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02/08/2012 - A partial survey of a vessel does not exclude liability of a seller where there is a defect – MacDonald v Pollack

Introduction

The decision in Macdonald v Pollack [2012] CSHI 12 revisits the meaning of section 14 of the Sale of Goods Act 1979, i.e. implied terms as to quality or fitness. Whilst the case was decided in Scotland, it is clear that the decision will have persuasive impact in the English jurisdiction.

Background

The parties to the action provided cruises to its customers. In September 2002, the Defenders sold their cruise ship "mv MONACO” (the "Vessel”) to the Pursuers for £75,000. The purchase was subject to a pre-purchase survey (which did not include a detailed report on the engine condition) and a 30 minute sea trial. The Defenders represented to the Pursuer that the engine was "excellent” and in "perfect condition”.

On delivery however, it became apparent that the Vessel's engine was leaking oil. On inspection, it was found that there was an underlying internal defect, which required the engine to be dismantled or stripped down at a cost of £50,000.

The Pursuer attempted to reject the Vessel and repudiate the contract.

At First Instance the Court held that the Defenders were in material breach of contract and gave Judgment for the sale price in full.

The Defenders appealed the decision on three grounds i.e. (1) the pre-purchase survey should have disclosed the defect in the engine and there was no breach of implied term; (2) they were not selling in the "course of business” as their main business was providing cruises, and the sale was "incidental” to the business; and (3) the Pursuer's writ sought damages and not a repudiation of the contract and therefore the sheriff was wrong to award full repayment of the sale price.

It was contended that a sale in the course of business included: (1) a sale which was integral part of the business in question; and (2) a sale which was incidental should be carried out with a degree of regularity to bring it within the definition of course of business; and (3) a one off trading venture which was intrinsically the business. It was argued that the sale did not fall into any of these categories. As such the appeal was allowed.

Decision

The Court of Session restored the decision at First Instance and rejected the Defenders' arguments.

A wider interpretation of section 14 of the Sale of Goods Act 1979 is applied where the seller is not a dealer in the goods subject to the claim and the tests of regularity or dealing of goods was removed.

The protection afforded by section 14 was there regardless of whether or not a buyer chose to have the goods inspected. The Court took the view that not everyone examines goods and often there is a reliance on the implied term that the goods are of satisfactory quality and fit for purpose. Applying this to the claim, it was difficult to see how the Pursuer who chose to have a partial survey could not rely on the same warranty.

Further section 14(2c) (b) stipulates that that protection can only be waived "where the buyer examines the goods before the contract is made, which that examination ought to reveal”. The examination did not include a detailed review of the engine. It could not, therefore, reveal the defect, and thus came within the scope of the implied warranty.

The Court also held that there was sufficient evidence to demonstrate that the Pursuers had rejected the Vessel despite there being inconsistent statements of case in the pleadings, and therefore it was entitled to award the repayment of the price, rather than damages.

Summary

The case demonstrates that section 14 of the Sale of Goods Act 1979 will still apply even when a buyer chooses to have a limited pre-purchase survey, and where the seller does not usually sell the defective good as an inherent part of their business.

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Damian Vaile (show profile)

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