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Keeley v guy mcdonald ltd


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law, merchantable quality

Published in: Law
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Keeley v guy mcdonald ltd

  1. 1. Page 1
  2. 2. Page 2 Official Transcripts (1980-1989) Keeley v Guy McDonald Ltd QUEEN'S BENCH DIVISION MUSTILL J 134 NLJ 522, 134 NLJ 706, (Transcript:Association) 1 FEBRUARY 1984 1 February 1984 A Smith for the Plaintiff; T Warmington for the Defendants. Stitt & Co; Stoneham Langton & Passmore. MUSTILL J Miss Linda Keeley had always wanted to own a Rolls Royce motor-car. It would be pleasant to drive, and would lend prestige to her business. At last, on 24th February 1981, she saw a car which attracted her, at an offering price which seemed within reach, in the showroom of the defendant company, Guy McDonald Limited. The car in question was a Rolls Royce Silver Shadow motor-car, first registered in 1969/70. The defendants had bought it, some weeks previously, at a price of £7,000. They looked at the vehicle when they bought it, but did not strip it down. One thing thet did know about the vehicle was that the reading on the odometer - namely, about 38,000 miles - was inaccurate. Their vendor told them that the true mileage was about 88,000 miles. On Monday 2nd March Miss Keeley went to the showroom to look at the car. She was given a test drive of about one mile. Everything seemed to be in order, and she liked the car.Miss Keeley had little prior experience of owning motor-vehicles, and had no pretensions to mechanical knowledge. On the following day she called again at the defendants' premises and had a discussion about the price with Mr. M.J. Osborn, a director of the defendant company. Originally, the defendants were asking £8,950, but Miss Keeley was looking for a discount, because she was paying cash and did not want to trade in another car. In the event, she was able to strike a bargain at £7,950. It was arranged that she would collect the car on Thursday 5th March, by which time the defendants would have had it put through a Department of Transport road test. On 5th March Miss Keeley duly arrived to collect her car. On this occasion, or perhaps on the
  3. 3. Page 3 occasion of the previous meeting - by the end of the trial neither party was suggesting that it mattered - two particular topics were discussed. First, Mr. Osborn told Miss Keeley that the odometer reading was incorrect, and that the previous owner had given a figure of 88,000 miles. This was made the subject of a written declaration by Mr. Osborn, which he handed to Miss Keeley. Second, mention was made of a guarantee. Miss Keeley had been told by a friend that she ought to ask for a guarantee, and accordingly did so. Mr. Osborn was not willing to provide a guarantee of any great substance, because Miss Keeley had bargained such a large amount off the price. He did, however, offer to sell her an insurance policy, one of several similar policies which were on the market, against failures of axle, gearbox and engine. Miss Keeley did not want to buy insurance; she wanted a warranty from the defendants themselves. In the end, Mr. Osborn wrote the following words on a printed order form, signed by both parties, which recorded the substance of the transaction - "vehicle supplied on the condition that the dealer undertakes gives one week's warranty". Mr. Osborn then handed over to Miss Keeley a recent Department of Transport test certificate. She paid the price, and drove the vehicle home. It seemed that the transaction had been concluded in a manner satisfactory to both sides. The defendants had made a reasonable profit on the resale of the car. Miss Keeley had bought a car of the type she wanted, at substantially less than the asking price. Both parties believed that the car was in reasonable condition, given its age and type. Unfortunately, however, things were not what they seemed. There are colourful phrases, well understood in the motor-vehicle trade, to describe the car which Miss Keeley had bought. Abstaining from the use of these, I will merely say for the present that in some respects the car was seriously decrepit. There was no suggestion at the trial that anyone acting on behalf of the defendants was aware of this. The original purchase was a bad bargain for the defendants, and its resale was an even worse bargain for Miss Keeley. At first, Miss Keeley noticed only trivial defects, on her way home from the defendants' showroom. However, on the following day she drove to the country for the weekend. She had not been on the motorway for long when the oil and brake warning lights came on. She stopped and added some oil, but the lights came on again. The same thing happened on the way back to London. She was so nervous about the condition of the car that she did not care to drive faster than 30 miles per hour. At the beginning of the following week, Miss Keeley took the car in to Henlys (South London) Limited, who are accredited Rolls Royce distributors, and asked them to examine the car. According to Miss Keeley, her idea was that, if Henly's report showed anything wrong, she would take it to the defendants so that they could put matters right. The report was forthcoming two days later, and it did show that something was wrong. The report was of a superficial nature, in that Henlys had not been instructed to open up the mechanism of the car. Nevertheless there were clear indications that things were wrong - and quite possibly seriously wrong - with the engine, clutch, gears, steering and suspension. Miss Keeley then took the report round to the defendants. She had a discussion with Mr. Osborn, the substance of which is in dispute. In the light of subsequent events, and of the way in which the case was presented at the trial, I do not think it necessary to resolve this dispute. At all events, Miss Keeley decided to consult solicitors. There next followed a rather confusing series of events. I am satisfied that the account given by Miss Keeley during her evidence in chief was put forward in good faith. Nevertheless, when additional documents were produced by Henlys in the course of the trial, it became clear that she was substantially mistaken. What seemed to have happened was this. On Sunday 15th March the defendants wrote to Miss Keeley, referring to recent telephone conversations, and continuing, "we would request that you bring the above vehicle to us at your convenience in order that we may have the opportunity of investigating your complaints". 15th March was a Sunday. On the following day Miss Keeley's solicitors (Messrs. Stitt & Co.)
  4. 4. Page 4 telephoned Mr. Craker of Henlys asking him to begin the stripping down of the vehicle's engine, with a view to providing a schedule of work that needed to be done to bring the vehicle up to merchantable quality. Stitts followed up this request with a letter dated 17th March. It seems, however, then to have been agreed that Henlys would not go ahead without written instructions. On 18th March the defendants' letter of 15th March was received by the plaintiff. Next, on 23rd March Miss Keeley wrote direct to Henlys, asking them to strip the car down and report to her. This Henlys began to do, on or shortly after 26th March. Throughout this period, there was no response to the defendants' letter of 15th March, asking that the car should be brought in for investigation. Henlys' detailed investigations revealed a depressing state of affairs, particularly as regards the engine, in respect of which they recommended that it would be cheaper and more satisfactory to fit a factory replacement, rather than attempt to repair the existing unit. Further events during April are not well documented, except that Miss Keeley instructed Henlys not to deliver the car up to the defendants for inspection, if they came in and asked for it. On 1st May, Stitts wrote to the defendants asserting that the vehicle was not of merchantable quality when purchased, and giving a detailed list of repairs which needed to be carried out. The estimated cost of this was some £5,700. The letter concluded by inviting the defendants to confirm tht they would be responsible for the cost of carrying out the repairs and informing them that Henlys would not begin the repairs for seven days so that the defendants could inspect the vehicle. The defendants replied, pointing out that they had Rolls Royce trained personnel who would have no difficulty in undertaking any repairs. They referred to the letter of 15th March, and emphasised that they would be happy to make an appointment to investigate the complaints. The letter concluded - "We would therefore suggest again that your client contacts us and arranges to bring the vehicle to our premises in order that we may bring this matter to a satisfactory conclusion". Miss Keeley stated in evidence, and I accept, that she never saw or knew about this letter addressed to her solicitors. On 12th May, Stitts wrote to the defendants, saying that in the view of their client only an authorised Rolls Royce dealer could carry out the necessary repairs, and that since the defendants had not taken the opportunity of inspecting the vehicle at Henlys' premises, Miss Keeley had instructed Henlys to commence the work required to bring the car up to merchantable quality. On the same day Stitts wrote to Henlys asking them to carry out the repairs, sending the bill direct to Miss Keeley. Perhaps because of this last proviso, the repair work did not commence for some days. In the meantime, the defendants wrote to Stitts on 14th May, saying that they had asked Miss Keeley to return the vehicle to their premises in order that they could investigate her complaints and - "with cooperation on both sides bring this matter to an amicable conclusion, i.e. carry out the necessary repairs if required or alternatively refund Miss Keeley her money". Once again, Miss Keeley said - and again I accept it - that she did not know about this offer. If she had been aware that the defendants were willing to return her money, she would have accepted - and, of course, the trial would never then have taken place. Finally, on about 21st or 22nd May, Miss Keeley asked Henlys to carry out the work. This they
  5. 5. Page 5 duly did, at great (although not excessive) expense. In the result, Miss Keeley now brings this action against the defendants, claiming damages for breach of the sale agreement in three different amounts - 1. £6,460.60, being the cost of repairing the vehicle. 2.£250.12, being the cost of the initial examination and the subsequent more expensive stripping of the engine and gearbox. 3. £231.74, being the cost of a routine service carried out by the defendants at Miss Keeley's request, after the repairs had been completed. Three different causes of action are relied upon in relation to these claims. First, it is said that the cost of repairs and inspection can be recovered under the guarantee endorsed on the order form. Second, there is a common law claim on the basis that the car was not of merchantable quality and reasonably fit for its purpose when delivered. Finally, there is an individual claim for the cost of the post-repairs' service, based on an allegation that the defendants agreed to have the car serviced before delivery. As the first limb of her claim, the plaintiff pleads that it was an express term of the contract that the defendants undertook to compensate her in respect of all faults which manifested themselves within one week of the vehicle's delivery to the plaintiff. In other words, she would be entitled to have any such fault repaired by another garage, charging the defendants with the cost. At one stage, it was being contended for the plaintiff that she could base this claim on an express oral undertaking. I am doubtful whether evidence of such an undertaking would in principle be admissible, in the absence of any claim to rectify the "warranty" written on the order form. In any event, however, the evidence did not support any such contention. Miss Keeley asked for a warranty because a friend had advised her to do so. The sequence of events was that she asked for a full warranty; was told that she could not have one, because of the sharp reduction in the offer price; was then offered an insurance policy; which she refused; and finally she accepted a warranty for one week only. It would be impossible to hold from this sequence of events that the warranty was in some way intended to mirror, on a shorter time-scale, the undertaking by an insurance company which she had been offered, but had refused to pay for. Indeed, in cross-examination she made it plain that she did not get the warranty instead of a policy, but got it because she had asked for one. An express oral agreement could not carry the plaintiff's case any further than the words written on the order form. What do these words mean? The defendants might well have had substantial grounds for arguing that they were too obscure to have any legal force at all. Very properly, however, the defendants did not seek to repudiate their own undertaking in this way. But they are entitled to say, and do say, that the words cannot on any view be read as a clear promise to pay the cost of repairs, even if executed by third parties. I agree with this contention. Explicit words would be needed to bring about such an extreme result. I can see no such words here. At the most, the warranty could be enforced as an undertaking to take the car back in for repairs if any faults manifested themselves within a week. So construed, the warranty is of no value to the plaintiff in the circumstances of the present case. The plaintiff never tendered the car to the defendants for repair. Indeed, when the defendants expressly offered either to take the car in and repair it, or to accept its permanent
  6. 6. Page 6 return and refund the plaintiff's money, the offer was refused. The plaintiff cannot now complain that the defendants have failed to perform a warranty which she never gave them an opportunity to honour. The plaintiff's claim at common law, which is not of course excluded by the addition of the express warranty, is much more substantial. One must begin by considering the level of performance demanded of the defendants. The precise boundaries of the two statutory implied terms are notoriously difficult to fix. Furthermore, it must always be borne in mind that judicial pronouncements in cases like Bartlett v. Sidney Marcus [1965] 2 All ER 753, [1965] 1 WLR 1013, Brown v Craiks [1970] 1 All ER 823, [1970] 1 WLR 753, Farnworth Finance Facilities v Attryde [1970] 2 All ER 774, [1970] 1 WLR 1053, Crowther v Shannon Motor Co [1975] 1 All ER 139, [1975] 1 WLR 30 and Lee v York Coach and Marine [1977] RTR 35, were aimed at the particular circumstances then in suit, and cannot be uncriticially applied to every factual situation. Nevertheless, the following propositions appear to be justified - 1. The vehicle must be fit to be driven on the road in safety. 2. The duration of the warranty extends beyond the moment of sale. The car must be in a condition such that it can continue to be driven in safety thereafter. 3. The warranty is not unlimited in time. No car will run safely forever. The condition of the car on delivery must be such that it will run safely for a reasonable time. What is a reasonable time will depend on the individual circumstances of the transaction, including in particular the age and type of vehicle. 4. As regards features of the car unrelated to its safety, the purchaser of a secondhand car cannot expect to receive a perfect vehicle, nor indeed (I would suggest) a vehicle whose condition conforms with the average. The primary rule caveat emptor is displaced to some extent by the statutory implied terms, but not so far as to give the buyer complete protection against hard luck or a bad bargain. A complaint does not arise unless the defect in question is one which could not reasonably have been anticipated as a possibility by a reasonably prudent and well-informed buyer. Before turning to the facts, I must mention a point which was taken in relation to the price of the Rolls Royce. This was appreciably below the price stated in Glass's Guide for a vehicle of this model and date. Founding on this, the defendants suggested that the standard called for by the statutory implied warranties should be adjusted downwards. I do not accept this. It is true that the price of the goods is an element to be taken into consideration, but the element of bargain must also be taken into account: Brown v Craiks [1970] 1 All ER 823, [1970] 1 WLR 753 supra. The defendants' stock position at the time of the sale enabled Miss Keeley to drive a hard bargain. She was nevertheless entitled to receive a car which complied reasonably with the standards to be expected of an H registration Silver Shadow Rolls Royce. I now turn to the individual defects. It is not necessary to spend long on the engine. When Mr. Craker and his workmen stripped the car down, he found that all the bearings were worn through to their backings, the crankshafts were scored, the hydraulic cam followers were badly worn on the bases, with consequent wear on the camshafts. The pistons were knocking through excessive wear. He thought that the car had done more than 88,000 miles. The engine would not have gone on much longer. Mr. Craker and Mr. Cane (who was called for the defendants) agreed that it was very unusual to find engine wear in a Rolls Royce after 90,000 miles such that it was necessary to replace the engine altogether. Mr. Osborn himself, in the course of his evidence, made no attempt to disguise that he was surprised and dismayed by the condition of the car as revealed by the inspection, and would not have let it
  7. 7. Page 7 leave his premises if he had known what it was like. In these circumstances no elaborate discussion is required to find that the state of the engine rendered the car both unmerchantable and unfit for its purpose, and indeed by the end of the trial the defendants were scarcely contending to the contrary. By contrast, the condition of the brakes was in my view on the other side of the line. The flickering of the brake warning light was a false alarm, probably due to faulty switches. Certainly, there was wear in the linings of the brakes, but these could not in any event have been expected to last for the lifetime of the car. They had about 6,000 miles of life left in them, and this was, in my judgment, a reasonable time, for the purpose of compliance with the warranty. The next complaint related to the gearbox. Essentially, here, the problem was that the clutches were worn: so badly worn, that, according to Mr. Craker, when he dropped the sump on the second inspection, he found particles of the clutch plate lying in the sump, with the oil burned. As I understand the evidence, it was impossible to tell how long the clutch would last in this state, whether a matter of weeks or months. Nevertheless, it does seem to me that the condition was markedly worse than could have been expected for a car of this age and model, and that here again there was a breach of the implied terms. Next there was the steering and suspension. This was described in Mr. Craker's report as follows: "The fore and aft sub-frame mountings were both worn and structurally weak causing the front beam to fail and knock on the body. The off-side rear height control ram was obviously defective as was the rear near-side height control flex pipe". The evidence as a whole did not go so far as to satisfy me that the car was unroadworthy at the time of delivery, as regards these defects. Nevertheless they were a potential source of trouble, and should not have been present in a car of this age and type. In my view, they contributed - although in not such a large degree as the flaws in the engine and gearbox - to make the vehicle unmerchantable. Finally, there was a miscellaneous collection of complaints, of which the most significant in terms of money related to the final drive unit. In my judgment, these did not in themselves cause the vehicle's condition to cross the line between disappointed expectation and unacceptability. The plaintiff has accordingly proved that the defendants were in breach of contract in a number of respects, and is entitled to be compensated, under section 53(3) of the Sale of Goods Act 1979, in terms of the difference between the actual unrepaired value of the car and the value which it would have possessed if the implied warranties had not been broken. Starting with the market value of the car, if it had complied with the warranty, we find that Glass's Guide gives figures of £9,500 for this model in showroom condition, and £7,750 for the trade-in value. I think it reasonable to take a round figure of £8,000 as the starting point of the calculation, a sum not materially different from the price actually paid by Miss Keeley. The actual value of the car as delivered cannot accurately be stated, on the evidence before the court, partly because no witness spoke directly to the effect on the value, of the particular
  8. 8. Page 8 combination of defects which I have held to be breaches of contract, and partly because the work done by Henlys undoubtedly brought about a substantial element of betterment. The evidence of Mr. Cane, which in this respect was not controverted and which I accept, did however set up certain marker-points. At the bottom end of the scale, Mr. Cane estimated the delivered value of the car at about £5,500. He stated that after completion of all the work, the value would be about £11,000 to £12,000. Allowing for the fact that the engine was further down the road to complete failure than the other relevant items, I think it fair to work on a betterment rate of 50 per cent. Applying this to the total repair cost of the engine, gearbox and sub-frame, together with part of the labour charged against the brakes (because it was necessitated by the removal of the engine), and then adding in the whole cost of a new spare tyre and indicator switch, one arrives at a figure of £2,675. In addition, there were the costs of the two inspections by Henlys. The first inspection was, in my judgment, a reasonable step to take, given the fact that the car showed every sign of being, as it ultimately proved to be, seriously defective. In my judgment the cost of the second inspection is also recoverable. The defendants did not argue that in mitigation of damage the plaintiff ought to have had the repairs carried out by them and nobody else. This being so, if a third party was legitimately to do the repairs, it was not unreasonable to cause that third party to look at the car to see what repairs were needed. I therefore add the sums of £66.70 and £183.42 to the amount recoverable. Finally, there was a separate claim in respect of the service carried out by Henlys, after the completion of repairs. Miss Keeley's evidence was to the effect that when she bought the car she had asked for, and had been promised, copies of the vehicle's service history, but that in the event the defendants could not find it. She was therefore promised, so her evidence ran, a pre-sales service instead. Plainly none was ever in fact performed. As will have appeared, I do not regard Miss Keeley's recollection as wholly reliable. Nevertheless, her evidence on this point was clear and convincing, and I accept it. Accordingly she is entitled to recover the further sum of £231.74. There will accordingly be judgment for the plaintiff for the total of £2,675.00, £66.70, £183.42 and £231.74, namely £3,256.86. Judgment for the Plaintiff in the sum of £3,256.86 with costs.