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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Gray v Smith & Ors [2013] EWHC 4136 (Comm) (20 December 2013) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2013/4136.html Cite as: [2013] EWHC 4136 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
MR ROBERT GRESHAM GRAY |
Claimant |
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- and – |
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(1) MR RICHARD SMITH (2) JMPC SALES LIMITED (3) MR RICHARD EDWARDS |
Defendants |
____________________
Mr A. Temple QC and Mr O. Ticciati (instructed by Wilmot & Co) for the defendants
Hearing dates: 3rd, 4th, 5th, 9th, 10th, 11th, 12th and 20th December 2013
____________________
Crown Copyright ©
Mr Justice Cooke:
Introduction
The Witnesses
The relationship between Mr Gray and Mr Edwards
"It was clearly understood between Mr Edwards and I from verbal discussions that took place around the time that Mr Edwards first started assisting me in acquiring cars that I was the principal and would become the outright owner of the car upon it being purchased and he would act only as my agent in purchasing or selling the cars as well as making all the practical arrangements in relation to them. … I am absolutely certain that this was the agreement between us and this is reflected in our subsequent dealings. … My arrangements with Mr Edwards in relation to his remuneration for finding the cars and acquiring them on my behalf were informal, as were the arrangements for the payment of transportation costs, insurance, storage … for the cars that I purchased through him. He would call and ask for an appropriate commission for him and others involved and I would usually simply agree. He would bill me for VAT and import duty as well as transportation costs. As regards remuneration, we did not work to a precise formula, but Mr Edwards and I both knew that he was not giving me the benefit of his contacts and experience for free. I trusted him to take a reasonable commission on each transaction to reflect the assistance that he was providing me. Broadly speaking, I knew that his remuneration on each car would be the difference between the gross price which I paid for the car less the price at which he was able to acquire it on my behalf."
The purchase of the McLaren from Symbolic
i) An invoice of 2nd December 2008 addressed to Mr Gray referring to the purchase from him of the Jaguar and Rolls Royce Phantom II "as described by Richard Edwards" for a total price of $350,000.
ii) An invoice dated 2nd December addressed to Mr Gray referring to the sale of the BMW 507 for a price of $1.1 million with all shipping and transport costs to be paid by the purchaser.
iii) A sale and purchase statement dated 2nd December 2008 addressed to Mr Gray referring to the purchase of the Jaguar and Rolls Royce Phantom II and the sale of the BMW at the prices in those invoices set off against one another, with a commission to Barnaby Brokaw of $15,000 and a total to be paid of $765,000 to be transferred to an account in the name of "The Grand Garage Barnaby Brokaw".
iv) A sales invoice for the sale of the McLaren 19R to Mr Gray for the price of £1 million with all shipping and transport costs to be paid by the purchaser, with the vehicle remaining insured by the Grand Garage until collection.
The Applicable Law
"Although the intention of one party uncommunicated to the other is not usually relevant to the legal effect of a transaction, it is plain that this must be a case where intention is relevant: if the agent intended to act for his own profit and not on the principal's behalf, the principal cannot intervene or be sued. Whether the agent so intended is a matter of evidence."
The law of California on the evidence of the experts was to the same effect.
"(1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though
(a) The transferor was deceived as to the identity of the purchaser, or …
(d) The delivery was procured through fraud punishable as larcenous under the criminal law."
Mr Edwards' arrangements with Mr Regis/Asphaltic
The Relationship between Cars UK, Mr Edwards, Mr Regis and Mr Macari
Mr Edwards' arrangements with Mr Macari and Mr Macari's arrangements with Mr Smith
"1.1 The vehicle sold is the 1996 McLaren F1 GTR competition car, Chassis No: 19R ("the Car"), which as a racing car is not titled or registered in any state; after Richard Edwards had paid off Peter Regis, who then released his security over the Car, the Car was acquired outright by Seller from Richard Edwards (trading as "Eurotrading") by a bill of sale dated [ ] November 2010, as shown by the copy documents attached as Annex 1;
1.2 The Car was brought into the UK on a temporary basis at least two years ago, and in that period had been held under customs bond or IPR by CARS UK; Seller has now obtained through CARS UK a Binding Tariff Information from HM Revenue & Customs to permit permanent import of the Car into the UK under Tariff Heading 97.05, as a collector's piece of historical interest, copy attached at Annex 2;
1.3 Seller has paid the VAT due to CARS UK for transmittal to HMRC and will shortly sign and forward the Form C&E 389 as proof that all EU import taxes are paid on the Car;
…
1.5 To the best of the Seller's knowledge the ownership history of the Car is McLaren Factory to [Japanese?] to [USA?] to [ ] to Eurotrading, and then by bill of sale to Seller, and no other person anywhere claims to own a McLaren F1 GTR with chassis identity 19R."
"1.1 The vehicle sold is the 1996 McLaren F1 GTR competition car, Chassis No: 19R ("the Car"), which as a racing car is not titled or registered in any state; after Eurotrading had paid off its lender, who had then released his security over the Car, the Car was acquired outright, and paid in full by Seller from Eurotrading by a bill of sale dated 4 November 2010, as shown by the copy documents attached as Annex 1;
…
1.5 To the best of Seller's knowledge no other person anywhere claims to own a McLaren F1 GTR with chassis identity 19R."
Annexed to the contract were the emails from Mr Regis on behalf of Asphaltic confirming that they had no further financial interest in the McLaren and that the car and spares should be released by Cars UK. Also annexed was a copy of the 4th December sales invoice signed by "Richard Edwards trading as Eurotrading" to JMPC Sales, with the price blanked out but including a warranty of clear and unencumbered title. A bill of sale from JMPC Sales to Richard Smith with confirmation of full payment was also attached. On 17th December, following Mr Lanzante's determination of the engine hours, JMPC Sales invoiced Mr Smith for the full sum of £1.2 million and on 20th December Mr Smith paid the balance of £50,000.
Attornment
i) Requesting the transfer of £150,000 as VAT payable in respect of the purchase of the McLaren in December 2009 when no VAT was due. Those funds doubtless were utilised by Mr Edwards for his own purposes.
ii) Setting out, in an email to Mr Gray dated 25th January 2010, a list of cars and values in which he referred to the McLaren as one of "your cars".
iii) In response to requests by Mr Gray's secretary to him as to documentation and storage location of cars purchased, saying he would drop off the paperwork two days later and referring to "a secure storage facility near Petersfield" in September 2009 and to storage in Gaydon in March 2010, neither of which was true.
The passing of title to JMPC Sales and/or Mr Smith
i) Under section 2(1) of the Factors Act of 1889 which provides:
"(1) Where a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same."
ii) Under section 23 of the Sale of Goods Act 1979 which provides:
"When the seller of goods has a voidable title to them, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect in title."
iii) As a bona fide purchaser for value without notice of Mr Gray's equitable interest.
i) Any reasonably prudent purchaser of a car of this kind would, since the car was not registered in any way or capable of being registered, require a chain of title to be shown by means of Bills of Sale from the original owner to the immediate seller. In particular, it was put to Mr Macari that he should have required more than simply an invoice from Mr Edwards to himself.
ii) Mr Edwards was known to be untrustworthy and any reasonably prudent purchaser of the car would have carried out investigations to ensure that he was entitled to sell the car.
i) Mr Noon's approach in selling the car to "Peter Williams" on an invoice only and Mr Edward's approach in purchasing the car on that basis.
ii) Mr Regis' own approach in taking the title to the McLaren on pledge on an Invoice/Bill of sale from Symbolic dated 15th June, after the car's arrival at Cars UK earlier in June. Only later did he, somewhat casually, ask Mr Noon for the history of the car on 29th July, receiving responses on 4th August and 10th August. He plainly relied on Mr Edwards who was, in Mr Macari's parlance, a trader rather than a dealer.
iii) Mr Emmison's approach, as a lawyer who wanted to investigate as fully as possible the past history, in accepting JMPC Sales' Bills of Sale and the warranty of title given by it, with an invoice from Mr Edwards to JMPC Sales and the email exchanges between Mr Regis, Mr Barker and Mr Macari.
Bona fide purchaser
Mercantile Agent
"To come within the section [the agent's] possession of the car must be possession, with the consent of the defendant, in his capacity as mercantile agent – that is to say, as one clothed with apparent authority to sell."
In Pearson v Rose & Young [1951] 1 KB 275, Lord Denning said, at p. 288:
"The owner must consent to the agent having them for a purpose which is in some way or other connected with his business as a mercantile agent. It may not actually be for sale. It may be for display or to get offers, or merely to put in his showroom; but there must be a consent to something of that kind before the owner can be deprived of his goods."
Seller with voidable title
Notice
i) As of 6th December did JMPC Sales in the person of Mr Macari have notice of Mr Gray's equitable interest?
ii) As of 7th December did Mr Smith have notice of Mr Gray's equitable interest?
The test for notice
"A person may have knowledge of a fact either by direct communication, or by being aware of the circumstances which must lead a reasonable man applying his mind to them, and judging from them, to the conclusion that the fact is so. Knowledge acquired in either of these ways is enough, I think, to exclude a party from the benefit of the provisions of this statute: a slight suspicion, I think, will not."
This dictum has subsequently been judicially approved but it is now established that suspicion in the mind of a person, and the means of knowledge in his power wilfully disregarded, would amount to notice. The main problem, as explained in Benjamin, is the extent to which the courts will adopt an objective approach to the question of notice by reference to the "reasonable man". The paragraph goes on to say that the doctrine of constructive notice does not normally apply to commercial transactions and there is no general duty on the buyer of goods in an ordinary commercial transaction to make enquiries as to the right of the seller to dispose of the goods. Nevertheless, it is appropriate that the court should apply an objective test to determine whether, in the circumstances of the sale, the buyer as a reasonable man, must have known of the agent's want of authority (or defect in title) or must have had suspicions and wilfully shut his eyes to the means of knowledge available to him. It is a question of fact and degree.
"The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it."
"It is commonly said that the doctrine of constructive notice has no place in "commercial transactions". …
But the question whether a recipient of property is fixed with constructive notice of an equitable interest should not depend simply on whether the transaction may be characterised as "commercial". The better approach may be to ask if there is a recognised practice of making inquires as to the transferor's title in transactions of this sort. In many transactions that may broadly be called "commercial" that practice may be non-existent or minimal. The overriding need is for speed and finality. It would be inappropriate to introduce the demanding standard of inquiry expected of a purchaser buying unregistered land.
It would be difficult to fix a person in such a transaction with constructive notice because the threshold of knowledge necessary to raise an obligation of inquiry is set so high. The person might not be put on enquiry unless he knew facts which pointed so clearly to the equitable interest affecting the payment that he would have actual notice of it at any event."
The application of the test
The factors relied on by Mr Gray
Conclusion