Scottish Court of Session Decisions

Lord Justice-Clerk (Alness).—The pursuer in this case is a butcher,

who carries on business at two shops in Montrose. The defenders manufacture and sell cash registers. In June 1918 the defenders sold to the pursuer, through their agent, Mr Nathan, a cash register at a price of £113, and in August of that year they sold him, through Mr Nathan, another cash register at a price of £115. The sole question in the case is whether it was made plain to the pursuer by Mr Nathan that the cash registers which he sold were not new but secondhand, as in point of fact they were. The pursuer expressly charges the defenders with fraud, and it is, I think, equally clear that the defenders, if their case is well founded, charge the pursuer, though not expressly, yet by necessary implication, with fraud also. The controversy between the parties is accordingly of a disagreeable nature. The pursuer has elected to retain the cash registers which he purchased. He does not seek to rescind the contract, but he contends that, as he was induced to enter into it by the fraud of Mr Nathan, he has suffered loss thereby, and that he is therefore entitled to an award of damages. Alternatively, the pursuer says that he is entitled to damages, as for breach of contract, under the Sale of Goods Act.

The area of discussion was materially narrowed by an admission made by Mr Mackay for the pursuer in the course of the argument, to the effect that he did not attribute fraud to the defenders personally, but only vicarious fraud through their agent Mr Nathan. A careful survey of the pursuer's averments on record leads me to the conclusion that the case with which the pursuer came into Court was not so limited. If it was intended in the pursuer's pleadings so to limit his claim, all I can say is that his averments are most unfortunately expressed. I am of opinion that they attribute fraud to the defenders personally, and I am further of opinion that there is not and never was any justification for that charge. However, as I have said, the ambit of inquiry is now abridged by Mr Mackay's admission, and I shall consider the case on the footing that the defenders personally are freed from an unjustifiable and odious charge.

It appears to me that the question of onus of proof is a vital, if not indeed a conclusive, factor in the decision of the case. Now, it is of course elementary and indisputable that a pursuer who comes into Court averring fraud against his opponent must prove fraud, if he is to succeed in his action. But onus is not an inflexible thing. It may shift as the case progresses. Indeed it may shift more than once in the course of the proceedings. I rather think that the learned Sheriff-substitute, looking to the terms of his note, has not adverted sufficiently to this rudimentary rule. The pursuer's contention is that, while the onus of proving that Mr Nathan did not disclose that the registers which he sold were secondhand originally rested upon the pursuer, there are facts and circumstances in this case, either admitted or proved, which shift the onus, and which impose upon the defenders the necessity of making it plain that their agent disclosed to the pursuer that the registers which he sold were in point of fact secondhand.

The facts and circumstances on which the pursuer relies in support of his contention are (1) that it is proved, nay, that it is not disputed, that what the pursuer desired to buy were new cash registers; (2) that the defenders hold themselves out to be makers and vendors of such registers; and (3) that what the pursuer obtained from the defenders were secondhand cash registers, which, however, by reason of reconditioning, appeared to be new. The pursuer maintains that in these circumstances it was for the defenders to establish that the pursuer was duly informed by Mr Nathan of the secondhand quality of the goods which he supplied. In this contention I think that the pursuer is well founded.

Much is said on record and in evidence regarding certain letters, S. and S. H., which appear on the registers sold, and which indicate that they were secondhand. Much is also said regarding certain documents or lists alleged to have been exhibited by Mr Nathan to the pursuer before he bought the registers, and which, it is said, yield the same result. But I did not understand the defenders ultimately to maintain that these things, separately or in combination, were sufficient to affect the pursuer with knowledge that the registers sold were secondhand, apart from an explanation to that effect tendered to the pursuer by Mr Nathan. The defenders relied on proving, as indeed on record they offer to prove, that Mr Nathan made it plain to the pursuer that the registers sold to him were in point of fact secondhand. In other words, the defenders did not seriously maintain that the pursuer should have spelt out of the symbols on the machines and the documents relating to them the secondhand character of the registers. They relied not on what the pursuer saw, but on what Mr Nathan said, as establishing their case.

The issue then appears to be this—Have the defenders discharged the onus, which I hold to rest upon them, of proving that Mr Nathan informed the pursuer that the registers which he was purchasing were secondhand?

On this matter there is a conflict of evidence which is acute and irreconcilable. Mr Nathan swears that he told the pursuer that the registers were secondhand not once but half a dozen times—although why it should have been necessary to reiterate the statement so frequently is not clear to me—while the pursuer says that, so far from Mr Nathan having disclosed the secondhand character of the registers, he said that they were the latest model produced by the defenders.

Now, as the onus of proof lies on the defenders, as the only witness adduced by them who can speak to the disclosure is Mr Nathan himself, and as he is flatly contradicted by the pursuer, it might be sufficient for the decision of the case simply to say that in these circumstances the defenders have failed to discharge the onus resting upon them, and that, accordingly, the defence fails. But, in a case which was argued as ably and anxiously as this case was, and in which the issues involved are so grave, it would be, I think, unsatisfactory to decide the case on such a narrow ground, and I do not propose to do so. I cannot absolve myself from the necessity of forming and expressing an opinion regarding the reliability of Mr Nathan as a witness on the one side, and of the pursuer and his shop assistant, Mrs Mullen, on the other. In that inquiry one must no doubt pay due heed to the views formed and expressed by the Judge of first instance, but I do not feel constrained to regard these views as necessarily conclusive—cf. Christie, 1913 S. C. 1077. [His Lordship then stated his reasons for holding Nathan an unreliable witness, and continued]—

I have not forgotten that Mr Nathan on 3rd June 1918 wrote to his employers, and informed them that the sale to the pursuer had been effected in the auction mart. That fact is relied on by the defenders as corroboration of Mr Nathan's evidence on the subject. I do not so regard it. It is duplication of his evidence, not corroboration of it. The importance of the letter consists in this—that what he wrote at the time is consistent with the testimony which he gave in the witness-box. Why Mr Nathan so wrote his employers it may be difficult to explain. The pursuer suggested that he did so to account for his failure to secure an immediate written contract for the sale of the register from the pursuer and a cheque in payment for it. These arrangements would presumably be more difficult to execute in a noisy auction mart than in a quiet shop. The explanation may or may not be correct. In any case I prefer the evidence of the pursuer, corroborated by Mrs Mullen, to what I regard as the uncorroborated evidence of Mr Nathan. Nor have I forgotten that on 31st May Mr Nathan wired to his employers from Montrose, at an hour earlier than that at which the pursuer states that the interview at his shop took place, stating that he (Nathan) had sold a cash register to the pursuer. The wire may be accounted for by Mr Nathan's optimism as a salesman, and by his anxiety, before the month ended, to lay a nexus on the machine in question in competition with the other salesmen of the defenders. On the sale depended not only a substantial commission but a prize as well. In any event, I prefer the evidence of the pursuer on this matter to the evidence of Mr Nathan.

Holding these views it is not difficult also to prefer the evidence of the pursuer to that of Mr Nathan in regard to what passed at the first interview. Whenever it took place, there is a sharp conflict between the pursuer and Mr Nathan as to (1) whether the bargain was then concluded, and (2) whether Mr Nathan then disclosed that the machine was secondhand. The pursuer's statement is that in his shop he—to use an unconventional word—boggled at the price asked by Mr Nathan for the register, and requested time to think the matter over. Mr Nathan on the other hand says the contract was completed on 31st May, and that the pursuer arranged to come into Dundee later merely to sign the formal contract. Again, Mr Nathan says he told the pursuer the register was secondhand. This the pursuer denies. All I need say is that I prefer the evidence of the pursuer to that of Mr Nathan when he says (a) that a bargain was completed at the mart on 31st May, and (b) that that bargain related to a secondhand register. The testimony of the pursuer negatives both these propositions.

I hold therefore that, even if Mr Nathan was a reliable witness, he has not discharged the onus which the circumstances of the case impose upon the defenders. But I further hold that Mr Nathan is not, for the reasons which I have stated, a reliable witness. That being so, the averment on which the defence really rests—that Mr Nathan disclosed to the pursuer that he was selling a secondhand register—is not established. The defenders' case therefore fails. To hold the contrary would, in my opinion, involve (a) that Mrs Mullen is not a witness of truth, and (b) that the pursuer, five years after he purchased the cash registers, having been made fully aware that they were secondhand, resolved at a late stage to raise a dishonest action against the defenders based on the averment that the registers were sold to him as new. I am not prepared to assent to both or indeed to either of these views. [His Lordship dealt with other matters with which this report is not concerned.]

Lord Ormidale.—[His Lordship narrated the facts leading up to the action.] The first question that arises is whether the onus is on the pursuer to prove that what he required and sought to buy were new machines, or on the defenders to prove that they made it plain to him that what they purported to sell were secondhand registers. I agree that it was for the defenders to disclose to the pursuer that what they had on sale were secondhand registers. They hold themselves out as makers of registers. In fact they are sellers of registers made in America by an allied company. As Mr Beeching [a witness for the defenders] puts it, they make the machines in America. Down to the second or third year of the war their trade was the sale of new machines so made. In 1916 the importation of registers was prohibited, and the defenders then commenced to buy up registers that had been sold by them and used. These they overhauled and reconditioned and then resold, and there can be little doubt that by 1918 their trade was almost exclusively in these reconditioned and secondhand registers. In their lists new serial numbers were given to the registers, and the letters S or SH were as a rule added to the numbers to denote that they were secondhand. But this complete change in the character of their goods was not advertised and was not generally known, and the pursuer was certainly not aware of it. In these circumstances it was their duty to disclose to an intending customer like the pursuer that a register being sold to him was not new but secondhand, and it is for them to prove that they discharged it.

As the Sheriff-substitute points out, however, the case made by the pursuer on record is that the fact that the registers for which he was in treaty were secondhand was not only not disclosed to him but was, to put it shortly, fraudulently concealed from him. In these circumstances, it appears to me that what I may term the minor onus which I have held to lie on the defenders becomes in some degree subordinated to the greater onus with which every pursuer charges himself when he alleges fraudulent dealing on the part of a defender. For it must be kept in view that there might well be innocent failure to disclose the quality of the goods supplied, e.g., the seller might think that the buyer was aware without express notice that the article for sale was not new but secondhand. That, however, is not the position taken up by the defenders in the present case, for they directly challenge the pursuer's averments and maintain that he was, in fact, fully certiorated that the registers in question were secondhand and not new. In a sense they accept the minor onus incumbent on them. On the other hand it does not appear to me to be possible, standing the averments of fraud, to dispose of this action as if it raised simply a question of breach of contract. The pursuer has elected to retain the registers and to claim damages in respect of the fraudulent representations and concealment of the defenders. The burden of proving the alleged fraud must remain therefore on the pursuer, although the proof of it may be much facilitated if the defenders fail to establish that their agent, Mr Nathan, in fact disclosed that the registers were secondhand. [His Lordship then proceeded to examine the evidence as to whether Nathan had disclosed that the registers were secondhand, and reached the conclusion that the evidence of the pursuer, corroborated by Mrs Mullen, that the sale took place in the pursuer's shop, and that no disclosure that the registers were secondhand was made, was preferable to Nathan's evidence that the sale took place at the mart, and continued]—The Sheriff-substitute, in his very careful note, has explained his reasons for preferring the testimony of Mr Nathan to that of the pursuer and Mrs Mullen. He refers to the telegram and letter despatched by Nathan to his employers on Friday the 31st of May and the following Monday the of 3rd June. These he considers to be complete corroboration of Mr Nathan's evidence that the meeting and sale of the register took place in the mart, and, conversely, that there was no meeting in the pursuer's shop on the afternoon of the Friday. I am quite unable to agree with the learned Sheriff-substitute that these documents afford conclusive confirmation of Mr Nathan's evidence. The pursuer was quite unaware of their existence, and was in no way concerned with them. They were ex parte, and are no more than an anticipation by Mr Nathan of what he said in the witness-box. I am satisfied that, read in the light of Mr Nathan's own evidence in cross-examination, they gave an account of a sale as if it had been definitely and finally effected, whereas, by his own admission, it was not. On the other hand, while I cannot hold that the telegram and letter are evidence corroborative of what Mr Nathan says in the witness-box, they are undoubtedly of importance. While they are not part of the res gestœ they are nevertheless a contemporaneous account of what, according to Mr Nathan, had taken place, and they show that his story now is, in a large measure though not entirely, e.g., as regards the duration of the interview in the mart, consistent with his story then, and to that extent may fairly be held to meet hostile counter criticism on his credibility; but to use them as evidence to justify a charge that the pursuer and Mrs Mullen have concocted a story of a meeting in the pursuer's shop which never took place is, in my judgment, altogether illegitimate. I appreciate the force of the argument that Mr Nathan had no apparent interest so long before any dispute had arisen to misrepresent things to his employers and to invent incidents which had not occurred; but then I do not think he did so in the fullest sense, while he agrees that he did mislead the defenders “in an innocent sense.” That is to say, he described to them as a concluded sale what he knew to be in fact only a tentative or likely bargain. His view may have been, as in another part of his evidence he puts it, that “as between man and man” he had come to terms with the pursuer. Hence his telegram. He was sanguine enough himself to take the transaction, as in his letter he invited the defenders to take it, as an actual sale. But he had really failed to clinch matters at the interview in the mart. That I cannot but think he had expected to do in the afternoon at a meeting agreed to be held at the pursuer's shop. And at this meeting he very nearly succeeded, but not quite. I further think that something may have been said in the afternoon about a visit to Dundee on the following Monday, for the pursuer did select a machine at the afternoon meeting, but shied off when he was told its price, leaving the bargain still incomplete. It must be kept in mind that Mr Nathan had a direct motive to have the register annexed before the end of the month, and that his anxiety in this connexion may have led him to cut a little before the point. When he had an object in view his methods of attaining it were not over scrupulous. For example, towards the end of June 1923, after this action was raised, he desired an interview with Mrs Mullen. On his own admission, and to use his own language, thinking that he would do the thing “sub rosa” like a detective, he, by a “subterfuge,” obtained the interview. In itself this was far from creditable. His true object in seeking the interview is obscure. He says that he wanted to know what the ground of the pursuer's complaint was. I do not believe him. The interview was sought after the action was raised, and, even before that, he was aware that a claim had been made by the pursuer, and I have no doubt, on the evidence, was also aware of its nature. He not only obtained the interview by a trick; in my opinion he gave a false reason for seeking the interview; and, what is more, he gave in the witness-box a false account of what passed at the interview. For I see no reason for doubting the testimony of Mrs Mullen as to what took place. She had no interest to tell anything but the truth, and I regard her as an unimpeachable witness. [His Lordship then pointed out that Nathan was an unreliable witness in other respects.]

Holding, as I do, that Mr Nathan is not to be believed when he says there was no meeting in the pursuer's shop on the 31st May, it seems to follow that the evidence of the pursuer and Mrs Mullen must be accepted as to what passed at it. Accordingly, I accept the denial of the pursuer that secondhand was ever mentioned either at the mart or in his shop, and that any secondhand lists were at any time shown to him. With regard to these meetings at his shop, he is corroborated by Mrs Mullen. I agree that Mrs Mullen's evidence is not very full or very definite, but it is none the less truthful, and I see no reason for holding that all that she says can be referred to the second meeting, i.e., the meeting in connexion with the repeat order. So far from secondhand machines being spoken about, the pursuer says he was shown a leaflet with an illustration which was described to him as the latest model, and he understood that his machine was to be of the same type. The illustration was of a new machine, as was the machine, or the illustration of it, shown to him when he went to Dundee on 5th June and signed the first order.

On the evidence the defenders have, in my opinion, failed to prove that it was disclosed to the pursuer that the registers they were prepared to sell and sold to the pursuer were secondhand registers. On the contrary, the pursuer has proved that Mr Nathan concealed from him, and purposely concealed from him, that the registers were secondhand. The defenders are responsible for their agent's conduct. [His Lordship then dealt with a matter which is not reported.]

Lord Anderson.—The sole legal basis of this action, in my opinion, is fraud. [His Lordship then considered the matters at issue in the action, and continued]—The only question, therefore, with which the appeal is concerned is whether or not it has been established that the contracts for the two registers were induced by the fraud of Nathan.

The general burden of proof, in a case of this nature, is undoubtedly on the pursuer, who avers fraud. Has the pursuer successfully discharged that onus?

There are certain important facts which are not disputed or are clearly proved. The defenders admit that they are manufacturers of cash registers, and, in normal times, it is undoubted that they dealt solely, or at all events mainly, in new machines. It is true that, in 1918, owing to the war, the import of new registers had been stopped, and the dealings of the defenders were mainly in secondhand machines. But this circumstance was not advertised by the defenders, or in any other way communicated by them to the general public. Again, it is clearly established that the pursuer wished to acquire a new register. Moreover, the leaflet shown to him by Nathan on 31st May 1918 was admittedly an illustration of a new cash register. The cash registers which were delivered to the pursuer by the defenders were admittedly secondhand, but they had been reconditioned to such effect that they presented the appearance of new machines, and the pursuer was of opinion, until recently, that they were new.

I agree with the Sheriff-substitute that, in those circumstances, there was a duty on the defenders to disclose to the pursuer that the cash registers which he was purchasing were secondhand machines. The defenders' counsel conceded that this duty was not properly discharged by the use of the letters “S.H.” in the contract documents or by stamping these letters on the machines. The sole defence now maintained is that Nathan disclosed to the pursuer, at the time the contracts were made, by verbal statements and by exhibition of price lists, that the machines which he was selling to the pursuer were secondhand.

It was maintained by the pursuer's counsel that, at this stage of the negotiations, the pursuer having established a prima facie case, the onus of proof changed and was on the defenders to establish affirmatively that Nathan had made the alleged disclosure. Otherwise, it was pointed out, the pursuer would be put to prove a negative. There is much force in this contention and it has been accepted by your Lordship. On this view of the law, the pursuer is bound to succeed, because, even if Nathan be regarded as a credible witness, his evidence is entirely uncorroborated, and the defenders must therefore be held to have failed to discharge the onus thus laid upon them. I shall, however, consider the evidence on the footing that the onus throughout, the case being one of fraud, was on the pursuer. The conclusion I have reached, on the consideration of the evidence as a whole, is that the pursuer has proved that it was not disclosed by Nathan that the machines which the pursuer was purchasing were secondhand. This means that I hold that the pursuer has been successful in proving a negative. I reach this conclusion because I accept the evidence of the pursuer and of Mrs Mullen which corroborates him in essentialibus, and, in consequence, refuse to accept the evidence of Nathan which is contradictory of that of the pursuer and Mrs Mullen. It is represented by Nathan that the disclosure that the registers were secondhand was made, and a contract entered into, at the mart in Montrose on the forenoon of 31st May. The evidence led for the pursuer and the probabilities of the case seem to me to negative the testimony of Nathan. The place and circumstances were unfavourable for the accomplishment of the transaction alleged; the duration of the interview, which Nathan at first stated to have been only three minutes, was too brief for the happening of all that is said by Nathan to have taken place.

Much difficulty in solving the question of fact is created by the terms of Nathan's telegram of 31st May and his letter of 3rd June. By these documents Nathan represented to his employers (1) that a contract for the sale of a cash register had been effected on 31st May at the mart, and (2) that the machine so sold was 422 E. Strictly speaking, this documentary evidence is not corroboration of the oral testimony of Nathan. It is merely a duplication or repetition of that oral evidence. But the documents may competently be referred to for the purpose of testing the credibility of Nathan as a witness. So using these documents, their terms are consistent with the oral evidence of Nathan as to what, according to him, took place in the mart, and they seem to have the effect of establishing his credibility. How, then, can these documents be made to square with the evidence of the pursuer and Mrs Mullen as to what is said by them to have taken place on the afternoon of 31st May? It must be kept in mind that Nathan had a powerful motive to sell to the pursuer a cash register. He would thereby earn a handsome commission and score competitive points which would sound in further remuneration. He was aware that the pursuer wished to acquire a new machine, and would probably refuse to buy a secondhand one. The reference in the telegram to a specific machine would seem to indicate that this machine or, at all events, its price had been referred to in the mart. Nathan knew that the pursuer was, in the matter of choice of machine, entirely in his hands. The pursuer knew nothing about cash registers. There was a scarcity of machines at this time, a considerable demand for those in stock, and competing agents pushing sales all over the country. It was in the interests of Nathan, at the end of the month, to get a nexus put on the machine which he had good reason to believe that he was on the point of selling. All this, of course, is speculation; but it explains, not unreasonably, the terms of the telegram, as to a contract which admittedly had not been completed by the execution of a written agreement. The terms of the letter may be explained by similar considerations. There is difficulty about the proposed visit to Dundee on the Monday, and the telephone message; but it is common ground that it had been arranged that the pursuer should visit Dundee to execute the contract, and Monday was undoubtedly mentioned by the pursuer as a day on which he might be there.

As to what happened on the afternoon of 31st May I am satisfied, on the evidence of the pursuer and Mrs Mullen, that Nathan did meet the pursuer in his shop, and that certain negotiations for the purchase of a cash register took place then and there. I hold it proved that Nathan did not disclose at the meeting that the machine which he desired the pursuer to purchase was secondhand. [His Lordship dealt with matters which are not the subject of this report.]

On the whole matter I agree that, with appropriate findings of fact and law, the decree proposed by your Lordship should be pronounced.