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England and Wales Court of Appeal (Civil Division) Decisions


You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Stevenson & Anor v Rogers [1998] EWCA Civ 1931 (8 December 1998)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1931.html
Cite as: [1999] QB 1028, [1999] 1 QB 1028, [1999] 2 WLR 1064, [1998] EWCA Civ 1931

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IN THE SUPREME COURT OF JUDICATURE QBENF 97/0668/1
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
PLYMOUTH DISTRICT REGISTRY
(HIS HONOUR JUDGE ANTHONY THOMPSON QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT )

Royal Courts of Justice
Strand
London WC2

Tuesday, 8 December 1998

B e f o r e:

LADY JUSTICE BUTLER-SLOSS
LORD JUSTICE POTTER
SIR PATRICK RUSSELL
- - - - - -

(1) WILLIAM STEVENSON
(2) ANTHONY STEVENSON
Plaintiffs/Appellants

- v -

MARTYN ROGERS
Defendant/Respondent
- - - - - -

(Handed Down Transcript of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 831 3183
Official Shorthand Writers to the Court)
- - - - - -
MR COLIN WYNTER ESQ. (Instructed by Bond Pearce, Plymouth, PL1 3AE) appeared on behalf of the Appellants
MR ALASTAIR NORRIS QC (Instructed by Roger Richards, Paignton, Devon, TQ4 6LE) appeared on behalf of the Respondent

- - - - - -
J U D G M E N T
(As approved by the Court )
- - - - - -
©Crown Copyright

LORD JUSTICE POTTER:

This appeal raises an interesting point upon the provisions of s14(2) of the Sale of Goods Act 1979 (“SGA 1979”). It arises from a decision of HH Judge Thompson QC sitting as a deputy high court Judge, in which he held upon a preliminary issue that the sale by the defendant to the plaintiff in April 1988 of the m/v JELLE for £600,000 was not a sale of goods “in the course of a business” for the purposes of s.14(2), and thus did not give rise to an implied term that the JELLE was of merchantable quality. That decision was effective to determine the outcome of the litigation between the parties.

THE FACTS

At the time of sale, the defendant had been a fisherman for some twenty years. He carried on the business of a fisherman, having purchased his first fishing vessel the DOLLY MOPP many years before. He bought the JELLE in 1983, operating the two boats for a time till he sold the DOLLY MOPP in November 1986, continuing his business with the JELLE. In April 1988 he sold the JELLE, intending to have a new boat built to his requirements, but shortly afterwards changed his mind and, by way of replacement, bought the MARILYN JANE on 20th May 1988 which he thereafter used for his fishing business.

THE JUDGMENT

The judge found in favour of the defendant that the sale of the JELLE was not made “in the course of a business”. In doing so, rather than construing those words broadly and at face value, he recited and purported to apply the construction applied to similar words in the two leading authorities of Davies -v- Sumner [1984] 1 WLR 1301 per Lord Keith at 1304E-1306B (relating to s.1(1) of the Trade Descriptions Act 1968 ) and R & B Customs Brokers Co Ltd -v- United Dominions Trust Ltd [1988] 1 WLR 321 per Dillon LJ at 330E-331A (relating to s.12(1) of the Unfair Contract Terms Act 1977 ). It is appropriate to quote the passages relied on by the judge at this stage.

In the course of his judgment in Davies -v- Sumner , Lord Keith considered an earlier decision in Havering London Borough Council -v- Stevenson [1970] 1WLR 1375 in which the Divisional Court upheld the conviction of the defendant for an offence under s.1(1)(b) of the Trade Descriptions Act 1968. In the Havering case the defendant carried on a car hire business as opposed to the business of a motor car vendor or dealer. He had a fleet of twenty-four cars and made a regular practice of selling his hire cars when he had had them for about two years or when the condition of a particular vehicle warranted it. He did not buy or sell the cars at a profit but simply for the purposes of replacing his fleet vehicles from time to time. By way of contrast, the facts in Davies -v- Sumner were that the defendant was a courier who used his own car almost exclusively in the course of his occupation. He sold it in order to replace it with another for similar use. He was charged before justices with the offence of applying, “in the course of trade or business”, a false trade description in respect of the mileage as shown on the odometer and he was acquitted on the grounds that the sale was not in the course of a trade or business within the meaning of the section. On appeal, the prosecution submitted that it was sufficient that the transaction was reasonably incidental to the carrying on of his business as courier. Lord Keith stated at 1305E-1306B.

“Any disposal of any chattel held for the purposes of a business may, in a certain sense, be said to have been in the course of that business, irrespective of whether the chattel was acquired with a view to resale or for consumption or as a capital asset. But in my opinion section 1(1) of the Act is not intended to cast such a wide net as this. The expression “in the course of a trade or business” in the context of an Act having consumer protection as its primary purpose conveys the concept of some degree of regularity and it is to be observed that the long title to the Act refer to “ mis-descriptions of goods, services, accommodation and facilities provided in the course of trade. Lord Parker CJ in the Havering case [1970] 1 WLR 1375 clearly considered that the expression was not used in the broadest sense. The reason why the transaction there in issue was caught was that in his view it was “an integral part of the business carried on as a car hire firm”. That would not cover the sporadic selling off of pieces of equipment which were no longer required for the purposes of a business. The vital feature of the Havering case appears to have been, in Lord Parker’s view, that the defendant’s business as part of its normal practice bought and disposed of cars. The need for some degree of regularity does not, however, involve that a one-off adventure in the nature of trade, carried through with a view to profit, would not fall within section 1(1) because such a transaction would itself constitute a trade.

In the present case it was sought to be inferred that the respondent, covering as he did such a large regular mileage, was likely to have occasion to sell his car at regular intervals, so that he too would have a normal practice of buying and disposing of cars. It is sufficient to say that such a normal practice had not yet been established at the time of the alleged offence. The respondent might well revert to hiring a car, as he had previously done. Further, the respondent’s car was a piece of equipment he used for providing his courier service. It was not something he exploited as stock in trade, which is what the defendant was in substance doing with his cars in the Havering case ... Where a person carries on the business of hiring out some description of goods to the public and has a practice of selling off those that are no longer in good enough condition, clearly the latter goods are offered or supplied in the course of his business within the meaning of section 1(1). But the occasional sale of some worn out piece of shop equipment would not fall within the enactment.”


In the R & B Customs case, there was an issue whether or not the purchase by the plaintiff of a second-hand car was made “in the course of a business” so as to preclude the plaintiff from relying upon the provisions of the Unfair Contract Terms Act 1977 (“UCTA 1977”) in relation to sales to consumers. Having quoted from the speech of Lord Keith, Dillon LJ analysed it in the following manner at p.330E-

“Lord Keith .. held that the requisite degree of regularity had not been established on the facts of Davies -v- Sumner because a normal practice of buying and disposing of cars had not yet been established at the time of the alleged offence. He pointed out for good measure that the disposal of the car was not a disposal of stock in trade of the business, but he clearly was not holding that only a disposal of stock in trade could be a disposal in the course of trade or business.

Lord Keith emphasised the need for some degree of regularity, and he found pointers to this in the primary purpose and long title of the Trade Descriptions Act 1968. I find pointers to a similar need for regularity under the Act of 1977, where matters merely incidental to the carrying on of a business are concerned, both in the words which I would emphasise, “in the course of” in the phrase “in the course of a business” and in the concept, or legislative purpose, which must underlie the dichotomy under the Act of 1977 between those who deal as consumers and those who deal otherwise than as consumers.

This reasoning leads to the conclusion that, in the Act of 1977 also, the words “in the course of business”, are not used in what Lord Keith called “the broadest sense”. I also find helpful the phrase used by Lord Parker C.J. and quoted by Lord Keith, “an integral part of the business carried on”. The reconciliation between that phrase and the need for some degree of regularity is as I see it as follows: there are some transactions which are clearly integral parts of the businesses concerned, and these should be held to have been carried out in the course of those businesses; this would cover, apart from much else, the instance of a one-off adventure in the nature of trade, where the transaction itself would constitute a trade or business. There are other transactions, however, such as the purchase of a car in the present case, which are at highest only incidental to the carrying on of the relevant business; here a degree of regularity is required before it can be said that they are an integral part of the business carried on, and so entered into in the course of that business.”


Neill LJ, agreed with the judgment of Dillon LJ. He also referred (at p.334) to three examples of statutes other than the 1977 Act in which the phrase “in the course of a business” or similar phrases are to be found, which examples included SGA 1979 section 14(2) and (3). He stated at p.336 E-F:

“.. in relation to a seller of goods or supplier of services, I consider that the court should follow the guidance given by Lord Keith in Davies -v- Sumner . Furthermore, as the words “in the course of a business,” are used both in section 12(1)a and in section 12(1)(b) of the Act of 1977 and as the party referred to in section 12(1) will be the seller or supplier of the goods, it seems to me that the same construction of the words “in the course of a business” must be adopted for both paragraphs, and that therefore the Davies -v- Sumner test should be used for construing 12(1)(a).”


Having considered the above authorities, the judge in this case said as follows:

“Mr Wynter in his careful analysis of these cases, points to the dichotomy suggested by Lord Justice Dillon which exists between transactions which are clearly integral parts of the business concerned and the need for some element of regularity for the disposal to be in the course of a business ... I am clearly of the opinion in the present case that what happened here quite simply was that Mr Rogers was disposing of the vessel which no longer responded to his requirements and as such was not making a sale as a seller “in the course of a business” within the meaning of those words in section 14 of the Sale of Goods Act 1979.

I think that the fact that he had previously bought and sold a vessel and that this was the second fishing boat that he had sold does not in any way indicate a regularity which would be sufficient to indicate that the dichotomy as it has been called, is overcome. I do not think there was any element here of regularity, which has been established, which could be said to show that the activity was an integral part of his business as a fisherman.

I think this falls very clearly on the other side of the fence, and going back to the words used by Lord Keith in his speech in Davies -v- Sumner , I think that this was what might merely be described as “a sporadic selling of a piece of equipment which was no longer required for the purposes of that business”.

The vessel, although clearly used in the course of and an integral part and vital part of a fishing business, was not being exploited as stock in trade when the sale was made, and in those circumstances I find that it falls without the provisions of section 14(2) of the sale of Goods Act, and therefore, in my judgment, the plaintiffs fail on the preliminary issue.”


THE SUBMISSIONS OF THE PARTIES

At the outset of this appeal, it was not in dispute between the parties, on the basis of the authorities from which I have quoted, that in the field of consumer protection three broad categories have been developed to identify whether a sale is made “in the course of a business”, namely
(a) A sale in a one-off venture in the nature of a trade carried through with a view to profit;
(b) A sale which is an integral part of the business carried on;
(c) A sale which is merely incidental to the business carried on but which is undertaken with a degree of regularity.

In categories (a) and (b), the transaction is in the course of a business because it is the conduct of the very business itself. In (c) the transaction is in the course of such business because its regularity has made it so; see also Devlin -v- Hall (1990) RTR 320. It is not in dispute that we need not concern ourselves with (a) in this case.

Mr Wynter criticised the approach of the learned judge as follows. He accepted that the judge, by appropriate reference to the judgment of Dillon LJ in the R & B Customs case, correctly identified that he was required to determine first whether or not the sale of the JELLE was a “clearly integral part” of the defendant’s business. If it was integral, then no proof of regularity would be required in order for the sale to have been “in the course of” the defendant’s business; if it was not integral, but merely incidental, to the business, then he had to determine whether or not there was a sufficient degree of regularity in the defendant’s sale of fishing vessels to render the sale one made in the course of his business. Mr Wynter submitted that, having thus identified his task, the judge wrongly failed to consider or make any finding of fact as to whether or not the sale of the JELLE was indeed an integral part of the defendant’s business; instead he moved directly to consider the question of the degree of regularity of the defendant’s sale of fishing vessels, treating that question as dispositive of the case.

Mr Wynter submitted that, given the finding that the defendant had sold the very thing (his fishing boat) without which he could have no fishing business and replaced it with another, the judge should also have found that the sale was an integral part of the defendant’s business, so that the question of regularity did not arise.

In the course of the appeal, prompted by a question from the court, Mr Wynter made a further and more fundamental submission, not advanced before the judge below, namely that, whatever the construction appropriate to the statutory provisions under consideration in Davies -v- Sumner and R & B Customs , when construing s.14(2) of the SGA 1979, a literal (i.e. wide) construction should be given to the words “in the course of a business”; he submitted they should be taken at face value, there being good reason to suppose that, from the form of the wording adopted, the legislative history of s.14(2) and (if necessary) a Pepper -v- Hart approach to its construction, the limitations perceived by Lord Keith to be necessary when construing the Trade Descriptions Act 1968, as applied by this Court in relation to UCTA 1977, are, if applied to s.14(2) of the SGA 1979, contrary to the intention of parliament. I shall return to the legislative history hereafter.

In support of the decision of the judge, Mr Norris QC argued that he was correct (as indeed Mr Wynter accepted) in reciting the effect of Davies -v- Sumner and R & B Customs and the three broad categories of sale described in those cases as amounting to a sale in the course of a business. The judge was correct also in holding that the isolated sale of the JELLE was neither an integral part of the business nor a transaction of a type undertaken with sufficient regularity to be regarded as part of that business. His finding that the defendant was simply disposing of a vessel which no longer responded to his requirements was clearly a finding that the sale was not integral to the business in the sense that the phrase was used in the Havering case and Davies -v- Sumner , and expanded in R & B Customs . Whilst acknowledging that the item sold was the principal asset of the defendant’s business as a fisherman, without which the business could not be carried on, and thus might be described as the sale of an integral part of the defendant’s business, that did not render the sale transaction itself one made in the course of that business. It was (as found by the judge) no more than the sporadic selling off of a piece of equipment no longer required for the business (cp Davies -v- Sumner ), that business being the business of a fisherman and not the business of selling fishing boats.

So far as the legislative history of s.14(2) is concerned, Mr Norris argued that a Pepper -v- Hart approach is inappropriate, if not impermissible, in a situation where, as he submitted, the meaning of the phrase in the field of consumer protection has been settled, at least so far as this court is concerned.

THE LEGISLATIVE HISTORY

The origins of s.14(2) of the SGA 1979 lie in s.14(2) of the 1893 Act which provided:

“Where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not) there is an implied term that the goods shall be of merchantable quality ...”


The wording of the section underwent considerable revision in the Supply of Goods (Implied Terms) Act 1973 (“SG(IT)A 1973”) which gave effect, with certain modifications, to the First Report of the Law Commission on Exemption Clauses in Contracts (Amendments to the Sale of Goods Act 1893) (Law Com No 24: Scot Law Com No 12), which in turn had drawn heavily upon the work of the Final Report of the Committee on Consumer Protection 1962: Cmnd 1781 (the Moloney Committee Report). The Moloney Committee had inter alia expressed dissatisfaction with the requirement that the condition of merchantability in s.14(2) of the 1893 Act was dependent on the seller being a dealer in the type of goods sold:
“We take the view that if a retailer sells an article in the course of business he should be answerable for its merchantability - which is not of course an assurance of perfection - whether or not he has traded in the same line previously. The test should be whether he sells by way of trade to the particular purchaser and not whether he makes a habit of trading in similar goods which is a circumstance not necessarily known to the purchaser. We recognise there are exceptional cases where a shopper may order a particular article through a retailer knowing that the retailer does not normally stock that type of goods. We think that even in such cases the consumer is entitled to get a merchantable article.” (See para 243)


It also drew attention to a number of important matters of consumer protection and made a number of recommendations in respect of which the Law Commission was subsequently asked to advise in August 1966 under s.3(1)(e) of the Law Commissions Act 1965.

In paragraph 31(Note 29) of its First Report, the Law Commission advised as follows:

“The Moloney Committee in the text quoted from paragraph 443 of their Final Report, suggested that the test should be whether the seller sells “by way of trade”. We prefer the formula “in the course of a business” which, unlike the phrase “by way of trade”, does not lend itself to a restrictive interpretation tending in the direction of making the seller’s particular trade the applicable test. Such a restrictive interpretation would defeat our main purpose which is to ensure that the conditions implied by section 14 are imposed on every trade seller, no matter whether he is or is not habitually dealing in goods of the type sold.”


Further, at paragraph 46 of the Report, it advised:


“In common with the Moloney Committee we recognise that there are exceptional cases where somebody may order a particular article through a retailer knowing that the retailer does not normally stock that type of goods. The Moloney Committee thought that even in such cases the consumer was entitled to get a merchantable article. Once again, we propose to go one step further and make sure that every buyer from a business seller should have a right under the implied condition to receive goods of merchantable quality.”

There was attached to the Report, a draft clause incorporating the change proposed in this respect.

The bulk of the Report was devoted to considering the problem of the extent to which the implied terms proposed could be excluded or varied by agreement and, in that context, proposed a statutory definition of a “consumer sale”, also contained in a draft clause attached to the Report.

The Law Commission’s draft clause amending s.14(2) of the 1893 Act was adopted and enacted without modification in s.3 of the SG(IT)A 1973, sub-section (2) of which provided:

“Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality ...”

The same opening words were also introduced by sub-section (3) into the former s.14(1) of the 1893 Act (Fitness for Purpose). In that case the words replaced the requirement of the 1893 Act that:

“the goods are of a description which it is in the course of the seller’s business to supply ...”


At the same time, by s.4 of the SG(IT)A 1973 it was provided, by way of amendment to s.55 of the 1893 Act, that:

“(4) In the case of a contract for sale of goods, any term of that or any other contract exempting from all or any of the provisions of section 13, 14 or 15 of this Act shall be void in the case of a consumer sale ... to the extent that it is shown that it would not be fair or reasonable to allow reliance on the term ..

(7) In this section “consumer sale” means a sale of goods (other than a sale by auction or by competitive tender) by a seller in the course of a business where the goods -

(a) are of a type ordinarily bought for private use or consumption; and
(b) are sold to a person who does not buy or hold himself out as buying them in the course of a business.” (emphasis added)


Thus, the imposition of the implied term as to merchantability “where the seller sells in the course of a business ” was enacted at the same time as the provision that the term should not be excluded in a sale “by a seller in the course of a business ” to a person “who does not buy or hold himself out as buying them in the course of a business.

In introducing the Second Reading of the 1973 Bill, the Minister of State for Trade and Consumer Affairs (Sir Geoffrey Howe) stated:

“This Bill is designed to bring up to date the important although not exactly modern consumer protection provisions contained in the Sale of Goods Act 1893 ... A lot of things have changed since then. Two particular classes of transaction were then customary, and accordingly required attention from the Law - first commercial contracts .. second, those in which consumers generally dealt directly with the makers of the goods they wanted ..

A set of rules of this kind can, however, work fairly only when there is more or less equality of bargaining power between the buyer and the seller. This is manifestly not so in the changed conditions of today.

Mass production and marketing and the increased technological complexity of consumer goods have combined to increase the market power of producers in relation to customers .. As bargaining through personal contact has become less and less practicable during the last 80 years, as the consumer’s bargaining power has declined, so has his chance of getting defective goods repaired or replaced. The balance has shifted a long way since 1893. This Bill will go part of the way towards addressing it.

As a first step consumers will have an inalienable right to be supplied with goods of reasonable quality. When the Bill becomes law it will no longer be possible in a consumer sale to exclude this or any other implied right provided by the Sale of Goods Act ...

I should remind the House that the Bill is founded upon the First Report of the Law Commission on Exemption Clauses in Contracts. I am sure the whole House will wish to join with me in expressing our gratitude to the Law Commissions for the work they have done on that task.”


S.4 of the SG(IT)A 1973, which rendered void exemption clauses in relation to the terms implied under s.14(2) in the case of any consumer sale, was itself repealed and replaced by s.6 and s.12 of the UCTA 1977 which, by the latter section, provided a different set of rules in relation to consumer sales. By s.12(1):

“A party to a contract “deals as consumer” in relation to another party if -

(a) he neither makes the contract in the course of a business nor holds himself out as doing so; and

(b) the other party does make the contract in the course of a business; and

(c) in the case of a contract governed by the law of sale of goods .. the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.”

It was s.12(1)(a) which was the subject of the decision in R & B Customs .

The SGA 1979 re-enacted s.14(2) in unaltered form. The act was a Consolidating Act embodying the amendments made to the 1893 Act throughout its long existence, including the additions to take account of the alterations made by the UCTA 1977.

I complete this review of the legislative history by recording that the implied term of merchantable quality contained in s.14(2) of SGA 1979 was replaced by an obligation that the goods supplied be of “satisfactory quality” as provided in s.1 of the Sale and Supply of Goods Act 1994 . However, we are concerned in this case with the law as it stood in 1988.

SALE “IN THE COURSE OF A BUSINESS”

In the light of this history, Mr Wynter has submitted that the words “in the course of a business” in s.14(2) must be interpreted at face value. He relies upon the statement which appeared in Benjamin’s Sale of Goods (2nd ed 1981) at para 795 (i.e. prior to the decision in Davies -v- Sumner ), which he adopts as his own submission. It reads:

“The intention of these words, first inserted by the Supply of Goods (Implied Terms) Act 1973, is doubtless to exclude any sales by purely private sellers. Similar phraseology appears also in Section 14(3) of the Unfair Contract Terms Act 1977. Although there is as yet no authority on the interpretation of the words in the present context, it would appear that their scope is wide, for there is nothing to confine them to situations where the business involved is one of selling .. They cover a seller in the business of selling one type of goods who incidentally in his business sells another type of goods - e.g. where a coal merchant disposes of a lorry by selling it on the second -hand market. But it seems they also cover persons who sell goods in the course of a business even though the business is not directed towards sales at all - e.g. where a television rental company sells off one of its vans ..”

In the current (5th) edition of Benjamin at para 11-045 there are added the further examples of:

“.. a farmer who sells off a surplus tractor or a medical practitioner or solicitor or local government department disposing of surplus equipment which sells a used typewriter ..”


It is notable, however, that the editor of Benjamin (5th ed), having referred to the reasoning underlying the decisions in Davies v- Sumner and R&B Customs expresses the view that:

“.. it may well be therefore that the reasoning referred to .. should be extended to section 14, with the result that “sporadic” sales by one in business but not in the business of selling, or of selling items such as that concerned, would not be subject to the same statutory term.”


Further, in the current edition of Chitty on Contracts (27th ed) at para 41-071 in relation to the same question, it is stated that:

“.. recent cases in other contexts suggest that for a person to deal in the course of a business, there must be sufficient degree of regularity in such transactions for them to constitute an integral part of his business, and this seems applicable here also”.


In approaching the construction of the words “in the course of a business”, it is of course the task of the court to construe s.14(2) as it appears in the 1979 Act. In that respect, not only does s.14(2) embody a deliberate change in the wording of its equivalent in the 1893 Act but it is to be construed as part of an overall code embodied in the 1979 Act which is different and more extensive in nature from the codification contained in its predecessor. As stated by Lord Diplock in Ashington Piggeries Limited -v- Christopher Hill Limited [1972] AC 441 at 501:

“Because of the source of the rules stated in the Sale of Goods Act 1893 the classification adopted is by reference to the promises made in relatively simple types of contracts for the sale of goods which were commonly made in the 19th century and had been the subject of judicial decision before 1893”.


In the 1893 Act, no distinctions were made between commercial sales and private sales save for the provisions in s.14(1) (goods “of a description which it is in the course of the seller’s business to supply”) and s.14(2) (goods bought by description from “a seller who deals in goods of that description”). The 1979 Act, on the other hand, consolidated the law as altered and expanded by inter alia, the 1973 Act and the 1977 Act which were largely concerned with consumer protection. The 1979 Act transformed the code of the 1893 Act from that of a corpus of rules which in principle applied to all contracts of sale, into one containing a number of variants, dependent on factors such as whether one of the parties is acting in the course of a business (or through an agent who is so acting), or whether a party does or does not deal as a “consumer”. Those considerations, as well as the nature or description of the goods sold, also govern the question whether a contractual term satisfies the “requirement of reasonableness” originally imposed by certain sections of UCTA 1977.

It seems to me clear that, free of any constraints imposed by the decisions to which we have been referred, this court, making use of the tools of construction now available to it, should construe the words of s.14(2) of the SGA 1979 at their wide face value. In my view, it is not necessary to do more than to turn to the statutory change of wording in s.14(2) as between the 1893 Act and s.3 of the SG(IT)A 1973 (which s.14(2) of SGA 1979 simply re-enacted) to see that it was the intention of the SG(IT)A 1973 to widen the protection afforded to a purchaser by s.14(2) from a situation where the seller was a dealer in the type of goods sold, to one where he simply made a sale “in the course of a business”; the requirement for regularity of dealing, or indeed any dealing, in the goods was removed. Given the removal of that requirement, there is on the face of it no reason or warrant (at any rate in a civil rather than a criminal context) to re-introduce some implied qualification, difficult to define, in order to narrow what appears to be the wide scope and apparent purpose of the words, which is to distinguish between a sale made in the course of a seller’s business and a purely private sale of goods outside the confines of the business (if any) carried on by the seller.

That said, I acknowledge the argument that, because of the varied approach of the courts in differing areas of the law to the question of what is or is not done in the course of a trade or business, an ambiguity or real doubt arises as to whether or not the words of s.14(2) should be taken at face value or whether they should be interpreted to connote at least some degree of regularity and so as to exclude sporadic sales which are no more than incidental to the seller’s business. In the light of that argument, this seems to me a case where it is appropriate and proper under the rule in Pepper -v- Hart to refer to Hansard and in particular to the statement of Sir Geoffrey Howe when introducing the Bill which became the SG(IT)A 1973, already quoted in this judgment; also to the First Report of the Law Commission. So far as the latter is concerned, it is legitimate to refer to it both because of the direct reference to it in the statement of the Minister that the Bill was “founded upon” the First Report of the Law Commission and, second, upon the basis enunciated by Lord Simon of Glaisedale in Black Clawson International Limited -v- Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 at 647D-648G and Lord Diplock in Fothergill -v- Monarch Airlines Limited [1981] AC 251 at 281A-D.

Reference to Hansard and the First Report makes clear that the mischief which parliament intended to rectify in relation to s.14(2) was that s.14(2) of the 1893 Act had a restrictive effect and was inadequate to impose on every business seller (whether or not habitually dealing in goods of the type sold) the implied condition as to merchantable quality. It was in that context that the draft clause annexed to the First Report was enacted without modification in s.3 of SG(IT)A 1973. Thus, resort to the mischief rule confirms my view formed at first impression that the changed wording of s.14(2) should not be read so as to bear the limitation for which Mr Norris argues.

Nor is there any countervailing reason to suppose that, at the time the SGA 1979 was passed, thereby re-enacting without alteration the form of s.14(2) earlier enacted by s.3 of SG(IT)A 1973, Parliament intended any change. As its Long Title states, the Act was a consolidating act so far as the sale of goods is concerned. Further, as at 1979, there had been no reported judicial decision or pronouncement which restricted or questioned the ambit of the words in s.14(2). Davies -v- Sumner had not been decided and the earlier decision in the Havering case had been cautiously restricted to the context and wording of the Trade Descriptions Act 1968; it had not been suggested to have wider application.

So far as the decision in Davies -v-Sumner is concerned, I would again observe that the context was that of a criminal statute. Thus, in the event of ambiguity, it required to be construed restrictively. Further, the Long Title of the Trade Descriptions Act, upon which Lord Keith placed reliance referred to “mis-descriptions of goods ... provided in the course of trade”. The use of the word “trade” in that context tended to emphasise the necessity for the transaction to be by way of trade. Equally, the wording of s.1(1) of that Act (“in the course of a trade or business”), by inclusion of the word “trade”, was apt to lead to an eiusdem generis construction of the word “business”. The observation of Lord Keith that such an expression, in the context of an act having consumer protection as its primary purpose, conveys the concept of some degree of regularity, is to be afforded great respect. However, I do not think that it should necessarily be regarded as of universal application.

The question thus becomes, in my view, whether the decision in the R & B Customs case, albeit relating to a separate section of the SGA 1979, is effectively binding upon us on the basis that the term “in the course of a business” must be interpreted so as to bear the same meaning as between the different sections of the codifying act in which it appears. While I recognise the force of that argument, I do not think that it should prevail.

The SGA 1979 forms a single code; however, that is upon the basis simply that it consolidates and enacts within one statute and without material amendment a number of disparate statutes previously governing the field of sale of goods. While, in the first instance, a consolidating act is to be construed in the same way as any other, if real doubt as to its legal meaning arises, its words are to be construed as if they remained in the earlier act. Thus, in terms of the proper construction of its provisions, the SGA 1979 is not to be regarded as more than the sum of its parts.

That being so, I would observe as follows in respect of the R & B Customs case. First, the ratio of the decision is limited to its context, namely the application of s.12 of UCTA 1977. Second, save for passing reference in the obiter dicta of Neill LJ to which I have referred, the meaning of the phrase “in the course of a business” in that section was not treated as coupled with, or dependent upon, the meaning of the phrase in s.14(2). Thus the court gave no consideration to whether or not the legislative history of s.14(2) might require it to be distinguished from s.12 of UCTA 1977 or, alternatively, if a common interpretation was called for, whether the construction of s.12 should not be subordinated to the of s.14(2). Third, the obiter dicta of Neill LJ which might suggest that the observations of Lord Keith should be applied generally in the case of a seller of goods, lacked the benefit of contrary argument in relation to s.14(2) and, not least (at a date well preceding Pepper -v- Hart ), any reference to Hansard or the First Report of the Law Commission, of which this court has had the advantage.

It is of course desirable that, when identical phrases occur in associated sections of a statute, they should be construed to similar effect. I have little doubt that such was the original intention of the Law Commission and of Parliament in relation both to the modification to s.14(2) made by s.3 of the SG(T)A 1973, and the amendment to s.55 of the 1893 Act made by s.4 of the of the SG(IT)A 1973, which referred to a “seller in the course of a business” when defining a “consumer sale”. However, the latter provision did not survive for long. It was repealed and replaced by s.12 of the UCTA 1977, which put in place a different formula in respect of exemption clauses, based upon either party “dealing as consumer”, rather than upon a “consumer sale” defined principally by reference to the seller. In my view, had the court in the R & B Customs case been concerned not with the UCTA 1977, but with the definition of a consumer sale under the SG(IT)A 1973, it might well have concluded that the phrase “in the course of business” in s.55 of the 1893 Act as amended, required to be construed in harmony with, and subject to, the proper construction of s.14(2).

As to the proper construction of s.14(2), given the clear view which I have formed, I do not consider it right to displace that construction simply to achieve harmony with a decision upon the meaning of s.12 of the UCTA 1977. S.14(2) as amended by SG(IT)A 1973 was itself a piece of consumer protection intended to afford wider protection to a buyer than that provided in the 1893 Act. Indeed, there is a sense in which the decision in R & B Customs can be said to be in harmony with that intention. It dealt with the position of consumer buyers and the effect of adopting the construction propounded in Davies -v- Sumner in relation to s.12(1)(a) of UCTA 1977 was to further such buyers’ protection. In the context of its statutory history, s.14(2), as amended by the SG(IT)A 1973 and re-enacted in SGA 1979, is the primary provision in the overall scheme of increased protection for buyers which the 1973 Act initiated. To apply the reasoning in the R & B Customs case in the interests only of consistency, thereby undermining the wide protection for buyers which s.14(2) was intended to introduce, would in my view be an unacceptable example of the tail wagging the dog. Accordingly, I would hold that, there was an implied term as to merchantable quality in the contract for the sale of the JELLE.

That being so, it is unnecessary to deal in any detail with the argument originally relied upon by the appellant, namely that the sale of the JELLE was the sale of an integral part of the defendant’s business. Suffice it to say that, had the judge been correct to apply the reasoning in Davies -v- Sumner to the sale of the JELLE, then I consider he was entitled to come to the conclusion which he did. I acknowledge that it seems a most curious result that the sale by a seller of the very asset without which he could not carry on his business, with the intention of purchasing a replacement for the purpose of continuing that business, should not be regarded as a sale made in the course of a business. However, that seems to me to be the logical result of applying the Davies -v- Sumner test. As Mr Norris neatly put it, under that test it is the transaction and not the goods which must be integral to the business. The defendant was not in the business of selling trawlers, and the fact that his boat was the principal asset of his business of fisherman did not mean that its sale was other than incidental thereto: c.p. the use made by the defendant of his car in Davies -v- Sumner .

CONCLUSION

For the reasons I have already given, I would allow this appeal.

SIR PATRICK RUSSELL:

The transaction involved in this case was a sale by one business organisation (the Defendant) to another business organisation (the Plaintiffs), of a fishing vessel used in the business of the Defendant, and to be used in the business of the Plaintiffs.

In the absence of any authority, I have to say that for my part, I would hold the sale as one made in the course of a business within the meaning of Section 14(2) of the Sale of Goods Act 1979. However, in the light of authorities cited to him His Honour Judge Thompson QC held that the sale was without the provisions of Section 14(2) and that accordingly the Defendant was entitled to succeed. It is against that finding that the Plaintiffs appeal.

During the course of argument before the learned Judge and before this Court, three cases in particular were cited: Havering London Borough Council v. Stevenson [1970] 1 WLR 1375, Davies v. Sumner [1984] 1 WLR 1301 and R & B Customs Brokers Co. Ltd. v. United Dominions Trust Ltd. [1988] 1 WLR 321. Those cases are analysed and considered by Potter LJ in his judgment which I have had the advantage of reading in draft. I would respectfully adopt Potter LJ’s conclusions as to the extent of assistance that can be derived from the cases in the particular circumstances of this dispute.

In further agreement with Potter LJ, I am satisfied that this Court is entitled to look at Parliamentary observations by those promoting the Bill which ultimately became the Sale of Goods Act 1979. In my view the intentions of the government of the day were clear; they were to give further protection to consumers in the light of the shortcomings of that protection in the Sale of Goods Act 1893.

Accordingly, my first impression remains. I am of the opinion that the sale was a sale in the course of a business, that there are implied terms as to quality, and that consequently the appeal should be allowed.

LADY JUSTICE BUTLER-SLOSS:

I agree with the judgments of Potter LJ and Sir Patrick Russell.

Order: Appeal allowed; no order in relation to the costs of the Court of Appeal; in relation to the costs below, costs to be costs in the cause; application for leave to appeal to the House of Lords granted. (This order does not form part of the approved judgment)



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