Landlord and tenant — Distress — Whether vehicle subject of hire agreement in reputed ownership of tenants — Whether landlords entitled to sell vehicle
By a lease
dated February 26 1991 the tenant held factory premises from the defendant
landlords on February 26 1992 the landlords distrained for rent and executed a
walking possession agreement of the goods on the premises, including a Mercedes
van belong to the plaintiffs and hired by them to the tenants under an
agreement dated July 19 1991. On May 5 1992 the landlords took close possession
of the van. The plaintiffs first learnt of the distress on June 1 1992 and
thereupon served a notice on the landlords under section 1 of the Law of
Distress (Amendment) Act 1908. However, the landlords sold the van on June 30
1991 for £6,100. The plaintiffs’ claim against the landlords, for the value of
their van, was dismissed in the court below, the judge finding that the van was
in the reputed ownership of the tenants. The plaintiffs appealed.
being generally known to the landlords included the fact that vans of the type
in question might be the subject of hire agreements. By reason of those
circumstances the landlords could not prove that reputation of ownership of the
van by the tenants must arise; probability was not sufficient.
Accordingly, the landlords were not protected by the Law of Distress
(Amendment) Act 1908.
The following
cases are referred to in this report.
Ex parte
Watkins (1873) LR 8 Ch App 520
Ex parte
Reynolds (1885) 15 QBD 169
Chappell
& Co Ltd v Harrison (1910) 103 LT 594
Fox, Re [1948] Ch 407; [1948] 1 All ER 849; [1948] 46 LGR 305,
DC
Sharp v Fowle (1884) 12 QBD 385
Watson, Re [1904] 2 KB 753
This was an
appeal by the plaintiffs, Salford Van Hire (Contracts) Ltd, from a decision of
Judge Tetlow in Manchester County Court, dismissing the plaintiffs’ claim for
damages against the defendants, Bocholt Developments Ltd.
James Bonney
(instructed by Dunderdale Wignall, of Manchester) appeared for the appellants;
Anthony Elleray QC (instructed by Widdows Masons, of Bolton) represented the
respondents.
Giving the
first judgment at the invitation of Nourse LJ, HIRST LJ said: This is an
appeal by the plaintiffs, Salford Van Hire (Contracts) Ltd, from the judgment
of Judge Tetlow dated February 7 1994, whereby it was ordered that the
plaintiffs’ claim against the defendants, Bocholt Developments Ltd, should be
dismissed.
In the action
the plaintiffs, who carry on business as large scale contract hirers of, inter
alia, commercial vehicles, claim the value, agreed at £6,100, of a Mercedes
7.5 ton van (‘the van’) which they had hired under an agreement dated July 19
1991 to a company called Northern Stock Plastics Ltd, trading as Surestyle,
which is now in receivership. The registered keeper of the van was the
plaintiffs’ holding company, Salford Van Hire Ltd.
Surestyle
manufactured double-glazing window units at a factory in Bury, Greater
Manchester. The defendants, who are a property holding company, are the owners
of those factory premises, which were let to Surestyle on a three-year lease
dated February 26 1991. Shortly afterwards Surestyle ran into financial
difficulties, and by February 18 1992 they owed the defendants £169,750 arrears
of rent.
On February 26
1992 the defendants distrained for rent, and on the same day there was executed
a walking possession agreement of the goods on the premises including the van.
Surestyle continued to default on the rent and, on May 5 1992, the defendants
took close possession. The receivership followed a few weeks later on May 29,
but it was not until June 1 that the plaintiffs first learnt of the distress.
They thereupon served a notice on the defendants under section 1 of the Law of
Distress (Amendment) Act 1908 (‘the 1908 Act’).
The vehicle
was sold by the defendants on June 30 1992 for £6,100.
Sections 1 and
2 of the Act provide, so far as relevant, that if a landlord levies distress on
the goods of any person other than a subtenant of, or a lodger in, the
premises, that person may serve a declaration on the landlord that the goods in
question are his property; and that, if after receipt of such declaration, the
landlord proceeds with a distress on the goods, such distress will be illegal,
and that person may take proceedings for the recovery of his goods. Similar
protection is extended to the goods of subtenants and lodgers, subject to their
undertaking to pay any rent due to the tenant to the superior landlord.
Section 4(1)
however provides that the Act:
… shall not apply —
… to goods …
in the possession, order, or disposition of such tenant by the consent
and permission of the true owner under such circumstances that such tenant is
the reputed owner thereof
Section 4A,
which was inserted by the Consumer Credit Act 1974, also excludes from the Act
goods bailed under a hire-purchase agreement or a consumer hire agreement, and
goods agreed to be sold
terminated.
Section 4A
replaced a provision in section 4(1) as originally drafted, which excluded
hire-purchase agreements simpliciter.
Neither in its
amended nor in its unamended form does the Act exclude, or indeed make any
reference to, hire agreements. In the present case it is common ground that the
goods were in the possession of Surestyle by the consent and permission of the
plaintiffs.
The first
question at issue is therefore whether Surestyle were the reputed owners of the
van in all the circumstances. If so, the second question at issue is whether
there is a well established trade custom of hiring motor vehicles which would
rebut or exclude the doctrine of reputed ownership.
The learned
judge answered both questions in the respondents’ favour.
The judge
dealt with the second question, both as a matter of law and as a matter of
fact, in considerable detail. However, on the first question (which is the
crucial one for the purpose of the present appeal) his approach was somewhat
perfunctory, not surprisingly perhaps since he did not have before him all the
relevant authorities.
In support of
his conclusion that the van was in the tenants’ reputed ownership, he relied
entirely on the physical situation and characteristics of the van, as follows:
(1) the van was on the premises at the time of the levy; (2) the van was a
plain white van with no markings on it whatsoever to indicate who the true
owner was; (3) the van was a little over three years old; and (4) the van had
undergone an unusual conversion for a vehicle of its size, with the
installation of a sleeper cabin and tail lift.
There was also
undisputed evidence that about 8% of the licensed vehicles in this country in
the 3.5 to 7.5 tonnes category, which number in total just short of 150,000 are
on hire.
The nub of the
dispute in the present appeal is whether (and if so to what extent) it is
relevant on the issue of reputed ownership to take into account, as part of the
relevant circumstances, the prevalence of hiring and other forms of
arrangements falling short of outright ownership, either as established by the
evidence, or as a factor of which it is permissible to take judicial knowledge.
The learned judge plainly did not do so, and the appellants’ case is that he
should have done, and that if he had, the inevitable answer was that the van
was not in the reputed ownership of the tenants.
Both counsel
summarised the main thrust of their arguments very helpfully and succinctly. Mr
James Bonney’s submission on behalf of the appellants was that:
(1) To
establish that goods in the possession of the tenants were in their reputed
ownership, the burden is on the landlords to establish:
(a) that the
hypothetical reasonable person with knowledge of the general course of
business, and having made all reasonable inquiries about the material facts,
would infer that the goods must (not may or may not) be owned by the
tenants (hereinafter called ‘the must test’); and
(b) that the
true owner consented not only to possession but also to the tenants’ reputed
ownership in that they must have realised that a reasonable person would draw
such an inference.
(2) The first
and most important question is whether in all the circumstances such an
inference can be drawn, and for that purpose all relevant circumstances,
including the prevalence of hiring, etc should be taken into account; such
circumstances were not limited to the physical situation or characteristics of
the goods.
(3) If and
only if the inference of reputed ownership could properly be drawn, the true
owner may rebut it by proof of an established trade custom for possession of
such goods to be given in such circumstances without any transfer of ownership.
Mr Anthony
Elleray QC on behalf of the respondents submitted:
(1) The
reputation of ownership for the purposes of section 4(1) is a reputation which
must necessarily arise on the facts of the case (ie he accepted the ‘must’ test
in principle).
(2) However,
in the absence of either:
(a) a
notorious trade custom (proved by evidence or judicial notice) the goods in the
hands of the tenant trader are not owned by such trader; or
(b) evidence
that the tenant has goods which actually belong to third parties, the inference
by the landlord of ownership in the tenant, from possession and use by him of
the goods, does necessarily arise.
(3) It is not
therefore enough to prevent the inference of ownership to say that it is known
that goods could be hired or hire-purchased.
(4) On the
facts the van in this case was necessarily in the reputed ownership of the
tenant.
Historically
the entitlement of the landlord to distrain for rent is a very old and
well-established right, dating back well before the Distress for Rent Act 1689,
which is still in force today. Equally the doctrine of reputed ownership dates
back to a statute of King James I. These were followed by a succession of
statutes in the 18th and 19th centuries, including the Lodgers’ Goods Protection
Act 1871, which, as its title implies, protected lodgers’ goods, and was
repealed and replaced by the wider provisions of the 1908 Act, which extended
the protection to other persons’ goods as described above.
However, one
remarkable feature of this branch of the law is that other persons’ property
may be distrained and sold without their knowledge, and thus without their
having any opportunity to serve a section 1 declaration. Even if they do find
out about the distraint in time, the notice must be served at the very latest
before the sale, and once the goods have been sold, they have no remedy.
Until the
Insolvency Act 1986, a similar doctrine of reputed ownership applied to goods
in the possession of a bankrupt in his trade or business with the consent of
the true owner: Bankruptcy Act 1914, section 38. However this provision has
been omitted from the Insolvency Act 1986, so the doctrine no longer applies in
the law of bankruptcy.
Reputed
ownership has been considered in several reported cases, most of which related
to bankruptcy, the most recent and by far the most important being in Re Fox
[1948] Ch 407, which unfortunately was not cited to the learned judge.
Of the earlier
cases, the leading authority, on which the judge relied in his judgment, is Ex
parte Watkins (1873) LR 8 Ch App 520, where Lord Selborne LC, with whom
Mellish LJ agreed, stated as follows at pp528–9:
There is no
inflexible rule of law that because a man who was once the owner of goods and
has sold them remains in possession of them he must therefore be held to be the
reputed owner. The statute does not say that. If he remains in possession with
the reputation of ownership, and in those circumstances which create a
reputation of ownership, then the property will pass to his assignees; but it
is always a question of fact whether or no the circumstances are such as to
create that reputation.
What, then,
are the principles applicable to the determination of that question? Much of
the argument seems to me to have proceeded on a fallacious application of the
expressions ‘knowledge of the world’ and ‘known to the public’. The doctrine of
reputed ownership does not require any investigation into the actual state of
knowledge or belief, either of all creditors, or of particular creditors, and
still less of the outside world, who are no creditors at all, as to the
position of particular goods. It is enough for the doctrine if those goods are
in such a situation as to convey to the minds of those who know their situation
the reputation of ownership, that reputation arising by the legitimate exercise
of reason and judgment on the knowledge of those facts which are capable of
being generally known to those who choose to make inquiry on the subject. It is
not at all necessary to examine into the degree of actual knowledge which is
possessed, but the Court must judge from the situation of the goods what
inference as to the ownership might be legitimately drawn by those who knew the
facts. I do not mean the facts that are only known to the parties dealing with
the goods, but such facts as are capable of being, and naturally would be, the
subject of general knowledge to those who take any means to inform themselves
on the subject. So, on the other hand, it is not at all necessary, in order to
exclude the doctrine of reputed ownership, to shew that every creditor, or any
particular creditor, or the outside world who are not creditors, knew anything
whatever about particular goods, one way or the other. It is quite enough, in
my judgment, if the situation of the goods was such as to exclude all
legitimate ground from which those who knew anything about that situation could
infer the ownership to be in the person having actual possession.
The next
important case is in Re Watson [1904] 2 KB 753, where the Court of Appeal
(Vaughan-Williams, Romer and Cozens-Hardy LJJ) stated in the judgment of the
court as follows at pp756–7:
In our
opinion it is essential before a Court can hold that one man’s goods are to be
taken to pay another man’s debts, because of the reputation of ownership of the
bankrupt, that the goods should be held and dealt with by the bankrupt in such
manner and under such circumstances that the reputation of ownership must
arise. We think that the cases of Load v Green [5 M&W 216]
and Smith v Hudson [(1865) 34 LJ (QB) 145] fully establish this
proposition. Blackburn J in his judgment in Smith v Hudson [34 LJ
(QB) 145, at p151] said: ‘Load v Green [15 M&W 216] decides
that the true owner as such must consent that the other side should be reputed
owner, not being true owner.’ The doctrine of reputed ownership was first
embodied in the Bankruptcy Act, 21 Jac 1. It has been couched in various words
in the successive bankruptcy statutes, but this principle has run through them
all, and the statement of Lord Redesdale in Joy v Campbell [1 Sch
& Lef 328, 336; 9 RR] (a case which has been approved and acted on again
and again: see Belcher v Bellamy [2 Ex 303], Hamilton v Bell
[(1854) 10 Ex 545], and many other cases), that the true owner must have
unconscientiously permitted the goods to remain in the order or disposition of
the bankrupt, justifies this statement. This does not mean, as we understand
it, that he must have intended that false credit should be obtained by the
bankrupt’s apparent possession of the goods, but it does at least mean that the
true owner of the goods must have consented to a state of things from which he
must have known, if he had considered the matter, that the inference of
ownership by the bankrupt must (observe, not might or might not) arise: see Hamilton
v Bell [(1854) 10 Ex 545]; Gibson v Bray [(1817) 8 Taunt
76; 19 RR]; Ex parte Bright [10 ChD 566].
In Re Fox
(supra) is a decision of a very distinguished Divisional Court of the
Chancery Division (Jenkins and Harman JJ as they respectively then were) and,
though not binding on us, is of very high authority. In that case a trustee in
bankruptcy of a bankrupt builder claimed under the doctrine of reputed
ownership three classes of goods which belonged to other persons viz:
(a) building
materials lying in the builder’s yard;
(b) further
building materials lying loose on another site where the builder was
constructing houses;
(c) roofing
tiles and materials which were also lying loose on the building site.
Jenkins J,
giving the judgment of the court, stated the principle in the following passage
which is central to the present case, at p413:
Mere proof of
possession in given circumstances (with the requisite consent or permission) may
indeed raise a prima facie case of reputed ownership only to be rebutted
by proof — or judicial notice — of a custom negativing that view. But the
primary question must always be whether, in the circumstances, the possession
of the goods by the bankrupt involved the inference that he was the reputed
owner. If the answer to that question is ‘No,’ then cadit quaestio. It
is only if the answer is ‘Yes’ that the question of custom enters into the
matter at all.
Having cited
the above mentioned cases, he considered category (a) at p417 as
follows:
As to
category (a), the circumstances were precisely the same as if the goods
had been his own, with nothing whatever to show that they were not, or might
not, be his. We cannot but think that any man seeing building materials stored
in a builder’s yard would naturally suppose that they were the builder’s
property and could not be expected to come to any other conclusion. The
evidence directed to showing that in these days builders in fact carry no stock
and can have no materials except such as are obtained under licences earmarking
them for the contracts which they have in hand, does not in our judgment alter
this result. Even if the hypothetical inquirer into the bankrupt’s position
knew that the materials in the yard must have been obtained under licence for
use only on particular approved works, that would give him no ground for
supposing that the bankrupt was not the owner of them.
As to the
other two categories, he stated at p418:
The first
question to be considered is whether any distinction should, for the present
purpose, be drawn between these two categories on the ground that whereas the
former were in fact the property of the bankrupt until they passed to the first
appellants under cl II of the contract, the latter were never his property, but
belonged throughout to the second appellants. On this point we were referred to
two cases, namely, Lingard v Messiter [1 B&C 308] and in [Re
Watson & Co [1904] 2 KB at p753, 756] (per Vaughan Williams LJ
in the course of the argument) to show that the onus of proof shifts according
to whether the bankrupt was or was not at one time the owner of the goods, or
in other words that it is easier to infer reputation of ownership where the
bankrupt having been in possession of the goods as owner has remained in
possession after transferring the property in them to somebody else, than it is
to do so where the bankrupt is in possession of goods of which he never was the
owner.
We do not
think these general propositions are of any assistance in the present case.
After all, the section is concerned with the apparent, not the actual,
situation.
From this
point of view no distinction can in our view be drawn between the tiles and the
other materials on the site, unless the evidence led to show that in the
Midlands and North tiling is almost universally done by sub-contractors on
terms that the roofing materials are to remain their property until fixed,
should be regarded as amounting to proof of a custom to that effect, of which
notice must be imputed to the hypothetical inquirer. Accordingly, we propose to
consider all these materials, including the tiles, as one, and in doing so to
assume for the moment that the custom alleged on behalf of the second
appellants is not made out.
On this
assumption we ask ourselves what inference the hypothetical inquirer would draw
as to the ownership of materials (including roofing materials) on the site. He
would see the site, with two pairs of houses in course of erection upon it, and
(from the board) that the bankrupt was in possession of the site as the builder
engaged on the work. He would see that the bankrupt had in his possession on
the site materials visibly appropriated to the building of the houses. That is
as much as his eyes would tell him. In addition, he must (we think) be taken as
knowing that whereas the bankrupt might be building as a speculation on his own
account, it was equally, if not more, likely that the bankrupt was concerned
merely as a contractor building on somebody else’s land for that other person,
in which latter case no inference as to ownership of the materials based on the
former hypothesis could justifiably be drawn. If the hypothetical inquirer took
steps to inform himself as to the terms on which building operations are
normally undertaken by a building contractor for a building owner, with a view
to arriving at some conclusion as to the ownership of the materials on the site
(as he must be assumed to have done on the principle stated in Ex parte
Watkins [LR 8 Ch 520]), he would (according to the evidence before us)
discover that the ownership of the materials on the site depended on the terms
of the contract with the building owner; that as likely as not, or more likely
than not, the contract was either in the RIBA form or in a form containing
provisions to the same effect as cl II of the RIBA form; and that, if this was
the case, all or any of the materials on the site, though provided in the first
instance by the builder, might have become the property of the building owner
by inclusion in certificates under which payment had been made.
It,
therefore, seems to us that it is impossible to impute to the hypothetical
inquirer the inference that the bankrupt was the owner of the materials on the
site as an inference which must arise from the bankrupt’s possession of those
materials. The most that can be said is that such an inference might have been
drawn. It was not a necessary inference.
It follows
that, in our opinion the materials (including roofing materials) on the site
were not in the possession of the bankrupt in such circumstances that he was
the reputed owner thereof within the meaning of the section as interpreted by
the authorities to which we have referred.
The
bankrupt’s possession of these materials was, in our view of the character,
aptly described by Wright J in In re Keen & Keen [[1902] 1 KB 555,
at p560] as ‘ambiguous’, and neither such as to make the bankrupt the reputed
owner of the goods nor such that the appellants’ consent to it amounted to a
consent on their part to the bankrupt’s reputation of ownership.
Mr Bonney
submitted that, having regard both to the present day prevalence, as an
ordinary incident of commercial life, of hiring and other arrangements short of
outright ownership (of which he said the court should take judicial notice) and
to the evidence that 8% of vehicles in this particular class are on hire, it
was manifest that the ‘must’ test had not been met. These matters were clearly,
he submitted, part of the overall circumstances which the court was bound to
take into account before concluding that the landlord was entitled to levy
distress on goods belonging to an innocent third party.
A cautious
approach to the doctrine of reputed ownership was endorsed by Lord Selborne in
the Watkins case at p532 as follows:
It would be
more in accordance with my opinion to say that the doctrine of
have of late years looked more narrowly and closely to the real value and
weight of the circumstances which tend on the one hand to confirm and on the
other hand to exclude the reputation of ownership. In so doing they seem to me
not to be going against the policy of the statute, but merely to be carrying it
into effect in accordance with sound principle.
This was
echoed by Brett MR in Ex parte Reynolds (1885) 15 QBD 169 at p191:
I will make
one further observation, and that is that the doctrine of reputed ownership is
a doctrine which ought in particular trades to be carefully watched and ought
not to be extended, and the moment it is found that creditors ought not to rely
upon the fact that goods are in the possession of their debtor, the Court ought
to be strict in saying that the property of one man shall not go to pay the
debts of another.
Mr Bonney also
relied on a number of official reports which had directly addressed this topic:
(1) In the
report of the review committee on insolvency law and practice (Cmd 8558 June
1982) presided over by Sir Kenneth Cork, it was stated as follows in the
chapter on reputed ownership at para 1088:
The Blagden
Committee expressed the view that the custom, already then increasingly
prevalent, of obtaining on hire-purchase practically every article employed in
trades and businesses, extending even to livestock in the possession of a
farmer, had made it virtually impossible to establish a right in the trustee in
bankruptcy to goods belonging to other parties. This view has been supported by
evidence which we ourselves have received.
This was
followed by the white paper, a Revised Framework for Insolvency Law (Cmd
9175 February 1984), which stated at paras 115–116 as follows:
Reputed
ownership
115. The
Review Committee noted that the underlying object of the doctrine of reputed
ownership was to prevent a trader obtaining false credit by the apparent
possession and ostensible ownership of property in the shape of trade goods
which in fact belong to other people. However, in the modern business world
such trade goods are frequently acquired on hire-purchase or lease and it is
the general credit rating of the customer rather than the extent of his visible
possessions that is the main criterion for the granting or withholding of
credit.
116. The
Government agrees with the Review Committee’s opinion that the doctrine of
reputed ownership, which applies only in bankruptcy, has no place in a modern
body of insolvency law. The relevant provisions will therefore be repealed.
These two
documents were the precursors of the Insolvency Act 1986.
(2) The Law
Commission in their report no 194 entitled Landlord and Tenant,
Distress for Rent (HC 138 1991) reported as follows at para 2.45:
A particular
handful of third parties are wholly disqualified from claiming the privilege
for their goods. Some may consider it appropriate that the property of the
tenant’s spouse, and of persons connected with him in business, should not be
distinguished from his own property even though that distinction is most firmly
drawn in other contexts such as execution and bankruptcy. In the context of
rent distress, such persons may be regarded as deriving some benefit from the
tenant’s lease, sharing occupation personally, or at least through their goods
being on the premises; further, the property of such persons and of the tenant
is likely to be mixed or shared, increasing the incidence and complexity of
ownership disputes, while property arrangements or devices to avoid distress
might be encouraged. Nevertheless, in no other context are such arguments
regarded as justification for taking the goods of one to satisfy the liability
of another. The same arguments cannot, in any event, be applied to the goods of
those underlessees who fail to qualify for privilege, or to goods held on
various consumer credit terms. There, the relationship between the owner and
the tenant is likely to be a commercial one, wholly at arm’s length. Also the
concept of reputed ownership may have yielded practical results when a man’s
possession of goods would normally have justified an inference of ownership,
but hire-purchase agreements (and retention of title clauses) are now so
prevalent, that the inference should rarely be drawn.
In the present
case, Mr Bonney suggested, a very simple inquiry by the bailiff to the DVLC at
Swansea would have elicited the information that the appellants were the owners
of the van.
At the outset
of his argument Mr Elleray on behalf of the respondents stressed that it is not
a function of the court to embark in effect on a judicial repeal of the 1908
Act, so long as it remains on the statute book. If the court upheld the
appellants’ submission, it would be going a long way down that road since the
scope for distress would be greatly curtailed, with motor vehicles and other
plant which is regularly hired being no longer available. He submitted that
evidence of the prevalence of hiring or other forms of arrangement falling
short of outright purchase only came into the picture at the second stage of
the inquiry concerning established custom, and was not relevant to the issue of
reputed ownership. Otherwise why, he asked, had so many of the older cases,
where the availability of some hiring or hire-purchase arrangements had been
proved, been decided on custom?
In this
context Mr Elleray relied particularly on the case of Chappell & Co Ltd
v Harrison (1910) 103 LT 594, a decision of the Divisional Court of the
Kings Bench Division (Lord Alverstone CJ, Darling and Pickford JJ). This was a
case stated by a magistrate concerning a piano which was the property of
Chappells, and which had been distrained by the landlord of a London theatre.
The magistrate held that the piano was in the reputed ownership of the theatre
proprietors and that no custom had been established. Mr Elleray particularly
relied on Lord Alverstone’s dictum at p598 that:
… one knows perfectly well and cannot shut
one’s eyes to the fact that pianos in all kinds of houses are constantly bought
and sold, and are not, at any rate, universally, or anything like universally,
only possessed on either hire and purchase agreements or upon terms which show
that the person having them is not the owner.
He submitted
that the van in the present case, having been found on the tenants’ premises,
was comparable to the building materials in the builders’ yard in Fox‘s
case, and should therefore be held to be within the tenant’s reputed ownership,
with no need for the bailiff to make any inquiries.
Mr Elleray is
of course right in his submission that we must apply the 1908 Act, and are not
entitled to side-step a statute which is still in force. However, we must do so
in accordance with the authorities, which of course include the cautionary note
struck by Lord Selborne and Lord Esher in the two passages cited by Mr Bonney.
The crucial question is whether Mr Elleray is right that the prevalence of
hiring etc, is immaterial on the issue of reputed ownership and only falls to
be considered on the issue of custom.
In my
judgment, Mr Bonney’s submissions to the contrary are right for a number of
reasons:
(1) Fox‘s
case, which Mr Elleray does not in any way challenge, is clear authority for
the proposition that the primary question is whether, in the circumstances, the
possession of the goods by the tenant supports the inference that he was the
reputed owner, and that if the answer is ‘No’ the question of custom does not
enter into the matter at all.
(2) All the
cases, including Fox, stress that all relevant circumstances must be
taken into account in order to evaluate the ‘must’ test, which Mr Elleray
acknowledges to be the correct one.
(3) Evidence,
or facts of which judicial notice can properly be taken, showing that a
significant number of vehicles of the relevant type are hired or held otherwise
than in outright ownership is obviously a relevant circumstance in deciding
whether the inference that the tenant must have been the owner can be drawn,
since it raises an ambiguity.
(4) The fact
that so many of the earlier cases are concentrated on the custom issue is, in
my judgment, beside the point. As Nourse LJ observed in argument, there are and
always will be many situations where, as a result of changes in social or
economic circumstances, the application of a given principle of law is
diminished or enlarged. Our perspective in this case must be that of the 1990s,
not the 1920s, let alone the 1870s.
How therefore
stands the case on prevalence? It is common ground that 8% of this type of
vehicle are hired, and that fact in itself, in my judgment, is sufficient to
invalidate the ‘must’ test in the present case. This was reinforced by the
evidence of Mr Christopher Brown, the former transport manager of Surestyle
(transcript December 21 1993 p55F):
Q So the
majority of companies in the industry would be very small and purchase their
own second-hand —
A Yes.
Q — vehicles
and the Anglians of this world, what would they do?
A The bigger
ones would tend to do as we would, which would be a mix of owned vehicles
purchased outright when they were cash rich and finding alternative means of
funding.
Q So would do
a mixture, ie purchase own vehicles when cash available.
A Yes.
Q And when
not, contract hire.
A They would
predominantly contract hire.
Q As opposed
to hire-purchase?
A Yes.
On top of this
evidence, the court cannot, in my judgment, properly fail to take judicial
notice of the huge expansion of hiring and hire-purchase since the second world
war, especially of motor vehicles, so that it has become a major feature in our
economic and social life, far more so than 60 or 100 years ago.
I mention
hire-purchase as well as hiring because, in my judgment, its exclusion from the
1908 Act is dependent on the express stipulation to that effect in the Act
itself (now section 4A), and not upon the doctrine of reputed ownership.
I do not think
that the treatment of the category (a) goods in Fox‘s case is of any
assistance to Mr Elleray, seeing that no reliance was being placed on hiring,
the sole ground for disputing reputed ownership being the licence system, which
the court considered but rejected. Indeed, by scrutinising the licence system
in relation to category (a), (and also the RIBA terms in relation to
categories (b) and (c)), the court in Fox‘s case clearly
demonstrated, in my judgment, that the relevant considerations are not limited
to the physical situation and characteristics of the goods.
Fox‘s case is also authority supporting the need for inquiries in
appropriate cases, of which, in my judgment, this present one is an obvious
instance. A simple telephone call by the bailiff to the DVLC would have
established that the vehicle belonged to Salford Van Hire Ltd, and that therefore,
having regard to that name, the van was in all likelihood on hire and not the
tenant’s property. Equally, the well known register of vehicles held on
hire-purchase kept by Hire-purchase Information Ltd, was also readily
accessible.
Consequently
the bailiff would have had no difficulty in establishing the ownership of the
vehicle, and in satisfying himself that it neither belonged to the tenant nor
was on hire-purchase or the other arrangements within the scope of section 4A
and so not subject to distraint.
Chappell‘s case is, in my judgment, of no assistance. There the appellants’
case broke down on the fact that there was no evidence of the prevalence of
hiring pianos other than the transaction in issue (see per Lord
Alverstone at p596), with the result that there was no factual basis for the
reversal of the magistrate’s decision on an issue of law. I should however add
that, in my judgment, the dictum of Lord Alverstone’s relied on by Mr
Elleray and quoted above reverses the burden of proof, and should not in future
be followed.
The appellants
therefore succeed at the first hurdle, and there is no need to examine the case
in relation to custom.
Finally, I
must refer briefly to a small point raised by respondents’ notice, where it is
contended that the appellants’ declaration was out of time, on the footing that
the time-limit for a declaration expired when the right of sale first arose, ie
five days after the levy, unless extended at the tenant’s request to 15 days:
Law of Distress Amendment Act 1888, section 6. This somewhat bold submission
was apparently intended to be based on a dictum of Cave J in Sharp
v Fowle (1884) 12 QBD 385 which, when examined, gave no support to it.
In my judgment, a declaration is validly served at any time prior to the moment
of actual sale.
I would
therefore, allow this appeal.
I cannot leave
the case without expressing a fervent hope that Parliament will adopt the Law
Commission’s recommendation to abolish the procedure of distress for rent, thus
bringing the law of landlord and tenant in this respect into line with the
modern law of bankruptcy.
Agreeing, SIR
RALPH GIBSON said: The basis of Mr Elleray’s submission for the defendants
before the judge, and in this court, was that, in the case of an ordinary
trader using goods for the purposes of his trading or manufacturing business,
it is legitimate to infer or assume that the goods are in his ownership in the
absence of proof of a notorious custom that such goods do not belong to him. It
seems that the judge accepted that submission.
In support of
his submission, Mr Elleray relied upon the passages in the judgment of Lord
Selborne LC in ex parte Watkins at p529 which Hirst LJ, has set out. The
passage in which Lord Selborne considered what might exclude the doctrine of
reputed ownership ended with the words:
It is quite
enough … if the situation of the goods
was such as to exclude all legitimate ground from which those who knew anything
about that situation could infer the ownership to be in the person having
actual possession.
In one sense,
those words might be seen as giving support to Mr Elleray’s submission if the
‘situation of the goods’ is regarded as limited to the physical circumstances
of possession by the tenant at the premises; but it is clear, in my judgment,
that the meaning is not so limited. That is shown by the decision of this court
in Re Watson, in the passage also cited by Hirst LJ, from which it is
apparent that it is for the distraining landlord to prove that ‘the goods
(were) held and dealt with by the (tenant) in such manner and in such
circumstances that the reputation of ownership must arise’.
Mr Elleray
accepted that, for the reputation of ownership to arise, the circumstances must
be such that that reputation must arise and, therefore, that probability
is not sufficient. Upon the evidence, it was clear, in my judgment, that ‘on
the knowledge of those facts which are capable of being generally known to
those who choose to make inquiry on the subject’ — per Lord Selborne in ex
parte Watkins — the circumstances in which Surestyle had possession of the
van were not such that the reputation of ownership must arise. On the contrary,
there was in fact a significant or substantial chance that the van was not
owned by Surestyle, but was on lease to them. The facts, much stressed by Mr
Elleray, that the van: was not marked with the name of the plaintiffs; was some
three and a half years old and was fitted with a sleeper cabin, etc; and was
thus an unusual commercial vehicle to be on hire; may have made it more likely
that the van was not on hire, but that does not suffice. It is satisfactory
that the law, on the facts of this case, does not require or permit the
property of the plaintiffs to go towards paying Surestyle’s debt to the
defendants.
I also hope
that Parliament will adopt the recommendation of the Law Commission in report
194 of February 1991. The Lodgers Goods Protection Act 1871 began with the
statement that lodgers are ‘subject to great loss and injustice by the exercise
of the power possessed by the superior landlord to levy distress’. The Act gave
to a lodger the right, on terms, to make a declaration and thus to prevent sale
of his goods. A lodger was likely to learn of the distress and thus be able to
take the necessary steps. The owner of the goods let on hire may well not learn
of the distress until too late. The remedy of distress, on the terms set out in
the current legislation, appears to have outlived its usefulness as a just
remedy.
Nourse LJ agreed and did not add anything.
Appeal
allowed.
