ON APPEAL FROM THE CARDIFF JUSTICE CENTRE
(HIS HONOUR JUDGE CHAMBERS QC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
LORD JUSTICE WILSON
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Mr M Anderson QC and Mr S Reed (instructed by Edwin Co LLP) appeared on behalf of the Respondent.
Crown Copyright ©
Lady Justice Arden:
"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.
"…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."
"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."
"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.
"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."
"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.
Lord Justice Carnwath:
Lord Justice Wilson:
Order: Appeal dismissed