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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 65
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A515/05
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OPINION OF LADY
CLARK
OF CALTON
in the cause
HARPERCOLLINS
PUBLISHERS LIMITED
Pursuer;
against
STEWART YOUNG
Defender:
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Pursuer:
Simpson; Brodies LLP
Defender: Cruikshank; Balfour & Manson
28 March 2007
Overview
[1] This
case came before me on procedural roll on 10 and 11 January 2007 to debate the first plea-in-law for
the defender seeking dismissal of the action.
In the event of dismissal not being granted, counsel for the defender
sought deletion of parts of the pleadings founding on the same plea and the
same submissions. The submissions which
were developed were based on the note of arguments for the defender, number 11 of
process. Before the debate commenced,
the pursuer sought to amend in terms of minute of amendment number 13 of process. This was not opposed and was granted.
Summary of the pleadings
[2] The
pursuer is a company which publishes and distributes books, audio books on
cassette and compact disc and other book related products. In Article 2 of condescendence it is
averred that the pursuer distributes these products from a distribution centre
in Glasgow where the pursuer
receives returns of its books from retailers and pulps paperbacks. It is averred that the pursuer outsources
pulping of hard back and audio books to Stirling Fibre Limited, and that the
pursuer retains title to the products it delivers to said company. It is averred that the pursuer distributes
its products in cellophane wrappers.
[3] In
Article 3 of condescendence it is averred that the defender is an individual
registered with e-bay since 15 May
1999 and that by 15 December
2004, the defender had listed for sale 14,083 products published by
the pursuer of which he had sold 9,365. It
is averred that the average sale price was г6.55 and the total receipt from
sales were г61,351.57. At page 8A-B it
is averred:
"All of these
items were described in the defender's description of them on e‑bay by
such words as 'new', 'brand new' or similar.
The majority of these items were described in that description as being
still in the manufacturer's cellophane wrapping."
Thereafter some details are given
about individual sales and prices and the wholesale price at which the pursuer
sells the product. There are no
averments that the defender was aware of the wholesale price or ought to have
been so aware. Counsel for the pursuer made
reference to and provided a list of all the products published and averred to
be relevant to those the defender sold, in the period from 15 May 1999 to 28 November 2004.
[4] In
Article 4 of condescendence it is averred that the pursuer does not have
commercial dealings with the defender and that, so far as the pursuer is aware,
none of the persons to whom the pursuer distributes its products has commercial
dealings with the defender. It is
averred that various products "have gone missing" both from the pursuer's distribution
centre and while in transit by Stirling Fibre Limited en route to
destruction. There are then some general
averments about the pursuer's wholesale prices and that the pursuer's practice
is not to distribute new published products at less than these prices. It is averred that in some instances
(unspecified) the price at which the defender sold the pursuer's products has
been lower that the cost to the pursuer of manufacturing them. It is averred that there is no legitimate
source from which the defender could have obtained so many items published by
the pursuer at a price enabling him to carry out the above transactions at
anything other than a massive loss. It
is averred that owing to the scale of the pursuer's distribution operation at
the distribution centre, it is not possible for the pursuer to ascertain
exactly when or how the items went missing.
[5] On
the basis of averments in Article 3 and 4 of condescendence, the pursuer
avers at page 12D-13B that items sold by the defender, presently advertised for
sale by the defender, and in possession of the defender and in new condition
have been stolen from the distribution centre.
It is also believed and averred that the defender knows all of these
items to have been stolen from the pursuer.
At page 13B-C it is averred that accordingly, title to these products
remains with the pursuer. By amendment
during procedural roll, which was not opposed and granted, it is further
averred that the value to the pursuer is their wholesale price. It is on the basis of these averments that
the pursuer seeks declarator, delivery, payment, interdict and interdict ad interim in terms of the
conclusions.
Note of arguments, paragraphs 1, 2, 4, 5 and 7 and discussion
[6] Counsel
for the defender developed his note of arguments under deletion of paragraph 3
which he submitted was no longer relevant because the pursuer had made
available a list of products and manufacturing cost and made averments in
relation to this.
[7] In
the course of submission it became apparent that there was some overlap in the
note of argument particularly in relation to paragraphs 1, 2, 4, 5 and 7. In summary, counsel for the defender having
analysed the claim made by the pursuer, submitted that it was essential for the
pursuer, in a case of this kind, to aver and offer to prove that the products
which are or had been in the hands of the defender were products which they
owned and which had been stolen from them.
Counsel submitted that the high point of the pursuer's averments is the
averment that the "products went missing".
He pointed to the averment, introduced by minute of amendment, in which
the pursuer states that "owing to the scale of the pursuer's distribution
operation at the distribution centre, it is not possible for the pursuer to
ascertain exactly when or how the items went missing". This is against a background that the pursuer
avers that products went missing both from the distribution centre and while in
transit by Stirling Fibre Limited. Counsel
for the defender submitted that the averments were too vague and general and
that it was essential to have some averments to identify which particular
products went missing on particular dates.
On this point, he concluded that without such averments, it was not
possible to aver any link between allegedly stolen products and products sold
or held by the defender. Relying in
particular on paragraph 7 of his note of arguments, he also submitted that
on the facts averred there was no basis to make averments to infer that the
defender knew all these products to have been stolen from the pursuer. He was critical of the "believed and averred"
averments at page 12D‑13B which he said could not be justified as
inferences from the facts averred by the pursuer.
[8] In
response, counsel for the pursuer stated that it was impossible for the pursuer
to give any further specification about the dates products went missing or
identification of missing products. He
explained that the pursuer distributed some 120 million books per year and
"the products are scattered to the four corners of the earth". This is not averred in the pleadings but was
given as background explanation. Nevertheless,
he maintained that there was enough specification given to link the missing products
to products sold by the defender. He
emphasised that the pursuer makes averments about the absence of any legitimate
sources for such products at prices below manufacturing price. In summary, he submitted that the pursuer was
offering to prove that it was impossible for the pursuer to have obtained the
products from the pursuer or any other legitimate sources at the prices the
defender bought and sold them for. The
only potential other source is the "missing books". That is an illegal source. In relation to the defender's knowledge, he
emphasised in particular the defender's own description of the products as
"new", "brand new" and the defender's description of the products as still
being in the manufacturer's cellophane wrapping.
[9] I
consider that it is plain from the pleas-in-law for the pursuer and the
narrative of the pleadings that it is fundamental to the case made by the
pursuer to aver (1) that the pursuer's products to which they have title have
been stolen, (2) that the defender is or has been in possession of some of said
products and (3) the defender retains or has disposed of said products in mala fide because, as averred by the
pursuer, the defender knows all of these products to have been stolen from the
pursuer.
[10] I consider that there may be many ways in which a pursuer may
seek to establish that products which have been or are in the hands of a third
party have been stolen from a pursuer. This
will vary depending on the particular circumstances of the case. I do not accept the submissions by counsel
for the defender that it is necessary to make detailed averments of the type he
advanced. I consider that, in theory at
least, the pursuer is entitled to set out averments seeking to establish a
controlled and limited market from which an inference might be drawn that the
products of the pursuer sold by the defender and held by the defender were not
sourced from any legitimate market and were products stolen as averred by the
pursuer. I consider that is a matter
which can only be resolved by proof.
[11] It is also essential, however, to the pursuer's mala fide case that on the facts averred
an inference can properly be made "that the defender knows all of these items
to have been stolen from the pursuer". I
have considered the pleadings. The
pursuer makes a serious allegation of criminal conduct on the part of the
defender. That proceeds on averments
that in respect of the pursuer's own knowledge it is believed and averred that
the items had been stolen from the distribution centre (12D‑13B). The case is unusual in that it appears that
even the pursuer, as owner, is not in a position to aver and prove theft of the
pursuer's goods, except by inference. The
pursuer, for the reasons explained by counsel, is not offering to prove which
products went missing on which dates or to prove whether the products were
stolen from the distribution centre rather than when in transit by Stirling
Fibre Limited. I am unable to identify
any averments which, in my opinion, form a satisfactory basis for the critical
averment at page 13B to the effect "that the defender knows all of these items
to have been stolen from the pursuer". It
is difficult to understand the basis for this bold averment about the
defender's knowledge. When pressed about
this issue, counsel for the pursuer relied on the market factors averred, particularly
the low selling price. But in the
absence of any averments that the defender knew or ought to have known from
these or other factors that the products were stolen, this is inadequate in my
opinion. In order to prove that products
of the pursuer have been stolen, the pursuer is averring and relying upon
specialist knowledge about their own marketing and contractual conditions. But there are no averments to found this
knowledge in the defender. Counsel for
the pursuer also relied on the defender's own description of the products as
"new" or "brand new" particularly in association with the defender's
description advertising the products as still in the manufacturer's cellophane
wrapping. Counsel for the pursuer
submitted that this indicated that the defender himself was aware that the
product had not progressed through the retail chain and that the defender was
indicating that these products were "new" in the sense of "direct from the
pursuer with no intermediary in the retail chain". I am of the opinion that there are many
meanings of "new" but the meaning advanced on behalf of the pursuer is not in
my opinion a meaning which would ordinarily be accepted. There is nothing in the pleadings to explain
why it is averred this was the meaning intended by the defender. The pursuer's position might have been
stronger in this respect, if the defender had advertised the products as direct
from the manufacturer and distributor or even direct from the pursuer. This coupled with averments that the defender
knew or ought to have known that he had no contractual arrangements to
distribute on that basis might have been the type of averment which might have
justified an averment in the form made at 13B.
I am not persuaded, however, that in an unregulated market, the mere
reference to a product offered for sale on e-bay as "new" and "in cellophane
wrapping" bears the meaning and inference for which counsel for the pursuer
contends. I consider that this averment
is critical to the pursuer's case which essentially is based on the defender retaining
or having disposed of the pursuer's property in mala fide. As I do not
consider the "believed and averred" averment at 13B to be supported by relevant
factual averments from which the relevant inference can be drawn, I am of the
opinion that there is no relevant case pled that the defender has acted in mala fide.
Note of arguments, paragraph 6 and discussion
[12] The theme of lack of specification was continued but in
relation to a different issue. Counsel
for the defender submitted that there was insufficient specification and a lack
of fair notice to enable a calculation of damages based on value or quantum lucratus. At page 10D in
response to averments from the defender, the pursuer also avers:
"Separatim, esto the defender was in good
faith when he sold the products (which is denied), the defender is liable to
pay the pursuer the profit he made on the sale of those items."
There was no supporting plea-in-law
by the pursuer for these averments. I am
of the opinion that such a plea-in-law is necessary but no specific criticism
was made by counsel for the defender in relation to the absence of a
plea-in-law. I do not consider the
criticisms which were made by counsel for the defender in relation to this
aspect of the case were well-founded. In
my opinion, the pursuer has specified the correct basis of calculation
depending on whether the defender is averred to be in mala fide or bona fide. The pursuer has averred the basis of
identification of their products which they say to be all products published by
them described as "new", "brand new" or similar. In relation to the mala fide case, the value to the pursuer is averred to be the
wholesale price. In relation to the
claim based on quantum lucratus, this
is within the defender's knowledge. I
consider there is adequate specification and fair notice. The details are a matter for proof.
Note of argument, paragraph 8 and discussion
[13] I now turn to deal with the submissions by counsel for the
defender in relation to the pursuer's averments at page 10C-D of the Closed
Record, which is the alternative case based on profit or quantum lucratus. He
submitted that this claim is relevant only if there are averments by the
pursuer that the products are irrecoverable.
In this case, he said, recovery was possible or at least the pursuer
could not aver that it was not available.
The defender had provided to the
pursuer a list of products giving the details of names and addresses of every
purchaser and it was open to the pursuer to seek recovery of the products. Recovery was the primary remedy and it was
only in the event of the products being irrecoverable that the pursuer would be
entitled to a claim based on quantum
lucratus. Counsel for the defender
submitted that as the pursuer had made no averments that recovery was not
possible, the averments were irrelevant.
[14] The foundation for this submission on behalf of the defender was
Walker, Delict page 1006. Counsel
for the defender then referred to a passage in Gloag & Henderson, The Law of Scotland, 4th ed.,
page 125:
"when a bona fide purchaser of stolen products
has resold them before receiving notice of the defect in his title, he is
liable only for any profit he may have made on the resale, and then only in the
event of the products being irrecoverable".
Counsel for the defender prayed in
aid the following cases: The International Banking Corporation v Ferguson, Shaw & Sons 1910 SC 182 at
page 191, Bunten v Silverdale 1951 Sh. Ct. Rep. 62, Jarvis v Mansons 1954 Sh. Ct. Rep. 62, Scot
v Low (1704) Mor 9123, Raymond Harrison v North West Securities 1989 SLT 718 at 719 and 722K. He submitted that there would be double or
additional compensation if a proprietor was able to obtain damages quantum lucratus from a possessor who no
longer possessed the products and then claim recovery of the products from a
third party. He submitted that the obvious
and only primary remedy for the pursuer was to recover the stolen products. The law provided an alternative remedy only if
recovery was not possible. The
alternative remedy was a claim quantum
lucratus against a possessor who in good faith had parted with possession
of the stolen products.
[15] In response, counsel for the pursuer submitted that the said passages
cited in Walker and Gloag & Henderson 4th ed. are not correct
statements of the law. He submitted that
in the passage from Walker, Delict, page 1006, the author is dealing
with the remedy of spuilzie under reference to cases cited in footnote 62. These cases, he submitted, do not support the
general legal proposition put forward on behalf of the defender. He pointed out that the passage in the 4th edition
of Gloag & Henderson has not survived in later editions. The relevant passage in the 11th edition
at paragraph 28.11 states:
"An obligation
of restitution also arises where someone is enriched by the use of another's
property. Even though a bona fide possessor who has ceased to
possess another's property is not liable in restitution for the value of the
property, he is liable for any profit which he has made but not for any fruits
which he has consumed in good faith.
This applies when the bona fide
possessor parts with possession to another from whom the owner can recover his
property."
Counsel for the pursuer also made
reference to Faulds v Townsend (1861) 23 D 437 at page 439 which
he submitted plainly envisaged that both remedies were available at the same
time. He also prayed in aid to the same
effect, International Banking Corporation,
cited on behalf of the defender, and referred to page 191 and F C Finance Limited v Langtry Investment Company Limited 1973
SLT (Sh. Ct.) 11 at page 17. He accepted that the passages relied on were obiter but submitted that there was no
suggestion in these well-accepted cases that there was some other rule about
the available remedy as submitted by
counsel for the defender. Under
reference to D L Carey Miller, Corporeal
Moveables in Scots Law (2nd ed.), pages 239-241 and
242-243, counsel for the pursuer submitted that there had been problems
identified by the Scottish Law Commission in the existing law about "double
recovery" but nevertheless no other policy had been adopted to date as a
solution.
[16] Counsel for the defender conceded that most of the cases
referred to in the passage on which he relied in Walker, Delict did not support the legal
proposition put forward by the author with the exception, he stated, of Bunten v Silverdale and Jarvis v
Manson. In Bunten
v Silverdale, the learned Sheriff
relied firstly on the passage in Gloag & Henderson, 4th ed.,
page 125. I consider that the criticisms
of this passage made by counsel for the pursuer and which I narrate in
paragraph 15 are well founded. The only
other authority relied on by the learned sheriff is Scot v Low, a case
involving an intermediary selling sheep which he did not own. In that case the claim was held not to be
relevant unless the pursuer could allege that the defender was in possession of
the sheep at the time of citation in bad faith or that the defender was lucratus. A claim for the full value of the sheep
against a bona fide purchaser who had
acquired the sheep for value in good faith and then resold the sheep was not
considered to be relevant. The case does
not disclose whether the sheep which had been resold were still alive and
potentially recoverable by the true owner, the pursuer. I can find no support in Scot v Low for the
learned Sheriff's decision or the submission on behalf of the defender. Jarvis v
Manson supports the general rule that
a bona fide possessor who has parted
with stolen goods is bound to recompense the owner by the amount of profit
only. The case does not deal with issues
about choice of remedy which the owner might have exercised and does not
support the proposition that a claim quantum
lucratus can only be made if return
of the property is not possible. The International Banking Corporation case
deals with a different situation where the possessor of the stolen property has
created by manufacture a new species of property which could not again be
resolved into its original elements.
Different policy considerations apply to such a case. The case of Raymond Harrison is concerned with the rights of a permanent
trustee on a sequestrated estate in which a claim was made that certain
payments constituted unfair preferences in favour of the defenders under
section 36 of the Bankcruptcy (Scotland)
Act 1985. The passages referred to in Lord
Clyde's Opinion must be understood in the context of a consideration of
remedies in the event of bankruptcy. In
these circumstances, I am not persuaded that the submission on behalf of the
defender in relation to paragraph 8 of the note of argument is well founded.
[17] During submissions by counsel, there was some discussion about
the underlying policy of the legal remedies.
It is perhaps surprising that some of the problems and policy issues
which were addressed by the Scottish Law Commission in 1976 in memoranda 25, 27
and 31 have not received more attention.
In developing his legal submission, counsel for the defender emphasised
what he considered to be the undesirable policy outcome if the law was as
stated on behalf of the pursuer. That is
not a matter which I am in a position to change if the law is settled which I
consider to be the case. In any event, I
am not persuaded that the remedy submitted by counsel for the defender to be
the prior remedy is so obviously desirable.
This remedy involved the pursuer having no choice but to seek the return
of hundreds of individual products from individuals in different parts of the
world at a time when the products were unlikely to be in "new condition".
[18] In order to allow parties the opportunity to consider my
opinion and address me on any further procedure, I have appointed the case to
the By Order roll. The issue of expenses
is reserved.
