B e f o r e :
LORD JUSTICE SELLERS
LORD JUSTICE PEARCE
and
LORD JUSTICE DEVLIN
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Between:
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(Transcript of the Shorthand Notes of the Association of Official Shorthandwriters, Ltd.,
Room 392, Royal Courts of Justice, and 8, New Square, Lincoln's Inn, W.C.2.)
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Mr. STEPHEN CHAPMAN. Q.C. and Mr. R. R. HOPKINS (Instructed by Messrs. Pressman & Redman)
appeared for the Respondent, Defendant below.
Mr. INGRAM POOLE (Instructed by Messrs. Gibson & Weldon, Agents for Gale, Greenwood & Co., Poole)
appeared on behalf of the Respondents, Plaintiffs below.
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HTML VERSION OF JUDGMENT
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Crown Copyright ©
LORD JUSTICE SELLERS: In August 1957 the plaintiffs were the joint owners of a Renault Dauphine Motor Car ULJ.101.
On the 3rd August, the Saturday before the August Bank holiday of that year, in a transaction with a man not inappropriately called 'the rogue Hutchinson' by the learned Judge, the plaintiffs parted with the car to him. By the 6th August the car was in Blackpool and there was a purported sale of it to the defendant by the rogue (as the Judge found) then using the name Hardy.
If the property in the car had passed on the 3rd August to 'the rogue Hutchinson', whatever his true name and identity was, then the defendant would have got a good title on the Judge's findings that Hutchinson and Hardy were but one person 'the rogue Hutchinson' and that the defendant through his servants bought the car in good faith and without notice of the Seller's defect in title.
Mr. Justice Slade held that no contract had in fact been entered into between the plaintiffs and 'Hutchinson' and that no title had passed to him and therefore none was transferred to the defendant and he gave judgment for the plaintiffs for £720 the agreed value of the car, as damages for conversion.
The defendant has appealed against this decision alleging that the learned Judge was wrong both in law and in fact in so holding and it will be necessary to examine the facts found as well as the law applied.
By a cross notice of appeal the Respondents have challenged the findings that the man who sold the car to the defendant was the same man who had obtained it from them and that the defendant bought the car in good faith. It was submitted to us, that the findings were unjustified but I agree so fully with what the learned Judge has said and held on both these matters that I do not review the evidence or the argument afresh on the respondents' contentions. The defendant and his servants like so many who buy and sell second hand motor cars, might have been more astute and more careful but it requires more than that to justify a finding of bad faith. The inference that there had been no transaction with the ear intervening between that with the plaintiffs and that with the defendants seems reasonable and probable and therefore sufficiently established as the Judge has held.
The decision in this case turns solely on whether 'Hutchinson' entered into a Contract which gave him a title to the car which would subsist until it was avoided on the undoubted fraud being discovered.
There was no evidence from the other alleged contracting party 'Hutchinson', the alleged buyer, for he is apparently unknown and untraced but the learned Judge found the plaintiffs evidence satisfactory and reliable and the judgment sufficiently and accurately makes these findings:
"About 2.15 p.m. the rogue Hutchinson called at the house where the two Misses Ingram and Miss Badger were living. He was, I think, actually admitted by Miss Hilda Ingram. Ha told her he was Hutchinson, and Miss Hilda Ingram accordingly introduced him to her sister Miss Elsie Ingram as Hutchinson. He looked at the car, and asked Miss Elsie Ingram to take him for a run in it, and she did so. During the run he was very talkative. He told Miss Elsie Ingram that he came from Surrey. He talked about his family, who he said were then in Cornwall, and he said that his home was at Caterham. At that time he had given no further information, nor, I believe, had he even given his initials; he was merely Mr. Hutchinson.
After the drive they came back to the house and discussed the sale of the car. As I have said, the asking price in the advertisement was £725 or near offer. Hutchinson offered Miss Elsie Ingram £700, and she refused. He then offered £717. Miss Ingram was prepared to accept £717 in cash, and I need hardly say that the price of anything which is sold is a price in cash unless anything else is said to the contrary. At that moment the rogue Hutchinson pulled out a cheque book and Miss Elsie Ingram immediately realised that he was proposing to pay the £717 by cheque. She told him that she would not in any circumstances accept a cheque, and that she was only willing to sell the car for cash. She told him that so far as she was concerned the proposed deal was finished. She said she was not prepared to accept a cheque. She had expected cash, and she made as though to walk out of the room.
The rogue Hutchinson started to talk and try to convince her that he was a most reputable person, and then for the first time he gave his initials. He said he was a Mr. P. G.M. Hutchinson. He said he had business interests in Guildford, and that he lived at Stanstead House, Stanstead Road, Caterham. At that moment Miss Hilda Ingram, who had been in the room, slipped out of the room and after a short time she returned.
I pause there for a moment to say what she had done while she was out of the room. She in fact went to the Parkstone Post Office, which was only about two minutes from their house, and she had looked in the main Directory covering the district of Caterham. In that Directory she saw the entry, 'Hutchingaon, P.G.M., Stanstead House, Stanstead Road, Caterham 4665, and she believed that that was the man who at that moment was with her sister in their house. Miss Hilda Ingram returned to the house and to the room where Miss Elsie Ingram was still discussing the proposed sale, and Miss Hilda told Miss Alice that she had checked with the telephone directory at the Lower Parkstone Post Office, and that there was such a person as Mr. P.G.M. Hutchinson Caterham, living at that address, that is to say, Stanstead House, Stanstead Road. Having received that information she and Miss Hilda decided that they would let the rogue Hutchinson have the ear in exchange for the cheque. She said that she did so because they believed that he was the person he said he was."
It was clearly proved that "Hutchinson" was not Mr. P.G.M. Hutchinson of Stanstead House, Stanstead Road, Caterham who had nothing whatever to do with the transaction in question and knew none of the parties connected with it. This gentleman banked with a branch of Lloyds Bank in London. It appears that the rogue "Hutchinson" opened an account on the 2nd August 195? at a branch of the Westminster Bank in Guildford with a deposit of £10, acquired a cheque book from which he drew cheques on this account to the extent of nearly R4000 including the cheque of the 3rd August for £717 made payable to the plaintiffs none of which cheques was honoured. Unlike the Mr. P.G.M. Hutchinson he purported to be, he was not a man of substance with an established address in Caterham.
During the conversation from which a contract if any has to be derived "Hutchinson" knew he was not the person the plaintiffs believed him to be and to whom alone they made their offer to sell the car and to whom alone they intended to give possession of it in exchange for his cheque.
"Hutchinson" knew that the offer to sell the car in exchange for a cheque was not made to him as he was but only to an existing person whom he represented himself to be. If the plaintiffs are to be regarded as the acceptors of Hutchinson's offer to pay by cheque, he knew full well that it was not his cheque they were accepting but the cheque of the man they thought he was by reason of his persuasion and deceit.
The learned Judge finds that Miss Elsie Ingram intended to part not merely with possession but with the property in the car, but that she did so believing that the person to whom she was selling the car was Mr. P.G.M. Hutchinson of Stanstead House, Stanstead Road, Caterham with a number in the telephone directory and he further holds that if the entry in the telephone directory had not been confirmed by Miss Hilda Ingram the two sisters would not have accepted the cheque in payment or parted with the ear.
If "Hutchinson" had paid cash for the car then it seems clear that there would have been a concluded and unimpeachable transaction in which the identity and financial stability of the buyer would have been of no moment. This is not a case where the plaintiffs wished to withhold their car from any particular person or class of persons. Their desire, made quite obvious in the negotiations, was to ensure that they received payment and unless cash was paid the person with whom they were dealing was of major importance truly only as to his credit worthiness and this fact was equally clear to "Hutchinson" from the course which the negotiations took.
It does not seem to me to matter whether the right view of the facts is, as the Judge has held and as I would agree, that there was no concluded contract before the cheque book was produced and before the vital fraudulent statements were made or that there was a concluded contract which "Hutchinson" at once repudiated by refusing to pay cash and that this repudiation was accepted by the plaintiffs and the transaction was then and there at an end. The property would not have passed until cash had been paid and it never was paid or intended to be paid.
Was there a contract of sale subsequently made which led to the plaintiffs taking "Hutchinson's" cheque and in exchange for it handing over the car and its log book.
The judgment holds that there never was a concluded contract, applying, as I understand it, the elementary factors required by law to establish a contract.
The learned Judge, treating the plaintiffs as the offerors and the rogue "Hutchinson" as the offeree finds that the plaintiffs in making their offer to sell the car not for cash but for a cheque (which in the circumstances of the Bank Holiday weekend could not be banked before the following Tuesday the 6th August) were under the belief that they were dealing with, and therefore making their offer to, the honest Mr. P.G.M. Hutchinson of Caterham whom they had reason to believe was a man of substance and standing.
"Hutchinson" the offeree, knew precisely what was in the minds of the two ladles for he had put it there and he knew that their offer was intended for Mr. P.G.M. Hutchinson of Caterham and that they were making no offer to and had no intention to contract with him, as he was. There was no offer which he "Hutchinson" could accept and therefore there was no Contract.
The Judge pointed out that the offer which the plaintiffs made was one which was capable of being accepted only by the honest Mr. P.G.M. Hutchinson of Caterham and was incapable of acceptance by "Hutchinson".
In all the circumstances of this case I would accept the learned Judge's findings. Indeed the conclusion so reached seems self-evident.
Is the conclusion to be held wrong in law? If it is then, as I see it, it must be on the sole ground that as "Hutchinson" was present, albeit making fraudulent statements to induce the plaintiffs to part with their car to him in exchange for his worthless cheque and was successful in so doing, then a bargain must have been struck with him personally however much he deceived the plaintiffs into thinking they were dealing with someone else.
Where two parties are negotiating together and there is no question of one or the other purporting to act as agent for another and an agreement is reached the normal and obvious conclusion would no doubt be that they are the contracting parties. A contrary finding would not be justified unless very clear evidence demanded it. The unfortunate position of the Defendant in this case illustrates how third parties who deal in good faith with the fraudulent person may be prejudiced.
The mere presence of an individual cannot however be conclusive that an apparent bargain he may make is made with him. If he were disguised in appearance and in dress to represent someone else and the other party, deceived by the disguise, dealt with him on the basis that he was that person and would not have contracted had he known the truth then, it seems clear, there would be no contract established. If words are substituted for outward disguise so as to depict a different person from the one physically present in what circumstances would the result be different?
Whether the person portrayed, by disguise or words, is known to the other party or not is important in considering whether the identity of the person is of any moment or whether it la a matter of indifference. If a man said his name was Brown when it was in fact Smith and both were unknown to the other party it would be difficult to say that there was any evidence that the contract was not made and intended to be made with the person present. In King's Norton Metal Co. Ltd. v. Edridge Merrett & Co.Ltd. 1897 14 T.L.R. 98 one Wallis fraudulently described himself as Hallam & Co. making it appear a substantial firm with a large factory. The court held that the use of an assumed name by the buyer did not prevent a finding that the plaintiffs, the sellers of some brass rivet wire, had contracted with him.
But personal knowledge of the person fraudulently represented cannot I think be an essential feature. It might be a very strong factor but the qualities of a person not personally known might be no less strong. If a man misrepresented himself to be a Minister of the Crown or a stockbroker confidence in the person so identified might arise although the individual so described was wholly unknown personally or by eight to the other party.
It would seem that there is an area of fact in cases of the type under consideration where a fraudulent person is present purporting to make a bargain with another and that the circumstances may justify a finding that notwithstanding some fraud and deceit the correct view may be that a bargain was struck with the person present or on the other hand they may equally justify, as here, a finding the other way.
Some of the difficulties and perhaps confusion which have arisen in some of the cases do not in my view arise here.
If less had been said by the rogue and if nothing had been done to confirm his statements by Miss Hilda Ingram who communicated what she had learnt to Miss Elsie who was doing the main negotiation the result might have been different, for the sellers' concern about the stability and standing of the buyer might not have been revealed and it might have been held that an offer in such circumstances was to the party present, whatever his true identity would be.
In Phillips v. Brook the rogue North had apparently been in the shop some time inspecting goods which were brought and displayed for sale to him without any regard to his identity -he was a "customer" only. The judgment of Mr. Justice Horridge is, as I read it, based on a finding of fact that Phillips intended to deal with North as a customer. Lord Haldane in Lake v. Simmons, 1927 A.C. page 487 has taken the view that the case could be explained on the ground that the fraudulent misrepresentation was not made until after the parties had agreed upon a sale.
That opinion has been criticised mainly I think by academic writers but if, as must be conceded, it is a possible view and as Phillips v. Brooks has stood for so long and is, as I think, a decision within an area of fact, I would not feel justified in saying it was wrong.
It is not an authority to establish that where an offer or acceptance is addressed to a person (although under a mistake as to his identity) who is present in person then it must in all circumstances be treated as if actually addressed to him. I would regard the issue as a question of fact in each case depending on what was said and done and applying the elementary principles of offer and acceptance in the manner in which Mr. Justice Slade directed himself.
The judgment quotes extensively from the Article by Dr. Goodhart, the learned Editor of the Law Quarterly Review, called "Mistake as to identity in the Law of Contract," 1941 Law Quarterly Review, Volume 57 page 228 and I would join the learned Judge in his expression of indebtedness to him. Referring to Phillips v. Brooks Dr. Goodhart asks
"Did the shopkeeper believe that he was entering into a contract with Sir George Bullough and did North know this? If both answers are in the affirmative then it is submitted that there was no contract."
I think there may be a doubt in that case whether both the answers should have been in the affirmative but on the facts of the present case I feel no doubt and 1 would uphold the learned Judge's view of no contract.
Dr. Goodhart may well be right when he says that "There is no branch of the Law of Contract which is more uncertain and difficult" than that involved in this case, and I am conscious that our decision here will not have served to dispel the uncertainty.
The recent case in the New Zealand Courts Fawcett v. Star Car Sales Ltd, 1960 New Zealand Law Reports, page 406 has also produced a division of opinion, President Gresson taking a different view from Mr. Justice North and Mr. Justice Cleary in the Appellate Court who upheld the judgment of Mr. Justice Hardie Boys that a mistake by a purchaser as to the identity of a person with whom he is dealing does not necessarily invalidate any sale which takes place. Mr. Justice North put the question thus on page 425:
"Does the purchaser of a chattel who pays "the price asked by the true owner and takes delivery of the "chattel from the true owner require a good title if it so "happens that he is told and believes he is not dealing with the "previous owner who he wrongly thinks is still the true owner."
In that case which was also the case of the purchase of a motorcar, the purchase of the car had not been completed by the purchaser and judgment had been obtained against him. In the action he was seeking to establish that no contract of sale of the car had been made by the purchaser, Mr. Justice North said on page 426 "In my view the vital and indeed all-important "matter was the representation made by Mrs. Davies that she was "the true owner of the motor car. The name of Mrs. Fawcett' "meant nothing to the purchaser. All he was interested in was "to ensure that he was dealing with the true owner, and indeed "he was. His eyes as well as his mind rested on Mrs. Davies. "In my opinion then the representation that the person present "negotiating the sale was 'Mrs. Fawcett' amounted to no more than "a false description." Mr. Justice Cleary on page 431 says; "Mr. Gould believed that the woman before him was Mrs. Fawcett "(which she was not) and was the owner of the car (which for "the present purposes she was) and he was in fact dealing with "a person able to make title to the car. In my view there was "not merely one side to a contract but a contract in fact, "voidable it is true, but one under which the property passed "from the owner to the purchaser notwithstanding the false name "assumed by the owner." The majority of the Court therefore could not accept the view that a contract was entered into. That case reveals the difficulties of the problem. It turns, I think, on the view taken of the facts and apart from a comprehensive review of the authorities made by the President Gresson I do not think it is helpful in the present case.
The question in each case should be solved in my opinion by applying the test which Mr. Justice Slade applied "How ought "the promisee to have interpreted the promise" in order to find whether a contract has been entered into.
I am in agreement with the learned Judge when he quotes, accepts and applies the following passage from Dr. Goodhart's article -
"It is the interpretation of the promise which is the essential thing. This is usually based on the interpretation which a reasonable man, in the promisee's position, would place on it, but in those cases where the promisor knows that the promisee has placed a peculiar interpretation on his words, then this is the binding one. The English law is not concerned with the motives of the parties nor with the reasons which influenced their actions. For practical reasons it has limited itself to the simple questions: what did the promisor promise, and how should this be interpreted?"
Phillips v. Brooks is the closest authority on which the Appellant relies. Once that is distinguished on its facts, without going so far as to say it is wrong, authority leans strongly in favour of the judgment appealed from.
Gundy v. Lindsay. 1878 2 Appeal Cases 459, on the findings of the Court of Appeal and the House of Lords, was to the same effect as the present case. The plaintiffs intended to sell to Blenkiron & Co. but Blenkiron fraudulently assumed the position of the buyer. Therefore an offer to sell to Blenkiron & Co. was knowingly "accepted" by Blenkiron and there was no contract.
But as the learned authors of Cheshire & Fifoot on the Law of Contract 5th Edition at page 197 point out another view of the facts of that case might have been that "the plaintiffs, "though deceived by the fraud of Blenkiron intended or were at "least content to sell to the person who traded at 37 Wood Street "from which address the offer to buy had come and to which the "goods were sent. If this were the true position there was a "contract with Blenkiron of 37 Wood Street though one that was "voidable against him for his fraud."
Blenkiron & Co's address was 123 Wood Street and the three judges of the Queens Bench Division had taken this view.
Hardman v. Booth 1863 1 Hurlstone & Coltman 803 more closely supports the judgment in the present case. One of the plaintiff was fraudulently persuaded by Edward Gandell that he was a member of Gandell & Co. which in fact consisted only of Thomas Gandell. It was held that there was no contract since the plaintiff's offer was made to Thomas only as Edward knew to be the fact, and therefore he could not accept it himself.
The legal position la, I think, well illustrated by Dr. Goodhart in the article already referred to. There la a difference between the case where A makes an offer to B in the belief that B is not B but is someone else and the case where A makes an offer to B in the belief that B is X. In the first case B does in fact receive an offer even though the offeror does not know that it is to B he is making it, since he believes B to be someone else. In the second case A does not in truth make any offer to B at all; he thinks B is X, for whom alone the offer is meant. There was an offer intended for and available only to X. B cannot accept it if he knew or ought to have known that it was not addressed to him.
The judgment has quoted and referred to Pothier's statement of the Law and I have observed that Dr. Goodhart concludes his article by saying that "it is certainly time that Pothier's "statement was firmly and finally buried."
Mr. Justice Slade would have held equally for the plaintiffs if he had applied the subjective test which Pothier seems to stipulate. Pothier's statement has been cited in several English cases by Mr. Justice Fry in Smith v. Wheatcroft, 1879 9 Chancery Division 723, a case of specific performance, and in this Court in Gordon v. Street, 1899 26 Queens Bench 641, and followed in Sowler v. Potter, 1940 1 Kings Bench 271.
Having regard to the Judge's finding that whichever view he takes it does not affect his decision, I do not feel the occasion appropriate to consider further the part that Pothier's views should play in English law.
If it is the formation of a contract which calls for consideration, as it is here, "How ought the promisee to have interpreted the promise" is in my opinion the correct approach, as the Judge has held; but I recognise that the correct answer may not always prove as ascertainable as I believe it to be in the present case.
I would dismiss the Appeal.
LORD JUSTICE PEARCE: I agree. The question here is whether there was any contract, whether offer and acceptance met. For, as President Gresson said in Fawcett v. Star Car Sales Ltd., 1960 New Zealand Law Reports at page 412, "a void contract is a "paradox; in truth there is no contract at all."
Much argument has ranged round Professor Goodhart's illuminating article of which the learned Judge made considerable use in arriving at his conclusion. The learned author rightly points out that the often quoted passage from Pothier is misleading. For it seems to substitute for the objective English test: "How ought the promisee to have interpreted the promise" the entirely different subjective test: "What did the promisor intend "when he made the promise", and if taken literally it seems to involve "an inquisition into the feelings", and into the motives of the promisor. When an offeror seeks to avoid an apparent contract on the ground of mistaken identity the investigation must start with his actual state of mind. For it would be absurd if he could avoid the contract when he was not really mistaken in his own mind as to the offeree's identity or when the apparent contract was not induced by mistake, when he was equally prepared to make the contract had he not been mistaken. That, as it seems to me, is a preliminary essential. But the Courts in deciding the question whether the apparent contract is nonexistent owing to mistake in identity, apply the usual objective test (see Holmes on the Common Law, Lecture 9) rather than a subjective test which would gravely impair the certainty and stability of contracts. The learned Judge approached the matter on an objective basis. He pointed out however that he would have reached the same result by approaching the matter on the subjective test suggested by Pothier. In cases such as this the cheat is fully aware of the offeror's actual state of mind. Moreover he could not be heard to say that he was not aware of the offeror's state of mind when he has himself deliberately and fraudulently induced it. Thus the objective and subjective tests produce the same result in such a case, and it is the offeror's intention which provides the answer. It is for that reason, I think, that in such cases as this so many observations have been made that are equally referable to the subjective and objective test.
The real problem in the present case is whether the plaintiffs were in fact intending to deal with the person physically present who had fraudulently endowed himself with the attributes of some other identity or whether they were intending only to deal with that other identity. If the former, there was a valid but voidable contract and the property passed. If the latter, there was no contract and the property did not pass. The cases on this difficult subject have been very fully set out in an interesting dissenting judgment of President Gresson in Fawcett v. Star Car Sales Ltd, supra, but the facts in that case, though they concern the fraudulent sale of a motor car, are dissimilar in certain ways that make the decision itself inapplicable to the present case.
The Judge dealt with the matter as if the plaintiffs were the offerors and the cheat was the acceptor and for convenience I do likewise. The question which was offeror and which was offeree makes no difference to the principle. There are no doubt cases where the answer to that question might throw some light on the facts but in this case no help is derived from it. Here it may well be that the ultimate offeror was the false Hutchinson and the plaintiffs were the "acceptors"; in which case the problem is whether the plaintiffs were intending to deal with or accept an offer from the false Hutchinson physically present or the real Hutchinson of Stanstead House.
The mere fact that the offeror la dealing with a person bearing an alias or false attributes does not create a mistake which will prevent the formation of a contract(King's Norton Metal Co.Ltd., v. Edridge Merritt & Co. Ltd., 14 Times Law Reports 98). For in such a case there is no other identity for which the identity of the offeree is mistaken. "There was only one "entity, trading it might be under an alias, and there was a "contract by which the property passed to him" (Lord Justice A. L. Smith, at page 90).
But where a cheat passes himself off as another identity (e.g. as someone with whom the other party is accustomed to deal) it is otherwise. In Cundy v. Lindsay, 3 Appeal Cases, Lord Cairns, Lord Chancellor, said at page 465: "I ask the question, "how is it possible to imagine that in that state of things any "contract could have arisen between the respondents and Blenkiron, "the dishonest man? Of him they knew nothing, and of him they "never thought. With him they never intended to deal. Their "minds never, even for an instant of time rested upon him, and as "between him and them there was no consensus of mind which could "lead to any agreement or any contract whatever. As between "him and them there was merely the one side to a contract, where, "in order to produce a contract, two sides would be required."
An apparent contract made orally inter praesentes raises particular difficulties. The offer is apparently addressed to the physical person present. Prima facie, he, by whatever name he is called, is the person to whom the offer is made. His physical presence identified by sight and hearing preponderates over vagaries of nomenclature. "Praesentia corporis tollit errorem nominis" said Lord Bacon. Yet clearly, though difficult, it is not impossible to rebut the prima facie presumption that the offer can be accepted by the person to whom it is physically addressed. To take two extreme instances. If a man orally commissions a portrait from some unknown artist who had deliberately passed himself off whether by disguise or merely by verbal cosmetics, as a famous painter, the impostor could not accept the offer. For though the offer is made to him physically, it is obviously, as he knows, addressed to the famous painter. The mistake in identity on such facts is clear and the nature of the contract makes it obvious that identity was of vital importance to the offeror. At the other end of the scale, if a shopkeeper sells goods in a normal cash transaction to a man who misrepresents himself as being some well known figure, the transaction will normally be valid. For the shopkeeper was ready to sell goods for cash to the world at large and the particular identity of the purchaser in such a contract was not of sufficient importance to override the physical presence identified by sight and hearing. Thus the nature of the proposed contract must have a strong bearing on the question of whether the intention of the offeror (as understood by his offeree) was to make his offer to some other particular identity rather than to the physical person to whom it was orally offered.
In our case the facts lie in the debateable area between the two extremes. At the beginning of the negotiations, always an important consideration, the name or personality of the false Hutchinson were of no importance and there was no other identity competing with his physical presence. The plaintiffs were content to sell the car for cash to any purchaser. The contractual conversation was orally addressed to the physical identity of the false Hutchinson. The identity was the man present, and his name was merely one of his attributes. Had matters continued thus there would clearly have been a valid but voidable contract.
I accept the learned Judge's view that there was no contract at the stage when the man pulled out his cheque book. From a practical point of view negotiations reached an impasse at that stage. For the vendor refused to discuss the question of selling on credit. It is argued that there was a contract as soon as the price was agreed at £717 and that from that moment either party could have sued on the contract with implied terms as to payment and delivery. That may be theoretically arguable, but in my view the Judge's more realistic approach was right. Payment and delivery still needed to be discussed and the parties would be expecting to discuss them. Immediately they did discuss them it became plain that they were not ad idem and that no contract had yet been created. But even if there had been a concluded agreement before discussion of a cheque, it was rescinded. The man tried to make Miss Ingram take a cheque. She declined and said that the deal was off. He did not demur but set himself to reconstruct the negotiations. For the moment had come which he must all along have anticipated as the crux of the negotiations, the vital crisis of the swindle. He wanted to take away the car on credit against his worthless cheque but she refused. Thereafter the negotiations were of a different kind from what the vendor had mistakenly believed them to be hitherto. The parties were no longer concerned with a cash sale of goods where the identity of the purchaser was prima facie unimportant. They were concerned with a credit sale in which both parties knew that the identity of the purchaser was of the utmost importance. She now realised that she was being asked to give to him possession of the car on the faith of his cheque.
This was an important stage of the transaction because it demonstrated quite clearly that she was not prepared to sell on credit to the mere physical man in her drawing room though he represented himself as a man of substance. He proceed to "give "to airy nothing a local habitation and a name." He tried to persuade her to sell to him as G.P.M. Hutchinson of Stanstead House, a personality which no doubt he had selected for the purpose of inspiring confidence into his victim. This was unsuccessful. Only when she had ascertained (through her sister's short excursion to the local Post Office and investigation of the telephone directory) that there was a G.P.M. Hutchinson of Stanstead House in the directory did she agree to sell on credit. The fact that the man wrote the name and address on the back of the cheque is an additional indication of the importance attached by the parties to the individuality of G.P.M. Hutchinson of Stanstead House.
It is not easy to decide whether the vendor was selling to the man in her drawing room (fraudulently misrepresented as being a man of substance with the attributes of the real Hutchinson) or to G.P.M. Hutchinson of Stanstead House (fraudulently misrepresented as being the man in her drawing room). Did the individuality of G.P.M. Hutchinson of Stanstead House or the physical presence of the man in the room preponderate? Can it be said that the prima facie predominance of the physical presence of the false Hutchinson identified by sight and hearing was overborne by the identity of the real Hutchinson on the particular facts of this case?
The learned Judge said:
"I have not the slightest hesitation in reaching the conclusion that the offer which the plaintiffs made to accept the cheque for £717 was one made solely to, and one which was capable of being accepted only by, the honest Hutchinson - that is to say Philip Gerald Morpeth Hutchinson of Stanstead House, Stanstead Road, Caterham, Surrey, and that it was capable of being accepted only by the honest Hutchinson."
In view of the experience of the learned Judge and the care which he devoted to this case I should hesitate long before interfering with that finding of fact and I would only do so if compelled by the evidence or by the view that the Judge drew some erroneous inference. Where as here, a border line case is concerned with ascertaining the intention of the parties, the views of the trial Judge who hears the witnesses should not lightly be discarded. I am not persuaded that on the evidence he should have found otherwise.
It is argued that the Judge should have come to a contrary conclusion by following the case of Phillips v. Brooks, 1919 (2) Kings Bench, 243. I do not find that case easy to evaluate because the facts are far from clear. It appears from the report that the name of Sir George Bullough was not mentioned until after the deal had apparently been concluded and the cheque in payment of the goods had been or was being written out.
Then, apparently, as a postscript or variation of the transaction the false Sir George obtained leave to take off one of the articles without waiting for the cheque to be cleared, and the vendor thereby relinquished his lien on that article. The plaintiff in re-examination had said that he had no intention of making any contract with any other person than Sir George but these words could hardly be true literally since he had apparently made a contract with the man before he was told that he was Sir George.
Lord Haldane in Lake v. Simmons 1927 Appeal Causes at page 501 said of the case:
"Mr. Justice Horridge found, as a fact, that though the jeweller believed the person to whom he handed the jewel was the person he pretended to be, yet he intended to sell to the person, whoever he was, who came into the shop and paid the price, and that the misrepresentation was only as to payment."
In my view it was a border line case decided on its own particular facts and is in no wise decisive of the case before us.
The case of Hardman v. Booth 1 Hurlstone & Coltman 803 was decided the other way. There the plaintiffs, going to the place of business of Gandell & Co. which consisted only of Thomas Gandell, were fraudulently misled at interviews with his son Edward, an unauthorised clerk in the business, into invoicing goods to Edward Gandell & Co. and paying with a bill of exchange similarly made out. It was held that there was no contract. Pollock, Chief Baron said at page 806:
"It is difficult to lay down any general rule by which, at all times and under any circumstances, it may be determined whether or no there is a contract voidable at the option of the party defrauded, but in this case I think it clear that there was no contract. Mr. Hawkins contended that there was a contract personally with Edward Gandell, the individual with whom the conversations took place ... but the plaintiffs supposed they were dealing with Gandell & Co., the packers, to whom they sent the goods; the fact being that Edward Gandell was not a member of that firm and had no authority to act as their agent. Therefore at no period of time were there two consenting minds to the same agreement."
Baron Wilde said at page 803:
"It is clear that there was no sale to Gandell & Co., because they never authorised Edward Gandell to purchase for them; and it is equally clear that there was no sale to Edward Gandell, because the plaintiffs never intended to deal with him personally."
That case however was a clearer case of there being no contract than is the present one since there the plaintiffs had gone to the premises of Gandell & Co. to deal with that firm, and on those premises they had dealt with someone who duped them into believing that he was a member of the firm. Had the plaintiffs in the present case gone to Stanstead House especially to deal with the real Hutchinson and been duped on the premises by the false Hutchinson, their case would have been very clear.
In Lake v. Simmons 1927 Appeal cases 487, the Court was dealing with a somewhat different problem, namely whether a jeweller had "entrusted" possession of jewellery to a cheat and it held that he had not. Lord Haldane there said at page 500:
"In circumstances such as these, I think there was no such consensus ad idem as, for example, Lord Cairns in his judgment in Cundy v. Lindsay declared to be requisite for the constitution of a contract. No doubt physically the woman entered the shop and pretended to bargain in a particular capacity, but only on the footing of being different person from what she really was. There was never any contract which could afterwards become voidable by reason of a false representation made in obtaining it, because there was no contract at all, nothing excepting the result of a trick practised on the jeweller."
Each case must be decided on its own facts. The question in such cases is this. Has it been sufficiently shown in the particular circumstances that, contrary to the prima facie presumption, a party was not contracting with the physical person to whom he uttered the offer, but with another individual whom (to the other party's knowledge) he believed to be the physical person present. The answer to that question is a finding of fact.
It is argued that although such a finding might properly have been reached if the cheat had pretended to be some great man or someone known already to the vendor by dealing or by reputation, it could not be so in this case since the vendor had no knowledge of Mr. P.M.G. Hutchinson of Stanstead House. Had it not been for investigation of the telephone directory that might well be so; but here the entry represented an individual of apparent standing and stability, a person whom the vendor was ready to trust with her car against his cheque. His individuality was less dominating than that of a famous man would be, but that is a question of degree. It does not, I think, preclude the Judge from finding that it was with him that the vendor was intending to deal.
The Court is naturally reluctant to accept the argument that there has been a mistake in such a case as this since it creates hardship on subsequent bona fide purchasers. The plaintiffs' unguarded transaction has caused loss to another. And unfortunately when the contract is void at common law the Court cannot (as the Law stands now) by its equitable powers impose terms that would produce a fairer result. However in this case the subsequent purchasers, although the Judge found that there was no mala fides, were no more wise or careful than the plaintiffs. The regrettable ease with which a dishonest person can accomplish such a fraud is partially due to the unfortunate fact that Registration Books are not documents of title and that Registration and legal ownership are so loosely connected.
Although I appreciate the force of Mr. Chapman's very full and fair argument, he has failed to persuade me that the Judge could not properly arrive at his conclusion. I agree that the Appeal should be dismissed.
LORD JUSTICE DEVLIN: The point on which this case turns is the effect of deception about the identity of a contracting party. It is a difficult point on which I have the misfortune to differ from my brethren. On all other points I agree with them and shall add nothing. On the chief point I shall not attempt to analyse all the authorities; there is a very full discussion of them in the recent judgment of President Gresson in Fawcett v. Star Car Sales Ltd. (1960) New Zealand Law Reports, 406, and I shall not need to repeat more than the essential facts.
The plaintiffs advertised their car for sale at £725 or nearest offer. The swindler, whose true name is unknown and whom Mr. Chapman has conveniently described as H, called in answer to the advertisement and after an inspection and negotiation offered f717; and as soon as the figure was agreed produced his cheque book. Miss Elsie Ingram, who was making the deal on behalf of the plaintiffs, at once said that she would not in any circumstances accept a cheque and she sought to bring the interview to an end. He went on talking. He had previously given his name as Hutchinson and said that he lived at Caterham; and it is common ground that if he had been able and willing to pay cash, the plaintiffs would have required to know no more. H now said that he was a Mr. P.G.M. Hutchinson, that he had business interests in Guildford and that he lived at Stanstead House, Stanstead Road, Caterham. On hearing the name and address, Miss Hilda Ingram, who was in the room, slipped out and went round to the post office nearby, looked in the directory covering the district of Caterham and saw the entry, "Hutchinson, P.G.M., Stanstead House, Stanstead, Road, Caterham 4,665". She was away 5 minutes or a little longer: and during that time the conversation between H. and Miss Elsie Ingram had continued. He had tried to convince Miss Ingram that he was indeed the Mr. Hutchinson he had mentioned. When Miss Hilda came back she told Miss Elsie that she had checked with the telephone directory and that there was such a person listed. They then decided that they would take his cheque and the deal was so concluded. The cheque was in due course dishonoured. Meanwhile, H. sold the car to the defendants.
The question is whether H. was able to pass the property in the car to the defendants so that they can resist a claim based on conversion; and that turns on whether the contract between the plaintiffs and H. was voidable or void. If the plaintiffs were induced to enter into a contract by H's false representation as to his identity; the contract remains valid until the plaintiffs elect to disaffirm it; since before they did that H. had parted with the car to the defendants, he was in a position to give them a good title to it, If, however, mistake as to identity prevented the contract being made at all, the property in the car did not pass to H. and so he could give no title to the defendants.
In the textbooks cases of mistaken identity are to be found both in the chapters that deal with the formation of contract and in those that deal with the effect of mistake. Whichever way it is looked at, the essential question is the same: has a contract been made? If the fatal defect goes to form, the question is answered with a simple negative and the case is put under the head of formation. If the defect is one of substance, that is, where the outward form is complete but the necessary consensus is vitiated by mistake, the question is answered by saying that the contract is void. It may be objected that a void contract is a meaningless expression; but it is a useful one to describe a contract that is perfect in form but void of substance. There is also this practical difference. It is for the plaintiff to prove offer and acceptance in form. But mistake is a ground of defence and it is for the defendant to plead it and assert that the contract is not what it seems to be. If the contract is complete on the surface, as when it is a formal document, the burden will be on him from the outset. But in oral contracts it may well be in question whether that is a contract even in appearance.
So the first thing for a judge to do is to satisfy himself that the alleged contract has been properly formed and Dr. Goodhart in the article that the learned judge has adopted has shown how easy it is to fall into error if one does not begin with that. There must be offer and acceptance. The offer must be addressed to the offeree, either as an individual or as a. member of a class or of the public. The acceptance must come from one who is so addressed and must itself be addressed to the offeror. Boulton v. Jones (1857) 2 Hurlstone & Norman, 563, for example, is a simple case in which an offer was accepted by someone to whom it was not addressed. The classic case of Cundy v. Lindsay (1873) 3 Appeal Cases, 459, was one in which the acceptance was not addressed to the offeror. The offer, as in the instant case, was addressed to a person who held himself out as willing to do business. But the offer was made by Blenkarn and the acceptance addressed to Blenkiron. The fact that there was a real Blenkiron whom Blenkark was pretending to be showed that it was not a case of falsa demonstratio nonnocet. It is noteworthy that the word "mistake" is not mentioned in the judgments of either of these cases.
Before therefore I consider mistake, I shall inquire whether there is offer and acceptance in form. There is no doubt that H's offer was addressed to Miss Ingram and her acceptance apparently addressed to him. But, it is argued, the acceptance was in reality addressed to P.G.M. Hutchinson, who was not the offeror, and therefore no contract was made. There can be no doubt upon the authorities that this argument must be settled by enquiring with whom Miss Ingram intended to contract: was it with the person to whom she was speaking or was it with the person whom he represented himself to be? it has been pressed upon us that this is a question of fact and that we ought to give great weight to the answer to it provided by the trial judge. It is, I think, a mixed question. I am sure that any attempt to solve it as a pure question of fact would fail. If Miss Ingram had been asked whether she intended to contract with the man in the room or with Mr. P.G.M.. Hutchinson, the question could have no meaning for her since she believed them both to be one and the same. The reasonable man of the law - if he stood in Miss Ingram's shoes - could not give any better answer. Whether it is fact or law, it is not a question that the trial judge is any better equipped to answer than we are. In saying that, I must acknowledge that I am with diffidence refusing the guidance offered by Viscount Sumner in Lake v. Simmons (1927) Appeal Cases, 487, at 503:
"The conclusion that his state of mind was an appearance of consent produce by the trick and not a real consent induced by fraud is a judicial conclusion from the circumstances proved, from the evidence of the victim as to what was said and done, what he believed, and what he would or would not have done in the absence of that belief, and finally, from the judge's own view of the ability of the witness himself to analyse and explain his own mental processes with tolerable exactness. A conclusion from these materials is greatly assisted by seeing him and judging what manner of man he is".
I hope that I am not diminishing the province of the trial judge which I should always wish to honour and respect. But I cannot understand how observation of the witness can detect whether his consent was produced by a trick or induced by fraud; I doubt whether an analysis of his mental processes would help either,. All that Miss Ingram or any other witness in her position can say is that she did in fact accept the offer made to her; and that if she had not been tricked or deceived, she would not have accepted it.
Courts of law are not inexperienced in dealing with this sort -of situation. They do go by means of presumptions. Let me take as an example the law that governs a contract. This depends on the intentions of the parties, but no-one ever attempts to ascertain their intentions by question and answer. The answer would almost invariably be that neither of the parties had thought about the matter at all. If one of them were pressed to say what law he would have chosen if he had thought about it, he would naturally tend to opt for the law that would be most favourable to him in the circumstances of the dispute that had brought him to Court.
In the present type of case the answer to a similar type of question might be equally misleading; as the deceived party in the present case, the plaintiff wants the contract declared void ab initio; as the deceived party in the recent case of Fawcett v. Star Sales (supra) the defendant wanted it affirmed. The Court therefore has to work on the presumed intention of the parties. In the case of conflict of laws there is a number of presumptions which the Court uses, such as that the parties are presumed to -intend the law of the country where they have provided for arbitration, if such be the case, or the law of the place where the contract was made. Whether the Court when it acts in this way is really ascertaining the intentions of the parties or whether it is simply providing a just solution of their difficulties is a theoretical question which I need not explore. Lord Wright has gome penetrating observations to make about the problem as it arises in cases of frustration: see Fibrosa v. Fairbairn (1943) Appeal Cases 32 at 70 and Denny Mott v. Fraser (1944) Appeal Cases at 275.
In my judgment the Court cannot arrive at a satisfactory solution in this case except by formulating a presumption and taking it at least as a starting point. The presumption that a person is intending to contract with the person to whom he is actually,-the words of contract seems to me to be a simple and sensible one and supported by some good authority. It is adopted in Benjamin on Sale, 8th edition, page 102, where two decisions in the United States are referred to, Edmunds v. Merchants Despatch (1883) 135 Massachusetts Reports, 283, and Phelps v. McQuade (1917) 220 New York Reports, 232. The reasoning in the former case was adoped by Mr. Justice Horridge in Phillips v. Brooks (1919) 2 King's Bench, 243, and the latter case is a decision of the New York Court of Appeals. All these three cases still stand as the law in their respective jurisdictions. Corbin on Contracts, vol. 3, s.602, cites them and a number of others and states the general principle in the United States as follow: "The Courts held that if A appeared in person before B, impersonating C, an innocent purchaser from A gets the property in the goods against B".
I do not think that it can be said that the presumption is conclusive since there is at least one class of case in which it can be rebutted. If the person addressed is posing only as an agent, it is plain that the party deceived has no thought of contracting with him but only with his supposed principal; if then there is no actual or ostensible authority, there can be no contract. Hardman v. Booth (1863) 1 Hurlstone & Coltman 803, is, I think, an example of this. Are there any other circumstances in which the presumption can be rebutted? It is not necessary to strain to find them, for we are here dealing only with offer and acceptance; contracts in which identity really matters may still be avoided on the ground of mistake. I am content to leave the question open and do not propose to speculate on what other exceptions there may be to the general rule. What seems plain to me is that the presumption cannot in the present case be rebutted by piling up the evidence to show that Miss Ingram would never have contracted with H unless she had thought him to be Mr, P.G.M. Hutchinson. That fact is conceded and, whether it is proved simpliciter or proved to the hilt, it does not go say further than to show that she was the victim of fraud. With great respect to the learned judge the question that he propounded as the test is not calculated to show any more than that. He said:
"Is it to be seriously suggested that they were willing to accept the cheque of the rogue other than in the belief, created by the rogue himself, that he, the rogue, was in fact the honest Mr. P.G.M. Hutchinson of the address in Caterham with the telephone number which they had verified?".
In my judgment there is everything to show that Miss Ingram would never have accepted H's offer if she had known the truth, but nothing to rebut the ordinary presumption that she was addressing her acceptance, in law as well as in fact, to the person to whom she was speaking. I think therefore that there was offer and acceptance in form.
On my view of the law it therefore becomes necessary to consider next whether there has been a mistake that vitiates the contract. As both my brethren are of opinion that there has been no offer and acceptance, the result of this further enquiry cannot affect the decision in this case or its ratio, and I shall therefore state my conclusions and my reasons for it as briefly as may be.
In my judgment there has been no such mistake. I shall assume without argument what I take to be the widest view of mistake that is to be found in the authorities; and that is that a mistake avoids the contract if at the time it is made there exists some state of fact which, as assumed, is the basis of the contract and, as it is in truth, frustrates its object. Cases of mistaken identity have usually been dealt with in the authorities by the application of the test propounded by Pothier in his Law of Contracts (1803) page 13, where he says: "Wherever the consideration of the person with whom I contract is an ingredient of the contract which I intend to make, an error respecting the person destroys ay consent, and consequently annuls the agreement". If this is wider than the principle I have stated, I do not think it can be part of the law of England, tor I can see no reason why mistake as to identity should operate more easily to avoid a contract than any other sort of mistake. If Pothier is correctly interpreted, the word "ingredient" is very wide; but the examples which he gives to illustrate his proposition are examples in which mistaken identity would generally destroy a fundamental assumption and frustrate the object of the contract. The whole object of contracting for a portrait, for instance, is to have it done by the particular artist selected and so his identity is normally essential.
The fact that Miss Ingram refused to contract with H until his supposed name and address had been "verified" goes to show that she regarded his identity as fundamental. In this she was misguided. She should have concerned herself with creditworthiness rather than with identity. The fact that H gave Mr. P.G.M. Hutchinson's address in the directory was no proof that he was Mr. P.G.M. Hutchinson; and if he had been, that fact alone was no proof that his cheque would be met. Identify therefore did not really matter. Nevertheless, it may truly be said that to Miss Ingram, as she looked at it, it did. In my judgment Miss Ingram's state of mind is immaterial to this question. When the law avoids a contract ab initio, it does so irrespective of the intentions or opinions or wishes of the parties themselves. That is the rule in the case of frustration; see Hirji Mulji v. Cheong, (1926)Appeal Cases 497. It is the rule also in a case such as Scammell v. Ouston (1941) Appeal Cases 261, where the parties believed them selves to have contracted but had failed to reach agreement on essentials with sufficient particularity. This rule applies in the case of mistake because the reason for the avoidance la the same, namely, that the consent is vitiated by non-agreement about essentials. It is for the Court to determine what in the light of all the circumstances is to be deemed essential. In my judgment, in this case H's identity was immaterial. The credit worthiness was not, but creditworthiness in relation to contract is not a basic fact; it is only a way of expressing the belief that each party normally holds that the other will honour his promise.
I wish that I could conclude this judgment without any reference to Lake v. Simmons (1926) 1 King's Bench, 366; (1926) 2 King's Bench, 51; (1927) Appeal Cases, 487, for that is a case with which I find it very difficult to deal briefly. But if, as is often suggested, the ratio decidendi in the House of Lords is that enunciated by Viscount Haldane in the leading speech, I should find it impossible to distinguish the present case satisfactorily. I must therefore embark on the difficult task of ascertaining what the true ratio is.
I do not think that the reasoning in the case can properly be analysed without some introductory observations about larceny by a trick. I base them on the judgment of Mr. Justice Sellers, as he then was, in Du Jardin v. Beadman (1952) 2 Queen's Bench, page 712. The history of the offence la fully set out in Russell on Crime, 11th edition, page 1036, and I give below only the bare account of it that is necessary for my purpose. Larceny at common law required that there should be an asportavit or taking of the goods with intent to steal. This produced a difficulty in the case of a bailee who got possession of the goods lawfully; he could not thereafter be guilty of larceny by appropriating them, however dishonestly. This difficulty was finally removed by statute in 1857 when the offence of larceny by a bailee was created. "In the meantime" as Russell says at page 1041, "the judges had found themselves forced to adopt strange contortions of reasoning in order to justify the conviction of dishonest men". The difficulty which had to be got round was that the bailee had taken the chattel with the consent of the owner. In R. v. Pear (1779) 2 East, Privy Council, 685, the Court decided, that if a horse was hired with the intention of stealing it, the fraudulent intention of the bailee at the inception of the transaction in some way negatived in law the consent of the owner to do what he in fact did. Therefore there was a taking without consent, which came to be called larceny by a trick, But the Courts restricted this doctrine to the transfer of possession; and they always refused to apply it to a case where what was in issue was the transfer of property. It is perhaps for this reason that we have not been troubled here by any argument about larceny by a trick. But there has been a great difference of opinion whether this notion of consent should or should not be imported into other branches of the law, particularly liability under the Factors Act. Until recently, the ruling judgments on this point have been obiter; but I trust that the law may now be regarded as settled by the decision of Mr. Justice Sellers in Du Jardin v. Beadman (supra) where he held that "consent" in the Factors Act was not to be interpreted in an artificial way in order to bring it into harmony with the criminal law. I need not pursue the controversy further. Its only importance for my purpose is so that the speech of Viscount Sumner, which I think to be crucial in Lake v. Simmons, is properly understood.
The facts in Lake v. Simmons centred round a woman who was living with a Van der Borgh, and who had dealings with the plaintiff, a jeweller. She falsely represented to him that she was Mrs. Van der Borgh and she obtained jewellery from him by falsely representing that she desired to show it to her husband for his approval, and also to a person she named as Commander Digby, who did not in fact exist. She made away with the jewellery and the plaintiff sued to recover his loss under a Lloyd's policy, the defendant being an underwriter. The policy was against (inter alia) theft, but subject to an exception on which the argument turned. A convenient summary of its essential terms is given by Lord Sumner at page 507:
"The exception clause takes out of the stipulated cover against 'thefts' generally ... those committed by customers ... but only when, the words 'in respect of goods entrusted to them by the assured' are satisfied."
All three courts held that there was a theft, i.e., larceny by a trick, and, accordingly, that the loss fell within the general words. There was, however, much difference of opinion about the operation of the exception. Mr. Justice McCardie held at (1926) 1 King's Bench, 382 that the jewellery was not entrusted to the woman as a customer, but that she received it as a mere agent or messenger for the purpose of showing it to others. He, therefore, decided in favour of the plaintiff. His decision was reversed by a majority in the Court of Appeal. None of the Lords Justices accepted his view that the woman was not a customer and the decision turned on the meaning of "entrusted." Lord Justices Bankes and Warrington held that there was an entrusting within the exception so that the loss fell outside the policy. Lord Justice Atkin held that there was not. He said at (1926) 2 King's Bench 71, that the word "entrust" implied a consensual act and that the fact of larceny negatived consent both in criminal and in civil matters. It would be absurd to hold, he thought, that the woman could both take the goods without the consent of the true owner for the purpose of larceny by a trick and be "entrusted" with the goods by the true owner.
In the House of Lords the decision of the Court of Appeal was reversed. Viscount Haldane at page 499 that for the purpose of an entrusting within the meaning of the policy there must be a definite contract. He held that there was never any contract at all, because the plaintiff was entirely deceived as to the identity of the person with whom he was transacting; it was only on the footing and in the belief that she was Mrs. Van der Borgh that he was willing to deal with her at all. This is a bare summary of his reasoning; it is sufficient for my purpose to say that it is clear authority for the view from which I am dissenting. None of the rest of their Lordships expressly followed Viscount Haldane. Lord Atkinson's opinion turned on the construction of the policy. He held that the entrusting within the exception could not mean the delivery in all good faith by a dealer of goods to a customer which that customer had planned to steal. He also inclined to McCardie J.'s view that the woman was not a customer. Lord Blanesburgh based his conclusion on the simple ground that the woman was not a customer, but entirely agreed with the judgment of Viscount Sumner. Lord Wrenbury 111 simply concurred.
It is clear, therefore, that Lord Haldane's reasoning can be accepted as the ratio decidendi only if it was assented to by Lord Sumner. I know that the fault must be mine, but I find the speech of Lord Sumner very difficult to interpret. I think that the operative part of his reasoning begins at page 507 after he has set out the policy. He gave a special meaning to the word "entrusted," derived from the use of the same word in an earlier part of the policy. He held that it meant entrusted on the condition of sale or return. He held that there was not an entrusting to the woman on this condition; if there was an entrusting, it was either to Van der Borgh or Commander Digby, one of whom was imaginary and the other was not a customer. That was his first reason. The second reason at page 508 was, I think, an acceptance of Lord Justice Atkin's view of the effect of larceny by a trick. Finally, he agreed that the woman was not a customer for the purpose of the exceptions clause.
But, before he gave this statement of his reasons, he made a number of observations that might suggest that he was agreeing with the view expressed by Lord Haldane, though he never in fact said so. At page 505 he says this:
"Again, if Mr. Lake consented to nothing, analogies from the distinction between void and voidable contracts are beside the mark, and equally so are arguments which turn on consensus ad idem as an ingredient in the conclusion of a contract ... As it is, there was no contract and nothing to avoid."
I have italicised the word "if" because I think that what appears to be a positive statement that "there was no contract and nothing to avoid" is based upon the hypothesis that Lake consented to nothing. I think this must be so, for, in the next paragraph Lord Sumner said:
"the next step is to consider whether anything can be imputed to Mr. Lake which would be equivalent to his consent."
I think that the clue to what Lord Sumner is saying in this part of his speech is on the next page where he saus:
"Such facts may raise difficulties in deciding whether his frame of mind involved misplaced consent or was consistent with absence of any consent at all, but the conclusion that it was such as would negative the appearance of consent and so remove the difficulty in the way of proving an asportavit, concludes the whole issue."
He elucidates this with three examples, one of which, a case of a confidence trick man, posing as a benevolent millionaire, would certainly not be a ground for avoiding a contract.
I think that Lord Sumner is neither agreeing nor disagreeing with Lord Haldane. What he is saying is that Lord Haldane's reasoning is not to the point as he, Lord Sumner, sees it. Distinction between void and voidable contracts are beside the mark and so are arguments which turn on consensus. The thing is concluded by the fact there is larceny by a trick. In other words, Lord Sumner is agreeing with Lord Justice Atkin and is refusing to distinguish between the sort of lack of consent that goes to make larceny by a trick and the sort that avoids a contract, though he at page 510 reserved his judgment about "consent" in the Factors Act. In my judgment, therefore, the ratio decidendi of Lake v. Simmons turns on the construction of the policy, and the only view for which there is a clear majority is the view that the woman was not a customer. Certainly there is no support for the opinion of Lord Haldane in any of the other speeches and, though I recognise his great authority, I prefer to follow Phillips v. Brooks Ltd. (supra), the cases in the United States to which I have referred, and the decision of the majority of the Court of Appeal in the recent case in New Zealand, Fawcett v. Star Car Sales Ltd (supra).
There can be no doubt, as all this difference of opinion shows, that the dividing line between voidness and voidability, between fundamental mistake and incidental deceit, is a very fine one. That a fine and difficult distinction has to be drawn is not necessarily any reproach to the law. But need the rights of the parties in a case like this depend on such a distinction? The great virtue of the common law is that it sets out to solve legal problems by the application to them of principles which the ordinary man is expected to recognise as sensible and just; their application in any particular case may produce what seems to him a hard result, but as principles they should be within his understanding and merit his approval. But here, contrary to its habit, the common law, instead of looking for a principle that is simple and just, rests on theoretical distinctions. Why should the question whether the defendant should or should not pay the plaintiff damages for conversion depend upon voidness or voidability, and upon inferences to be drawn from a conversation in which the defendant took no part? The true spirit of the common law is to override theoretical distinctions when they stand in the way of doing practical justice. For the doing of justice, the relevant question in this sort of case is not whether the contract was void or voidable, but which of two innocent parties shall suffer for the fraud of a third. The plain answer is that the loss should be divided between them in such proportion as is just in all the circumstances. If it be pure misfortune, the loss should be borne equally; if the fault or imprudence of either party has caused or contributed to the loss, it should be borne by that party in the whole or in the grdater part. In saying this, I am suggesting nothing novel, for this sort of observation has often been made. But it is only in comparatively recent times that the idea of giving to a court power to apportion loss has found a place in our law. I have in mind particularly the Law Reform Acts of 1935, 1943 and 1945, that dealt respectively with joint tortfeasors, frustrated contracts and contributory negligence. These statutes, which I believe to have worked satisfactorily, show a modern inclination towards a decision based on a just apportionment rather than one given in black or in white according to the logic of the law. I believe it would be useful if Parliament were now to consider whether or not it is practicable by means of a similar act of law reform to provide for the victims of a fraud a better way of adjusting their mutual loss than that which has grown out of the common law.
Appeal dismissed with costs. Leave to appeal to the House of Lords granted.
