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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 >> Quinn v CC Automotive Group Ltd (t/a Carcraft)  EWCA Civ 1412 (16 December 2010)
Cite as:  2 All ER (Comm) 584,  EWCA Civ 1412
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SULLIVAN
LORD JUSTICE GROSS
| Paul Quinn
|- and -
|CC Automotive Group Limited t/a Carcraft
Mark Harper (instructed by Greenhalghs) for the Respondent
Hearing dates : 18/11/2010
Crown Copyright ©
Lord Justice Gross:
i) As of July, 2005, A was in possession of a Silver Jaguar ("the Silver Jaguar"), the subject of a hire purchase agreement arranged through the Claimant in the original proceedings, Black Horse Limited ("Black Horse").
ii) The wedding of the A's daughter was due to take place (and, happily, so far as we are aware, did take place) on the 22nd July. A wished to purchase a new Jaguar, preferably red, for the occasion. With that in mind, A went to R's showroom in Leeds on the 4th July.
iii) At the showroom, A met K and discussed the purchase of a Blue Jaguar ("the Blue Jaguar"). In the event, A agreed to purchase the Blue Jaguar; he paid, then and there, a reservation fee of £100 in cash (and, subsequently, on the 8th July, an additional £400 by credit card) – so a total deposit of £500. It may be noted that the Blue Jaguar was not present in the showroom at the time. The transaction was handled on R's behalf by K. It was agreed that A would pay £7,500 for the Blue Jaguar, together with the Silver Jag in part exchange. As part of the deal, R would be responsible for paying and clearing the outstanding finance with Black Horse on the Silver Jaguar, together with arranging (hire purchase) financing for the Blue Jaguar. The Judge observed, rightly, that this was not an unusual transaction.
iv) As the Judge held and was not in dispute before this Court, later on the 4th July, K telephoned A's wife ("Mrs Quinn") to say that he had located a Red Jaguar and invited A and Mrs Quinn to return to the showroom on the 5th July, with a view to buying the Red Jaguar instead of the Blue Jaguar. Accordingly, on the 5th July, A and Mrs Quinn again went to R's premises, where K showed them a Red Jaguar on a computer screen; they were told that the car was physically in Bury, hence they were shown the picture/s on the screen.
v) In the event, A decided to purchase the Red Jaguar ("the Red Jaguar") instead of the Blue Jaguar and, thereafter, K arranged for the return of the deposit paid on the Blue Jaguar.
vi) On the 14th July, A and Mrs Quinn met K at a motorway service station on the M62. The meeting was brief but included the cancellation of the agreement for the Blue Jaguar and signing the finance agreement for the Red Jaguar. The terms of the purchase of the Red Jaguar, apparently finalised at this meeting, were the same as those for the Blue Jaguar; a part exchange price of £7,500, with finance to be arranged by R, who would pay and clear the outstanding finance on the Silver Jaguar. In fact, it would appear that no deposit was ever paid on the Red Jaguar. As recorded by the Judge, neither A nor Mrs Quinn thought it odd to meet K at the service station; Mrs Quinn said that they thought K was "thoroughly charming" and doing everything he could to ensure that they had the Red Jaguar in time for the 22nd July wedding.
vii) On the 20th July, Mrs Quinn received a telephone call from K; he was going to collect the Red Jaguar that day and they arranged to meet at the same service station – it was more convenient than travelling to Leeds. K also said that an additional £700.00 was required, as the Judge noted, "as Black Horse had not allowed enough finance". Mrs Quinn said they could only afford £400. K said that was in order and that the balance (£300) could be paid later.
viii) A, Mrs Quinn and K duly met at the service station at about 20.00 on the 20th July. A looked over the car and was very happy with it. K gave A the keys for the Red Jaguar; A gave K the keys for the Silver Jaguar, together with £400 in cash and various documents relating to the vehicle.
ix) In these circumstances, A cancelled the standing order for the finance payments in respect of the Silver Jaguar. However, in August 2005, A received a no doubt unwelcome letter from Black Horse advising him that the money owing on the Silver Jaguar had not been settled. Subsequent investigations revealed that K had not cleared the finance on the Silver Jaguar; instead K had sold the Silver Jaguar to a bona fide purchaser for value without notice of the fraud.
x) Inevitably, Black Horse brought proceedings against A for the outstanding balance on the original finance agreement in respect of the Silver Jaguar and, on the 19th February, 2008, obtained judgment against him in the amount of £11,134.65, plus costs amounting to £3,372.50. A has since obtained a judgment against K but, in practical terms, that judgment must be assumed to be worthless.
xi) As it transpired, the Red Jaguar had never belonged to R or formed part of its stock. Despite extensive inquiries, it has never been established exactly where the vehicle came from. To that, I add, that its subsequent fate too is uncertain – counsel could not tell us (though it matters not to the decision in this case) whether A still has it. But it necessarily follows from this history that K had no actual authority from R to sell the Red Jaguar. Accordingly, the dispute has been concerned with K's apparent authority.
" ...at no point did either of them consider that Mr Khan was, or might be, acting outside the scope of his employment/authority. "
" 41. In my judgment, whilst Mr. Khan had actual authority only to sell vehicles belonging to Carcraft, in assessing his apparent authority I have to consider what a third-party, a customer such as Mr. Quinn would properly consider Mr. Khan could do in the ordinary course of business. Plainly Mr. Khan was employed as a car salesman to sell cars. It would have been unusual, and no doubt, considered very odd if Mr. Quinn had asked Mr. Khan for proof of his authority. Had he done so, he would have received proof that Mr. Khan was authorised by Carcraft to sell cars on their behalf. From Mr. Quinn's point of view that is exactly what Mr Khan went on to do. In my judgment, there is nothing which occurred at Carcraft's premises which would or should have led Mr. Quinn to consider that Mr. Khan was doing anything other than what he was authorised to do, namely selling a vehicle belonging to Carcraft. In the circumstances…Mr. Quinn was….entitled to assume that the red Jaguar he was shown on a desktop computer at Carcraft's premises was a vehicle owned by Carcraft and, therefore, a vehicle Mr. Khan was entitled to sell, and had apparent authority to sell on behalf of Carcraft…."
If it was necessary to express the matter in terms of vicarious liability, the Judge accepted (at ) that the deceit practised by K on A "was closely connected with Mr Khan's employment". K was employed as a salesman to sell R's cars; the "wrong alleged" was "deceit in selling a car which he led Mr. Quinn to believe was a car belonging to Carcraft". That wrong had a "sufficiently close connection" with K's employment.
" 44. …..whether a reasonable person in Mr. Quinn's position would have been put on enquiry that Mr. Khan was acting outside his employment and therefore lacked authority to bind Carcraft."
" 50. ….the demand for the £700 in cash and Mr. Khan's willingness to accept £400 with the balance to follow later, was sufficiently unusual that Mr. Quinn ought to have been put on enquiry at that time. I am satisfied that those aspects of this matter which ought to have put Mr Quinn on enquiry were matters which he overlooked in his desire to have the red Jaguar ….and to have it in time for his daughter's wedding. I do not criticise him for that and I was impressed by this family's desire to make their daughter's wedding as perfect as possible. However the issue I have to decide is whether Mr Quinn should have been on enquiry such that he cannot rely upon Mr. Khan's apparent authority in connection with the transaction. I have enormous sympathy for the position that Mr. Quinn now finds himself in. However, I find that he should have been on enquiry and that in those circumtances he cannot succeed in his claim against Carcraft. These matters would also sever the chain of causation in relation to the vicarious liability for any deceit. "
"54. …..To put this another way, based on the findings of fact I have made, whether applying the objective test as to whether a reasonable person would have been put on enquiry, or the subjective test as to whether Mr. Quinn was or ought to have been put on enquiry, I reach the same conclusion. "
THE RIVAL CASES
THE LEGAL FRAMEWORK
" Seeing somebody must be a loser, by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger."
That passage was described, with approval, by Diplock LJ (as he then was), in Morris v Martin (at p.733), as expressing an "old, robust and moral principle". More recently, Lord Millett has spoken of vicarious liability "…as a species of strict liability….best understood as a loss-distribution device….": Lister v Hesley Hall, at .
i) The principal may be liable for the fraud of his agent committed when "purporting to act in the course of business such as he was authorised, or held out as authorised, to transact on account of his principal": Earl Loreburn, in Lloyd v Grace Smith (at p.725); or, as Lord Denning MR in Morris v Martin, at p.727, summarised Lloyd v Grace Smith - the solicitor's clerk was "acting within the apparent scope of his authority".
ii) Treating apparent authority as, essentially, a species of estoppel by representation (see, at p. 503), Diplock LJ, in Freeman & Lockyer v Buckhurst Park, listed (at pp. 505-6) a number of conditions which must be fulfilled so as to entitle a contractor to enforce against a company a contract entered into on its behalf by an agent who had no actual authority to do so; insofar as here relevant these are as follows:
" (1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor:
(2) that such representation was made by a person or persons who had 'actual' authority to manage the business of the company either generally or in respect of those matters to which the contract relates;
(3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; ….. "
iii) In Armagas v Mundogas, at p.783, Lord Keith said that it would be just for an employer to bear such loss in circumstances where:
" …..the employer by words or conduct has induced the injured party to believe that the servant was acting in the lawful course of the employer's business. "
Conversely, those circumstances do not exist where:
"…….such belief, although it is present, has been brought about through misguided reliance on the servant himself, when the servant is not authorised to do what he is purporting to do, when what he is purporting to do is not within the class of acts that an employee in his position is usually authorised to do, and when the employer has done nothing to represent that he is authorised to do it."
iv) It is instructive that in these passages considering apparent authority, Diplock LJ focused upon the authority of the agent to enter into "contracts of the kind" sought to be enforced and Lord Keith highlighted the "class of acts" that an employee in the position of the rogue is usually authorised to do. The representation, however made (whether by words or conduct), must of course emanate from the employer (or principal) rather than from the servant (or agent) himself.
" 42. ….in considering the scope of the employment a broad approach should be adopted…..
43. If a broad approach is adopted it becomes inappropriate to concentrate too closely upon the particular act complained of. Not only do the purpose and the nature of the act have to be considered but the context and the circumstances in which it occurred have to be taken into account….. "
In this regard, Lord Clyde may perhaps be seen as echoing the observations of Lord Macnaghten in Lloyd v Grace Smith, at p.739, when disapproving of the Court of Appeal's reasoning:
" They look at the execution of the deeds by which Sandles cheated Mrs. Lloyd out of her property as if it were an isolated transaction – as a thing standing by itself; whereas the trick was so cunningly contrived as to seem to the victim of the fraud a mere matter of course – a trifling incident in the business about which the firm was being employed."
I would add that hindsight is to be avoided.
i) Plainly, there can be no reliance on such a representation if the third party did not have an honest belief in the employee's authority; so too, if the third party turns a "blind eye" to suspicions as to the apparent authority of the employee: see the discussion in Akai, at  – . However, the touchstone is honest belief and, possibly, "irrationality" – a point conceded in Akai (ibid) and upon which it is unnecessary to express any concluded view.
ii) However and consistent with principle in the field of misrepresentation, the question of the "reasonableness" of the third party's belief is neither here nor there. As pithily summarised in Spencer Bower, Turner and Handley, Actionable Misrepresentation (4th ed.), at para. 188:
" A man who has told an untruth, innocently or fraudulently, cannot complain that the representee acted on the faith of his misstatement in the manner in which he, the representor, intended that he should. He can never be heard to say that another should not have believed the lie that he was told for the purpose of inspiring that belief, or plead that if the representee had not been such a fool , no harm would have been done. The representee never owed any duty to the representor to be careful, to be active in suspicion, or diligent in research when it was the very purpose of the misrepresentation to put his mind at rest. "
The observations of Lord Neuberger in Akai, at  and the sources there referred to, are to the same effect.
iii) To my mind, an analysis founded on reliance and belief leaves little room for any consideration of whether the third party was "put on enquiry". If there is proper scope for such consideration, it would seem to arise as an aspect of whether the third party turned a "blind eye" to his suspicions as to the employee's apparent authority; possibly too, there could be debate as to whether the third party was put on enquiry if the employee was acting outside of the usual authority of a person holding the position he holds: see Bowstead and Reynolds on Agency (19th ed.), at paras. 8-054 – 8-055. But on no view can it be said that the third party is put on enquiry because of mere unreasonableness in failing to see through the employee's deceit; a fortiori, if the transaction is within the class of acts that an employee in the position of the rogue is usually authorised to do.
LORD JUSTICE SULLIVAN:
LORD JUSTICE MUMMERY: