Car & Universal Finance Company Ltd v Caldwell [1963] EWCA Civ 4 (19 December 1963)

Caldwell sold his Jaguar to Norris, who paid with a worthless cheque and absconded. Caldwell immediately informed police and the AA to trace the car. The Court of Appeal held that where a fraudulent buyer deliberately absconds, the defrauded seller can rescind the contract without communicating directly with the fraudster, thereby defeating later innocent purchasers' claims.

Facts

On 12 January 1960, Mr Caldwell sold his Jaguar motor car to one Norris for £975. Norris paid £10 in cash and a cheque for £965, which proved worthless. The next morning, upon discovering the fraud, Caldwell immediately contacted the police (who were already seeking Norris under a warrant) and the Automobile Association to trace the car. Norris had absconded and could not be found. On 13 January, Norris sold the car to Motobella Company Ltd, who had notice of the defective title. On 15 January, Motobella sold to G & C Finance Corporation Ltd, who were bona fide purchasers. The car eventually passed to Car & Universal Finance Company Ltd in August 1960.

The Voidable Title

It was agreed that Norris acquired a voidable title to the car through the fraudulent transaction.

Issues

The primary issue was whether a contract voidable for fraud can be rescinded without communication to the fraudulent party where that party has deliberately absconded to avoid contact.

Judgment

The Court of Appeal (Lord Justice Sellers, Lord Upjohn, and Lord Justice Davies) unanimously dismissed the appeal, holding that Caldwell had effectively rescinded the contract on 13 January 1960.

Communication Not Always Required

Lord Justice Sellers held that while the general rule requires communication of rescission, this cannot apply where the fraudulent party deliberately absconds. He stated that to hold otherwise would allow a defrauding party to deprive the innocent party of his right to rescind by skilfully keeping out of the way.

Lord Upjohn agreed, stating that where one party by absconding deliberately puts it out of the power of the other to communicate his intention to rescind, the fraudulent party cannot insist on his right to be made aware of the election. He held that the innocent party may evince his intention to disaffirm by overt means falling short of communication or repossession.

Lord Justice Davies considered that it must be implied in such transactions that the defrauded party should be entitled to rescind by the best means possible, applying the maxim lex non cogit ad impossibilia (the law does not compel the impossible).

Agency Point Rejected

The Court declined to follow the Master of the Rolls’ alternative ground that Motobella were agents of G & C Finance Corporation for investigating title. Lord Upjohn stated that in the sale transaction between dealer and finance company, the dealer gives a warranty as to title but deals at arm’s length, and there was no implication of agency to investigate title.

Implications

This case established an important exception to the general rule requiring communication of rescission. Where a fraudulent party deliberately absconds to avoid contact, the defrauded party may effectively rescind by taking all reasonable steps to recover the goods and making his intention to rescind unequivocally known through other means. The decision recognises that the law should not permit a fraudster to benefit from his own wrongdoing by preventing the innocent party from exercising legitimate rights. The case remains significant in the law of contract regarding rescission for fraudulent misrepresentation.

Verdict: Appeal dismissed. The Court held that Caldwell had effectively rescinded the contract on 13 January 1960 before any subsequent sale to an innocent purchaser, thereby retaining title to the car.

Source: Car & Universal Finance Company Ltd v Caldwell [1963] EWCA Civ 4 (19 December 1963)