Neutral Citation Number: [1997] EWCA Civ 2878
CCRTI 97/0611/G
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NEWCASTLE-UPON-TYNE COUNTY COURT
(His Honour Judge Stephenson)

Royal Courts of Justice
The Strand
London WC2

Date: Tuesday 2nd December, 1997

B e f o r e:

LORD JUSTICE MORRITT
LORD JUSTICE THORPE

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PAUL MILBURN
Respondent

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SUPERCAR INTERNATIONAL LIMITED
Appellant

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(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
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MR H MENON (Instructed by Messrs Smith & Bennett, DX 62200 Wallsend) appeared on behalf of the Respondent

MR M BERKLEY (Instructed by Messrs Woollcombe Beer Watts, Newton Abbot Devon TQ12 2QP) appeared on behalf of the Appellant
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J U D G M E N T (As approved by the Court)
LORD JUSTICE MORRITT:
1.	This is the appeal of the defendant, Supercar International Ltd, brought with the leave of Waite and Potter LJJ from the order of His Honour Judge Stephenson sitting in the Newcastle County Court made on 10th January 1997. 
  
2.	By that order Judge Stephenson dismissed the appeal of Supercar International Ltd from the order of District Judge Powell who had refused to set aside the judgment entered in default of appearance on 17th April 1996. He also had before him an application to set aside a subsequent judgment on 12th July 1996, as I will explain shortly, and he must I think be taken to have dismissed that application as well. 
  
3.	The facts surrounding those judgments are briefly as follows: Supercar International Ltd is a broker or dealer specialising primarily in Ferraris. It has an associated company called Pledge International Ltd which carries on a business of lending money on the security of motorcars. On 12th January 1993 Mr North pledgeD with Pledge International Ltd as security for a loan of £3,500 what he described as a 1987 Ford Sierra Cosworth RS500. The agreed redemption date was 11th November 1993. 
  
4.	When that date came Mr North did not redeem the car, as he warned Pledge International Ltd that he might not by a letter of 4th October 1993. 
  
5.	On 9th December 1993 in the edition of Exchange & Mart for that date there was an advertisement for an RS Cosworth. That advertisement was paid for by Pledge International Ltd and gave as the numbers at which persons interested should contact the seller the telephone numbers of Pledge International Ltd. Mr Milburn responded to that advertisement by going from Newcastle‑Upon‑Tyne to the premises of Supercar International Ltd at Sutton in order to view and, if he could, buy the car. The upshot of it was that he did buy the car for £7,750.  He was given a proforma invoice by Supercar International Ltd. The invoice records the date, the vehicle in question being a Ford Cosworth RS500, registration number HIL 594O, date of first registration 12th March 1987, 44,000 mileage recorded. It was then signed by Mr Milburn and beneath his signature appears this: 
  
		"This is a trade sale and as such there is no warranty implied or given. Supercar International Ltd was selling the car as agent for the owner and has no knowledge as to the car's history, condition or engine conversion it is therefore sold as seen, tried and tested" 

6.	In driving the car back from Sutton to Newcastle it broke down shortly after Mr Milburn commenced his journey. He incurred a certain amount of expense in having it towed to Newcastle and subsequently in having it repaired. About a week after he bought it he found that it was not an RS Cosworth at all but a Sierra Cosworth, which apparently does not command the same secondhand price as an RS Cosworth. He accordingly complained to Supercar International Ltd and was offered his money back, which he refused on the footing that he had incurred expenses in repairing it and in the journey north to Newcastle for which he was not being offered any reimbursement. He indicated that he would be prepared to keep it in consideration of a sum of £3,000; that is to say that he should be re‑imbursed £3,750. That suggestion was not acceptable to Supercar International Ltd and no further negotiations took place. 
  
7.	On 27th November 1995 Supercar International Ltd pleaded guilty to an offence under Section 1.1 (b) of the Trade Descriptions Act 1968 in respect of the advertisement which had appeared in Exchange & Mart. The affidavit evidence before us indicates that they pleaded guilty on legal advice on the basis that the offence with which they were charged was one of absolute liability, so any absence of knowledge on their part would have been irrelevant. 
  
8.	These proceedings were started on 16th March 1996 by Mr Milburn seeking damages for negligent misrepresentation and breach of contract. The summons as issued by the County Court correctly recorded the address of the Registered Office of Supercar International Ltd as 312‑314, High Street, Sutton, Surrey, SM1 1PR. It is accepted that in accordance with the County Court Rules the summons was properly served on Supercar International Ltd as a body corporate because the summons was not returned in due course of post. The evidence filed on behalf of Supercar International Ltd is to the effect that although they are bound to accept the summons as having been properly served, it did not in fact come to their notice until some time in May of the same year. That is why on 17th April 1996 judgment was entered against them for damages to be assessed. 
  
9.	On 7th May 1996 the solicitors for Mr Milburn wrote to Supercar International Ltd indicating that there had been a judgment for damages to be assessed. Nothing appears to have happened in that respect and on 14th June 1996 the County Court sent to Supercar International Ltd a notification that there had been a judgment for damages to be assessed and that the date for the assessment would be 12th July 1996. 
  
10.	That notice, which Supercar International Ltd did receive, prompted some activity on their part and on 24th June 1996 they applied to set aside the judgment that had been entered on 17th April. Surprisingly they did nothing then or thereafter in relation to the hearing of the assessment of damages which took place on 12th July 1996. The damages as assessed by the Recorder came in all to £9,760.94. He ordered that that sum should be paid by Supercar International Ltd to Mr Milburn with costs on scale two. The order says nothing about revesting the car in Supercar International Ltd and, on the face of it, therefore, Mr Milburn has kept the car and is also to be entitled to £9,760 of damages.   
  
11.	When the application to set aside came before the District Judge on 20th September 1996 he dismissed it. Supercar International Ltd then appealed and on 3rd January 1997 gave notice of an amendment to their appeal which indicated, to the satisfaction of those appearing for Mr Milburn, that they proposed to apply to set aside the judgment entered on 12th July as well as that entered on 17th April. 
  
12.	That was the application that came before Judge Stephenson and was dismissed by him on 10th January 1997. The basis of the judge's judgment was that although documents sent to Supercar International Ltd at its Registered Office both before and after the County Court summons had duly been received by Supercar International Ltd in the ordinary course of post, there was no proper evidence that the default summons had not been received by anyone who had direct knowledge of the postal arrangements in Supercar International Ltd's office. He was satisfied that though there was room for argument on the merits of the case, there was insufficient evidence that the failure to respond to the default summons had been due in any way to some form of accident or mistake. He refused leave to appeal. 
  
13.	When application for leave to appeal was made to this court leave, as I have indicated, was granted by Waite and Potter LJJ. They noted, amongst other things, that it was the intention of Supercar International Ltd to supplement the evidence on the hearing of the appeal for which leave was granted by the evidence of the secretary in Supercar International Ltd's office who was responsible for receiving incoming and despatching outgoing mail. That was an affidavit of Miss Adams, no relation of the Managing Director Mr Adams, who swore an affidavit in April 1997. The first application before us was for leave to adduce that additional evidence on the hearing of this appeal; the application was not opposed and therefore we admitted it. 
  
14.	The evidence of Miss Adams indicates that Mr Adams, the director, was away in Australia from December 1995 until May 1996. That she, Miss Adams was in charge of the office in his absence which included dealing with incoming and despatching outgoing post. She says that she was aware of the significance of this particular motorcar and in any event had instructions from Mr Adams, the director, to communicate with Supercar International Ltd's solicitors if anything of legal significance came thorough the post. She testified directly that nothing came into the office in connection with this current case until the letter of 7th May from Mr Milburn's solicitors to which I have referred earlier. 
  
15.	In these circumstances it is the case for Supercar International Ltd that there was no sufficient reason for Judge Stephenson to refuse to allow the appeal and set aside the various judgments. It is contended that he failed properly to direct himself as to the appropriate test laid down in the Alpine Bulk Transport Company Incorporated v. Saudi Eagle Shipping Company Incorporated [1986] 2 Lloyds Rep 221, that he wrongly concentrated too much on the lack of any excuse for not responding to the default summons in March 1996, and paid insufficient regard to the merits of the defence which Supercar International Ltd would wish to run if these judgments were set aside. 
  
16.	The suggested defences are in summary as follows: first, it is suggested that, as the proforma invoice shows, Supercar International Ltd's involvement was as agent for a disclosed principal, namely Mr North. As such, it is suggested, the liability, if any, rests on the principal and not on the agent. Second, it is submitted that any contractual liability on the footing that the agent was in fact a party to the contract was properly excluded by the note at the foot of the invoice and that, in any event, the Misrepresentation Act claim is subject to the defence of reasonable belief on reasonable grounds, which would be a matter of fact suitable to go before a judge at a proper trial. 
  
17.	It is pointed out that the order would on its face appear to be excessive, in that it allows damages in the full amount to Mr Milburn but also enables him to keep the car. It is suggested in that connection that the response of Supercar International Ltd, when the problem was brought to their attention in December 1996, was such that the offer to refund Mr Milburn all that he had paid and to take the car back was a contract or an offer of tender of full amends which thereby on being refused precluded Mr Milburn bringing the claim that he did. These points and others are disputed by counsel for Mr Milburn. First, it is pointed out that there is what is submitted to be a procedural error, in that until 3rd January 1997, there was no application at all to set aside the judgment entered on 12th July 1996. It is submitted that although there was then an application out of time that was not properly renewed by the Notice of Appeal, which seeks only that Judge Stephenson's order should be set aside and says nothing about setting aside the underlying judgment entered on 12th July.
   
18.	For my part I would not accept the procedural point as having any force. Nobody has suggested that Mr Milburn or his advisors were in any way misled by the form of the documentation. It has been sufficiently clear throughout that the purpose of Supercar International Ltd from 3rd January 1997 onwards has been to set aside all the judgments against it whether those entered on 17th April or on 12th July. It seems to me, therefore, that one must look more closely at the merits of the case rather than the procedural defaults which have occurred. 
  
19.	So far as the merits are concerned, it is submitted on behalf of Mr Milburn that the clause at the foot of the sales invoice which I have read was inadequate to exclude the liabilities under the Sale of Goods Act 1979, arising under sections 13 and 14, that the form of the contract was such that it is evident that Supercar International Ltd was a party to it and not acting for a disclosed principal only and that the defence otherwise available under the Misrepresentation Act 1967 is not available on the facts of this case because the guilty plea to the offence charged under the Trade Descriptions Act 1968 precluded reliance on the statutory defence under section 24 (3) of having acted with due diligence before placing the advertisement in the first place. It is submitted, therefore, that the Misrepresentation Act defence cannot be pursued because it is excluded by the effect of the guilty plea made to the Trade Descriptions Act offence. In relation to the contractual claim there is in addition the question of whether Mr Milburn was dealing as a consumer so that those provisions of the Unfair Contract Terms Act 1977 which preclude the exclusion of certain liabilities in favour of a consumer are applicable in his case. That, I hope, is an adequate summary of the rival argument in relation to the merits of the case. 
  
20.	We are not trying the action and therefore it is not necessary to reach a final conclusion on who is right and who is wrong; suffice it to say for my part I think there is a substantial defence on the merits. First, it is possible for a disclosed agent for a disclosed principal to be a party to the contract; the question whether it is or not is dependent upon a proper construction of the contract if in writing or in all the circumstances if not. It seems to me that the note at the foot of the invoice indicating that this is a trade sale and as such there is no warranty implied or given goes a very long way to indicating that Supercar International Ltd must have been regarded as a party to the contract even if the true owner was also a party. I would therefore tend to the view that Supercar International Ltd was a party to the contract and the first defence suggested would not be successful. But it does not follow from that, that Supercar International Ltd having been a party to the contract does not have a defence to the claim either under the contract or for the misrepresentation. 
  
21.	So far as the contract is concerned, there is some evidence that Mr Milburn indicated that he was a car dealer. There is therefore evidence fit to go to the trial as to whether or not the exclusions in favour of consumers is applicable in his case. So far as the Misrepresentation Act defence is concerned, it seems to me there is substantial argument available as to whether pleading guilty to an offence under the Trade Descriptions Act with the consequence that you cannot rely on the statutory defence under section 24 (3) goes so far as to exclude relying on the statutory defence under the Misrepresentation Act of not knowing of the falsity on reasonable grounds. There may well be other problems facing the case for Supercar International Ltd at the trial, arising on various parts of the Sale of Goods Act. But against all that, I would put the fact that the order on the face of it appears to be excessive in entitling Mr Milburn not only to the car but to damages as well. 
  
22.	Accordingly on the merits, it seems to me that there is a substantial case available to Supercar International Ltd properly to be considered at a trial. The question then is whether their conduct in allowing these judgments to be entered against them is such as ought to preclude them from having the trial to which they would otherwise be entitled. I have been troubled by the fact that they appear to have done nothing from 7th May when they were first notified of the judgment until 24th June when they applied to set it aside. That does not appear to me to be conduct appropriate to somebody with a proper defence who wishes to have it considered by the court. Likewise it seems to me to be very surprising that having applied to set aside the judgment entered in April on 24th June, they should have done nothing whatever to prevent the assessment of damages taking place as it did on 12th July. It seems to me that the solicitors acting for Supercar International Ltd have a great deal to answer for. But in the end I accept the submission made on their behalf by their counsel that it would be wrong to visit the lamentable neglect of the solicitor on the client.  For those reasons I think it would be appropriate in this case to allow the appeal to set aside the judgments entered on 12th July and 17th April 1996 so as to enable this claim to be tried in the ordinary way but with the evidence given on both sides. 
  
LORD JUSTICE THORPE:  
23.	I agree. 

ORDER:  Appeal allowed.  Costs in the court below to be paid by Supercar International Ltd forthwith.  No order for costs in the appeal.  Legal Aid Taxation of the respondent's costs.