Quinn v CC Automotive Group Ltd (t/a Carcraft)

An employer may be vicariously liable for an employee’s deceit where the employee acted within the apparent authority of the employment and the innocent third party honestly relied on the employer’s representation of that authority. The transaction must fall within the class of acts ordinarily authorised for an employee in that position. A third party’s belief need not be reasonable, and a general duty to investigate cannot be imposed merely because reasonable care might have exposed the fraud. Relevant suspicion may arise if the third party turned a blind eye, or possibly where the employee acted outside the usual authority of the position. Authority is assessed broadly, in context and without hindsight. Between two innocent parties, the employer who placed the employee in the position of trust should bear the loss.

Paul Quinn pursued a Part 20 claim against CC Automotive Group Ltd, trading as Carcraft, after its salesman, Abeed Khan, fraudulently took Quinn’s existing Jaguar and represented that a replacement Jaguar was being sold and financed through Carcraft. Khan had no actual authority to sell the replacement vehicle, which had never belonged to Carcraft, but the judge held that he had apparent authority and that the deceit was closely connected with his employment.

HHJ Belcher nevertheless dismissed Quinn’s claim, holding that unusual circumstances, particularly Khan’s request for an additional cash payment, put Quinn on enquiry. Quinn appealed. The central issue was whether an honest third party who relied on an employee’s apparent authority could be denied a remedy because he was, or ought to have been, put on enquiry.

1. Appeal allowed. The judge was right that Khan had apparent authority to sell the replacement Jaguar and to deal with the related part-exchange and financing. Those dealings were within the class of acts ordinarily authorised for a car salesman, and the deceit was closely connected with Khan’s employment. The absence of actual authority to sell a vehicle that Carcraft did not own did not prevent apparent authority arising from Carcraft’s representation that Khan was authorised to sell cars on its behalf (paras [24]–[25]).
2. The unchallenged findings that Quinn and his wife were honest witnesses, and had never considered that Khan was acting outside his employment or authority, established Quinn’s honest belief in and reliance on the representation that Khan had authority. There was no issue of blind-eye reliance on suspicions (para [26]).
3. The judge erred by importing a general enquiry test and, more particularly, an objective reasonableness test. Once apparent authority, honest belief and reliance were established, there was no room or need for such a test. The fact that reasonable care might have revealed the deceit did not defeat reliance. The transaction was squarely within the class of acts usually authorised for a car salesman (para [27]).
4. The court further held, although unnecessary to the result, that the request for an additional £700, the acceptance of £400 with the balance deferred, and the other unusual features had to be assessed in context and without hindsight. On the judge’s primary findings, those matters were further manifestations of Khan’s apparently helpful conduct; Quinn neither was nor ought to have been put on enquiry (para [28]).
5. The result accorded with the policy that, between two innocent parties, the employer who placed the employee in a position of trust should bear the loss occasioned by the deceit. The appeal was allowed (paras [29]–[30]). Lord Justice Sullivan and Lord Justice Mummery agreed (paras [31]–[32]).

• Court of Appeal (Civil Division): [2010] EWCA Civ 1412. Allowed Quinn’s appeal from the judgment of HHJ Belcher.
• HHJ Belcher: claim no 7HD01993. Dismissed Quinn’s Part 20 claim against Carcraft.