Summers v Havard

Under Factors Act 1889, section 2(1), good faith is assessed in all the circumstances. A buyer may fail that condition where, knowing that an agent acts for other principals and is in financial difficulty, the buyer is aware of indications that the agent may misuse entrusted property and deliberately refrains from making enquiries. Deliberate avoidance of enquiry may justify a finding of bad faith. An appellate court should not disturb such a finding based on oral evidence unless the trial judge was plainly wrong or the conclusion was unavailable on the evidence.

Mr Havard appealed against an order of HHJ Chambers QC dated 20 September 2010, made in the Cardiff Mercantile Court, requiring him to pay Mr Summers £120,740 plus interest. The claim concerned cars belonging to Mr Summers which Halfway Car Sales Ltd had sold to Mr Havard without authority. Mr Havard relied on the protection afforded by section 2 of the Factors Act 1889.

Limited permission to appeal was granted on whether the sales were made in the ordinary course of business and whether Mr Havard acted in good faith. The Court of Appeal heard argument first on good faith. The central issue was whether, in the circumstances found by the trial judge, Mr Havard’s deliberate failure to enquire into ownership meant that he lacked good faith.

Appeal dismissed. The appellant needed to succeed on both grounds of appeal. The court therefore addressed the good-faith ground first; its decision on that ground was sufficient to dispose of the appeal.

1. In applying the conditions in Factors Act 1889, section 2(1), the court must consider all the circumstances relevant to good faith. The inquiry is not confined to matters directly concerning whether the sales were in the ordinary course of a mercantile agent’s business.
2. The appellate court’s role was to decide whether the trial judge was entitled to make the findings reached. Findings of primary fact based on oral evidence should not be disturbed unless the judge was plainly wrong. A conclusion which the judge could properly and fairly reach on the evidence must stand, even if the appellate court might have reached a different conclusion.
3. The trial judge was entitled to find that Mr Havard knew Halfway acted for other principals, knew that some cars belonged to others, knew of Halfway’s financial difficulties and suspected dishonest or improper financial practices. He also knew there was a risk of Halfway’s failure and had not made enquiries about the ownership or source of the cars. In those circumstances, his deliberate failure to enquire supported the finding that he had not acted in good faith.
4. The finding that the vehicles were not sold in the ordinary course of Halfway’s business was used as one circumstance supporting the lack of good faith. The court did not determine the separate ordinary-course ground of appeal.

Lady Justice Arden gave the leading judgment. Lord Justice Carnwath agreed, stating that there was no special definition of good faith under the Act and sufficient material supported the finding. Lord Justice Wilson agreed with both judgments. The formal order was: appeal dismissed.

• Court of Appeal (Civil Division): Appeal by Mr Havard against the order of HHJ Chambers QC dated 20 September 2010. The appeal was dismissed on the good-faith ground.
• Cardiff Mercantile Court: Judgment was entered against Mr Havard for £120,740 plus interest in respect of cars belonging to Mr Summers which Halfway had sold without authority.