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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Habton Farms v Nimmo [2003] EWCA Civ 68 (06 February 2003) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2003/68.html Cite as: [2003] EWCA Civ 68, [2003] 3 WLR 633, [2004] QB 1 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS MERCANTILE COURT
His Honour Judge Behrens
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE CLARKE
and
LORD JUSTICE JONATHAN PARKER
____________________
HABTON FARMS (an unlimited company) | Claimant/ Respondent | |
- and - | ||
CHRISTOPHER N NIMMO | First Defendant/ Appellant |
____________________
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Stephen Howd (instructed by Lodders) for the Appellant
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
The Horse
The Claim
The Judgment
i) The first defendant did not enter or purport to enter into any contract with the claimant as a principal.
ii) On 12 October 1998 the first defendant purported to contract with the claimant as the agent of a named or an unnamed principal. He thus warranted his principal's authority to do so.
iii) The judge did not decide whether the principal was named or unnamed, but in either event his 'principal' was the second defendant, but the second defendant was not bound by the contract because:
a) the first defendant had no express or implied authority to contract on his behalf;
b) although in some respects the first defendant may have acted as a bloodstock agent for the second defendant, a bloodstock agent does not (without more) have usual authority to buy horses on behalf of his principal;
c) the second defendant did not hold the first defendant out as having such authority so as to clothe him with ostensible authority to buy the horse.
iv) The claimant relied upon the first defendant's warranty of his principal's authority by making the contract.
v) The claimant was in principle entitled to damages for breach of warranty of authority.
vi) The measure of damages was £70,000.
The Facts
"37. I have to confess as being very uncertain as to what happened at this meeting. It seems to me likely that both Mr Peter Easterby and Mr Tim Easterby were present at some time. I think that it is probable that Mr Williamson's name was mentioned at some time in the meeting in that I think it likely that Mr MacDonald and Ms Gaines were introduced as his agent even though neither Mr Peter Easterby nor Mr Tim Easterby now remembers it. I am not however satisfied that it was made clear that all future negotiations for the horse were to be carried out as agent for Mr Williamson. It has to be remembered that there were no negotiations for the purchase of High Spirits at that time. No offers were made or rejected. The principal purpose of the visit was to allow Ms Gaines to view High Spirits to assess him. As she said in evidence – she liked him."
"40. In any event neither Mr Peter Easterby nor Mr Nimmo could remember any details of the telephone conversations now. Both of them were satisfied that as a result of the negotiations High Spirits had been sold for £70,000 subject only to a vet's inspection and approval of x-rays in America.
41. In evidence Mr Nimmo accepted that there was a concluded deal. Nothing was said at that time about it being subject to payment by the ultimate buyer. He said he received authority from Mr MacDonald to proceed.
42. Following the final telephone conversation Mr Nimmo sent a fax dated 12th October 1998 to Mr Peter Easterby and Mr Tim Easterby which reads:
"Further to our conversation of this morning I confirm a net purchase price for the above horse of £70,000, subject to veterinary inspection and approval of x-rays in the USA.
I will arrange for Aldridge & Pritchard to vet the horse ASAP."
I interpose to note that that fax was sent on fax paper headed simply 'CN Nimmo'.
"44. On the same day Mr Nimmo faxed Mr MacDonald asking for details where the bill for the vet should be sent and where the x-rays should be sent.
45. On 13th October 1998 High Spirits was inspected by Mr Ordidge. X-rays were taken and sent to Dr Maher in America. It is common ground that the vet's inspection was satisfactory and that the x-rays had been passed by Dr Maher.
46. According to Mr Nimmo Mr MacDonald faxed him to inform him of Dr Maher's approval and to request wiring instructions for the purchase price. At about 9.38 am on 19th October 1998 Habton Farms sent details of their bank account to Mr Nimmo."
It is thus plain, as I see it, that the judge held that the first defendant told the claimant that the horse had passed the vet and that the x-rays were OK and asked the claimant to send wiring instructions with regard to payment of the purchase price.
"49. After Ms Gaines had received the reports from the vets and Dr Maher she presented the information to Mr Williamson. It may be that Mr MacDonald was there as well. In any event Mr Williamson decided that the horse was too old and (to use the phrase in his witness statement) had "too much mileage". He did not wish to risk purchasing an older animal. He accordingly told both Ms Gaines and Mr MacDonald that he was not interested in High Spirits. ..."
"53. Mr Williamson's evidence was corroborated by Ms Gaines. She made the point that she had never understood there to be a sale of High Spirits. She confirmed that Mr Williamson never agreed to buy High Spirits as he thought it too old.
54. I saw Mr Williamson and Ms Gaines give their evidence over the video link. I have no hesitation in accepting their evidence. Both impressed me as clear and helpful witnesses doing their best to assist the Court. Mr Williamson was clearly concerned that an attempt had been made to get him to sign a false witness statement and also that someone had lodged with the court an affidavit purportedly from him containing a forged signature."
The Appeal
Nature of the contract
"… I confirm a net purchase price for the horse of £70,000, subject to veterinary inspection and approval of x-rays in the USA."
"That is the position which, according to authority, exists in relation to sale of real property where the arrangement is made "subject to surveyor's report". The closest case decided in that context is the decision of Mr Justice Rowlatt in Marks v Board and Others, (1930) 46 TLR 424. In that case Mr Justice Rowlatt referred to what was called a memorandum of agreement which contained the words "subject to surveyor's report" in connection with the sale of a house. Mr Justice Rowlatt is reported to have said (ibid at p 424):
... The whole thing was subject to that; it was perfectly well understood in this business with regard to houses that, when a person said that he would buy "subject to surveyor's report", although he agreed everything else, what it meant was that he would not decide whether he would take the house until he had seen what his surveyor said about it, and that he reserved to himself the absolute and undisputed right to say whether he liked the surveyor's report. In short, there was no contract, because the buyer was not yet bound and, therefore, the seller was not bound either.
In this case the wording is different because the word "satisfactory" is included in the arrangement here before the word "survey". It is also suggested that there is a difference as between a sale of land or real property on the one hand and the sale of a ship, being a chattel, on the other hand. In my judgment there is no simple distinction between the two cases. I do not regard the word "satisfactory" here as adding to or subtracting from what would have been the meaning and effect in law in the absence of that word. In my judgment there was here no binding contract; neither side was bound. All that had happened was that there had been certain terms agreed not amounting to a legally binding agreement, but one which could be made a legally binding agreement if Commander Light had not withdrawn his provisional consent to the sale of the vessel before the plaintiffs chose to say: "We have had a satisfactory survey and therefore the sale will now go on".
"Suppose, however, that I should be wrong in that, and that there is some distinction, either because of the use of the word "satisfactory" or because of some difference between the sale of land on the one hand and the sale of chattels on the other hand: I should nevertheless find it quite impossible to accept the defendants' propositions in this case.
If there was a legally binding contract here at all it was a legally binding contract which contained an implied term, presumably, that the plaintiff company would use all reasonable diligence to have a survey held by, presumably, a competent surveyor, but I cannot read the meaning of the arrangement made between the parties as being anything other than that the survey report was to be effective if, and only if, it was satisfactory to the plaintiffs; in other words, it is quite impossible, in my judgment, to attempt here to apply and kind of objective test to the satisfactoriness or otherwise of the survey or the survey report. I am not impressed by the suggestions that the words that have been used in various letters in the correspondence give any contrary indication. I am confident that if, at the time those letters were being written and received, either of the potential parties to this matter had been asked: "Subject to satisfactory survey – satisfactory to whom?" they would both have answered: "Satisfactory to the plaintiffs who are going to cause the survey to be made and who are going to be the people who will be the purchasers of that ship if there ever comes a contract of sale." It would probably be right as a matter of law to assume that the plaintiffs' satisfaction has to be confined and limited in this way and in this sense, that it must be a bona fide dissatisfaction before they can reject the survey as being unsatisfactory.
This is all on the assumption that I am wrong on my first supposition and that there is here a binding contract conditional upon a satisfactory survey. In those circumstances, as I say, the survey is one that has to be satisfactory to the purchaser, the plaintiff company, but there is an implied term that dissatisfaction must be bona fide."
"82. … The position here is that the veterinary inspection took place on 13th October 1998 and the x-rays were sent to Dr Maher in the US. Both were approved. Mr Nimmo was informed of this and communicated the approval to Habton Farms. The cases cited by Mr Dhillon [notably Stabilidad Ltd v Stephens & Carter Ltd (No 2) [1999] 2 All ER (Comm) 651] might have been relevant if there had been no such approval and no communication. It follows in my view that there was no further room for argument over the conditions. They were satisfied.
83. Mr Dhillon and Mr Howd made a further submission based on Habton Farms pleaded case to the effect the report had to be satisfactory to "the buyer". They make the point that the report was never expressly approved by Mr Williamson. The fax did not mention express approval by the buyer. In my view it was sufficient for the purpose of this case that the vet's report was satisfactory to Dr Maher and that this was communicated to Habton Farms. It is to be noted that when he gave evidence Mr Williamson readily agreed that both the vet's report and the x-rays were in fact satisfactory. He rejected High Spirits because of its age. Thus I reject this submission."
Authority
"It appears, from that judgment [ie that of Diplock LJ in Freeman & Lockyer], that ostensible authority is created by a representation by the principal to the third party that the agent has the relevant authority; and that the representation, when acted upon by the third party, operates as an estoppel, precluding the principal from asserting that he is not bound."
"1) There is no suggestion that Mr Williamson made any representation at all to Habton Farms either express or implied. Some form of representation is required if ostensible authority is to succeed.
2) I do not accept the submission that Mr Nimmo (or Mr MacDonald) had authority to enter into even a conditional contract on behalf of Mr Williamson. They required express authority to enter into any contract at all.
3) I do not accept for the reasons given by Goff LJ … that a representation by Mr MacDonald that he was authorised to get wiring instructions could amount to a representation by Mr Williamson. The fact that previous representations had been true does not affect the position here. The previous representations were representations by Mr MacDonald and not by Mr Williamson.
4) … There was nothing in this case to clothe Mr MacDonald with ostensible authority to communicate Mr Williamson's authority to purchase High Spirits."
Damages
Causation
Measure of damages
"1307 One who professes to act as agent for a principal is taken to warrant the existence of his authority in consideration of the representee acting in a matter of business faith on it, and will be liable for damages for breach of contract if that authority does not exist. …
1308 … This measure [ie of damages] is now established as not that for the tort of deceit, ie restoring the status quo ante, but the general contract measure. Lord Esher put the measure for breach of warranty of authority concisely in Firbank's Executors v Humphreys (1886) 18 QBD 54 at 60:
"The damages under the general rule are arrived at by considering the difference in the position he [the person acting in reliance on the warranty] would have been in had the representation been true and the position he is actually in in consequence of its being untrue."
1309 In this, the commonest case of breach of warranty of authority [ie warranty of authority to contract on the principal's behalf] the basis of the damages is the amount that the plaintiff has lost by being unable, by reason of falsity of the warranty, to sue the alleged principal."
"1311 Given an enforceable contract had the agent had authority and given a solvent principal, the damages will be based on the measure of damages that the plaintiff could have recovered in an action for breach of contract against the principal had the principal been bound, and this will generally give him damages for the loss of his bargain. The particular measure falls to be judged in accordance with the particular type of contract that the defendant had warranted his authority to negotiate, and illustrations in the cases range over a variety of contract types.
1312 (1) Where the contract was one of purchase of goods by the plaintiff it was held in Hughes v Graeme (1864) 33 LJQB 335 that he could recover the value of the goods less the contract price. …
1313 (2) Where the contract was one of purchase of land by the plaintiff it was held in Godwin v Francis (1870) LR 5 CP 295 that he could recover the market value of the land less the contract price …
1315 (3) All the prior cases involved a plaintiff at the purchasing end of the transaction: it is similar with a sale by the plaintiff. In Simons v Patchett …
1319 These cases all illustrate the recovery from the purported agent of what would have represented only the normal measure of damages in an action against the principal, but such consequential losses as would not, on general principles have been too remote to be recoverable may also be properly included in the damages."
"What then has the plaintiff suffered from this bargain not being binding on Rostron & Co? It is not disputed that, if the bargain had been binding and had not been fulfilled, the plaintiff would have recovered against Rostron & Co damages for not fulfilling the contract; and if they had fulfilled the contract, the plaintiff would have had from them the full price. The loss of the damages therefore which he would have recovered from Rostron & Co is the direct consequence of the breach of the defendant's contract. Viewing the matter in another light, the result is much the same. It is not to be disputed that, if direct evidence had been given of a fall in the market price of ships between the time of the making of the supposed bargain and the time at which the plaintiff might reasonably resell the ship, that fall in price would be recoverable. Might not the jury reasonably infer such a fall in price from the difference in price actually obtained in this case? If so, the case would be brought within the general rule as to the measure of damages in an action for not accepting goods."
The part of that passage which I have put in italics is quoted in paragraph 1315 of McGregor.
"What then did the company lose? … In this particular case what would they have got by the contract with Mr Lawrence if he had given authority to make it? If he had been insolvent they would not have got a farthing; but he was not insolvent, and therefore in this particular case they would have got £50 from him on the allotment of his shares and they would not have given him anything; it would not have been like an ordinary vendor handing over the goods. They would have only handed over a piece of paper. In return for his £50 in money they would only have given him a phantasy. … The sum of £50 was prima facie the measure of damages, and there was nothing to displace it."
It seems to me to be clear from that passage that, if the shares had had a market value at the time that the company would have received the £50, it would have had to give credit for that value.
"Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of refusal to accept."
Section 51(2) and (3) contains almost identical provisions in respect of damages for non-delivery. Those sections had of course been sections 50 and 51 respectively of the Sale of Goods Act 1893.
"… If the seller retains the shares after the breach, the speculation as to the way the market will subsequently go is the speculation of the seller, not of the buyer; the seller cannot recover from the buyer loss below the market price at the date of the breach if the market falls, nor is he liable to the purchaser for the profit if the market rises."
Robert Goff J added:
"So in that situation, generally speaking, the decision not to take advantage of the available market is the independent decision of the innocent party, independent of the wrongdoing which has taken place. It takes place in the context of a pre-existing wrong but it does not, to use Viscount Haldane's expression, "arise out of the transaction"."
"108. Mr Howd submits that the measure of damages is the difference between purchase price and the value of High Spirits at the date of the breach. It was agreed that High Spirits was a valuable horse and that £70,000 was a fair price. There was no other evidence of value before the court. It follows that there was no loss. The loss was caused by the death of High Spirits which was unforeseeable and too remote.
109. I accept that the death of High Spirits some 6 weeks after the contract was not a reasonably foreseeable consequence of the breach of warranty of authority but I think that Mr Howd's submission oversimplifies the position.
110. If the property in High Spirits would not have passed to the buyer under the alleged contract then I agree that Mr Howd's submission represents the measure of damages. If the property in High Spirits had not passed to the buyer, then the seller's damages would be governed by section 50 of the Sale of Goods Act 1979 and the seller would not be able to recover against the buyer any loss that was unforeseeable as at the date of the contract. In other words the risk of unforeseeable loss would have remained with the seller. A similar position would be reached if the property (and therefore the risk of unforeseeable loss) had reverted to the seller.
"111. On the other hand the position is in my view quite different if under the alleged contract the property (and thus the risk of unforeseeable loss) would have passed and remained with the buyer. In that event the seller could have maintained an action for the price under section 49 of the Sale of Goods Act 1979 against the seller and could still have maintained it in the event of an unforeseeable loss to High Spirits.
112. If Mr Howd's submissions are correct the seller is in a worse position in an action for breach of warranty of authority than he would have been in an action against the alleged buyer. His position is worse because the risk of unforeseeable loss has been passed back from the buyer to the seller. In my view the true position is that the measure of damages in a case such as this depends on where the risk of unforeseeable loss lay at the time of the loss. If, under the warranted contract, the risk would have been with the buyer if the warranty had been true then the seller can recover the price notwithstanding the unforeseeable loss. On the other hand if the risk would have been with the seller he can only recover the difference between the price and the value of the goods (which - in this case - would have been nothing).
113. It is to be noted that this analysis does not mean that the seller can recover the price if there is no unforeseeable or partial unforeseeable loss. In that event the seller has gained the value of the goods (High Spirits) because the property has not in fact passed. Thus he must give credit for the actual value of the goods against the price.
114. It follows in my judgment that Habton Farms can recover the price of High Spirits as damages for breach of warranty of authority notwithstanding the unforeseeable death of High Spirits if at the time of the death of High Spirits the risk of unforeseeable loss would have been with Mr Williamson if the warranty had been true."
"Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods."
The judge held that, if under the contract the property in High Spirits would have passed to the buyer before the price became payable, the claimant could have sued the buyer for the price without running the risk of the unforeseeable loss of the horse because that risk would already have passed to the buyer. I recognise that that is so, but it does not seem to me to lead to the conclusion which the judge reached, as between the claimant and the first defendant.
"That case illustrates how, in an appropriate case, where a buyer goes out into the market subsequently and buys in, his action in buying in may be an action which is not independent of the original transaction with the consequence that any saving which he makes must be brought into account in the assessment of damages."
Equally here it seems to me that, if the decision not to sell the horse arose out of the transaction in the sense that it was not independent of it, that fact should be taken into account in assessing the damages.
"115. Under section 20 of the Sale of Goods Act 1979 ("the Act") unless otherwise agreed the goods remain at the seller's risk until the property in the goods is transferred to the buyer. Thereafter the risk passes to the buyer. Under section 17 of the Act where there is a contract for the sale of specific goods the property in them is transferred to the buyer at such time as the parties intend it to be transferred. In determining the intention of the parties the court has to have regard to the terms of the contract, the conduct of the parties and the circumstances of the case. Section 18 of the Act sets out 5 rules for ascertaining the intention of the parties in the absence of a different intention appearing.
116. Where a contract for the sale of specific goods is made subject to a condition upon the fulfilment of which the transfer of property depends the property will not pass to the buyer when the contact is made but only when the condition is fulfilled. Until that time the contract takes effect as an agreement to sell and not a sale of goods. In his skeleton argument and final submissions Mr Dhillon submitted that that was the position here. He relied on the fact that Mr Williamson never communicated to Habton Farms that he approved of the vet's report or the x-rays. However Mr Nimmo communicated to Habton Farms that both were approved and it is that stage that the agreement would have become unconditional if Mr Nimmo had had the necessary authority.
117. Mr Dhillon also drew to my attention some observations of Diplock LJ in Ward v Bignall where he made the point that in modern times very little is required to give rise to the inference that the property in specific goods is to pass only on delivery. He drew my attention to Mr Peter Easterby's diary entry for 2nd November to the effect that High Spirits will not leave premises till get paid. He submitted that that was sufficient to give rise to the inference.
118. I see the force of Mr Dhillon's submissions; in the end, though, I cannot accept them. In my view if Mr Nimmo had been properly authorised the property in High Spirits would have passed to Mr Williamson when the contract became unconditional. The note in the diary is not inconsistent with this. It is clear from sections 39(1) and 41 of the Act that Habton Farms as an unpaid seller would have had the right to retain High Spirits for the price while in possession of it notwithstanding the property in High Spirits had passed to the buyer."
Conclusion
Lord Justice Jonathan Parker :
"The highest it can be put is that High Spirits was still for sale."
"Normally when a seller tenders goods which are so defective that they do not correspond with the contract, the buyer has an option. He can reject the goods and recover as damages the difference between the contract price and the market price at the date of the breach if the market price is then in excess of the contract price. Alternatively, he can take the goods and deduct from the purchase price, or claim damages for, the difference between the value of the goods at the time of delivery and their value had they been up to contract. But the buyer cannot have his cake and eat it, as these buyers are seeking to do. They went through the motions of rejecting the goods in October 1995. Indeed they did, in law, reject them. They did so, however, in the confident expectation that, as a result of their rejection and the sequestration order, they would be able to negotiate a new agreement under which they would acquire the goods at a price favourable to themselves. This they did by their purchase of November 13. The price was substantially below the market price and their resulting profit certainly exceeded the difference between the May contract price as varied and the prevailing market price at all relevant times.
Damages for breach of contract are awarded for loss suffered. Here the buyers suffered no loss. It is only by looking in isolation at the sellers' failure to deliver sound goods that the buyers' claim is even arguable. This failure cannot in my view properly be looked at in isolation because together with the purchase of November 13 which arose out of the situation in which the buyers found themselves, it formed one continuous dealing between the same parties in respect of the same goods. As a result of this dealing, looked at as a whole, the buyers, notwithstanding the sellers' breach, made a profit and no loss. To allow the buyers' claim would in my view be contrary alike to justice, common sense and authority."
Lord Justice Auld :
"the innocent party reasonably continues to try to have the contract completed: in such a case it is logical and just to assess damages as at the date when (otherwise than by his default) the contract is lost."