Scottish Court of Session Decisions

At advising on 14th May 1965,—

LORD PRESIDENT (Clyde).—The issue in this case is whether a motor car at present in the custody of the Procurator-fiscal belongs in property now to Mr Kerr (the defender and real raiser) who at one time admittedly owned the car, or to Mr Gibson (the defender), who claims that it is now his. After a proof the Sheriff-substitute decided the issue in favour of Mr Kerr and Mr Gibson has appealed to the Court of Session against this decision.

The facts are not essentially in dispute. Prior to 12th February 1964 the car was owned by Mr Kerr. He wished to dispose of it and advertised it for sale. On 12th February 1964 a man called on him in reply to the advertisement and after negotiations Mr Kerr agreed to take £375 for the car. This man purported to be named L. Craig, although his true name was Galloway. Galloway wrote out a cheque for £375, signing it "L. Craig." Mr Kerr gave him the registration book, and Galloway drove the car away. Next day Mr Kerr ascertained that the cheque book had been stolen and the cheque was dishonoured. Mr Kerr at once informed the police. On 14th February Galloway, purporting to be Mr Kerr, called at Mr Gibson's garage with the car and sold it to Mr Gibson for £185 plus a small credit against the purchase of a new car. Mr Gibson purchased and paid for the car in good faith and without any knowledge of any defect in Galloway's title. Shortly thereafter the police took possession of the car. It was on these facts that the issue before us arises.

The Sheriff-substitute decided the case upon the view that Galloway had stolen the car from Mr Kerr and he invoked the well-known principle that, where goods are stolen, the true owner has a right to recover them even against a third party who bona fide acquired them. In the view of the Sheriff-substitute, therefore, Mr Kerr could now recover the car and Mr Gibson has no right to it. But the fallacy of this conclusion is that the car was not in fact stolen from Mr Kerr at all; he voluntarily agreed to transfer the car to the person who called in answer to the advertisement, and he did so transfer it. To constitute theft of the car from Mr Kerr there would have to be a taking away from Mr Kerr without any intention on his part to convey it and without his consent to the transfer (Hume on Crimes, vol. i, p. 57; Alison, Criminal Law, vol. i, p. 259). On the facts in this case it is clear that Mr Kerr intended to transfer the car and did in fact voluntarily transfer it to the man who appeared in answer to the advertisement, whom he honestly regarded as purchasing the car. The facts in the present case therefore exclude theft. It was consequently not open to the Sheriff-substitute to hold that the car was stolen from Mr Kerr.

The Sheriff-substitute appears to have been misled into treating the present case as one of theft by passages in Professor T. B. Smith's Short Commentary on the Law of Scotland criticising the decision in Morrisson v. Robertson . But Professor Smith's criticism is erroneous. In Morrisson's case, as in the present, the seller of the article (in that case cows) was willing to convey the article for a price, and therefore no question of theft arose. But in Morrisson's case the party with whom he negotiated (a man Telford) fraudulently represented himself as agent of a Mr Wilson, who was known to Morrisson to be a dairyman of good credit, with whom Morrisson had previously had dealings, although in fact Telford was not Mr Wilson's agent and had no authority from Mr Wilson to negotiate at all. The court held that there was no sale of the cows, as Morrisson had been deceived by the false representation that he was selling to Wilson. The case was decided accordingly on the ground that here was an essential error as to the identity of the purchaser, and the contract was therefore void.

Professor T. B. Smith in his Short Commentary on the Law of Scotland (at p. 816) says in relation to this decision that "the case was argued and apparently decided (except possibly by Lord M'Laren) on a false premise—that this was a case of error regarding the identity of the purchaser, like the English case of Cundy v. Lindsay . It seems self-evident that this was a misconception … Telford was in the position of a thief, and a vitium reale would taint any res handed over to him … The decision was right but the ratio decidendi of the majority cannot be relied on with confidence." In reality, however, the alleged misconception was a correct inference from the facts and was the basis of the opinions of all the judges in the Division. The case truly was a case of error regarding the identity of the purchaser, and the learned author is quite wrong in suggesting that Telford was in the position of a thief, for Morrisson voluntarily and intentionally delivered the cows to Telford. As Lord M'Laren says (at p. 336), the pursuer "believed he was selling his cows to Wilson whom he knew to be a person of reasonably good credit and to whom he was content to give credit for the payment of the price." In my opinion the decision in Morrisson's case is a sound one, and the ratio decidendi (namely, error as to the identity of the purchaser) was the correct ratio.

In the present case, however, the true position is that there was a completed contract of sale of the car by Mr Kerr to Galloway. For there was no dubiety in the present case as to the identity of the purchaser, namely, the man who came in answer to the advertisement. But the seller, Mr Kerr, was induced to enter into the contract by false and fraudulent misrepresentations on the part of Galloway. In law the result is that there was a contract of sale, but it was voidable at the instance of Mr Kerr. As Lord Kinnear says in Morrisson's case (at p. 338), "the principle is that a contract obtained by fraud is not void but voidable; and since it follows that it is valid until it is rescinded, the rescission may come too late if in the meantime third parties have acquired rights in good faith and for value." (Compare Gloag on Contract, (2nd ed.) p. 534, note 1.) In the present case, in my opinion, although this contract with Mr Kerr was voidable, it was not rescinded before Mr Gibson had acquired the car in question from Galloway in perfect good faith and for value. For Mr Gibson knew nothing of Galloway's fraudulent operations. In my opinion, therefore, the car now belongs to Mr Gibson.

It was finally contended on behalf of Mr Kerr that, even assuming the contract was merely voidable and not void, Mr Kerr had rescinded the contract before the resale to Mr Gibson. There is no averment and no plea in law to support this contention, and it does not appear to have been argued to the Sheriff-substitute. But apart from these unsurmountable difficulties the only fact relied upon to justify the argument that there was any rescission of the contract by Mr Kerr is that on 13th February—the day before the resale—Mr Kerr informed the police that the cheque with which Galloway had purported to pay him for the car had been stolen. There is no suggestion of any intimation to Galloway, prior to the resale on 14th February, of any rescission of the contract, far less any suggestion that proceedings were by then initiated by Mr Kerr against Galloway. By no stretch of imagination could we treat an intimation to the police as of any materiality to found a plea of rescission of the contract.

On the whole matter in my opinion the Sheriff-substitute reached the wrong conclusion, and in the present case the car is now the property of Mr Gibson.

LORD CARMONT .—This is a multiplepoinding. The real raiser, Peter Kerr, owned a Vauxhall motor car, which he advertised for sale. A man Galloway came to Kerr in answer to the advertisement and offered to buy the car for £375, which offer was accepted, and Galloway, impliedly professing that his name was "L. Craig," gave a cheque for that amount to Kerr, who accepted it as being drawn by the man transacting with him, whom he believed to be called "L. Craig." Galloway received delivery of the car from Kerr, and drove it away from Kerr's premises. Not only was Galloway not called Craig, but when making payment to Kerr he used a cheque which had been stolen from its owner. The stolen cheque was, therefore, used in furtherance of a fraudulent transaction so as to obtain delivery of the car from Kerr. The fact that the cheque was stolen did not result in a theft of the car, delivery of which had been obtained from Kerr. The use of a stolen cheque, and Galloway's obtaining of delivery of the car from Kerr by passing off the cheque as his own, by Galloway, did not bring about a theft of the car from Kerr, but the fraudulent obtaining by Galloway of possession of the car from Kerr. This approach to the case is entirely different from that taken by the Sheriff-substitute and no vitium reale tainted the car. Until the fraudulent transaction was set aside, Galloway was in a position to pass, by sale, the property in the car which he (Galloway) had fraudulently obtained, provided the sale was to an innocent third party. The defender, George Gibson, was such an innocent third party. He bought it on 14th February and paid Galloway £185 for it. In acquiring the car when he did, from Galloway, in the open market without any notice of a taint, Gibson acquired the ownership of the car, albeit through a fraudulent person.

The suggestion that the fact that Kerr notified the police of the fraud which had been used against him so as to get him to part with the car to Galloway (alias "L. Craig") was enough to prevent Gibson from acquiring ownership through the fraudulent seller to him, has no validity or bearing on the result of this case. The matter would, of course, have been different if Kerr had notified Gibson of what had happened in regard to his (Kerr's) car before Gibson had acquired it from the seller to him.

I agree with your Lordships that the interlocutor of the Sheriff-substitute should be reversed and that Gibson's claim to be ranked and preferred to the car should be sustained.

LORD GUTHRIE .—There is no dispute between the parties to this appeal as to the essential facts, which are these. In February 1964 the defender and real raiser, Peter Kerr, was the owner of a Vauxhall motor car, which he advertised as for sale in the press. In response to the advertisement, a man whose name was Galloway, but who gave a false name, "L. Craig," called on Mr Kerr on 12th February. After discussion, Mr Kerr agreed to accept £375 in payment for the car. Galloway wrote out and handed over a cheque for £375, signed "L. Craig," which was accepted by Mr Kerr, who handed to Galloway the registration book of the car. Galloway then drove the car away. Next day, 13th February, Mr Kerr ascertained through his bank that the cheque came from a stolen cheque book and was not honoured. He then informed the police about the matter. On the following day, 14th February, Galloway called on the defender, Mr Gibson, giving on this occasion the name Peter Kerr, and Mr Gibson bought the car from him for £185. Mr Gibson purchased the car in good faith and without any knowledge of any defect in Galloway's title to the motor car. In a multiplepoinding raised in the name of the Procurator-fiscal after the criminal proceedings against Galloway were completed, Mr Kerr and Mr Gibson each claimed the ownership of the car. The Sheriff-substitute decided in favour of Mr Kerr, the original owner, and Mr Gibson has appealed against his interlocutor. The Sheriff-substitute held that the car was tainted by a vitium reale because Galloway stole it, and therefore that Mr Gibson did not acquire a good title to the car.

In my opinion the appeal is clearly entitled to succeed. In the first place, I agree with the Sheriff-substitute's view that the contention for Mr Kerr that there had been no contract between him and Galloway, because he was in error as to the person dealt with, is unsound. Indeed counsel for Mr Kerr abandoned this contention before us. On 12th February Mr Kerr intended to sell the car to the person present in his premises. It is true that Galloway gave a false name to Mr Kerr, but that lie did not affect the identity of the person who was offering to buy the car from the latter. Galloway did not falsely represent to Mr Kerr that he was another particular person named L. Craig, and Mr Kerr did not think that the man seeking to buy the car was another person than the man actually present in the premises. This case therefore does not fall within the scope of the principle stated by Lord Kinnear in Morrisson v. Robertson in these terms:

"If a man obtains goods by pretending to be somebody else, or by pretending that he is an agent for somebody, who has in fact given him no authority, there is no contract between the owner of the goods and him; there is no consensus which can support a contract. The owner, in this case the pursuer, does not contract with the fraudulent person who obtains the goods, because he never meant to contract with him."

In this case Galloway did not pretend to be somebody else, and Mr Kerr meant to contract with Galloway. There was therefore no error in the mind of Mr Kerr as to the identity of the person to whom he was selling his car, and an agreement was concluded between him and Galloway for the sale of the car.

In the second place, I think that the Sheriff-substitute is wrong in stating that Galloway stole the car. Mr Kerr consented to Galloway taking away the car, and therefore there was no theft. Galloway bought the car from Mr Kerr by fraudulent misrepresentations that he would pay the price by cheque, he well knowing that the cheque he gave was worthless, being stolen. But although the contract was induced by fraud, it was nevertheless a contract of sale, under which the ownership of the car passed from Mr Kerr to Galloway. Therefore, as the car was not stolen, it was not tainted by a vitium reale which would prevent even a purchaser in good faith from obtaining a title to it good against its owner. The contract, having been induced by fraud, was voidable, not void. Therefore it conferred a title to the car on Galloway, who could transfer the ownership of it to a purchaser in good faith until his title was avoided.

It was argued for Mr Kerr that the title of Galloway was avoided on 13th February, the day before the car was acquired by Mr Gibson, because on 13th February Mr Kerr had notified the police of the transaction. There is neither averment nor plea to found this contention, which was not put before the Sheriff-substitute. In any event it is wholly unsound, since an invocation of the powers of the criminal authorities cannot possibly be the avoidance of a contract entered into under the civil law.

I therefore agree that Mr Gibson acquired the ownership of the car from Galloway, and that his appeal should be sustained, with the effect of ranking and preferring him to the car.