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Saturday, 26 November 2011

Rogue salesman: where does the loss lie?

A case that's only recently come to my attention - Quinn v CC Automotive Group Ltd (t/a Carcraft) [2010] EWCA Civ 1412 (16 December 2010) - concerns the classic situation that arises when a finance agreement is not cleared on a car taken in part exchange. The buyer ends up with a new car, but still has to pay for the one he just gave away - and to make matters worse, the dealer's salesman was, as the court put it, a rogue.

The rogue, being the dealer's salesman, had express authority to do certain things on behalf of his employer: the court (both the trial judge and the Court of Appeal) was clear about that. He also had ostensible authority, so he could bind the dealer even if he had gone beyond what he was actually supposed to do. The question on appeal was whether the customer should have been put on enquiry when strange things happened - like meetings being held at a motorway service station, and being told by the salesman that part of an additional deposit that was suddenly asked for could be paid sometime later. What the salesman had done were all things that salesmen commonly do, and it was wrong for the judge to import an "inquiry" test, not to mention a reasonableness test.

In situations like this, the court has to decide which of two innocent parties bears the loss (because the rogue is unlikely to be able to compensate anyone). After an interesting review of the authorities on the point, the Court of Appeal concluded that the answer lay in the principle stated by Holt CJ in Hern v Nichols (1700) 1 Salk. 289:
Seeing somebody must be a loser, by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger.
That passage was described, with approval, by Diplock LJ (as he then was), in Morris v Martin (at p.733), as expressing an "old, robust and moral principle". By allowing the customer's appeal, and holding the dealer liable, the Court of Appeal considered that it was following that principle. But it's still a rough form of justice, and one that certainly requires dealers to be on their guard.

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