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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Macdonald v Pollock [2012] ScotCS CSIH_12 (14 February 2012)
URL: http://www.bailii.org/scot/cases/ScotCS/2012/2012CSIH12.html
Cite as: 2013 SC 22, 2012 GWD 8-162, 2012 SLT 462, [2012] ScotCS CSIH_12, [2012] CSIH 12, [2012] 1 Lloyd's Rep 425

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Eassie

Lord Brodie

Lord Osborne

[2012] CSIH 12

XA59/10

OPINION OF THE COURT

delivered by LORD EASSIE

in the cause

of

MURDO DONALD MACDONALD

Pursuer & Appellant;

against

ROBERT & ELIZABETH POLLOCK

Defenders & Respondents:

_______

Act: J Campbell, Q.C.; D McKenzie; Drummond Miller LLP for

MacDonald, MacIver & Co Ltd, Stornoway

Alt: Sandison, Q.C.; Thomson; Morton Fraser LLP for Anderson Banks, Oban

14 February 2012

Introduction
[1] This appeal is taken against a decision of the sheriff principal of North Strathclyde in which he allowed an appeal against an interlocutor of the sheriff at Oban by which the sheriff granted decree in favour of the pursuer - the appellant in this court - for payment by the defenders and respondents of the sum of 75,000.


[2] The litigation arises out of a contract concluded in September 2002 for the sale by the defenders to the pursuer of a former fishing vessel, the "M.V. Monaco", which had earlier been converted for use as a cruise vessel by the provision of appropriate passenger accommodation. The defenders are a partnership trading under the firm name or style of "Western Isles Cruising" and prior to the sale of the vessel they exploited the vessel commercially by providing cruises to their customers. The pursuer carried on a similar business under the style of "Island Cruising" from his base in Uig, Isle of Lewis.


[3] In outline, the contract for the sale of the "Monaco" was concluded by an offer faxed to the defenders by the pursuer on 16 September 2002 in which he offered to buy the vessel for 75,000. That offer was accepted by a letter dated 17 September 2002. Prior to making the offer, the pursuer had instructed a marine engineer - Mr John Bain - to carry out a general survey of the vessel, which was lying at Corpach and shortly to be slipped. Following Mr Bain's inspection of the vessel at Corpach, which did not involve any sea trial, the pursuer received a favourable oral report from him. Later, on 11 September 2002, the pursuer met with Mr Robert Pollock of the defenders on the vessel at Lochaline and a short sea trial was carried out. Thereafter the contract was concluded and the pursuer took delivery of the vessel on 20 September 2002 at Oban, having paid the price. On the following day he set off towards Lewis.


[4] On that voyage it became apparent that the engine was using up excessive quantities of lubricating oil. On eventual arrival in Stornoway the engine was inspected by a marine engineer - Mr Tony Morrison of Morton McKenzie & Co Ltd. He confirmed what had been noted by another engineer when the vessel had put into Scalpay en voyage to Lewis, namely that there was a weld on the lower part of the engine block between the engine sump casings and the crank case whence oil was leaking. Further, Mr Morrison noted that the bolts holding down the engine were loose, which indicated, in the view of the engineer, the existence of some underlying internal problem which required the engine to be dismantled or stripped down in order that that problem might be identified and rectified. The cost of that exercise was estimated at around 50,000.


[5] Upon receipt of that advice the pursuer telephoned Mr Robert Pollock. The sheriff held that in that telephone call the pursuer unequivocally rejected the vessel. Whether the pursuer did thus unequivocally reject the goods is a matter in issue in the proceedings. Since the making of that telephone call the vessel has remained berthed in Stornoway. No use has been made of her by the pursuer, nor have any repairs or maintenance been carried out.


[6] While the foregoing is a summary of the events, it is nonetheless appropriate to set out in full the findings in fact which were made by the sheriff:

"1. Since November 1977 the Pursuer has operated a Boat Charter Business trading under the name "Island Cruising" from the address shown in the instance. The Defenders operate and operated in 2002 a Boat Chartering Business trading under the name "Western Isles Cruising" from the address shown in the instance.

2. In or about 2002 the Pursuer answered an advertisement in "Boats and Yachts for Sale" (Pursuer's Sixth Inventory - Production 2) which offered for sale a "converted fishing vessel" called the "Monaco". He contacted the First named Defender on or about the 20/21 August 2002 and was advised by him that the vessel was still for sale and was slipped at Corpach.

3. The Pursuer thereafter instructed John Bain, a Marine Engineer with "Marine and Engineering Services Hebrides" to carry out a general survey of the boat. Notwithstanding that John Bain did not carry out a sea trial of the boat he provided the Pursuer with a favourable verbal report which did not include a detailed report of the condition of the boat's engine. His report in relation to the engine being restricted to a visual inspection of the engine running and checking the engine gauges.

4. On 11 September 2002 the Pursuer and his wife met with the First Defender and Stuart Moir, a friend of the First Defenders on board the "Monaco" at Lochaline. A sea trial of the "Monaco" which lasted approximately 30 minutes was carried out. The Pursuer's examination of the engine as with John Bain's was superficial and comprised of a visual inspection of the outer casings of the engine which could be seen above the floor plates in the engine room. The Pursuer advised the First Defender that Stuart (sic: John) Bain had not carried out any detailed examination of the engine.

5. On completion of the sea trial and on being advised by the First Defender that the engine was in "excellent" and "perfect" condition, the Pursuer advised the First Defender that he wished to purchase the vessel and the parties shook hands.

6. On 16 September 2002 the Pursuer forwarded a formal offer to purchase the "Monaco" for 75,000 (Pursuer's First Inventory - Production 2) which offer was accepted by the First Defender on 17 September 2002 (Pursuer's First Inventory - Production 3).

7. It was agreed that the First Defender would bring the boat to the North pier at Oban in order for the Pursuer to take delivery. On Friday 20 September 2002 the Pursuer accompanied by his wife and brother-in-law took delivery of the boat at Oban. After payment of the agreed price the Pursuer was advised by the First Defender that the only problem with the boat was with a fuel injector pump. In addition he was advised that if too much oil was put into the engine it would be thrown out through the exhaust.

8. The pursuer and his crew departed Oban harbour for Tobermory at 3.20pm on 21 September 2002 intending to proceed ultimately to Stornoway. The journey to Tobermory was unremarkable.

9. On 22 September 2002 the Pursuer and crew departed from Tobermory for Lochmaddy. Shortly after their departure the fire alarm sounded in the engine room. It was discovered that the exhaust lagging was smouldering. After dousing the lagging and initially diverting at reduced speed to Mallaig the boat continued on its original course to Lochmaddy.

10. At Neist Point the oil level alarm sounded. Five litres of oil was added to the engine. The oil level alarm sounded again before the boat arrived at Lochmaddy. At Lochmaddy oil was discovered in the boats bilges and the "oil level" in the engine was found to be well below the minimum. Thirty litres of oil was added to the engine before the boat proceeded on to Scalpay.

11. In Scalpay the boat's engine was examined by Murdo MacLeod, a Marine Engineer. On removing a screwed down floor plate a weld on the engine block which leaked oil was revealed. More oil was added to the boat's engine before proceeding at a reduced speed to Stornoway.

12. In Stornoway the boat's engine was examined by Tony Morrison, a Marine Engineer, whose report is Production 1 of the Pursuer's First Inventory. The weld on the engine block was between the engine sump casings and the crank case and was porous. It was an unsuccessful attempt to stop oil leaking out of the engine. In addition oil leaked from several of the main securing bolts which were slack and several of the holding down bolts were packed with repair compound. To simply tighten the bolts could have exacerbated an underlying problem. None of the defects in the engine and referred to in the report by Mr Morrison were drawn to the attention of John Bain or the Pursuer by the Defenders or anyone acting on their behalf.

13. The First Defender was aware when he sold the boat to the Pursuer of the weld which he had personally authorised. He was aware that the repair had been unsuccessful and that oil leaked from it. He was aware that the boat used excessive amounts of oil and that the engine required to be repaired. In agreeing to purchase the boat the Pursuer relied on the First Defender's description of the engine.

14. The boat's log book which was found in the Deckhouse of the boat after the Pursuer had purchased the boat demonstrated that the boat used excessive amounts of engine oil.

15. Production 3 of the Pursuer's Sixth Inventory is a record of a telephone conversation which took place on 25 September 2002 between the pursuer and the First Defender. This conversation amounted to unequivocal rejection by the Pursuer of the boat.

16. Since the Pursuer's telephone conversation with the Defender on 25 September 2002, the "Monaco" has remained berthed in Stornoway harbour. The Pursuer has carried out no maintenance work on the vessel nor has he paid harbour dues."


[7] Having made those findings in fact the sheriff, in his consequent findings in fact and law, thereafter held, in summary, that the vessel sold was of unsatisfactory quality; that the defenders were thereby in material breach of contract; that the pursuer, having rejected the vessel, was entitled to repudiate the contract; and that the pursuer was entitled to repetition of the price of 75,000 (that being the nature and amount of the sum for which the sheriff granted decree).


[8] As already indicated, the sheriff principal reversed that decision and assoilzied the defenders. In brief, the sheriff principal did so on the bases, first, differing from the sheriff, that he considered (a) that the sale had not been effected by the defenders "in the course of a business" and (b) that, in any event, the defects could have been detected by the pursuer's surveyor had he carried out a "full" examination of the engine, when he had the opportunity to do so. Accordingly, the sale was, for those reason, not one in which the condition of satisfactory quality under section 14 of the Sale of Goods Act 1979 was implied; the defects in the vessel thus did not constitute a breach of contract. Secondly, the sheriff principal held that in any event the sheriff had erred in holding that the pursuer had unequivocally rejected the goods. The pursuer was therefore, on that account also, not entitled to repayment of the price.

The issues in this appeal
[9] The matters debated before us were largely reflective of the issues argued before sheriff principal and may be listed thus;

(i) Was the sale by the defenders a sale, by their partnership, "in the course of a business", that being requisite in terms of section 14 of the Sale of Goods Act 1979 for the implication of any condition or warranty of satisfactory quality?

(ii) If that question were answered positively, is the defenders' liability then obviated by reason of the qualification to the implied term set out in section 14(2C)(b) to the effect that, where the purchaser has examined the goods, liability does not extend to matters which that examination would have disclosed?

(iii) If both of those questions were to be answered favourably to the pursuer, can he yet properly be said to have rejected the goods so as to entitle him to repetition of the price?

Statutory provisions
[10] The first and second issues involve questions of the proper interpretation of certain parts of section 14 of the Sale of Goods Act 1979 - "the 1979 Act". The section was amended by the Sale and Supply of Goods Act 1994 - "the 1994 Act" - and as so amended section 14(1) to (2D) inclusive reads:

"14.- Implied terms about quality or fitness.

(1) Except as provided by this section and section 15 below and subject to any other enactment, there is no implied term about the quality or fitness for any particular purpose of goods supplied under a contract of sale.

(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances.

(2B) For the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods-

(a) fitness for all the purposes for which goods of the kind in question are commonly supplied,

(b) appearance and finish,

(c) freedom from minor defects,

(d) safety, and

(e) durability.

(2C) The term implied by subsection (2) above does not extend to any matter making the quality of goods unsatisfactory-

(a) which is specifically drawn to the buyer's attention before the contract is made,

(b) where the buyer examines the goods before the contract is made, which that examination ought to reveal, or

(c) in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample.

(2D) If the buyer deals as consumer or, in Scotland, if a contract of sale is a consumer contract, the relevant circumstances mentioned in subsection (2A) above include any public statements on the specific characteristics of the goods made about them by the seller, the producer or his representative, particularly in advertising or on labelling."

Section 14(3) is concerned with an implied warranty of fitness for purpose where goods are sold in the course of a business, but no issue respecting that warranty arises in the present case.


[11] The antecedent provision in the Sale of Goods Act 1893 - "the 1893 Act" - is also section 14, which reads:

"14. Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

(1) ...[warranty of fitness for purpose]

(2) 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 condition that the goods shall be of merchantable quality; provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed:

(3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

(4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith."

Along with other provisions in the 1893 Act which were amended by the Supply of Goods (Implied Terms) Act 1973 - "the 1973 Act" - section 14(2) of the 1893 Act was amended by section 3 of the 1973 Act to read:

"(2) 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, except that there is no such condition -

(a) as regards defects specifically drawn to the buyers attention before the contract is made; or

(b) if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal."

The principal change to section 14(2) thereafter effected by the 1994 Act was to replace the concept of merchantable quality with the concept of satisfactory quality and (for present purposes) also to move the legislative text respecting the exception or proviso applying where the buyer had examined the goods into what is now section 14(2C) of the amended 1979 Act.


[12] The 1973 Act was enacted to give effect to recommendations made by the Law Commission and the Scottish Law Commission in their joint report "Exception Clauses in Contracts First Report: Amendment to the Sale of Goods Act 1893" (Law Com No 24; Scot Law Com No 12). The Law Commissions' report followed the report of the Committee on Consumer protection (1962 - Cmnd 1781) - the Molony Committee. In paragraph 31 of their report the Law Commissions state:

"31. The Molony Committee recommended two amendments to subsection (1) [of section 14 of the 1893Act]. The first of these concerned the requirement that, in order to give rise to the implied condition of fitness, the goods must be "of a description which it is in the course of the seller's business to supply". The Molony Committee took the view that if a retailer sells an article in the course of business, he should be answerable for both its merchantability and its fitness for purpose, 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.'28 We associate ourselves with these arguments and recommend that the condition of fitness for purpose should be implied into all sales other than those in which the seller sells in a private capacity. In other words, the condition should be implied whenever the seller is acting in the course of a business29 even though he may not be a dealer in goods of the relevant description. 30

28. Final Report, paragraph 443; the arguments there advanced with reference to merchantable quality were adopted in paragraph 447 with reference to fitness for purpose.

29. The Molony 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.

30. Thus, for example, where a coal merchant whose business it is to supply coal sells one of his delivery vehicles the condition of fitness should be implied; for the sale is part of the seller's business activities, even though he is not a dealer in vehicles."

While these views were couched in terms of s 14(1) of the 1893 Act the Law Commissions made plain that, understandably, the same considerations were applicable to the implied warranty respecting merchantable quality under section 14(2). The amendments to section 14 of the 1893 Act which were effected by the 1973 Act are precisely as set out in the draft Bill annexed to the Law Commissions' report. The text of section 14 of the 1893 Act as amended by the 1973 Act was then carried into the 1979 Act, which was a consolidating statute.

[13] With that recital of the principal statutory provisions and their antecedents we now turn to the issues in this appeal.

Issue 1: Sale in the course of a business
[14] This issue arises because the defenders contend that the sale by their

partnership of the "Monaco" was not a sale "in the course of a business," with the consequence that there was no implied contractual term of satisfactory quality. The sheriff rejected that contention but, as already indicated, the sheriff principal upheld

it. While it is, and was, not in dispute that the vessel was an asset of the defenders' business, the defenders contend that, properly construed, the concept of a sale in the course of a business which is now deployed in section 14(2) of the 1979 Act encompasses but three categories of sale, namely:

(i) a sale which is an integral part of the conduct of the business in question, such as the sale of an article in which it is the normal practice of the business to deal;

(ii) a sale which is incidental to the conduct of the business but which is of a kind which is carried out with a sufficient degree of regularity to bring it within the ambit of the section; and

(iii) a "one-off" trading venture, which is essentially the business.

The last of these had plainly no application in the present case but, it was contended, since the defenders' business was that of providing cruises, not that of dealing in vessels, the sale of the "Monaco" was merely incidental to the business. It was thus not in the first category. And it was not in the second category since the sale of the Monaco was a kind of sale which lacked the requisite degree of regularity.

[15] The proposition thus advanced by the defenders that, for the purposes of section 14 of the 1979 Act, sales in the course of a business were confined to those three categories of sale was based primarily on the decision of the House of Lords in Davies v Sumner [1984] 1 WLR 1301; and also on a decision of the Court of Appeal in England and Wales in R & B Customs Brokers Co Ltd v The United Dominions Trust Ltd [1988] 1 WLR 321. The decision - to apparent contrary effect - of the Court of Appeal in Stevenson and Another v Rogers [1999] QB 1028, if not distinguishable on the grounds there indicated, was wrongly decided; and, it was further submitted, was in any event not binding in Scotland.

[16] We find it convenient first to examine these authorities. The decision in Davies v Sumner arose from a prosecution under section 1(1)(a) of the Trade Descriptions Act 1968. The accused was a self-employed courier who sold the motor car which he used almost, but not wholly, exclusively for his business knowing the odometer to display a false reading. The question certified by the Divisional Court was, put shortly, whether the sale transaction was a transaction "in the course of a trade or business", being the phrase used in section 1(1) of that Act. In the course of his speech, with which the other members of the Judicial Committee agreed, Lord Keith of Kinkeld, having first referred to Havering London Borough Council v Stevenson [1970] 1 WLR 1375, said at p.1306:

"Any disposal of a 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 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 refers to "misdescriptions of goods, services, accommodation and facilities provided in the course of trade". Lord Parker CJ in the Havering case ... 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". [emphasis in the original]

It was then noted that in contrast to the factual position in Havering London Borough Council v Stevenson, the accused, Davies, had not yet established a practice of buying and disposing of the car which he used in his business.

[17] R & B Customs Brokers Co Ltd v United Dominions Trust Ltd concerned defects in a car bought under a conditional sale agreement by a company for the personal and business use of its director. The terms of the conditional sale agreement excluded any implied or express warranty of quality or fitness unless the buyer dealt as a consumer in terms of section 12 of the Unfair Contract terms Act 1977. In order to overcome that express exclusion, the company contended that it had dealt as a consumer. Since the definition of "dealing as a consumer" in that section included a requirement that the party claiming to be a consumer "neither makes the contract in the course of a business nor holds himself out as doing so", the question thus arising was whether in purchasing the car for its director's use the company was making the contract in the course of its business. Having been referred to Davies v Sumner the Court of Appeal decided that the words in question in section 12 of the 1977 Act should not be given a wider interpretation than the equivalent phrase in section 1(1) of the Trades Description Act 1968. The court further considered that since it was only the second or third occasion on which the company had purchased a car on credit terms for its director's use, the requisite degree of regularity had not been made out.

[18] Both Davies v Sumner and R & B Customs Brokers Co Ltd were among the authorities considered by the Court of Appeal in Stevenson and Another v Rodger. That case concerned the sale by a fisherman of the fishing vessel which he used in his fishing business to purchasers who intended similarly to use the vessel for commercial fishing. (As is evident, and recognized by parties, the facts of that case are essentially indistinguishable from those of this appeal). The purchasers of the fishing vessel brought proceedings based on the implied term in section 14(2) of the 1979 Act in respect of defects in the vessel. Holding that for the purposes of that section the sale of the fishing boat was a sale in the course of the sellers fishing business, the Court of Appeal distinguished Davies v Sumner and R & B Customs Brokers Co Ltd. Having noted, among other things, the relevant legislative history (including the terms of the Law Commissions' report, the recommendations in which were implemented in the 1973 Act) Potter LJ, in giving the leading judgment with which the other judges agreed, stated at page 1039B:

"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 section 14(2) of the Act of 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 section 14(2) as between the Act of 1893 and section 3 of the Act of 1973 (which section 14(2) of the Act of 1979 simply re-enacted) to see that it was the intention of the Act of 1973 to widen the protection afforded to a purchaser by section 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 reintroduce 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".

[19] Having reached that conclusion as a matter of ordinary construction, Potter LJ then acknowledged in light of earlier decisions in differing areas of law that an ambiguity or doubt arose, justifying in terms of Pepper v Hart [1993] AC 593 reference to Hansard, in particular reference to the statement made by the Minister of State for Trade & Consumer Affairs on introducing the second reading of the Bill which became the 1973 Act. In that statement the Minister (Sir Geoffrey Howe) reminded the House that the Bill was founded on the Law Commissions' report. Potter LJ then considered it permissible to have regard to that report both because it was referred to the statement by the Minister, and independently on the basis pronunciated by Lord Simon of Glaisdale in Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg A.G. [1975] AC 591, 647-648 and Lord Diplock in Fothergill v Monarch Airlines Ltd [1981] AC 251, 281. He then continued at page 1039H:

"Reference to Hansard and the First Report makes clear that the mischief which Parliament intended to rectify in relation to section 14(2) was that section 14(2) of the Act of 1893 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 section 3 of the Act of 1973. Thus, resort to the mischief rule confirms my view formed at first impression that the changed wording of section 14(2) should not be read so as to bear the limitation for which [counsel for the seller] argues.

Nor is there any countervailing reason to suppose that, at the time the Act of 1979 was passed, thereby re-enacting without alteration the form of section 14(2) earlier enacted by section 3 of the Act of 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 section 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".

[20] For our part, we find the approach and reasoning of Potter LJ (with whom, as we have already mentioned, the other judges agreed) highly persuasive. In the course of their submissions, counsel for the defenders were critical of the resort made by Potter LJ to Hansard. The statement to the House that the Bill was founded on the Law Commissions' report was not, said counsel, a statement of policy and was thus outwith the limits of what was contemplated in Pepper v Hart. We do not agree with that submission. It appears to us that what the Minister was in effect stating was a policy to implement the recommendations of the Law Commissions' report. Further, we share the view of Potter LJ that the mischief identified by the Commissions in section 14 of the 1893 Act was that it did not extend to all sales other than private sales.

[21] Along with Potter LJ (at p1040) we would also observe that the decision in Davies v Sumner was directed towards a statutory provision creating a criminal offence and that Lord Keith drew upon the references in the long title to misdescriptions "provided in the course of trade" as pointing to a narrower construction of the words "in the course of a trade or business". In our view, the particular statutory context is important and words used in one statute need not have exactly the same meaning when deployed in a different context. We would add that we do not overlook the argument, invoking policy considerations, advanced by counsel for the defenders to the effect that in making an incidental sale, rather than the sale of a product in which the business normally traded - the examples given being the coal merchant who sells his lorry or the advocate who sells his computer - the commercial seller may not have the particular knowledge of the article thus incidentally sold which he would possess of articles regularly traded; but unless selling to a consumer, the seller may expressly exclude the implied warranty and the wider interpretation has the merit of a relative simplicity and certainty. While perhaps understandable as a limitation on criminal liability in a statute concerned with "misdescriptions of goods, services, accommodation and facilities provided in the course of trade", the notion, on the other hand, of a need for some prior degree of regularity in the selling before the purchaser may rely on the implied warranties in section 14 presents, in our view, unsatisfactory features in the context of the civil law.

[22] The court in Stevenson and Another v Rogers distinguished the earlier Court of Appeal decision in R & B Customs Brokers Co Ltd. In so far as it may be thought necessary or appropriate for us to distinguish the latter case, we would respectfully adopt the reasoning and the approach of Potter LJ in that regard. We would add however that, for our part, were it thought necessary that the phrase in issue in section 12 and section 14 of the 1979 Act receive the same interpretation we would be minded to decline to follow R & B Customs Brokers Co Ltd, which is a decision by which we are not bound.

[23] We mention two further matters. First, we were naturally referred by counsel to Buchanan-Jardine v Hamilink 1983 SLT 149. The opinion delivered by Lord Cameron in that case contains some discussion whether a sale of the business itself might be a sale in the course of a business. However, the goods of which complaint was made - livestock - were of a kind sold by the farming business in question; and in that respect the case was not seen by either party to this appeal as being of much assistance. Suffice to say that we do not see in the Opinion of Lord Cameron, with whom the Lord Justice Clerk (Ross) agreed, anything in conflict with Stevenson and Another v Rogers. Secondly, although we were not referred to it, the annotation by Professor A G Guest
[1]
to section 3 of the 1973 Act in Current Law Statutes contains this passage:

"A number of significant changes are made. First there is no requirement that the goods should be 'bought by description'; thus all sales, even of specific goods as such, are potentially subject to the new section 14(2). Secondly, the corresponding provision in the 1893 Act required that the goods should be bought from a seller 'who deals in goods of that description'; ... Non-business sales are still excluded, but the requirement that 'the seller sells goods in the course of a business' is less narrowly confined in that it will undoubtedly extend to cases where the seller sells goods of a kind in which he has not previously dealt and (semble) also to cases where he sells goods of a kind in which he does not ordinarily deal, e.g. where a store sells off one of its delivery vans".

[24] The sheriff principal declined to follow Stevenson and Another v Rogers. He expressed the view:

"...that the true distinction intended was one between (on the one hand) sales in the course of a business to consumers or their equivalent and (on the other hand) sales occurring between parties whether businessmen or business organizations or private individuals of broadly comparable status and bargaining power" (appeal print page 73).

Later the sheriff principal says that the phrase "in the course of a business" should be construed in the manner qualified as the House of Lords in Davies v Sumner and the Court of Appeal in R & B Customs Brokers Co Ltd thought it should be. He continues:

"Where the status and bargaining power of the parties to the contract is broadly equal, such a qualification will have the effect that the terms in the Act will be implied only where the sale transaction is one integral to the normal business of the seller".

Counsel for the defenders did not seek to support the views so expressed by the sheriff principal. For the reasons which we have already indicated we consider that the proper interpretation, for the purposes of section 14 of the 1979 Act, of the concept of a sale in the course of a business is that given by the Court of Appeal in Stevenson and Another v Rogers. It follows therefore that in our opinion the sale by the defenders of the "Monaco" was a sale in the course of their business. Having thus answered the first issue in the appeal favorably to the pursuer and appellant, we turn to the second issue.

Issue 2 -Examination of the goods
[25] This chapter of the appeal is concerned with the limitation on the extent of the warranty implied under section 14(2) which is to be found in section 14(2C)(b) of the 1979 Act and which excludes from the warranty any matter making the quality of the goods unsatisfactory - "(b) where the buyer examines the goods before the contract is made, which that examination ought to reveal". A largely similar limitation was contained in the proviso in section 14(2) of the 1893 Act save that the proviso employed the words "such examination" rather than the current phrase "that examination".

[26] The sheriff approached matters on the basis that what should be considered was the actual examination in fact carried out by or on behalf of the purchaser and what that examination ought to have revealed. The sheriff found that the examination carried out by Mr Bain and by the pursuer was confined to the engine above the floor plates and thus would not have disclosed the defects, which were below the floor plates. The sheriff principal on the other hand held that the sheriff had thereby misinterpreted section 14(2C)(b). Under reference to the judgment of Bray J in Thornett & Fehr v Beers & Son [1919] KB 486 the sheriff principal expresses this view:

"Although not bound by the decision of Bray J I find it persuasive and find myself in agreement with the rational underlying it. He who has the opportunity to fully examine the goods but decides to do so only partially or imperfectly when he could have done so more fully cannot hide behind his own decision to refrain from a full examination. In the present case a full examination was apparently not intended on the ground partly of expense, but it remains a case like that tried 90 years ago by Bray J in which the prospective purchaser refrained for his own reasons from carrying out as full an examination as he could have done. From the sheriff's findings it is I think clearly apparent that a fuller examination involving the lifting of floor plates would have revealed the defect now complained of". (page 78 of the appeal print).

The sheriff principal then goes on to note that one of the pursuer's reasons for not having a fuller examination was the assurance derived from the first defender's description of the engine's condition as "excellent" or "perfect". He then continues:

"...but I do not think it open to the purchaser of a mechanically complex article such as a fishing vessel realistically to rely on such bland assurances from a seller and later maintain that he took those bland assurances at face value".

A little later in his judgment the sheriff principal states:

"In the present situation it was therefore incumbent on the pursuer in my opinion, having been given the opportunity to carry out as full an examination as he might wish, to satisfy himself that he was buying an article free of fundamental defect so far as detectable and worthy of the price paid.

For these reasons I consider, differing from the sheriff, that section 14(2C)(b) when properly applied to the facts of this case as found by the sheriff had the effect of excluding the defect on which the present action is founded as a basis for holding the vessel sold not to have been of satisfactory quality".

[27] Counsel for the pursuer submitted, in summary, that the approach of the sheriff principal was erroneous. It was not without some significance that the phrase "such examination" in the 1893 Act had been altered to "that examination"; the alteration made clear that what the provision contemplated was the actual examination which had been made. The warranty was unrestricted if no examination at all took place, irrespective whether an opportunity to examine had been offered. It would be illogical, where the buyer had availed himself of the opportunity to examine but had carried out a limited examination, to exclude from the warranty defects which only a fuller examination would have disclosed. Further, whereas section 14(2C)(c), relating to sale by sample, referred to a "reasonable" examination, no such adjective appeared in section 14(2C)(b). Thornett & Fehr v Beers & Son was wrongly decided. What the provision in section 14(2C)(b) envisaged was the actual examination carried out and only defects which that examination, with all the limitations in its nature and scope which might apply to it, would have revealed.

[28] Counsel for the defenders made clear that it was not contended on behalf of the defenders that a purchaser who had the opportunity to examine the goods prior to making the contract required to carry out a "full" examination of the goods. In a case in which the purchaser had availed himself of the opportunity to make an examination, what one first required to do, said Mr Sandison, was to identify objectively the essential, defining characteristics of the examination which had taken place. The defining characteristics were such matters as (i) the identity and qualifications of the examiner; (ii) the matters to which the examination was directed (by way of example, an avionics examination would not be expected to examine for metal fatigue in the fuselage of an aircraft); (iii) the extent to which examination was reasonably possible without damaging or destroying the subject of the contemplated sale; and (iv) the extent to which the seller was prepared to allow examination. Next one required to ask, objectively, what an examination with the identified defining characteristics ought to have revealed. However, where the prospective buyer instructed an examiner, the private contractual arrangements of that instruction were not relevant. Such an approach to the terms of section 14(2C)(b) was consistent with the decision in Thornett & Fehr v Beers & Son and also with what was said in Bramhill v Edwards [2004] EWCA Civ 403; [2004] 2 Lloyds L R 653.

[29] In considering the submissions advanced respecting the proper construction of section 14(2C)(b) we think it convenient first to consider what assistance may be derived from the judgment in Thornett & Fehr v Beers & Son. The case was concerned with a contract for the sale of a number of barrels containing vegetable glue. Having arranged to inspect the glue, representatives of the buyer attended at the warehouse but, being apparently short of time in view of another appointment, they merely saw the barrels and left without opening any of them in order to ascertain the condition of the glue within the barrels. At page 489⅓ in the report of the judgment, Bray J acknowledges that the 1893 Act had altered the prior English law whereby an opportunity to examine the goods resulted ipso facto in the application of the rule of caveat emptor. The judge notes that under the statute it was no longer sufficient that the buyer should have had the opportunity of inspecting the goods; he must have examined them. The judge then says:

"I do not think the statute requires a full examination, because the words that follow show that the proviso deals with the case where the buyer has not made a full examination".

Pausing there, it might be thought that the judge was of the view that it was the actual examination conducted by the buyer and not the extent of the opportunity to examine which was envisaged in the statute. However, having thereafter narrated that the buyer's representatives did not open any barrels, the judge then concludes that the buyers "examined the goods within the meaning of the subsection". The judgment then continues:

"There can be no doubt that such an examination if made in the ordinary way would have revealed the defects complained of. The defects complained of were apparent the moment the casks were opened. The examination agreed to on September 18, which they had full opportunity of making on September 19, would involve the opening of a sufficient number of casks to ascertain the condition of the glue. I hold that this case falls within the proviso, and consequently there was no implied condition. Having found that it was not a sale by sample, and that there was no implied condition that the glue was merchantable, the defence fails, and the plaintiffs [the sellers] are entitled to judgment".

[30] We have to say that we have some difficulty with the terms of the judgment of Bray J. It respectfully appears to us that having acknowledged that opportunity for examination did not elide the implication of the warranty and that a "full examination" was not required, the judge then decides against the purchasers on the basis, which appears somewhat contradictory of his earlier view, that they did not avail themselves of an opportunity to open up the casks and to take samples (which was the only way in which the subject of the sale, namely the glue, could be inspected at all). We therefore think that the judgment of Bray LJ in Thornett & Fehr v Beers & Son does not provide any assistance.

[31] As already mentioned, counsel for the defenders referred to Bramhill v Edwards. The facts of that case and the procedure at first instance were perhaps not wholly straightforward. However, essentially, the plaintiffs bought an American "Dolphin" mobile home from the defendants, the external width of which slightly exceeded the maximum width permitted under Regulation 8 of the Road Vehicles (Construction & Use) Regulations 1986. There was a dispute as to representations said to have been made, or not made, respecting the width of the vehicle. The judge at first instance held that a representation as to width had been made but that it related to the interior of the vehicle. Since that width was the maximum permitted under the regulations for the external width of the vehicle, it was evident, in a sense, that the purchasers were informed of the external non-compliance. The judge at first instance also found that the excessive width did not render the vehicle to be of unsatisfactory quality. But in so far at section 14(2C)(b) of the 1979 Act was concerned, he held that the examination made by the purchasers, who were not only aware of the terms of the regulations but had lived in the "Dolphin" for some days prior to concluding the contract for its purchase, ought to have revealed the excessive width. As the section 14(2C)(b) defence had not been pled originally, issues arose as to whether at appellant level amendment of the pleadings was required. At paragraph 54 of his judgment Auld LJ says:

"54. Given the judge's finding, which I would uphold, that Mr Edwards made a representation as to the interior width of the Dolphin and that that should have alerted Mr & Mrs Bramhill to the effect that the over-all width was in excess of the permitted limit, this argument merges with that on the primary issue on which, as I have said, Mr Edwards should succeed. It also overlaps with the defence under section 14(2C)(b) of buyers inspection, on which, as I have said, I would also, if necessary, have upheld the Judge's finding. For that reason...the proposed amendment to the respondent's notice is unnecessary..."

The discussion of the terms of section 14(2C)(b) is thus essentially obiter but moreover proceeds upon the basis of a finding that the actual examination made was one which ought to have revealed the excessive width.


[32] With that discussion of the two authorities to which we were referred on this chapter of the argument we turn to what is perhaps the proper starting point in a question of statutory interpretation, namely the terms of the legislative provision. We have come to the view that there is force in the argument for the pursuer, based on the terms of the statute, which we have endeavoured to summarise. It is clear that the statutory provisions do not contemplate the giving, or existence, of an opportunity to examine the goods as eliding the implied warranty. The prospective purchaser may decline that opportunity and rely entirely on the implied warranty. That being so, it is hard to see good reason why the purchaser who only partially declines the examination facility or facilities on offer should be unable to rely upon the warranty in respect of that part of the examination facility or facilities of which he did not avail himself. Further, as counsel for the pursuers pointed out, the use of the words "that examination" clearly points in the direction of the particular examination which was in fact carried out. The statute does not refer to a reasonable examination but merely to "that examination". In these circumstances and looking to the terms of the legislation we have come to the view that before the seller may successfully invoke section 14(2C)(b) in order to limit the scope of the warranty, it has to be established that the actual examination carried out ought to have disclosed the defect or defects in issue.


[33] Counsel for the defenders largely eschewed the views of the sheriff principal to the effect that where an opportunity to examine the goods was provided it was incumbent upon the purchaser to carry out a full examination. The argument for the defenders proposed an approach more sophisticated or complicated than that advocated by the argument for the pursuer but at first sight it is not entirely clear to what extent the two arguments lie apart. We think that, if we have correctly understood the argument for the defenders and discerned the principal difference, it is that, on the defenders' contention, one departs from the simple factual question of what was actually done by way of examination or inspection and endeavours to classify the examination generically ignoring, as counsel insisted, the precise instructions or requests or contractual arrangements between the examiner and the purchaser; one asks instead the question what an examination of the particular category or type might have revealed. That appears to us to introduce an element of opportunity to examine which may not in fact have been taken up. In so far as the argument for the defenders thus appears to contain, or retain, an "opportunity" test, inconsistent with section 14(2C)(b), we consider it to be unsound.


[34] We would add that the view which we take, namely that section 14(2C)(b) is concerned with the examination which was in fact conducted and what that examination ought to have revealed, is consistent with the view expressed by Pape J in the Supreme Court of Victoria in Frank v Grosvenor Motor Auctions Pty Ltd [1960] Vic Rp 95; [1960] Vr 607 (to which we were not referred). The legislation then in force in the State of Victoria, namely the Goods Act 1958, contained in its section 19(b) provisions similar to section 14 of the 1893 Act, including a proviso identically worded to that in section 14(2) of the 1893 Act. In the course of his judgment Pape J observed in respect of that proviso:

"The proviso has a limited operation, and excludes the implication of a condition of merchantable quality only where it is shown that the defect which existed and which deprived the goods of their merchantable quality was one which the buyer's examination ought to have revealed.

.......

In order to ascertain whether the proviso operated the magistrate should have considered first whether the buyer did in fact examine the car before he agreed to buy and then (if he - the magistrate - decided that the buyer had in fact examined the car before the sale) whether the defects which had been proved to exist were such that they ought to have been revealed to the buyer by the examination which he made".


[35] We also find of interest the following passage in the annotation prepared by Professor Guest, to which we referred earlier. Professor Guest wrote:

"The exception ... set out in section 14(2)(b) reproduces, in changed language, the proviso to section 14(2) of the 1893 Act. A mere opportunity to examine the goods before the contract is made will not defeat the implication of the condition as to merchantable quality; and the substitution of the words "that examination" for the former 'such examination' indicates that the condition will only be excluded in respect of defects which should have been revealed by the actual examination made, and not those which would have been revealed by a reasonable or thorough examination if the actual examination is only cursory or partial". [emphasis in the original].


[36] As part of their submissions on this branch of the appeal, counsel for the defenders invited us to amend the findings in fact made by the sheriff as respects the inspection of the "Monaco". In the final proposed revised form the findings in fact on this aspect would read:

"3. The Pursuer thereafter instructed John Bain, a Marine Engineer with "Marine and Engineering Services Hebrides" to carry out a general survey of the boat. Notwithstanding that John Bain did not carry out a sea trial of the boat he provided the Pursuer with a favourable verbal report which did not include a detailed report of the condition of the boat's engine. He carried out a general marine survey. A general marine survey ought to have identified the weld and oil leaks referred to in findings in fact 11,12,13 and 14 and would have been seen by Mr Bain had the floor plates in the engine room been lifted. His report in relation to the engine being restricted to a visual inspection of the engine running and checking the engine gauges.

4. On 11 September 2002 the Pursuer and his wife met with the First Defender and Stuart Moir, a friend of the First Defenders on board the "Monaco" at Lochaline. A sea trial of the "Monaco" which lasted approximately 30 minutes was carried out. The Pursuer's examination of the engine as with John Bain's was superficial and comprised of a visual inspection of the outer casings of the engine which could be seen above the floor plates in the engine room. The Pursuer advised the First Defender that Stuart (sic: John) Bain had not carried out any detailed examination of the engine."

(proposed insertions in italics; deletions in italics but underlined)


[37] Mr Bain did not give evidence. It appears that he was in ill-health. However, there was evidence from another marine surveyor, Mr Morrison, that he would not expect a marine surveyor such as Mr Bain to lift the floor plates in the engine room. There was no contrary evidence respecting practice of marine surveyors. Nor was there any evidence that a surveyor who lifted the floor plates would necessarily have then discovered the defective weld in the absence of knowledge that the engine was using excessive quantities of oil.


[38] At one point in his testimony the first named defender (who had been present when Mr Bain came to inspect the vessel at Corpach), deponed that Mr Bain had lifted the floor plates. This was challenged by counsel acting for the pursuer. The sheriff principal was invited by the defenders to alter the sheriff's findings in fact so as to make a finding that Mr Bain had indeed lifted the floor plates in engine room but the sheriff principal declined to make those alterations for the reasons which he explains in his judgment (appeal print pp 76-77). In our view those reasons are well founded and the sheriff principal was correct in his decision to decline the invitation.


[39] In these circumstances we have come to the conclusion that it would not in any event be appropriate for us to alter the findings in fact in the respects in which counsel for defenders asked us to do.


[40] We accordingly have reached the conclusion that the sheriff did not misinterpret the provisions of section 14(2C)(b) of the 1979 Act and that his decision that the defects were not excluded from the scope of the implied warranty by virtue of that provision was sound. We turn now to the third issue.

Issue 3 - Rejection

[41] It is not in dispute that after learning from Mr Morrison of the nature and extent of the defects in the engine of the "Monaco" the pursuer, on 25 September 2002, telephoned Mr Robert Pollock, complained of the defects and told Mr Pollock that he was to take the boat back and return the purchase price. The sheriff found that in that telephone conversation the pursuer unequivocally rejected the vessel. The sheriff principal however reversed that finding on the basis, put very shortly, that the way in which matters proceeded afterwards rendered the pursuer's action equivocal. In particular the sheriff principal notes that although the pursuer instructed his solicitor that he wished his money back, the solicitor on 8 October 2002 served an initial writ which only claimed on the damages. For completeness we mention that the sheriff principal also rejected a contention on behalf of the defenders that the pursuer had done acts relating to the vessel inconsistent with the ownership of the seller and the sheriff principal's decision in that regard is not challenged by the defenders.


[42] It is unquestionable that the initial writ framed by the pursuer's solicitor sought only damages, including damages based on the estimated cost of repair. It also contained an averment of deliberate concealment of the defects and deliberate misrepresentation. Following lodging of defences there was a relatively lengthy adjustment period followed shortly thereafter by the lodging of minutes of amendment and answers thereto which themselves were subject to a lengthy period of adjustment. It appears that during this lengthy process of alteration and adaption of the pleadings the averment of deliberate misrepresentation was developed into a claim for reduction of the contract and repetition of the price. Averments were made respecting the telephone conversation of 25 September 2002 and the notes which the pursuer had made of that call were lodged and incorporated into the pleadings. The case of misrepresentation was subsequently dismissed by, it seems, excisim of some averments, but the averment seeking repetition of the price remained in the pleadings. It was however only in the course of the proof that the pleadings were amended to focus clearly that the action was one seeking repayment of the price following rejection of the goods.


[43] Counsel for the pursuer submitted that the sheriff was well entitled to find that the terms of the telephone conversation constituted an unequivocal rejection of the vessel. That was how, on the evidence, it was understood by both the pursuer and Mr Pollock. Once goods were thus rejected, they reverted to the seller and (absent further agreement between the parties) could no longer be accepted by the purchaser. Counsel acknowledged that there might be circumstances in which the purchaser might be personally barred from maintaining that he had rejected the goods. However, no case of personal bar was made in the present case. Counsel recognised that the initial writ appeared to have been framed without reference to the telephone conversation and did not sit consistently with what had happened in that conversation. However, pleadings were open to adjustment and amendment; and that had taken place so as to concur with the position adopted in the telephone call, rejecting the goods.


[44] Counsel for the defenders on the other hand submitted in summary that the terms of the telephone conversation were in themselves insufficient to constitute an unequivocal rejection of the vessel. But further, it was necessary to look not just at the telephone conversation but at the pursuer's actings as a whole. Reference was made to a passage in the judgment of Evans J in Graanhandel T Vink B.V v European Grain & Shipping Ltd [1989] 2 Lloyds L R 531 in which, after having referred to certain authorities, the judge at p.533 says that he takes from them -

"Secondly, an unequivocal rejection does not necessarily depend upon the terms of one communication alone. It is necessary to consider the whole of the relevant communications and also the buyer's conduct generally".

Counsel for the defenders also referred to Tradax Export SA v European Grain & Shipping Ltd [1983] 2 Lloyds LR 100. It was submitted that when one took the terms of the telephone conversation, in which it appeared reference had been made by the pursuer to putting the matter in the hands of his solicitors; the fact that the initial writ claimed only damages and not repetition of the price; and that only at the proof was the matter of rejection finally focused in the pleadings, the pursuer's whole conduct had been equivocal as to whether he had rejected the goods. The sheriff principal was thus correct in concluding that there had been no unequivocal rejection of the vessel.


[45] It is convenient first to examine the authorities to which we were referred. Tradax Export S A v European Grain & Shipping Ltd involved an appeal from the Board of Appeal in a GAFTA arbitration. The buyers, by a letter of 12 August 1974, gave notice of rejection of the goods (soyabean meal) on the ground that the fibre content exceeded the contractually stipulated maximum, that information having been communicated to them by an analysist's certificate on 8 August 1974. The buyers claimed arbitration and requested refund of the price. On 29 October 1974 the parties reached agreement as to the financial consequences of possible outcomes in the arbitration favourable to each party respectively. The Board of Appeal held that the buyer had lost its right to reject because the buyer had not shown what had happened to the soyabean meal between 12 August and 29 October 1974. In reversing the Board of Appeal the judge, Bingham J, noted that the Board of Appeal did not treat the buyers' rejection and claim for arbitration on 12 August as conditional or equivocal in anyway. However he went on to say at p.107:

"A finding that the buyers clearly rejected the goods and claimed arbitration does not in my judgment conclude this question in their favour. It might emerge as it did in Chapman v Morton (1843) 11 M & W 534, that the buyers were saying one thing and doing another, so as to invalidate their written statements or throw doubt on the bona fides or the unequivocal nature of their rejection. Or they might act in such a way as to create an estoppel against themselves. Or they might enter into a new agreement with the sellers involving an express or implied withdrawal of their rejection or a retransfer of title to them. It does, however, seem to me quite plain that once the buyers have proved what, on its face, amounted to a clear and unequivocal rejection of the goods and claim for arbitration, it is for the sellers to prove, if they can, that the apparent effect of the buyers' conduct was destroyed by other conduct having a different and inconsistent effect and not for the buyers to establish the negative case that they did nothing subsequently to disentitle themselves from asserting their rejection".

A little later in his judgment Bingham J continued:

"It follows from what I have said ...that events after August 12 were not irrelevant if they threw doubt on the bona fides of the rejection or showed a later agreement. But, subject to these possibilites, [counsel for the buyers] was in my opinion quite correct when he submitted that a clear, unequivocal and bona fide rejection of goods liable to rejection has the effect of preserving or revesting the ownership of the goods in the seller. He was also right to submit that the reference to acts inconsistent with the ownership of the seller in section 35 of the 1893 Act is concerned with acts occurring before rejection and (because they are deemed to amount to acceptance) precluding rejection and not to events occurring after rejection".

Thereafter reference is made to rules summarized in Chalmers, Sale of Goods 18th edition at page 197 to the effect that on rejection the goods have revested in the seller and absent a possible claim to act as an agent of necessity the buyer would be liable to the seller for conversion were he to sell the goods. The passage quoted in the judgment goes on to say that probably:

"...in such a case the seller could not claim that the buyer's conduct in selling the goods was inconsistent with a bona fide intention to reject them".


[46] The judgment in Vargas Pena Apezteguia y Cia SAIC v Peter Cremer G.m.b.H. [1987] 1 Lloyds LR 394 was not expressly referred to in the debate before us but is one of the authorities considered by Evans J in Graanhandel T Vink B.V. v European Grain & Shipping Ltd. It too was an appeal from a decision of the GAFTA Board of Appeal. The buyer contended that samples of the goods (Paraguayan cottonseed expeller) revealed on analysis a higher fat content than the maximum which had been stipulated under the contract. By telex to the sellers on 23 August 1984 the buyers intimated that they could not accept the cargo, which they had a right to reject. The telex however went on to say inter alia that

"In order to protect the cargo we herewith inform you that we will sell the cargo on 27 August 1984 at the best obtainable price through an independent international Broker (sic) basis CIF Rotterdam ...".

The sellers did not express any consent to that course but the buyers sold the cargo on 28 August 1984. At page 398 in the report of his judgment Saville J says

"It is not clear whether or not the Board of Appeal concluded that the buyers had exercised their right of rejection, but I agree with the parties that this is the first matter to consider. In my view the buyers did not exercise this right, but on the contrary must be taken to have accepted the documents when they sold the shipment on Aug. 28, 1984. [Counsel for the buyers] submitted that the telex of the buyers dated Aug. 23, 1984, constituted a clear and unequivocal rejection, so that later events were irrelevant - see Tradax Esport S.A. v European Grain & Shipping Ltd, [1983] 2 Lloyd's Rep. 100. Could that telex be so described I would agree with this submission - the later sale would then logically have to be treated as a wrongful interference by the buyers with goods which ex hypothesi would belong at that stage exclusively to the sellers. To my mind, however, a clear and unequivocal rejection is one where buyers indicate that they want and will have nothing more to do with the goods. In my view the telex is, in this regard, neither clear nor unequivocal, for the buyers simultaneously asserted that they were not accepting the cargo while also asserting that they would (if the sellers did not reply) deal with the cargo by selling it. The present case has interesting similarities to the situation in Chapman v Morton, (1843) 11 M. & W. 534 and I reach the same conclusion as the Court reached in that case - namely that up to the time of the resale (in the present circumstances on Aug. 28, 1984) the buyers had not unequivocally rejected the goods; and that such a resale was an act inconsistent with the ownership of the sellers and must therefore be treated as the acceptance of the buyers".

47. Graanhandel T Vink B.V. v European Grain & Shipping Ltd. was also an appeal to the Queen's Bench Division from a decision of the GAFTA Board of Appeal, the commodity in question being Ethiopian Nigerseed expellers. By a telex message of 2 August 1984 the buyers rejected the consignment on various grounds but made proposals for the disposal of the goods. Further telex messages ensued with the buyers contending for the need for urgent disposal, including reference to their acting negotiorum gestio, but on 7 August 1984, in response to a refusal by the sellers to accept that there was any basis for rejection and that they withheld any authority for the sale, the buyer nonetheless proceeded to sell the goods. Against that factual background and having referred to Chapman v Morton, Tradax Esport S.A. v European Grain & Shipping Ltd and Vargas Pena Apezteguia y Cia SAIC v Peter Cremer G.m.b.H., the judge - Evans J - then says in a passage from which we included only a portion of our earlier summary of counsel's argument:

"In my judgment, these authorities show, first, that an unequivocal rejection prevents a subsequent acceptance of the goods whether that be called an affirmation of the contract or otherwise. Similarly, an affirmation of the contract prevents a later rejection of the goods. It follows logically, as Mr Justice Saville said in the third of those cases, that a subsequent resale by the buyer is a wrongful conversion of the goods. I would observe in passing that if the seller has refused to accept the rejection, it would seem difficult for him to complain that a subsequent sale is a conversion. It may be - I do not need to decide this - that the effect of the seller's refusal of the rejection is to give a locus poenitentiae to the buyer, which would mean that the subsequent sale would not be wrongful but, of course, would be regarded as an affirmation of the contract. Secondly, an unequivocal rejection does not necessarily depend upon the terms of one communication alone. It is necessary to consider the whole of the relevant communications and also of the buyer's conduct generally. It is noteworthy that section 35 of the Sale of Goods Act, by reason of which a subsequent inconsistent dealing with the goods is deemed to be an acceptance of them, does not depend upon communication of any facts to the seller. It of course remains true that once the goods have been rejected there can be no subsequent acceptance of them. Thirdly, the buyer may be entitled to sell goods as an agent of necessity but, first, the facts must justify this in the particular case and, secondly, it has been said that no question of agency can arise if the necessary authority has been expressly refused".


[48] Having given consideration to the judgments in these cases, and recognising that to an extent the judgments contain an analysis or distillation of earlier cases, we attempt what might be described as a further analysis on the following lines. First, it appears from the judgments to be recognised and accepted that in the event of a clear rejection of the goods, subsequent acts of the buyer such as selling or doing any other material act respecting the goods constitute an unlawful interference with the property of the seller, the right of property having reverted to the seller by reason of the buyer's rejection of the goods. It might be thought that the commission of such an act is plainly inconsistent with the expression of rejection and therefore, on a prima facie reading of the particular sentence in the judgment of Evans J in Graanhandel T Vink B.V. v European Grain & Shipping Ltd. respecting the entirety of the conduct of the buyer, upon which counsel for the defenders particularly founded, renders the initial expression of rejection equivocal. So, to our mind, there is a possible, apparent tension between the notion of considering "the whole of the relevant communications and also of the buyer's conduct generally", and the principle that, given rejection of the goods by the buyer, any sale of or other transaction respecting the goods entered into by the buyer is an unlawful interference with the seller's property.

We have however come to the view that such tension arises only if the reference by Evans J to the whole of the communications and the buyer's conduct generally is read too widely. It is relatively easy to see that, as in Vargas Pena Apezteguia y Cia SAIC v Peter Cremer G.m.b.H., a communication from the buyer which says that the buyer rejects the goods but is proceeding to sell them is equivocal; and an ex facie unequivocal written communication purporting to reject the goods may be seen as not genuine if contemporaneously, or quasi contemporaneously, the buyer is taking actual steps to sell or otherwise deal with the goods. To that extent, a plurality of communications and parallel conduct may be relevant to the issue whether the goods were genuinely rejected. But, in our view, if a communication makes plain that the goods are rejected (and it is not shown that the communication was made in mala fide) that rejection is not retrospectively rendered equivocal by subsequent inconsistent conduct or statements. Such inconsistent conduct, or statements, might no doubt give rise in some cases to a plea of personal bar, and in the case of a sale or other exploitation of the goods, a delictual claim by seller, but they are not, we think, available to impugn retroactively the validity of the earlier unequivocal rejection.


[49] Against that consideration of the authorities before us, we turn first to consider the evidence respecting the telephone conversation of 25 September 2002, being the communication by which the pursuer says he rejected the "Monaco" and sought repayment of the price which he had paid. It is of course no longer contended by the defenders that, at that point, in knowledge of the defects in the vessel, the pursuer had done any act inconsistent with the ownership of the seller so as to amount to prior deemed acceptance in terms of section 35 of the 1979 Act. As already mentioned, it is not in any dispute that the telephone conversation took place. From the evidence, it is clear that the pursuer's intention was to make plain that because of the significant and costly defects of which he had been advised by Mr Morrison, he was rejecting the boat and seeking to get his money back. The notes which the pursuer had prepared at the conclusion of the telephone conversation were lodged and referred to in the pleadings. Importantly, in our view, in his evidence Mr Robert Pollock accepted that his understanding of the telephone conversation was indeed that the pursuer was rejecting the boat and requiring repayment of the price (transcript - 31 January 2006, p 85; 23 March 2006, p 61ff.).

[50] The sheriff, who of course heard and saw the witnesses on this matter, came to the conclusion that in the telephone conversation on 25 September 2002 the pursuer unequivocally rejected the boat and sought repayment of the price. In our view, having regard to the terms of the evidence, he was well entitled to reach that conclusion, which was the understanding of both parties. The sheriff principal, as we read his judgment, also accepts that in itself the telephone conversation amounted to a clear rejection. He says (appeal print, page 80):

"I agree with [the sheriff] that the telephone conversation of 25 September 2002 is capable of interpretation as a statement of rejection and to that extent I think he was correct to reject the contention of counsel for the defenders to the effect that it amounted to no more than an intimation by the pursuer of a wish to discuss matters. I am similarly sceptical of the submission by counsel for the appellants before me that the telephone conversation amounted only to an offer to unravel the transaction".

But that passage is preceded by:

"In my opinion it is necessary in a situation such as this to consider the whole circumstances of the transaction and its aftermath in order to determine whether a clear position of rejection of the vessel has been established by the pursuer. This, I think, the sheriff has not done or at least not done adequately".

The passage first quoted is followed by:

"The sheriff however has in effect confined his attention to the terms of that telephone conversation and declared them to constitute in his view an unequivocal rejection as if that alone was sufficient to determine the matter".

The sheriff principal then goes on in his judgment to refer to the dictum of Evans J in the Graanhandel case on which counsel for the defenders found and to what the sheriff principal conceives as being necessary, namely a formal solicitor's letter, and the terms in which the initial writ was framed.


[51] While the sheriff principal is thus critical of the sheriff's approach, it should be noted that the subsequent conduct to which the sheriff principal refers does not encompass any actings taken by the pursuer in respect of the vessel itself. There is no suggestion that after the telephone conversation in question the pursuer did anything to or with the Monaco. He neither used her, nor repaired her. The conduct to which the sheriff principal refers is the action of the pursuer's solicitors in serving an initial writ which claimed damages and did not assert that the goods had been rejected. That action is taken by the sheriff principal as retroactively rendering the rejection of the goods plainly and unequivocally stated in the telephone conversation nonetheless to be equivocal, and thus not a rejection.


[52] While we have by no means found this matter to be free of difficulty, on our reading and analysis of the authorities to which we were referred, we have come to the view that the sheriff principal may be said to have erred in thinking that the unequivocal terms of the rejection of the vessel, conveyed in no doubt blunt or robust terms, by the pursuer in his telephone conversation to Mr Robert Pollock and so understood by Mr Pollock in those terms were later rendered equivocal by the wording of the initial writ (which, incidentally and as the sheriff principal accepts, did not accord with the pursuer's instructions to his solicitors). As we have already mentioned, there was no question of the pursuer having taken any steps - by use or sale - respecting the vessel. The pursuer's conduct as respects the goods was thus entirely consistent with his position expressed in the telephone conversation. In all of the cases to which we were referred, the actings or behaviour of the buyer upon which reliance was placed were all in respect of the goods and took place prior to the raising of any proceedings. By contrast, what is founded upon in the present case are the terms of the pleadings - necessarily post litem motam. While the terms in which the solicitor initially framed the writ were not consistent with the fact of the pursuer's having earlier rejected the vessel, pleadings are indeed just pleadings and may be adjusted and amended. They do not generally alter the facts which existed prior to the raising of the action. While counsel for the pursuer accepted that the terms of the initial writ might have given a possible basis for a case of personal bar, it was not contended by counsel for the defenders that any plea of personal bar was advanced in this case. We have thus come to the view that also on this aspect of the case the sheriff was entitled to reach the result which he did.


[53] Accordingly we have reached the conclusion that all of the issues in the appeal fall to be answered in favour of the pursuer. It follows that we shall reverse the decision of the sheriff principal and restore the judgment of the sheriff.




[1]
Professor of English Law, Kings College, University of London


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