[COURT OF APPEAL]

BOWMAKERS, LIMITED v. BARNET INSTRUMENTS, LIMITED.

Conversion - Sale of goods under illegal contract - Machine tools - Maximum price fixed by order - Sale at price infringing order.

No claim founded on an illegal contract will be enforced by the court, but as a general rule a man's right to possession of his own chattels will be enforced against one who, without any claim of right, is detaining them, or has converted them to his own use, even though it may appear from the pleadings, or in the course of the trial, that the chattels in question came into the defendant's possession by reason of an illegal contract between himself and the plaintiff, provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract, or to plead its illegality in order to support his claim. An exception to this general rule arises in cases in which the goods claimed are of such a kind that it is unlawful to deal in them at all.

APPEAL from Croom-Johnson J.

The plaintiffs, Bowmakers, Ld., sued the defendants, Barnet Instruments, Ld., to recover damages for the conversion of certain machine tools which they alleged were their property. The tools in question were the subject of three hiring agreements between the plaintiffs and the defendants, each containing an option to purchase, dated March 18, April 15 and June 16, 1944. They were described in the statement of claim as agreements Nos. 1, 2 and 3. In each case the machines were originally the property of a man named

Smith, who was prepared to sell them to the defendants at prices which they were willing to pay, though not at once. The goods comprised in the first agreement were originally the subject of a contract of sale between Smith and the defendants, but this contract was rescinded. Eventually it was arranged in every case, for the convenience of the defendants, that the defendants should obtain possession of the machines, not by a direct purchase from Smith, but under a hire-purchase agreement from the plaintiffs. In pursuance of this arrangement Smith sold the goods to the plaintiffs, and the plaintiffs entered into the three agreements with the defendants. The contracts between the plaintiffs and the defendants were in a familiar form. Each of them contained a provision for the monthly payment of hire and further provided that "if the hirer shall duly make the said payments and strictly observe and perform all the terms and conditions on his part herein contained then the hirer shall thereupon have the option of purchasing the said chattels for the sum of ten shillings." The defendants after making some, but by no means all the agreed payments, sold for their own advantage, and so converted to their use, all the machines except that one which was the subject of agreement 2, and this latter they also converted to their own use by refusing to deliver it up to the plaintiffs on demand. They maintained however, that the plaintiffs had no remedy against them.

The goods comprised in agreements 1 and 2 were new machine tools. On October 4, 1940, the Minister of Supply, in exercise of powers conferred on him by regs. 55 and 98 of the Defence (General) Regulations, 1939, made an order (St. R. & O., 1940, No. 1784), which admittedly applied to them. The material clause of the order was as follows: "No person shall pay or receive any price (except a provisional price subject to any adjustment that may be required upon determination of the maximum price) for any machine tool produced in the United Kingdom and delivered or to be delivered in the United Kingdom after the coming into force of this order under a contract of sale whenever made (a) until a maximum price for that machine tool shall have been provided by a special or general direction issued by the Minister of Supply, or (b) in excess of the maximum price so provided." By an amendment introduced by a later order the application of this prohibition was limited to new machine tools. It was a matter of dispute at the trial whether a maximum price for new machine

tools such as were included in agreements 1 and 2 had in fact been provided. The defendants said that there had been an infringement of that order. The third agreement dealt solely with a machine tool which was "used." As to that agreement, the defendants relied on another order of the Minister of Supply (St. R & O., 1940, No. 1374), which provided that no person should "in the United Kingdom at any time after August 17, 1940, dispose of or agree or offer to dispose of any used machine tool, except under the authority of a licence granted to him by the Minister of Supply." It further provided that the expression "dispose of" should include any disposal of (a) ownership or any proprietary interest or (b) the right to possession, or (c) possession, whether or not accompanied by any disposal or acquisition of ownership or of any proprietary interest or of the right to possession. The plaintiffs had no such licence to dispose of the machine tool in question. They had, therefore, infringed the order, if not by buying from Smith, the previous owner of the tool, then certainly by themselves hiring out the chattel to the defendants. This illegality, it was contended, must have the same result as the offence committed in respect of the new machines, namely, that the plaintiffs had no remedy against the defendants. Croom-Johnson J. held that no illegality had been proved in respect of any of the hiring agreements, and, accordingly, entered judgment for the plaintiffs against the defendants for damages for conversion. The defendants appealed.

Stenham for the plaintiffs.

Gallop and R. T. Paget for the defendants.

The arguments sufficiently appear from the judgment.

Nov. 3. DU PARCQ L.J. read the following judgment of the court. In this case the plaintiffs have obtained a judgment against the defendants for damages for conversion of certain machine tools, the property of the plaintiffs. But for the defence of illegality which has been raised, there is no answer to the plaintiffs' claim. It is said, however, that the claim is one which the court, having regard to the circumstances, ought not to enforce.

[His Lordship stated the facts and continued:] It was a matter of dispute at the trial whether a maximum price for new machine tools such as were included in agreements 1 and 2 had in fact been "provided" within the meaning of that term in the Order, No. 1784 of 1940. It was said by the defendants that none had been provided; by the plaintiffs that there had been special directions "providing" maximum prices. In this court it was not thought necessary to examine the evidence on the point, since (as will appear) the argument put forward by the defendants can be based equally well on either view of the facts. That argument is as follows: First, with regard to agreements 1 and 2, it is said that the sales by Smith to the plaintiffs were not made at a "provisional" price, and it was neither agreed nor intended that the purchase price which was fixed should be subject to adjustment. This was an infringement of the order quoted. If no maximum price was ever fixed, it still remained an infringement. If certain directions which were proved to have been given to some manufacturers were to be considered as "special directions" by which a maximum price was provided, then admittedly the price paid to Smith in every case greatly exceeded the maximum price. On either view, therefore, there was an infringement of the order. It had to be conceded that the hiring agreements did not in themselves transgress this order, but it was contended, and with much force, that any illegality which attached to the anterior contract of sale must in the circumstances of this case affect the hiring agreements, since these latter agreements were negotiated by the plaintiffs, the defendants and Smith, acting in concert, with a view to ensuring the payment to Smith of a price which could not legally be paid. It is right to add that neither the plaintiffs nor the defendants had any knowledge of the order, so that, if they erred, their error was involuntary, but this, the defendants say, is immaterial. The defendants obtained possession of the machinery as the result of a bargain to procure the commission of a criminal offence, and hence, it was said, they and the plaintiffs, however venial their offence, had been engaged in nothing less than a criminal conspiracy. The plaintiffs therefore, should be driven from the judgment seat, with the result, fortunate or unfortunate according to the point of view, that the defendants would escape from the transaction without loss, and without even suffering the reproaches of an uneasy conscience. [His Lordship then set out the order on which the

defendants relied as having been infringed by the dealings with the used machine tool which was the subject of the third agreement and continued]: Neither Smith or the plaintiffs had the authority of such a licence to dispose of the machine tool in question. The plaintiffs had, therefore, infringed the order, if not by buying from Smith, certainly by themselves hiring out the chattel to the defendants. The result of this illegality, it was contended, must have the same satisfactory consequences for the defendants as the offence committed in respect of the new machines.

Croom-Johnson J., who tried the case, came to the conclusion that no illegality had been proved in respect of any of the hiring agreements. As to the new machine tools, he held that no harm had been done by fixing a price for the sale from Smith to the plaintiffs. As we understand his judgment, his view was that, if parties to a contract fix a price, the order is not transgressed since the price on which they have agreed can subsequently be treated as a provisional price and suitably adjusted. With regard to the used machine, the learned judge was of opinion that Smith, and Smith alone, had broken the law, since, in his view, the plaintiffs were under no obligation to satisfy themselves that Smith had been licensed by the minister. With great respect to the learned judge, we confess that his reasoning does not appear to us to be convincing. if, as we think, it is plain that Smith and the plaintiffs agreed a price for the new machines which was not intended by either of them to be a "provisional" price, we find it difficult to escape the conclusion that they both infringed the order when that price was paid and received. As to the used machine tool, the learned judge would appear to have overlooked the fact that the plaintiffs themselves disposed of it by their agreement with the defendants, so that their ignorance of the fact that Smith was selling without "the authority of a licence" could not avail them. The view which we take of the case makes it unnecessary to pass a final judgment on the question whether, on the true construction of the orders, the suggested offences have been proved, but we will assume in favour of the defendants that the three hiring agreements were all, as they allege, and for the reasons which they give, affected by illegality.

The question, then, is whether in the circumstances the plaintiffs are without a remedy. So far as their claim in conversion is concerned, they are not relying on the hiring agreements at all. On the contrary, they are willing to admit

for this purpose that they cannot rely on them. They simply say that the machines were their property, and this, we think, cannot be denied. We understood Mr. Gallop to concede that the property had passed from Smith to the plaintiffs, and still remained in the plaintiffs at the date of the conversion. At any rate, we have no doubt that this is the legal result of the transaction and we find support for this view in the dicta of Parke B. in Scarfe v. Morgan (1).

Why then should not the plaintiffs have what is their own? No question of the defendants' rights arises. They do not, and cannot, pretend to have had any legal right to possession of the goods at the date of the conversion. Their counsel has to rely, not on any alleged right of theirs, but on the requirements of public policy. He was entitled, and bound, to do so, although, as Lord Mansfield long ago observed, "The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant." "No court," Lord Mansfield added, "will lend its aid to a man who founds his cause of action upon an immoral or an illegal act:" Holman v. Johnson (2). This principle, long firmly established, has probably even been extended since Lord Mansfield's day. Mr. Gallop is, we think, right in his submission that, if the sale by Smith to the plaintiffs was illegal, then the first and second hiring agreements were tainted with the illegality, since they were brought into being to make that illegal sale possible, but, as we have said, the plaintiffs are not now relying on these agreements or on the third hiring agreement. Prima facie, a man is entitled to his own property, and it is not a general principle of our law (as was suggested) that when one man's goods have got into another's possession in consequence of some unlawful dealings between them, the true owner can never be allowed to recover those goods by an action. The necessity of such a principle to the interests and advancement of public policy is certainly not obvious. The suggestion that it exists is not, in our opinion, supported by authority. It would, indeed, be astonishing if (to take one instance) a person in the position of the defendant in Pearce v. Brooks (3), supposing that she had converted the plaintiff's brougham to her own use, were to be permitted, in the supposed interests of public policy, to keep it or the proceeds of its sale for her own benefit. The principle which is, in truth,

(1) (1838) 4 M. & W. 270, 281.

(2) (1775) 1 Cowp. 341, 343.

(3) (1866) L. R. 1 Ex. 213.

followed by the courts is that stated by Lord Mansfield, that no claim founded on an illegal contract will be enforced, and for this purpose the words "illegal contract" must now be understood in the wide sense which we have already indicated and no technical meaning must be ascribed to the words "founded on an illegal contract." The form of the pleadings is by no means conclusive. More modern illustrations of the principle on which the courts act are Scott v. Brown, Doering, McNab & Co. (1) and Alexander v. Rayson (2), but, as Lindley L.J. said in the former of the cases just cited(3): "Any rights which [a plaintiff] may have irrespective of his illegal contract will, of course, be recognized and enforced."

In our opinion, a man's right to possess his own chattels will as a general rule be enforced against one who, without any claim of right, is detaining them, or has converted them to his own use, even though it may appear either from the pleadings, or in the course of the trial, that the chattels in question came into the defendant's possession by reason of an illegal contract between himself and the plaintiff, provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract or to plead its illegality in order to support his claim.

Mr. Gallop sought to derive assistance from the decision of the Court of Queen's Bench in Taylor v. Chester (4). The decision there was, however, entirely consonant with the view which we have expressed. It differed from the present case in one essential respect, since in that case the defendant had prima facie a right to possession of the half-note which the plaintiff claimed. She was holding it as a pledge to secure the payment of money which remained due. The plaintiff could only defeat her plea by showing that the money due had been lent for an immoral purpose, and this could not avail him since he was in pari delicto with her. The judgment of the court, delivered by Mellor J., makes it plain that this was the ratio of the decision. "The plaintiff," said Mellor J.(5), "no doubt, was the owner of the note, but he pledged it by way of security for the price of meat and drink provided for, and money advanced to, him by the defendant. Had the case rested there, and no pleading raised the question of illegality, a valid pledge would have been created, and a special property

(1) [1892] 2 Q. B. 724.

(2) [1936] 1 K. B. 169.

(3) [1892] 2 Q. B. 729.

(4) (1869) L. R. 4 Q. B. 309.

(5) Ibid. 314.

conferred upon the defendant in the half-note, and the plaintiff could only have recovered by showing payment or a tender of the amount due. In order to get rid of the defence arising from the plea, which set up an existing pledge of the half-note, the plaintiff had recourse to the special replication, in which he was obliged to set forth the immoral and illegal character of the contract upon which the half-note had been deposited. It was, therefore, impossible for him to recover except through the medium and by the aid of an illegal transaction to which he was himself a party. Under such circumstances, the maxim 'in pari delicto potior est conditio possidentis' clearly applies, and is decisive of the case." The Latin maxim which Mellor J. cited must not be understood as meaning that where a transaction is vitiated by illegality the person left in possession of goods after its completion is always and of necessity entitled to keep them. Its true meaning is that, where the circumstances are such that the court will refuse to assist either party, the consequence must, in fact, follow that the party in possession will not be disturbed. As Lord Mansfield said in the case already cited(1), the defendant then obtains an advantage "contrary to the real justice," and, so to say, "by accident."

It must not be supposed that the general rule which we have stated is subject to no exception. Indeed, there is one obvious exception, namely, that class of cases in which the goods claimed are of such a kind that it is unlawful to deal in them at all, as for example, obscene books. No doubt, there are others, but it is unnecessary, and would we think be unwise, to seek to name them all or to forecast the decisions which would be given in a variety of circumstances which may hereafter arise. We are satisfied that no rule of law, and no considerations of public policy, compel the court to dismiss the plaintiffs' claim in the case before us, and to do so would be, in our opinion, a manifest injustice. The appeal will be dismissed, with costs.

Solicitor for defendants: L. A. Hart.

Solicitors for plaintiffs: Field, Roscoe & Co., for W. Parkinson Curtis, Bournemouth.

(1) 1 Cowp. 343.

R. F. S.