Pearson v. Rose & Young, Ltd. (1950) 2 Ch. D. 1027

Case Summary

Full Case Details

The plaintiff gave possession of his motor car to H., a motor car dealer and a
mercantile agent within the Factors Act, 1889, s. 2(1), for the purpose of inviting offers to
purchase it. By means of a trick H, induced the plaintiff to hand him the registration
book relating to the car. Later the same day H., acting without the authority or
knowledge of the plaintiff, sold the car and handed the registration book to the fourth
party who acted in good faith without notice of any absence of authority. The fourth
party subsequently sold the car to the third party, and the third party sold it to the
defendants. In an action by the plaintiff against the defendants claiming damages for the
conversion of the car.
Held: Though the plaintiff consented to H’s having possession of the car as a
mercantile agent, within the meaning of s. 2(1), he did not consent to his possession in
that capacity of the registration book; the sale of a car without the registration book
relating to it was not a sale of goods “in the ordinary course of business” within s. 2(1),
and the consent necessary to pass a good title to a purchaser under s. 2(1) was a consent
to possession of both the car and the registration book; and, therefore, H. was unable to
pass a good title to the fourth party.
SOMERVELL, LJ. – This is an appeal from a decision of DEVLIN, J., who decided
against the plaintiff. There is a third and a fourth party. The claim is for damages for the
conversion of a motor car, which admittedly up to Mar. 17, 1949, was the property of the
plaintiff. The car came into the possession of a Mr. Hunt, admittedly a mercantile agent. The
fourth party bought it from Mr. Hunt and claims a good title under s. 2(1) of the Factors Act,
1889, which is as follows:
“(1) Where a mercantile agent is, with the consent of the owner, in possession of
goods or of the documents of title to goods, any sale, pledge, or other disposition of
the goods, made by him when acting in the ordinary course of business of a
mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were
expressly authorised by the owner of the goods to make the same; provided that the
person taking under the disposition acts in good faith, and has not at the time of the
disposition notice that the person making the disposition has not authority to make
the same.”
The fourth party sold the car to the third party, who sold it to the defendants. The sole
issue in the appeal is whether the fourth party did or did not get a good title under the Factors
Act, 1889. On these findings counsel for the plaintiff submitted that the only possible
conclusion was that the car was obtained by larceny by a trick. On that basis there are
conflicting opinions whether s. 2(1) of the Factors Act, 1889, can or cannot apply. Counsel
for the plaintiff submitted it could not. I will refer to this later because I have come to the
conclusion that the appeal succeeds on the judge’s findings irrespective of that point. It is, I
think, clear that on the sale of a second-hand car the vendor will ordinarily deliver and the

purchaser require the delivery of the registration, or “log”, book. Counsel for the plaintiff
stated, and I accept it, that he did not contend that cars could not be sold without their log
books, but the price would be substantially reduced thereby. This shows, and I so hold, that a
sale of a car without its log book would not be a sale “in the ordinary course of business.”
The findings of DEVLIN, J., as to Mr. Hunt’s reasons for getting hold of the log book support
this view.
The transaction which the fourth party seeks to uphold is the sale of a car with its log
book, a more valuable subject-matter than a car without its log book. Mr. Hunt, it seems to
me, was never in possession of the log book with the consent of the plaintiff. One can test it in
this way. If immediately after the plaintiff had left the building he had been asked: “Did you
mean to leave your car?” he would have answered “Yes.” If he had been asked” “Did you
mean to leave your log book?” He would have answered “No”, and would have gone back
and collected it. The ostensible authority which enabled Mr. Hunt to effect a sale “in the
ordinary course of business” arose because of his possession of the log book without the
consent of the owner. The relationship of the log book, which is, of course, not a document of
title, to a motor car is one to which no useful analogy has occurred to me. I am, however, of
opinion that on the conclusions as set out above the fourth party cannot claim the protection
of the Factors Act, 1889. In cases of larceny by a trick, the person defrauded does in one
sense consent to the possession of the thief, but, so far as the log book is concerned, for the
reasons I have given, the plaintiff never consented to Mr. Hunt’s having possession of it.
The issue with regard to larceny by a trick was fully argued before us. I will deal with it
because, if there was larceny by a trick of the goods sold, and this prevents the Factors Act
applying, the appeal would succeed in any event. I accept the submission of counsel for the
plaintiff that, on the findings of DEVLIN, J., there is only one possible conclusion – that the
possession of the car was obtained by larceny by a trick. The law as to larceny by a trick is
fully set out in the judgment of BANKES, L.J., in Folkes v. King [(1923) 1 K.B. 291 to 293].
It seems to me clear that Mr. Hunt had an animus furandi at the time he got possession of the
car and that the other conditions are fulfilled. The plaintiff clearly did not intend to pass the
property, nor on the judge’s findings did he authorise Mr. Hunt to conclude a sale.
The question whether this necessarily excludes a purchaser from the protection of the
Factors Act has been considered in more than one case, but there is not clear decision on the
point. In Folkes v. King BANKES, L.J. and SCRUTTON, L.J. considered the point.
BANKERS, L.J. said:
“The question is whether, assuming that Hudson was guilty of larceny of the car, that
fact renders it impossible that anyone can have obtained a title to the car from
Hudson under the Factors Act; the argument being that no one can under those
circumstances prove the owner’s consent to the car being in Hudson’s possession.
The argument against this view was admirably put by Mr. J.A. Hamilton (as he then
was) in Oppenheimer v. Frazer & Wyatt [(1907) 1 K.B. 519], but it was expressly
rejected by every member of the court. The view taken by the court in that case as to
the want of bonafides on the part of the purchaser of the goods rendered it
unnecessary to decide the point, and the opinions of the members of the court are

therefore, I think, strictly speaking obiter and not binding upon us. They deserve
however to be treated with the greatest respect, and it is only because I am unable
after full consideration to agree with them that I venture to differ from the conclusion
at which they arrived.”
In Oppenheimer v. Frazer & Wyatt, FLETCHER MOULTON, L.J., said:
“A mercantile agent is as capable of stealing as any other man, and, if he has stolen
the goods, there can be no question, in my opinion, that he must be taken to hold
possession of them without the consent of the owner. One of the recognized methods
of stealing at common law is distinguished from other types of larceny, and called
larceny by a trick, but it is in the eye of the law pure stealing.”
With regard to the consent required for the Factors Acts, BANKES, L.J., in Folkes v.
King said:
“What the section refers to is the consent of the owner. To establish a consent it is no
doubt necessary to consider what the state of mind of the owner of the goods was
with reference to the possession of them by the mercantile agent.”
SCRUTTON, L.J., after referring to the earlier cases, said:
“First on the question whether to prove larceny by a trick is a defence to the Factors
Act as excluding consent of the true owner. I can understand that where by a trick
there is error in the person there is no true consent and the Factors Act is excluded.
But where there is agreement on the person and the true owner intends to give him
possession, it does not seem to me that the fact that the person apparently agreeing to
accept an agency really means to disregard the agency, and act for his own benefit,
destroys the consent of the true owner under the Factors Act. That Act intended to
protect a purchaser in good faith carrying out an ordinary mercantile transaction with
a person in the position of a mercantile agent. It does not do so completely, for it
requires the purchaser to prove that the goods were in possession of the mercantile
agent ‘with the consent of the owner.’ But it does not require the purchaser in
addition to prove that the mercantile agent agreed both openly and secretly,
ostensibly and really, to the terms on which the owner transferred possession to the
mercantile agent. It appears to me to be enough to show that the true owner did
intentionally deposit in the hands of the mercantile agent the goods in question. It is
admitted that if he was induced to deposit the goods by a fraudulent
misrepresentation as to external facts, he has yet consented to give possession, and
the Factors Act applies, but it is argued that if he deposits the goods in the possession
of an agent who secretly intends to break his contract of agency the Factors Act does
not apply. I do not think Parliament had any intention of applying the artificial
distinctions of the criminal law to a commercial transaction, defeating it if there were
larceny by a trick, but not if there were only larceny by a bailee, or possession
obtained by false pretences.”
I have set out these passages at some length because I agree with the conclusion and the
reasons given for it and do not desire to add to them. As the issue was fully argued before us,

and as opinions have already been expressed, I thought it right to set out the conclusion to
which I have come. For the reasons given above I think the appeal succeeds.
DENNING, LJ. – In the early days of the common law the governing principle of our law of
property was that no person could give a better title than he himself had got, but the needs of
commerce have led to a progressive modification of this principle so as to protect innocent
purchasers. We have had cases in this court recently about sales in market overt and sales by
a sheriff, and now we have the present case about sales by a mercantile agent. The cases
show how difficult it is to strike the right balance between the claims of true owners and the
claims of innocent purchasers. The way that Parliament has done it in the case of mercantile
agents is this. Parliament has protected the true owner by making it clear that he does not lose
his right to goods when they are taken from him without his consent, as, for instance, when
they have been stolen from his house by a burglar who has handed them over to a mercantile
agent. In that case the true owner can claim them back from any person into whose hands
they come, even from an innocent purchaser who has brought from a mercantile agent.
Parliament has not protected the true owner if he has himself consented to a mercantile agent
having possession of them, because, by leaving them in the agent’s possession, he has clothed
the agent with apparent authority to sell them, and he should not, therefore, be allowed to
claim them back from an innocent purchaser.
The critical question, therefore, in every case is whether the true owner consented to the
mercantile agent having possession of the goods. This is often a very difficult question to
decide. There are three points of principle which arise for consideration in the present case.
(i) If the goods are stolen from the true owner by the mercantile agent, does that
mean that the owner does not consent to the mercantile agent having possession of
them? At first sight the answer seems to be obvious. No man ever consents to the
theft of his goods, but therein lurks a fallacy. There are many cases of larceny where
the true owner consents to the thief having possession of the goods, but not to his
stealing them. For instance, if the true owner allows the agent to have the goods on
hire or for repair, and the agent later on makes up his mind to steal them and does so,
either by breaking bulk (common law), or by converting them to his own use
(statute), the agent is guilty of larceny as a bailee, but the true owner undoubtedly
consented to his having possession of them. Take the same instance where the owner
lets the agent have the goods on hire or for repair, but, with this difference, that the
agent from the very beginning intended to steal the goods, then on all the authorities
the agent is guilty of larceny by a trick, but the owner undoubtedly consented to his
having possession of them. His state of mind is the same in both instances. He
consented to possession, but not to the theft of the goods. In my opinion, therefore,
the fact that the agent is guilty of larceny by a trick does not prevent the operation of
the Factors Act any more than the fact that he has been guilty of larceny as a bailee. I
find myself in full agreement with the judgments of BANKES, L.J., and
SCRUTTON, L.J., in Folkes v. King, and I see nothing to the contrary in the opinion
of VISCOUNT SUMNER in Lake v. Simmons [(1927) A.C. 510, 511].
(ii) If the true owner was induced to part with the goods by some fraud on the
part of the mercantile agent, does that mean that he did not consent to the mercantile

agent having possession of them? Again the answer at first sight seems obvious. A
consent obtained by fraud is no consent at all, because fraud negatives consent. The
effect of fraud, however, in this, as in other parts of the law, is as a rule only to make
the transaction voidable and not void, and if, therefore, an innocent purchaser has
bought the goods before the transaction is avoided the true owner cannot claim them
back. For instance, if a mercantile agent should induce the owner to pass the
property to him by some false pretence, as by giving him a worthless cheque, or
should induce the owner to entrust the property to him for display purposes, by
falsely pretending that he was in a large way of business when he was not, then the
owner cannot claim the goods back from an innocent purchaser who has bought them
in good faith from the mercantile agent. The agent’s offence may in some cases be
obtaining goods by false pretences, or in other cases larceny by a trick, the difference
depending on whether as a result of the fraud the owner intended to pass to the agent
the property or the power to pass the property (false pretences), or only to pass the
possession (larceny by trick). In each case, whether the owner intended to pass the
property or not, at any rate he consented to the agent having possession. The consent
may have been obtained by fraud but, until avoided, it is a consent which enables the
Factors Act to operate.
(iii)If the true owner consents to the mercantile agent having the goods for repair
but not for sale, is that a consent which enables the Factors Act to operate? The
answer would seem at first sight to be “Yes”, because it is undoubtedly a consent to
the agent having possession, but this needs testing. Suppose, for instance, that the
owner of furniture leaves it with a repairer for repair and that the repairer happens to
be a dealer as well. Does that mean that the repairer can deprive the true owner of his
goods by selling them to a buyer? Clearly not, if the owner did not know the repairer
to be a dealer, and, even if he did, why should that incidental knowledge deprive the
true owner of his goods? Such considerations have led the courts to the conclusion
that the consent, which is to enable the Factors Act to operate, must be a consent to
be possession of the goods by a mercantile agent as mercantile agent: That means
that the owner must consent to the agent having them for a purpose which is in some
way or other connected with his business as a mercantile agent. It may not actually
be for sale. It may be for display or to get offers, or merely to put the goods in his
showroom, but there must be a consent to something of that kind before the owner
can be deprived of his goods.
If it were right to apply these considerations to the car taken by itself, without the
registration book, I should find myself in full agreement with the judgment of DEVLIN, J.
Hunt was a mercantile agent who got possession of the car with the consent of the plaintiff. It
is true that Hunt was probably guilty of larceny by a trick. The plaintiff did not intend to pass
the property to him or even to give him the power to pass the property, and Hunt had the
animus furandi from the beginning. That does not alter the fact that the plaintiff consented to
his having possession of it. It is also true that he intended Hunt to repair it, but the plaintiff
also intended that Hunt should act in some respects as a dealer by receiving offers from

prospective purchasers. He did, therefore, consent to his having possession of the car as a
mercantile agent.
Where I do not agree with DEVLIN, J. is that he put the registration book on one side as
if it was of no significance in law. He seems to have thought the Factors Act operated if the
mercantile agent had possession of the car with the consent of the true owner, even though he
did not have possession of the registration book. I cannot share that view. This court has
recently had to consider the position of the registration book, or, as it is more commonly
called, the “log book”, of a car: It is not a document of title, but it is the best evidence of title.
Everyone who buys or sells a second-hand car knows that a clean title cannot be given or
obtained without the log book. The instructions on every log book tell the owner to “keep
this book in a safe place, not on the vehicle” and that “on transferring the vehicle to another
person you must hand over this book to the person acquiring the vehicle.” All sensible
owners pay heed to these instructions. If the seller can produce the book showing that his title
is in order, he will receive the proper market price, but no wise buyer pays his money except
against delivery, not only of the car, but also of the log book. If the seller cannot produce it,
he will receive as a rule only a fraction of the proper price, because its absence is of itself
notice of a defect of title. This state of affairs was foreseen by SCRUTTON, L.J., twentyseven years ago. In Folkes v. King, he said:
“If the production of the book, or if it was said to be lost, of a new one, was required
by every purchaser, it would be very difficult to find a market for the cars which have
lately been stolen in such large numbers; and the courts may have to take adverse
notice of the conduct of a purchaser who does not require the production of the book
of registry.”
The courts have adopted that suggestion, and now view with suspicion any dealing in a
second-hand car without a log book.
When the significance of the log book is realised, it becomes plain that the consent of the
owner, which is necessary for the Factors Act to operate, is a consent to the possession by the
mercantile agent, not only of the car, but also of the log book that goes with it. So long as the
owner retains the log book, the mercantile agent cannot dispose of the car in the ordinary
course of his business, because it is not in the ordinary course of anyone’s business to dispose
of a second-hand car without a log book. The retention by the owner of the log book,
therefore, effectually prevents the Factors Act from operating. The handing over of the log
book with the car enables the Act to operate. The owner then clothes the agent with apparent
authority to dispose of the car, and the agent is enabled to dispose of it in the ordinary course
of his business, and the Factors Act operates to give a good title to an innocent purchaser. To
put it shortly, in the case of a car, “goods” in the Act means the car together with the log
book.
This brings me to the critical question in this case: Did the plaintiff consent to Hunt
having possession of the log book as well as the car? On the findings of fact by DEVLIN, J.,
the answer is clearly “No.” On March 18, 1949, the plaintiff simply let Hunt have the log
book in his hands to inspect if for a few moments. The plaintiff gave Hunt the barest physical
custody of it while he was still there himself. He never consented to Hunt having possession

of it. Then Hunt, by a trick, managed to get the plaintiff called away while he, Hunt, still held
the book. Armed thus with the log book, Hunt was able to sell the car on the very same day
to an innocent purchaser, which, without it, he could not have done. On those facts the
plaintiff no more consented to Hunt having possession of the log book than if Hunt had stolen
it from his pocket. The Factors Act does not operate, therefore, to give a good title to the
dealer who bought from Hunt, nor to the buyers in succession from him.
I confess that I come to this conclusion with some reluctance, because I recognise that the
legislature intended the courts to make every reasonable presumption in favour of the
innocent purchaser: see s. 2(4) of the Act, but my reluctance is tempered by the reflection that
in this case the buyer, Mr. Marshall, was himself a motor car dealer, who bought the car from
Hunt on March 18, 1949, for £450 and sold it on March 21, 1949, for £620. A dealer whose
business enables him to make quick and large profits of that kind must not be surprised if he
occasionally gets his fingers burnt. In my opinion, therefore, the appeal should be allowed.
VAISEY, J. – Where there are two innocent parties of whom one has to suffer for the
criminal act of a third, no decision can be said to be satisfactory. This example of that
familiar problem presents to my mind considerable difficulty. On the whole, having had the
advantage of reading the judgments of my Lords which have just been delivered, I share their
view that this appeal should succeed. What the relationship between a motor car and its
registration book or log book really is, I find it extremely difficult to define. For many
purposes the book ought not to be regarded as a part of the car in the same sense as one of the
car’s four wheels can be so regarded. What strikes me as decisive of the present case is the
fact, already pointed out by my Lords, that a dealer in cars, being a mercantile agent, cannot
be said to be “acting in the ordinary course of” his business as such when selling a car without
its log book, any more, in my judgment, that he would be so acting if he sold a car with only
three wheels. Suppose that a car with only three of its wheels had come into the dealer’s
possession with the owner’s consent, and that the dealer had proceeded to steal the fourth
wheel from the owner’s garage, had placed it on the car, and had then sold the car. In such a
case, I do not think that the totality of the four-wheeled vehicle could be said to have come
into the dealer’s possession with the owner’s consent, so as to bring into operation s. 2(1) of
the Factors Act, 1889. When once it is admitted that the sale of a car without a log book is
not an ordinary, but a quite extraordinary, transaction on the part of a dealer in cars, I think it
must follow that the transaction here is not within the protection of the sub-section. In
suggesting the imaginary case of the stolen wheel, I am well aware of the danger of analogies,
and mine may be no better than most. That Act does modify and form an exception to the
general law of property by conferring a title upon strangers in derogation of the rights of the
true owner, and for myself I would be reluctant to extend its operation further than its terms
necessitate. The appeal appears to me to be well-founded, and I have nothing further to add.