[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Car & Universal Finance Company Ltd v Caldwell [1963] EWCA Civ 4 (19 December 1963) URL: http://www.bailii.org/ew/cases/EWCA/Civ/1963/4.html Cite as: [1964] 2 WLR 600, [1965] 1 QB 525, [1963] EWCA Civ 4, [1965] QB 525, [1964] 1 All ER 290

[New search] [Buy ICLR report: [1965] 1 QB 525] [Buy ICLR report: [1964] 2 WLR 600] [Help]

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
(From: Lord Denning, Master of the Rolls - (Middlesex)

		Royal Courts of Justice
		19th December 1963

LORD JUSTICE SELLERS: This appeal raises a primary point in the law of contract. The question has arisen whether a contract which is voidable by one party can in any circumstances be terminated by that party without his rescission being communicated to the other party.

Lord Denning, Master of the Rolls, from whom this appeal comes from a trial in the Queen's Bench, has held in the circumstances of this case that there can be rescission without communication where the seller of a motor car who admittedly had the right to rescind the contract of sale on the ground of fraudulent misrepresentation terminated the contract by an unequivocal act of election which demonstrated clearly that he had elected to rescind it and to be no longer bound by it.

The general rule, no doubt, is that where a party is entitled to rescind a contract and wishes to do so the contract subsists until the opposing party is informed that the contract has been terminated. The difficulty of the seller in this case was that, when he learnt of the fraud and therefore ascertained his right to terminate the bargain, he could not without considerable delay find either the fraudulent buyer or the car which had been sold. Such circumstances would not appear to be so rare in transactions in motor cars (or horses in earlier days) that they would not, it might be thought, have given rise to litigation and an authoritative decision, but it seems that over the years the point in issue has not been decided in any reported case in similar or comparable circumstances.

The case was heard on an agreed statement of facts and of issues arising out of a sheriff's interpleader, and some oral evidence was called. Briefly, Mr. Caldwell, the defendant in this interpleader, owned a Jaguar motor car which was obtained from him by one Norris, who took the car away from the defendant's house on Tuesday evening, the 12th January, 1960, having induced the owner to sell it for £975, of which £l0 in cash had been paid as a deposit two days before and for which a cheque for £965 was handed over. As soon as the bank in Brighton on which the cheque was drawn opened at 10 a.m. on the 13th January, Mr. Caldwell discovered that the cheque was worthless and that he had been deceived and defrauded. The car had been obtained by false pretences. A Hillman car was also left as security but the buyer had no title in it to transfer to Mr. Caldwell and it too was worthless to him. It was agreed that Norris acquired a voidable title to the car. Some time on the 13th January Norris sold and delivered the Jaguar to Motobella Company, Limited, and it was further agreed that Motobella had notice of the defect in title and took the vehicle with no better title than that previously vested in Norris. On the 15th January Motobella Company Ltd., sold the car to G. & C. Finance Corporation Ltd., who purported to hire it to one Alfred Harry Knowles, who would appear to have been a fictitious hirer. On the 13th August, 1960, the car was sold to the plaintiffs on this interpleader issue, Car & Universal Finance Company, Ltd., another company dealing in hire purchase finance. Mr. Caldwell's present claim to the car is based on what he did on the 13th January, 1960, which it is alleged terminated the contract of sale of the previous evening and restored the title in the car to him.

This is what he did. As soon as he learnt from the bank manager that the cheque in payment for the car could not be met and that there had been a similar transaction previously and that the police were looking for Norris, Mr. Caldwell went at once to the police. The police produced a photograph of Norris, whom Mr. Caldwell identified as the man to whom he had sold his car. A warrant was out for the arrest of this man in the name of Rowley. His house had been watched and endeavours had been made to find him. Through the police and the organisation of the Automobile Association Mr. Caldwell made every endeavour to find and recover the car forthwith and to discover the absconding and elusive Norris. Mr. Caldwell clearly wished to terminate the contract of sale and take back the car and acted as far as he could to that end.

The Jaguar was found on the 20th January when it was being driven by a director of Motobella Company, Ltd., who had purported to sell it to the G. & C. Finance Corporation on the 15th January for hire to one Knowles. He claimed that his company had bought it and it was their property, but the claim was not persisted in when the matter came to trial. The Motobella Company Ltd. were sued by Mr. Caldwell for the return of the car and when the action was called on it was not defended and Mr. Caldwell obtained judgment. When he sought to take the car under the judgment the present plaintiffs on the interpleader issue claimed it as theirs. They had the car transferred to them on the 13th August, 1960, and thereafter they seem to have hired it out.

By reason of the transaction completed on the 12th January, 1960, Norris, otherwise Rowley, obtained the property in the car in question. Another man was with Norris, but as he was apparently the servant or agent of Norris no question arises with regard to him.

The sole question on this part of the appeal is whether Mr. Caldwell avoided the contract of sale and recovered his title to the car before the purported sale by Motobella Company Ltd. to G. & C. Finance Corpn. Ltd. on the 15th January, 1960. If Mr. Caldwell did not do so then, subject to the other contention which arises on the appeal, G. & C. Finance Corpn. Ltd. obtained a good title and were able to pass it on to the Car & Universal Finance Company Ltd. later in the same year.

The learned Master of the Rolls' decision that Mr. Caldwell had established a rescission on the 13th January, 1960, was strongly attacked before us on the ground that, though interesting, it was contrary to authority and was not supported by the various cases of election which the learned judge found comparable and where communication was, it was said, not required as an essential prerequisite - and reference was made in the judgment to termination of a lease for forfeiture and ratification, repudiation and affirmation of a contract. Much of the argument before us was an endeavour to show that these illustrations and comparisons were either fallacious or ambiguous. I do not pursue them for, with respect, I do not find them helpful to the decision, except possibly in the case of an affirmation of a contract which is an election to the contrary effect to a disaffirmation. An affirmation of a voidable contract may be established by any conduct which unequivocally manifests an intention to affirm it by the party who has the right to affirm or disaffirm. Communication of an acceptance of a contract after knowledge of a fundamental breach of it by the other party or of fraud affecting it is, of course, evidence establishing affirmation but it is not essential evidence. A party cannot reject goods sold and delivered if he uses them after knowledge of a right to reject and the judgment cites a case where an instruction to a broker to re-sell was sufficient affirmation of the contract in question even though that conduct was not communicated. It may be said that a contract may be more readily approved and accepted than it can be terminated where a unilateral right to affirm or disaffirm arises. The disaffirmation or election to avoid a contract changes the relationship of the parties and brings their respective obligations to an end whereas an affirmation leaves the contract effective though subject to a claim for damages for its breach. Where a contracting party could be communicated with, and modern facilities make communication practically worldwide and almost immediate, it would be unlikely that a party could be held to have disaffirmed a contract unless he went so far as to communicate his decision so to do. It would be what the other contracting party would normally require and unless communication were made the party's intention to rescind would not have been unequivocal, or clearly demonstrated or made manifest. But in circumstances such as the present case the other contracting party, a fraudulent rogue who would know that the vendor would want his car back as soon as he knew of the fraud, would not expect to be communicated with as a matter of right or requirement and would deliberately, as here, do all he could to evade any such communication being made to him. In such exceptional contractual circumstances, it does not seem to me appropriate to hold that a party so acting can claim any right to have a decision to rescind communicated to him before the contract is terminated. To hold that he could would involve that the defrauding party if skilful enough to keep out of the way could deprive the other party to the contract of his right to rescind, a right to which he was entitled and which he would wish to exercise as the defrauding party would well know or at least confidently suspect. The position has to be viewed, as I see it, between the two contracting parties involved in the particular contract in question. That another innocent party or parties may suffer does not in my view of the matter justify imposing on a defrauded seller an impossible task. He has to establish clearly and unequivocally that he terminates the con" tract and is no longer to be bound by it. If he cannot communicate his decision he may still satisfy a judge or jury that he had made a final and irrevocable decision and ended the contract.

I am in agreement with the Master of the Rolls, who asked "And is a man in the position of Mr Caldwell ever to be able to rescind the contract when a fraudulent person absconds as Mr. Norris did here?" and answered that he can do so "if he at once, on discovering the fraud, takes all possible steps to regain the goods even though he cannot find the rogue nor communicate with him".

The appellants contended that in Scarf v. Jardine (7 Appeal Cases page 345) Lord Blackburn laid it down that election to avoid a contract is not completed until the decision has been communicated to the other side "in such a way as to lead the opposite party to believe that he has made that choice", and they relied on the many works of authority which state that where a right of election exists there has to be communication. Scarf v. Jardine is a very different case from the present. It is so well known and so often cited that it does not call for analysis. In that case Lord Blackburn and, in the various works referred to, the authors had not in mind in enunciating a general principle the circumstances and the arguments which have arisen in the present case.

Even in the light of this statement of the law it was conceded - and rightly so - that if Mr. Caldwell could have found the car and had re-taken it without the knowledge of the buyer, but before resale to an innocent purchaser, the contract would have been at an end and the title restored to Mr. Caldwell. Such an act would have been an unequivocal act of election to disaffirm the contract.

In the case of an innocent misrepresentation in circumstances which would permit the party misled to rescind, the other party would not deliberately avoid communication (for that would seem to negative innocence) and circumstances would be rare where communication could not be readily made in one way or another. If communication was possible it is difficult to see how there could be rescission without communication and the inference would be that the contracting parties required communication of termination. Special circumstances may arise and call for future consideration but I do not think the appellants' comparison in argument between innocent and fraudulent misrepresentation invalidates the learned Master of the Rolls' judgment.

It has to be recognised that in transactions such as this where fraud intervenes, some innocent party may have to suffer and it may well be that legislation is overdue to do justice between the victims of fraud and to apportion in some way the loss. But in the present case I can see nothing unjust in the loss falling on the G. & C. Finance Corporation Ltd. (against whom the appellants can claim redress) who made the minimum enquiries, who bought a car which apparently they never saw and hired it out to a man of those existence and identity they did not know and who may well have been fictitious, rather than that the loss should fall on Mr. Caldwell who acted immediately and did all in his power to retract the transaction.

I would dismiss the appeal on this issue and that is sufficient to decide the appeal in the respondent's favour.

The learned Master of the Rolls took his judgment in favour of Mr Caldwell further and held that Motobella Company Ltd. were in the circumstances of this case the general agents of G. & C. Finance Corporation Ltd. and that as Motobella admittedly had notice of the fraud and that as the defect in title known to the agents was fixed upon G. & C. Finance Corporation Ltd. they did not acquire a good title to the car. The judgment recognises that this issue of agency is difficult and I find, with respect, the decision on it too difficult to accept and to support. That it would be desirable that a hire purchase company such as the G. & C. Finance Corporation Ltd., either themselves or through an agent, should inquire into the title to a car in which they intend to deal I would not doubt. Their sole reliance on the dealers (who are not always carefully selected) to warrant the title, and their apparent indifference to the condition or even the roadworthiness of a car - I have already mentioned even its existence as a vehicle - and their complete lack of knowledge of the existence or identity of the hirer, leaves open opportunity for fraud, with no real check or supervision. In fact fraud within this gap in a finance company's knowledge is known in the courts to be so extensive that the practice does not seem to me to be sufficiently excused on the ground, sometimes set up, that speed and the exigencies of this class of business do not permit further investigation. Reliance on a dealer's warranty has so often proved worthless. But agency requires a mandate, express or implied. The G. & C. Corporation Ltd.'s standard form of hiring which purported to hire the Jaguar car in question to Alfred Henry Knowles contains the clause, "I recognise that the supplier of the goods is not your agent and is not authorised to make any representations on your behalf", and in the seller's invoice contained in the same form the seller (in this case the Motobella Co. Ltd., who signed the document), states, "We certify that the statements in this invoice are true and that the goods which are correctly described and referred to in this invoice belong absolutely to us and that the goods are free from all lien and encumbrances".

The invoice is an offer to sell the car referred to in the hire purchase agreement and it expressly provides that it "shall be considered pro forma until notification of acceptance is received by us". On acceptance, which was given by G. & C. Finance Corporation, Ltd., a contract of sale was concluded and the stipulation that the goods "belong absolutely to us" became part of the bargain. It was a contractual term and as far as I can see there is no evidence that the dealers were employed to investigate the title on behalf of the buyers or that the buyers relied on anything other than the seller's warranty.

It would seem that the dealers, the Motobella Company, were on the books of the Finance Corporation and were "recognised dealers" with them and it would appear that they were from the very circumstances the agents of the Finance Corporation to hand over the car to the hirer after the Finance Corporation had become owners. The Finance Corporation had to give possession of the car to the hirer and as they never saw the car or the hirer the dealer must have acted to this extent as their agent.

In this state of the facts I do not find sufficient evidence to establish a general agency or any agency which involved a duty on the dealers to make enquiries as to title on behalf of the Finance Corporation. The dealers' contractual obligation in the sale was a different matter and in that they were clearly in breach. I do not inquire what would have been the position if agency had been established. It was argued before us that even in that event the agent's knowledge might not be imparted to the Finance Corporation.

The first ground of the learned Master of the Rolls' judgment is sufficient for the respondent's success on this interpleader issue and in my opinion the appeal should be dismissed.

LORD UPJOHN (Judgment read by Lord Justice Davies):

On the 12th January, 1960, one Norris agreed to purchase a Jaguar motor car from the plaintiff Caldwell for the sum of £975. He took delivery of it on the same day giving in exchange £10 in cash and a cheque for £965. Norris also left as security a Hillman motor car to which he had no title.

Norris was in fact a fraudulent rogue. His cheque was worthless and he absconded with the car. The police were already searching for him, for there was a warrant for his arrest in connection with some other transaction. He could not be found.

Admittedly however he acquired a voidable title to the car when he took delivery. On the 15th January, after passing through the hands of a company called Motobella Company Ltd., the Jaguar was sold to a person who was admittedly a bona fide purchaser for value. The plaintiff realised that the cheque was worthless and that Norris was a fraudulent rogue on the morning of the 13th January. He immediately did everything he reasonably could to trace the car and repossess it. It was no good trying to search for or to communicate with Norris, for the police were already doing their best to apprehend him.

On the footing that on the 13th January the plaintiff did everything he reasonably could to avoid the contract of sale short of communicating his intention to do so to Norris, the whole question is whether such acts of avoidance were effective in law to avoid the contract on that day or whether communication to Norris of intention to avoid the contract was necessary in law.

Where one party to a contract has an option unilaterally to rescind or disaffirm it by reason of the fraud or misrepresentation of the other party, he must elect to do so within a reasonable time and cannot do so after he has done anything to affirm the contract with knowledge of the facts giving rise to the option to rescind. But in principle and on authority he must in my judgment in the ordinary course communicate his intention to rescind to the other party. This must be so because the other party is entitled to treat the contractual nexus as continuing until he is made aware of the intention of the other to exercise his option to rescind.

So the intention must be communicated and an uncommunicated intention, for example by speaking to a third party or making a private note, will be ineffective. The text books to which we were referred are unanimous on the subject, "If a party elects to rescind he must within a reasonable time manifest that election by communicating to the other party his intention to rescind the transaction and claim no interest under it. The communication need not be formal provided it is a distinct and positive repudiation of the transaction": Kerr on Fraud and Mistake, 7th Edition, page 530.

See also Benjamin on Sale, 8th Edition, page 441; Pollock on Contracts, 13th Edition, page 467.

Mr. Caplan for the appellant of course also relies strongly on the well known words of Lord Blackburn in Scarf v. Jardine (7 Appeal Cases 345, starting at the foot of page 360), to the effect that in general an election must be communicated to the other side though that was not a case of contract.

Further, with all respect to the judgment of the Master of the Rolls, Lord Hatherley's observations in Reese River Silver Mining Co. v. Smith (Law Reports 4 House of Lords 64, at page 74) in my view support the same conclusion.

Such in my view must be the general principle. Does it admit of any exception ?

Mr. Caplan concedes that there is one: where the subject-matter of the contract is a transfer of property, then the party entitled to do so may disaffirm the contract by retaking possession of the property. But Mr. Caplan submits this is really a method of communication, though for my part I do not see how that can be true of every case that could be suggested.

Is there any other exception? Mr. Caplan submits not and that there should be a universal rule of law that communication is essential to break the nexus. On the facts of this case it is clear that Norris intended quite deliberately to disappear and render it impossible for the plaintiff to communicate with him or to recover the car. While I appreciate Mr. Caplan's argument that this point can only arise in cases between the vendor and a third party, I agree with Lord Justice Sellers that this problem must be solved by consideration of the rights between the two contracting parties. Admittedly one of two innocent parties must suffer for the fraud of a third, but that cannot be helped and does not assist to solve the problem. One thing is quite clear - that neither Lord Blackburn nor Lord Hatherley in the cases above mentioned nor the text-book writers had in mind circumstances remotely resembling these. It is indeed strange that there is no authority in point.

If one party by absconding deliberately puts it out of the power of the other to communicate his intention to rescind which he knows the other will almost certainly want to do, I do not think he can any longer insist on his right to be made aware of the election to determine the contract. In these circumstances communication is a useless formality. I think that the law must allow the innocent party to exercise his right of rescission otherwise than by communication or repossession. To hold otherwise would be to allow a fraudulent contracting party by his very fraud to prevent the innocent party from exercising his undoubted right. I would hold that in circumstances such as these the innocent party may evince his intention to disaffirm the contract by overt means falling short of communication or repossession.

We heard much interesting discussion on the position where one party makes an innocent misrepresentation which entitles the other to elect to rescind and then innocently so acts that the other cannot find him to communicate his election to him. I say nothing about that case and would leave it to be decided if and when it arises. I am solely concerned with the fraudulent rogue who deliberately makes it impossible for the other to communicate with him or to retake the property.

Mr. Caplan further argued that if in the circumstances of the case communication to Norris was not necessary, yet what the plaintiff did on the 13th January when the cheque was dishonoured did not amount to an unequivocal election to disaffirm; and it was further said that he could have done more to contact Norris. On the facts of this case I do not see what more the plaintiff could reasonably have done nor how he could have made his position plainer.

We heard much argument on what were called the comparable cases: election; forfeiture of a lease; ratification of a contract; repudiation of a contract; affirmation of a contract. I do not deal with them, for in my opinion they are not truly comparable. With regard to forfeiture of a lease we were referred to a number of authorities on the question whether it is the issue or service of the writ that constitutes the election to determine the lease. In some cases the distinction between the two was, on the facts, immaterial and in those cases judges have I think sometimes reasonably used "issue" of the writ as being synonymous with "issue and service" of the writ. On principle, as at present advised, I prefer the view that the election to determine arises only on service of the writ; until then the plaintiff may change his mind and tear it up.

On this part of the appeal I therefore agree with the learned Master of the Rolls.

He went on to hold, however, that the purchasers of the Jaguar car on the 15th January, the G. & C. Finance Corporation Ltd., must be fixed with notice of the fact that their vendor, Motobella Company Ltd., had only a defeasible title and so failed to establish their plea of a purchaser in good faith without notice of any defect of title.

The learned Master of the Rolls held that the G. & C. Finance Corporation Ltd. were themselves innocent purchasers in good faith, but they were a hire purchase company accustomed to do business with Motobella, who were car dealers. The Master of the Rolls held that Motobella were general agents of G. & C. Finance Corporation Ltd. and that in particular "the dealers were agents of the finance company to see that the title was in order". As it was conceded that Motobella had notice of the defect in title, it followed that the finance company were fixed with notice of the defect.

I regret I cannot agree with the judgment of the Master of the Rolls. No doubt car dealers are agents for some purposes of the finance companies with whom they deal in relation to transactions with the hirer; but the basic transaction between car dealer and finance company is one of sale and purchase.

In the absence of some express term of the contract between them or some custom of the trade (which is not suggested) I am not prepared to hold that in these hire purchase transactions there is some special rule that the purchaser constitutes his vendor his agent to investigate title for him. Caveat emptor is the rule.

It is I think against the realities of the case to imply or suggest any such term or rule. The finance company truly relies on the car dealer to sell it a car without a defective title; but this is as a matter of commercial good faith not because it relies on the dealer to make an investigation of title on the finance company's behalf. In fact on the evidence the G. & C. Finance Corporation did itself make some very limited investigation into title. In truth the finance company knows perfectly well that occasionally the dealer will sell it a car with a defective title not because of any dishonesty on the part of the dealer but because there are some dishonest persons operating in the second-hand motor market. The finance company also probably knows that some of the dealers with whom it may do business may be or become dishonest. The finance company protects itself from these frauds, by and large, by adjusting its charges to hirers.

Furthermore, the finance company usually does, and in this case did, protect itself by obtaining an express warranty from, the dealers "that the goods which are correctly described and referred to in this invoice belong absolutely to me/us". So that if the dealers do sell a car with a defective title to the finance company the latter will have its common law remedy in damages against the dealer.

That is the simple commercial way in which finance companies protect themselves and it seems to me that such an express covenant must negative any implication that the dealer is an agent to investigate title.

However, for the reasons given earlier, I would dismiss this appeal.

LORD JUSTICE DAVIES: I agree.

It is, indeed, curious that the point at issue in the present case appears to be free from any direct authority and not to have been considered in any of the text books.

Norris obtains the car from Caldwell under a contract procured by the fraud or false pretences of Norris. Caldwell has thus the right as against Norris upon ascertaining the true facts to rescind the contract. If by his conduct Norris makes it impossible for Caldwell either to communicate to Norris his decision to rescind or to retake the car, how, if at all, can Caldwell exercise his right to rescind?

The contention for the appellants is that the party entitled to rescind can exercise that right only by communicating his decision to the other party by words or conduct or alternatively, where the title to the goods is in question, by actually retaking possession of the goods; and that, therefore, in the present case, as Caldwell did neither of these things before the 15th January, when the car was transferred to the G. & C. Finance Corporation, Ltd., the latter, having bought in good faith and without notice of any defect in the title, acquired a good title to the car.

Mr. Finer for the respondent agrees that an election or decision to rescind, in order to be effective, must be exercised unequivocally, or, to use the phrase of Lord Hatherley, Lord Chancellor, in Reese River Silver Mining Co. v. Smith (1869), Law Reports 4 House of Lords 64, at page 74, "in the plainest and most open manner competent". He agrees also that in the overwhelming number of cases communication to the other party would probably be essential. But, he submits, the question whether the election to rescind has been validly exercised is always one of fact (Longman v. Hill (1891), 7 Times Law Reports page 639); and the essential question always is whether the party having the right to rescind did all that was in his power in the circumstances to make his decision unequivocally known.

In my judgment, the admission by the appellants that recaption is an exception to the allegedly universal necessity for communication is important. Curiously enough, though both Mr. Capler and Mr. Finer agreed that recaption without communication is a sufficient act of rescission, no very clear authority was cited to that effect, except possibly the decision of Mr. Justice Bigham in In re Eastgate, (1905 1 King's Bench page 465). It is true that recaption is a plain act of resumption of dominion over the goods.

But if the fact of the recaption is unknown to the other party, there is obviously no communication to him. We were much pressed by Mr. Caplan on another part of his argument with the case of an innocent misrepresentation. But it is to be observed that a person who has obtained goods by an innocent misrepresentation might well in all innocence purport to transfer the goods to a third party at a time after the goods had without the representor's knowledge been retaken by the representee, so that the purported transfer would be invalid.

On the facts of this case Norris must be taken to have known that Caldwell might on ascertaining the fraud wish to rescind the contract. Norris disappeared, and so did the car. Caldwell could therefore neither communicate with Norris nor retake the car. It must, therefore, I think, be taken to be implied in the transaction between Norris and Caldwell that in the event of Caldwell wishing to rescind he should be entitled to do so by the best of the means possible. Lex non cogit ad impossibilia. It is true that it was conceivably possible that Caldwell might decide not to rescind and to sue on the cheque instead; but it is most doubtful whether on the facts of this case such a possibility could have occurred to Norris as a real one.

The fact that Norris knew that he was a rogue and that there fore Caldwell was likely to be after him distinguishes this case from that of an innocent misrepresentor. It would not occur to the latter that the other party to the contract would have any right or desire to rescind, so that there would be no such implication as that which I have suggested arose in the present case.

It was argued that Caldwell's action in going to the police and the Automobile Association was not an unequivocal act, since I was open to him to have changed his mind on the next day if, to us Mr. Caplan's phrase, Norris had suddenly won a football pool and so have become a worthwhile defendant to an action on the cheque. That again, in my opinion, is an unrealistic view of the facts. Caldwell was, as I think, declaring to the world "I have been swindled and I want my car back". He was declaring his intention as clearly as if he had seen the car in the street and seized it.

In the result, therefore, I agree with the judgment of the learned Master of the Rolls on this ground. But, like my Lords, I do not think that the analogies which the Master of the Rolls drew in support of his judgment were helpful or, with respect, wholly accurate.

The learned Master of the Rolls also put his judgment upon an alternative ground, namely, that Motobella, the dealers, were the agents of G. & C. to enquire into the title to the car, and that, as Motobella had notice of a defect in the title, G. &C. were fixed with that knowledge. With the greatest respect, I do not think that this can be right. It may be that in some hire purchase transactions, whatever the documents may say, a motor dealer is for some purposes the agent of the hire purchase company, for example to produce, and procure signatures to, the hire purchase contract. Lord Denning himself expressed this view in Financings v. Stimson (1962 1 Weekly Law Reports page 1184), though those observations must obviously be read subject to the views expressed in Campbell Discount v. Gall (1961 1 Queen's Bench page 431), which was not cited to the Master of the Rolls in the present case. But whatever be the dealer's position vis-a-vis the hire purchase company as to the making of the hire purchase agreement, the present case is entirely different. We are concerned here with a sale of a car by the dealer to the hire purchase company. In that transaction the dealer gives a warranty as to title, always implied and frequently, as here, express. But he is dealing at arm's-length with the hire purchase company. It is a contradiction in terms to speak of the seller being an agent of the buyer. Moreover the conception of agency, as I understand it, presupposes the existence of three parties, namely the principal, the agent, and the third party between whom and the principal the agent creates relations. In the sale of the car by the dealer to the hire purchase company there was no third party involved.

I should, therefore, not be prepared to uphold the decision of the learned Master of the Rolls that the dealers in this case were the agents of the hire purchase company to enquire into the title to the car or that the latter were fixed with notice which the former had as to any defect of title.

MR FINER: Then the appeal will be dismissed, my Lords; and I ask for the costs of the appeal?

LORD JUSTICE SELLERS: So be it.