Triffit Nurseries (A Firm) and Others v Salads Etcetera Ltd (in administrative receivership) and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ROBERT WALKER,MRS JUSTICE SMITH,THE MASTER OF THE ROLLS |
| Judgment Date | 18 April 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0418-10 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CHANF 99/0011 A3 |
| Date | 18 April 2000 |
[2000] EWCA Civ J0418-10
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (LONGMORE J)
Royal Courts of Justice
Strand,London, WC2A 2LL
The Master Of The Rolls (lord Woolf)
Lord Justice Robert Walker and
Andmrs Justice Smith
Case No: CHANF 99/0011 A3
Mr Edward Bannister QC (instructed by Actons for the appellant)
Mr Simon Mortimore QC (instructed by Walker Morris for the respondents)
The main issue in this appeal is concerned with the beneficial ownership of money collected by administrative receivers appointed by a bank to take over the assets and undertaking of a mercantile agent.
The facts were not in dispute (although there is a subsidiary issue as to the costs implications of two notices to admit facts) and they were put before the court in the form of two statements of agreed facts, amplified by witness statements on which there was no cross-examination. The following summary is an abbreviated version of the fuller statement of facts in the judgment of Longmore J, which is reported at [1999] 1 AER (Comm) 110. The parties' co-operation in agreeing statements of facts is commendable, but (as sometimes happens in such cases) some points have emerged in this court on which there is nothing in the agreed statements, and therefore no finding by the judge.
The claimants are all growers of vegetables, and in particular salad vegetables such as lettuce, tomatoes and cucumbers, in the north- east of England. The first defendant Salads Etcetera Ltd ("Salads") had premises at Newport, North Humberside. It took delivery of produce from growers (including, but by no means limited to, the five claimants) and sold the produce on either by direct sales to supermarkets (which took Class I produce) or to wholesale markets (which took Class II produce, or Class I produce not sold by direct sales). Unsold produce was treated as waste. Salads dealt with the claimants as a mercantile agent, although there were some other suppliers from whom Salads bought produce which it sold on as a principal. It charged the claimants a commission on all produce which it sold, even if the produce was rejected by the customer. Salads also debited each grower with the wholesaler's commission on market sales.
There were no written agreements between Salads and any of the claimants but there was standard documentation which evidenced the way business was done between them: the growers' delivery notes; weekly stock sheets prepared by Salads and sent to individual growers; weekly growers' returns prepared by Salads and sent out with the stock sheets, showing the prices achieved and deductions for Salads' commission on direct sales (described as 'haulage') and for wholesalers' commission; and (where relevant) invoices for packaging materials sent by Salads to growers. These are described in more detail in the judge's judgment.
Salads might decide to pool produce from different sources for more efficient marketing. This was known to the claimants and must therefore have been accepted by them. When pooling had taken place the growers' returns would show an average price obtained that week by all produce of that type and grade. The delivery notes and invoices which Salads sent to its customers did not identify the grower which had consigned the produce; nor did the weekly stock sheets and growers' returns identify the customer, although a supermarket customer might be identified by the packaging which a grower was required to use. There was not in practice any direct dealing between grower and customer. Salads made payments to growers by BACS transfer at a fixed period (at first three weeks and later four weeks) after the week of sale. Most customers had credit terms requiring payment to Salads within that period, but two supermarkets had used their economic power to secure 35-day credit terms.
Salads had been incorporated on 23 October 1989 and on the same day it entered into a debenture in favour of the Royal Bank of Scotland. This contained a fixed charge on Salads' freehold and leasehold property and other specified categories of assets including book debts, and a floating charge on all its other assets and rights. The five claimants (two limited companies and three partnerships) began dealing with Salads on a regular basis at various dates between April 1990 and February 1994. Salads did not prosper and on 11 October 1994 the bank exercised its power under the debenture to appoint the second and third defendants, Mr Michael Hore and Mr Keith Hinds, as administrative receivers.
At the time of the appointment of the receivers there was no saleable growers' produce on Salads' premises, nor was any further produce consigned by growers after that time. Nothing further, therefore, was sold or delivered to customers by Salads' receivers after their appointment. So far as the growers were concerned the receivers' only task was to get in trade debts from past sales of produce. The receivers got in debts of over £666,000, but Salads' debt to the bank was about £1.878m when the receivers were appointed, and its total liabilities were very large. It does not appear from the agreed facts how much of the £666,000 was in respect of sales of produce consigned by the five claimants, but it was clear that neither they nor other growers in a similar position would receive anything significant unless they could establish that the receivers held the money in trust for them, and not as part of Salads' assets. That was the claim which the claimants put forward before the judge, and which they again put forward on appeal to this court.
It was not and is not the claimants' case that while Salads was trading, it held the proceeds of sales to customers as a trustee and was obliged to keep them separate from its own funds. It was at liberty to mix the proceeds with its own funds and use them for its own purposes, subject to a contractual obligation to account to the claimants (and other growers with whom it was in an agency relationship). The judge noted that that concession stemmed from cases such as Henry v Hammond [1913] 2 KB 515, Neste Oy v Lloyds Bank [1983] 2 LLR 658 and the Australian case of Walker v Corboy (1990) 19 NSW LR 382. He also referred to what he rightly called the illuminating discussion in Bowstead & Reynolds on Agency, 16th ed para 6.043 (approved, in the previous edition, by Lord Goff in Napier v Hunter [1993] AC 713, 744).
The case put forward by Mr Edward Bannister QC (appearing in this court, as below, for the claimants) was that a change of critical importance occurred when the receivers were appointed and Salads' business ceased to be a going concern. At that point, he submitted, the authority of Salads to act as agent on behalf of the claimants came to an end, and with it the debtor-creditor relationship which had previously existed between Salads and the claimants (and other growers dealing with Salads on similar terms). Mr Bannister has placed particular reliance on the decision of this court in Re Farrow's Bank [1922] 1 Ch 51 and has described that case as exemplifying a principle established at latest by the middle of the eighteenth century.
The judge analysed Re Farrow's Bank in detail. Mr Voyce was a customer of Farrow's Bank and on 16 December 1920 he paid into its Birmingham branch a cheque drawn on another bank. The cheque was sent to clearing agents and was finally cleared (by the cessation of any relevant right of recourse) at 12.30pm on 21 December. However Farrow's Bank had suspended payment at the opening of business on 21 December, and news of this had been telegraphed to all its branches before 12.30pm.
Before Astbury J there were two issues: whether Farrow's Bank took the cheque on 16 December as a holder for value or as a collecting agent; and whether (if it took the cheque as a collecting agent) it had effectively changed its relationship with its customer from that of agent and principal to that of debtor and creditor. Astbury J held that the bank took the cheque as a collecting agent, and there was no appeal on that point. He also held that the bank's authority to effect a change of the relationship came to an end when the bank had, to the knowledge of its Birmingham branch, suspended payment ( [1922] Ch 41, 51):
"That being so it seems to me that after ceasing to act as a going concern and stating their intention no longer to act as a going concern they had no longer any authority from Voyce to take what was in fact his money received after the stoppage and convert it into money forming part of their assets, in respect of which they would be entitled to assume the position of debtors instead of agents."
This court upheld the decision that the bank's suspension of payment had a crystallising effect which terminated its authority to complete the collection of the cheque and to treat Mr Voyce as its creditor for the amount of the cheque. Lord Sterndale MR put the point in these terms ( [1922] 1 Ch 41, 53),
"If [the bank] received [the amount of the cheque] before they suspended payment, they then held the money simply in the relation of debtors to their customer; if they did not receive it till after the suspension, then they had given up all their functions as a bank, and they had no right to receive the money and retain it, and the customer would be entitled to recover it."
It has not been suggested that Re Farrow's Bank does not bind this court (although there was some discussion before the judge as to whether, and why,...
To continue reading
Request your trial
-
On the Relations between Agent and Principal: Angove's Pty Ltd v Bailey
...made a similar point: see P. Watts, ‘The Insolvency of Agents’ (2017) 133 LQR 11, 12.44 n 1 above at [16].45 ibid.46 ibid.47 ibid.48 [2001] BCC 457. I am grateful to Charles Mitchell for drawing this case to my attention.49 ibid, 463–464. Indeed, as Robert Walker LJ noted, it would have bee......