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Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Fiat Auto Financial Services v. Connelly Senior [2006] ScotSC 104 (19 December 2006)
URL: http://www.bailii.org/scot/cases/ScotSC/2006/104.html
Cite as: [2006] ScotSC 104
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A1522/05
FIAT AUTO FINANCIAL SERVICES v MR LAURENCE CONNELLY SNR
FINDS-IN-FACT:-
(1) On
(2)
The
transaction between the defender and Arnold Clark followed upon negotiations,
which took place shortly prior to
(3)
In the course of negotiations with
Robert Cochrane the defender was shown a Fiat Stilo motor vehicle which
was fitted with air conditioning, a CD player and a refrigerated cool box. Robert Cochrane informed the defender
that he could purchase a vehicle in a different colour with an identical
specification. The transaction between
the defender and Arnold Clark proceeded on the basis of that representation.
(4)
When the defender took delivery of the vehicle
it was discovered that it was not fitted with a CD player, nor with air
conditioning nor a refrigerated cool box.
The defender raised the matter with Robert Cochrane who initially
indicated that he would look into arranging for the supply of these items. Over
a period of time the defender continued to press Mr Cochrane in regard to
the missing items. Eventually, the defender was told, by another Arnold Clark
employee Gary Connor, that if he wished these items he would require to
pay for them.
(5)
The
vehicle is fitted with a computerised engine management system. Within three days of taking delivery of the
vehicle the defender experienced difficulties with the engine management
system, which caused poor engine performance.
On 27 October the vehicle broke down. The defender called out the AA who recovered
the vehicle and took it to Arnold Clark's garage at
(6) On a number
of occasions when the defender experienced problems with the engine management
system he attended at Arnold Clark's Service Department at
(7) At the
12,000 mile service of the vehicle, which took place in January 2004, two tyres
required to be replaced. The tyres had
worn unevenly. Following the service it
was noticed that the vehicle showed a tendency to veer to the left. The
defender complained and on about 10 June 2004 Arnold Clark replaced the
rear axle. By this time the vehicle had
travelled 36,000 miles. The problems,
which had given rise to this repair, persisted and became worse: the vehicle
continued to pull to the left when driven and showed excessive and uneven
wearing of its tyres. These faults
persisted throughout the whole of the remainder of the defender's period of
possession.
(8)
The
headlamps of the vehicle developed a fault.
The headlamps were replaced by Arnold Clark on
(9) The
windscreen wipers of the vehicle developed a fault. Arnold Clark replaced the
linkage on
(10) On
(11) The defender
did not immediately return the vehicle to Arnold Clark. Fiat replied to his letter of
(12) As at
(13) During the
defender's possession of the vehicle it travelled in excess of 40,000 miles.
(14) The pursuers
served a default notice on the defender on
FINDS-IN-FACT-AND-IN-LAW:-
(1) That it was
an implied term of the contract between the defender and Arnold Clark that the
vehicle would be of satisfactory quality.
(2) That the
defender having made known to Arnold Clark that the vehicle was being purchased for use as a private
hire taxi, it was a further implied term that the vehicle would be fit for that
purpose.
(3) The vehicle
was neither of satisfactory quality nor fit for purpose.
(4) Arnold Clark
being in breach of the implied terms the defender was entitled to reject the
vehicle.
(5)
The
defender's right to reject the goods subsisted at
The defender
effectively rejected the goods on that date.
(6)
The
defender did not lose his right of rejection in the period between
15 July and
FINDS-IN-LAW:-
The credit agreement being a debtor/creditor/supplier
agreement entered into for the purpose of financing the sale transaction
between the defender and Arnold Clark and the defender being entitled, by
virtue of Arnold Clark's breach of contract, to reject the vehicle and to
rescind the contract of sale, accordingly by virtue of section 75 of the
Consumer Credit Act 1974 he has a like claim to rescind the credit agreement.
THEREFORE Sustains the defender's first and second pleas‑in‑law;
Repels the pursuers' first, second and fourth pleas‑in‑law and
Assoilzies the defender from the crave of the Initial Writ and Finds the
pursuers liable to the defender in the expenses in the cause as taxed; Allows
an account to be given in and Remits the same when lodged to the Auditor of
Court to tax and to report.
NOTE:
Introduction
In this action the pursuers a
finance company seek payment of the balance due to them in terms of a credit
agreement entered into with the defender. Pursuant to that agreement the
pursuers granted the defender a loan to finance the defender's purchase of a
motor vehicle. Including finance charges the total amount payable under the
credit agreement was £18,050.60. The
transaction financed by the credit agreement was a sale transaction in terms of
which the defender purchased the vehicle from Arnold Clark. The defender
resists the pursuers' claim for payment on the grounds, that he is entitled to
reject the vehicle and to rescind the contract of sale. He asserts that these
rights of rejection and rescission arise through certain breaches of the
implied terms concerning quality and fitness which were imported into the
contract by virtue of section 14 of the Sale of Goods Act 1979. The
defender contends that the right to reject the vehicle and to rescind the
contract of sale affords him a shield against the pursuers' claim for payment
under the separate credit agreement.
This defence is said to arrise by virtue of section 75(1) of the
Consumer Credit Act 1974 which provides as follows:-
"(1) If the debtor under a
debtor/creditor/supplier agreement falling within section 12(b) or (c)
has, in relation to a transaction financed by the agreement, any claim against
the supplier in respect of a misrepresentation or breach of contract, he shall
have a like claim against the creditor, who, with the supplier, shall
accordingly be jointly and severally liable to the debtor."
The defender's position is that by
virtue of this statutory provision, then, should he succeed in establishing a
right to reject the goods and to rescind the supply contract, he is in turn
entitled to rescind the credit agreement.
In the debate on the evidence Mr Craik, for the pursuers, conceded
that this proposition was accepted by them. Presumably this was on the footing
that the pursuers agree that the Court should follow the decisions in United
Dominions Trust Ltd v
Again, when it came to the debate
on the evidence, Mr Craig did not seriously dispute that at
"(1) the buyer is deemed to have accepted the
goods subject to sub‑section (2) below -
(a) when he intimates to the seller that he
has accepted them, or
(b) when the goods have been delivered to
him and he does any act in relation to them which is inconsistent with the
ownership of the seller.
(4) The buyer is also deemed to have
accepted the goods when after the lapse of a reasonable time he retains the
goods without intimating to the seller that he has rejected them."
The Evidence:
On the morning of the proof the
parties lodged a Joint Minute of Admissions which agrees the following
matters:-
(1) On or about 27 October 2003 the
pursuers and the defender entered into a credit agreement numbered 42606110046.
(2) Copy credit agreement no. 5/1 of process
is a true copy.
(3) The pursuers served a default notice on
(4) The pursuers demanded payment of the
balance outstanding in terms of the credit agreement on
(5) The balance outstanding in terms of the
credit agreement is £15,575.52.
(6) The vehicle was supplied to the defender
on or about
(7) During the defender's possession of the
vehicle it travelled in excess of 40,000 miles.
I heard oral evidence from
Colin Philips, currently Arnold Clark's General Manager at
The defender and his son
Laurence Connelly Jnr gave evidence, which substantially confirmed Finding‑In-Facts
Nos. (2) to (12) inclusive. I found them
to be both credible and reliable. The defender gave evidence that, in addition
to the work carried out on the vehicle as recorded in the Arnold Clark
paperwork, he had attended at
I heard evidence from the
defender's expert Mr Robin Cant.
Mr Cant is a Consulting Mechanical Engineer with considerable
experience as an independent assessor for insurance companies. He was a most impressive witness. I found him
to be credible and reliable. He gave
evidence broadly in line with his report No. 6/1 of process. His evidence
disclosed that the computer diagnostic equipment, which had been connected to
the on‑board computer for the purposes of his inspection, did not reveal
that there had ever been a malfunction indicating engine overheating. That
explanation was recorded in the Arnold Clark paperwork in relation to the
breakdown, which had occurred in October 2003. This suggested that Arnold
Clark's records in this respect were incorrect.
I consider that on a balance of probabilities the fault in the engine
management system, which Mr Cant found, was the same fault as had caused
the vehicle to break down within days of the defender's purchase of it.
Mr Cant's evidence indicated that the vehicle had been stored by Arnold
Clark in the period from 27 September through to the date of his
inspection on
Mr Cant's evidence also
confirmed the evidence of the defender and his son that 40,000 was a relatively
modest mileage for a private hire taxi over the period of the defender's
possession of the vehicle.
Decision:
When it came to the debate on the
evidence Mr Craik's position had come to one of acceptance that the
vehicle was at the date of its rejection neither of satisfactory quality nor
fit for purpose. Indeed he was quite
prepared to concede that when the vehicle first broke down a few days after purchase
the fault in the engine management system was such as would have entitled the
defender to reject the vehicle at that stage.
It was Mr Craik's contention that the defender had lost his right
to rejection. Firstly this was so by virtue of section 35(1)(b) of the
Sale of Goods Act, which provides that the buyer is deemed to have accepted the
goods "...when the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the seller."
To have used the car as a private hire taxi from September of 2003 through to
at least July of 2004 and to have travelled in excess of 40,000 miles in the
vehicle was inconsistent with the ownership of the seller. Moreover in terms of section 35(4):
"The buyer is also deemed to
have accepted the goods when after the lapse of a reasonable time he retains
the goods without intimating to the seller that he has rejected them."
The policy behind section 35 was
to provide finality of transactions and accordingly a reasonable time must be a
matter of weeks after the purchase. It could not be 10 months as in the
present case.
What does it mean to say that
there is deemed acceptance when the buyer does any act in relation to the goods
which is inconsistent with the ownership of the seller? The effect of section 35(1)(b) is that
the buyer must be taken to have accepted the goods if he acts in a way which is
inconsistent with rejection and thus denying the possibility of the re‑vesting
of ownership of the goods in the seller. This notion of re‑vesting
ownership was identified by Devlin J in Kwei
Tek Chow v British Traders and Shippers Ltd [1954] 2 QB 459.
Devlin J's explanation was expressly approved in the context of the
current version of the section by Lord Justice Morritt V-C at paragraph 39
in Clegg v Anderson T/A Nordic Marine [2003] EWCACIV 320 to which I was
referred by Mr Craik:
"...Mr Justice Devlin explained
that in cases where as in this case, property in the goods has passed to the
buyer, the ownership of the seller with which the buyer must not act inconsistently
is the reversionary interest of the seller which remains in him arising from
the contingency that the buyer may reject the goods."
Throughout the period of his
possession, the defender was engaging with the sellers regularly and often in
regard to his complaints and concerns over the vehicle's quality and fitness
for purpose. Against that background, I am unable to accept that his continued
use of the vehicle necessarily amounted to acts inconsistent with the ownership
of the sellers, Arnold Clark. Also relevant in this context are his efforts to
obtain the specified extras, which were missing from the vehicle delivered to
him. The key issue is whether the defender lost the right to reject by lapse of
time.
What in the context of the present
case may be said to be a reasonable time for rejection? By virtue of
section 39 of the Act this is a question of fact, however, section 35
does offer guidance as to how the question is to be approached. Section 35(5) provides:
"The questions that are material in determining for the purposes of sub‑section
4 above whether a reasonable time has elapsed include
whether the buyer has had a reasonable opportunity of examining goods..."
Section 35(6) provides:
"The buyer is not by virtue
of this section deemed to have accepted the goods merely because -
(a) He asks for, or agrees to, the repair by
or under an arrangement with the seller."
In Clegg Lord Justice Morritt
comments on these two sub‑sections as follows:
"Thus sub‑section (5)
provides that whether or not the buyer has had a reasonable time to inspect the
goods is only one of the questions to be answered in ascertaining whether there
has been acceptance in accordance with sub‑section (4). Sub‑section 6(a) shows that the
time taken merely in requesting or agreeing to repairs, and, I would hope for
carrying them out, is not to be counted.
In these circumstances I consider
that time taken to ascertain what would be required to effect modification or
repair is to be taken into account in resolving the question of fact which
arises under sub‑section (4)."
This passage appears to me to be
authority for the proposition that the right to reject is not lost during any
period where the purchaser is waiting for information to make an informed
judgement as to whether to accept or reject the goods or to seek a repair.
Similarly the following passages
from the judgment of Lady Justice Hale in the same case, make it plain that in
certain circumstances the clock may stop ticking against the buyer so that
deemed acceptance is delayed:-
"75. The buyer loses the right to reject if he informs the seller
that he has accepted the goods, or if he acts inconsistently with the seller's
reversionary interest in the goods, or if he leaves it too long before telling
the seller that he rejects them: s. 35(1), (4). The first two of these are subject to his
having a reasonable opportunity of examining the goods to ascertain whether
they conform to the contract, including the implied terms in s. 14; whether he has had such an opportunity is also
relevant to the third: s. 35(2), (5).
And a buyer does not accept the goods simply because he asks for or
agrees to their repair: s. 35(6).
It follows that if a buyer is seeking information which the seller has
agreed to supply which will enable the buyer to make a properly informed choice
between acceptance, rejection or cure, and if cure in what way, he cannot have
lost his right to reject.
76. This was a buyer who was told very early on that something was
not right with his brand new boat and given one suggesting for curing it. When he sought time and information for
reflect upon the best way forward the sellers agreed to supply the information
required. When they eventually produced
this, they not only made it clear that there was no "do nothing"
option, but presented two very different options for putting it right, each
different from the one they had originally proposed. In my view, time only began to run then and
the three weeks it took the buyer to inform the seller that he was rejecting the
boat were not more than an reasonable time."
The quoted sections from each
judgement support the view, that in a case such as the present one, the actings
of the seller in relation to dealing with defects and attempts to cure defects
may postpone deemed acceptance. That may be particularly so where the goods
involve complex technology and the seller is the only available source of
information as to the nature of the defect and any potential remedy. It was
apparent from Mr Cant's evidence that examination of the engine management
system was dependent upon access to an appropriate diagnostic computer system.
In relation to latent defects it
seems clear that section 35 may prevent rejection where a defect, which if
known of at the outset would have justified it, emerges only after a period of
time. Thus, if the fault in the engine
management system had been satisfactorily resolved in October 2003, when the
vehicle was first returned to Arnold Clark for repair, then it may have been
difficult to argue, that it was still open to the defender to reject, when, in
May 2004, the rear axle problem emerged. I consider that in this case the door
to rejection was kept open because when the initial repair was not effective,
Arnold Clark and the defender continued to engage with one another in attempts
to ascertain what would be required to cure the difficulty. This initial
chapter of attempts to resolve the problem with the engine management system
overlaps with and it seems became overshadowed by the emergence of the steering
problem, itself a symptom of the rear axle fault.
In the period between the initial
failed attempt to repair the engine management system and 27 May 2004 the
clock had stopped running against rejection.
Thereafter I considered the clock never re‑started. This was
because the period from May through to the letter of rejection issued on
15 July 2004 was very much taken up with the defender requesting repairs,
Arnold Clark agreeing to carry them out and then when repairs were not
effective, with efforts to ascertain what might be done to resolve the
problem. In the peculiar circumstances
of this case I have therefore held that when the defender came to reject the
goods in July 2004 this was a rejection made within a reasonable time.
The question which next arises is
whether by retaining possession of the vehicle in the period from 15 July
to 27 September 2004 the defender finally lost his right to reject by
acting inconsistently with its rejection and therefore with the possibility of
ownership re‑vesting in Arnold Clark.
I would observe firstly that there was no evidence that the defender
continued to use the vehicle after 15 July. It appears to me that Mr Ireland's
submission that the defender was entitled to rely on section 36 of the
Sale of Goods Act 1979 is correct. That
section provides as follows:-
"Unless otherwise agreed
where the goods are delivered to the buyer, and he refuses to accept them,
having the right to do so, he is not bound to return them to the seller, but it
is sufficient that he intimates to the seller that he refuses to accept
them."
The letter of 15 July from
the defender to Arnold Clark is a clear intimation of refusal to accept the
goods.
Of equal importance in relation to
this question is the defender's unchallenged evidence of Arnold Clark's
behaviour in this period. To put it
colloquially Arnold Clark appear to have been stringing the defender along.
Contrary to Mr Ireland's
submission I do not agree that the acceptance of the keys by Mr Connor is
necessarily of much significance. Anyone
in the defender's position would have expected that Mr Connor would
require to have referred the matter to a higher authority.
I did not find the case of J and H Ritchie Ltd v Lloyd Ltd 2005 1 SC 155 to be of much
assistance. There the pursuers had allowed the sellers to carry out a repair
and the pursuers had not led evidence that in its repaired state the goods were
still defective. Following the repairs
to the engine management system and the rear axle the vehicle remained defective
in respect of both these matters.
Again, I did not find the case of Lamara v Capital Bank Plc [2006] CSIH 49 (XA405) to be of
assistance. That case was concerned with
issues of quality and fitness for purpose rather than loss of the to the right
of rejection.
In summary, I conclude that,
notwithstanding the mileage, the use made of the vehicle and the lapse of the
time, the defender was entitled to reject the vehicle on 15 July
2005. Further that his right of rejection
was not lost by virtue of the fact that the vehicle was not returned to the
sellers until sometime after formal rejection.
In light of Mr Craik's concession in regard to the effect of
section 75 of the Consumer Credit Act I have sustained the defenders
first and second pleas-in-law and have granted absolvitor in favour of the
defender. I was not addressed on the question of expenses. I have therefore assigned a hearing on
expenses. There appears to be no question
of divided success and accordingly parties may regard such a hearing as unnecessary. In the event that parties are agreed on the
matter of expenses they are welcome to e-mail me and I will simply issue a
further interlocutor discharging the hearing of and making an award.
SHAFD.AH.Fiat.15.12