Before:

 
Lord Justice Neill
Lord Justice Farquharson
Sir John Megaw
 
 

B E T W E E N

JUDGMENT
 
DATED: 25 January 1990

FARQUHARSON LJ

On 22nd November 1983, one of the appellant's lorries broke down and was taken to the respondent's garage in Guildford for repair. The damage was substantial, requiring the replacement of the engine, and in the event the cost of repair was nearly £2,000. As the respondent had not previously had any dealings with the appellant, the respondent was not prepared to carry out the work for the appellant on a credit basis. The respondent required that the order should be placed by a main Ford dealer, rather than by the appellant itself. The appellant therefore arranged for such a dealer, Reginald Tildesley Limited, to place the order for the necessary work. Accordingly, the job sheet, which also served as the invoice, was made out showing the customer's name as Reginald Tildesley.

The respondent's purpose was, of course, to ensure that its bill was met. Unfortunately, matters did not develop as it would have wished, and on 31st January 1984 the business of Reginald Tildesley went into receivership, without the debt being paid. In March 1984 both parties sought the receiver's agreement for the appellant to pay the amount owing directly to the respondent, but the receiver would not agree. In 1985 Reginald Tildesley went into liquidation. The respondent put in a claim in the liquidation and also sought relief from Value Added Tax which would be payable on a bad debt. Thereafter, it appears that the liquidator agreed with the proposal that the appellant should pay the money directly to the respondent, and the latter sent the appropriate credit note to the liquidator. Unhappily, the appellant refused to pay the amount owing although, on any basis, it had benefited from the contract to repair its own vehicle, and had paid nothing towards the cost.

Proceedings to recover the debt and interest from the appellant were taken in the Guildford County Court, and the learned judge gave judgment for the respondent in the sum of £2,566.62, which included interest on the original charge. The appellant now appeals against that decision, on the grounds that it never had any contractual relationship with the respondent, and that the respondent's claim, in reality, lay only against the liquidator of Reginald Tildesley.

It was contended by the respondent before the learned judge, and again before us, that on these facts there was indeed a direct contract between the appellant and the respondent, and that the intervention of Reginald Tildesley was simply as a means of guaranteeing payment. It was an undoubted practice, as the judge found, for a Ford main dealer to vouch for one of his customers to another Ford main dealer by placing the order and making himself responsible for payment, which he in turn would recover from his customer.

The learned judge had no difficulty in rejecting this contention on the facts. Indeed, the documentation is quite inconsistent with there being any express agreement between the respondent and the appellant. Quite apart from the work sheet/invoice, which, as I have already noted, revealed the customer as Reginald Tildesley, and that it was to Reginald Tildesley that it was rendered, there were other documents which are consistent only with there being no contract between the appellant and the respondent, but one between the respondent and Reginald Tildesley.

To take certain examples, there was a letter written on 12th April 1984 addressed to Reginald Tildesley by the respondent, saying:

"Due to your customer Olaf Johnston requiring further work to be carried out by us in this area, we have agreed to cancel our charges to you. In turn Olaf Johnston, as a goodwill gesture, have agreed to pay our charges."

Secondly, there is a proof in the liquidation, which was submitted by the respondent to the liquidator of Reginald Tildesley, as well as the application, which I have already noted, for relief against VAT on a bad debt. This, of course, is only consistent with the situation that the debt was indeed owed by Tildesley's liquidator to the respondent and that the debt was not owed by the appellant.

A further document appears at page 60, to which Miss Wakefield refers us, again coming from the respondent to the liquidator, and saying this:

"OLAF L Johnston has agreed settlement direct to us prior to further warranty work being carried out on the aforementioned engine and as agreed in our telephone conversation on 25.11.85 we enclose our Credit Note in full, releasing Reginald Tildesley's debt to us and likewise OLAF L Johnston's debt to Reginald Tildesley."

Those documents were fortified by the evidence that was given by the Managing Director of the plaintiffs, a Mr Peter Rudkin, which was accepted by the judge. He said that the invoice would be sent to Reginald Tildesley and "We would expect to receive payment from them." He had already noted in his evidence that when a vehicle is repaired, his company either required a cheque or cash or a guarantee in some other way, such as an order number from another Ford dealer. Having rendered their invoice, he pointed out that Reginald Tildesley would then invoice their customer, who would pay them.

In those circumstances, the learned judge came to the conclusion that there was no express contract. There was clearly, from what I have already cited, abundant evidence that the only contract, subject to what I shall come to later, was between the respondent and Reginald Tildesley.

The next point taken before him and indeed before us, by Miss Wakefiield on behalf of the respondent, was that Reginald Tildesley was in fact an agent for the appellant, and that the respondent could recover from the appellant as a principal. As the learned judge pointed out in the course of his judgment, this could not in reality have been the case because, if Reginald Tildesley were agents of a disclosed principal, the main purpose of the exercise would have been defeated, because recourse could only, in those circumstances, be had by the respondent against the appellant; and, on the facts found by the learned judge, it was quite plain that the respondent was not prepared to rely on the appellant for the placing of the order.

Accordingly, the learned judge rejected the submission of agency, which was not really strongly pressed before us. It was further submitted by counsel that one could approach the case as one where there had been an unjust enrichment and that, in law, the respondent should be compensated for the work done. She underlined the fact that the appellant had received all the benefit from the transaction. It was the appellant's lorry, and it was the appellant who had asked for the work to be done. It had received the benefit of the repairs and had not paid a penny. In those circumstances, she said, there was an element of unjust enrichment which, in law, the respondent should be compensated for.

In support she relied on a case in this court, a decision called Greenwood v. Bennett [1973] 1 QB 195. That was a case where a car had been stolen and had come into the possession of a bona fide purchaser who had done a great deal of work on the car, so that it could safely be driven on the roads. Proceedings were brought by the original owner or the original owner's representative, who it was said had an unanswerable claim to repossession of the car. He was duly granted restitution. When the matter came before this court, the appellant being a bona fide purchaser for value, it was decided that the car should not be retained by the respondent without him paying to the appellant the cost of the work carried out on the vehicle. This was based by Lord Denning Master of the Rolls on the law of restitution.

Those facts, as Miss Wakefield acknowledges, are quite different. There is no question here of a bona fide purchaser for value doing work on a car which he genuinely believed to be his, and which he had to deliver up by operation of law. There is, in my judgment, no room for the kind of remedy which counsel seeks to obtain under this head.

The last of the various submissions before the learned judge and the fourth one before us, was one which, in the court below, achieved rather more success than the others. Counsel's contention was that there was a collateral, or implied, contract between the appellant and the respondent, whereby the appellant would make payment of the debt due, should Reginald Tildesley fail to do so. It is necessary, I think, to cite the relevant passage in the judgment. I start at the bottom of page 3.

"That leaves" says the learned judge "the Plaintiffs' last argument of a collateral or implied contract. I have been referred to Brown and Davis v. Galbraith in which claim by a repairer who had been instructed by an Insurance Company failed in a claim against the owner of the vehicle when the Insurance Company became insolvent. The facts were of course different from the present case. In the present case there was never any doubt that the Defendants were to be ultimately liable. There was no question of Reginald Tildesley insuring them. There was no question of any other than a marginal benefit to Reginald Tildesley. The Defendants would happily have entered into a direct contractual relationship with the Plaintiffs -- it was the Plaintiffs who for security wished otherwise. It was, in the words of Cairns LJ an arrangement to give business efficacy to a transaction to enable the work to be done for someone with whom the Plaintiffs had no previous dealing. The work was authorised by the Defendants. They were the sole beneficiaries of it. The role of Reginald Tildesley was as a medium for payment. I have no doubt that there was a collateral or implied contract that if for any reason Reginald Tildesley did not pay the Plaintiffs the Defendants would be ultimately liable."

So, in effect, the learned judge was holding that, in the circumstances and on the evidence available to him, there was an implied or collateral contract of guarantee as between the appellant and the respondent.

But before turning to that decision, I say a word about the case of Brown and Davis v. Galbraith [1972] 1 WLR 997. That was a case in which the car owner had brought to the repairers a car that had been damaged, in respect of which there was an insurance claim. A representative of the insurers attended the garage and gave instructions to the repairers that certain work should be carried out, leaving other obligations, with regard to the £25 excess on the policy and the towing charges, to be paid by the motor-car owner. The work was duly done and the owner took possession of the car.

Unfortunately, thereafter the insurers went into liquidation. The repairers sought to proceed against the owner and it was held that, as far as the main part of the contract was concerned, there could be no remedy because the owner had never been in a contractual relationship with the repairers in respect of the repairs that had been authorised by the insurers. True it was that the Court of Appeal found, as indeed had the learned judge, that there was a collateral contract, the owner having submitted the order and brought the car along for repairs, that the respondents would carry out the work expeditiously. That is a quite different situation, as appears from those facts, from that which obtains in the present case.

I return, therefore, to the learned judge's decision that he, on the evidence, was able to imply a contract of guarantee. For my part I have rarely, if ever, come across such an implication, but it is suggested that the reason why it can be implied was to give business efficacy to the transaction. One is tempted to ask, "Which transaction?" because the only transaction which had been held to be in existence by the learned judge was the express contract between the respondent and Reginald Tildesley for the carrying out of the work to the car. There could be no question, in my judgment, or any business efficacy terms being necessary in those circumstances. The contract between the respondent and Reginald Tildesley Limited stood effectively by itself.

I question also whether a term of a contract can be implied in relation to the contract between the respondent and Reginald Tildesley in a contract between two other parties, namely, the respondent and the appellant. It may be, although perhaps the learned judge did not have sufficient evidence, that an implied contract could have been spelled out as between the appellant and Reginald Tildesley, that when Reginald Tildesley did discharge the debt to the respondent, the appellant would reimburse him, but, for my part, I can find no evidence upon which the learned judge could reasonably have come to the conclusion that there was an implied contract of guarantee of the nature which I have just described.

The reality of this case was that when the lorry was brought to the respondent for repair, the respondent was not prepared to carry out the work simply on the instructions of the appellant. It did not know the appellant; its employees did not know the appellant; and therefore it was made perfectly clear, as the judge found, that the work would not be carried out unless the order was placed by somebody on whom the respondent could place reliance. It could, of course, place reliance on a business colleague who had the same franchise as itself, namely the Ford main dealer. It was just, from the respondent's point of view, unfortunate that the one who it thought was the more creditworthy of the two, that is to say, Reginald Tildesley, turned out not to be so. Accordingly, it looked for payment from Reginald Tildesley and, in the circumstances I have already described, they failed to obtain it.

What counsel is seeking to do, however eloquently, is to build up another contract whereby the respondent could look to the appellant. For the reasons I have given I do not think there is material available for her to do that and, for my part, I would allow this appeal and reverse the order of the learned judge.

Appeal allowed with costs here and below; £2566.62 in court and interest thereon to be paid out to the appellant's solicitors.

I agree that the appeal should be allowed for the reasons which have been given by my Lord. Despite the attractive way in which Miss Wakefield, the counsel for the respondent, has presented her case, I fear that I find myself unable to accept the proposition which she put forward, either by reference to her respondent's notice, or by reference to the upholding of the single ground on which the learned judge found in her favour in the court below.

I am unable to see that there is evidence here on which it was permissible to hold that there was an implied contract of guarantee. The whole purpose of the plaintiff's requirement that the contract should be placed with Richard Tildesley, rather than with Olaf L Johnston Limited as being the owner of the vehicle, was that the plaintiff regarded Richard Tildesley as being one in whom they could have more confidence as being the person liable to pay them as a matter of legal obligation. In those circumstances it would have been surprising that the plaintiff should have gone on to provide, or to make clear to the other persons concerned, that it was intending to provide, that there should be a further contract, collateral to that plain and simple contract, whereby the defendant was to be made guarantor of Reginald Tildesley, who were deliberately being made the persons primarily liable.

I agree. Miss Wakefield has put forward her arguments most attractively and persuasively, but for the reasons which have been given by my Lords it seems to be impossible to find any sufficient ground in law to entitle the plaintiff to succeed in its claim against the defendant company. In these circumstances the appeal is to be allowed.