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1999/0975/B2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE NORTHAMPTON
COUNTY COURT (HIS HONOUR JUDGE
CHARLESHARRIS QC)
Royal Courts of Justice
Strand
London
WC2A 2LL
27 July 2000
Before:
LORD JUSTICE PILL
and
SIR MURRAY STUART-SMITH
__________________________
Heathcote ball & Co (Commercial Auctions) Ltd
CLAIMANT/
APPELLANT
-and-
Paul Barry
DEFENDANT/
RESPONDENT
_________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
_________________________
Mr V. Moran (instructed by Messrs Woolley & Co, Northampton) appeared on
behalf of the Appellant
Mr A. Iles (instructed by Messrs Borneo Linnells, Milton Keynes) appeared on
behalf of the Respondent
_________________________
Judgment
As Approved by the Court
Crown Copyright ©
SIR MURRAY STUART-SMITH:
This is an appeal from a judgment of H H Judge Harris given at Northampton
County Court on 6 August 1999 in which he gave judgment for the Claimant for
£27,600 against the Defendants. The appeal raises a point of some general
interest and importance as to the effect of a sale by auction which is
expressed to be "without reserve".
The auction was held on 25 June 1997 at the Defendants' Auction Room in
Northampton. Mr Cross was the auctioneer. One of the lots for sale consisted
of two Alan Smart engine analysers. They were new machines being sold by
Customs and Excise because of some liability that the manufacturers had
incurred over VAT payment. The price of new machines from the manufacturers
was £14,521 each. Customs and Excise had instructed Mr Cross that the
machines were to be sold without reserve and he accepted them for sale on that
basis.
The Claimant runs a car tuning business. He saw the machines being delivered
to the auction house on 20 June. He returned on the viewing day and spoke to
Mr Cross who said that they would be sold at noon on 25 June without reserve.
The Claimant decided they would be useful in his business and decided to bid
for them.
The Claimant attended the auction house a few minutes before noon. When it
came to the lots in question Mr Cross said that the machines were to be `sold
that day' on behalf of the VAT office, that each was worth £14,000, `ready
to plug in and away you go'. He tried to obtain a bid of £5,000 to start
with; there was no bid; he tried £3,000; still no response. He then asked
what bids there were for the machines, and the Claimant bid £200 for each.
No other bid was made. In fact Mr Cross had received a bid from his son-in-law
for £400 each; but he made no mention of this.
Mr Cross then withdrew the machines from the sale. His explanation was: "I
could not see how I could sell for as little as this, even though it was
without reserve. I think I am justified in not selling at an auction without
reserve if I think I could get more in some other way later. I did not take up
[the offer of] £400. I thought they were worth more". He told those
present that he was not prepared to sell the machines for £200. They were
sold a few days later for £1,500 (£750 each) after advertisement in a
magazine.
The Claimant claimed damages on the basis that he was the highest bidder. The
particulars of the damage claimed was the difference between the value of the
machines, said to be £28,000 and the bid of £400.
The judge held that it would be the general and reasonable expectation of
persons attending at an auction sale without reserve that the highest bidder
would and should be entitled to the lot for which he bids. Such an outcome was
in his view fair and logical. As a matter of law he held that there was a
collateral contract between the auctioneer and the highest bidder constituted
by an offer by the auctioneer to sell to the highest bidder which was accepted
when the bid was made. In so doing he followed the views of the majority of
the Court of Exchequer Chamber in Warlow v Harrison [1859] 1 E & E
309.
He also held that this was the effect of condition 1 of the conditions of sale
which was in these terms:
"The highest bidder to be the purchaser; but should any dispute arise between
two or more bidders the same shall be determined by the auctioneers who shall
have the right of withdrawing lots."
The judge concluded that the first sentence meant what it said and the right
of withdrawal was conditioned on there being a dispute between bidders, and
there was none.
Mr Moran on behalf of the Appellant criticises this conclusion on a number of
grounds. First he submits that the holding of an auction without reserve does
not amount to a promise on the part of the auctioneer to sell the lots to the
highest bidder. There are no express words to the effect, merely a statement
of fact that the vendor has not placed a reserve on the lot. Such an
intention, he submits is inconsistent with two principles of law, namely that
the auctioneer's request for bids is not an offer which can be accepted by the
highest bidder (Payne v Cave (1789) 3 TR 148) and that there is no
completed contract of sale until the auctioneer's hammer falls and the bidder
may withdraw his bid up until that time (Sale of Goods Act 1979 S57(2) which
reflects the common law). There should be no need to imply such a promise into
a statement that the sale is without reserve, because there may be other valid
reasons why the auctioneer should be entitled to withdraw the lot, for example
if he suspected an illegal ring or that the vendor had no title to sell.
Secondly Mr Moran submits that there is no consideration for the auctioneer's
promise. He submits that the bid itself cannot amount to consideration because
the bidder has not promised to do anything, he can withdraw the bid until it is
accepted and the sale completed by the fall of the hammer. At most the bid
represents a discretionary promise, which amounts to illusory consideration,
for example promising to do something `if I feel like it'. The bid only had
real benefit to the auctioneer at the moment the sale is completed by the fall
of the hammer. Furthermore the suggestion that consideration is provided
because the auctioneer has the opportunity to accept the bid or to obtain a
higher bid as the bidding is driven up depends upon the bid not being
withdrawn.
Finally Mr Moran submits that where an agent is acting for a disclosed
principal he is not liable on the contract (Bowstead and Reynolds on Agency
16th Ed para 9-001 and Mainprice v Westley (1865) 6 B&S
421). If therefore there is any collateral contract it is with the principal
and not the agent.
These submissions were forcefully and attractively argued by Mr Moran. The
authorities, such as they were, do not speak with one voice. The starting
point is S57 of the Sale of Goods Act 1979, which re-enacted the 1893 Act,
itself in this section a codification of the common law. I have already
referred to the effect of subsection (2). Subsections (3) and (4) are also
important. They provide:
"(3) A sale by auction may be notified to be subject to a reserve or upset
price, and a right to bid may also be reserved expressly by or on behalf of the
seller.
(4) Where a sale by auction is not notified to be subject to the right to bid
by or on behalf of the seller, it is not lawful for the seller to bid himself
or to employ any person to bid at the sale, or for the auctioneer knowingly to
take any bid from the seller or any such person."
Although the Act does not expressly deal with sales by auction without
reserve, the auctioneer is the agent of the vendor and unless subsection (4)
has been complied with, it is not lawful for him to make a bid. Yet
withdrawing the lot from the sale because it has not reached the level which
the auctioneer considers appropriate is tantamount to bidding on behalf of the
seller. The highest bid cannot be rejected simply because it is not high
enough.
The judge based his decision on the reasoning of the majority of the Court of
Exchequer Chamber in Warlow v Harrison. The sale was of `the three
following horses, the property of a gentleman, without reserve'. The Plaintiff
bid sixty guineas for one of the horses; another person, who was in fact the
owner, immediately bid sixty one guineas. The Plaintiff, having been informed
that the bid was from the owner declined to bid higher, and claimed he was
entitled to the horse. He sued the auctioneer; he based his claim on a plea
that the auctioneer was his agent to complete the contract on his behalf. On
that plea the Plaintiff succeeded at first instance; but the verdict was set
aside in the Court of Queen's Bench. The Plaintiff appealed. Although the
Court of Exchequer Chamber upheld the decision on the case as pleaded, all five
members of the Court held that if the pleadings were appropriately amended, the
Plaintiff would be entitled to succeed on a retrial. Martin B gave the
judgment of the majority consisting of Byles and Watson BB. At p 316 he said
this:
"Upon the facts of the case, it seems to us that the plaintiff is entitled to
recover. In a sale by auction there are three parties, viz. the owner of the
property to be sold, the auctioneer, and the portion of the public who attend
to bid, which of course includes the highest bidder. In this, as in most cases
of sales by auction, the owner's name was not disclosed: he was a concealed
principal. The name of the auctioneers, of whom the defendant was one, alone
was published; and the sale was announced by them to be `without reserve.'
This, according to all the cases both at law and equity, means that neither the
vendor nor any person in his behalf shall bid at the auction, and that the
property shall be sold to the highest bidder, whether the sum bid be equivalent
to the real value or not; Thornett v. Haines (a). We
cannot distinguish the case of an auctioneer putting up property for sale upon
such a condition from the case of the loser of property offering a reward, or
that of a railway company publishing a time table stating the times when, and
the places to which, the trains run. It has been decided that the person
giving the information advertised for, or a passenger taking a ticket, may sue
as upon a contract with him; Denton v. Great Northern Railway Company
(b). Upon the same principle, it seems to us that the highest
bonâ fide bidder at an auction may sue the auctioneer as upon a contract
that the sale shall be without reserve. We think the auctioneer who puts the
property up for sale upon such a condition pledges himself that the sale shall
be without reserve; or, in other words, contracts that it shall be so; and that
this contract is made with the highest bonâ fide bidder; and, in case of
breach of it, that he has a right of action against the auctioneer."
And at p 317 he said:
"We entertain no doubt that the owner may, at any time before the contract is
legally complete, interfere and revoke the auctioneer's authority: but he does
so at his peril; and, if the auctioneer has contracted any liability in
consequence of his employment and the subsequent revocation or conduct of the
owner, he is entitled to be indemnified."
The two other members of the Court, Willes J and Bramwell B reached the same
conclusion, but based their decision on breach of warranty of authority.
Although therefore the decision of the majority is not strictly binding, it
was the reasoned judgment of the majority and is entitled to very great
respect. In Mainprice v Westley (1865) 6B of S, 421, the Court
distinguished Warlow v Harrison on the basis that in Mainprice's
case the principal was disclosed, whereas in Warlow's case he was not.
The judgment of the Court consisting of Cockburn CJ, Blackburn and Shee JJ was
given by Blackburn J. On this basis it was held that the agent was not liable.
With all respect to the Court, it does not seem to me that this was the basis
of the decision in Warlow's case; rather that there was a separate
collateral contract with the auctioneer; there is no reason why such a contract
should not exist, even if the principal is disclosed. It is indeed the basis
of an action for breach of warranty of authority. Moreover it was in fact
clear in Warlow's case that the auctioneer was selling as an agent.
In Harris v Nickerson [1873] LR 8 QB 286 CA the Defendant an
auctioneer, advertised a sale by auction of certain lots including office
furniture on a certain day and the two following days. But the sale of
furniture on the third day was withdrawn. The Plaintiff attended the sale and
claimed against the Defendant for breach of contract in not holding the sale,
seeking to recover his expenses in attending. The claim was rejected by the
Court of Queen's Bench. In the course of his judgment Blackburn J said at p
288:
"In the case of Warlow v. Harrison (1), the opinion of the
majority of the judges in the Exchequer Chamber appears to have been that an
action would lie for not knocking down the lot to the highest bonâ fide
bidder when the sale was advertised as without reserve; in such a case it may
be that there is a contract to sell to the highest bidder, and that if the
owner bids there is a breach of contract."
And at p 289 Quain J said:
"When a sale is advertised as without reserve, and a lot is put up and bid for,
there is ground for saying, as was said in Warlow v. Harrison
(1), that a contract is entered into between the auctioneer and the highest
bonâ fide bidder."
In Johnston v Boyes [1899] 2 Ch 73 Cozens-Hardy J also accepted the
majority view in Warlow's case as being good law. (See p 77).
The only other case to when I need refer is Fenwick v MacDonald Fraser and
Co [1904] 6F (Ct of Sess) 850. The sale was not without reserve because
the condition of sale reserved to the owner the right to make one offer for
each animal. The Lord Ordinary Lord Kyllachy appears to have decided the case
both on the grounds that there was a disclosed principal, following
Mainprice's case, and also that it was not a sale without reserve. In
the Court of Session the Lord Justice - Clerk agreed with the Lord Ordinary.
Lord Young held that because the purchaser could withdraw his bid until the
hammer fell, so could the seller. He also considered that the sale was not
`without reserve'. Lord Traynor considered that the law of Scotland had been
changed by the Sale of Goods Act 1893 which enabled a bid to be withdrawn until
the hammer had fallen. Prior to that date the highest bid had to be accepted.
The case however is not satisfactory, since there is no reference in any of the
judgments to Warlow v Harrison or the analysis of the reasoning of the
majority in that case. Moreover it is quite clear, as it seems to me, that it
was not a sale without reserve.
So far as text-book writers are concerned both Chitty (28th Edition
para 2-010) and Benjamin of Sale of Goods (5th Ed para 2-005) adopt
the view expressed by the majority of the Court in Warlow's case.
As to consideration, in my judgment there is consideration both in the form of
detriment to the bidder, since his bid can be accepted unless and until it is
withdrawn, and benefit to the auctioneer as the bidding is driven up. Moreover
attendance at the sale is likely to be increased if it is known that there is
no reserve.
As to the agency point, there is no doubt that when the sale is concluded, the
contract is between the purchaser and vendor and not the auctioneer. Even if
the identity of the vendor is not disclosed, it is clear that the auctioneer is
selling as agent. It is true that there was no such contract between vendor
and purchaser. But that does not prevent a collateral agreement existing
between the auctioneer and bidder. A common example of this is an action for
breach of warranty of authority, which arises on a collateral contract.
For these reasons I would uphold the judge's decision on liability.
Mr Moran submits that the judge was in error in awarding the Claimant
£27,600. He submits that he should have awarded no more than £1,600.
He described it as a pleading point, and I confess I have found it not
altogether easy to follow. The argument appears to be this: the judge's
assessment was based on the replacement cost of the machines, yet that was not
the way the Claimant's case was presented, at least until final submissions.
The pleading was `the Plaintiff claims the value of the machines, in the sum of
£14,000 each, less the bid price of £200 and the costs of the auction
£82. Sum claimed £27,518.' Mr Moran submitted that he had come to
meet a case based on the difference in value and not the cost of replacement.
In the course of the hearing Mr Moran objected to the Claimant giving any
evidence that he had replaced the machines and this objection was upheld. He
is therefor aggrieved that the judge appears to have assessed quantum on the
basis of the cost of a new machine. Rather he submits it should have been the
price at which they were eventually sold or £1,000 each which was what the
Claimant himself said he was prepared to bid for them.
The judge expressed the matter in the way at p 7 line 32:
"The Plaintiff is entitled to be put in the position in which he would have
been if the contract had not been broken, that is, he would have had two newly
manufactured engine tuning machines. There is no doubt that on the only
evidence there is these would have cost over £14,000 each to buy in the
ordinary way. There was no evidence that such machines could be bought
anywhere else by the Plaintiff for less, only that in fact these two were sold
elsewhere for a total of £1,500, which fact the Defendants were not
prepared at the time to tell the Plaintiff. It was not suggested that the
Plaintiff could or should have bought them himself via the magazine
advertisement for this sum.
The Plaintiff of course has to prove his loss. He says that he lost these two
new machines. Clearly he did. The Defendant's contention is that the value of
these machines, i.e. the measure of the Plaintiff's loss, was only £1,500,
but that sum would not put the Plaintiff into possession or into a position to
obtain possession of two brand new £14,000 tuning machines. If the
position had been that the Plaintiff was simply a trader only concerned with
the sale value of machinery which he was not going to use, then there is a
logic in the Defendant's contention. He would simply have lost a saleable item
with a value, on the evidence, of £1,500 at most. But the Plaintiff
wanted to use these new machines in his business and not trade them, and on the
evidence there was, namely that the manufacturer sold such new machines at
£14,521, and the auctioneer's assertion that they were worth £14,000
each, and there being no evidence that comparable machines could be got
elsewhere for less, I find that the measure of the Plaintiff's loss is indeed
£28,000, less the £400 of his bid, namely £27,600."
In my opinion the judge was entitled to approach the matter in the way he did.
Where a seller wrongfully refuses to deliver goods to the buyer, the measure of
damages where there is a market in the goods is prima facie to be ascertained
by the difference between the contract price and the market or current price of
the goods at the time when they ought to have been delivered. (Sale of Goods
Act 1979 S51(3)). Although this is not an action against the vendor, it seems
to me that the same measure of damages applies. It is not necessary that the
purchaser actually goes into the market and replaces the goods.
There was in fact evidence that the only market was to purchase from the
manufacturer and there was also the evidence of Mr Cross himself in his witness
statement that the machines are worth £14,000 each; this was supported by
the manufacturer's invoice. We do not in fact know whether the Claimant
purchased replacement machines and if so at what price, because Mr Moran
objected to the evidence being given, no doubt because he thought that the
judge might accept his argument based on the actual price at which they were
subsequently sold. If the Claimant had in fact replaced the machines at the
manufacturer's list price (the only market), then that would be the recoverable
damages, less of course the £400 bid. But of that there is no evidence.
In my view the judge was entitled to accept that on the evidence the value was
£14,000 each. I would therefor dismiss the appeal.
PILL LJ:
I agree that the auctioneer was under an obligation to sell to the highest
bidder, for the reasons given by Sir Murray Stuart-Smith.
I also agree that the judge was entitled on the evidence to award damages of
£27,600 for breach of that obligation. The use of the word "value" in the
claimant's pleading was in my view a sufficient indication that the claimant
intended to rely on the rule provided by section 51(3) of the Sale of Goods Act
1979. The judge was on the evidence entitled to hold that the manufacturer's
list price of £14,000 was the relevant market price of each machine.
The claimant was perhaps fortunate in that respect. In most cases involving
the sale of second-hand equipment, there will be evidence of second-hand prices
which would disentitle the judge from adopting the figure from the
manufacturer's list. In this case, the auctioneer's counsel objected to such
evidence being given in the hope that the judge would assess damages on the
basis of the sum of £750 each for which the machines were actually sold
subsequent to the auction. In my view the judge was not bound to find that the
sale price of those particular machines was the market price. His finding is
justified on the special facts of the case. The finding does not support a
principle that the manufacturer's list price is normally the market price of
second-hand goods.
Order: Appeal dismissed with costs; detailed assessment.
(Order does not form part of approved judgment.)
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