THE MASTER OF THE ROLLS: Mr. Charles Walter Bentley, sometimes known as Dick Bentley, brings an action against Harold Smith (Motors) Limited for damages for breach of warranty on the sale of a car. Mr. Bentley had been dealing with Mr. Smith for a couple of years and told Mr. Smith he was on the look-out for a well vetted Bentley car. In January, 1960, Mr. Smith found one and bought it for 1,500 from a firm in Leicester. He wrote to Mr. Bentley and said: "I have just purchased a Park Ward power operated hood convertible. It is one of the nicest cars we have had in for quite a long time". Mr. Smith had told Mr. Bentley earlier he was in a position to find out the history of cars. It appears that with a car of this quality the makers do keep a complete biography of it.
Mr. Bentley went to see the car. Mr. Smith told him that a German Baron had had this car. He said that it had been fitted at one time with a replacement engine and gearbox, and had done 20,000 miles only since it had been so fitted. The speedometer on the car showed only 20,000 miles. Mr. Smith said the price was 1,850, and he would guarantee the car for 12 months, including parts and labour. That was on the morning of the 23rd January. In the afternoon Mr. Bentley took his wife over to see the car. Mr. Bentley repeated to his wife in Mr. Smith's presence what Mr. Smith had told him in the morning. In particular that Mr. Smith said it had done only 20,000 miles since it had been refitted with a replacement engine and gearbox. Mr. Bentley took it for a short run. He bought the car for 1,850, gave his cheque and the sale was concluded.
The car was/considerable disappointment to Mr. Bentley. He took it back to Smith from time to time. A good deal of work was done on it during the first 12 months guarantee period. Just after the 12 months, in February 1961, there was a knocking noise in the engine. Mr. Bentley took it to Mr. Smith, who told him that the gudgeon pins ought to be replaced. Mr. Smith said it would cost 60 because the pins were not covered in the guarantee given by the makers. Thereupon Mr. Bentley said that the work should be done. So work was done on those gudgeon pins costing 60. But at the time when Mr. Smith's firm was doing that work they found out that the cylinder had been scored by broken piston rings. So they, on their own initiative, re-bored the engine. That cost some 130. Thereafter the car was a good deal better. But it had given Mr. Bentley a lot of trouble,, And eventually he brought this action against Smith for breach of warranty.
The Judge found that there was a warranty, that it was broken, and that the damages were more than 4-00, but as the claim was limited to 400, he gave Judgment for Mr. Bentley for that amount.
The first point is whether this representation, namely that it had done 20,000 miles only since it had been fitted with a replacement engine and gearbox, was an innocent misrepresentation (which does not give rise to damages), or whether it was a warranty. It was said by Chief Justice Holt, and repeated in Heilbut, Symons and Go. -v- Buckleton, reported in 1913 Appeal Cases at page 49:
"An affirmation at the time of the sale is a warranty, provided it appear on evidence to be so intended".
But that word "intended" has given rise to difficulties. I endeavoured to explain in Oscar Chess Ltd. -v- Williams in 1957, 1 Weekly Law Reports, page 375, that the question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice. What conduct, then? What words and behaviour lead to the inference of a warranty?
Looking at the cases once more, as we have done so often, it seems to me that if a representation is made in the course of dealings for a contract for the very purpose of inducing the other party to act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty. It is not necessary to speak of it as being collateral. Suffice it that it was intended to be acted upon and was in fact acted on. But the maker of the representation can rebut this inference if he can show that it really was an innocent misrepresentation, in that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it. In the Oscar Chess case the inference was rebutted. There a man had bought a second-hand car and received with it a log-book which stated the year of the car, '194-8. He afterwards resold the car. When he resold it he simply repeated what was in the log-book and passed it on to the buyer. He honestly believed on reasonable grounds that it was true. He was completely innocent of any fault. There was no warranty by him but only an innocent misrepresentation.. Whereas in the present case it is very different. The inference is not rebutted. Here we have a dealer, Mr. Smith, who was in a position to know, or at least to find out, the history of the car. He could get it by writing to the makers. He did not do so. Indeed it was done later. When the history of this car was examined, his statement turned out to be quite wrong. He ought to have known better. There was no reasonable foundation for it.
What happened was this: This car had been owned by a German Baron from 1949 to 1952. It had then been involved in an accident. It was returned to the makers. The speedometer then read some 84,000 kilometres (i.e. 50,000 miles). It was fitted with a completely new 1952 body. The engine was reconditioned and a new gearbox was fitted. That was in 1952. It was returned to the German Baron. He disposed of it in or about 1958 or 1959 and it came back to England. We do not know how many miles it had done from 1952 to 1959; but the Judge inferred-- and it seems to me there was ample evidence from which he could infer that, during the whole time while the German Baron had it, from 1949 to 1959, it had done very nearly 100,000 miles. On that footing, on its return to England in 1959 the speedometer would have read 160,000 kilometres. Afterwards, when Mr. Bentley's solicitors raised the point of mileage, Mr. Smith wrote a letter on the 18th July, 1961, to Mr. Bentley's solicitors purporting to justify his statement. He said:
"From various sources it appears that the car had a considerable amount of storage whilst abroad and very little use to the extent that, when the car was returned in '58 to this country, either at the end of '58 or early '59, the speedometer reading was then only 90,000 odd kilometres. A standard m.p.h. speedometer was fitted and, when Mr. Bentley bought the car from my company, the speedometer reading was then 20,000 miles".
The Judge said that there was no evidence whatsoever as to the reading of 90,000 kilometres. It was an entire invention of Mr. Smith. Nobody knew the mileage at the time when the car was returned to England.
The Judge found that the representations were not dishonest. Mr. Smith was not guilty of fraud. But he made the statement as to 20,000 miles without any foundation. And the Judge was well justified in finding that there was a warranty. The Judge said:
"I have no hesitation that as a matter of law the statement was a warranty. Mr. Smith stated a fact that should be within his own knowledge. He had jumped to a conclusion and stated it as a fact. A fact that a buyer would act on".
That is ample foundation for the inference of a warranty. So much for the first point.
The second point is on the counter-claim. When those new gudgeon pins were put in, Mr. Bentley did agree to pay 60 for them. The Judge said that these gudgeon pins really had broken down during the first 12 months, but this was not discovered till after the 12 months. The defect arose, therefore, within the period of the guarantee, and they ought to have been replaced under this guarantee. In those circumstances the learned Judge held that Messrs. Smith ought not to recover that 60.
Mr. Ross-Munro says: Here is a contract by Mr. Bentley to pay 60 for these gudgeon pins; how can he get out of it? There are, I think, two answers to that argument: Firstly, inasmuch as there was an obligation to replace these gudgeon pins under the guarantee, there was no consideration for the promise to pay 60. Mr. Smith was only promising to do that which he was already legally bound to do. But I think that perhaps a more satisfactory way of putting it is to allow Mr. Bentley to make a cross-claim on the guarantee. Mr. Bentley can say: "Now that I have discovered you ought to have done this under the guarantee, therefore I can claim damages for the breach of the guarantee; the amount is 60 and 1 can set it off". That is covered by the pleading in paragraph 3, of the Reply and Defence to Counterclaim, This was really covered by the guarantee, as the Judge found, so I do not think Smiths are entitled to the 60.
The third point raised is that in any event the award of damages was excessive, insofar as the Judge did not give credit for the fact that the engine had been re-bored at a cost of 129. The learned Judge, it seems to me, assessed damages in this way. He had the evidence of a very expert witness, a Mr. Kinsey, who said what the value of the car would be if it had complied with the warranty, and the value of the car as it was. It would have been worth 1,800 if it had done a very small mileage for its age and been exceptionally well maintained. But as it was, in January 1960 the retail market value would be about 1,200. Those seem to be the figures taken by the Judge They come to some 600. The rebore at 129 can be struck off that and still leave more than 400. The Judge says the diminution in value owing to the breach of warranty is very considerably over 400, but making all allowances the net sum would be at least 400.
It seems to me that on this point there is nothing wrong in the way the Judge has dealt with the case, and therefore on all three points I would hold the appeal fails and should be dismissed.
LORD JUSTICE DANCKWERTS: I agree with the judgment of the Master of the Rolls.
LORD JUSTICE SALMON: I agree. I have no doubt at all that the learned Judge reached a correct conclusion when he decided that Mr. Smith gave a warranty to Mr. Bentley and that that warranty was broken. Was what Mr, Smith said intended and understood as a legally "binding promise? If so, it was a warranty and as such may "be part of the contract of sale or collateral to it. In effect, Mr. Smith said:
"If you will enter into a contract to buy this motor car from me for 1,850, I undertake that you will be getting a motor car which has done no more than 20,000 miles since it was fitted with a new engine and a new gearbox."
I have no doubt at all that what was said by Mr. Smith' was so understood and was intended to be so understood by Mr. Bentley.
I confess, however, that I have had considerable doubt on the issue of the gudgeon pins, namely as to whether the Judge reached a correct conclusion when he held that the Defendants were not entitled to succeed on their counter-claim for 60. In the end, however, after having heard my Lord, I have come to the conclusion that the Judge's finding on this issue should not be disturbed. I accordingly agree that the appeal should be dismissed.