Parallel Imports (Europe) Ltd (T/a Baglan Car Centre) v Radivan & Anor

This is the judgment of the court.

Parallel Imports (Europe) Limited, trading as the Baglan Car Centre (Baglan), appeals against an order made on 17 April 2007 by HHJ Chambers QC sitting as a Judge of the Queen’s Bench Division in the Cardiff Mercantile Court. He dismissed Baglan’s claim for damages for fraudulent misrepresentation against the two defendants: (1) AJR Import and Export Ireland Limited (AJR), an Irish company with offices in Dublin and Manchester which we were told was in liquidation and took no active part in the trial or the appeal; and (2) Mr Maurice Radivan, a de facto director of AJR and the only active defendant.

The essence of Baglan’s claim was that on 7 May 2002 Mr. Radivan falsely represented to Baglan that 36 specified Ford Ka “Collection” cars were available for purchase from a Belgian dealer in Ford cars, Deprince NV (Deprince). In fact, they were not available to Baglan and they were not delivered to Baglan, as AJR had already acquired the cars in question from Deprince. Relying on Mr. Radivan’s misrepresentation about the availability of the 36 cars, Baglan paid to Deprince the purchase price of €281,880. Deprince subsequently supplied to Baglan 10 different cars, but retained the entire sum that it had received from Baglan for 36 cars.

After giving credit for the 10 different cars delivered, Baglan’s damages claim against Mr Radivan for fraudulent misrepresentation totalled €205,580, which, at the close of business on 7 May 2002, amounted to £124,172. A claim for loss of profit of £10,000.34 based on the re-sale price of the cars was dismissed by the judge. It was not pursued in this court.

Mr. Radivan did not appeal against the finding of fraudulent misrepresentation. Baglan appealed because, despite the finding of fraud in its favour, the judge did not award any damages. He dismissed the claim on the ground that Baglan had not proved that it had suffered any loss.

The loss point turned on Mr Radivan’s contention that in May 2001 Baglan, through him, placed an order with Deprince for the purchase of 500 cars, that Deprince brought proceedings in the Belgian courts against Baglan for alleged breach of that contract and that Baglan failed to prove in this action that Deprince was not entitled to keep the payment for the 36 cars received from Baglan in May 2002 to meet its claim.

The judge explained his conclusion in the last paragraph of his judgment: -

In a separate judgment given at the conclusion of argument on 17 April 2007 the judge made no order for costs on the ground that “the overwhelmingly largest part of the time in this case was devoted to a factual analysis of matters, which resulted in a finding against (Mr. Radivan)”. Mr Radivan appealed against that costs order.

On giving Baglan permission to appeal, the judge set out his reasons as follows:

As the appeal is limited to the loss point the facts can be stated quite shortly.

Baglan and AJR, its commercial agent, supplied and sold cars imported into England and the Republic of Ireland from other EU countries. The chairman of Baglan’s parent company was Mr. Geoffrey Thomas. His daughter, Ms Sara Canfield, was a director of Baglan’s parent company and the company secretary of Baglan.

The arrangements between Baglan, AJR and Deprince for the importation and supply of Ford Ka cars from Belgium are the background to the case. In May 2001 there were negotiations between Deprince and Mr Radivan for the delivery of 500 Ford Ka cars by 31 August 2001, at the rate 100 a month starting June 2001, and on terms as to payment, including the payment of a £50,000 deposit by Baglan. This was not in fact paid. Mr Thomas said that he was not told that a deposit of £50,000 was payable.

Baglan received about 100 cars by the end of August. The cars were handled in batches of 36 known as transports. At no stage did Baglan take delivery of 500 cars from Deprince. Baglan’s case was that between October 2001 and April 2002 it purchased and took possession of 205 cars from Deprince. Deprince complained of a breach of contract by Baglan in failing to take prompt delivery of the cars and in failing to provide copies of registration forms so that Deprince could recover discounts from Ford.

The judge referred to “the dysfunctional state of affairs” relating to these arrangements. At some point in September or October 2001, Mr. Thomas made it clear to Mr. Radivan that, because of the failure to deliver the balance of the cars by the end of August, he did not regard Baglan as being bound by an agreement, but he did not notify Deprince of this.

The judge found that: -

The judge also found that: -

The judge described the course of dealing and accepted in its entirety the evidence of Ms Canfield about it. He also preferred her evidence to that of Mr Radivan on the fraud that was perpetrated on Baglan.

Mr Radivan did not challenge the finding of fraudulent misrepresentation. The judge found that when, on 7 May 2002, Ms Canfield asked Mr Radivan whether 36 identified vehicles in transport T5 were available, Mr Radivan told her that they were available. Baglan then paid Deprince for the cars by bank transfer. Baglan acted in reliance on the representation by Mr. Radivan that the specific cars, identified by their chassis numbers, were available. The judge held that Mr. Radivan could not have honestly believed that the cars in question were available to Baglan. AJR had, on its own account, bought, taken delivery of and sold cars out of T5. The judge said of Mr Radivan that “while in no commonplace way would he be described as a dishonest man, he was a good natured ‘fingers crossed that it will be alright on the night’ man”. However, in relation to the fraud, the judge’s findings are unequivocal. The judge found that: -

Although he held that the fraudulent misrepresentation was the effective cause of Baglan’s payment for cars that were not delivered, the judge dismissed Baglan’s claim for damages. On the issue of damages the judge invited written submissions from the parties at the end of the trial in the event that he found that there had been fraud. The judge considered the submissions in paragraphs 45-56 of his judgment. He commented (in paragraph 54) that the problem with this aspect of the case was that “it was only explored to a limited extent” and he was “not expressly invited to rule on the legitimacy of the Deprince claim as opposed to looking at various aspects of it.”

Nevertheless the judge went on to find that a contract was negotiated by Mr Radivan on behalf of Baglan with Deprince in May 2001, that it remained in force, that Baglan never terminated it nor sought to alter its terms and that Deprince was entitled to enforce its terms. He held that it was both a natural and a foreseeable consequence of the misrepresentation that the receipt of the payment by Deprince would lead to it allocating at least part of the money to what it said was due to it from Baglan. Since it was, the judge found, “reasonable to suppose” that Baglan’s failure “to take prompt delivery of vehicles, and to supply the documentation necessary to obtain fleet discounts” had caused Deprince loss, Baglan had not discharged the burden on it to prove its loss. Baglan had failed to show that Deprince was not entitled to keep the balance of the money after allowance for the 10 different cars supplied.

For Baglan, Ms Amanda Eilledge submitted that the judge erred in law in holding that the burden was on Baglan to prove that Deprince was not entitled to keep the money paid by Baglan for the 36 cars in May 2002.

The basic principles applicable to the assessment of damages for fraudulent misrepresentation were summarised in the speech of Lord Browne-Wilkinson in Smith New Court Securities Ltd v Citibank N.A.[1997] AC 254 at 266H to 267C -

The speech of Lord Steyn at page 284D-E is to the same effect: - see, in particular, his reference to the judgment of Bingham LJ (as he then was) in Cemp Properties (U.K.) Limited v Dentsply Research & Development Corporation [1991] EGLR 197 at 201, which is followed by this sentence:

In our judgment, the judge’s findings on the fraudulent misrepresentation and the direct financial loss suffered by Baglan are clear. Baglan proved, to “the exacting standard” that must be applied to allegations of fraud, that the assurance given by Mr Radivan to Ms Canfield that the 36 Ka vehicles in T5 were available was fraudulently made, that it was the immediate and effective cause of the payment by Baglan on 7 May 2002 to Deprince and that the only cars received by Baglan were 10 different cars. On those findings why should Baglan not be entitled to damages?

Mr David Uff, who appeared for Mr Radivan, submitted that the burden of proof rested with Baglan to prove that it had suffered loss. He submitted that there were two reasons why Baglan had not proved loss and was not entitled to damages.

His primary submission was that Baglan obtained what it paid for. It had not therefore suffered any loss. It had obtained an enforceable contractual right against Deprince to the delivery of 36 cars. This contractual right was property. Baglan had acquired the benefit which it intended to acquire when it made the payment. Baglan suffered no loss in paying Deprince for the contractual right.

In our judgment, this is not a correct analysis of the transaction between Baglan and Deprince. Baglan paid Deprince for specified and identified property, the 36 Ka’s, in consequence of the fraudulent misrepresentation of Mr Radivan that the cars were available for delivery. Baglan did not pay Deprince for a contractual right to delivery of the cars. Baglan was paying for cars imported from Belgium, not for the acquisition of a right of action against a Belgian car dealer for failing to deliver the cars. The loss suffered by Baglan was that, in reliance on Mr Radivan’s fraudulent misrepresentation, it had paid Deprince for cars which it never received.

Mr Uff’s second submission was that Baglan suffered no loss, because Deprince was entitled to keep the money as payment for what Baglan owed to Deprince under a 2001 contract for the purchase of 500 cars. He argued that the “loss” suffered by Baglan was not the making of the payment for the 36 cars, which were unavailable for delivery, but the assertion by Deprince of its pre-existing contractual rights against Baglan and the exercise of those rights over the payment received from Baglan. It was for Baglan, which had knowledge of the relevant facts, to prove that Deprince had acted wrongfully in failing to deliver the 36 cars or to return the payment.

As already explained, Baglan had proved that a fraudulent misrepresentation was made by Mr Radivan to Baglan, that Baglan was induced to make a payment to Deprince that it would not have otherwise made, that the cars paid for were not available and that Baglan was not repaid. In our judgment, it was for Mr. Radivan to adduce evidence showing that Baglan had in reality suffered no loss by making the payment, because Deprince was entitled to keep it in respect of Baglan’s existing liability to it.

Neither side called any evidence from Deprince about the 2001 transaction or any other transactions or about the claims made by Deprince in the Belgian proceedings or about the extent of any pre-existing liability of Baglan to Deprince. Neither side even sought to join Deprince as a party to this action for the purposes of claiming re-payment or contribution.

In our judgment, the judge wrongly placed the burden on Baglan to show that Deprince was not entitled to keep the payment made in May 2002. The position was that Baglan had proved all that it needed to prove in order to recover substantial damages from Mr Radivan for fraudulent misrepresentation. It was for Mr Radivan to adduce evidence showing that Baglan had not suffered the loss claimed by it, because Deprince was entitled to keep the payment.

Mr Radivan did not discharge that burden, which would have involved adducing evidence about Baglan’s existing liability to Deprince and the extent of it. No evidence was adduced by Mr Radivan (for example, from Deprince) to show that the Belgian proceedings by Deprince against Baglan had resulted in any judgment or finding against Baglan. No other evidence was adduced by Mr Radivan, which would have enabled the court to make any finding about the extent of Baglan’s existing liability to Deprince or about any rights of set off that might have been exercisable by Deprince against Baglan entitling it to retain the money paid for the 36 cars.

In his written submissions to the judge after the hearing Mr. Uff accepted (in paragraph 14.3.6) that “the Court in this action cannot determine the respective rights and obligations in (Baglan) and Deprince”. In our judgment, this inability is fatal to Mr. Uff’s submission that Deprince was entitled to keep the payment by Baglan and that Baglan is not entitled to damages from Mr Radivan to compensate it for the payment that it was deceived by Mr Radivan into making for cars that were unavailable for delivery to it.

In summary, in respect of its claim for damages for fraudulent misrepresentation, Baglan discharged the burden of proof in establishing liability and loss, but Mr Radivan failed to adduce evidence to show that Deprince was entitled to keep the payment made by Baglan.

That is sufficient to dispose of the narrow point on the burden of proof which arises on this appeal. It is neither necessary nor desirable for this court to determine a clutch of wide-ranging points which were argued at trial and have been re-argued on the appeal: whether a binding contract was concluded between Baglan and Deprince in 2001 under which Baglan would pay for and accept delivery of 500 Ford cars; whether Mr Radivan had express or implied actual authority or apparent authority to act for Baglan in negotiations for and to enter into the contract that he did with Deprince in 2001; whether, to the knowledge of Deprince, Mr Radivan had exceeded his authority; whether Baglan was aware of the terms of the contract and had, by its conduct, ratified a contract made by Mr Radivan with Deprince without authority; whether any contract which had been concluded was terminated or varied; whether Deprince had claims for breach of contract against Baglan; and whether the pleadings by Baglan in relation to the 2001 transaction were defective and precluded Baglan from advancing its case on damages against Mr Radivan.

We accordingly allow the appeal, set aside the judge’s order, save in so far as it relates to the payment out to Baglan of a sum lodged in court as security for costs, and enter judgment for Baglan in the sum of £124,172 together with interest and costs.

It follows that Baglan should have been awarded its costs below. We also dismiss Mr Radivan’s cross-appeal on costs, in which he contended that, as he was successful on the damages issue, the judge ought to have made an issue- based costs order rather than depriving Mr Radivan of a significant proportion of his costs.

We invite counsel to agree an order. Any outstanding points of disagreement between the parties should be put in writing.

On 17 December 2007 we received from Mr Uff written submissions consequent on the court’s draft judgment, which had been made available to counsel prior to hand down.

Mr Uff respectfully submitted that the draft judgment did not address his principal argument on the appeal, as set out in the passages quoted from his amended skeleton argument and the respondent’s grounds of appeal. This complaint was the first of the grounds on which he based his application for permission to appeal to the House of Lords.

Mr Uff reminded the court of his written submissions on causation/loss: that the payment by Baglan for the 36 ascertained cars was made in performance of an existing contractual obligation in Baglan to pay Deprince for the balance of 500 unascertained vehicles; that the existence of this contractual liability was all that was necessary to the judge’s decision on causation/loss; and that, as the payment was for a liability that had accrued in 2001, the cause of the loss was the “alleged” breach by Deprince and not the fraudulent misrepresentation made by Mr Radivan. Although the judge had accepted (paragraph 55 of his judgment) that there was a contractual obligation in Baglan to pay for the 500 unascertained cars, he had not addressed the respondent’s submissions on this point nor had this court.

With respect to Mr Uff this court has addressed his submissions and it does not accept them. As they were developed in oral argument at the hearing of the appeal, their focus was on the point that Baglan was not entitled to damages for fraudulent misrepresentation as it had not suffered any loss. The submissions that were made to the court are summarised in paragraph 28 above, as are the relevant findings of the judge on damages in paragraphs 19 and 20 above. In the court’s judgment (and contrary to the judge’s conclusion) the burden of proof, which was crucial on the point that Baglan had not suffered loss, was on Mr Radivan and he failed to discharge it.