Scottish Court of Session Decisions

Lord M'Laren.—In this action the pursuer, Robert Morrisson, who is a dairyman, sues for the delivery of two cows which he says are his property, but which, having been obtained from him by fraud, have actually passed into the possession of the defender by what is not disputed to be a bona fide purchase. The case which the pursuer makes on record is of this nature. He says that he had taken the cows to market for sale, but there were no offerers at his price; and then he says that shortly after the cows had been withdrawn from the sale ring, a man, who afterwards turned out to be Alexander Telford of no fixed residence, came up to the pursuer and falsely represented that he wanted to purchase two cows on behalf of his father, Mr Wilson, Westrigg, Bonnyrigg. The pursuer says that he had on already sold cows to James Wilson, a dairyman at Bonnyrigg, although he was not very well acquainted with him. But he knew that he was a dairyman at Bonnyrigg, as when he purchased cows through the sale ring in the Edinburgh auction marts his name was always given as “Wilson, dairyman, Bonnyrigg”; and the pursuer believed that the Mr Wilson, Westrigg, Bonnyrigg, whom the said Alexander Telford falsely represented as his father, was the said James Wilson, who is a person of good credit. Then he says that he did not know Alexander Telford at all, but he was induced by the said false representations to believe, and did believe, that this Telford was the son of the said James Wilson, and that he had the authority of the said James Wilson to purchase cows on his behalf. These are the pursuer's averments. I do not think it necessary to go into the evidence, but it may suffice to say that the pursuer's averments are completely proved. He was induced by the fraudulent representations of Telford, which I have just read, to part with two of his cows upon credit. I think that these facts were not seriously disputed, and on the other hand it was not disputed that the defender had purchased the cows for value which he paid without suspicion that they had been improperly obtained.

Now, in these circumstances the question arises whether the pursuer can recover the cows as his property, or whether they have by their transmission to a purchaser for value been irrevocably taken out of the pursuer's possession. This appears to me to be just one of those questions which a lawyer who is willing to think for himself could have no difficulty in solving, even if he had not precedents to guide him. If there had been a contract of sale, then, although the pursuer might have had an action of damages against the person who obtained the goods by fraud, or might have had an action for reducing the sale, yet if in the meantime the property of the cows had passed by lawful subsale to a third person, then the right of that third person, the analogue of the defender in the present case, would be indefeasible. Having acquired the property by purchase from someone who had a lawful title, he would have had a good defence to an action of this nature. But then the case of the pursuer is that there was here no contract of sale. If Telford, the man who committed the fraud, had by false representations as to his own character and credit obtained the cows from the pursuer on credit, then I think that would have been the case of a sale which, although liable to reduction, would stand good until reduced. But then that was not at all the nature of the case. The pursuer never sold his cows to Telford. He believed that he was selling the cows to a man Wilson at Bonnyrigg, 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. This belief that he was selling the cows to Wilson was induced by the fraudulent statement of Telford that he was Wilson's son. It is perfectly plain that in such circumstances there was no contract between Telford and the pursuer, because Telford did not propose to buy the cows for himself, and because the pursuer would not have sold them on credit to a man of whom he had no knowledge. Neither was there any sale of the cows by the pursuer to Mr Wilson, Bonnyrigg. Wilson knew nothing about them, and never authorised the purchase; the whole story was an invention. There being no sale either to Wilson or to Telford, and there being no other party concerned in the business in hand, it follows that there was no contract of sale at all, and there being no contract of sale the pursuer remained the undivested owner of his cows, although he had parted with their custody to Telford in consequence of these false representations.

So much being premised, then I think it follows that as Telford had no right to the cows he could not give a good title to the defender even under a contract for an onerous consideration. He had no better title to sell the cows to any third person than he would have had if he had gone into the pursuer's byre and stolen the cows. This seems to me to be perfectly clear upon a consideration of known principles, but it is satisfactory that in the judgment which we are to give according to the law of Scotland, we are confirmed by a decision of the English Court of Exchequer, in circumstances which are in all respects parallel to those in the present case—I mean the case of Higgons v. Burton . There never were at any time, as I think, such differences in the law of sale in the two parts of Great Britain as would have affected the present question, but under the Sale of Goods Act these differences have been reduced to the vanishing point, and I can have no difficulty in holding that a decision given by an English Court in a case of this kind is an authority which is entitled to the greatest weight, and which, if sound, would be directly applicable to the same state of circumstances arising in Scotland. Therefore, both on principle and on authority, I think that the pursuer has established his case, and is entitled to a decree for the vindication of his property.

Lord Kinnear.—I agree with your Lordship. I think the principle upon which the case must be decided is so well established that it requires little explanation, but since we are differing from the learned Sheriff-depute it may be well to refer shortly to the authorities which appear to me to be conclusive. Probably the most apposite is the judgment of the House of Lords in Cundy v. Lindsay, and the first observation with which Lord Chancellor Cairns begins his opinion is certainly directly applicable, viz., that it is always a disagreeable duty “to determine as between two parties, both of whom are perfectly innocent, upon which of the two the consequences of a fraud practised upon both of them must fall,” and that discharging that duty we can “do no more than apply, rigorously, the settled and well-known rules of law.” Then his Lordship proceeds to lay down the rules which according to his judgment must determine the question whether a purchaser in good faith and for value has or has not acquired a title to property which he has purchased from a seller to whom the property did not belong. He states, in the first place, a distinction with reference to a purchase in market overt, which has never been recognised by the law of Scotland, and which we may therefore dismiss. But the other rules which he lays down are all common to the law of both countries. His Lordship says:—“By the law of our country the purchaser of a chattel”—or, as we should say, corporeal moveable—“takes the chattel as a general rule subject to what may turn out to be certain infirmities in the title. … If it turns out that the chattel has been found by the person who professed to sell it, the purchaser will not obtain a title good as against real owner. If it turns out that the chattel has been stolen by the person who has professed to sell it, the purchaser will not obtain a title. If it turns out that the chattel has come into the hands of the person who professed to sell it by a de facto contract, that is to say, a contract which has purported to pass the property to him from the owner of the property, then the purchaser will obtain a good title, even although afterwards it should appear that there were circumstances connected with that contract which would enable the original owner of the goods to reduce it, and to set it aside, because these circumstances so enabling the original owner of the goods or of the chattel to reduce the contract and to set it aside will not be allowed to interfere with a title for valuable consideration obtained by some third party during the interval while the contract remained unreduced.” This last rule is one example of a general principle which has governed the decision of many cases of a different kind, of which Oakes v. Turquand in the liquidation of Overend and Gurney is a familiar instance. 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 persons have acquired rights in good faith and for value. But then on the other hand if such third persons have acquired their title through a person who himself did not acquire the goods by virtue of any contract with the true owner, or to whom they were not intentionally transferred by the true owner upon any title, then the purchaser can obtain no better title than the person from whom he acquired, who ex hypothesi had no title at all. The doctrine is established by a great mass of authority, and I agree with your Lordship in thinking that the case of Higgons v. Burton, and other cases which were referred to in the course of the argument, such as the case of Hardman v. Booth, decided in England, are very valuable authorities which we may well follow. But the truth is we do not require to go beyond our own books for authority for a doctrine which is stated distinctly by our institutional writers, and which has been followed in the decisions of this Court from a very early date. It is stated with great precision by Lord Stair, who takes exactly the distinction which Lord Cairns takes in Cundy v. Lindsay, between a title obtained by virtue of a contract which may be set aside as fraudulent, and possession which is supported by no contract at all. Thus, he says,—“In moveables, purchasers are not quarrellable upon the fraud of their authors, if they did purchase for an onerous equivalent cause. The reason is because moveables must have a current course of traffic, and the buyer is not to consider how the seller purchased, unless it were by theft or violence, which the law accounts as labes reales, following the subject to all successors.” There is the distinction quite clearly put, and it is stated with equal precision by Mr Bell, who gives in his illustrations a series of decisions beginning so far back as 1629 with the case of the Bishop of Caithness, in which the doctrine has been applied by this Court.

Therefore I think that Mr Morton in his able argument put his case on exactly the right ground when he said that there was no contract between his client and Telford, the fraudulent person. He said if Telford had obtained the cattle by fraudulent contract he should have had nothing to say, but that there was no contract at all with Telford; and upon the facts I agree with your Lordship that that is an exactly accurate statement. 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. He thinks he is contracting with an agent for a different person altogether. He does not contract with the person with whom he in fact supposes that he is making a contract, because that person knows nothing about it and never intended to make an agreement; therefore there is no agreement at all. I think the fallacy of the reasoning of the learned Sheriff-depute becomes quite apparent when one considers that in order to make a contract of sale you must have a certain seller and a certain buyer. The learned Sheriff says that the pursuer was willing to sell, and was in the market to sell; but then a general desire to sell to someone is not a contract to sell to any particular person, and it is as clear as evidence can make it that the pursuer never intended to sell to Telford. He knew nothing about him, he never thought of him, and never intended to deal with him. Therefore, there was no consensus which could lead to any agreement. For these reasons I entirely agree with your Lordship that the pursuer is entitled to recover his cattle if they are still extant. If the defender is not in a position to deliver either or both of the cattle the question will arise as to the pursuer's remedy for the value, which has not been disposed of by the Sheriff-substitute. In the meantime I agree with the decision which your Lordship proposes.

Lord Pearson.—I agree so far with the learned Sheriff that the pursuer has no case merely in respect of Telford's fraud, or merely in respect that he sold the cattle to Telford under essential error. But I think the real question here arises at a prior stage. The Sheriff's view is that there was here a contract, and if there was, then he is probably right in his view of the law. I am unable to find that the proof establishes any contract to which the pursuer was a party. Telford did not represent himself as being principal, but as an agent. The pursuer was entirely deceived, both as to the identity and also as to the intention of the person with whom he supposed he was contracting and intended to contract, and in that essential part of a contract there was no consensus in idem, and therefore no sale. I think that the case falls within the principle of the English cases of Higgons and Cundy; and that the delivery to Telford gave him no such title of possession as would enable him in law to transfer the property of the cattle to another.

The LORD PRESIDENT was absent.