Worcester Works Finance Ltd v Cooden Engineering Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER of THE ROLLS,LORD JUSTICE PHILLIMORE |
| Judgment Date | 20 July 1971 |
| Judgment citation (vLex) | [1971] EWCA Civ J0720-2 |
| Date | 20 July 1971 |
| Court | Court of Appeal (Civil Division) |
[1971] EWCA Civ J0720-2
The Master of the Rolls (Lord Denning),
Lord Justice Phillimore
and
Lord Justice Megaw.
In The Supreme Court of Judicature
Court of Appeal
Appeal by plaintiffs from judgment of His Honour Judge Herbert at Westminster County Court on 10th December, 1980.
Mr. I. JACOB (instructed by Messrs. D. H. P. Levy & Co.) appeared on behalf of the Appellant Plaintiffs.
Mr. TIMOTHY STOW (instructed by Messrs. Higgs Thompson & Samwell of Sutton, Surrey) appeared on behalf of the Respondent Defendants.
This case raises again the question of which of two innocent people should suffer owing to the fraud of a third. In June of 1966 the Cooden Engineering Co. Ltd. or their parent company owned a Ford Zephyr motor oar. A dealer called Griffiths (who turned out to be a fraud) wanted to buy it from the Cooden Company; He said he had a customer to whom he wanted to re-sell it. The Cooden Company agreed to sell it to Griffiths for the sum of £525. Griffiths gave them his cheque dated the 21st June of 1966 for £525. He took delivery of the car and the logbook with it. On the 14th July, 1966, he was registered with the registration authority as the owner of the car. In point of fact, he did not pay for the car. His cheque was returned dishonoured. But more of that hereafter.
Whilst Griffiths still had the car, he made arrangements with a man called Millerick (whom one suspects was in the fraud) by means of which Griffiths got money from a finance company called Worcester Works Finance Ltd. Griffiths and Millerick filled up documents which on the face of them appeared to evidence the following transaction; on the 14th July 1966 Griffiths invoiced this oar to Worcester Finance Ltd. at a price of £645, less initial payment of £195, leaving £450. Woroester Finance paid the £450 to Griffiths and thus became the owners of the car. By a hire-purchase agreement dated the 14th July 1966, Worcester Finance let the car on hire-purchase terms to Millerick at a total hire-purchase price of £757. 7s.6d. payable at £20. 15s,10d. a month for 26 months. Millerick signed a delivery receipt acknowledging that he had taken delivery of the car.
Those documents told a false story. Millerick never took delivery, never paid any deposit, or any instalment of hirecharges. The truth was that Griffiths took the car to Millerick's house. He left it outside. He went in and got Millerlck to sign the documents. Griffiths then went off in the oar with the documents. He sent the documents up to the Worcester Finance company and got £450 from them on the faith of the documents. The Worcester Finance Company did not see the car or have anything to do with it. They simply received the documents, assumed they were genuine, and paid out the £450. Griffiths retained the car in his own possession. Millerlck never had it.
Let me return to the original transaction. The Cooden Engineering Co. had sold the car to Griffiths and received a cheque from him for £525. They presented the cheque for payment but it was dishonoured. It was re-presented and still dishonoured. It was dishonoured three times. Not being paid, Cooden on the 15th August 1966 determined to re-possess the car. They sent a man along to Griffiths' premises. The car was still In Griffiths' custody. So Cooden took possession of it. So far as Cooden were concerned, they thought that the cheque not having been met, they were entitled to re-take possession, and they did so. The man who re-took it said: We all thought it belonged to Cooden, because the cheque had been dishonoured… fter Cooden had got the car back, they used it in their own fleet of self drive cars.
Now I must return to Griffiths again. He had, as I have said, received £450 from Worcester Finance, and paid out nothing. But he did not want his fraud to be discovered. So he – no doubt In league with Millerlck – kept up the hire instalments for several months. He paid some £240, but then stopped altogether. (That still left Griffiths well in hand.) Afterthat time, Griffiths kept the Finance Company quiet for a time by asking for a settlement figure at which Millerick could buy the car. The Finance Company quoted £310, being the balance of the hire-purchase pride. But nothing was ever paid.
I come back now to the Cooden Engineering Company. They used the car in their own fleet for a time, but afterwards let it out on hire-purchase themselves: and they registered their interest with the Hire-Purchase Information Bureau, In consequence the Worcester Finance Company got to know that the car was in the hands of the Cooden Engineering Co. Thereupon the Worcester Finance Company claimed that the car was theirs. Now they bring this action for damages for conversion. They have limited their claim to £315'Os, 10d., which was the balance of the hire purchase price. The Worcester Finance Company rely on the documents which were executed, which, on the face of them, give them the title to the car. They claim £315 which is the balance outstanding, recoverable in conversion.
The Cooden Engineering Co. in answer rely on the provisions of Section 25 of the Sale of Goods Act 1893. subsection (1), which says:
"Where a person having sold goods continues or is in possession of the goods…. The delivery…. by that person…. of the goods…. under any sales, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery… were expressly authorised by the owner of the goods to make the same."
Cooden apply that section in this way: They say thatGriffiths was a person who, having sold goods to the Finance Company, continued in possession of them.
The Judge has found (and it is no longer disputed) that when Cooden delivered the car and logbook to Griffiths and received the cheque for £525, then that was a completed sale to Griffiths. That was in June of 1966. So Griffiths was the owner of the car at that time and was in possession of it. Then when Griffiths on the 14th July 1966 invoiced the car to the Worcester Finance Company, he was "a person who had sold goods" to the Finance Company: and was thus within the opening words of section 25(1). So far there is no difference between the parties.
The question is whether Griffiths comes within the words: Was he a person who "continues or is in possession of the goods"? The material word here is "continues". The words "or is" have been explained in a New Zealand case of Mitchell v, Jones (1905) 24 N. Z. L. R. 932, which was approved by the Privy Council in Motor Auctions PTY Ltd. and Motor Credits (Hire Finance) Ltd. 1965 A. C. 867, They refer only to a case where the person who sold the goods had not the goods when he sold them, but they came into his possession afterwards. Those words "or is" do not apply to this case because Griffiths, at the time when he sold the car to the Worcester Finance Company, was already in possession of it. The only relevant word is therefore "continues". Was Griffiths a person who, having Sold goods, Continues in possession of the goods"?
Mr. Jacob, who appears for the Worcester Finance Company, submits that the words "continues in possession" mean continues in lawful possession. He says that, after Griffiths sold the car to the Finance Company, he ought to have delivered it to thehirer Millerlck: and that, by retaining it himself, he retained it unlawfully; and he was, vis-a-vis the Finance Company, a trespasser. He was in possession of it without their consent at all. In support of this contention Mr. Jacob relied on two oases: Staffs Motor Guarantee Ltd. v. British Wagon Co. Ltd., 1934 2 K. B. 305, applied in this Court in Eastern Distributors Ltd. v. Goldring (Murphy. Third Party). 1957 2 Q. B. 600. In those cases it was held that the words "continues in possession" mean continues in possession as seller and not as bailer: and accordingly, if the person, who had sold goods, continued in possession as a bailee: he did not "continue in possession" within the meaning of the section. But those cases are no longer good law. They were disapproved by the Privy Council in Pacific Motor Auctions and Motor Credits, 1965 867: and, although decisions of the Privy Council are not binding on this Court, nevertheless when the Privy Council disapprove of a previous decision of this Court, or cast doubt on it, then we are at liberty to depart from the previous decision. I am glad to depart from those earlier cases and to follow the Privy Council. The words "continues in possession" refer to "the continuity of physical possession, regardless of any private transaction between seller and purchaser which might alter the legal title under which the possession was held". This is how Lord Pearce put it in 1965 A. C. at page 888. It does not matter what private arrangement may be made by the seller with the purchaser – such as whether the seller remains as bailee or trespasser, or whether he is lawfully in possession or not. It is sufficient if he remains...
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