Jersey Unreported Judgments

[2003]JCA049

court OF APPEAL

 

14^th March, 2003.

 

 

 

 

 

Appeal by the Defendant/APPELLANT against so much of the judgment given and order made by the Royal Court, following the hearing on 18th October, 2002, as adjudged that: (1) the Defendant/APPELLANT pay damages to the Plaintiff/RESPONDENT in the sum of £125,500; (2) the Defendant/APPELLANT pay to the Plaintiff/RESPONDENT interest on the said sum of £125,500, in accordance with Practice Direction 93/1, from 16th May, 1998, until date of payment; and (3) the Defendant/APPELLANT pay the costs of the Plaintiff/RESPONDENT.

 

Advocate D. F. Le Quesne for the Plaintiff/RESPONDENT;

Advocate A.J. Olsen for the Defendant/APPELLANT.

 

judgment

SMITH JA:

1.        This is the judgment of the Court.  This appeal is from a decision of the Royal Court, F.C. Hamon, Esq., O.B.E., Commissioner, presiding, in which that Court gave judgment in favour of Mr Freyr Jakobsson, an Icelandic businessman, against Offshore Nautical Sales Limited (ONS), for damages and interest in respect of certain boat sales.  Against that decision ONS now appeals.

2.        In 1994 Mr Jakobsson met a Mr Neil Barnes and bought a boat through Jersey Boat Brokerage Limited - a company by which Mr Barnes was then employed.  In 1996 this boat was sold by Jersey Boat Brokerage, on behalf of Mr Jakobsson, and that company received commission in respect of that sale.  Using the proceeds Mr Jakobsson bought another boat - a Fairline Targa 39 - called Klaas II.

3.        Klaas II was unsuitable for Mr Jakobsson's young family and he decided to sell it through Jersey Boat Brokerage and in due course Barnes found a buyer, a Mr Griffey.  Initially Mr Griffey decided not to buy the boat but at the end of February or the beginning of March 1998 there were negotiations between Barnes and Mr Griffey which resulted in certain repairs being carried out to Klaas II.  On 16^th May, 1998 Mr Griffey paid £40,000 (Barnes persuaded Mr Griffey to make the cheque payable to him), transferred his own boat, the Dayton Flyer, and received Klaas II in return. 

4.        Meanwhile Jersey Boat Brokerage had been experiencing financial difficulties and in the spring of 1998 Barnes became involved in the setting up of a new company to replace Jersey Boat Brokerage as Fairline dealers.  The new company was incorporated as Power Boats CI Limited on 9^th April, 1998.  It changed its name on 20^th April, 1998 to Offshore Nautical Sales Limited.  Its first meeting was held on 17^th April, 1998; the first directors were a Mr Simon Neal and Barnes.  On 24^th April 1998, the Finance and Economics Committee granted permission to ONS under the Regulation of Undertakings and Development (Jersey) Law 1973 for "the commencement of a Fairline Boat franchise undertaking".  Thereafter ONS appears to have traded under the style of Port Fairline CI.  The Royal Court concluded that Barnes was the managing director of ONS, although it does not appear that he was ever appointed formally to that position. 

5.        When Mr Jakobsson learnt that the £40,000 had been paid he did not immediately request that it be remitted to him.  He was content that the money remain in Jersey as the Icelandic Krone was not of great value at the time.  In late 1998 he was told by Barnes that the Dayton Flyer had been sold and that the proceeds and the £40,000 would approximate to £129,000.  However, in spite of pressure from Mr Jakobsson, Barnes failed to pay over any money and Barnes was eventually sent to prison for offences of dishonesty. 

6.        In his Order of Justice, Mr Jakobsson claimed that the acts of Barnes in relation to the proceeds of Klaas II, which we have set out above, were acts of ONS and that, further or in the alternative, Barnes had the actual and/or ostensible authority of ONS to carry out the said acts.  The Royal Court found in Mr Jakobsson's favour and awarded him £125,500 and interest.

7.        ONS' appeal is against the Royal Court's finding on both liability and quantum.  The grounds of appeal on liability are to the effect that there was no sufficient evidence supporting the Royal Court's finding that ONS acted for Mr Jakobsson in respect of the sale of Klaas II and that the Royal Court ought to have found that Barnes was acting in his personal capacity or alternatively that Barnes was acting for Jersey Boat Brokerage.  Furthermore ONS sought to challenge the finding of the Royal Court that the agreement for the sale and purchase of Klaas II was made on 16^th May 1998.  It was argued that it ought to have concluded that the contract between Mr Jakobsson and Mr Griffey was made in February or March 1998 when, of course, ONS was not in existence. 

8.        Dealing with the last point first, it has to be said that the Royal Court's finding that the contract was made on 16^th May 1998 is not stated as clearly as it might have been in the Royal Court's judgment.  At one point in the judgment it is stated that:

"The decision was made on Klaas II at the end of February or at the beginning of March 1998."

And at another: "The contract was complete" - a rather ambiguous phrase - "on 16^th May 1998".

However, at yet another point in the judgment, the Royal Court expresses itself as being:

"....unconvinced that the contract was made before the company was formed."

and this we believe must be taken to mean that, of the two dates canvassed - February/March 1998 and the 16^th May 1998 - the Royal Court had chosen the latter.

9.        Advocate Anthony Olsen, who appeared before us for ONS, drew our attention to portions of the evidence adduced before the Royal Court which, he argued, supported the view that the Jakobsson/Griffey contract was made at the earlier date.  We do not believe that it is necessary for us to set those portions out in this judgment.  Suffice to say, that we regard this issue as having being very much a matter of fact for the Royal Court.  On the facts it preferred the later date; there was evidence on which it could reach that conclusion and we do not consider it to be open to us to choose instead the alternative. 

10.      As to the question of whether Barnes was to be considered as acting for ONS at the time the Jakobsson/Griffey contract was made the Royal Court based its conclusion on certain remarks of Lord Justice Diplock in Freeman and Lockyer (a firm) v Buckhurst Park  Properties (Mangal) Ltd [1964] 1 All ER 630 (at p.646).  In those remarks Diplock LJ adumbrated four conditions:

"which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so."

11.      In the course of its judgment the Royal Court sought to apply certain findings of fact made by it to Diplock LJ's four conditions.  Once again, the judgment is unsatisfactory in that some of those findings of fact are patently not apposite to the conditions to which they are appropriated.  Nevertheless, on this basis the Royal Court felt able to conclude, or more precisely, appears to have concluded - its findings are not clearly expressed - that as at 16^th May 1998 and in relation to Mr Jakobsson Barnes was clothed with apparent authority to act on behalf of ONS.

12.      We are not persuaded that Freeman v Buckhurst is applicable to the facts found by the Royal Court.  In that case a director acted as if he were the managing director of a company and this was well known to the board of directors.  He engaged agents and it was held by the Court of Appeal that the company was liable for their fees.  However, the basis of the decision in that case was not that the director was clothed with actual authority to employ the agents but that, as the director acted as the managing director to the knowledge of the board, he had been held out as managing director and that he could bind the company by reason of the ostensible authority thus conferred.  The company's Articles of Association provided for there being a managing director of the company (the Articles of ONS also contain a provision to this effect).  The director's act of employing the agents was within the ordinary ambit of the authority of a managing director. 

13.      The crucial difference between Freeman v Buckhurst and the instant case lies in the Royal Court's finding, to which we have already referred, that Barnes was actually the managing director of ONS, although not formally so appointed.  This finding of fact was not just not disputed before us but Advocate Olsen expressly indicated to us that ONS accepted the validity of it.  Indeed, he could not have done otherwise in the light of the clear evidence to this effect given by Mr Simon Neal at the trial.  The significance of this factor is clear from another decision of the English Court of Appeal which does not appear to have been cited to the Royal Court, namely Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549. 

14.      In the Hely-Hutchinson case the director in question was chairman of the company and had no express authority from the board of directors to enter into the two contracts in question.  The trial judge had found that the director had acted as de facto managing director of the company and that the board knew of and had acquiesced in the director acting as such.  He held that the director had ostensible or apparent authority to contract but Lord Denning MR in the Court of Appeal went further.  He concluded (at p. 540e) that the trial judge's findings:

"carry with it the necessary inference that [the director] had also actual authority."

Both Lord Wilberforce (at p.558g) and Lord Pearson (at p.592d) concluded that, on the facts as found, the director had actual authority (curiously, two of the three judges constituting the Court of Appeal in that case were Lords of Appeal in Ordinary, as Lord Denning himself had previously been).

15.      It is, in our opinion, worthwhile setting out in extenso the analysis by Lord Denning MR in the Hely-Hutchinson case of the implied actual and the ostensible or apparent authority of a managing director which we believe remains valid to this day and applicable as part of the law of Jersey.  It is stated in the following terms (at p. 583a):

"I need not consider at length the law on the authority of an agent, actual, apparent, or ostensible.  That has been done in the judgments of this court in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd.  It is there shown that actual authority may be express or implied.  It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques.  It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director.  They thereby impliedly authorise him to do all such things as fall within the usual scope of that office.  Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it.

Ostensible or apparent authority is the authority of an agent as it appears to others.  It often coincides with actual authority.  Thus, when the board appoint one of their number to be managing director, they invest him not only with implied authority, but also with ostensible authority to do all such things as fall within the usual scope of that office.  Other people who see him acting as managing director are entitled to assume that he has the usual authority of a managing director.  But sometimes ostensible authority exceeds actual authority.  For instance, when the board appoint the managing director, they may expressly limit his authority by saying he is not to order goods worth more than £500 without the sanction of the board.  In that case his actual authority is subject to the £500 limitation, but his ostensible authority includes all the usual authority of a managing director.  The company is bound by his ostensible authority in his dealings with those who do not know of the limitation.  He may himself do the "holding out".  Thus, if he orders goods worth £1,000 and signs himself "Managing Director for and on behalf of the company", the company is bound to the other party who does not know of the £500 limitation."

16.      It seems to us that the present case is, if anything, stronger than the Hely-Hutchinson case.  Barnes had actual authority to act as managing director.  It is true that there was evidence that prior to the creation of ONS Mr Simon Neal, who became Barnes' sole co-director shortly after incorporation, told Barnes that the company was not to be involved in the sale of Klaas II and the suggestion was made - it is not clear whether it was accepted by the Royal Court - that it was company policy "that they did not buy second hand boats".  On this basis it might be said that Barnes' capacity to act as managing director was to that extent limited.  However, there was no suggestion that this limitation or any limitation was ever communicated to Mr Jakobsson.  Thus, as far as Mr Jakobsson was concerned, Barnes' ostensible authority to act as managing director was unrestricted and that ostensible authority would undoubtedly have extended to and included dealing in boats.

17.      Advocate Olsen argued that the Royal Court ought to have been very suspicious of Mr Jakobsson's evidence that he believed that the sale of Klaas II was being conducted on his behalf by ONS.  Once again, the Royal Court's findings on this issue are not expressed with clarity.  However, it could not have found in Mr Jakobsson's favour had it concluded that by May 1998 Mr Jakobsson thought that Barnes personally, or even perhaps Jersey Boat Brokerage, had carriage of the sale at that stage.  And it is apparent from the transcript of the trial that there was ample evidence to support the view that by May 1998 Mr Jakobsson thought that the disposal was being effected through ONS.  Mr Jakobsson's previous boat transactions had not been handled by Barnes acting in his own right but through the company employing him.  At the trial Mr Jakobsson repeatedly asserted that he intended that the transaction be carried out on his behalf by Barnes' new company, namely ONS.  Once again, this was an issue of fact on which the Royal Court made a finding that, on the evidence, was open to it and we have not been persuaded that we should disturb it.

18.      Although we have now reached the stage at which it has been established that the sale of Klaas II and the receipt of the consideration on 16^th May, 1998 would have been within the scope of Barnes' ostensible authority to act on behalf of ONS, vis-à-vis Mr Jakobsson, and that Mr Jakobsson believed by that date that ONS was acting on his behalf in relation to those matters, the question still remains as to whether the acts referred to which were actually carried out by Barnes are to be attributed to ONS rather than Barnes personally. The Royal Court held that they were to be attributed to ONS, but this conclusion was challenged before us and we must now turn to examine the findings of the Royal Court bearing on this issue. 

19.      The only circumstances which are roughly contemporaneous with the sale of Klaas II and which point to whether the sale was or was to be conducted by ONS or Barnes personally occurred at Easter 1998 between about the 12^th and 14^th April when Mr Jakobsson visited Jersey with his wife.  It is true that this period preceded the date on which Barnes was appointed as a director of ONS, and it is certainly arguable that at that time he could not be deemed to have been managing director.  As we understand the Royal Court's findings it concluded that during that period Barnes led the Jakobssons to believe that the transaction in relation to Klaas II was thenceforth to be vested in ONS and that this was confirmed to them by Mr Mark Neal, brother of Mr Simon Neal, who, as we have already stated, was appointed co-director of ONS along with Barnes on 17^th April, 1998.

20.      As far as Barnes was concerned, there was, once again, sufficient evidence entitling the Royal Court to reach the conclusion we have just described.  Specifically, and we refer to findings of fact set out in the judgment: Barnes told Mr Jakobsson that he was moving to a new company; Barnes showed Mr Jakobsson the offices of the new company; and in those offices Barnes showed Mr Jakobsson equipment from Klaas II.  All of these incidents tend to suggest not that Barnes was then acting in his own right, which he did not suggest to Mr Jakobsson, but that the new company, ONS, was taking over from the old company, Jersey Boat Brokerage.

21.      Advocate Olsen argued before us that nothing said by Mr Mark Neal, who Mr Barnes introduced to Mr Jakobsson as his business partner, could be attributed to ONS.  He was not an employee of ONS; he did not become a director until February, 1999.  Yet, the Royal Court described as crucial the meeting between Mr Jakobsson and Mr Mark Neal on the latter's boat during Mr Jakobsson's visit to Jersey at Easter, 1998.

22.      It is true that the Royal Court recorded no express findings in its judgment indicating the basis on which it considered that the role of Mark Neal at Easter, 1998 was crucial to the fixing of ONS with liability to Mr Jakobsson.  But it is clear from the evidence that Mr Mark Neal was involved in the evolution of the arrangement with Barnes whereby a new company, eventually ONS, would, in effect, supersede Jersey Boat Brokerage.  His brother, Mr Simon Neal, may have had a greater role, perhaps reflected in his appointment as a director at the outset.  But we think it reasonable on the evidence for the Royal Court to have viewed Mr Mark Neal as a business partner of Barnes, using this phrase in a colloquial sense, and that Barnes and the Neal brothers were part of a joint enterprise to set up and run a boat dealership.  The words and conduct of both Barnes and Mr Mark Neal at Easter, 1998 amounted, in effect, to a statement to Mr Jakobsson, on behalf of both themselves and their new business, that the sale of Klaas II was to be conducted as part of that business.  In our judgment it is not now open to that business in the form of ONS to be heard to say that the conduct of that sale was solely a matter for Barnes acting in his own right.  Accordingly, and although not on the basis of the reasoning adopted by the Royal Court, we affirm its finding that ONS is liable to Mr Jakobsson.

23.      Turning to damages, we think that the correct approach is to consider what Mr Jakobsson would have received had ONS properly performed its contract with him.  This approach is complicated by the fact that Mr Jakobsson's evidence was that he would not have agreed to accept another boat in part payment for the Dayton Flyer.  However, the Royal Court did not deal with this issue and we think that we have no alternative but to view the total consideration comprising money and a boat in part exchange in each case - there were two more transactions subsequent to the sale of the Dayton Flyer - as representing the value of the boat sold.  Thus, on this basis and on the basis of the information placed before us, we calculate that the total net sum received in respect of Klaas II was £111,673.50 and conclude that this was the value of Klaas II.

24.      In the normal course of things expenses and commission would have fallen to be deducted and, in order to put Mr Jakobsson in the position he would have been in had the contract been properly performed, we consider that those deductions must be made.  We allow the deduction of the expenses sought by ONS less the sum of £5,000 which, it appears, ought to have been recovered by way of a warranty claim.  As far as commission is concerned, the parties contentions differed quite markedly, ranging from 2-3% for Mr Jakobsson to 8% ONS.  Doing the best we can we allow 5%.  We calculate damages as follows (the interest and tax figures are calculated on a pro rata basis from information supplied by ONS):

Value of Klaas II	£111,673.50
Less expenses and commission	£20,079.62
Balance	£91,593.88
Add interest net of tax	£9,928.97
Total	£101,532.85

Accordingly we substitute the figure of £101,532.85, which includes interest, for the Royal Court's award of £125,500 plus interest.

25.      Our assessment of damages is inevitably rough and ready.  For whatever reason (no explanation appears in the judgment), no detailed consideration appears to have been given by the Royal Court to this issue.  It would have been better had it done so.  It would also have been appropriate if it had set out its findings of fact more clearly; many important findings have had to be extrapolated by us from the Royal Court's conclusions. 

26.      Finally, we mention that Advocate David le Quesne appeared for Mr Jakobsson.  We are indebted to both him and Advocate Olsen for their clear and helpful submissions.                     

 

 

Authorities

Companies (Jersey) Law 1991: Article 21.

JK Fruit and Vegetable Catering Limited -v- Harbour Lights Hotel Limited (1987-88) JLR 72.

H L Bolton Engineering Co Ltd -v- T J Graham & Sons Ltd (1956) 3 All ER 624.

Eastern Distributors Ltd -v- Goldring (1957) 2 All ER 525.

Freeman & Lockyer -v- Buckhurst Park Properties (Mangal) Ltd. (1964) 1 All ER 630 at 646.

Biggerstaff -v- Rowatt's Wharf Ltd (1896) 2 Ch.93.

Panorama Developments (Guilford) Limited -v- Fidelis Furnishing Fabrics Ltd. (1971) 3 All ER 16.

Lloyd -v- Grace, Smith & Co. (1911-13) All ER 51.

Firbank's Executors -v- Humphreys (1886) 18 QBD 54 at 60.

Hely-Hutchinson -v- Brayhead Ltd [1968] 1 QB 549.