Car Firm Given Judgment On Resale Covenant

Press, Volume C, Issue 29671, 15 November 1961, Page 11

Car Firm Given Judgment On Resale Covenant

to a civil action heard before Mr A. P. Blair, S.M., Hutahineon Motors, Ltd., succeeded in a ctotan arising drcm an alleged breach ot a deed of covenant binding the purchaser of a new Ford V 8 custom saloon car, bought tor £lO4B on October 9, 1957, not to sell the car wMtuta two years of purchase without first giving Hutohineoa Motors the option of buying it back agein.

The defendant in the action was Frank Overbaugh Gage, a market gardener. The third party joined in the action was David P. S. Ainsworth, a public accountant. Mir R. S. D. Twyneham appeared for Huitohinson Motors, Ltd., Mr C. G. Penlinglton tor Gage, and Mr B. J. Drake tor Ainsworth.

In his formal judgment released yesterday the Magistrate entered judmuent for Hutchinson Motors against Gage tor £302, plus £27 19s Court costs, witnesses’ expenses, and solicitors’ fee The Magistrate then entered judgment far Gage against Ainsworth, as third party, tor the sum ot £329 19s plus costs, tor an order of discovery, of £2 2s. The Magistrate did not award epets tor solicitor’s fees to Gage against Ainsworth.

Hutchinson - Motors, in its statement of cfeitn, said that Gage signed a deed of covenant not to sell the car, except to Hutrtiineon Motors, at the price and terms set out in the covenant within a period of two years. In a third party notice served on Ainsworth, Gage claimed he was entitled to be indemnified by Ainsworth against liability in respect of the claim brought against him by Hutchinson Motors, because Gage claimed he was acting in all respects, when purchasing the car, as agent of Ainsworth and was under his instructions.

Common Ground It was common ground in the hearing of the case that Gage had his name on the waiting list of Hutchinson Motors and was informed after a time that a new car was available to him. Gage then approached a company director, Herbert O. Solomon, with a view to Solomon financing a buyer for the car. Solomon gave him the name of Ainsworth and told Gage that he (Solomon) wanted to be in on the deal.

Gage the® saw Ainsworth. Gage bought the car from Hutchinson Motors for the list price of £1648 and gave Ainsworth possession ot the car the same day. Gage had been paid the list price of the car plus £B6 commission before he bought the ear. When Hutchinson Moton asked Gage to sign the deed of covenant on the car, he went to Ainsworth and asked if it would be all right if he signed the deed of covenant. Ainsworth told Gage be should seek his own solicitor’s advice before signing any covenant. Gage did so, and signed the deed before purchasing the car from Hutchinson Motors and giving possession to Ainsworth.

In his oval judgment given after the hearing of evidence from all parties, the Magistrate said the primary question was whether the deed of covenant was a valid, legal document. The defendants eaid it was illegal. The Magistrate cited the case of Mouat v. Bette Motors in which the Privy Council had held that a deed of covenant concerning a car sold by Mouat within two years ot buying it from Bette Motora, contrary to the terms of the covenant, was a valid and legal document Consequently he held against the defendants, raid the Magistrate, and found that the covenant signed by Gage was legal and not contrary to the Control of Prices Art.

"The next point which I must consider is the position of Mr Gage in this transaction. I think it is perfectly clear from the evidence that at the time he signed the deed of covenant he knew what he was signing. In any event it is good law, I imagine, that if he signa such a document he is presumed to know the contents of it and is bound by it But there hi evidence, in any event, that he had some idea of what that deed of covenant contained,” the Magistrate Mid. “Pretty Minor Figure" "So far as Hutchinson Motors is concerned it is also perfectly clear that Mr Gage did not disclose that he had another transaction in view or that he was in any way acting for any other person, and I think that as regards Hutchtoaon Moton, Mr Gage is estopped from denying that

he wm the real purchaser in this transaction. I think it has been established that in relation to the plaintiff, Mr Gage acted' in breach of his covenant.

“In point of fact, and I think this, too, is established by the evidence, Mr Gage was a pretty minor figure in this episode. He had no money; he seized the opportunity that was available to him to make a quick profit by reason of the fact that his name was on this list. He saw the opportunity and took it. He appears to have made some £5O out of the transaction by the time he had paid a sort of commission to Mr Solomon,” the Magistrate said. “The further question I have to decide is whether or not Gage was, at the material time, the agent of Mir Ainsworth. In my view he was. At the time he went to see Mr Ainsworth he was certainly not the owner of the car, nor was he in a position to purchase it Doubtless if he had not been aide to get in touch with someone ne would have bod to abandon the transaction.

“He could not have purchased the car for himself. It was Mr Ainsworth’s money that was used to purchase the car. Mr Gage got possession of this money before he completed the transaction with Hutchinson Motors. “Immediate delivery was given by Mr Gage to Mr Ainsworth, and the deed of covenant which Mr Gage entered into, was signed by Mr Gage, if not with tbs expree> approval of Mr Ainsworth at least with his knowledge that Mr Gage was committing himself to signing this document

“I think that if the episode between these two is looked at, then there is very little doubt that when Mr Gage signed this contract he was really doing it as an agent for Mr Ainsworth with Mr Ainsworth’s money and doing a job for which he was to receive some £BO, less his obligation to Mr Solomon,” said the Magistrate. “As regards the point that the money actually came from the company which Mr AinaWorth was associated with and Controlled, I think that this makes no material difference as between Mr Ainsworth and Mr Gage. “The car was purchased so far as Mr Gage was concerned, by Mr Ainsworth and the contract was approved by Mir Ainsworth, whom ,I regard as his principal. The fact that the money was actually forthcoming from one of his companies I do not regard as material evidence. I think it bas been established that at the material time Mr Gage was the agent for Mr Ainsworth, and as such he is entitled to be indemnified by his principal.

Question, of Damages “With regard to the question of damages I find this a difficult question. There is certainly some scarcity of evidence as to the -value of the vehicle at the material time. The purpose of the covenant, as I see it, is to impose a penalty upon the purchaser of the vehicle to prevent him from taking advantage of the special position in which he is given as a purchaser, and the covenant is not primarily intended, as I see it, to give to the- car vendor a monetary advantage, "But Mouat’s case seems to be authority for the proposition that the correct measure of damages is the difference between what has been called the surreptitious market value and the controlled price, and it does seem that the piaintiS had adopted the correct measure of damages tn claiming for the difference between thia surreptitious market value and the actual sale value. The plaintiff claims that the market value is £2OOO and I agree with Mr Drake that the material time for the purpose of the claim is October », 1957. “It Is clear that there is not much evidence of sales at this type of vehicle, or indeed of any naw secondhand vehicles (if I may use such a phrase) at about this time, for obvious reasons. That such a vehicle has a value over and above the list prices appears dear from the evidence. “It also appears dear from the evidence that that value bad enhanced considerably a few months later; ultimately Mr Ainsworth sold the vehicle in question in July, 1960, I think, for £2lOO. but as Mr Drake has pointed out, that figure can only be accepted with reservation, as all sorts of curious things happened to the intervening months and that sale price can be nothing

"more than a very rough guide to the value in October. 1967. “Nevertheless I think I can infer front the evidence, and particularly the evidence of one of the plaintiff’s witnesses and also the evidence of Mr Ainsworth himself, that as at October, 1957 the surreptitious market value was considerably in excess of the control prices value. The plaintiff in putting that value at £2OOO placed an arbitrary figure on it I must also do the best I can, and I also place an arbitrary value on it I thank there is also evidence to support it I am going to find that the surreptitious market value was £l9OO and give judgment to the plaintiff on that basis,” said the Magistrate.