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Cite as: [2007] CSOH 65, [2007] ScotCS CSOH_65

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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 65

A515/05

OPINION OF LADY CLARK

OF CALTON

in the cause

HARPERCOLLINS PUBLISHERS LIMITED

Pursuer;

against

STEWART YOUNG

Defender:

________________

Pursuer: Simpson; Brodies LLP

Defender: Cruikshank; Balfour & Manson

28 March 2007

Overview

[1] This case came before me on procedural roll on 10 and 11 January 2007 to debate the first plea-in-law for the defender seeking dismissal of the action. In the event of dismissal not being granted, counsel for the defender sought deletion of parts of the pleadings founding on the same plea and the same submissions. The submissions which were developed were based on the note of arguments for the defender, number 11 of process. Before the debate commenced, the pursuer sought to amend in terms of minute of amendment number 13 of process. This was not opposed and was granted.

Summary of the pleadings

[2 ] The pursuer is a company which publishes and distributes books, audio books on cassette and compact disc and other book related products. In Article 2 of condescendence it is averred that the pursuer distributes these products from a distribution centre in Glasgow where the pursuer receives returns of its books from retailers and pulps paperbacks. It is averred that the pursuer outsources pulping of hard back and audio books to Stirling Fibre Limited, and that the pursuer retains title to the products it delivers to said company. It is averred that the pursuer distributes its products in cellophane wrappers.

[3 ] In Article 3 of condescendence it is averred that the defender is an individual registered with e-bay since 15 May 1999 and that by 15 December 2004, the defender had listed for sale 14,083 products published by the pursuer of which he had sold 9,365. It is averred that the average sale price was £6.55 and the total receipt from sales were £61,351.57. At page 8A-B it is averred:

"All of these items were described in the defender's description of them on e‑bay by such words as 'new', 'brand new' or similar. The majority of these items were described in that description as being still in the manufacturer's cellophane wrapping."

Thereafter some details are given about individual sales and prices and the wholesale price at which the pursuer sells the product. There are no averments that the defender was aware of the wholesale price or ought to have been so aware. Counsel for the pursuer made reference to and provided a list of all the products published and averred to be relevant to those the defender sold, in the period from 15 May 1999 to 28 November 2004.

[4 ] In Article 4 of condescendence it is averred that the pursuer does not have commercial dealings with the defender and that, so far as the pursuer is aware, none of the persons to whom the pursuer distributes its products has commercial dealings with the defender. It is averred that various products "have gone missing" both from the pursuer's distribution centre and while in transit by Stirling Fibre Limited en route to destruction. There are then some general averments about the pursuer's wholesale prices and that the pursuer's practice is not to distribute new published products at less than these prices. It is averred that in some instances (unspecified) the price at which the defender sold the pursuer's products has been lower that the cost to the pursuer of manufacturing them. It is averred that there is no legitimate source from which the defender could have obtained so many items published by the pursuer at a price enabling him to carry out the above transactions at anything other than a massive loss. It is averred that owing to the scale of the pursuer's distribution operation at the distribution centre, it is not possible for the pursuer to ascertain exactly when or how the items went missing.

[5 ] On the basis of averments in Article 3 and 4 of condescendence, the pursuer avers at page 12D-13B that items sold by the defender, presently advertised for sale by the defender, and in possession of the defender and in new condition have been stolen from the distribution centre. It is also believed and averred that the defender knows all of these items to have been stolen from the pursuer. At page 13B-C it is averred that accordingly, title to these products remains with the pursuer. By amendment during procedural roll, which was not opposed and granted, it is further averred that the value to the pursuer is their wholesale price. It is on the basis of these averments that the pursuer seeks declarator, delivery, payment, interdict and interdict ad interim in terms of the conclusions.

Note of arguments, paragraphs 1, 2, 4, 5 and 7 and discussion

[6 ] Counsel for the defender developed his note of arguments under deletion of paragraph 3 which he submitted was no longer relevant because the pursuer had made available a list of products and manufacturing cost and made averments in relation to this.

[7 ] In the course of submission it became apparent that there was some overlap in the note of argument particularly in relation to paragraphs 1, 2, 4, 5 and 7. In summary, counsel for the defender having analysed the claim made by the pursuer, submitted that it was essential for the pursuer, in a case of this kind, to aver and offer to prove that the products which are or had been in the hands of the defender were products which they owned and which had been stolen from them. Counsel submitted that the high point of the pursuer's averments is the averment that the "products went missing". He pointed to the averment, introduced by minute of amendment, in which the pursuer states that "owing to the scale of the pursuer's distribution operation at the distribution centre, it is not possible for the pursuer to ascertain exactly when or how the items went missing". This is against a background that the pursuer avers that products went missing both from the distribution centre and while in transit by Stirling Fibre Limited. Counsel for the defender submitted that the averments were too vague and general and that it was essential to have some averments to identify which particular products went missing on particular dates. On this point, he concluded that without such averments, it was not possible to aver any link between allegedly stolen products and products sold or held by the defender. Relying in particular on paragraph 7 of his note of arguments, he also submitted that on the facts averred there was no basis to make averments to infer that the defender knew all these products to have been stolen from the pursuer. He was critical of the "believed and averred" averments at page 12D‑13B which he said could not be justified as inferences from the facts averred by the pursuer.

[8 ] In response, counsel for the pursuer stated that it was impossible for the pursuer to give any further specification about the dates products went missing or identification of missing products. He explained that the pursuer distributed some 120 million books per year and "the products are scattered to the four corners of the earth". This is not averred in the pleadings but was given as background explanation. Nevertheless, he maintained that there was enough specification given to link the missing products to products sold by the defender. He emphasised that the pursuer makes averments about the absence of any legitimate sources for such products at prices below manufacturing price. In summary, he submitted that the pursuer was offering to prove that it was impossible for the pursuer to have obtained the products from the pursuer or any other legitimate sources at the prices the defender bought and sold them for. The only potential other source is the "missing books". That is an illegal source. In relation to the defender's knowledge, he emphasised in particular the defender's own description of the products as "new", "brand new" and the defender's description of the products as still being in the manufacturer's cellophane wrapping.

[9 ] I consider that it is plain from the pleas-in-law for the pursuer and the narrative of the pleadings that it is fundamental to the case made by the pursuer to aver (1) that the pursuer's products to which they have title have been stolen, (2) that the defender is or has been in possession of some of said products and (3) the defender retains or has disposed of said products in mala fide because, as averred by the pursuer, the defender knows all of these products to have been stolen from the pursuer.

[10 ] I consider that there may be many ways in which a pursuer may seek to establish that products which have been or are in the hands of a third party have been stolen from a pursuer. This will vary depending on the particular circumstances of the case. I do not accept the submissions by counsel for the defender that it is necessary to make detailed averments of the type he advanced. I consider that, in theory at least, the pursuer is entitled to set out averments seeking to establish a controlled and limited market from which an inference might be drawn that the products of the pursuer sold by the defender and held by the defender were not sourced from any legitimate market and were products stolen as averred by the pursuer. I consider that is a matter which can only be resolved by proof.

[11 ] It is also essential, however, to the pursuer's mala fide case that on the facts averred an inference can properly be made "that the defender knows all of these items to have been stolen from the pursuer". I have considered the pleadings. The pursuer makes a serious allegation of criminal conduct on the part of the defender. That proceeds on averments that in respect of the pursuer's own knowledge it is believed and averred that the items had been stolen from the distribution centre (12D‑13B). The case is unusual in that it appears that even the pursuer, as owner, is not in a position to aver and prove theft of the pursuer's goods, except by inference. The pursuer, for the reasons explained by counsel, is not offering to prove which products went missing on which dates or to prove whether the products were stolen from the distribution centre rather than when in transit by Stirling Fibre Limited. I am unable to identify any averments which, in my opinion, form a satisfactory basis for the critical averment at page 13B to the effect "that the defender knows all of these items to have been stolen from the pursuer". It is difficult to understand the basis for this bold averment about the defender's knowledge. When pressed about this issue, counsel for the pursuer relied on the market factors averred, particularly the low selling price. But in the absence of any averments that the defender knew or ought to have known from these or other factors that the products were stolen, this is inadequate in my opinion. In order to prove that products of the pursuer have been stolen, the pursuer is averring and relying upon specialist knowledge about their own marketing and contractual conditions. But there are no averments to found this knowledge in the defender. Counsel for the pursuer also relied on the defender's own description of the products as "new" or "brand new" particularly in association with the defender's description advertising the products as still in the manufacturer's cellophane wrapping. Counsel for the pursuer submitted that this indicated that the defender himself was aware that the product had not progressed through the retail chain and that the defender was indicating that these products were "new" in the sense of "direct from the pursuer with no intermediary in the retail chain". I am of the opinion that there are many meanings of "new" but the meaning advanced on behalf of the pursuer is not in my opinion a meaning which would ordinarily be accepted. There is nothing in the pleadings to explain why it is averred this was the meaning intended by the defender. The pursuer's position might have been stronger in this respect, if the defender had advertised the products as direct from the manufacturer and distributor or even direct from the pursuer. This coupled with averments that the defender knew or ought to have known that he had no contractual arrangements to distribute on that basis might have been the type of averment which might have justified an averment in the form made at 13B. I am not persuaded, however, that in an unregulated market, the mere reference to a product offered for sale on e-bay as "new" and "in cellophane wrapping" bears the meaning and inference for which counsel for the pursuer contends. I consider that this averment is critical to the pursuer's case which essentially is based on the defender retaining or having disposed of the pursuer's property in mala fide. As I do not consider the "believed and averred" averment at 13B to be supported by relevant factual averments from which the relevant inference can be drawn, I am of the opinion that there is no relevant case pled that the defender has acted in mala fide.

Note of arguments, paragraph 6 and discussion

[12 ] The theme of lack of specification was continued but in relation to a different issue. Counsel for the defender submitted that there was insufficient specification and a lack of fair notice to enable a calculation of damages based on value or quantum lucratus. At page 10D in response to averments from the defender, the pursuer also avers:

"Separatim, esto the defender was in good faith when he sold the products (which is denied), the defender is liable to pay the pursuer the profit he made on the sale of those items."

There was no supporting plea-in-law by the pursuer for these averments. I am of the opinion that such a plea-in-law is necessary but no specific criticism was made by counsel for the defender in relation to the absence of a plea-in-law. I do not consider the criticisms which were made by counsel for the defender in relation to this aspect of the case were well-founded. In my opinion, the pursuer has specified the correct basis of calculation depending on whether the defender is averred to be in mala fide or bona fide. The pursuer has averred the basis of identification of their products which they say to be all products published by them described as "new", "brand new" or similar. In relation to the mala fide case, the value to the pursuer is averred to be the wholesale price. In relation to the claim based on quantum lucratus, this is within the defender's knowledge. I consider there is adequate specification and fair notice. The details are a matter for proof.

Note of argument, paragraph 8 and discussion

[13 ] I now turn to deal with the submissions by counsel for the defender in relation to the pursuer's averments at page 10C-D of the Closed Record, which is the alternative case based on profit or quantum lucratus. He submitted that this claim is relevant only if there are averments by the pursuer that the products are irrecoverable. In this case, he said, recovery was possible or at least the pursuer could not aver that it was not available. The defender had provided to the pursuer a list of products giving the details of names and addresses of every purchaser and it was open to the pursuer to seek recovery of the products. Recovery was the primary remedy and it was only in the event of the products being irrecoverable that the pursuer would be entitled to a claim based on quantum lucratus. Counsel for the defender submitted that as the pursuer had made no averments that recovery was not possible, the averments were irrelevant.

[14 ] The foundation for this submission on behalf of the defender was Walker, Delict page 1006. Counsel for the defender then referred to a passage in Gloag & Henderson, The Law of Scotland, 4^th ed., page 125:

"when a bona fide purchaser of stolen products has resold them before receiving notice of the defect in his title, he is liable only for any profit he may have made on the resale, and then only in the event of the products being irrecoverable".

Counsel for the defender prayed in aid the following cases: The International Banking Corporation v Ferguson, Shaw & Sons 1910 SC 182 at page 191, Bunten v Silverdale 1951 Sh. Ct. Rep. 62, Jarvis v Mansons 1954 Sh. Ct. Rep. 62, Scot v Low (1704) Mor 9123, Raymond Harrison v North West Securities 1989 SLT 718 at 719 and 722K. He submitted that there would be double or additional compensation if a proprietor was able to obtain damages quantum lucratus from a possessor who no longer possessed the products and then claim recovery of the products from a third party. He submitted that the obvious and only primary remedy for the pursuer was to recover the stolen products. The law provided an alternative remedy only if recovery was not possible. The alternative remedy was a claim quantum lucratus against a possessor who in good faith had parted with possession of the stolen products.

[15] In response, counsel for the pursuer submitted that the said passages cited in Walker and Gloag & Henderson 4^th ed. are not correct statements of the law. He submitted that in the passage from Walker, Delict, page 1006, the author is dealing with the remedy of spuilzie under reference to cases cited in footnote 62. These cases, he submitted, do not support the general legal proposition put forward on behalf of the defender. He pointed out that the passage in the 4^th edition of Gloag & Henderson has not survived in later editions. The relevant passage in the 11^th edition at paragraph 28.11 states:

"An obligation of restitution also arises where someone is enriched by the use of another's property. Even though a bona fide possessor who has ceased to possess another's property is not liable in restitution for the value of the property, he is liable for any profit which he has made but not for any fruits which he has consumed in good faith. This applies when the bona fide possessor parts with possession to another from whom the owner can recover his property."

Counsel for the pursuer also made reference to Faulds v Townsend (1861) 23 D 437 at page 439 which he submitted plainly envisaged that both remedies were available at the same time. He also prayed in aid to the same effect, International Banking Corporation, cited on behalf of the defender, and referred to page 191 and F C Finance Limited v Langtry Investment Company Limited 1973 SLT (Sh. Ct.) 11 at page 17. He accepted that the passages relied on were obiter but submitted that there was no suggestion in these well-accepted cases that there was some other rule about the available remedy as submitted by counsel for the defender. Under reference to D L Carey Miller, Corporeal Moveables in Scots Law (2^nd ed.), pages 239-241 and 242-243, counsel for the pursuer submitted that there had been problems identified by the Scottish Law Commission in the existing law about "double recovery" but nevertheless no other policy had been adopted to date as a solution.

[16 ] Counsel for the defender conceded that most of the cases referred to in the passage on which he relied in Walker, Delict did not support the legal proposition put forward by the author with the exception, he stated, of Bunten v Silverdale and Jarvis v Manson. In Bunten v Silverdale, the learned Sheriff relied firstly on the passage in Gloag & Henderson, 4^th ed., page 125. I consider that the criticisms of this passage made by counsel for the pursuer and which I narrate in paragraph 15 are well founded. The only other authority relied on by the learned sheriff is Scot v Low, a case involving an intermediary selling sheep which he did not own. In that case the claim was held not to be relevant unless the pursuer could allege that the defender was in possession of the sheep at the time of citation in bad faith or that the defender was lucratus. A claim for the full value of the sheep against a bona fide purchaser who had acquired the sheep for value in good faith and then resold the sheep was not considered to be relevant. The case does not disclose whether the sheep which had been resold were still alive and potentially recoverable by the true owner, the pursuer. I can find no support in Scot v Low for the learned Sheriff's decision or the submission on behalf of the defender. Jarvis v Manson supports the general rule that a bona fide possessor who has parted with stolen goods is bound to recompense the owner by the amount of profit only. The case does not deal with issues about choice of remedy which the owner might have exercised and does not support the proposition that a claim quantum lucratus can only be made if return of the property is not possible. The International Banking Corporation case deals with a different situation where the possessor of the stolen property has created by manufacture a new species of property which could not again be resolved into its original elements. Different policy considerations apply to such a case. The case of Raymond Harrison is concerned with the rights of a permanent trustee on a sequestrated estate in which a claim was made that certain payments constituted unfair preferences in favour of the defenders under section 36 of the Bankcruptcy (Scotland) Act 1985. The passages referred to in Lord Clyde's Opinion must be understood in the context of a consideration of remedies in the event of bankruptcy. In these circumstances, I am not persuaded that the submission on behalf of the defender in relation to paragraph 8 of the note of argument is well founded.

[17 ] During submissions by counsel, there was some discussion about the underlying policy of the legal remedies. It is perhaps surprising that some of the problems and policy issues which were addressed by the Scottish Law Commission in 1976 in memoranda 25, 27 and 31 have not received more attention. In developing his legal submission, counsel for the defender emphasised what he considered to be the undesirable policy outcome if the law was as stated on behalf of the pursuer. That is not a matter which I am in a position to change if the law is settled which I consider to be the case. In any event, I am not persuaded that the remedy submitted by counsel for the defender to be the prior remedy is so obviously desirable. This remedy involved the pursuer having no choice but to seek the return of hundreds of individual products from individuals in different parts of the world at a time when the products were unlikely to be in "new condition".

[18 ] In order to allow parties the opportunity to consider my opinion and address me on any further procedure, I have appointed the case to the By Order roll. The issue of expenses is reserved.