Computer 2000 Distribution Ltd & Ors v ICM Computer Solutions Plc [2004] EWCA Civ 1634

Case No B2/2004/0549[2004] EWCA Civ 1634
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM READING COUNTY COURT
(HIS HONOUR JUDGE CATLIN)
Venue Royal Courts of JusticeDate Wednesday, 17th November 2004
Strand
London, WC2
B E F O R E:
LORD JUSTICE JUDGE
LORD JUSTICE CHADWICK
LORD JUSTICE LATHAM
Between
COMPUTER 2000 DISTRIBUTION LIMITEDRespondentMICRO PERIPHERALS LIMITEDRespondentIMAGO MICRO LIMITEDRespondent-v-
Between
ICM COMPUTER SOLUTIONS PLCAppellant
(Computer-Aided Transcript of the Palantype Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MR R WALFORD (instructed by Messrs Fox Hayes, Leeds LS8 5LD) appeared for AppellantMR A PETO (instructed by Messrs Lester Aldridge, Bournemouth BH8 8EX) appeared for First RespondentMR J EVANS (instructed by Messrs Pannone & Partners, Manchester M3 2BU) appeared for Second RespondentMR R CASE (instructed by Messrs Boyes Turner, Reading RG1 3BD) appeared for Third Respondent
J U D G M E N T

LORD JUSTICE JUDGE:

[1]I shall ask Lord Justice Chadwick to give the first judgment.

LORD JUSTICE CHADWICK: These are appeals from orders made in March 2004 by His Honour Judge Catlin sitting at Reading County Court in proceedings brought against the appellant, ICM Computer Solutions Plc, by three of its suppliers. There are three orders under appeal. The first was made on 12th March 2004 in proceedings RG210026 brought by Imago Micro Ltd. The second, also made on 12th March 2004, was in proceedings PH204039 brought by Computer 2000 Distribution Ltd. The third, dated 23rd March 2004, was made in proceedings MA291371, brought by Micro Peripherals Ltd.

[3]The three actions raised common issues. They were heard together over three days in November 2003. They are the subject of a single judgment handed down on 16th December 2003. The delay between the handing down of the judgment in December 2003 and the making of the orders in March 2004 is explained by the need for a further hearing, held on 26th February 2004, to resolve points which the parties wished to raise on the December judgment - including an application for permission to appeal. The judge took the opportunity, on 26th February 2004, to explain what he had meant in certain passages of his earlier judgment. In those circumstances the two judgments must, I think, be read together.[4]The judge refused permission to appeal from the orders made in March 2004. In his written reasons for doing so, he explained that the basic issues in each of the proceedings were(i) what were the terms of each contract, and(ii) had the claimants proved that they had performed the contract so as to entitle them to the price. He decided the latter issue in favour of the suppliers. His view was that ICM (the defendant before him) had no prospect of success on an appeal. Permission to appeal was granted by this court (Neuberger LJ) on 23rd April 2004.[5]The claim, in each case, was for payment for goods sold and delivered. The details are, I think, of little importance; but, for completeness, I will refer to them briefly.[6]Imago Micro Ltd ("Imago") commenced proceedings on 31st October 2002 in the Reading County Court. Its claim was for £65,876.38 invoiced on 1st August 2002 in respect of six 61" plasma screens, and interest. The supply was made pursuant to an ICM purchase order dated 1st August 2002.[7]Computer 2000 Distribution Ltd (abbreviated in the material before us to "C2K") commenced proceedings in the Poole County Court on or about 18th November 2002. Its claim was for £64,661.47 invoiced on 29th July 2002 in respect of 26 Sony GRX 416 SP laptop computers and interest. That supply was made pursuant to an ICM purchase order of the same date, 29th July 2002 - which had been preceded by a telephone call on 26th July.[8]Micro Peripherals Ltd ("Micro") had commenced its proceedings in the Manchester District Registry of the High Court by the issue of a claim form on 4th October 2002. Its claim was for £59,688.19 invoiced on 1st August 2002 in respect of 24 Sony GRX 416 SP laptop computers.[9]As I have said, in each case the claim was a claim for goods sold and delivered. In each case the primary defence was failure to deliver the goods to the consignee named in the relevant purchase order. In each case the judge rejected that defence. He gave judgment to Imago and C2K for the amounts claimed, with interest; and he gave judgment to Micro for the slightly lower amount of £57,210.55, again with interest.[10]The judge directed himself, correctly, that, to succeed in its defence, ICM had to rely on the terms of the purchase orders pursuant to which the goods had been ordered, sold and delivered. Each purchase order was in the same form. It identified the purchaser as "ICM Computer Solutions", without any corporate suffix. It named the supplier - Imago, C2K or Micro as the case might be. It included the request:
"Please supply the goods or services described in this purchase order subject to our standard conditions of purchase."
It identified the goods, the date delivery was requested, the unit price, the total price for the number of units to be supplied, and the VAT chargeable on that price. It contained the following delivery instructions:
"Delivery AMEC Plc Address South Bank House Black Prince Way Prince Road London SE1 7SJ."
Under a heading "Special Instructions", the purchase order identified the person at the supplier with whom the order had been agreed, and the person (Mr Timothy Evans) at ICM who had originated and authorised the order. Also under the heading "Special Instructions" there appeared the words:
"Shipment Inst.: SHIP FAO: RICHARD COLE."
[11]AMEC Plc is a well-known and substantial public limited company. It has and had no place of business at South Bank House, Black Prince Way. The building at South Bank House is owned by Business Environment Group Ltd, who let or licence serviced office accommodation there.[12]On 5th August 2002 Business Environment Group Ltd entered into a licence agreement with a licensee named as AMEC (not AMEC Plc) for the use of a room, Room 430, from 24th July 2002 to 23rd September 2002 in consideration of a single payment of £250. The agreement had been signed on behalf of the licensee, AMEC, in the name "R Cole", who was described in the agreement as managing director. The business of the licensee was stated to be "IT". As

the judge found (at internal page 5 of his judgment):

"The building at South Bank House does not display the names of the licensees. It is common ground that neither the name of AMEC or AMEC PLC appeared on the outside of the building or in the reception area. It is also common ground that AMEC PLC have no presence at South Bank House, no connection with AMEC and that AMEC PLC did not order any goods from ICM."
He went on to say:
"It is plain that the name AMEC was used by the fraudster, Richard Cole so as to mislead those dealing with him into thinking that they were dealing with AMEC PLC, a reputable, large business."
[13]Acting on the purchase orders which they had received from ICM, each of the claimant suppliers dispatched the goods by courier to AMEC Plc at South Bank House. They each used different couriers, but nothing turns on that.[14]The goods were received at South Bank House by Mr Elijah Bee, a security guard employed by Storm Operative Security Ltd, who provided security services at South Bank House to Business Environment Group Ltd. In each case Mr Bee signed the courier's delivery slip or sheet to indicate that he had received or accepted goods addressed to AMEC Plc FAO Richard Cole. And in each case Mr Bee entered those goods in his own record of goods received, identifying the date and time that they were received, the number of boxes received and the addressee - AMEC or, in one case, AMEC Plc. It was Mr Bee's evidence, which the judge accepted, that he was wearing the uniform of a security guard and that what he was doing was in accordance with his normal procedure. It was also his evidence that there was nothing unusual about the deliveries; save that, in each case, the goods were collected from him within five or ten minutes of the goods arriving at the premises. They were collected by a man who signed the "goods received" record in the name "R Cole" - and who Mr Bee thought was Mr Richard Cole. Indeed, on one occasion Mr Bee recalled that Mr Cole had been "hanging around in reception" when the goods arrived.[15]The position, therefore, as it appears from Mr Bee's records is that the goods were received by the man describing himself as Mr Richard Cole. I should emphasise that there is no suggestion that Mr Bee acted otherwise than honestly and properly in these transactions. He was employed as a security guard at South Bank House. It was part of his duty to receive goods for delivery to licensees occupying office premises at South Bank House. He had a system for recording receipt and onward transmission to the addressee and he operated that system in the normal way. The only criticism that could be made - and it could not seriously be pressed - was that he, Mr Bee, failed to appreciate that the licensee at South Bank House (if, indeed, he had a list of licensees available to him) was named as AMEC and not AMEC Plc. But, of course, the goods were marked "FAO Richard Cole" and the signature which Mr Bee obtained was that of a man purporting to be Mr Richard Cole.[16]AMEC Plc, who had neither ordered nor received goods from ICM or its suppliers, would not pay for those goods. ICM, who were not paid by AMEC or Mr Cole, sought to avoid paying the suppliers from whom they had ordered the goods. As

the judge put it (internal page 2 of his judgment):

"All of the computer goods the subject of the three claims have been lost to the parties in these three proceedings. The three Claimants have not been paid for the goods that they dispatched; putting the matter simply because the Defendant submits that each of the Claimants have not carried out their contractual obligations and therefore are not entitled to the price of the goods in question. The theft and dishonesty has been perpetrated by a man calling himself Richard Cole who received all of the goods dishonestly, and both the goods and Richard Cole have not been traced. There is no allegation that any of the parties or indeed any of the witnesses who appeared to give oral testimony are in any way implicated in the dishonesty."
[17]The question, therefore, is on which of these innocent parties does the loss fall. To my mind that question is to be answered - as the judge thought - by enquiring upon what terms did the suppliers agree to supply the goods which they dispatched to AMEC Plc at South Bank House, and did they perform the contracts on which they sue in accordance with those terms.[18]The purchase order in each case, as I have said, requests supply of the goods described therein, subject to ICM's standard conditions of purchase. Prima facie, therefore, unless supplanted by the supplier's own standard terms and conditions by reason of some prior course of dealing, the terms and conditions upon which the goods were supplied by the suppliers are the standard terms and conditions printed on the reverse of each purchase order. Those terms and conditions contain a provision for payment, "Payment to be made at the end of the month following delivery, unless otherwise specifically agreed", and a term as to ownership. The paragraph as to ownership is in these terms:
"Ownership of the goods will be vested in us only after delivery in accordance with the Purchase Order notwithstanding that the goods are collected by our own transport and the Supplier will remain responsible to make good loss or damage to the goods howsoever occasioned at any time prior to delivery."
That term, although relied on, really takes the matter no further. The question remains: what is delivery in accordance with the purchase order in that context?[19]It is said on behalf of ICM that delivery in accordance with the purchase order requires delivery to AMEC Plc or its authorised agent. AMEC Plc, being a corporate body, can only accept delivery through an agent who is an individual. That individual agent may have express authority to receive goods on behalf of AMEC Plc; or may have implied authority by virtue of the job that he is doing; or may be held out by AMEC Plc as having authority to receive goods on its behalf - that is to say, to have ostensible or (as it is sometimes put in this context) apparent authority.[20]It is plain, in the present case, that Mr Bee had no actual, implied or apparent - in the sense of ostensible - authority from AMEC Plc. AMEC Plc had never heard of him, had nothing to do with South Bank House and cannot have been holding out anyone at South Bank House to have any authority to do anything on its behalf.[21]So, if the correct question was "did anyone with authority from AMEC Plc receive these goods on behalf of AMEC Plc?" at South Bank House, the answer would plainly be "No". ICM would succeed in its defence. But, to my mind, that is not the correct question. There is no issue in this case between any of the parties and AMEC Plc. The issue in this case is between the suppliers and ICM. The right question, therefore, is: whom did ICM hold out to the suppliers as a person authorised to receive goods dispatched to AMEC Plc at South Bank House? The answer appears from the purchase order itself; and, in particular, from the shipment instruction, "Ship FAO: Richard Cole".[22]On the facts in these cases, the goods did reach the person described as Richard Cole. There is no suggestion - and there could be no suggestion - that the person claiming to be Richard Cole was not the person to whom ICM meant to refer by the instruction "Ship FAO: Richard Cole". So on the facts in these cases there was delivery to the person held out by ICM, in the purchase order, as having authority to accept the goods on behalf of AMEC Plc. It is nothing to the point that that person was wholly unknown to AMEC Plc.[23]If it were necessary to do so, I would go further than that. Would it have been sufficient that the goods were received and accepted by the security guard, Mr Bee? What if the goods had not been collected from Mr Bee by someone purporting to be Richard Cole? The answer to those questions, I think, is to be found in the decision in the Divisional Court in Galbraith and Grant Ltd v Block [1922] 2 KB 155. The headnote reads as follows:
"Where under a contract the seller of goods is required to deliver them at the buyer's premises he fulfils his obligation if he delivers them there to a person who apparently has authority to receive them, taking care to see that no unauthorized person receives them. If therefore the goods are received by an apparently respectable person, who has obtained access to the buyer's premises, and who signs for the goods in the buyer's absence and misappropriates them, the loss must fall on the buyer and not on the carrier or seller."
[24]In that case the plaintiffs, who were wine merchants, claimed to recover from the defendant, Mr Block, a licensed victualler, the price of a case of champagne which the plaintiffs had sold to him on terms that it should be delivered at the defendant's premises. The carrier employed by the defendants to effect that delivery gave evidence, which was accepted, that he delivered the goods at the defendant's premises to someone who signed a delivery sheet in the name of the defendant. The defendant's case was that his premises were closed at the time when it was alleged that the wine was delivered, that he had never received the wine, that the signature on the delivery sheet was not his signature and that he had never authorised anyone to sign it. So in that case there was no actual or implied authority; and nothing which could be said to be a holding out by the defendant of the person who signed the form as having authority to receive goods on his behalf.[25]In the judgment of the court (delivered by Lush J) the principle is explained at page 157:
"A vendor who is told to deliver goods at the purchaser's premises discharges his obligations if he delivers them there without negligence to a person apparently having authority to receive them. He cannot know what authority the actual recipient has. His duty is to deliver the goods at the proper place, and, of course, to take all proper care to see that no unauthorized person receives them. He is under no obligation to do more. If the purchaser has been unfortunate enough to have had access to his premises obtained by some apparently respectable person who takes his goods and signs for them in his absence, the loss must fall on him, and not on the innocent carrier or vendor."
The judge had not considered the question whether the carrier had exercised all proper care in handing the goods over to the person who took and signed for them. So the matter was sent back for a new trial on that single question.[26]His Honour Judge Catlin had that principle in mind when, in the later judgment which he gave on 26th February 2004, he explained what he had meant by "apparent authority":
"Counsel for the defendant does not understand the basis on which I made my finding. If anything, that may be a criticism of me for not making myself clear. What I said on page 13 of my [earlier] judgment when talking about apparent authority was that: 'I prefer the submission made on behalf of the Defendant that the delivery instructions were clear, that is the goods were to be delivered to AMEC PLC at the stated address to which my judgment can only be performed in each case by each claimant proving that the Goods were delivered to a servant or agent of AMEC PLC with actual or apparent authority to receive them on behalf of AMEC PLC.' It was for practical commercial considerations that I made this decision. I was not using apparent authority in the technical sense. I think the expression here is giving business understanding to the contract. You have to look at the practicalities. You cannot deliver goods to a limited company as it has no physical presence. They have to be delivered to a person, as I have identified."
[27]If the judge had been understood to be saying, in his December judgment, that what was required was delivery to a servant or agent of AMEC Plc with actual or apparent authority from AMEC Plc to receive them on behalf of AMEC Plc, it is not surprising that he was thought to have erred. Mr Bee, plainly, did not have actual or apparent authority from AMEC Plc. But as the judge explained in his later judgment he was not using apparent authority in that technical sense; that is to say, in the sense in which it was understood and explained in this court by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. He was using the phrase in the sense in which the Divisional Court had used it in Galbraith and Grant. He was applying the test: is the person who receives the goods at the designated premises a person who the courier or other deliveror would expect to have authority to receive goods on behalf of the addressee at those premises?[28]If that test is applied, it is plain that the judge was right to take the view that Mr Bee was a person who could be expected to have the authority to receive goods at South Bank House on behalf of persons carrying on business there. There was no indication to the courier that AMEC Plc was not carrying on business there; and an express representation from ICM, in its purchase order and delivery instructions, that AMEC Plc could be expected to be found there. This was a delivery made in apparent compliance with the requirements imposed by ICM in its purchase orders.[29]For those reasons, I would dismiss these appeals. That makes it unnecessary to go on to consider the further point, raised by way of respondent's notice on behalf of C2K, that (in any event) the relevant terms which applied to the order from C2K were C2K's own standard terms and conditions. Those terms make the position clear beyond doubt. But it is unnecessary to decide whether, in the somewhat complex circumstances of this case, C2K's standard terms and conditions had become incorporated, by a prior course of dealing, into the contract between ICM and C2K for the supply of these goods so as to prevail over any inconsistent terms sought to be imposed by ICM's own standard terms. The appeal fails even if ICM can rely on its own terms.

LORD JUSTICE LATHAM: I agree.

LORD JUSTICE JUDGE: In these appeals we are once again required to decide which of a number of innocent parties will have to bear the loss and damage caused by a fraudulent third party. That individual has never been traced, and even if he were traced the possibility that anything of value would be found with him is remote.

[32]We all know who caused the troubles that ended up in this litigation. We also appreciate that the result of the litigation will add to the burdens endured by the loser, who was and will continue to be a victim of fraud. We therefore cannot reach a decision without expressing a measure of sympathy for the loser, but sympathy does not entitle us to avoid deciding where all this loss must now fall.[33]I agree with Lord Justice Chadwick's judgment, and the reasons he has given why these appeals must be dismissed. (Submissions on costs)

LORD JUSTICE JUDGE: We have reflected on the various submissions that have been made to us in relation to costs. We have reached clear conclusions. Each of these appeals will be dismissed with costs. We shall invite the costs judge to ensure that there is no duplication in relation to individual items of costs.

[35]So far as Imago is concerned, with effect from 18th June the costs will be on an indemnity basis, and in relation to the costs which they themselves have incurred there will be interest to be paid at the rate of 9% either from 18th June or the date when payments were made to their solicitors after that date.

ORDER

Appeals dismissed with costs; the costs judge is invited to ensure that there is no duplication in relation to items of costs; with effect from 18th June ICM to pay Imago's costs on an indemnity basis with interest to be paid at the rate of 9%, either from 18th June or the date when payments were made to their solicitors after that date; there to be a payment of costs on account by ICM in the sum of £5,000 for Imago and £4,000 for C2K within 14 days. (Order not part of approved judgment)

Cited in 1 later judgment