Sprite. The two men left with the Mini and Mr. Davis found himself with the Sprite. No money had passed; it was a straight swop. The unfortunate part of the transaction was that, unknown to Mr. Davis, the Sprite was a car that had been stolen in Northern Ireland. Within a week detectives descended upon him and took it away. Later a man pleaded guilty in the Dublin Circuit Court to fraudulently obtaining the Mini from Mr. Davis by falsely pretending that he was the owner of the Sprite. Mr. Davis eventually recovered the Mini and has since sold it.
In the meantime, someone approached the defendant in this action, who carries on business as a panel-beater in Cork Street, Dublin, and indicated that he was prepared to sell the defendant a Mini for £200. It was, in fact, the Mini belonging to Mr. Davis. The defendant was interested in the purchase but was not prepared to go through with it until he had obtained a purchaser to whom he could sell the car at a profit. The plaintiff, who is a garage owner in Bray, turned out to be such a person. He visited the defendant’s premises, where the Mini happened to be, inspected the car, and agreed to buy it for £225 plus £22 for panel repairs to it, which the defendant agreed to do. The plaintiff, having made enquiries which
showed that the car was not subject to a hire-purchase agreement, there and then, on the 15th January, 1965, made out a cheque in favour of the defendant for the sum of £244 10s. 0d. to cover the £225 for the Mini and also to cover an account that the plaintiff owed to the defendant for panel beating which had been previously done for the plaintiff by the defendant. The defendant lodged the cheque to his account on the following day. My impression from the evidence is that the defendant had no title to the Mini when that deal was made. But, later, on the same evening as he got the cheque from the plaintiff, the defendant gave a cheque for £200 for the car to someone who purported to be, but was not, Mr. Davis. The defendant proceeded to do the panel beating which he had arranged with the plaintiff to do.
A few days later the plaintiff called to the defendant’s premises, paid the defendant the sum of £22 for the further panel beating, collected the registration book (which showed Mr. Davis to be the owner) and took the Mini away. He then placed it on display in the forecourt of his garage in Bray as a second-hand car for sale. Once again the arm of the law reached out. Two detectives called and said that the Mini was the subject matter of criminal proceedings. They told the plaintiff that he would have to allow them to take it away and that if he did not give it to them they would return with a warrant. He let them take it away. That is the last he saw of the car or his £247. The plaintiff recovered judgment in the Circuit Court against the defendant for the sum of £247, and the defendant has appealed against that judgment.
The plaintiff rests his case on ss. 12 and 21 of the Sale of Goods Act, 1893. In support of his contention that he is entitled to recover the £247 as money paid upon a consideration that has wholly failed, he relies upon sub-s. 1 of s. 21 which is as follows:”Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.”
In the present case, it is clear that, if the defendant was not the owner of the Mini at the time he sold it to the plaintiff, the plaintiff got nothing for his money and he would be entitled to recover the £247 as money paid upon a consideration that had wholly failed. Counsel for the plaintiff says that the car was sold on the 15th January, 1965, when the plaintiff inspected it, agreed on the price and gave a cheque for £244 10s. 0d.; and that the defendant then had no title.
In my view, the flaw in that argument is that it confuses an agreement to sell with a sale. The distinction is made clear in s. 1 of the Act of 1893, which is in the following terms:”(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. There may be a contract of sale between one part owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.”
The transaction between the plaintiff and the defendant on the 15th January, 1965, was no more than an agreement to sell. The property in the car did not pass. It was plainly the intention of the parties that the property would not pass until the panel beating had been done by the defendant and the balance of £22 had been paid; until that had happened the agreement to sell would not have merged into a sale. Sect. 21, sub-s. 1, has reference only to a case “where goods are sold,” i.e. where there has been a sale of goods. It matters not for the purposes of the sub-section if the seller is not the owner at the time of the agreement to sell. He may mend his hand between then and the sale. But if at the time of the sale (i.e. when the property passes or is due to pass) the seller is neither the owner nor a person selling under the authority or with the consent of the owner, and in fact has no title whatsoever, the buyer would be entitled to claim the purchase money back on the ground that he has paid it on a consideration that has totally failed, subject to the proviso that the owner may be estopped by his conduct from denying the seller’s authority to sell. Sect. 21, sub-s. 1, is applicable in the present case only if I hold that the defendant had no title to transfer ownership when he handed over the car.
The plaintiff also rests his case on s. 12 of the Act to the extent that it provides that in a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is (a) an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods, and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass, and (b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods. The circumstances of this case do not show a contrary intention, so the plaintiff would be entitled to damages for breach of an implied warranty if he shows that the true legal position is that, when the car was handed over to him, he did not get the property in it together with the ancillary right of quiet possession.
Therefore, the central question which decides the points raised under both s. 12 and 8. 21 is:”Did the defendant have a good title to the car when he sold and delivered it to the plaintiff?” To decide this question one must go back to the circumstances under which the original owner, Mr. Davis, parted with possession of the car. As I have said, he exchanged it for the Sprite. The inducement for him to do so was not alone the desirability to him of the exchange but also the representation by the other party that the Sprite was his property. That was a false and fraudulent representation as to an existing fact. The contract of exchange was, therefore, a voidable contract. Since Mr. Davis intended to pass the ownership of the Mini, the person who got the car in exchange acquired a title to it, but it was a voidable title, that is, voidable at the option of Mr. Davis. It would have been different if Mr. Davis had parted with the Mini as a result of larceny by a trick, for then no title would have passed. Authority for the conclusion that what passed on the exchange was a voidable title is to be found in Cundy v. Lindsay (1); Robin & Rambler Coaches, Ltd. v. Turner (2); Central Newbury Car Auctions Limited v. Unity Finance Ltd. (3) and Archbold on Criminal Pleading (36th ed.) para. 1497.
There is no evidence that there was any intermediate sale of the Mini between the fraudulent exchange and the sale to the defendant. In fact, all the likelihood is that the car was sold to the defendant by or on behalf of the person who effected the fraudulent exchange. One looks then to see what title, if any, such person conveyed to the defendant. The answer is to be found in s. 23 of the Act, which is as follows:”When the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.” It is clear from the evidence that Mr. Davis had not avoided the title of the person who sold the car to the defendant at the time of that sale, and it has not been suggested that the defendant bought otherwise than in good faith and without notice of the seller’s defect of title.
I am satisfied, therefore, that the defendant acquired a good title to the car and that he in turn passed a good title to the plaintiff. It is unfortunate that the plaintiff has been deprived of a car of which he was the rightful owner, but the fault for that does not lie with the defendant. As the plaintiff may wish to recoup his loss in other proceedings, I express no view on the legal interpretation to be put on the events that led to him being permanently deprived of a car that was lawfully his. I go no further than saying that no liability attaches to the defendant for the plaintiff’s loss and that the plaintiff’s claim must be dismissed. The order of the Circuit Court will be reversed.
Kulkarni v Manor Credit (Davenham) Ltd
[2010] EWCA Civ 69 [2010] 2 Lloyd’s Rep 431, [2010] EWCA Civ 69, [2010] 2 All ER (Comm) 1017
“Disposition” is defined in section 29(1):
“”disposition” means any sale or contract of sale (including a conditional sale agreement), any bailment or (in Scotland) hiring under a hire-purchase agreement and any transfer of the property in goods in pursuance of a provision in that behalf in a hire-purchase agreement, and includes any transaction purporting to be a disposition (as so defined) and “dispose of” shall be construed accordingly.”
For these purposes, Manor Credit is the creditor, Gwent the debtor, and Dr Kulkarni the private purchaser. There is no dispute that Dr Kulkarni is a private purchaser in good faith without notice. What is required, however, for section 27 to pass a good title to a private purchaser is a “disposition” by the debtor Gwent at a time when it is a debtor, that is to say a hirer under its hire-purchase agreement with Manor Credit which it entered into on 14 March 2008. Disposition is defined as a sale or a contract of sale or a transaction purporting to be a sale or contract of sale.
Dr Kulkarni’s original contract of sale was of course entered into well before Gwent became Manor Credit’s debtor. However, Mr James Ross, who appears for Manor Credit, does not rely on that contract as a relevant disposition, because he concedes that section 27 would give relief to a private purchaser for the latest relevant “disposition”, even if there had been an earlier one at a time before section 27 became applicable. Thus he concedes that where an earlier contract of sale, which does not itself amount to a sale, fructifies later into a sale, when there is a transfer or purported transfer of property, and that later sale falls within the relevant window of section 27, then that will count as a disposition within section 27, even though the earlier contract of sale fell outside that window. He had earlier made the same concession at trial, which is why the judge had said (at para 13):
“it is not so important to look at the earliest date on which there could be a contract of sale or a sale, but to look to the latest date”.
Another possible rationalisation is that for these purposes “contract of sale” means such a contract as amounts to a sale, as will occur (see above) where the parties intend the contract to transfer the property in the car there and then. (It might be said, however, that that makes the words “or contract of sale” redundant; and it may be important in another context to consider whether a purchaser is a “private purchaser” at the earlier time of an agreement to sell: see section 29(2) and GE Capital Bank Ltd v. Rushton [2005] EWCA Civ 1556, [2005] 1 WLR 899.) Another possible rationalisation is that nothing counts as a relevant disposition until a particular motor vehicle has been identified. That is because section 27 is concerned with property and title in a particular identifiable motor vehicle: see “the property in the vehicle” and “a purchaser of the vehicle in good faith”. On that basis, there could in any event be no “disposition” until the car labelled as VK08 EVF had been (irrevocably) identified with the goods to pass under Dr Kulkarni’s contract. A third rationalisation may be that the definition of “disposition” provides true alternatives, so that as long as there is something which counts as a disposition within the statutory window, then section 27 may work its power.
Be that as it may, Mr Ross made it plain that his concession was made. If there was a passing of property or purported passing of property at a time when Gwent was a hirer of the car from Manor Credit, then Dr Kulkarni would obtain a good title under section 27; but if property had purportedly been transferred to Dr Kulkarni before that time, then there would be no assistance to Dr Kulkarni to be derived from that section. Thus there was no concession in relation to anything which occurred after Dr Kulkarni’s agreement had fructified into a sale (or purported sale). Once there had been a final transfer of property under his agreement with Gwent, it was too late to talk of any further “disposition” under the 1964 Act.
All this explains why it became important to identify the latest moment when a mere agreement to sell fructified into a sale (or at least a purported sale) under which transfer of the property in the car was intended to be transferred. If that was before Gwent became Manor Credit’s debtor under their hire purchase agreement, then the disposition in question fell outside the protection of section 27 and Dr Kulkarni received no aid from it to establish a better title than Manor Credit’s.
In the circumstances, the question became when Gwent and Dr Kulkarni intended property in the car to be transferred to Dr Kulkarni, a question of sale of goods law.
Transfer of property under the SGA 1979
Manor Credit’s case was that the judge was right to say that such transfer took place by 11 March and that rule 5(1) of section 18 of the SGA 1979 provided the answer. Dr Kulkarni’s case, however, was that there was no intention to transfer the property until delivery itself. As of 11 March there had been no unconditional appropriation: there could be no such appropriation, nor any relevant assent on the part of Dr Kulkarni at a time when Gwent did not have any property in the car. Dr Kulkarni could not be taken to assent to the appropriation of a car in which Gwent had no property to transfer. Alternatively, the car was not in a deliverable state without its registration plates being attached to it. In any event, rule 5(1) was only a prima facie rule. There could be no intention to pass property in a car in which Gwent had no property. In such circumstances, property would not pass until delivery (see rule 5(2)). That was in any event the better view of what parties to such a contract of sale should be taken to intend, namely that property passes with delivery.
I refer to the Appendix to this judgment where relevant provisions of the SGA 1979 are collected. In brief, however, we are concerned in this case with a contract for the sale of unascertained or future goods. In such a case, no property is transferred unless and until the goods are ascertained (section 16). Where, however, there is a contract for the sale of specific or ascertained goods, property in them is transferred at such time as the parties intend it to be transferred, and for these purposes regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case (section 17). (In terms section 17 appears to apply only to contracts for the sale of specific or ascertained goods, but in practice it has come to be applied to contracts for the sale of unascertained goods as well, once they have become ascertained.) The statute also contains working rules for discovering that intention “Unless a different intention appears”. Those rules are set out in section 18. The rules with which we are concerned in this case are rules 5(1) and (2).
Rule 5(1) for present purposes requires (i) “goods of that [ie the contractual] description”; (ii) “in a deliverable state”; (iii) which have been “unconditionally appropriated to the contract” by the seller; (iv) “with the assent of the buyer”, which assent may be given either before or after the appropriation. No one has argued here for a prior assent by Dr Kulkarni. There is no suggestion that VK08 EVF did not comply with the contractual description. The three matters which it is therefore necessary to consider are (ii), (iii) and (iv).
Rule 5(2), which until the addition of rules 5(3) and 5(4) pursuant to the Sale of Goods (Amendment) Act 1995 was the last of the rules to be set out under section 18, represents a form of long stop prima facie rule, which is that, save where the seller reserves a right of disposal, delivery to the buyer (or to a carrier or other bailee or custodier for transmission to the buyer) amounts to an unconditional appropriation of the goods. For these purposes there is no need for there to be any assent by the buyer, the rule presupposes that the goods are in a deliverable state without making that a condition of the intention to transfer property, and the goods are deemed to have been unconditionally appropriated, whether they have been or not. There is of course no theoretical need for transfer of property and delivery to coincide, just as there is no theoretical need for delivery and payment to occur at the same time, or of property and risk to pass at the same time. However, in the absence of a right of disposal where the price has not yet been paid, and in the absence of any earlier transfer of property, delivery is likely to be the time when parties would intend property to pass.
The passing of risk is dealt with in section 20. Unless otherwise agreed, the goods remain at the seller’s risk until property is transferred: upon transfer risk passes to the buyer as well, whether delivery has been made or not. But not in the case of a consumer sale. By an exception first introduced pursuant to the Sale and Supply of Goods to Consumers Regulations 2002, section 20(4) of the SGA 1979 now provides that where the buyer deals as consumer, the goods remain at the seller’s risk until delivery to the consumer. That is presumably to protect a consumer to whom property and risk may have passed, but to whom delivery has not yet been made.
Deliverable state
The definition of “deliverable state” is contained in section 61(5) of the SGA 1979, viz “such a state that the buyer would under the contract be bound to take delivery of them”. It is true that the absence of the registration plates was in one sense a trivial matter which certainly did not fundamentally affect the condition or the quality of the car in question. However, it could not be lawfully driven by Dr Kulkarni without them. If Gwent had proposed delivery of the car to Dr Kulkarni without putting them on, he would have said that the car was of no use to him without its plates. The judge seems to have considered that there was a substantial question as to when in this case the plates were attached to the Mercedes, for in para 16 he said that –
“The only thing that might be said in respect of this Mercedes was that until it actually had a number plate affixed to it, it might not be said to be in a deliverable state, but I reject that argument. It seems to me that it would be in a perfectly deliverable state without actually having a number plate affixed to it, even though actually at the time that that event arises Gwent would not in fact have been able to deliver it.”
The judge therefore contemplated that, without registration plates attached, Gwent would not even have been able to deliver the car. Whether that is so or not, for dealers are, I believe, entitled to transport cars with their own dealer plates attached, the judge found that without its individual registration plates Gwent would not have been able to deliver the car. Either for that reason or because in any event Dr Kulkarni would not have been able to drive the car without its registration plates attached, which is possibly what the judge meant by his observation, and in circumstances where there was no evidence that, at any material time prior to the time of delivery, the car had its registration plates attached, the car was not shown to have been in a deliverable state as of 11 March (even if at that time it might have become ascertained goods by being appropriated to the contract). In my judgment, Dr Kulkarni would not have been bound to have taken delivery of the car without registration plates attached.
I would therefore be prepared to hold that there is no evidence that rule 5(1) was fulfilled in this respect before Gwent became Manor Credit’s debtor under their hire purchase agreement. In such a case, Dr Kulkarni could establish that he had become a purchaser of the car under a disposition which first took place at the time of delivery, and thus when Gwent was in a position to transfer the property in the car under the nemo dat exception contained within section 27. That is enough to entitle Dr Kulkarni to judgment in his favour and thus to succeed on his appeal.
On behalf of Dr Kulkarni, Mr Christopher Purchas QC had prepared a skeleton argument which sought to argue in addition that the car was not in a deliverable state for reasons unconnected with its physical state and which resided in the fact that at what might otherwise have been the time intended for transfer of the property in the car Gwent lacked any title to transfer. However, at the appeal hearing he abandoned that wider argument, in my judgment correctly. See, for instance, Underwood Ltd v. Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343 (CA) at 345 – “It depends on the actual state of the goods…” per Bankes LJ; see also Benjamin on Sale, 6th ed, 2002, para 5-023, “The goods must therefore be in a physical condition in which the buyer can take delivery and in which it has been agreed that he shall take delivery under the contract.”
Unconditional appropriation and assent as indicators of intention
If that conclusion about deliverable state be wrong, the next question which would arise would be whether there was an unconditional appropriation of the car with the assent of Dr Kulkarni, ie factors (iii) and (iv) above. The judge considered that there had been such an appropriation, and that therefore property in the goods had been intended to be transferred to Dr Kulkarni by at latest 11 March. He said (at para 17):
“Once the identity of the vehicle had been obtained by obtaining a number plate, or rather a registration number of the vehicle, because that must refer to a specific vehicle, then those goods are unconditionally appropriated to the contract, and it is done by the seller with the implied consent of the buyer. At the very latest the buyer assents to that by insuring the vehicle on 11th March. I have to say that that seems to me to be an unassailable argument.”
Subject to the ultimate question of intention, for of course rule 5(1) is only a prima facie rule, the judge’s proposition appears to have a rough good sense to it. Authority, however, suggests that the rule is not after all so very easily fulfilled, at any rate as an indicator of the parties’ intentions. This is in part because the statutory presumptions are not difficult to rebut. As Diplock LJ said in Ward v. Bignall [1967] 1 QB 534 at 545 –
“in modern times very little is needed to give rise to the inference that the property in specific goods is to pass only on delivery or payment.”
A number of cases illustrate the flexibility of the law. Thus in Varley v. Whipp [1900] 1 QB 513 the buyer bought, sight unseen, a second hand reaper under a certain description, viz that it was nearly new as having been used to cut only about 50 to 60 acres. The reaper was sent to the buyer by rail, and on its arrival the buyer complained that it did not comply with its description, being old and mended. The seller sued for the price. The divisional court treated this contract for the sale of specific goods under section 17, not under section 18, and held that property could not have been intended to pass in goods which did not comply with their description until they had been inspected and accepted, which the reaper had not been. The seller therefore failed in his action. In the present case, there was no problem about the car’s description, but there was a breach of the implied condition as to title.
In Noblett v. Hopkinson [1905] 2 KB 214 the buyers bought and paid for a half gallon of beer from a publican. The purchase was made on a Saturday and the beer was drawn off and put aside for delivery on the Sunday. The publican was proceeded against for selling liquor on the Sunday. The issue was whether there had been a transfer of property in the beer on the Saturday. The magistrates found that transfer of the property had been effected on the Saturday. The divisional court however held that that was wrong in law, as property had not been transferred until the Sunday. Lord Alverstone CJ said that the correct inference was that what was done by the publican was under his own responsibility and that “if the bottle of beer had been broken during the Saturday night, other beer would have had to be supplied to the men on the Sunday morning” (at 219). There was no sufficient appropriation.
In Ollett v. Jordan [1918] 2 KB 41 the sale was of herrings, despatched by rail by a seller in Hull to a buyer in Eastbourne. The issue under the Public Health Act 1875 was whether the seller had “exposed for sale” the herrings in an unmerchantable condition. They were in good condition on despatch, but bad on arrival. If property had been transferred on despatch, the seller was not guilty. The question was therefore whether there had been such an appropriation as would transfer the property. It was held that as the buyer had a right to inspect and reject the herrings, property had not passed on despatch, and the seller’s acquittal by the magistrates was reversed on appeal.
The famous case of Rowland v. Divall [1923] 2 KB 500 (CA) concerned a car which had been sold by a seller who had no title to it, for it turned out to have been stolen. After the buyer had used the car for some time, it was recovered by the police for its true owner, and the buyer sued the seller to recover the price. He was held by this court to have been entitled to do so, on the ground that there had been a total failure of consideration, since the seller had contracted to transfer the property in the car but had failed to do so. Bankes, Scrutton and Atkin LJJ agreed in the result. Atkin LJ said (at 506):
“He paid the money in order that he might get the property, and he has not got it. It is true that the seller delivered to him the de facto possession, but the seller had not got the right to possession and consequently could not give it to the buyer.”
He also (controversially) said “there can be no sale at all of goods which the seller has no right to sell” (at 506), but I do not rely on that.
Finally, in Carlos Federspiel & Co SA v. Charles Twigg & Co Ltd (1957) Ll Law Rep 240 the buyer paid in advance for goods to be shipped. The seller failed before shipment, and his receiver refused to ship without a second payment. It was held that he was entitled to do so, since there had been no appropriation and thus as yet no transfer of property. Pearson J reviewed the law from the early nineteenth century. Among the cases which he examined was Mucklow and Others (Assignees of Royland) v. Mangles (1808) 1 Taunt 318, where a buyer had paid for the whole cost of a barge to be constructed, and his name had been painted on it, but the seller sold the barge to a third party and it was held that property had not yet been transferred to the original buyer. Another case was Wilkins v. Bromhead and Hutton (1844) 6 M&G 963, where the buyer had assented to an appropriation of a greenhouse which had been constructed for him: the buyer remitted the price to the seller and asked him to keep it for him. That was a clear case, but the judgment of Tindal CJ is interesting for the following observation (at 974):
“If a purchaser’s assent to the appropriation was shown to have been obtained by misrepresentation, it seems to me it would probably be held to be no assent at all.”
So, in the present case, if Dr Kulkarni’s insurance of the car is to be taken, as the judge thought, as an assent to Gwent’s appropriation, it might be said that such an assent was given on the basis of the implied representation and understanding that at that time Gwent had the property in the car which it would need to have if it was to transfer that property which it had promised to transfer at a time when the agreement to sell matured into a sale. On that basis, Dr Kulkarni’s assent would be no assent.
On the basis of his review of such cases Pearson J restated the following principles at 255/6:
“Therefore the element of common intention has always to be borne in mind. A mere setting apart or selection of the seller of the goods which he expects to use in performance of the contract is not enough. If that is all, he can change his mind and use those goods in performance of some other contract and use some other goods in performance of this contract…
Secondly, it is by agreement of the parties that the appropriation, involving a change of ownership, is made…
Thirdly, an appropriation by the seller, with the assent of the buyer, may be said always to involve an actual or constructive delivery. If the seller retains possession, he does so as bailee for the buyer…
Fourthly, one has to remember Sect. 20 of the Sale of Goods Act, whereby the ownership and the risk are normally associated. Therefore as it appears that there is reason for thinking, on the construction of the relevant documents, that the goods were, at all material times, still at the seller’s risk, that is prima facie an indication that the property had not passed to the buyer.
Fifthly, usually but not necessarily, the appropriating act is the last act to be performed by the seller…But if there is a further act, an important and decisive act to be done by the seller, then there is prima facie evidence that probably the property does not pass until the final act is done.”
Applying those principles, Pearson J concluded that (1) the intention was that the ownership should pass on shipment because shipment was emphasised as the decisive act; (2) there was nothing in the parties’ correspondence to indicate any change in that intention; (3) there was no actual or constructive delivery; (4) there was no suggestion of the goods being at the buyer’s risk before delivery; and (5) there was no delivery or sending for delivery. Therefore property had not passed.
That was an international sale of goods in commerce. The present case is the standard case of the domestic sale of a car to a consumer. It has to be acknowledged that such a purchaser who has paid up front for a car yet to be sourced would be protected by obtaining title to a car, once identified and sufficiently appropriated, in the dealer’s showroom or garage, were the dealer to become insolvent. Nevertheless, the present case shows that there are equal dangers in losing the protection of section 27 if property passes too early. I do not think that one can argue backwards from the consequences in any particular case to the prospective intentions of the parties. In the meantime the standard provision in a consumer case that risk remains with the seller until delivery will protect the buyer against all risk except insolvency. As to that risk in the present case, the fact is that Dr Kulkarni was prepared to trust Gwent with his cash at a time when he had no possibility of having property in a car yet to be sourced or ascertained.
Mr Purchas submitted that in the case of the sale of a car to a consumer property is in general not intended to pass until delivery, and I think that there is force in that submission, at any rate where as here the contract is not for the sale of a specific car and the buyer has never seen the car. Generally speaking, it will be on delivery that the buyer will be able to inspect the car, if new, for its specification, and if second-hand, for any work which the dealer has been asked to do to it. It is on delivery that the buyer will be handed the car’s log-book or registration document (not a matter considered by the judge). Although such a document speaks to the car’s keeper, not its owner, it is I think well recognised that a legitimate buyer would not readily assent to complete the sale of a car without getting its log-book. It is at latest on delivery that the dealer will have ensured that he is paid. It is, I would think, for and from the time of delivery that the buyer insures the car. The special rule as to risk, although perhaps designed to protect a consumer even where property may have passed before delivery, is apt for a passing of property on delivery. The consumer will have little knowledge of the rules of section 18 of the SGA 1979, but he or she will have in their mind the adage that possession is nine points of the law, and that points to the time of delivery as well. Moreover, such a result seems on the whole to fit into the apparent circumspection of the law, indicated by the review conducted by Pearson J, about any assumption that the parties are too readily supposed to intend that property passes under rule 5(1).
I would therefore have wanted some good evidence that the parties in this case had intended the property in the Mercedes to pass prior to delivery before solving the issue on the basis of the rule 5(1) presumption. The judge thought that he had that evidence above all in Dr Kulkarni’s insurance of the car, identified as it would have to be by its registration number. However, as I have pointed out above, there is no finding as to the time from which Dr Kulkarni insured cover for the car. If, as I would in the absence of evidence infer, Dr Kulkarni only insured it from the time of its expected delivery, then this matter of insurance, so far from pointing towards a solution in terms of rule 5(1), actually points against it.
Moreover, on the facts of this case, Gwent never had property in the car to transfer to Dr Kulkarni. It knew that it did not, and it knew that it had no intention of fulfilling its contract to transfer property in the car to its buyer. It knew therefore that any assent by Dr Kulkarni to the appropriation of a car in which Gwent had no property had been procured by its own dishonest pretence. Dr Kulkarni of course did not know the truth of the situation, but it could not be supposed on any objective basis that he would assent to an appropriation to him and thus to the transfer of title there and then in respect of a car in which his seller, Gwent, lacked title. Could a seller who knows that he lacks the property in goods which he appropriates to a contract reasonably think that his buyer would assent to such an appropriation as the means and moment of transferring property? In my judgment, no.
It seems to me that in such a situation, rule 5(1) is unlikely to provide a solution to the question of the parties’ intentions. The rule assumes that the goods which a seller proposes to appropriate unconditionally to his contract, so that with the assent of his buyer property should be transferred then and there to that buyer, are goods in which the seller has property with which to perform his section 12(1) obligation. If, therefore, a seller lacks property in the goods, his appropriation to the contract of goods in which he has no property, a fortiori where he knows he has no property, is unlikely to be any more reliable as an indication of his or the parties’ intentions than his appropriation of goods which are not in a deliverable state, or of goods which are not goods of the contract description.
A seller might in some circumstances not know that he lacks property in the goods, and therefore in his ignorance he might intend to transfer a property that he does not have. That however is not this case. Gwent knew that it had no property, and for his part Dr Kulkarni could not be thought of as intending to assent to an appropriation which his seller knew could not transfer to him the property which, if rule 5(1) were to be applied, would be required to be transferred.
In such circumstances, it seems to me that the agreement to sell would only mature into a sale, or purported sale, with actual delivery of the goods itself. That would reflect the presumption in rule 5(2), which focuses on delivery, deems an unconditional appropriation then to occur, and has no requirement for the buyer’s assent. Thus, I should not be thought of as saying (despite the great authority of anything falling from Atkin LJ) that a seller cannot complete a sale if he lacks full rights of ownership in the goods. Where he lacks full title, he may well transfer such property as he has, such as a possessory title. As it happens, in the present case there is no finding even as to whether Gwent had possession of the car on 11 March.
Such a solution would also reflect the principles derived by Pearson J from his examination of the topic in Federspiel. Thus in terms of those principles I would say that: (1) delivery was here looked to as the decisive act which would transfer both possession and property; (2) there was nothing in the parties’ communications which indicated an intention otherwise; (3) there was no actual or constructive delivery, no sense in which Gwent became the bailee of Dr Kulkarni’s car; (4) the car was not at Dr Kulkarni’s risk before delivery; and (5) in the circumstances of Gwent’s fraud the parties should not be taken to intend anything prior to actual delivery of the car to turn their agreement into a sale.
It is not that Gwent may not have appropriated the car to the contract and done so unconditionally. It is rather that in the circumstances of the case such an appropriation should not be regarded, under a merely presumptive rule, as intended to transfer the property in the car to Dr Kulkarni.
Conclusion
It follows that, for all or some of those reasons, the terms of section 27 applied to this case, and Dr Kulkarni is entitled to judgment. His appeal must therefore be allowed.
Pacific Motor Auctions Pty. Limited v Motor Credits (Hire Finance) Limited (Australia)
[1965] UKPC 6 [1965] AC 867, [1965] 2 All ER 105, [1965] 2 WLR 881
Mr. Street, for the defendant, has contended
that even if the plaintiff had a good title to the
cars, it cannot dispute the effectiveness of this
transaction, and cannot assert its title against
the defendant. He did not rest his argument on
s. 5 of the Factors (Mercantile Agents) Act 1923,
feeling that there was some difficulty in contending
that this was a sale, “in the ordinary
course of business of a mercantile agent”. But
he contended that, in accordance with common law
principles, the plaintiff must fail, and that
his argument is applicable, whether or not the
sale was “in the ordinary course of business”.
40 The authorities relating to the circumstances in
which an owner is prevented from asserting his
title to goods against one who has dealt with a
person in whose possession the plaintiff has
allowed the goods to be, are not all consistent
in their statement of the principles applicable,
or in their statement of the basic concepts upon
which the principles are founded. This may be
seen by comparing the two Privy Council decisions
of Mercantile Bank of India Limited -v- Central
Bank of India Limited, 193# A.C. 2#7, and
Commonwealth Trust -v- Akotey, 1926 A.C. 72.
The difficulties of the subject are illustrated
also by the case of Farquharson -v- King, 1902
A.C. 325, in which the House of Lords reversed
a unanimous decision of the Court of Appeal, and
in which Lord Holsbury said that but for respect
for those who had taken a different view, he would
have said that it was M a particularly plain case
in which no difficulty whatsoever arises”. In
Farquharson -v- King, 1902 A.C. 325, at 330, Lord
Halsbury held that there was, in that case, no
estoppel, and he went on to say of the plaintiffss
n …..if they had represented their clerk,
Capon, to be invested with disposing
power, and (note the importance of the
next sentence) if anybody, supposing
Capon to be invested with that power, had
acted upon it to his own prejudice, then
undoubtedly estoppel would have arisen.-
The person who had improperly and negligently
allowed Capon to be apparently so
invested with authority would be estopped
from denying that Capon had authority”.
If the principle as stated in Commonwealth
Trust -v- Akotey, 1926 A.C. 72 at 76, and quoted
in Mercantile Bank of India Ltd. -v- Central Bank
of India Limited, 1938 A.C. 28? at 293, is
applied to the facts of the present case, it
seems that the plaintiff would fail. That statement
wassnt
To permit goods to go into the possession
of another, with all the insignia of possession
thereof and of apparent title, and
to leave it open to go behind that possessession
so given and accompanied, and upset
a purchase of the goods made for full value
and in good faith, would bring confusion
into Mercantile transactions, and would
be inconsistent with law and with the
principles so-often affirmed, following
Lickbarrow -v- Mason.”
It is to be noticed that the principle as
there stated requires that the purchase in question
should be for full value and in good faith, but
course of business. But after the citation of that
passage, Their Lordships went on, in the Mercantile
Bank case, to say that “it is impossible to accept
without qualification as a true statement of law
the principles there broadly laid down.” They
referred with approval, to earlier authorities,
and particularly to the statement of Blackburn J.
in Swan -v- North British Australasian Co., 2 H.
& C. 175 at 182, to the effect that it is
10 necessary if an estoppel of this kind is to
operate, that there must have been on the part of
the person alleged to be estopped, a duty owed to
the person who has been misled “or to the general
public of whom the person is one”, and a neglect
of that duty, which neglect was the “proximate
cause” of the person being misled.
In the case just discussed, and in other
cases, the problem is considered in language
appropriate to the doctrine of estoppel. But is
20 has not always been so considered as will appear
in the references to be made later to-the recent
case of Eastern Distributors Limited -v- Goldring,
(1957) 2 Q.B. 600.
It can be taken as settled that the much
quoted statement of Ashhurst J. in Lickbarrow
-v- Mason,(1737) 2 T.R. 63, is too wide. That
statement was, “Wherever one of two innocent
persons must suffer by the acts of a third, he
who has enabled such third person to occasion the
30 loss must sustain it.” Whilst this is too widely
stated, there have been differences of opinion in
more modern cases, as to the basis upon which the
Court must determine who it is who must bear the
loss. But in the judgment given by Devlin J. for
the Court of Appeal, in Eastern Distributors
limited -v- Goldring, (1957) 2 Q.B. 600, the
whole matter is discussed at some length. But
before adverting to the principles laid down by
that judgment, it is desirable to make some
40 reference to the manner in which the matter was
debated by counsel in their addresses. For the
defendant, Mr. Street sought to place reliance
on s. 2& of the Sale of Goods Act, but he contended
also that, independently of that provision,
the plaintiff must fail. Mr. Rath, for
the plaintiff, has submitted that the defendant
cannot rely on s.28, because it is not pleaded
and because, in any event, it is untenable. He
contends that the possession of Motordom after
it sold the cars to the plaintiff, was a
possession as bailee and not as seller, and
that in such a case s. 2& does not apply. See
Eastern Distributors Limited -v- Goldring,(l957)
2 Q.B. 600 at 614; Staffordshire Motor
Guarantee Limited -v- British Wagon Co. Limited,
(1934) 2 K.B. 305.
In my opinion, this part of the case is to
be determined upon the application of relevant 10
common law principles, recognised but not fully
enunciated in the Sale of Goods Act, which
remain applicable notwithstanding the enactment
of the Factors Act and of s. 2$ of the Sale of
Goods Act. S.26 (1) of the latter Act declares
the general rule that the buyer gets no better
title than the seller had, but adds “unless the
owner is by his conduct precluded from denying
the seller’s authority to sell”. This subsection
is expressed to be “subject to the pro- 20
visions of this Act”. In sub-section (2),
reference is made to the Factors Act. There
appears then to be a statutory recognition of
a principle that an owner may be precluded by
conduct, from denying the authority to sell of
the actual seller, in cases which are not governed
by s. 5 of the Factors Act or by s. 2& of the Sale
of Goods Act, and that it is not only in cases so
governed that the owner may have to suffer the
loss caused by an unauthorised sale. For if this 30
is not so, the words in s. 26 (l) beginning with
the word “unless” would be unnecessary. The
applicability of the general rule enacted by
s.26 (1) would be, without those words, subject
to s. 2& and to the provisions of the Factors
Act. S. 26(1) does not, however, contain any
definition of the circumstances in which an
owner is to be regarded, by his conduct, as precluded
from denying the validity of the transaction.
This is left to be worked out under the 40
general law. See s. 4 (2) of the Act.
In Eastern Distributors Limited -v- Goldring
the conclusion is reached that the exceptions
recognised by the common law, in relation to
contracts for the sale of goods, to the general
principle expressed in the maxim nemo dat quod
non habet, were based upon grounds of mercantile
convenience, and that a buyer in good faith from
a person with apparent authority to dispose of the
goods, does not merely acquire a title by estoppel,
based on an implied representation by the owner
that there was a right of disposition. He acquires
a real title, good against the world. Davlin J.
said that the solution of the difficulty created
when an agent has been held out or represented as
having an authority to sell which he has not, in
fact, got, might have been found by the application
10 of the doctrine of estoppel, “but in fact the Courts
of common law approached the problem of the unauthorised
sale from a different angle” (at p.607).
His Lordship supports the foregoing propositions
by reference to the cases of Pickering -v- Busk,
15 last 37: and Fuentes -v- Montis, L.R. 3 C.P.
26$ at 276j and to the language used in the
provisions based on the common law, contained in
the Factors Acts and in s. 2$ of the New South
Wales Sale of Goods Act, which he says “is not the
20 language of estoppel”. He states that the reason
for the Factors Act was that it was held that the
relevant common law principle did not apply to
pledges but only to sales. He goes on to say that
where an agent is entrusted with goods, and where
the only evidence of apparrent authority is the
possession of the goods, the position must now be
treated as governed by the Factors Acts which, in
this respect, “codify as well as amplify the
common law”. But there may be cases where there
30 is evidence, other than mere possession, showing
that a man has been clothed with apparent ownership
or apparent authority to sell, and to these
the common law principle is still to be applied,
and it applies to any form of representation or
holding out of apparent ownership or the right
to sell (at p.6lOl, and this principle is preserved
by s. 26(1) of the Sale of Goods Act. He
then states, at p. 611:
“This section expresses the old principle
40 that apparent authority to sell is an
exception to the maxim nemo dat quod non
habet; and it is plain from the wording
that if the owner of the goods is precluded
from denying authority,, the buyer will in
fact acquire a better title than the seller.
We doubt whether this principle, which is
sometimes referred to- — for example by
law estoppel, ought really to be regarded
as part of the law of estoppel. At any
rate it differs from what is sometimes
called ‘equitable estoppel* in this vital
respect, that the effect of its application
is to transfer a real title and not merely
a metaphorical title by estoppel.”
I think it would be difficult to reconcile
the statements that have been made in some of the
earlier decisions, with this analysis of the matter 10
set out in the judgment of Devlin J. But as I do
not think that the earlier decisions of high
authority are directly applicable to the facts
of the present case, I consider that it is right
for me to accept this recent considered judgment
of the Court of Appeal as a correct exposition of
the relevant principles.
In the present case there was more than the
mere circumstance that Motordom was in possession
of the cars. It had for some time been trading in 20
cars in its own name, both buying and selling them,
and paying and being paid for them by cheques drawn
by it or payable to it. Apart from any special
knowledge that a particular person might have, any
person dealing with Motordom who thought about it
would naturally assume that that company was the
owner or, if not the owner, had full authority to
sell. By its course of conduct the plaintiff
permitted those assumptions to be made. It
invested Motordom with authority to sell in that 30
manner and knew that it was doing so and, so far
as the defendant was concerned, the plaintiff
kaew that the defendant had been dealing with
Motordom in that manner. If it is necessary to
find a duty owed to the defendant, as the Mercantile
Bank case indicates, the duty was owed to all
persons, including the defendant, who might be
likely to deal with Motordom
Fadallah v Pollak
[2013] EWHC 3159 (QB)
Seymour QC
What was relied upon on behalf of Mr. Fadallah was the provisions of Factors Act 1889 s.2(1):-
“Where a mercantile agent is, with the consent of the owner, in possession of goods or of 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.”
That provision is obviously intended to deal with a situation in which an owner of goods has given a mercantile agent possession of goods, or of documents of title to goods, but not authority to sell them, but the mercantile agent has sold them anyway. What is critical to the operation of the sub-section is that the person purporting to sell the goods should be a mercantile agent appointed to act on behalf of the owner of the goods. The expression “mercantile agent” is defined, for the purposes of Factors Act 1889 in s.1(1) of that Act:-
“The expression “mercantile agent” shall mean a mercantile agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods.”
There was no evidence before me that the business of Eagle had been that of a mercantile agent. Rather the evidence was that Eagle’s business, during its existence, had been that of a buyer and seller of power generation equipment. As I have already indicated, I accept the evidence of Mr. Pollak and that of Mr. Nijim that Mr. Pollak never retained Eagle to act as his agent for the sale of any goods, and in particular not the Generating Sets. Consequently this alternative basis for the claims of Mr. Fadallah also fails.
In his written skeleton argument Mr. Harris advanced as the first alternative basis for the claims of Mr. Fadallah the proposition that, by reason of the sale of the Generating Sets by Mr. Pollak to Eagle on or about 30 August 2011, title to the Generating Sets had passed from Mr. Pollak to Eagle, and that passing of title had had the consequence of “feeding” the title which should have passed from Eagle to Mr. Fadallah pursuant to the agreement of sale between those parties, had Eagle at the time of that sale possessed title to the Generating Sets. Mr. Harris relied upon the decision of Pearson J in Butterworth v. Kingsway Motors Ltd. [1954] 1 WLR 1286.
Sale of Goods Act 1979 s. 17 is in these terms:-
“(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purposes of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.”
In Sale of Goods Act 1979 s.18 are set out “… rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer” which apply “Unless a different intention appears”.
The effect of Sale of Goods Act 1979 ss. 17 and 18, as it seems to me, is that, in a case in which the contract of sale provides for the time at which the property in the goods sold is to pass, that contractual provision is decisive.
Mr. Higgins did not dispute the approach of Pearson J in Butterworth v. Kingsway Motors Ltd. in an appropriate case. However, he contended at paragraph 33 of his written skeleton argument that there was a critical difference between the facts of the case before Pearson J and the facts of the present case:-
“Since Eagle never re-acquired title to the Cummins Generators from the Defendant because the contract of sale between them was subject to the condition that property would not pass until the Defendant had been paid in full, and the Defendant was never paid, the effect of their contract was not to feed Eagle’s title and to enable it [to] give good title, belatedly, to the Claimant.”
On my findings of fact that is a complete answer to this alternative way of putting Mr. Fadallah’s claims. Under the agreement made between Mr. Pollak and Eagle on or about 30 August 2011, by clause 6(b) of the Pollak Terms incorporated therein both expressly and impliedly by a course of dealing, title was not to pass from Mr. Pollak to Eagle until Eagle had paid in full the agreed price. That never happened. Instead the contract of sale was discharged by mutual agreement between Mr. Pollak and Eagle on about 16 September 2011.
By Sale of Goods Act 1979 s.24 it is provided that:-
“Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.”
The next alternative case of Mr. Fadallah was that Eagle, having sold the Generating Sets to Mr. Pollak, continued or was in possession of the Generating Sets and had delivered or transferred them to Mr. Fadallah, who received them in good faith and without notice of the previous sale. Consequently, it was said, title to the Generating Sets had passed to Mr. Fadallah.
Again, however, it seems that the actual facts of the present case are important. Prior to the sale of the Generating Sets to Mr. Pollak they had never been in the physical possession of Eagle. They had been in the physical possession of J.P. Morgan. The Generating Sets only came into the physical possession of Eagle after title in them had passed to Mr. Pollak and he had taken physical possession of them at the premises of J.P. Morgan in the sense of supervising the disconnection of the Generating Sets and ancillary equipment and the loading of the Generating Sets onto lorries for transport from the premises of J.P. Morgan, and the unloading of the Generating Sets at the premises of Eagle. At the point at which the Generating Sets were unloaded and stored at the premises of Eagle it was simply a gratuitous bailee of the Generating Sets.
In Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [1965] AC 867 the Privy Council had to consider Sale of Goods Act 1923 s.28(1) of New South Wales, which was in terms not materially different from those of Sale of Goods Act 1979 s.24 or those of Sale of Goods Act 1895 s.27(1) of New Zealand. The New Zealand provision had been considered by the Supreme Court of New Zealand in Mitchell v. Jones (1905) 24 NZLR 932. In Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. the Privy Council, in its advice, delivered by Lord Pearce, at pages 883 – 884 approved the decision of the Supreme Court of New Zealand in this passage:-
“The first reported question that arose about the construction of those same words is to be found in Mitchell v. Jones, a case under the New Zealand Sale of Goods Act, 1895. There the owner of a horse sold it to a buyer and some days later obtained it back from him on lease. Then, having possession of the horse in the capacity of lessee, he sold it a second time to an innocent purchaser. The full court held that the innocent purchaser was not protected. Stout CJ said: “The point turns on how the words ‘or is in possession of the goods’ in the subsection are to be construed … The meaning is – first, that if a person sells goods and continues in possession, even though he has made a valid contract of sale, provided that he has not delivered them, he may to a bona fide buyer make a good title; and, secondly, the putting in of the words ‘or is in possession of the goods’ was meant to apply to a case of this character: if a vendor had not the goods when he sold them, but they came into his possession afterwards, then he would have possession of the goods, and if he sold them to a bona fide purchaser he could make a good title to them. He would be in the same position as if he had continued in possession of the goods when he made his first sale. In such a case as that he could make a good title to a bona fide purchaser.
“That is not this case. In this case the person who sold the goods gave up possession of them, and gave delivery of them to the buyer. The relationship, therefore, of buyer and seller between them was at an end. It is true that the seller got possession of the goods again, but not as a seller. He got the goods the second time as the bailee of the buyer, and as the bailee he had no warrant, in my opinion, to sell the goods again, nor could he make a good title to them to even a bona fide purchaser.”
And Williams J said that the section “does not … apply where a sale has been absolutely final by delivery, and possession has been obtained by the vendee.” It has not been doubted in argument nor do their Lordships doubt that that case was rightly decided.”
It thus appears, in my judgment, that the critical question, for the purposes of Sale of Goods Act 1979 s.24, is, in what capacity did the party which first sold the goods in question acquire physical possession of the goods before the second sale. If it was qua seller, the section could apply. However, if it was in some other capacity, as in Mitchell v. Jones, then the fact that, at an earlier point in time, the seller of the goods on the second occasion had sold the goods on the first occasion, the section did not apply. That that is the critical question is rather emphasised by the decision in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance )Ltd. itself. In that case the goods in question had remained throughout in the physical possession of the party which was the seller in the first and second sales. Lord Pearce said, at pages 865 – 866:-
“There is thus no case which holds that the section does not apply where after the sale the seller simply attorns to the buyer and holds the goods as his bailee.
It is plainly right to read the section as inapplicable to cases where there has been a break in the continuity of the physical possession. On this point their Lordships accept the observations of the judges in Mitchell v. Jones as to the words “or is” which are the sole grounds for any doubt on this point. But what is the justification for saying that a person does not continue in possession where his physical possession does continue although the title under or by virtue of which he is in possession has changed? The fact that a person having sold goods is described as continuing in possession would seem to indicate that the section is not contemplating as relevant a change in the legal title under which he possesses. For the legal title by which he is in possession cannot continue. Before the sale he is in possession as an owner, whereas after the sale he is in possession as a bailee holding goods for the new owner. The possession continues unchanged but the title under which he possesses has changed. One may, perhaps, say in loose terms that a person having sold goods continues in possession as along as he is holding because of and only because of the sale; but what justification is there for imposing such an elaborate and artificial construction on the natural meaning of the words? The object of the section is to protect an innocent purchaser who is deceived by the vendor’s physical possession of goods or documents and who is inevitably unaware of legal rights which fetter the apparent power to dispose. Where a vendor retains uninterrupted physical possession of the goods why should an unknown arrangement, which substitutes a bailment for ownership, disentitle the innocent purchaser to protection from a danger which is just as great as that from which the section is admittedly intended to protect him?”
It cannot be said that the distinction between a case in which a seller has continued in possession of goods which he has sold a second time, and a case in which, not having had possession of the goods at the time of the first sale, the seller subsequently obtained possession before making the second sale, is particularly satisfactory. However, it does at least make it clear that Sale of Goods Act 1979 s.24 would not apply in an extreme case, such as a seller of goods in, say, 2000, who received them back from the original purchaser in 2013 to make repairs, or to refurbish the goods, but in fact sold them on. Whether the distinction is satisfactory or not, it does seem to be clearly established.
On the uncontested evidence of Mr. Pollak it seems plain that, following his purchase of the Generating Sets, delivery of the Generating Sets was made to him and, in the manner which I have explained he came into physical possession of the Generating Sets. In Michael Gerson (Leasing) Ltd. v. Wilkinson [2001] QB 514 the leading judgment was that of Clarke LJ. At paragraph 28 on page 526 he explained the concept of delivery for the purposes of the law of sale of goods:-
“In my judgment the legal position is as set out by both Pollock & Wright and Bowstead. Thus, where a seller in possession of the goods sold acknowledges that he is holding the goods on account of the buyer in circumstances where (as Pollock & Wright put it, at p.72) he recognises the purchaser’s right to possess as owner and his continuing to hold the goods thereafter as the bailee with possession derived from that right, then (as Pollock & Wright put it, at p.73) the transaction amounts to delivery to the seller as bailee and that is so whether the seller’s custody is “in the character of a bailee for reward or of a borrower”. There is a change of character of the seller’s possession when he holds the goods for the buyer and, indeed, when he subsequently becomes, say, the bailee from the buyer for reward.”
If delivery can take place simply by the acknowledgment by a seller in possession that he recognises the right of the purchaser to possess as owner, it seems to me that a case in which the seller has never been in possession whilst a seller, but arranges, as in the present case, to have collected and delivered to it, in order to hold to the order of the purchaser, the goods the subject of the sale is an a fortiori case. The goods have been delivered to the purchaser and are received into its physical possession for the first time by the seller, not as seller, but as bailee.
The significance of delivery in the present case did not relate simply to the capacity in which Eagle first received the Generating Sets into its physical possession. For Sale of Goods Act 1979 s.24 to be of any application it was necessary for there to be “the delivery or transfer by [the person having sold the goods] of the goods … under any sale … to any person receiving the same in good faith and without notice of the previous sale”. In other words, the section was of no application in the circumstances of the present case in any event unless the Generating Sets had been the subject of “delivery or transfer” by Eagle to Mr. Fadallah.
It was common ground that Eagle had never transferred the physical custody of the Generating Sets to Mr. Fadallah. Thus, if it was to be said that there had been delivery of the Generating Sets to Mr. Fadallah it had to be shown that Eagle had recognised the right of Mr. Fadallah to possess the Generating Sets as owner. The highest that it could be put, as it seems to me, was that, by virtue of the terms of the contract between Eagle and Mr. Fadallah, property in the Generating Sets was intended to pass from Eagle to Mr. Fadallah upon the making by Mr. Fadallah of full payment for the Generating Sets, so on or about 17 August 2011, and that consequently on the relevant date there was a constructive delivery to Mr. Fadallah. That was the case for which Mr. Harris contended in his skeleton argument, and Mr. Higgins did not dispute that contention. Indeed, as I shall explain, in another context Mr. Higgins positively relied upon that analysis.
Mr. Harris submitted that Eagle acknowledged that it was holding the Generating Sets on behalf of Mr. Fadallah by communicating, as it did, with Mr. Fadallah concerning the costs of transportation of the Generating Sets to Nigeria, which it asked Mr. Fadallah to pay, and shipping dates. I have already quoted the e-mails dated, respectively, 26 August 2011, 30 August 2011, I September 2011 and 26 September 2011 from Mr. Clarke to Mr. Fadallah upon which Mr. Harris relied. However, those communications seem to me to be equivocal and not necessarily consistent only with Eagle recognising that Mr. Fadallah had the right to possession of the Generating Sets as owner. However, bearing in mind that it was common ground in relation to Mr. Fadallah’s case in respect of Sale of Goods Act 1979 s.24 that there had been a constructively delivery to Mr. Fadallah on or about 17 August 2011, that equivocation was not material.
Consequently, in my judgment, Mr. Fadallah was not able to rely, in support of his claims against Mr. Pollak upon the provisions of Sale of Goods Act 1979 s.24 because Eagle did not obtain possession of the Generating Sets in its capacity as the seller of those items to Mr. Pollak.
The last alternative foundation for his claims upon which Mr. Fadallah sought to rely was the provisions of Sale of Goods Act 1979 s.25(1):-
“Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery of transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.”
In the light of my finding that Mr. Pollak did not agree to re-sell the Generating Sets to Eagle until he entered into the agreement to sell on 30 August 2011, it would seem, simply as a matter of the ordinary understanding of the English language, that, in order to bring himself within Sale of Goods Act 1979 s.25(1), Mr. Fadallah would have to show that, at a point after 30 August 2011 Eagle obtained possession of the Generating Sets and delivered them to Mr. Fadallah. However, it was common ground that Eagle in fact had possession of the Generating Sets considerably earlier than 30 August 2011, and that fact seems to me to be fatal to the reliance of Mr. Fadallah upon the sub-section. Another fatal defect, in my judgment, was that, as was also common ground, delivery by Eagle to Mr. Fadallah of the Generating Sets took place constructively on or about 17 August 2011, in advance of the relevant contract between Mr. Pollak and Eagle, upon the making of full payment of the sum agreed to be paid by Mr. Fadallah to Eagle for the Generating Sets. In his closing submissions Mr. Harris sought to contend that, for the purposes of Mr. Fadallah’s reliance upon Sale of Goods Act 1979 s.25(1), delivery to Mr. Fadallah of the Generating Sets had not taken place on or about 17 August 2011, whilst maintaining for the purposes of Mr. Fadallah’s reliance upon Sale of Goods Act 1979 s.24, that it had. For the reasons which I have explained Mr. Harris had to contend for a delivery after 30 August 2011 in relation to the reliance upon Sale of Goods Act 1979 s.25(1), and that brought about the unhappy inconsistency in his client’s positions. However, I am satisfied that the submission in his written skeleton argument that there had been a delivery on or about 17 August 2011, which Mr. Higgins did not contest, was sound.
Mr. Harris, in his written skeleton argument, recognised the difficulties which Mr. Fadallah faced if I reached the conclusions which I have. He sought to avoid what appeared to me to be the plain construction of Sale of Goods Act 1979 s.25(1) by raising the contention that that provision did not require that the sale pursuant to which the delivery which that sub-section contemplated took place had itself to take place after the buyer in question assumed his capacity as such. Although the argument which Mr. Harris put forward was carefully constructed, it did not seem to me to overcome the fatal objections which I have already identified. Consequently Mr. Fadallah also failed to make out his claims based on Sale of Goods Act 1979 s.25(1).
Conclusion
In the result this action fails and is dismissed.
Spencer v S Franses Ltd
[2011] EWHC 1269
Thirlwall J
The other issues do not in practice arise, but given the time and effort that was expended in evidence and argument upon them I set out my conclusions.
Did the Defendant have a common law right to enquire as to title?
Conclusion
The Defendant did not have a common law right to enquire as to title. Even if it did, the right was not exercised within a reasonable time.
Discussion and Reasons
It was Mr McLinden’s primary submission in closing that a bailee has no right to make reasonable inquiries as to title where the immediate Claimant is the bailor of the possessor. He refined that submission to include the following: “at least in the absence of a positive demand from a third party.” The submission was accompanied by a comprehensive and impressive analysis of the authorities and writings on bailment, a subject I have not found easy.
The primary submission took Mr. Legge by surprise since it represented a shift from the Claimant’s position in opening. I allowed Mr Legge to reply at some length in oral submissions. It was the Defendant’s case, essentially, that because as at early 2009 the Defendant was on notice as to the rights of third parties it had a common law right to enquire as to title, subject to a requirement that the right should be exercised within a reasonable period. Mr Legge submitted that the Defendant had exercised its right accordingly in early 2009.
Mr McLinden’s secondary submission was that if the Defendant had a right to make enquiries as to title the right had to be exercised in good faith and within a reasonable time (see Tavoulareas v Lau [2007] EWCA Civ 474). The Defendant, he submitted, was not acting in good faith and failed to exercise its right in anything like a reasonable time.
There are thus 3 questions: first, is there a common law right? If there is did the Defendant exercise it in good faith and did he exercise within a reasonable time? As is plain from the rest of my judgment I am satisfied that the Defendant was acting in good faith. I turn then to the other two questions.
Common law right
In closing submissions Mr McLinden went back to first principles. He relied on the following statement of the position in Bridge Personal Property Law (3 ed) at 29:
“Commerce…would become paralysed if the care and deliberation taken when investigating title to land were also taken when chattels are bought and sold. This is why the owner of a chattel may be described as the person with the best possessory interest in it. The affinity between possession and ownership has long been recognized by the law.”
Mr McLinden reminded me of the decision of the Court of Appeal in Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437 where the police were obliged to return to a car thief a stolen car because the true owner had not been found and the thief had greater title to the car than anyone but the true owner In giving the judgment of the Court Lightman J said at [31]:
In my view on a review of the authorities, (save so far as legislation otherwise provides) as a matter of principle and authority possession means the same thing and is entitled to the same legal protection whether or not it has been obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is good against the world save as against anyone setting up or claiming under a better title. In the case of a theft the title is frail, and of likely limited value (see e.g. Rowland v Divall [1923] 2 KB 500, [1923] All ER Rep 270), but none the less remains a title to which the law affords protection.
Mr Legge did not disagree with the statement in Bridge on the judgment in Costello but he submits that the law recognises the right to enquire in some situations.
As invited by Mr McLinden I adopt as my starting point the opinion of Lord Diplock in China Pacific S A v Food Corporation of India (The Winson) [1982] AC 939 “It follows from the existence of the legal relationship of bailor and bailee as a matter of general principle of the law of bailment …that as between the cargo owner and the salvors the latter as bailees were estopped from denying the title to the goods of the former as their bailor, including as an incident of that title its right to possession.” – Lord Diplock described this as “hornbook law”.
Both parties took me to the decision of the House of Lords in Hollins v Fowler (1875) L.R.7H.L. 757, Mr McLinden relies on the following at 765:
‘If the refusal is by a person who does not know the Plaintiff’s title, and having a bona fide doubt as to the title to the goods, detains them for a reasonable time, for clearing up that doubt, it is not a conversion’. In this case the Defendant knew the Claimant was the bailor, therefore he could not say he did not know the Claimant’s title. But Mr Legge points to the speech of Blackburn J in the same case:
“I cannot find it anywhere distinctly laid down, but I submit to your Lordships that on principle, one who deals with goods at the request of the person who has the actual custody of them in the bona fide belief that the custodier is the true owner, or has the authority of the true owner, should be excused for what he does if the act is of such a nature as would be excused if done by the authority of the person in possession”. There is force in Mr Legge’s argument that the reference to a “bona fide belief” implies that in the absence of such a belief different consequences may flow. Accordingly, Mr Legge submits there cannot be an absolute prohibition on a bailee making inquiries as to the bailor’s title.
I was taken by both parties to a number of cases where the courts have decided that a bailee is entitled to make inquiries into the title of the person seeking to recover them. As Mr McLinden pointed out in each case the person seeking to recover the item from the bailee was not the bailor himself. I adopt Mr McLinden’s analysis of those authorities which was as follows.
In Vaughan v Watt 151 E.R. 506; (1840) 6 M. & W. 492, a pawnbroker received goods from A and issued a receipt (which would allow their recovery on payment of the appropriate charge). A then returned on two separate occasions to the pawnbroker and obtained duplicate copies of the receipt, claiming that she had lost the original and first copy respectively. A third party, B (who was A’s husband but did not identify himself as so), subsequently appeared with a copy of receipt, tendered the amount owing and demanded the goods. The pawnbroker refused to release the goods on the basis that he was unsure whether B was entitled to the goods in the circumstances. He was entitled to do so.
In Pillott v Wilkinson 159 E.R. 564; (1864) 3 Hurl. & C. 345 C had bought goods in the possession of a warehouse owner from a third party vendor. The warehouse owner had been told by the sheriff not to dispose of any of the third party vendor’s goods so that he could satisfy debts owed by the vendor. When C demanded the goods that were stored at the warehouse, D who was unsure if he was allowed to release them asked for time to consult his Attorney. He was entitled to do so.
In Clayton v Le Roy [1911] 2 KB 1031 a watch that had been stolen from C and subsequently purchased by B was sent to the Defendant jewellers to be valued. D recognised the watch as one that C had said had been stolen from him, and he contacted C and B to ask them what they wanted him to do. A representative from C’s solicitors went to D and demanded that D hand the watch over. D refused. The majority in the Court of Appeal held that D was entitled to do this, because he was entitled to take reasonable time to find out whether C was in fact entitled to claim the watch. Fletcher Moulton LJ said at 1051:
‘The authorities show clearly, as one would expect, that a man does not act unlawfully in refusing to deliver up property immediately upon demand made. He is entitled to take adequate time to inquire into the rights of the Claimant.’
Vaughan Williams LJ said at 1055
‘A man may not assert any other person’s title, but he may nevertheless do an act which is inconsistent with the dominion of the true owner. Very often such an act may be justified, as, for instance, if the thing is detained for the purpose of making a reasonable inquiry about the title.’
The majority emphasised that the Defendant had been entitled to retain the watch because:
‘The man sent to demand the watch was a solicitor’s clerk, a stranger to the Defendant, who produced no written authority to receive it. I cannot conceive any one in the position of the Defendant being so foolish as to hand over a watch to a man whom he had never seen before and who presented no credentials in writing’ (per Farwell LJ, at 1053) and
‘the question as to title was one which might most properly be a subject for inquiry; the moment had not then arrived for the Defendant’s final decision’ (per Fletcher Moulton LJ, at 1052).
Both parties sought to derive support from the writings of Professor Palmer (who pleaded the case on behalf of the Defendant) – see Palmer on Bailment (3rd Ed 2009). Both were able to do so because Professor Palmer sets out the arguments, and identifies the dilemmas and difficulties on both sides. I note the following at 1-085:
Where the possessor was already the bailee of the Claimant, and has therefore ostensibly undertaken not to deny the Claimant’s title, it is arguably in conflict with that undertaking for the possessor to insist on delaying the return of the chattel to the Claimant until the possessor has had a reasonable period in which to investigate the Claimant-bailor’s title. If the bailee is forbidden to contest his bailor’s title in any event, it would seem otiose and contrary to the terms of the bailment, if not downright mischievous, to allow him time to investigate that title… Arguably a distinction must be drawn for this purpose between a bailee who receives a positive demand from a third party (who should be entitled to a reasonable time for inquiry following the Claimant-bailor’s demand for the return of the goods) and a bailee who receives no positive demand but merely suspects the existence of some ulterior interest (who should not be entitled to a reasonable time for inquiry but should comply immediately with a demand that he return the goods to his bailor).
Alternatively, Professor Palmer argues, since the bailee can invoke Section 8 of the Torts (Interference with Goods) Act 1977 he does not need the privilege of reasonable inquiry. Mr McLinden submits that this is correct. The proper course of the Defendant was to plead rule 19.5(a), as it eventually did.
Professor Palmer’s helpful and erudite text identifies the problems. It does not however answer the questions in this case.
It was Mr Legge’s submission that in considering whether or not the Defendant bailee was entitled to investigate the title of the Claimant bailor the court should have regard to the Defendant’s understanding of its potential exposure to a claim in conversion or negligence to the true owner. I am not sure that adds anything to his proposition that where the Defendant has notice of the true owner’s title he is entitled to make enquiries, the proposition he derives from Hollins v Fowler. The reason for the enquiries is to protect the bailee against a potential claim from the true owner. The desire to protect its reputation would not entitle the Defendant to make enquiries – see Howard E Perry & Co Ltd v British Railway Board [1980] 1 WLR 1375, 1381.
Although Mr Legge suggests that constructive notice would suffice the authorities to which he refers me suggest that what was required in the sale cases is actual notice. In Marcq Christie Manson and Woods Ltd [2004] 4 All ER 1005 notice meant actual knowledge of facts indicating that the bailor was not in fact the owner. In the absence of notice the auctioneer bailee was under no duty to make inquiries as to title. At first instance Jack J stated that it was for the true owner to establish that the bailee had notice.
Mr Legge referred me to two other first instance decisions involving auctioneers, Kurtha v Marks [2008] EWHC 336 (at para 140) and De Preval v Adrian Alan (unreported) 24.1.97. I was not much assisted by those authorities, in both of which the auctioneer had been engaged in the sale of the items to a third party. In this case there was no question of a sale or other disposal to a third party. The man with possessory title simply wanted his property back.
As to notice Mr Legge relies on the position as the Defendant knew it in March 2009. He points to the following:-
i) There was no bill of sale.
ii) The “Piers Haussen” receipt showed an entity with better title than the Claimant.
iii) Mr Spencer’s account of finding the Henry Moore bronze was inconsistent with the article in the New York Daily News article and with most of the papers filed in the New York Court, all of which attributed the find to Mrs McGrath of whom the Defendant had not previously heard.
iv) The receipt
a) was not signed by both Guardians
b) did not describe the items. Mr Legge submits that even without any question of fabrication, the receipt left open the possibility that the sale would be challenged by Tedeschi, the second Guardian. It relied on the Claimant to establish that it applied to the embroideries
c) The fact that the signature of John Nevin on the Nevin receipt did not include his middle name or initial (which (put at its lowest) he appears nearly always to have used) raised the possibility that the signature was forged.
v) Charlie Hill indicated that the Berkeley Safe Deposit letter raised grounds for suspicion. The inference I am asked to draw from that is, I think, that the embroideries may have been in the safe deposit box and not in the flat at all. In the fevered atmosphere of early March 2009 that may have seemed likely. It is not an inference I have drawn.
To those concerns I add the fact that the Claimant once again refused to provide an indemnity to the Defendant in respect of the embroideries. I have no doubt that this troubled Mr Franses.
I remind myself that as at January 2009, had its charges been paid the Defendant would have returned the embroideries notwithstanding any doubts it had about title.
Conclusion
I am not satisfied that a bailee who receives a demand from a bailor for the return of his goods can never have a right to a reasonable period to inquire into title when he is on notice that the bailor does not have good title. However I am not persuaded that the Defendant had that right in this case. If I am wrong about that I am satisfied that the Defendant did not exercise his right within a reasonable time.
I draw together the following matters:-
i) The Piers Haussen Trust receipt constituted clear actual notice that Mr Spencer may not be the owner of the embroideries. That is why Ms Swirski was so concerned to read it in February 2009. It was that document that caused the Defendant to begin the inquiries in New York, as Mr Franses says in his third witness statement. I am satisfied that is correct. None of the other private doubts and concerns were sufficient to cause the Defendant to do anything to research title. That is why it was prepared to return the embroideries as late as January 2009.
ii) The Claimant handed over the Piers Haussen receipt in 2003. He had his own reasons for doing so, but the issue of title was clear on the face of the document. Whilst I accept Mr Franses did not pay any attention to it that was not as a result of anything the Claimant did.
iii) Had the Google search been carried out in 2003 (which it could have been) it would have revealed the New York Daily News Article in the same way as the search in 2009. All the other New York information would then have been instantly available, as it was in 2009. The Defendant is not entitled in my judgment to rely on the cumulative effect in 2009 of lots of discoveries when all of them could have been made years earlier.
iv) Whilst the refusal of the indemnity in 2009 further worried Mr Franses, an indemnity had been refused on several occasions over several years.
v) The Claimant had sought the return of the embroideries on more than one occasion before 2005 so the Defendant had been alerted to that possibility.
Conclusion
My analysis of the authorities leads me to conclude that the principle underpinning such right as the authorities may allow is an acceptance that a bailee should have a reasonable opportunity to protect himself from a claim by the rightful owner.
In all of the authorities where a bailee has been permitted to rely on the right to make reasonable inquiries right is said to arise when the demand is made and time runs from that date. In this case the demand relied on by the Claimant was in March 2009, and the Defendant submits that the period runs from that date, although the Defendant has acknowledged throughout that the first demand was 2005. In none of the reported cases where a right has been found to exist has the period before inquiry been prolonged, still less 5 ½ years.
In this case the length of time the embroideries were in the Defendant’s custody coupled with what the Defendant knew throughout the period gave the Defendant ample opportunity to inquire into the Claimant’s title long before the demand in March 2009. Inquiry during that period would have led to the Defendant obtaining much earlier the information it obtained in 2009. Those facts taken in conjunction with the availability of Rule 19.5a satisfy me that the underpinning principle justifying the right that I have set out in paragraph 301 above has no application here. Indeed, on closer analysis I consider this to be the ratio of the decision in Tavoulareas v Lau [2007] EWCA Civ 474 (see paragraph 39) although the Claimant relies on it as authority for the proposition that any inquiry should be carried out within a reasonable time.
In the end it matters not; having spent many years making no inquiries, notwithstanding what it knew, the Defendant had no right to start doing so in March 2009. Alternatively the requirement that the right be exercised within a reasonable time is of no avail to the Defendant; when 51/2 years had already elapsed during which sufficient information to put it on inquiry was known to it, and all relevant information could have been known to it, no further time was reasonable. It comes to the same thing.
Borealis Ab v. Stargas Limited and Others and Bergesen D.Y. A/S
[2001] UKHL 17; [2001] 2 All ER 193 : [2001] 1 LLR 663, [2001] CLC 1084, [2001] UKHL 17, [2001] 2 WLR 1118, [2001] 1 Lloyd’s Rep 663, [2001] 1 All ER (Comm) 673, [2002] 2 AC 205, [2001] 2 All ER 193
Lord Hobhouse
The Passing of “Property” “upon or by Reason of” the Endorsement:
22. This problem was the subject of the decision of your Lordships’ House in Sewell v Burdick (1884) 10 App Cas 74. It has two aspects. The first is what does the word “property” encompass. Is it limited to the general property in the goods, that is, the legal title to the goods as is transferred by a sale? Or does it include the special property which signifies the right to possession? In Sewell v Burdick it was decided that it should be limited to the passing of the general property. The primary reason for reaching that conclusion was that bills of lading are as often as not used as security documents facilitating the financing by banks of merchants’ sale transactions (eg under documentary letters of credit). A bank’s interest is to use the possessory right to the document and the goods it represents as security; its interest is not to enter into contractual relations with the carrier, still less, to undertake contractual obligations towards the carrier. The decision in Sewell v Burdick was that a transaction of pledge accompanied by the endorsement of the bill of lading over to the pledgee did not come within the scope of s.1 and did not transfer to the pledgee any contractual rights nor subject the pledgee to any contractual liabilities under the bill of lading.
23. The other aspect was that the passing of the property had to be “upon or by reason of [the] consignment or endorsement”. But property under a contract of sale passes when the parties to that contract intend it to pass; it passes by reason of the contract of sale, not by reason of the endorsement of the bill of lading. (Section 18 of the Sale of Goods Acts 1893 and 1971.) Under an FOB contract, the property in the goods prima facie passes upon shipment not upon the endorsement of or other dealing with the bills of lading. A contract for the international sale of goods commonly includes an express term covering the transfer of title. Similarly, s.18(2) and s.19(2) of the Sale of Goods Acts made relevant the question whether the seller has by taking a bill of lading making the goods deliverable to his own order reserved the right of disposal. The difficulties of using the criterion in the 1855 Act were increased by simple logistics. The goods would arrive and be discharged and delivered before the documents had completed their progress down the chain of the intermediate buyers and sellers and their banks. The endorsement of those documents ceases to have any role in relation to the possession or legal ownership of the goods. (The Delfini [1990] 1 Lloyd’s 252) In the present case, by January 1994, the cargo of propane had probably long since been processed at Terneuzen and had ceased to exist.
24. There were cases therefore where the 1855 Act could not be used and where the tool of inferring a Brandt v Liverpool contract became less and less useful. (eg The Aramis [1989] 1 Lloyd’s 213 ) There were related problems arising from changed patterns of trade. Cargoes were shipped in bulk. Bills of lading were issued for quantities out of undivided consignments and those quantities were then sold to different buyers and the various bills of lading endorsed over to them. Such endorsements were ineffective to pass the legal title in part of an undivided whole to a purchaser. (In re Wait [1927] 1 Ch 606: See now the Sale of Goods (Amendment) Act 1995.) Further, the practice of issuing delivery orders for parcels out of a bulk cargo were similarly ineffective and the intended buyers were left without remedy against the carrier. (Margarine Union v Cambay Prince [1969] 1 QB 219, Leigh & Sillavan v Aliakmon [1986] AC 785.)
“Subject to the Same Liabilities”:
25. The use of this phrase in the 1855 Act gave rise to immediate difficulty. What was the position of an endorser after he had endorsed over the bill of lading to another? How did endorsement affect the liabilities of the shipper? The answer was given in Fox v Nott (1861) 6 H&N 630 and Smurthwaite v Wilkins (1862) 11 CB(ns) 842. The endorser is not liable after he has endorsed over the bill of lading to another who is; the shipper remains liable as an original party to the contract. Two considerations seem to have weighed with the courts in these and the later cases. (See per Lord Lloyd of Berwick in Effort Shipping v Linden Management [1998] AC 605, at p 615-8.) The words “subject to the same liabilities” were to be contrasted with the words “have transferred to him”. The liability of the endorsee was to be additional to that of the original contracting party. The other was to follow the reasoning which underlay the Allen v Coltart line of authority. It is the use of the bill of lading to demand and take delivery of the goods which is the basis of liability. Thus Erle CJ said in Smurthwaite v Wilkins at p.848:
“Looking at the whole statute it seems to me that the obvious meaning is that the assignee who receives the cargo shall have all the rights and bear all the liabilities of a contracting party; but that if he passes on the bill of lading by indorsement to another, he passes on all the rights and liabilities which the bill of lading carries with it.”
He rejected the argument that the endorser having passed on all his rights to the endorsee should retain all his liabilities in respect of the goods, saying (p.849) –
“Such a construction might be very convenient for the shipowner but it would be clearly repugnant to one’s notions of justice.”
The judgment of Erle CJ was approved by the Earl of Selborne LC in Sewell v Burdick at pp.86-8 (see also p 83) and he echoed his language when he referred to a person who had had the bill of lading endorsed to him while the goods were at sea and who then chooses to take advantage of his possession of the bill of lading to “take the position of full proprietor upon himself with its corresponding burdens if he thinks fit”;
“and that he actually does so as between himself and the shipowner if and when he claims and takes delivery of the goods by virtue of that title.”
The Drafting of the 1992 Act:
26. By 1980 the difficulties in the 1855 Act had assumed serious proportions and the Act was failing to meet the needs of the mercantile community and the changed pattern of international trade and carriage by sea. There were other points of concern as well. In certain trades the use of paper bills of lading was becoming increasingly obsolete. Electronic documents were coming into use. Documents other than bills of lading were being used for the purposes previously served by bills of lading. Another related question which had to be considered particularly in the drafting of any new legislation was the concept when a bill of lading became ‘accomplished’, ie ceased to be capable of transferring rights to an endorsee (save by estoppel). This was always a potential problem under the 1855 Act but did not cause significant problems in practice. It was however a problem which would have to be faced by the draftsman of a replacement for the 1855 Act.
27. The existing state of the law having been recognised to be unsatisfactory, the question was referred to the Law Commission and the Scottish Law Commission. Their Joint Report, “Rights of Suit in respect of Carriage of Goods by Sea” (Law Com No 196; Scot Law Com No 130), was published in March 1991 and appended a draft Bill. They concentrated upon the carriage of goods by sea and the adequacy of the 1855 Act and did not in that Report make recommendations for the amendment of the Sale of Goods Act. They reviewed in detail the various aspects to which I have referred. They made recommendations for reform. They rejected as inadequate amendments to s.1 of the 1855 Act which would simply have removed the requirement that the holder should have become the owner of the goods “upon or by reason of” the endorsement or which would have removed all reference to property in s.1, so that it sufficed for the purposes of both rights and liabilities that the person was the holder of the bill of lading. They preferred instead an approach which severed the link between property and right of action and transferred the rights of suit to the holder without more, but not the liabilities. They recommended that there should not be an automatic linking of contractual rights and liabilities; pledgees would not be liable “unless they sought to enforce their security”. (§2.31) In support of their recommendation they said:
“The statutory assignment model of the 1855 Act is familiar to international traders. … Our reform is an evolutionary one which recognises that those parts of the 1855 Act which have worked well should be retained. …” (§2.34(iv))
As regards the point at which the bill of lading ceases to be a transferable document of title, they adopted the existing test of delivery of the goods to the person entitled to receive them. (§2.42) As regards the liability of the holder under the bill of lading, their recommendation was in essence that a holder who seeks to take the benefit of the contract of carriage should not be permitted to do so without the corresponding burdens. (§§3.15 to 3.22) I will come back later to what they said.
28. The recommendations are summarised in Part VII of the Report and the appended draft bill was designed to reflect those recommendations. The Bill was enacted without substantive amendment. Your Lordships are entitled to look at the Report in order to identify the mischief to which the Act is directed and, in the case of ambiguity, to help in resolving any such ambiguity.
The 1992 Act:
29. Not the whole of the Act is relevant to the present appeal. It is not necessary to quote those provisions which extend the descriptions of documents which are to be recognised as having a similar function to bills of lading nor the sections which revise s.3 of the 1855 Act. I will confine my quotation to what is directly relevant to bills of lading and the present appeal.
“An Act to replace the Bills of Lading Act 1855 with new provision with respect to bills of lading and certain other shipping documents.
1.
This Act applies to … any bill of lading …
Rights under Shipping Documents
2. (1) Subject to the following provisions of this section, a person
who becomes-
(a) the lawful holder of a bill of lading; …… shall (by virtue of becoming the holder of the bill …….) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract. (2) Where, when a person becomes the lawful holder of a bill of lading, possession of the bill no longer gives a right (as against the carrier) to possession of the goods to which the bill relates, that person shall not have any rights transferred to him by virtue of subsection (1) above unless he becomes the holder of the bill – (a) by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time when such a right to possession ceased to attach to possession of the bill; or (b) as a result of the rejection to that person by another person of goods or documents delivered to the other person in pursuance of any such arrangements. (4) Where, in the case of any document to which this Act applies – (a) a person with any interest or right in or in relation to goods to which the document relates sustains loss or damage in consequence of a breach of the contract of carriage; but (b) subsection (1) above operates in relation to that document so that rights of suit in respect of that breach are vested in another person, the other person shall be entitled to exercise those rights for the benefit of the person who sustained the loss or damage to the same extent as they could have been exercised if they had been vested in the person for whose benefit they are exercised. (5) Where rights are transferred by virtue of the operation of subsection (1) above in relation to any document, the transfer for which that subsection provides shall extinguish any entitlement to those rights which derives – (a) where that document is a bill of lading, from a person’s having been an original party to the contract of carriage; or (b) in the case of any document to which this Act applies, from the previous operation of that subsection in relation to that document;
Liabilities under Shipping Documents
3. (1) Where subsection (1) of section 2 of this Act operates in relation to any document to which this Act applies and the person in whom rights are vested by virtue of that subsection – (a) takes or demands delivery from the carrier of any of the goods to which the document relates; (b) makes a claim under the contract of carriage against the carrier in respect of any of those goods; or (c) is a person who, at a time before those rights were vested in him, took or demanded delivery from the carrier of any of those goods, that person shall (by virtue of taking or demanding delivery or making the claim or, in a case falling within paragraph (c) above, of having the rights vested in him) become subject to the same liabilities under that contract as if he had been a party to that contract. (3) This section, so far as it imposes liabilities under any contract on any person, shall be without prejudice to the liabilities under the contract of any person as an original party to the contract. Interpretation etc 5. (1) In this Act “the contract of carriage” – (a) in relation to a bill of lading ….. means the contract contained in or evidenced by that bill; “holder”, in relation to a bill of lading, shall be construed in accordance with subsection (2) below; (2) References in this Act to the holder of a bill of lading are references to any of the following persons, that is to say – (a) a person with possession of the bill who, by virtue of being the person identified in the bill, is the consignee of the goods to which the bill relates; (b) a person with possession of the bill as a result of the completion, by delivery of the bill, of any indorsement of the bill or, in the case of a bearer bill, of any other transfer of the bill; (c) a person with possession of the bill as a result of any transaction by virtue of which he would have become a holder falling within paragraph (a) or (b) above had not the transaction been effected at a time when possession of the bill no longer gave a right (as against the carrier) to possession of the goods to which the bill relates; and a person shall be regarded for the purposes of this Act as having become the lawful holder of a bill of lading wherever he has become the holder of the bill in good faith. (3) References in this Act to a person’s being identified in a document include references to his being identified by a description which allows for the identity of the person in question to be varied, in accordance with the terms of the document, after its issue; and the reference in section 1(3)(b) of this Act to a document’s identifying a person shall be construed accordingly. (4) Without prejudice to sections 2(2) and 4 above, nothing in this Act shall preclude its operation in relation to a case where the goods to which a document relates – (a) cease to exist after the issue of the document; or (b) cannot be identified (whether because they are mixed with other goods or for any other reason); and references in this Act to the goods to which a document relates shall be construed accordingly. 6. (2) The Bills of Lading Act 1855 is hereby repealed.”
30. This Act, in accordance with the view expressed in the Report, retains much of the basic structure of the 1855 Act. Much of its increased length and complexity derives from the fact that it covers other documents – way bills and delivery orders – besides bills of lading. It makes separate provision for the rights and the liabilities of a bill of lading holder. S.2(1) makes being the lawful holder of the bill of lading the sole criterion for the right to enforce the contract which it evidences and this transfer of the right extinguishes the right of preceding holders to do so: s.2(5). There are two qualifications: in simplified terms, the holder can sue and recover damages on behalf of another with an interest in the goods, s.2(4), and the transfer of a bill of lading after it has ceased to give a right to the possession of the goods does not confer any right of suit against the carrier unless the transfer was pursuant to an earlier contract or to the revesting of that right after a rejection by a buyer, s.2(2) and s.5(2). In the present case the provisions of s.2 do not give rise to any problem. Until, anyway, the discharge of the propane from the vessel at Terneusen to Dow Europe in the second half of November 1993, the bills of lading remained effective to give a right to the possession to the cargo as against Bergesen. Both the contract between Stargas and Borealis and that between Borealis and Dow Europe were made before that time. Therefore, Borealis and Dow Europe were in January 1994 successively holders of the bills of lading who came within the provisions of s.2(1) and (2) and the extended definition of “holder” in s.5(2).
31. S.2 of the Act has adopted a different and more generous approach to the transfer of contractual rights than that adopted by s.1 of the 1855 Act in that it wholly omits the ‘property’ criterion. A party who takes a bill of lading as security, as a pledgee, has the contractual rights transferred to him under s.2. He can enforce them against the carrier or not as he chooses and may, if he chooses to do so, recover from the carrier also on behalf of the person with the full legal title (s.2(4)). This leaves the question whether the pledgee or similar person should come under any liability to the carrier. Under the 1855 Act he did not because he did not come within s.1 of that Act and acquired neither rights nor liabilities. The draftsman of the 1992 Act respected the commercial reasoning upon which Sewell v Burdick was based and did not require bankers and others taking the documents as security to have to accept any liabilities merely by reason of being the holders of the bills of lading. S.3(1) imposes additional requirements before a holder of a bill of lading comes under any contractual liability to the carrier. The solution adopted by the draftsman was to use the principle that he who wishes to enforce the contract against the carrier must also accept the corresponding liabilities to the carrier under that contract. This was the view expressed by the Earl of Selborne (sup.). It is the rationale of the cases leading up to Brandt v Liverpool. It is a principle of mutuality. It was spelled out in the Commissions’ Report.
“However, where the holder of the bill of lading enforces any rights conferred on him under the contract of carriage he should do so on condition that he assumes any liabilities imposed upon him under that contract.” (§3.15)
“We see in general no unfairness in making the person who either claims delivery or who takes delivery of the goods from being subject to the terms of the contract of carriage since in both cases the person is enforcing or at least attempting to enforce rights under the contract of carriage.” (§3.18)
“Furthermore it is unfair that the carrier should be denied redress against the indorsee of the bill of lading who seeks to take the benefit of the contract of carriage without the corresponding burdens.” (§3.22)
But it must be observed that all these statements in the Report, like the terminology used in the Act, are expressed in terms which refer explicitly to “the contract of carriage” and not to the right of the holder of the endorsed bill of lading to the possession of the goods as the bailor as against the bailee. It is thus categorising the delivery up of the goods in this context as the performance of a contractual obligation not a bailment obligation. This is not objectionable since where there is a contract of carriage the contract certainly includes a contractual obligation to deliver the goods. A bill of lading invariably includes words evidencing the carrier’s agreement to deliver the goods at destination to “or order or assigns” or words to that effect; the bailment is a contractual bailment. The relationship of the original parties to the contract of carriage is a contractually mutual relationship, each having contractual rights against the other. The important point which is demonstrated by this part of the Report, and carried through into the Act is that it is the contractual rights, not the proprietary rights (be they general or special), that are to be relevant. The relevant consideration is the mutuality of the contractual relationship transferred to the endorsee and the reciprocal contractual rights and obligations which arise from that relationship.
32. In giving effect to this intention, s.3 of the Act postulates first that the holder in question must be a person in whom the contractual rights of suit have been vested by s.2(1). The language of s.2(1) adopts and is identical to the corresponding words in the 1855 Act: “shall have transferred [to] and vested in him all rights of suit”. Section 3(1) paragraphs (a) and (b) relate to a person who, being a person who has those rights, chooses to exercise them either (a) by taking or demanding delivery of the goods or (b) by making a claim under the contract of carriage contained in or evidenced by the bill of lading. Both involve an enforcement by the endorsee of the contractual rights against the carrier transferred to him by s.2(1). Under (a) it is by enjoying or demanding the performance of the carrier’s contractual delivery obligation. Under (b) it is by claiming a remedy for some breach by the carrier of the contract of carriage. Each of (a) and (b) involves a choice by the endorsee to take a positive step in relation to the contract of carriage and the rights against the carrier transferred to him by s.2(1). It has the character of an election to avail himself of those contractual rights against the carrier. There are however difficulties which neither the drafting nor the Report faces up to. Whilst taking delivery is a clear enough concept – it involves a voluntary transfer of possession from one person to another – making a “demand” or “claim” does not have such a specific character and, what is more, may be tentative or capable of being resiled from, a point commented upon by Millett LJ in the Court of Appeal at [1999] QB 884C-D. Delivery brings an end to the actual bailment of the goods and is (save in special circumstances) the final act of contractual performance on the part of the carrier. Claims or demands may on the other hand be made at any stage (although usually only made after the end of the voyage) and there may at the time still be performance obligations of the carrier yet to be performed.
33. To ‘make a claim’ may be anything from expressing a view in the course of a meeting or letter as to the liability of the carrier to issuing a writ or arresting the vessel. A ‘demand’ might be an invitation or request, or, perhaps, even implied from making arrangements; or it might be a more formal express communication, such as would have sufficed to support an action in detinue. From the context in the Act and the purpose underlying s.3(1), it is clear that s.3 must be understood in a way which reflects the potentially important consequences of the choice or election which the bill of lading holder is making. The liabilities, particularly when alleged dangerous goods are involved, may be disproportionate to the value of the goods; the liabilities may not be covered by insurance; the endorsee may not be fully aware of what the liabilities are. I would therefore read the phrase “demands delivery” as referring to a formal demand made to the carrier or his agent asserting the contractual right as the endorsee of the bill of lading to have the carrier deliver the goods to him. And I would read the phrase “makes a claim under the contract of carriage” as referring to a formal claim against the carrier asserting a legal liability of the carrier under the contract of carriage to the holder of the bill of lading.
34. But this is not the end of this problem. The use of the word “demand” is problematic as is the phrase “or at least attempting to enforce rights” in §3.18 of the Report. (It seems that those who wrote §3.18 had in mind such exceptional situations as where the cargo is destroyed while the vessel is waiting to discharge at the discharge port and after a demurrage liability recoverable under the bill of lading has arisen – an intriguing and, if I may be forgiven for saying so, a relatively unilluminating example.) If the carrier accedes to the demand and gives delivery as demanded, the demand is subsumed in the taking of delivery. If the carrier rejects the demand, a new scenario arises: is the endorsee going to make a claim against the carrier for refusing to comply with the demand? If the endorsee chooses to let the matter drop and not to make a claim, what significance of the demand remains? What principle of mutuality requires that the endorsee shall nevertheless be made subject to the liabilities of a contracting party? What if the endorsee chooses to endorse over the bill of lading to another to whom the carrier is willing to and does deliver the goods? The task of the judge, arbitrator or legal adviser attempting to construe s.3(1) is not an easy one and it is necessary to try and extract from it some self-consistent structure.
35. So far I have been concentrating on paragraphs (a) and (b). Paragraph (c) presents further problems. It raises the relatively common situation where the vessel and its cargo arrive at the destination before the bills of lading have completed their journey down the chain of banks and buyers. The intended receiver has not yet acquired any rights under s.2(1). He is not entitled to demand delivery of the goods from the carrier. He may or may not be the owner of the goods but he quite probably will not at that time have the right to the possession of the goods; an earlier holder of the bill of lading may be a pledgee of the goods. This situation is dealt with commercially by delivering the goods against a letter of indemnity provided by the receiver (or his bank) which will include an undertaking by the receiver to surrender the bill of lading to the carrier as soon as it is acquired and will include any other stipulations and terms which the situation calls for. It may well at that time, either expressly or by implication, give rise to a Brandt v Liverpool type of contract on the terms of the bill of lading. But again the question arises: what is the character and the role of the demand referred to in paragraph (c)? Ex hypothesi, the intended receiver had no right to make the demand and the carrier had no obligation to accede to it unless there was some other contract between the receiver and the carrier, eg a charter party, which gave rise to that right and obligation in which case sections 2 and 3 have no application to that transaction. Paragraph (c) clearly involves an anticipation that the s.2(1) rights will be transferred to the receiver. The parenthesis which follows emphasises this: “by virtue of having the rights vested in him”. This shows that it is a necessary condition of the receiver’s becoming liable under s.3(1) that the rights are vested in him by the operation of s.2(1). The inclusion of the word “demanded” remains problematical. A rightly rejected demand for delivery by one who is not entitled to delivery is an act devoid of legal significance. What is significant is if the carrier decides (voluntarily) to accede to the demand and deliver the goods to the receiver notwithstanding the non-arrival of the bill of lading. Paragraph (c) does not include the making of a claim. The draftsman has accepted the irrelevance of a claim made by one who has no contractual standing to make it. Unless facts occur which give a relevance to the inclusion of the word “demanded” in paragraph (c), in my view the scheme of sections 2 and 3 requires that any such demand be treated as irrelevant for the purposes of s.3(1) and that the Act be construed accordingly. A ‘demand’ made without any basis for making it or insisting upon compliance is not in reality a demand at all. It is not a request made “as of right”, which is the primary dictionary meaning of “demand”. It is not accompanied by any threat of legal sanction. It is a request which can voluntarily be acceded to or refused as the person to whom it is made may choose. Accordingly it will be unlikely in the extreme that paragraph (c) will ever apply save where there has been an actual delivery of the cargo.
36. Taking delivery in paragraphs (a) and (c) means, as I have said, the voluntary transfer of possession from one person to another. This is more than just cooperating in the discharge of the cargo from the vessel. Discharge and delivery are distinct aspects of the international carriage of goods. (See generally Scrutton on Charterparties, 20th ed (1996): Section XIII) Although the normal time for delivering cargo to the receiver may be at the time of its discharge from the vessel, that is not necessarily so. There may be a through contract of carriage. The goods may need to be unpacked from a container. The vessel may need to discharge its cargo without delay into a terminal. The discharge of the vessel is a necessary operation in the interests of the ship as well as of the cargo and requires the cooperation of others besides the shipowner. Providing that cooperation should not be confused with demanding delivery. The unloading of one cargo is for the shipowner the necessary preliminary to the loading of the next. Damaged or contaminated cargoes may need especial discharge because they may cause damage or pollution. Any unnecessary delays will cost the shipowner money and a loss to the charterer through incurring demurrage or forfeiting dispatch. Where the vessel is operating under a charter party it is more likely than not that the obligation to discharge will be that of the charterer. The charterer will be responsible for providing or arranging a berth at which the vessel can discharge. Where the cargo is a bulk cargo which has been sold by the charterer to the intended receiver, the contract of sale may require the buyer to perform the seller’s charter party obligations in relation to the discharge of the vessel. The delivery to which s.3 is referring is that which involves a full transfer of the possession of the relevant goods by the carrier to the holder of the bill of lading. The surrender of the relevant endorsed bill of lading to the carrier or his agent before or at the time of delivery will ordinarily be an incident of such delivery. Where that is not done, the carrier will ordinarily require a letter of indemnity. The letter of indemnity will probably be the best evidence of what arrangement has been made and will probably contain appropriate express terms.
Angara Maritime Ltd v Oceanconnect UK Ltd & Anor
[2010] EWHC 619 [2011] 1 Lloyd’s Rep 61
Mackie QC
Submissions of the Parties-Section 25.
Against those findings of fact I turn next to the submissions of the parties.
While I am grateful for the detailed lists of issues prepared by Mr Kulkarni and Ms Hilliard the evaluation of the claim under Section 25 is most usefully conducted by the sequence of steps adopted by Clarke J in Forsythe which I first set out; adapted slightly to the facts of this case.
Step 1 – Did the persons who bought or agreed to buy the goods, that is the charterers, obtain possession of the goods with the consent of the seller?
Step 2 – Was there delivery, within the meaning of Section 25, of the bunkers by the charterers to the owners?
Step 3 – Did the owners receive the bunkers in good faith and without notice of any lien or other right of the original seller in respect of the goods?
This is in reality two steps because the owners must establish that both that they received the bunkers in goof faith and also that they did so without the relevant notice.
Step 4 – If the first three steps are satisfied by the owners what is the meaning of the last part of Section 25 (1) “as the same effect as if the person making the delivery … were a mercantile agent in possession of the goods … with the consent of the owner”. In Forsythe (at 1351 H) the judge held that if there was a delivery by the charterers to the owners pursuant to a sale the charterers were acting in the ordinary course of their business as charterers and were doing something (namely delivering goods pursuant to a sale) which would constitute acting in the ordinary course of business if they were mercantile agents.
Ms Hilliard submitted in general terms that Clarke J had got it wrong but did not identify any good reason why I should not follow the decision in Forsythe. I respectfully agree with the reasoning in Forsythe. Accordingly Step 4 will not be an obstacle for the Claimant if it satisfies the first three steps.
Step 1
Angara submits that it is self-evident that Britannia obtained possession of the bunkers and did so with the consent of Oceanconnect. Mr Kulkarni submits for the reasons given in Forsythe at 1343 F – 1345 C, that while the owners obtained possession of the bunkers because they obtained actually custody so did the charterers because the bunkers were held by the owners subject to their control or on their behalf.
Oceanconnect do not seriously dispute this.
Step 2
Angara submits that there was a delivery within Section 25 (1) ie “some voluntary act by the buyers in possession amounting to delivery” (Forsythe at 1349B). Angara submits that there was in this case the voluntary act which was lacking in Forsythe. This is because while in Forsythe there was a termination of the charter party for non-payment of hire by the owner the position was different in this case as the events on 29 October 2008 show. The telephone conversation and the email demonstrate that while Britannia, the buyer in possession, had not wanted the contract to come to an end it was deciding of its own volition to redeliver the vessels early having been as Mr Znak put it “left with no other option”.
Oceanconnect say there was no such voluntary delivery. Angara has alleged that there was a contractual redelivery on 5 November 2008 resulting, under Clause 40, in the owners taking over and paying for all bunkers remaining on board. Oceanconnect submit that the clause does not apply in the event of premature termination for the reasons given by Lord Diplock in the House of Lords in The Span Terza [1984] 1 Lloyd’s Rep 119, at 122:-
“My Lords I agree with Lord Justice Kerr that cl.3 [which set out that Owners were to pay for bunkers on redelivery] and the latter half of cl.4 [which set out the means of redelivery] deal with the same subject-matter and are confined to it. The latter half of cl.4 deals with the redelivery of the vessel (i.e. its being put once more at the disposal of the shipowners by the charterers) on dropping last outward sea pilot at the port within the redelivery range at the end of the contract period; in casu, about two years, 45 days more/less, from the date of delivery. Clause 3 deals with what is to happen to the bunkers aboard the vessel at the time of that redelivery. I share the view of Lord Justice Kerr that as a matter of construction its express provisions are wholly inapt to apply to termination otherwise that pursuant to cl.4”
Ms Hilliard argues that the Claimant cannot succeed at this point without an express clause stating that the consequences set out in Clause 40 would occur whether delivery occurred during the charter period or on an earlier termination, as happened in Forsythe. (She also submits that the Claimant did not pay for the bunkers with the agreement of the charterers and therefore did not buy them).
Angara responds that consideration of Clause 40 is a distraction. The Span Terza was about who owned bunkers at the point of sale in a dispute between the suppliers and the charterers. The question is whether, as a matter of fact, there was a voluntary act. In this case there was an unqualified tender of redelivery accepted by Angara. Had it been necessary to evaluate the matter in contractual terms the fact would remain that Britannia and Angarahad, notwithstanding the provisions of Clause 4, agreed to redelivery with Angara taking over the bunkers.
I prefer Angara’s approach. The issue is whether as a matter of fact there was a voluntary act by the buyers in possession amounting to delivery and, on the evidence, there clearly was. It is a question of fact not contractual analysis. Even if that analysis is required one then has the parties agreeing to redelivery otherwise than under the clause and thus varying the terms of the deal between them. It is unrealistic for Oceanconnect to present the events as being Angara’s voluntary act, a process beginning with breach by Britannia potentially bringing the charter to an end, ending when Angaravoluntarily accepted the repudiation.
Ms Hilliard placed emphasis on the fact that the burden of proof rests on Angara throughout. So it does. That does not mean however that Angaramust itself produce evidence in any particular form. The question is simply whether on the agreed facts and those established at the trial the Claimant has, on balance, established its case on the point in issue.
Such documents as exist are consistent with there being a sale by Britannia to Angara. The redelivery notice presupposes on a preliminary basis that the debt due to the owner is $197,127.25 (albeit not $201,127.67), as does the Statement of Account. Then is no question of Angara/Fesco dreaming up the sale at a later and convenient point.
Step 3
Oceanconnect claim that Angara lacked good faith and/or had notice of their rights. Ms Hilliard emphasises that in some circumstances mere negligence or carelessness may be evidence of bad faith and that suspicion combined with the power to acquire knowledge can amount to notice. Angara claims that it had no knowledge of Oceanconnect’s standard terms or that there was a retention of title clause within them. Angara further submits that it was not aware that Britannia had not paid for the bunkers. I have accepted Mr Chabrov’s evidence about these points and I find no evidence of negligence or suspicion in what he did and did not do.
For the reasons that I have given I find that Angara did act in good faith and without notice of Oceanconnect’s rights because there was nothing to put someone in the position of Mr Chabrov on enquiry. There would have been no reason for Mr Chabrov to give the email the close textual analysis to which the lawyers have now subjected it. Even when that examination is conducted it seems to me that the unredacted copies support the position that Mr Chabrov had no knowledge of Oceanconnect’s adverse rights or that Britannia had not paid for the bunkers on board.
Section 25 (1) – Conclusion
Angara has established that it meets the first three steps and the fourth one is satisfied for the reasons I have given. As Angara purchased bunkers from Britannia upon redelivery in good faith and without notice of any adverse right, what would otherwise be a good claim in conversion fails.
Bailment
Ms Hilliard contends that Angara is liable for a breach of its duties as bailee. Oceanconnect’s case is that upon delivery of the bunkers to the vessel Angara, as owner, became bailee. In breach of Angara’s duties as bailee it consumed the bunkers and became liable to Oceanconnect. Consumption of bunkers is a conversion and Angara therefore has no defence, even under Section 25(1), in the period up to re-delivery.
Mr Kulkarni responds that upon delivery to the vessel the bunkers would have been held by Britannia as bailee. They would also, he accepts, have been held by Angara as sub-bailee but, as it was put by Lord Diplock in The Span Terza (see Clarke J’s reference at 1341F of Forsythe), Angara would have been under a duty to procure that the bunkers were used by the Master in carrying out Britannia’s lawful orders under the charterparty. Britannia, as bailee exercised full control over the bunkers and, during the charterparty, could have directed Angara to deliver them to it. The sub-bailment was on terms, as explained by Lord Goff in The Pioneer Container [1994] 2 AC 324. Angara is thus entitled to rely upon the terms of the contract between it and Britannia under which the sub-bailment of the bunkers took place. Oceanconnect is to be taken as having consented to Britannia sub-bailing the bunkers on the terms of the charterparty. Those terms in clauses 2 and 86 require the charterers to provide and pay for the fuel.
Ms Hilliard counters that this would still not be a defence to the claim in respect of the IFO because it can only apply to the period while the charterparty remained alive. The answer to that is that Oceanconnect can in that regard be in no better position than Britannia, as regards a bailment claim.
Although Angara was a bailee the relationship is a classic illustration of a sub-bailment on terms. In a claim based on bailment Oceanconnect could not be in any better position than that which Britannia would have enjoyed. There is thus no basis for Oceanconnect’s bailment claim either during the period prior to redelivery or afterwards.
Unjust Enrichment
Oceanconnect claim that Angara is liable to it in unjust enrichment. The case was advanced very briefly at the trial and occupies just five lines of Ms Hilliard’s skeleton argument. The case is that the bunkers were consumed by Angara’s vessel and Angara thereby obtained the benefit. Angara has not paid Oceanconnect for the bunkers or, Oceanconnect maintain, Britannia either. There has therefore been a total failure of consideration and Angara is liable in restitution/unjust enrichment for the value of the bunkers.
This claim cannot get off the ground for the reasons given in Mr Kulkarni’s skeleton argument. It appears that the unjust enrichment claim only arose in the first place when the Defendants were submitting that it was governed by the law of an unspecified US state or alternatively of the Marshall Islands.
Conclusion
There will be judgment for the Claimant because Section 25(1) of the Sale of Goods Act 1979 protects it from what would otherwise be a claim for conversion and because the claims based on bailment and unjust enrichment fail. I shall be grateful if counsel will let me have corrections of the usual kind at least 48 hours before this judgment is handed down together with a draft order and a note of any further matters which arise for decision by me.
GE Capital Bank Ltd v Rushton & Anor
2006] WLR 899, [2005] EWCA Civ 1556, [2006] 1 WLR 899
Moore Bick LJ
3. The Appeal
The Bank appeals against the Recorder’s decision on three grounds. The first is that on the true construction of section 27 of the Hire Purchase Act 1964 Mr. Rushton was not a private purchaser. The second is that in reaching her decision on whether Mr. Rushton had acted in good faith the Recorder had wrongly had regard to the prices at which the cars had been sold at auction in September 2004 as providing direct evidence of their value at the end of January or the beginning of February that year. The third is that her decision that Mr. Rushton had acted in good faith was contrary to the weight of the evidence and wrong.
(i) Private purchaser
The relevant parts of section 27 of the Hire Purchase Act 1964 provide as follows:
“(1) This section applies where a motor vehicle has been bailed or (in Scotland) hired under a hire-purchase agreement, or has been agreed to be sold under a conditional sale agreement, and, before the property in the vehicle has become vested in the debtor, he disposes of the vehicle to another person.
(2) Where the disposition referred to in subsection (1) above is to a private purchaser, and he is a purchaser of the motor vehicle in good faith, without notice of the hire-purchase or conditional sale agreement (the “relevant agreement”) that disposition shall have effect as if the creditor’s title to the vehicle has been vested in the debtor immediately before that disposition.”
Section 29(2) of the Act provides as follows:
“In this Part of this Act, “trade or finance purchaser” means a purchaser who, at the time of the disposition made to him, carries on a business which consists, wholly or partly,—
(a) of purchasing motor vehicles for the purpose of offering or exposing them for sale, or
(b) . . . . . . . . . .
and “private purchaser” means a purchaser who, at the time of the disposition made to him, does not carry on any such business.”
Mr. Rushton candidly admitted in the course of his evidence that he bought the vehicles from T&T as a business venture with a view to making some money out of them. However, he was not in any sense an established motor dealer, nor was he seeking to set himself up as one in the long term. The Recorder’s attention was drawn to Benjamin’s Sale of Goods, 6th ed., paragraph 7-090 in which the learned authors suggest that the expression “carries on business” denotes a certain degree of regularity and the holding of oneself out to do such business. Applying that test, she held that the purchase of the vehicles was an isolated transaction as far as Mr. Rushton was concerned and that he was therefore a private purchaser within the meaning of the Act.
Before us attention was again directed primarily to the words “carries on a business” in section 29(2). Mr. Beaumont argued forcefully that the expression denotes an element of continuity and naturally refers to a person who is already an established motor trader at the time of the disposition. In support of that submission he drew our attention to a number of decided cases, beginning with those mentioned in footnote 61 to paragraph 7-090 of Benjamin, namely, Litchfield v Dreyfus [1906] 1 K.B. 584, Newman v Oughton [1911] 1 K.B. 792 and Marshall v Goulston Discount (Northern) Ltd [1967] Ch. 72. Since these are all decisions on the Moneylenders Acts 1900-1927 it may be helpful to set out the provisions of section 6 of the Moneylenders Act 1900 on which the argument turned in each case.
Section 6 of the Moneylenders Act 1900 provided as follows:
“The expression “money-lender” in this Act shall include every person whose business is that of money-lending, or who advertises or announces himself or holds himself out in any way as carrying on that business; but shall not include
(a) any pawnbroker in respect of business carried on by him in accordance with the provisions of the Acts for the time being in force in relation to pawnbrokers; or
. . . . . . . . . . .
(d) any person bona fide carrying on the business of banking or insurance or bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money; . . . . . .”
In Litchfield v Dreyfus the plaintiff carried on business as an antique dealer. In the course of the business he gave credit to customers and took bills from them in payment of amounts they owed for purchases, some of which he discounted and renewed from time to time. When he ceased business he sold his stock and took bills for the greater part of the purchase money which he also discounted and renewed from time to time. After he ceased business he became a consultant and assisted two dealers by discounting their customers’ bills. He also assisted some old friends in the trade and a few people with whom he had been connected in business with loans and by discounting bills for them, but he did not advertise as a moneylender and did not discount bills for people outside his own circle. In an action by the plaintiff on bills given in respect of a loan to an old customer the defendant pleaded that he was an unregistered moneylender and could not recover.
This unmeritorious defence failed. Farwell J. held that credit given to customers and to those who purchased stock at the plaintiff’s closing down sale were loans incidental to the carrying on of his business as an antique dealer and so within proviso (d) to section 6. The judge did not regard the subsequent discounting of bills to assist a few old friends as carrying on the business of a moneylender, holding that whether a person carries on the business of a moneylender depends on the facts of the case. He did not attempt to define with any greater precision what was necessary to bring a case within the section. In my view, therefore, apart from evidencing a certain amount of judicial distaste for the argument, the authority provides little or no assistance in determining the question before us.
In Newman v Oughton the claimant sought to execute a judgment against goods in the possession of a judgment debtor. The goods were claimed by a firm of pawnbrokers who said that they were included in a bill of sale granted to them. At the trial of the resulting interpleader it appeared that the bill of sale had been given as security for an advance of £50. The plaintiff argued that an advance on a bill of sale did not constitute business conducted in accordance with the provisions of the Pawnbrokers Act 1872, that the claimant was an unregistered moneylender and that the transaction was therefore void. Ridley J. decided the matter on the basis that the claimant had not acted in breach of the Pawnbrokers Act and was therefore entitled to the protection of section 6(a) of the Moneylenders Act, but he also expressed the view that since there was evidence of only one loan it could not be said that the claimants had been proved to be persons whose business was that of moneylending within the meaning of the Act. Avory J. was of the same view, holding that one isolated transaction was not enough to bring the claimants within the definition of a moneylender. It follows that both judges thought that for the Act to apply there had to be an established business of moneylending. The case can therefore be said to provide some support for the defendants’ argument.
Marshall v Goulston Discount (Northern) Ltd was a case about discovery (or disclosure, as it is now called). The plaintiff brought an action for a declaration that a charge and bill of sale that he had executed in favour of the defendants were void because they formed part of moneylending transactions carried on by the defendants who were unregistered moneylenders. In support of that argument he sought discovery of all documents in the defendants’ possession relating to offers of, and proposals for, advances and correspondence relating to loans coming into existence after the date of the relevant transactions. The defendants resisted giving discovery, but were ordered to do so by the judge. Their appeal was dismissed on the grounds that documents coming into existence after the date of the transaction might shed some light on the nature of their business at the earlier date. The dispute turned on whether there was an established rule of practice that discovery should not be ordered of documents coming into existence after the date of the transaction. I can find nothing in the decision that bears on the question before us.
In addition to those cases a number of other authorities were drawn to our attention. The first of these was Kirkwood v Gadd [1910] A.C. 422. In that case the House of Lords was concerned with section 2 of the Moneylenders Act 1900 under which a moneylender was required to carry on his business only in his registered name and at his registered address. Mr. Beaumont relied on a passage in the speech of Lord Atkinson at page 431 in which he said that the words “carries on business” implied a repetition of acts and a similar expression of opinion can be found in the speech of Lord Loreburn at page 423. Mr. Buck, however, was able to point to another passage in the speech of Lord Atkinson at page 433 in which he said:
“Whether one isolated transaction carried out by a money-lender from its inception to its completion at a place other than his registered address amounts or does not amount to the crime of carrying on business elsewhere than at his registered address, within the meaning of the statute, must depend on the particulars or circumstances attending the transaction. The carrying out of one such transaction does not necessarily amount to an offence, but circumstances are conceivable where it might amount to it; . . . . . . . .”
The issue in that case was whether an injunction should be granted to prevent a moneylender from taking possession under a bill of sale in circumstances where the agreement for a loan, the advance and the granting of the security all took place at the borrower’s residence and the speeches must be read with that in mind.
Litchfield v Dreyfus, Newman v Oughton and Kirkwood v Gadd, as well as other decisions on the Moneylenders Acts, were all considered by this court in Conroy v Kenny [1999] 1 WLR 1340. In that case too the central question was whether at the time the loan was made the lender was a person whose business was that of moneylending within the meaning of section 6 of the Moneylenders Act 1900. Having reviewed the authorities Kennedy L.J. who gave the leading judgment accepted that
“. . . . . . a licensed moneylender who sets up business with an office probably falls within section 6 of the Act of 1900 when he makes his first loan, even if he never makes another, because at the time when that loan was made his business was that of moneylending.”
When considering the assistance to be derived from decisions on section 6 of the Moneylenders Act 1900 two factors have to be borne in mind. The first is that the primary expression used to define a moneylender is a person “whose business is that of money-lending”. Although the word “business” may often denote a degree of repetition and continuity, it need not always do so, as Kennedy L.J. observed in Conroy v Kenny. The expression “carrying on [that] business”, which one also finds in section 6 and which is more suggestive of a continuing state of affairs, is partly dictated by the use of the words “. . . . . advertises or announces himself or holds himself out in any way as . . . .” The second thing to bear in mind is that one can detect in some of the cases (Litchfield v Dreyfus is perhaps a good example) a degree of reluctance on the part of the judges to allow unmeritorious defendants to take advantage of the Act. In those circumstances it may be more profitable to look for guidance to decisions on statutory provisions providing protection for purchasers of goods and services insofar as they contain broadly comparable language.
Three such decisions have been drawn to our attention. The first is Davies v Sumner [1984] 1 W.L.R. 1301, a decision of the House of Lords on section 1(1)(a) of the Trade Descriptions Act 1968. This provides that
“Any person who, in the course of a trade or business
(a) applies a false trade description to any goods; or
(b) supplies or offers to supply any goods to which a false trade description is applied;
shall, subject to the provisions of this Act, be guilty of an offence.”
The critical words are “in the course of a trade or business.” In that case the defendant carried on business as a self-employed courier for a television company carrying films and packages from place to place using his own car for the purpose. From time to time he traded his car in for a new one. On one occasion when trading in his car he told the dealer that it had travelled 18,000 miles whereas it had actually travelled 118,000 miles. As a result he was prosecuted for a breach of the Trade Descriptions Act. His defence was that he did not sell the car in the course of a trade or business within the meaning of the Act. Lord Keith of Kinkel with whom the other members of the House agreed said at page 1305:
“Any disposal of a chattel held for the purposes of a business may, in a certain sense, be said to have been in the course of that business, irrespective of whether the chattel was acquired with a view to resale or for consumption or as a capital asset. But in my opinion section 1(1) of the Act is not intended to cast such a wide net as this. The expression “in the course of a trade or business” in the context of an Act having consumer protection as its primary purpose conveys the concept of some degree of regularity, and it is to be observed that the long title to the Act refers to “misdescriptions of goods, services, accommodation and facilities provided in the course of trade”. . . . . . . . . . . The need for some degree of regularity does not, however, involve that a one-off adventure in the nature of trade, carried through with a view to profit, would not fall within section 1(1) because such a transaction would itself constitute a trade.”
In R. & B. Customs Brokers Co. Ltd v United Dominions Trust Ltd [1988] 1 WLR 321 the plaintiff was a freight forwarding and shipping agency which bought a car for the use of one of its directors through the defendant, a finance company. The agreement between the plaintiff and the defendant excluded any condition or warranty relating to the car’s condition or fitness for purpose. The roof of the car leaked and in due course it was rejected by the company which claimed damages for breach of the condition implied by section 14(3) of the Sale of Goods Act 1979 that the car was fit for its purpose. The defendant sought to rely on the terms of the contract to exclude any such liability; the plaintiff relied on section 6(2) of the Unfair Contract Terms Act 1977 (which renders ineffective any term purporting to exclude liability for breach of section 14(3)) on the grounds that it was dealing as a consumer.
By section 12(1) of the Unfair Contract Terms Act a party to a contract deals as a consumer if he “neither makes the contract in the course of a business nor holds himself out as doing so”. The critical question, therefore was whether the plaintiff had bought the car in the course of a business. Having referred to the speech of Lord Keith in Davies v Sumner, Dillon L.J. said at page 330:
“Lord Keith emphasised the need for some degree of regularity, and he found pointers to this in the primary purpose and long title of the Trade Descriptions Act 1968. I find pointers to a similar need for regularity under the Act of 1977, where matters merely incidental to the carrying on of a business are concerned, both in the words which I would emphasise, “in the course of” in the phrase “in the course of a business” and in the concept, or legislative purpose, which must underlie the dichotomy under the Act of 1977 between those who deal as consumers and those who deal otherwise than as consumers.
This reasoning leads to the conclusion that, in the Act of 1977 also, the words “in the course of business” are not used in what Lord Keith called “the broadest sense.” I also find helpful the phrase used by Lord Parker C.J. and quoted by Lord Keith, “an integral part of the business carried on.” The reconciliation between that phrase and the need for some degree of regularity is, as I see it, as follows: there are some transactions which are clearly integral parts of the businesses concerned, and these should be held to have been carried out in the course of those businesses; this would cover, apart from much else, the instance of a one-off adventure in the nature of trade, where the transaction itself would constitute a trade or business. There are other transactions, however, such as the purchase of the car in the present case, which are at highest only incidental to the carrying on of the relevant business; here a degree of regularity is required before it can be said that they are an integral part of the business carried on, and so entered into in the course of that business.”
Neill L.J. observed that the expression “in the course of a business”, or similar language, is to be found in statutes such as the Sale of Goods Act 1979, the Trade Descriptions Act 1968 and the Supply of Goods and Services Act 1982. He noted that section 1(1) of the Trade Descriptions Act creates a criminal offence, but nonetheless thought that it would be unsatisfactory if, when dealing with broadly similar legislation, the courts were not to adopt a consistent construction of the same or similar phrases. For that reason he thought that the court should follow the guidance given in Davies v Sumner when construing section 12(1) of the Unfair Contract Terms Act.
A very similar question arose for consideration in Stevenson v Rogers [1999] QB 1028. In April 1988 the defendant, who carried on the business of a fisherman, sold his vessel Jelle to the plaintiff with a view to having a new boat built to his requirements. In the event he bought a replacement vessel which he continued to use for his business. The question for the court was whether the sale of the Jelle had been made “in the course of a business” within the meaning of section 14(2) of the Sale of Goods Act 1979 so that it was subject to an implied term that the vessel was of merchantable quality. The leading judgment in the Court of Appeal was given by Potter L.J. Having considered Davies v Sumner and R. & B. Customs Brokers Co. Ltd v United Dominions Trust, he noted that it was common ground between the parties that
“. . . . . in the field of consumer protection three broad categories have been developed to identify whether a sale is made “in the course of a business,” namely (a) a sale in a one-off venture in the nature of a trade carried through with a view to profit; (b) a sale which is an integral part of the business carried on; (c) a sale which is merely incidental to the business carried on but which is undertaken with a degree of regularity.
In categories (a) and (b) the transaction is in the course of a business because it is the conduct of the very business itself. In (c) the transaction is in the course of such business because its regularity has made it so . . . . . .;”
The appellant submitted that the transaction in that case was one that was an integral part of the respondent’s business, since he had to replace his boat from time to time, rather than a transaction of a kind that was made infrequently and merely incidental to that business. However, he also submitted that the words “in the course of a business” in section 14(2) of the Sale of Goods Act should be given a broader construction than that given to them in Davies v Sumner so that it was unnecessary to determine whether that was so or not. Potter L.J. pointed out that the changes to the original language of section 14 of the Sale of Goods Act brought about by the Supply of Goods (Implied Terms) Act 1973 and the Unfair Contract Terms Act 1977 had transformed the code enshrined in the 1893 Act from a corpus of rules which in principle applied to all contracts of sale into one containing a number of variants, dependent on factors such as whether one of the parties is acting in the course of a business or whether a party does or does not deal as a “consumer”. He concluded that the court was free to construe the words of section 14(2) at their wide face value and should do so in order to provide the degree of protection to consumers that Parliament had intended. He therefore held that the sale was one made in the course of a business. Russell and Butler-Sloss L.JJ. agreed.
Mr. Beaumont referred us to two further authorities in other areas of the law, Smith v Anderson (1879) 15 Ch. D. 247 and Commissioners of Inland Revenue v Marine Steam Turbine Co. Ltd [1920] 1 K.B. 193. In Smith v Anderson a number of investors subscribed for shares in telegraph companies which they vested in trustees to manage the investment on certain terms. A question arose whether this arrangement contravened section 4 of the Companies Act 1862 which prohibited the formation of an association consisting of more than 20 persons “for the purpose of carrying on any business that has for its object the acquisition of gain” unless it was registered in accordance with the Act. It was cited only for a passage in the judgment of Brett L.J. who at page 277 said that the expression “carrying on” implied a repetition of acts and excluded the case of an association formed for doing one particular act which was never to be repeated. However, the context in which the statutory language fell to be considered is so far removed from that of the present case that I am unable to derive much assistance from it.
Commissioners of Inland Revenue v Marine Steam Turbine Co. Ltd concerned an appeal from the Special Commissioners who had held that the respondent company, which had transferred to a third party its licence to exploit various patents for the manufacture of a marine steam turbine engine in return for the payment of a royalty on every engine sold by the third party and whose only business consisted of receiving the royalties, was not “carrying on a trade or business” within the meaning of the Finance (No. 2) Act 1915. It was also cited for a brief passage in the judgment, on this occasion of Rowlatt J., at page 203 in which he expressed the view that the word “business” was used in the sense of “an active occupation or profession continuously carried on”. Again, the words in question had to be construed in a very different context and I do not derive much assistance from this decision.
The critical issues in this case are (i) whether it is possible for a person to be carrying on a trade or business consisting wholly or partly of purchasing motor vehicles for the purpose of offering or exposing them for sale within the meaning of section 29(2) of the Hire Purchase Act 1964 at the time when he acquires his first vehicles for stock and (ii) if it is, whether Mr. Rushton can properly be regarded as falling within that description. None of the authorities to which I have referred provides the answers to these questions, although they do contain some valuable pointers. That the expression “carries on a business” may, in an appropriate context, be apt to refer to a single transaction in the way of business is, I think, clear both from Lord Keith’s remarks in Davies v Sumner and from the comment of Kennedy L.J. in Conroy v Kenny. Whether it should be construed in that way in the present context is, of course, another question.
The argument before us concentrated mainly on the two expressions “at the time of the disposition” and “carries on a business”, both of which naturally tend to direct attention to the activities of the purchaser prior to and at the time at which he acquired the vehicle in question. However, those words form part of a larger phrase which must be read as a whole and which describes the nature of the business in a way that also directs attention to the purpose for which the purchaser is acquiring the vehicle. Sections 27(2) and 29(2) draw a clear distinction between a private purchaser, who obtains the protection of the Act, and a trade purchaser, who does not. I do not think there can be much doubt that the purpose of the legislation is to provide protection to those who do not buy in the course of trade and to withhold it from those who do. In this context I think that the reference to a person who “carries on a business which consists wholly or partly of purchasing motor vehicles for the purpose of offering or exposing them for sale” is intended to direct attention not merely to the business of the purchaser immediately prior to and at the time of the disposition but also to the purpose for which the vehicle is bought. Thus, I do not think that an established motor trader who buys a car for his personal use is deprived of the protection of the Act just because he is a motor trader (although he might find it more difficult to satisfy the other requirements). Equally, however, I do not think that a person is necessarily to be regarded as a private purchaser simply because he has not previously bought motor vehicles with a view to selling them in the way of business. If a person has decided to enter the motor trade and for that purpose has obtained premises at which he intends to hold his stock, offer it for sale and carry out the formalities associated with the sale of motor vehicles, I have little doubt that he would properly be described as a person who was carrying on the business of purchasing motor vehicles for the purpose of offering them for sale at the time when he bought his first vehicle for stock. Mr. Beaumont was inclined to accept that and I think he was right to do so.
I accept, of course, that when Mr. Rushton bought the vehicles from T&T he had not taken any formal steps to set himself up as a motor dealer and at that stage had not even decided where to store them while they were awaiting disposal. However, he clearly had decided to purchase them as a business venture with a view to selling them at a profit. In those circumstances purchasing the vehicles from T&T was no less a step in carrying on a business of purchasing motor vehicles for the purpose of offering or exposing them for sale than it would have been if he had already prepared a showroom or forecourt to receive them. For these reasons I am satisfied that at the time he bought the vehicles Mr. Rushton was a trade purchaser and not a private purchaser within the meaning of the Act. It was, to adopt the words used by Lord Keith in Davies v Sumner, a one-off adventure in the nature of trade, carried through with a view to profit. That is also consistent with the fact that when Mr. Rushton sold one of the vehicles he did so “in the course of a business” within the meaning of section 14(2) of the Sale of Goods Act 1979 (Stevenson v Rogers) and “in the course of a trade or business” within the meaning of section 1(1) of the Trade Descriptions Act 1968 (Davies v Sumner). It follows that in my view Mr. Rushton did not obtain a good title to the vehicles when he bought them from T&T.
This makes it unnecessary to decide the other grounds of appeal, but since they were fully argued I shall express my views on them shortly.
(ii) Use of the auction prices as evidence of value
(iv) Conversion
It was common ground both before the Recorder and before this court that the Bank terminated the Master Trading Agreement on 10th February 2004 and obtained an immediate right to possession of the vehicles on that date, but not before. In the absence of any suggestion by the Bank that it became entitled to possession of the vehicles at any earlier date, I am content to assume for present purposes that that is correct. It follows, therefore, that Mr. Rushtonconverted the VW Golf the next day when he sold and delivered it to Mr. Jenking and that he subsequently converted the other cars both by insisting when challenged by Mr. Thomas that he had a good title to them and by refusing to return them to the Bank when asked to do so. (Mr. Buck did not place any emphasis on the fact that he had been in possession of the cars prior to receiving the telephone call from Mr. Thomas and it is unnecessary, therefore, to decide whether he was guilty of converting them at any earlier date.)
Mr. Beaumont submitted that apart from purchasing and taking possession of the VW Golf, Mr. Jenking, by contrast, had done nothing after the Bank obtained an immediate right to possession of the vehicles on 10th February that could render him liable to the Bank in conversion. However, I am unable to accept that. The evidence given at the trial supports the conclusion (which does not appear to have been in issue) that Mr. Jenking was assisting Mr. Rushton throughout in helping him take possession of all the vehicles, putting them into store and looking after them, and that is reflected in the statements of case and in the way in which the case was presented in the court below. In its particulars of claim the Bank alleged that the cars had been converted by both defendants and they responded to the allegations against them in the same way in a joint defence and counterclaim. In their counterclaim they both made a claim against the Bank for losses which it was said they had incurred as a result of being prevented from disposing of the cars by the Bank’s assertion of title. They included the costs of storing and insuring the vehicles and depreciation. The defendants subsequently provided further information supplementing their defence in which they declined to state where the vehicles then were. At the trial Mr. Buck opened the case on the basis that the defendants were jointly liable in conversion and there was no suggestion on the part of Mr. Jenking in the submissions that he made on behalf of them both that he was not as fully involved as Mr. Rushton or that he was not liable to the Bank even if Mr. Rushton was. In these circumstances it is not open to Mr. Jenking to contend before us that he is not liable to the Bank because he did not take part in the removal or retention of the vehiclestogether with Mr. Rushton.
If follows that in my view Mr. Rushton is liable to the Bank for conversion of all seven cars which are the subject of these proceedings. Mr. Jenking is also liable to the Bank for conversion of the six cars other than the VW Golf. Whether he is also liable in respect of that vehicle depends on whether he obtained a good title to it despite the fact that it did not belong to Mr. Rushton at the time he sold it to him.
(v) The sale of the VW Golf to Mr. Jenking
Mr. Beaumont submitted that if property in the cars did not pass to Mr. Rushton because he was a trade purchaser within the meaning of section 27(2) of the Hire Purchase Act 1964, Mr. Jenking obtained a good title to the VW Golf under section 27(3) of the Act when he bought it from Mr. Rushton.
Section 27(3) provides as follows:
“Where the person to whom the disposition referred to in subsection (1) above is made (the “original purchaser”) is a trade or finance purchaser, then if the person who is the first private purchaser of the motor vehicle after that disposition (the “first private purchaser”) is a purchaser of the vehicle in good faith without notice of the relevant agreement, the disposition of the vehicle to the first private purchaser shall have effect as if the title of the creditor to the vehicle had been vested in the debtor immediately before he disposed of it to the original purchaser.”
This subsection broadly mirrors subsection (2) by providing the same protection to the first private purchaser from a trade purchaser as he would have had if he had bought the vehicle from the debtor, in this case T&T. Unfortunately, the Recorder made no findings about Mr. Jenking’s bona fides or his knowledge of the agreement under which the car had been in the possession of T&T. It was not necessary for her to do so in view of the conclusion to which she had come on the effect of the sale to Mr. Rushton and she did not touch on the point in her judgment.
Although a question of this kind would normally be one for decision by the judge at first instance, if necessary after hearing further evidence, the parties asked us to determine it on the material before the court, if it became appropriate to do so, rather than remit the case to the Recorder for a further hearing. In the circumstances we accepted that we should do so in the interests of saving time and costs, despite the somewhat unsatisfactory nature of the exercise.
As it happens, Mr. Buck chose the VW Golf as the vehicle for cross-examining Mr. Rushton about his bona fides. Mr. Jenking’s bona fides was not in issue in relation to the purchase from T&T, but there are no grounds for thinking that he knew any more at that time than Mr. Rushton did about the terms on which T&T held the car. Mr. Jenking’s own state of mind is to be judged at the time he bought the Golf from Mr. Rushton about a fortnight later, but he gave evidence to the effect that he was unaware of the Bank’s interest at the time of the original purchase and certainly nothing appears to have occurred in the interim to alert him to a possible problem. T&T did not go into liquidation until early March. The price Mr. Jenking paid for the car (£9,000) was £2,000 more than Mr. Rushton had paid for it and very close to the adjusted value put forward by the Bank. The burden is on Mr. Jenking to show that he was a bona fide purchaser without notice of the agreement between the Bank and T&T, but in the circumstances I do not think that the evidence admits of any other conclusion. In those circumstances I am of the view that he obtained a good title to the car under section 27(3) of the Act. Conversion involves a wrongful interference with the rights of the true owner of the goods. Although Mr. Jenking did interfere with the Bank’s rights over the VWGolf when he bought it from Mr. Rushton, the fact that he obtained a good title to it under the Hire Purchase Act means that the Bank’s rights as owner of the car were transferred to him at the moment of sale and accordingly the Bank can have no claim against him in respect of it. Moreover, since it was his car, he is entitled in principle to recover the relevant part of the sale proceeds, £6,300, now held by the Bank’s solicitors, subject to any right the Bank may have, or may in the future be granted, to retain that sum in part satisfaction of his liability.
For these reasons I would allow the Bank’s appeal in full against Mr. Rushton. As far as Mr. Jenking is concerned, I would allow the appeal in relation to all the vehicles apart from the VW Golf.
In a case of this kind damages are assessed at the date of the conversion and it was for that reason that the Bank put forward its adjusted values. Although those figures are not agreed, they provide the best evidence we have of the value of the vehicles in February and March 2004. In my view,therefore, Mr. Rushton is liable to the bank for conversion in the sum of £64,550, being the value of the VW Golf in February and of the other six cars in March, and Mr. Jenking is liable to the Bank for conversion in the sum of £55,700, being the value in March of the six vehicles other than the VW Golf.
Lord Justice Rix:
I agree
Sir Anthony Clarke M.R.:
I also agree.
SIR ANTHONY CLARKE: The arguments in this appeal took place some weeks ago. Judgment in the appeal was reserved and draft judgments were prepared (in substance the judgment of Moore-Bick LJ with which Rix LJ and I agree) and were sent to the parties some days ago with a view to the judgments being handed down and the appeal being finally resolved today.
Since the draft was made available to the parties, Mr Beaumont, who represented the respondents in the appeal but not in the court below (where they represented themselves), has produced a skeleton argument inviting the court to consider and determine a point under section 2 of the Factors Act 1889. That point had been referred to in paragraph 44(iv) of the skeleton argument drafted by one of the respondents, Mr Jenking. It was not, however, mentioned in the course of the oral argument in the appeal. The question is whether in these circumstances it would be just, having regard to all the circumstances of the
Sir Thomas Bingham’s observations in Timeload have no application to the present case. If Zockoll are correct, Mercury have stood by and allowed Zockollto invest millions in building up a market for alphanumerics in the hope and expectation of being able to make very profitable use of numbers provided by Mercury. One of the numbers with the most obvious potential value is the FLIGHTS number. Mercury has now claimed to be entitled to remove that number on 14 days’ notice and before the stage has been reached when Zockoll could, or could reasonably have been expected, to use the number for the purpose for which it was acquired. It seems to me arguable that this conduct has rendered performance of the contract substantially different from what had been reasonably expected, or has resulted in non-performance of part of the contractual obligation. Nor would it be right to ignore the Master of the Rolls’ observations on the potential operation of the common law.
I turn to the submission that the requirement for reasonable notice renders Clause 8(1) a reasonable clause. That is an unattractive submission from a Defendant who has purported to give but 14 days’ notice of withdrawal. If correct, the submission would seem to lead to the conclusion that, in the case of numbers acquired by Zockoll in order to benefit from the anticipated future adoption of alphanumeric telephone addresses in this country, notice of withdrawal of a number should be sufficiently lengthy to enable them to achieve this benefit. Such a conclusion might defeat a claim based on the 1977 Act, but it would open wide the door to a much simpler claim for breach of the notice requirement in Clause 8(1).
For these reasons I do not accept that Zockoll have no reasonably arguable case that Mercury are in breach of contract such as can
properly found an application for interlocutory relief. At the same time I cannot accept Miss Heilbron’s submission that the Court can “feel a high degree of assurance” that, at the trial,
it will be established that a mandatory interlocutory injunction was appropriate. Mr Douglas has satisfied me that, while Zockoll have an arguable case, there are nonetheless substantial issues both of fact and law that will have to be resolved. If a note in the current Supreme Court Practice is correct, this is an impediment to the relief that Zockoll seek, but Miss Heilbron has submitted that the note in question does not reflect the current law.
The approach to an application for a mandatory interlocutory injunction.
The note at O.29/1/5 of the White Book ends with a paragraph that begins:
“The Cyanamid guidelines are not relevant to mandatory injunctions. The case has to be unusually strong and clear before a mandatory injunction will be granted at the interlocutory stage even if it is sought in order to enforce a contractual obligation.”
This note is consistent with the statement of Megarry J. in Shepherd Homes Ltd. v. Sandham [1971] 1 Ch 340 at 351 that:
“… on motion, as contrasted with the trial, the court is far more reluctant to grant a mandatory injunction than it would be to grant a comparable prohibitory injunction. In a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this is a higher standard than is required for a prohibitory injunction.”
The note in the White Book is also consistent with the comment made by Mustill L.J. in relation to that statement by Megarry J. in Locabail Finance Ltd. v. Agroexport [1986] 1 WLR 657 at p. 664:
“It was pointed out in argument that the judgment of Megarry J. antedates the comprehensive review of the law as to injunctions given by the House of Lords in American Cyanamid Co. v Ethicon Ltd. [1975] AC 396 but to my mind at least, the statement of principle by Megarry J. in relation to the very special case of the mandatory injunction is not affected by what the House of Lords said in the Cyanamid case.”
The note in the White Book continues, however:
“… where it is necessary that some mandatory order has to be made ad interim the Court will make the order whether or not the high standard of probability of success at trial is made out ( Leisure Data v. Bell [1988] F.S.R. 367).”
In Leisure Data Dillon L.J. also referred, at p. 372, to the statement of Megarry J. He went on to observe:
“The statutory authority, however, for the grant of mandatory and prohibitory injunctions stems alike from section 37 of the Supreme Court Act 1981. The court is required, as Lord Diplock pointed out in N.W.L. Ltd. v Woods [1979] 3 All E.R. 614 at 625, to give full weight to the practical realities of the situation and weigh the respective risks that injustice may result from a decision one way or another.”
Later in the same case at p. 376 Neill L.J. referred, with approval, to the statement of Eveleigh L.J. in Cayne v. Global Natural Resources [1984] 1 All E.R. 225 at 233 that the broad principle is “…what can the court do in its best endeavour to avoid injustice?” and to the statement of May L.J. at p. 237 in the same case that “the ´balance of the risk of doing an injustice’ better describes the process involved”.
These observations in Leisure Data were consistent with the conclusions of Hoffman J. in Films Rover Ltd. v. Cannon Film Sales Ltd. [1987] 1 WLR 670 at 680. These were not cited to the Court, but were subsequently to be approved by Lord Jauncey in Factortame No. 2 [1991] 1 AC 603 at p. 683 and were relied upon by Miss Heilbron as representing the current state of the law:
“The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ´wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been to have been ´wrong’ in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.
The passage quoted is from Megarry J. in Shepherd Homes Ltd. v. Sandham [1971] Ch. 340, 351, qualified as it was by the words ´in a normal case’, was plainly intended as a guideline rather than an independent principle. It is another way of saying that the features which justify describing an injunction as ´mandatory’ will usually also have the consequence of creating a greater risk of injustice if it is granted rather than withheld at the interlocutory stage unless the court feels a ´high degree of assurance’ that the plaintiff will be able to establish his right at a trial. I have taken the liberty of reformulating the proposition in this way in order to bring out two points. The first is to show that semantic arguments over whether the injunction as formulated can properly be classified as mandatory or prohibitory are barren. The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term ´mandatory’ to describe the injunction, the same question of substance will determine whether the case is ´normal’ and therefore within the guideline of ´exceptional’ and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a ´high degree of assurance’ about the plaintiff’s chances of establishing his right, there cannot be any rational basis for withholding the injunction.
In Shepherd Homes Ltd. v. Sandham , Megarry J. spelled out some of the reasons why mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage: they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and make it unlikely that there will be a trial. One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable. In addition to all these practical considerations, there is also what might be loosely called a ´due process’ question. An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action. The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.”
I would concur with this passage as providing detailed guidance to the approach of the court when considering an application to grant a mandatory interlocutory injunction. A more concise summary, which I would commend as being all the citation that should in future be necessary, is the following passage in the judgment of Chadwick J. in Nottingham Building Society v. Eurodynamics Systems [1993] FSR 468 at p. 474:
“In my view the principles to be applied are these. First, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be ´wrong’ in the sense described by Hoffmann J.
Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.
Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish this right at a trial. That is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.
But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted.”
These are the principles to be applied to the facts of the present case.