Teheran-Europe Company Ltd v S T Belton (Tractors) Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DIPLOCK,LORD JUSTICE SACHS |
| Judgment Date | 15 May 1968 |
| Judgment citation (vLex) | [1968] EWCA Civ J0515-1 |
| Date | 15 May 1968 |
| Court | Court of Appeal (Civil Division) |
[1968] EWCA Civ J0515-1
The Master Of the Rolls (Lord Denning)
Lord Justice Diplock And
Lord Justice Sachs.
In The Supreme Court of Judicature
Court of Appeal.
Mr. E. W. EVELEIGH, Q. C., and Mr. R. H. OTTON (instructed by Messrs. Lee Bolton & Lee, agents for Messrs. Roythorne & Co, Boston, Lincolnshire) appeared on behalf of the Appellant Defendants.
Mr. BERNARD FINLAY, Q. C., and Mr. W. A. B. FORBES (instructed by Mr. Eric G. L. Temple) appeared on behalf of the Plaintiff Respondents.
Teheran (Europe) Limited is a company incorporated in Persia which carries on business in Teheran. It imports machinery into Persia and re-sells it there. It buys machinery in England through an intermediary called Richards Marketing Ltd., which is an English company carrying on business in London. In 1957, the Managing Director of the Persian Co. came over to England. He was interested in machines called air compressors. Some of these machines were being offered for sale by a company called S. T. Belton (Tractors) Ltd., of Boston, Lincolnshire. That company had acquired several of these compressors as surplus Government stores. Eventually, a contract was made for the purchase of 12 of these air compressors at £340 each. Six of them were delivered. The Persian company complained that they were not up to contract and brought an action against S. T. Belton (Tractors) Ltd. for breach of contract. In that action two preliminary issues have been raised for determination.
The first issue is whether the following contention raised by the defence is correct: it says that: "The plaintiffs were at all material times an undisclosed foreign principal in respect of the agreement now sued upon, and there has at no time been any privity of contract between the plaintiffs and the defendants, and the plaintiffs are not entitled to sue the defendants in respect of their alleged cause of action herein (if any, which is denied)".
In order to understand this issue I must set out the material words of the agreement. On the 10th August of 1957 Richards Marketing Ltd. wrote to S. T. Belton (Tractors) Ltd, saying: We have been in communication with our clients and have been instructed to put forward an offer to purchase 12units at £300 each delivered London Packers…… We shall be obliged to have your acceptance to this"
On the 17th August, 1957, S. T. Belton (Tractors) Ltd. replied to Richards Marketing Ltd. saying: "We have been goinginto your offer very carefully. Our best offer is 12 units delivered free to your packers (London) for the sum of £340 each".
On the 19th August, 1957, Richards Marketing Ltd. wrote to S. T. Belton (Tractors) Ltd.: "We now have pleasure in confirming our acceptance as follows" and then a number of details: 12 air compressors "new and unused….delivered London Packers at £340 cash. "We shall require delivery of these, if convenient to you, two at a time with intervals of approximately 2/3 weeks commencing 9th September……Our clients are asking for a liberal supply of descriptive literature for advertising purposes in Iran……Yours faithfully, Richards Marketing Ltd."
It is to be noted that in those letters Richards Marketing Ltd. referred to the Persian company as "our clients", but did not name them. S. T. Belton (Tractors) Ltd. did not know who they were. The words "our clients" are ambiguous: they might denote that a Persian company were principals to the contract, or alternatively were customers to whom Richards Marketing Co. would re-sell. In these circumstances I think it was correct for the Defendants in the issue to describe the Persian company as "undisclosed foreign principals'. Their identity was not disclosed. Their existence as principals was not disclosed.
But the Persian company were principals to the contract, albeit undisclosed. They employed Richards Marketing Ltd. as their agents, paying them a commission. The Judge said: "I have no doubt whatsoever that as between the plaintiffs' and Richards, Richards acted throughout as the plaintiffs' agents and not as principals".
I think also that it was correct for the Defendants in the issue to state that there was "at no time privity of contract", strictly so called, between S. T. Belton (Tractors) Ltd. are the Persian company. S. T. Belton (Tractors) Ltd. did not look to the Persian Company of whom they knew nothing. They looked to Richards Marketing Ltd. who were the only people they knew.Richards Marketing Ltd, could I think sue and be sued on the contract in their own name. They signed the contract in their own name without qualification. They did not add the words "as agent for" or "for and on behalf of" or any of the phrases which exclude personal liability.
Nevertheless, I do not think that on this issue the contention of the defendants is well-founded. It is a well-established rule of English law that an undisclosed principal can sue and be sued upon a contract, even though his name and even his existence is undisclosed, save in those cases when the terms of the contract expressly or impliedly confine it to the parties to it. This rule is an anomaly, but is justified by business convenience. It has been held so for many years. The only question in the case is whether this rule (that an undisclosed principal can sue and be sued) extends to a case where the principal is a foreigner. In my opinion, the rule applies to a foreign principal Just as to an English principal. I know that nearly 100 years ago Mr. Justice Blackburn used words which have led people to suppose the contrary. In the case of Elbinger Actien-Gesellschaft v. Claye, in 1873, Law Reports, 8 Queen's Bench Cases, 313, he said: "yet where a foreigner has instructed English merchants to act for him, I take it that the usage of trade, established for many years, has been that it is understood that the foreign constituent has not authorised the merchants to pledge his credit to the contract, to establish privity between him and the home supplier. On the other hand, the home supplier, knowing that to be the usage, unless there is something in the bargain shewing the intention to be otherwise, does not trust the foreigner and so does not make the foreigner responsible to him, and does not make himself responsible to the foreigner."
I do not think tint usage of 100 years ago applies today. Overseas business is conducted very differently now from what it was then. In this case, as in nearly every other case, the foreign buyers opened a banker's commercial credit, so that thegoods, were paid for before they left England. On the 22nd August 1957, Belton (Tractors) Ltd. wrote to Richards Marketing Ltd.; "As these compressors are far export we must ask for cash payment before delivery as it is customary for us to have Irrevocable Credit on the equipment which we export".
In the light of modern usage I think that an undisclosed foreign principal can sue and be sued upon a contract, just as an undisclosed English principal can, save, of course, when the contract on its true construction limits it to the English intermediary and excludes a foreign principal. The fact that the principal is a foreigner is an element to be thrown into the scale on construction, but that is all. In the present "case there is nothing in the contract to confine it to Richards Marketing Ltd. I am quite clear that the Persian company can sue in its own name on the contract. I agree with the Judge on this issue.
The second issue is this: "What are or were the precise terms of the contract sued upon by the plaintiffs". This issue resolved itself into a discussion as to whether there was an implied term that the machines" should be reasonably fit for the purpose of resale in Persia as new and unused machines". It was said that this term was to be Implied under Section 14(1) of the Sale of Goods Act, 1892.
Now, as I read this contract, it was a contract for the sale of goods by description. These were air compressors, described as new and unused - described in the catalogue and in the correspondence. There was clearly art implied term that they should comply with the description as set. out in Section 13(1) of the Sale of Goods Act.
So far as Section 14(1) Is concerned, it is quite clear that the buyers made known to the sellers that they were required for resale in Persia. In the letter of the 10th August, 1967, Richards Marketing Ltd. wrote to S. T. Belton (Tractors) Ltd.: "We have now received provisional estimates for packing theseunits singly suitable for shipment to Khorranshahr, and cross-country transit". Khorranshahr, as far as I understand it, is in Persia. and then in the letter of the 19th August, 1957, they said, "Our clients are asking for a liberal supply of descriptive literature for advertising purposes in Iran". So that it is quite clear that the buyers made known to the sellers that they required them for resale in Persia.
But the section of the Statute contains a further requirement before a condition is Implied. The particular purpose might be made known to the seller so as to show that the buyer relies on the seller's skill and judgment. The Judge held that, once the purpose was made known, there was an inference that the buyer relied on the seller's skill and judgment. He quoted some of the speeches in the case of ( Manchester Liners, Ltd. v. Rea, Ltd. 1922, 2 A. C. 74). But that case has, in the last few days, been considered by the House of Lords in the Hardwicke Game Farm case. Lord Reid said: "I do not think that that case, Manchester Liners, Ltd. v. Rea, is any authority for the view which has some -times been expressed that, if the seller knows the purpose for which the buyer wants the goods, it will be presumed that the buyer relied on his skill...
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