1. This appeal relates to rival claims by appellant (defendant No. 1) and respondent (plaintiff) to the ownership of a motor-bus. The undisputed facts are as follows:
Appellant was the original owner of the bus and had in his possession the registration certificate, which is practically equivalent to a title-deed, and a 'G' permit by virtue of which he was empowered to ply the bus for hire. In may 1932, appellant arranged with one Arumuga Mudaliar that the latter should run the bus as his agent, and left with him a letter signed by himself (Appellant) and addressed to the District Magistrate, requesting that the 'G' permit be transferred to Arumuga Mudali. Arumuga Mudali proceeded to alter this letter, without the knowledge of the appellant into one addressed to the District Superintendent of Police and requesting the transfer to him of the registration certificate. The registration certificate was accordingly transferred, and in December, 1932 the respondent having, of course, every reason to think that Arumuga Mudali was the owner of the bus, purchased it from him. The bona fide nature of respondent's purchase is not contested, and the question is which party is to suffer as the result of Arumuga Mudali's fraud.
2. The law to be applied to these facts is to be found in Section 27 of the Sale of Goods Act, the material portion of which runs as follows:
Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner,, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.
3. The learned City Civil Judge accordingly addressed himself to the consideration of the appellant's conduct and finds definitely that it is blameworthy. He had no right to' leave the registration certificate along with the other papers in the bus, his duty was to keep that certificate in his own possession. If he did not do so, he should have inspected it from time to time, apparently to assure himself that his agent had committed no fraud-and he should have issued some kind of public notice to obviate the possibility of any innocent would-be-purchaser being defrauded.
4. With this view of appellant's conduct we are unable to agree, and must point out very plainly that it is based upon no evidence whatever. The only witness examined in the case was the appellant himself, and not one single question was put to him in cross-examination. He has admitted, no doubt, that he left the registration certificate in a box attached to the bus, but he had not been asked why he did so, or what was involved in his doing so, or what the rules were relating to his transaction, and how far he knew of them. Nowhere does the learned City Civil Judge give any authority for his statement that it was the appellant's duty to retain the registration certificate in his own possession. It seems to us on the contrary that in pursuance of the arrangement made, whereby Arumuga Mudali should run the bus, account for the proceeds and pay the periodical tax due upon it, it might well be necessary for Arumuga Mudali periodically to produce the registration certificate for examination by the authorities.
5. Mr. V.V. Srinivasa Aiyangar, however, for the respondent seeks to support the learned City Civil Judge's decree upon another ground. He argues that it is not necessary to find that appellant's conduct has been blameworthy. Section 27 of the Sale of Goods Act embodies the English rule of equity which is very succinctly laid down in Lickbarrow v. Mason (1793) 1 Sm. L.C. 693 : 6 East. 21 as follows:
That wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it.
6. As there is no authority cited before us with regard to the direct interpretation of Section 27 we may accept this principle, and may examine certain English cases in which its application has been considered.
7. In Henderson & Co. v. Williams L.R. (1895) 1 Q.B. 521 the facts were that Grey & Co., had deposited 150 bags of sugar with Williams, a warehouseman at Hull. On 6th June, 1894, they sent Williams the following telegram 'Transfer to order of Fletcher, Leeds '150 R.A.V.'' which was confirmed by letter sent on the same day. Fletcher meanwhile on the 3rd June had fraudulently initiated negotiations for a sale of the sugar to Henderson & Co. and they purchased the sugar from him. Williams after some correspondence refused to deliver the sugar to Henderson & Co. who sued him. The suit was decreed in favour of the plaintiffs and it was held in the course of the Judgment by Lord Halsbury that 'the true owner, having enabled Fletcher to hold himself out as the owner, could not set up his title against that of the purchaser.'
8. Commonwealth Trust, Ltd. v. Akotey L.R. (1926) A.C. 72 is a judgment of the Privy Council on appeal from the Gold Coast. It was concerned with consignment of cocoa sent by the respondent to one Laing and sold by Laing to the appellants. With the consignment respondent sent to Laing the consignment notes which served as documents of title to the cocoa, but as respondent and Laing had not yet by the time of the sale to the appellant come to any agreement as to the price Laing should pay, it was held that there was no contract of sale. Nevertheless, though the property in the cocoa had not passed to Laing, the appellant's title was affirmed upon the principle of Lickbarrow v. Mason (1787) 2 T.R. 63.
9. Now it is clear from an analysis of these two cases that when the real owner 'enables' a third party to occasion a loss he must by his own act put him directly in a position to do so. In the sugar case the owners definitely put the sugar at the: disposal of Fletcher; in the cocoa case the owners definitely sent to Laing the documents which would give him the right to take the cocoa from the railway company and hold it as if it were his own.
10. By the direct act of the owners, therefore, in each case, Fletcher and Laing were in a position to dispose of the goods and as it was this direct act which gave them that authority, the owners were naturally held to be precluded by their conduct from denying the title of Fletcher and Laing to sell.
11. The case here is quite different. The appellant no doubt left Arumuga Mudali in possession of the bus, and left him also in possession of the document of title to it. But that document was in appellant's own name, and unless it were transferred to the name of Arumuga Mudali, Arumuga Mudali had no right to dispose of the bus. Merely to leave the registration certificate with Arumuga Mudali was therefore not equivalent to the sending of the telegram or of the consignment notes in the other cases; nor is it possible to argue that the appellant ought to have contemplated the possibility of forgery and fraud upon Arumuga Mudali's part.
12. In the third English case with which we have to deal the limitations of the proposition in Lickbarrow v. Mason (1787) 2 T.R. 63 are considered, and it will be seen from it that the respondent's case here must fail. That case is Farquharson Bros. & Co. v. C. King & Co. (1902) A.C. 325. There the owners of some timber warehoused it with a deck company with instructions to accept all transfer or delivery orders signed by their clerk. The clerk signed orders transferring the property to himself under an assumed name, and then under that assumed name sold the timber to C King & Co., who purchased it in good faith. It was held that although the authority given to the clerk was the ultimate cause of the sale and therefore in one sense the clerk was 'enabled' by that authority to effect the transfer and occasion the loss, there was no authority to 'sell'. The true owners had not therefore precluded themselves by anything they had done from denying the clerk's title to sell. The present case is exactly similar in principle. The appellant never gave Arumuga Mudali any authority to sell, or any document which, without fraud on his part, could confer any such authority.
13. We are accordingly of opinion on the true construction of Section 27 of the Sale of Goods Act the appellant here is not precluded by his conduct from denying the seller's authority to sell. We allow the appeal and dismiss plaintiff's suit with costs of defendant 1 throughout.