Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd

A car dealer told a buyer that a Bentley had done only 20,000 miles since a replacement engine and gearbox. His statement turned out to be quite wrong. The Court of Appeal held that the statement was a warranty, not an innocent misrepresentation.

Quick Revision

Read the full judgment: BAILII

Parties

Dick Bentley Productions Limited — plaintiff in the action; named with Mr. Bentley in the case title.

Charles Walter Bentley (Mr. Bentley, sometimes known as Dick Bentley) — plaintiff in the action; the buyer of the car.

Harold Smith (Motors) Limited — defendant in the action and appellant; the car dealer that sold the car.

Mr. Smith — the dealer's representative who made the statements about the car. The judgment does not give his first name.

Procedural History

1. Mr. Bentley sued Harold Smith (Motors) Limited for damages for breach of warranty on the sale of a car.
2. The trial judge found that there was a warranty and that it was broken. He found the damages were more than £400.
3. The claim was limited to £400, so the judge gave judgment for Mr. Bentley for £400. The judgment does not name the trial judge.
4. The trial judge also held that the dealer could not recover £60 on its counterclaim for the gudgeon pins.
5. The dealer appealed to the Court of Appeal. The judgment is dated 3 March 1965.
6. The Court dismissed the appeal with costs.

Facts

1. Mr. Bentley had dealt with Mr. Smith for a couple of years. He told Mr. Smith he was looking for a carefully checked Bentley car.
2. In January 1960, Mr. Smith found a car and bought it for £1,500 from a firm in Leicester.
3. Mr. Smith wrote to Mr. Bentley that he had just bought a Park Ward power operated hood convertible. He called it one of the nicest cars the firm had had in for quite a long time.
4. Mr. Smith had told Mr. Bentley earlier that he was able to find out the history of cars. With a car of this quality, the makers keep a complete biography of it.
5. On the morning of 23 January, Mr. Bentley went to see the car. Mr. Smith told him a German Baron had owned it.
6. Mr. Smith said the car had been fitted at one time with a replacement engine and gearbox. He said it had done 20,000 miles only since then. The speedometer showed only 20,000 miles.
7. Mr. Smith said the price was £1,850, and he would guarantee the car for 12 months, including parts and labour.
8. In the afternoon, Mr. Bentley brought his wife to see the car. He repeated in Mr. Smith's presence what Mr. Smith had said in the morning, including the 20,000 miles since the refit.
9. Mr. Bentley took the car for a short run. He bought it for £1,850, gave his cheque and the sale was concluded.
10. The car was a considerable disappointment. Mr. Bentley took it back to the dealer from time to time. A good deal of work was done during the 12-month guarantee.
11. In February 1961, just after the 12 months, the engine made a knocking noise. Mr. Smith said the gudgeon pins should be replaced, at a cost of £60, because the makers' guarantee did not cover them.
12. Mr. Bentley said the work should be done, and it was done at a cost of £60.
13. While doing that work, the dealer's firm found that broken piston rings had scored the cylinder. On its own initiative it re-bored the engine, at a cost of some £130.
14. The car was a good deal better afterwards, but it had given Mr. Bentley a lot of trouble. He brought this action for breach of warranty.
15. The car had been owned by a German Baron from 1949 to 1952. It was then in an accident and was returned to the makers.
16. The speedometer then read some 84,000 kilometres (about 50,000 miles). The car was fitted with a completely new 1952 body, a reconditioned engine and a new gearbox, and was returned to the Baron.
17. The Baron disposed of it in or about 1958 or 1959, and it came back to England.
18. The judge inferred that the car had done very nearly 100,000 miles while the Baron had it, from 1949 to 1959. On that footing, the speedometer would have read 160,000 kilometres on its return to England in 1959.
19. On 18 July 1961, after Mr. Bentley's solicitors raised the mileage point, Mr. Smith wrote to them. He said that when the car returned to England in late 1958 or early 1959, the speedometer read only 90,000 odd kilometres, after much storage abroad.
20. The judge found there was no evidence of a reading of 90,000 kilometres. He found it was an entire invention of Mr. Smith. Nobody knew the mileage when the car returned to England.
21. The judge found the representations were not dishonest and Mr. Smith was not guilty of fraud. He found Mr. Smith made the 20,000 miles statement without any foundation.
22. The expert witness, Mr. Kinsey, gave two values. The car would have been worth £1,800 had it done a very small mileage for its age and been exceptionally well maintained. As it was, its retail market value in January 1960 was about £1,200.

Issues Raised

1. Did the dealer make a mere innocent misrepresentation, which gives no damages, or give a warranty? The statement was that the car had done 20,000 miles only since a replacement engine and gearbox.
2. Was the dealer entitled to recover £60 for the gudgeon pins, given the guarantee and Mr. Bentley's agreement to pay for them?
3. Was the award of £400 damages excessive because the judge gave no credit for the re-bore?

Arguments Contended

For the appellants (Harold Smith (Motors) Ltd; Mr. Colin Ross-Munro is named as counsel):

• The £60 claim rests on a contract. Mr. Bentley agreed to pay £60 for the gudgeon pins, so he cannot get out of it.
• The award of damages was excessive. The judge gave no credit for the re-bore, which cost £129.
• The reported judgment records no further arguments. It treats the first point as whether the statement was an innocent misrepresentation or a warranty.

For the respondents (Mr. Bentley; Mr. Graham Eyre is named as counsel):

• The reported judgment does not set out the respondents' arguments.

Court's Reasoning

Opinion of Lord Denning M.R.

1. Noted: Mr. Bentley sued for damages for breach of warranty on the sale of a car. The judge found a warranty, found it broken, and gave judgment for £400.
2. Noted: The first point is whether the 20,000 miles representation was an innocent misrepresentation, which gives no damages, or a warranty.
3. Noted: Chief Justice Holt said, and Heilbut, Symons & Co. v. Buckleton repeated, "An affirmation at the time of the sale is a warranty, provided it appear on evidence to be so intended".
4. Noted: The word "intended" has caused difficulties. In Oscar Chess Ltd. v. Williams he explained that intention depends on the parties' conduct, on their words and behaviour, rather than on their thoughts.
5. Noted: "If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice."
6. Noted: The question is what words and behaviour lead to the inference of a warranty.
7. Noted: Suppose a representation is made in the course of dealings for a contract, for the very purpose of inducing the other party to act on it. It does in fact induce him to enter the contract. Held: that is prima facie ground for inferring that a warranty was intended.
8. Held: It is not necessary to call the warranty collateral. It is enough that it was meant to be acted on and was acted on.
9. Held: The maker can rebut the inference. He must show that he was innocent of fault in making it. He must also show that it would not be reasonable for him to be bound by it. The statement is then an innocent misrepresentation.
10. Noted: In Oscar Chess the inference was rebutted. A man bought a second-hand car with a log-book stating the year as 1948. He resold it and repeated the log-book. He honestly believed on reasonable grounds that it was true.
11. Noted: In Oscar Chess he was completely innocent of fault. There was no warranty by him, only an innocent misrepresentation.
12. Held: This case is very different, and the inference is not rebutted.
13. Why: Mr. Smith was a dealer who was in a position to know, or at least to find out, the car's history. He could get it by writing to the makers. He did not. When the history was examined, his statement was quite wrong.
14. Held: He ought to have known better. There was no reasonable foundation for the statement.
15. Noted: The judge found there was no evidence of the 90,000 kilometre reading, and that Mr. Smith invented it. Nobody knew the mileage when the car returned to England.
16. Held: The judge found the statements were not dishonest and not fraud. But Mr. Smith made the 20,000 miles statement without foundation. The judge was well justified in finding a warranty.
17. Noted: The judge said he had no hesitation that, as a matter of law, the statement was a warranty. He said Mr. Smith stated a fact that should be within his own knowledge. He jumped to a conclusion and stated it as a fact that a buyer would act on.
18. Held: That is ample foundation for the inference of a warranty. So much for the first point.
19. Noted: The second point is the dealer's counterclaim. Mr. Bentley had agreed to pay £60 for the new gudgeon pins.
20. Noted: The judge found the pins really broke down during the first 12 months, but this was not discovered until after the 12 months. The defect arose within the guarantee period, so the pins ought to have been replaced under it. He held the dealer ought not to recover the £60.
21. Noted: Counsel for the appellants said Mr. Bentley had contracted to pay £60 and asked how he could get out of it.
22. Held: There are two answers. First, the guarantee obliged the dealer to replace the pins, so 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."
23. Held: A perhaps more satisfactory answer is to allow Mr. Bentley a cross-claim on the guarantee. He can claim £60 damages for breach of the guarantee and set it off (deduct it from what the dealer claims). The pleading in paragraph 3 of the Reply and Defence to Counterclaim covers this.
24. Held: The guarantee covered the work, as the judge found. So the dealer is not entitled to the £60.
25. Noted: The third point is that the damages were excessive because the judge gave no credit for the re-bore at £129.
26. Noted: The judge relied on the expert, Mr. Kinsey. The car would have been worth £1,800 had it complied with the warranty. As it was, its retail value in January 1960 was about £1,200. The difference is some £600.
27. Held: The re-bore at £129 can be struck off and still leave more than £400. The judge said the fall in value from the breach was very considerably over £400, and that on making all allowances the net sum was at least £400.
28. Held: There is nothing wrong in how the judge dealt with this point. On all three points the appeal fails and should be dismissed.

Opinion of Danckwerts L.J.

1. Held: He agrees with the judgment of the Master of the Rolls.

Opinion of Salmon L.J.

1. Held: He agrees. He has no doubt that the judge reached the correct conclusion that Mr. Smith gave a warranty to Mr. Bentley, and that it was broken.
2. Noted: The test is whether what Mr. Smith said was intended and understood as a legally binding promise. If so, it was a warranty. It may be part of the contract of sale or collateral to it.
3. Noted: In effect, Mr. Smith said that if Mr. Bentley bought the car for £1,850, he undertook that the car had done no more than 20,000 miles since it was fitted with a new engine and gearbox.
4. Held: He has no doubt that Mr. Bentley understood this, and that it was intended to be so understood.
5. Noted: He had considerable doubt on the gudgeon pins issue. This was whether the judge was right to hold that the defendants could not succeed on their counterclaim for £60.
6. Held: After hearing the Master of the Rolls, he concluded that the judge's finding on this issue should not be disturbed. He agrees the appeal should be dismissed.

Statutes and provisions

• The judgment cites no statute, section or article. It rests on common law rules on warranty, misrepresentation and consideration.
• Contract terms in issue: the dealer's 12-month guarantee, including parts and labour, and the £1,850 sale.

Authorities

• Chief Justice Holt, as repeated in Heilbut, Symons & Co. v. Buckleton, reported in 1913 Appeal Cases, page 49: Lord Denning quoted the rule that an affirmation at the time of sale is a warranty if so intended. He used it as the starting point.
• Oscar Chess Ltd. v. Williams, [1957] 1 Weekly Law Reports, page 375: Lord Denning cited it for the test of intention by conduct. He distinguished it on its facts, because there the seller was innocent of fault and the inference was rebutted.
• Also cited in footnotes: none. The judgment text has no footnotes.

Judgement

1. The appeal is dismissed with costs.
2. The judgment for Mr. Bentley for £400 stands.
3. The dealer is not entitled to the £60 on its counterclaim.

Legal Principle / Ratio

A representation made in the course of dealings for a contract, to induce the other party to enter it, is prima facie a warranty. The maker can rebut this only by showing he was innocent of fault and it is not reasonable for him to be bound.

Key holding (Lord Denning): "that is prima facie ground for inferring that it was intended as a warranty".

Critical Analysis

Analysis based on the judgment text.

• Lord Denning uses an objective test: the intelligent bystander. The judgment does not say how far a seller's honest belief matters beyond the rebuttal test.
• The rebuttal test has two limbs: innocence of fault and unreasonableness of binding the maker. The judgment applies both together and does not separate them.
• The dealer's special means of knowledge, by writing to the makers, was central here. The judgment does not say what happens where both parties have equal means of knowledge.
• Lord Denning gave two answers on the £60. Salmon L.J. had considerable doubt on this issue. The judgment does not explain the doubt.

Significance

• The case sets a test for telling a warranty from an innocent misrepresentation.
• It shows that a dealer with special means of knowledge is held to statements made without foundation.
• It shows that a warranty need not be called collateral. It is enough that it was intended and acted on.
• It shows that a promise to pay for work already owed under a guarantee lacks consideration.

Exam-Important Points

• Rule: a statement made to induce a contract, and that does induce it, is prima facie a warranty. Trap: the inference is rebuttable.
• Rule: intention is judged by conduct, through the intelligent bystander. Trap: not by the speaker's private thoughts.
• Rebuttal needs innocence of fault and that it would not be reasonable to bind the maker. Contrast Oscar Chess, where a seller repeating a log-book was innocent.
• Mr. Smith was not fraudulent. The judge found no dishonesty, and the warranty still arose.
• Gudgeon pins: no consideration for a promise to do what the guarantee already required. Alternative: a set-off of £60 damages for breach of the guarantee.
• Damages: the gap between £1,800 and £1,200, less £129 for the re-bore, still left over £400.
• Result: appeal dismissed with costs.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited; each opinion is cited by judge.