NOTES OF CASES

Published date01 January 1985
DOIhttp://doi.org/10.1111/j.1468-2230.1985.tb00827.x
Date01 January 1985
NOTES
OF
CASES
REMEDIES
FOR
ECONOMIC
Loss
AGAINST
A
SUB-AGENT
THE
tentative recognition of recovery for “pure economic loss” in
the tort of negligence made by the House of Lords in the famous
(or notorious) decision of
Junior
Books
Ltd.
v.
Veitchi
Co.
Ltd.’
offers for reconsideration issues previously dealt with not only by
the rules of contract, but also by the rules of property, trusts and
restitution. The significance of this development of negligence for
these other legal rules may be illustrated by the various conceptual
approaches available for analysis of the facts of
Balsamo
v.
Medici?
a recent decision of Walton J.
The plaintiff, an Italian
ci-devant
marquis, owned a
1937
BMW
motor car, which he wished to sell. He arranged with the first
defendant, Medici, a dealer in cars with whom he was on friendly
terms, to have the car transported to England and sold at auction
and instructed him to pay the proceeds of the sale, less expenses,
to a Mrs. Zecchi, whose London telephone number he gave him.
Unknown to the plaintiff, Medici contacted the second defendant,
Morris, a tug-boat captain with an interest in old cars, who acted
as his man of business in England, being repaid by free holidays in
Italy. Morris arranged for the car to be sent to auctioneers where it
was sold for
215,000.
Wishing to return to Italy, Medici arranged
with Morris that the latter should receive the cheque drawn on the
auctioneers to his account and then pay the sum by cheque to Mrs.
Zecchi, whose name and telephone number Morris noted on an
auction catalogue. However, Morris lost this catalogue, and with it
the number, though he still retained Medici’s Italian address.
Later, Morris received the cheque for the proceeds of sale from
the auctioneers and placed it to his own credit. Medici informed
the plaintiff of Morris’s role in the payment, with which he was
satisfied as he considered him trustworthy. Unfortunately, two
rogues had found out that Morris was to pay Mrs. Zecchi for the
BMW car. One of these posed as Mrs. Zecchi, telephoning Morris
frequently to arrange for payment. She persuaded him to hand
over the proceeds of sale in cash to her accomplice, one Julian,
who posed as Medici’s accredited agent. The two confidence
tricksters then disappeared. Throughout, Morris had been unaware
of the plaintiffs existence, thinking that he was acting solely for
Medici.
The plaintiff, on hearing of the payment by Morris into wrong
hands, sued Medici, his agent, for the sale price, less expenses, as
an account or by way of damages for breach of contract. Medici
did not, however, appear at the trial, nor did he serve a third party
1983
A.C.
520.
*
119841
2
All
E.R.
304.
86
Jan.
19851
NOTES
OF
CASES
87
notice on Morris requiring him to account
as
sub-agent. As Walton
J.
made clear, there was no doubt that Medici was liable for the
proceeds of sale, it being no defence that they were received by his
sub-agent, rather than by himself. Moreover, as between the two
agents, the learned judge considered that Morris’s non-compliance
with his instructions would make him liable to Medici. However, it
appears that Medici had become insolvent, though it is unclear
whether this was brought about by the threat of the liability in
issue or for other reasons.
Thus, for Balsamo the crucial issue was whether he had a
remedy directly against Morris which would enable him to sidestep
the probable insolvency of his own agent, Medici. The various
ways in which Balsamo may put his grievances find their
counterparts in the various classifications
of
legal remedies
potentially available.
So,
complaints based on broken promises
seem suitable to be dealt with by the law of contract, while those
which emphasise the loss caused by careless action, the tort of
negligence. Balsamo’s claims against Morris based on his receipt of
the proceeds suggest the possibility of a proprietary, or perhaps
restitutionary, remedy. It is proposed to treat these analyses in
turn, with a view to finding the technique which is best suited to
giving effect to the various considerations of policy which apply.
But what are the policy considerations to be taken into account
in deciding whether to make a sub-agent directly liable to the
principal? Some possible factors appear behind the various
conceptual analyses mentioned already. Thus, we have less
sympathy towards a defendant if he has caused harm through lack
of care, rather than taking all normal precautions; or if he holds
value which ought not to remain with him, but be transferred.
Conversely, if the defendant no longer retains value received, we
should perhaps no longer
ask
him to transfer an equivalent to the
value received, again, unless its loss was owing to his own lack of
reasonable care.
If
the defendant has failed to do as we would
expect of him, by reason of a relationship existing between himself
and the plaintiff, we would again have less sympathy. Two further
considerations which do not appear directly from the conceptual
analyses may also be helpful in our decision. We may be quicker to
impose liability on someone who is getting paid for his services,
even if he is not being paid by the plaintiff. And we ought to be
more happy to impose liability on a professional supplier of services
than on a non-professional. The readiness of English courts to
impose liability on professional advisers is made clear by their
development of
Hedley Byrne
&
Co.
Ltd.
v.
Heller
&
Partners
Ltd.3
Apart from any possible spreading of the risk of his own
incompetence by increased charges for his services, it is reasonable
to expect a professional to take out appropriate insurance. The
[1964]
A.C.
465.

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