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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 >> Karsales (Harrow) Ltd v Wallis [1956] EWCA Civ 4 (12 June 1956)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1956/4.html
Cite as: [1956] EWCA Civ 4, [1956] WLR 936, [1956] 2 All ER 866, [1956] 1 WLR 936

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JISCBAILII_CASE_CONTRACT

BAILII Citation Number: [1956] EWCA Civ 4
Case No.:

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL.

Royal Courts of Justice
12th June 1956

B e f o r e :

LORD JUSTICE DENNING
LORD JUSTICE BIRKETT
AND
LORD JUSTICE PARKER

____________________

Between:
KARSALES (HARROW) LIMITED

-v-

FRANK ERNEST WALLIS

____________________

(Transcript of the Shorthand Notes of The Association of Official Shorthandwriters, Limited , Room 392 Royal Courts of Justice, and 2 New Square, Lincoln's Inn, London W.0.2).

____________________

Mr. JOHN LLOYD-ELEY (instructed by Messrs Sampson & Co.) appeared for the Appellant (Defendant).
Mr. M. ANWYL-DAVIES (instructed by Messrs Horne, Engall & Freeman, Egham ) appeared for the Respondent (Plaintiff).

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    LORD JUSTICE DENNING: Mr Wallis, Mr. Wallis in this action, is the owner of the By Pass Garage, Bagshot. At the end of 1954 a Mr Stinton came to him wishing to sell him a second-hand Buick motor car. Mr. Wallis inspected it and found it an excellent car. He had not the money to pay the price asked, some £600, and he said he would buy it through a hire purchase finance company, if Mr Stinton could make the necessary arrangements. Mr Stinton at first put forward forms for the North Central Wagon Company as the hire purchase finance company. They rejected the application. He next suggested Mutual Finance Limited and got the Mr. Wallis to sign their forms. Mr. Wallis signed them in blank over a sixpenny stamp, with no details filled in. He did not on that occasion pay any sum cash down to Mr Stinton; nor did he take delivery of the car, thus departing from the usual practice in these matters. Mr Stinton took the forms away and kept the car in his possession. The forms were in due course submitted to Mutual Finance, Limited, but he did not do it himself: he did it through an intermediary called Karsales (Harrow) Limited. Mutual Finance Limited accepted the application and the transaction was concluded in this way: Karsales (Harrow) Limited bought the car from Mr Stinton and re-sold it to Mutual Finance Ltd; then Mutual Finance Limited let it out on hire purchase terms to Mr. Wallis on the terms of the form which Mr. Wallis had signed. No one in the offices of Mutual Finance Limited ever inspected the car, but someone must have filled in the details on the form, giving the registration number of the car, the total price, the initial payment, and the instalments. They dated it 10th February, 1955, and sent a copy to Mr. Wallis . He accepted the form without objection, and has in the pleadings in this action admitted that it is an agreement between Mutual Finance Limited and himself. When however, Mr. Wallis received the agreement the car had still not been delivered. It was apparently still in Mr Stinton's possession. Mr. Wallis had not seen it since his first inspection. So he got into touch with Mr. Stinton and asked for delivery. Mr. Stinton said that he would not deliver it because he had not been paid -- meaning, presumably, that he had not been paid by the finance company the sum due for the car. He told Mr. Wallis that he would make enquiries. It would appear that he was paid soon afterwards, because what happened next was this: About a week later the vehicle was left, late at night, outside Mr. Wallis's garage. It was examined by Mr. Wallis the next morning. It was the same Buick car as he had previously inspected in this sense, that it had the same body and engine and registration number, but it had been badly damaged. It had evidently been towed in: there was a rope attached to the front bumper. It was, as the Judge found, "in a deplorable state". The tyres had been changed, the new tyres had been taken off and old ones put on; the radio - the wireless set - had been removed from it; the chrome strips round the body were missing; and when Mr. Wallis's fitter looked at the engine, the cylinder head was off, all the valves were burnt, and there were two broken pistons. The car would not go. Mr. Wallis said to Mr Stinton "I will not accept the car in this condition"; the car was towed away to Mr Stinton's place and was never repaired. It would have cost £150 to put it into the condition in which Mr. Wallis had first seen it.

    Mutual Finance Limited after several months, assigned all their rights under the hire purchase agreement to Karsales (Harrow) Limited, the intermediary to which I have referred, and Karsales (Harrow) Limited now sue Mr. Wallis for ten months' instalments of payments under the hire purchase agreement. The Judge has found that they are entitled to those payments as having become due under the agreement, and the question is whether that decision is right in point of law or not.

    On this matter, Mr. Lloyd-Eley on behalf of Mr. Wallis, says that he agreed to take on hire purchase terms a Buick motor car which he had seen a week or two before he had signed these documents. He says that it was the duty of Mutual Finance Limited to see that there was delivered to Mr. Wallis a motor car which corresponded to the car which he had seen. He says that, owing to the condition of the car on delivery, there was a fundamental breach by the finance company and that they cannot recover the instalments. In answer, Mr. Anwyl-Davies, on behalf of the finance company, says that there was delivered to Mr. Wallis a Buick motor car of the registration number specified in the agreement and they are in no way responsible for its condition on delivery. They rely on clause 3 (g) of the hire purchase agreement:

    "No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owner or implied herein."

    The Judge held that that clause meant that the hire purchase company were not responsible in any way for the condition of this car when it was delivered, and that although it was in this deplorable condition they could still recover the instalments due under the agreement; and that, even though the car was rejected by Mr. Wallis, they could still recover them.

    In my opinion, under a hire purchase agreement of this kind, when the hirer has himself previously seen and examined the motor car and made application for hire purchase on the basis of his inspection of it, there is an obligation on the lender to deliver the car in substantially the same condition as when it was seen. It makes no difference that the lender is a finance company which has bought the car in the interval without seeing it. The lender must know, from the ordinry course of business, that the hirer applies on the faith of his inspection and on the understanding that the car will be delivered in substantially the same condition: and it is an implied term of the agreement that pending delivery the car will be kept in suitable order and repair for the purposes of the bailment. This is supported by Story On Bailment, articles 383 to 385, and Robertson v Amazon Tug & Lighterage Company (7 Queen's Bench Division 598).

    The Plaintiffs say that there can be no such implication in this case in view of the express terms of clause 3 (g): but the law about exempting clauses, however, has been much developed in recent years, at any rate about printed exempting clauses, which so often pass unread. Notwithstanding earlier cases which might suggest the contrary, it is now settled that exempting clauses of this kind, no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects. He is not allowed to use them as a cover for misconduct or indifference or to enable him to turn a blind eye to his obligations. They do not avail him when he is guilty of a breach which goes to the root of the contract. The thing to do is to look at the contract apart from the exempting clauses and see what are the terms, express or implied, which impose an obligation on the party. If he has been guilty of a breach of those obligations in a respect which goes to the very root of the contract, he cannot rely on the exempting clauses. I would refer in this regard to what was said by Mr. Justice Roche in the cppra cake case (Pinnock Bros v Lewis & Peat 1923 1 King's Bench page 690, at page 695) and the judgments of Mr. Justice Devlin in Alexander v Railway Executive (1951 2 King's Bench, page 882) and Smeaton Hanscomb & Company Limited v Sassoon I Setty, Son & Company (1953 2 All England Reports, page 1471), and a recent case in this Court of J. Spurling, Limited v Bradshaw (1956 1 Weekly Law Reports, page 461), and the cases there mentioned. The principle is sometimes said to be that the party cannot rely on an exempting clause when he delivers something "different in kind" from that contracted for, or has broken a "fundamental term" or a "fundamental contractual obligation", but these are, I think, all comprehended by the general principle that a breach which goes to the root of the contract disentitles the party from relying on the exempting clause. In the present case the lender was in breach of the implied obligation that I have mentioned. When Mr. Wallis inspected the car prior to signing the application form, the car was in excellent condition and would go: whereas the car which was subsequently delivered to him was no doubt the same car but it was in a deplorable state and would not go. That breach went, I think, to the root of the contract and disentitles the lender from relying on the exempting clause.

    The only real difficulty that I have felt in the case is whether this point is put with sufficient clarity in the pleadings. It is not put as clearly as one could wish. Nevertheless, I have always understood in modern times that it is sufficient for a pleader to plead the material facts. He need not plead the legal consequences which flow from them. Even although he has stated the legal consequences inaccurately or incompletely, that does not shut him out from arguing points of law which arise on the facts pleaded. Looking at this Defence, it is quite plain that the Defence pleaded all the material facts which I have mentioned, and it is, I think, sufficient.

    There is a further point. It is quite plain from the authorities (for example, National Cash Register Company v Stanley (1921 3 King's Bench, at page 292) that when goods are let on hire purchase and there is a refusal by the hirer to take them, the proper remedy of the lender is not to claim for arrears of instalments but for damages for failure to accept delivery. In this case, therefore, in any event there could not be a claim for arrears of instalments but only for damages. The assignment by Mutual Finance Limited to Karsales (Harrow) Limited only covers moneys payable under the agreement. It does not cover a claim to damages. On that ground also the Plaintiffs could not succeed in this action.

    I am therefore of opinion that the appeal should be allowed.

    LORD JUSTICE BIRKETT: I am entirely of the same opinion; and in view of my Lord's Judgment I do not propose to add very much to what he has already said. I think this case (as the learned County Court Judge said) is an unfortunate case in very many respects; and I think also, if I may add another word on that, it is a very troublesome sort of case, which I must say has been extremely well argued by the learned Counsel on both sides.

    In its simplicity, the Plaintiffs' case against the Defendant is that he is owing to them certain hire charges on a motor car and that he would continue to be liable for further charges on a motor car and that he would continue to be liable for further charges (I think 23 in all) in the circumstances which my Lord has already indicated -- most unusual circumstances, to say the least of it. The answer that Mr. Wallis, the Defendant, makes is: "I am not liable at all"; and he points to certain matters of extreme importance. He says: It is quite true that originally this matter arose because there was a Buick car owned by a many called Stinton" -- and it would appear from all that one has heard in this matter that Mr. Stinton was really the villain of this piece ; but Mr. Wallis says "That was the origin of all the subsequent matters which have been so troublesome: it was the possession of this Buick car which belonged to Mr. Stinton: it was a good car, and I liked the car, and in my business I would like to have had the car".

    It would appear that the way Karsales (Harrow) Limited came into it was by way of assignment from Mutual Finance Limited; but it was clearly one of those transactions where some additional finances was needed if the transaction was to be carried through. All that detail I do not propose to go into again. When the moment came that there was a purported delivery of this car after the documents had been signed in blank, it is most astonishing that the thing that was bought as a car of which possession was going to be taken by Mr Wallis was a car which would not travel as a car but had to be towed there. It was towed there and left outside the premises (I rather gather) late at night, and ultimately was toed away again. It is upon that point only that I just desire to say a word in support and supplement of what my Lord has already said upon the matter. Mr. Wallis said: "The original Buick car is the car I had seen before and which I would like to have". Clearly it was the duty of finance company in those circumstances, having regard to the history, to supply to Mr. Wallis a "car", in the ordinary sense of that term, not something that needed towing, because in the true meaning of words a car that will not go is not a car at all; and on the evidence before the Court the learned County Court Judge that was the kind of article which was supplied.

    This matter was raised in the Court below, and it is the only matter about which I am going to speak which has occasioned me any anxiety at all. It was said that in the Court below (this is on page 9 of the notes) Mr. Lloyd-Eley submitted

    to the learned County Court Judge, amongst other submissions, this one:

    "I say that that the Defendant got something he did not contract for" -- and then, in parenthesis, "(Don't take this matter further)". In the Judgment the learned Judge says:

    "Mr. Lloyd-Eley says that in certain circumstances you can read into a contract a term similar to that in the Sale of Goods Act dealing with description of the article hired. He says that the description given in December or January, 1955, was not complied with and that since one can read such a term into a hire purchase contract there was a fundamental breach of the agreement, upon which the Defendant is entitled to rely. At one stage in his argument Mr. Lloyd-Eley submitted that something other than that contracted for had been delivered but was forced to admit that this allegation had not been pleaded."

    Now we enquired into that matter this morning , and although there did not appear to be perfect agreement between the learned Counsel engaged in the case, what Mr. Lloyd-Eley said was this:

    "I did make that submission to the learned Judge on the pleading which I had myself drawn";

    and if one looks at the defence it is quite true that these words are used:

    "David William Stinton delivered to the Defendant's garage a Buick motor car.... but the same did not correspond with the car submitted to the Defendant prior to entering into the said agreement as aforesaid and was not reasonably fit for the purpose as hereinbefore alleged and the Defendant refused to accept the car and the Plaintiffs or Mutual Finance Limited or the said David William Stinton removed the same forthwith from the Defendant's premises:

    and then particulars of the defects are set out. Mr. Lloyd-Eley said:

    "On that pleading I did submit to the learned Judge what the learned Judge has recorded on page 9; and certainly I did submit on the form of the pleading I had made that that contention was open to me".

    As I say, that does not appear to be quite acceptable to Mr. Anwyl-Davies, but that is what we are told and it is quite clear to this extent that the submission was made, and it was made on these facts (and my Lord has read the evidence that was given to support the pleading, as to the particulars which are given in paragraph t of the Defence). Those particulars are the facts which Mr. Lloyd-Eley says were before the learned Judge. He says that "It is not quite accurate to say I was forced to admit it was not pleaded", but that what really happened was that the learned Judge said he was not able to accept the main argument which was being submitted and that then the learned Counsel said "I will not press that any further".

    I agree with what my Lord has said with regard to this matter. I think that it was clearly shown that there was a fundamental breach -- indeed, those are the very words of the submission that was made. It may be put in alternative forms -- that the thing delivered was not the thing contracted for, or words of that kind; but it seems to me that the finance company, being in breach, and fundamentally in breach, cannot rely, as they have sought to rely, upon the provisions of clause 3 (g) in the written agreement. In those circumstances, therefore, I think that the Defendant, Mr. Wallis, is entitled to succeed and should have succeeded in the Court below.

    For my own part, I would allow the appeal.

    LORD JUSTICE PARKER: I have come to the same conclusion. I think it is the duty of a hire purchase finance company, which is letting out a chattel on hire purchase, to ascertain that the chattel is reasonably fit for the purpose for which it is expressly hired. It is for that reason that it has become common practice for hire purchase finance companies to insert exception clauses. In the present case the company had inserted a very extensive clause in their agreement, clause 3 (g). I need not read the whole of it, but the opening words are:

    "No condition or warranty that the vehicle is roadworthy or as to its age condition or fitness for any purpose is given by the Owner or implied herein."

    Accordingly, Mutual Finance Limited said, (in effect) that it does not matter what is delivered so long as it bears the appellation of a "Buick" car as described in the agreement, and that the hirer is bound to take it.

    But my judgment, however extensive the exception clause may be, it has no application if there has been a breach of a fundamental term. We were referred to a number of cases, the most recent of which, I think, is that decided by Mr. Justice Devlin, Smeaton Hanscomb & Co. Ltd. v Sassoon I Setty, Son & Co. (reported in 1953, 2 All England Reports at page 1471). At page 1473 the learned Judge says this:

    "It is, no doubt, a principle of construction that exceptions are to be construed as not being applicable for the protection of those for whose benefit they are inserted if the beneficiary has committed a breach of a fundamental term of the contract":

    and a little lower down he says this:

    "I do not think that what is a fundamental term has ever been closely defined. It must be something, I think, narrower than a condition of the contract, for it would be limiting the exceptions too much to say that they applied only to breaches of warranty. It is, I think, something which underlies the whole contract so that, if it is not complied with, the performance becomes something totally different from that which the contract contemplates."

    Applying that to the facts of this case, it seems to me that the vehicle delivered in effect is not properly described (as the agreement describes it) as a motor vehicle, "Buick", giving the chassis and engine number. By that I am not saying that every defect in a car which renders it for the moment unusable on the road amounts to a breach of a fundamental term; but where, as here, a vehicle is delivered incapable of self-propulsion except after a complete overhaul and in the condition referred to by my Lord, it seems to me that it is abundantly clear that there was a breach of a fundamental term and that accordingly the exceptions in clause 3 (g) do not apply.

    I think the same result is achieved by saying, in effect, that what was delivered was not what was contracted for; and I think that Andrews Brothers Ltd. v. Singer & Co. Ltd. (reported in 1934, 1 King's Bench at page 17) might well have been decided on the basis that there had been a breach of a fundamental term. In that case the contract was for the sale of new Singer cars, and again there was an elaborate exception clause. Lord Justice Scrutton in that case held that, there being an express term that what was sold was a new Singer car, and there having been a breach of that express term, the exception clauses dealing with implied conditions and warranties had no application.

    In my view the position is perfectly clear, and my only doubts in this case have arisen by reason of the pleadings. All I desire to say on that is that, for the reasons given by my Lords, I think it is open to this court to decide the case on that ground.

    I should add that in my view these proceedings for arrears of instalments cannot possibly be sustained on any view. It is, I think, clear from the cases to which we were referred (National Cash Register v. Stanley, 1921 3 King's Bench, page 292, and British Stamp and Ticket Automatic Delivery Company Limited v. Haynes, 1921 1 King's Bench, page 377) that, unless delivery of the chattel has been made and accepted, the only possible action is for damages and not for rent. In this case, by reason of the form of the assignment, if delivery was not made and accepted the plaintiffs must fail. As to delivery, it is, I think, plain that no delivery was made until, at the end of February or early in March, the vehicle was towed and left outside the Defendant's premises. Mr. Anwyl-Davies has argued that thereafter delivery was accepted because the vehicle was not at once returned to Mutual Finance Limited; nor indeed were they immediately notified; but it was sent back to Mr Stinton. I do not think that that really amounts to an acceptance of delivery. Mr Stinton, in leaving it outside the Defendant's premises, must have been acting as agent of the finance company to deliver the vehicle, and all that the Defendant did was immediately to return it to that same agent. For these reasons, it seems to me that delivery was never accepted, and the only claim could be a claim in damages.

    Accordingly, I would allow this appeal.

    (Appeal allowed, with costs in both Courts)


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