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Decisions of the Superior Courts of New South Wales, 1788-1899

Fennell v. Graham [1837] NSWSupC 68

auction, puffers - auction, false bidders, deceit, fraud, caveat emptor, Campbelltown

Supreme Court of New South Wales

Dowling A.C.J., 1 March 1837

Source: Australian, 3 March 1837[ 1]

Wednesday. - Before His Honor the Acting Chief Justice, and Messrs. Johnstone and Campbell, of George-street Assessors.

Fennell v. Graham. - This was an action brought to recover the sum of £64 17s 6d, being the amount of the purchase of nine cows, at a sale at Campbell Town, in the month of August last, at which plaintiff was auctioneer, by whom the said cows were nocked down singly to the defendant, as the highest bidder, and were by him (the said defendant) accepted and driven away.  The cattle had been advertised, and were sold, as of the breed known as Mr. Howe's, or the Glenlee breed; Mr. Graham, however, on his return home, near Sydney, after a trial of three days of the qualities of the cows for milkers, was dissatisfied, and sent them back by a servant with a note to Mr. Fennell, intimating his reason for so doing, the cows not being of the description he understood that they were; Mr. Fennell, however, would not receive them, and they were sent to the pound, the keeper of which afterwards sold them.  The terms upon which they were sold to Mr. Graham were a bill at three months, being above the amount of £20, as declared at the sale and previously advertised in the papers; the defendant, however, drove away the cattle before signing the bill, and on its being sent him for that purpose, he refused so to do, and therefore this action was bought.

Mr. John Hurley - Recollect a sale of cattle at Campbell-Town, in August last, by Mr. Fennell, to whom I acted as clerk, and entered in the sales; book the price and the purchaser against each animal that was knocked down; they had previously been publicly exhibited, and any one who chase had every opportunity of inspecting them; Mr. Graham was the purchaser of several; he bought nine cows, -- one at £5 2s 6d, one at £6 15s, one at £7 17s, one at £8, one at £8 15s, and one at £9 10s.  As each animal was knocked down it was taken in charge by Mr. Graham; I could not recollect the description and the price of each lot, except by the assistance of this document, which is the bill I made out immediately after the sale, copied from the sales' book; the cattle belonged to Mr. Howe, and I believe were of the breed known as the Glenlee breed.  Mr. Graham drove away the cattle the same day without signing the bill for the amount of his purchase, according to the terms of the sale, which were read from the advertisement by Mr. Fennell; on being written to on the subject he refused to do so, alleging in his letter, that the cattle were not the description he bought them for; he sent the cows back, but Mr. Fennell would not receive them, and they were taken to the pound.

This witness underwent several examinations in continuation and cross-examinations, and on being asked if he was at the time of the sale a partner with Mr. Fennell, he admitted that he was, - when

The Attorney General submitted that the whole of this evidence must be struck out, as, he being interested in the commissioner on the sales expected, he was incapacitated thereby from giving evidence, which was in fact swearing for himself.

Mr. Foster contended that it would not be allowed after the opposite party had had two or three cross-examinations of a witness, and discovering that his evidence was not to be shaken, that they should at the last moment ask the question of partnership, which, as they must have been aware of it from the beginning, should have been the first fact elicited; it was not too late to cut out the witness's testimony.

The Attorney General said it had but that moment been communicated to him, or he would have put the question earlier; but he contended that at any time before the witness left the box, he was entitled to prove his incompetency to give evidence; he should therefore move that a nonsuit be entered against the plaintiff.

His Honor would not grant the nonsuit but would reserve the point of law as to the admissibility of Mr. Hurley's evidence, under these circumstances, for the decision of the Court in Banco.

Mr. Foster then called

Christopher Farrell - I attended Fennell's sale of cattle in August last, with the intention of purchasing two cows for myself for the purpose of breeding from them; I know from a knowledge of Mr. Howe's cattle for twelve or thirteen years, that they were of the description knows as the Glenlee breed.

This was the evidence for the plaintiff.

The Attorney General submitted to the Court that no evidence had been adduced to prove the bidding at the sale, and therefore the case must fall to the ground; for certainly the Court would not admit the memorandum produced by Mr. Hurley as evidence upon which the plaintiff could claim a verdict.  The sales' book ought to have been produced in Court which might have been evidence, but this they were afraid to do, knowing that its production in Court would expose the fraud which had been attempted to be put in practise against his client, and upon which fraud the whole action was founded.

His Honor over-ruled the objection.

The Attorney General, for the defendant, then addressed the Court at some length, and attempted to prove that the cattle were not of the breed described.

His Honor summed up, and after a few minutes' consideration the Assessors returned a verdict for the Plaintiff - Damages, £54.

For the Plaintiff, -- Messrs. Foster and G. R. Nichols; for Defendant, the Attorney-General and Mr. Nicol Allan.

 

Dowling A.C.J., and Burton and Kinchela JJ, 28 March 1837

Source: Sydney Herald, 30 March, 1837[ 2]

Fennell v. Graham. -- This was an action tried before the Acting Chief Justice and Assessors, to recover the value of some cattle sold by auction, when a verdict was returned for the plaintiff for the amount sued for.  The Attorney-General now moved for a nonsuit, on the ground of a witness, whose evidence was inadmissable [sic], having been examined, and for a new trial, on the ground of misdirection in the learned Judge, who said "that puffers were not illegal at an auction, if they attended merely for the purpose of preventing a sacrifice of property and not to obtain outrageous prices."  After counsel had been heard on both sides, the Court said, that as the case was one of great importance, and would form a precedent, they would only state that at present they were of opinion the judgment could not stand, but they would take time to consider of the terms in which they would make their decision.

 

Dowling A.C.J., and Burton and Kinchela JJ, 10 April 1837

Source: Australian, 14 April 1837[ 3]

Patrick Fennell versus G. T. Graham.

Chief Justice Dowling delivered the Judgment of the Court:-

This was a action of assumpsit to recover the price of nine cows, sold and delivered in different lost, by the plaintiff, at public auction to the defendant.  Plea - Non Assumpsit.

At the trial before Mr. Dowling, A. C. J., on the 1st March last, it appeared in evidence, that Mr. Howe, of Glenlee, employed the plaintiff, an auctioneer at Campbelltown to sell in August last, a number of cows by public auction.  The cows were advertised in the public newspapers as "Dairy Cows of the Glenlee breed."  The defendant attended the sale.  The cows were exposed to public view, and he had an opportunity of inspection, and did, in fact, inspect them.  The owner of the cows, Mr. Howe, and his son, also attended the sale, and several other persons attended as bonâ fide bidders.  As each cow was exhibited for sale, the defendant either asked or caused to be asked of Mr. Howe, the character of the animal.  Mr. Howe said generally he knew very little about them, but that his son who was present, knew more, and referred to him for information.  The son gave all the cows a good character, and spoke very highly of some particular ones' as good milkers, and it was sworn by one witness, that there was not doubt these recommendations had induced the defendant to bid higher prices than he otherwise would have done, if nothing had been said.  It was also proved, that the owner of the cows himself had bid; and also, unknown to the defendant, employed two persons as puffers, to keep up the prices, and that those persons not being bonâ fide purchasers, bid against the defendant until they amounted to a certain price.  The defendant bought the six cows in question, at prices varying between £5 10s. and £6 13s. each.  There was no express warranty of the goodness of the cows as milkers.  They were delivered to the defendant, who drove them to his dairy near Sydney, and in three days afterwards, returned them to the plaintiff, finding that they did not produce so much mild as he expected.  It was proved that they were in fact "Dairy Cows of the Glenlee Breed."  Due care was taken of them whilst they were in the defendant's possession, both as to the feeding and driving.  A witness was called who acted as clerk to the auction, to prove the prices at which the cows were knocked down.  After being examined, cross examined, and re-examined, but before he actually left the box, he was asked if he was not a partner with the plaintiff in his business as an auctioneer at the time of, and since the sale, and he admitted that he was; whereupon it was objected that his evidence ought to be struck out of the Judge's notes  [Vide Stone v. Blackburne, 1 Esp. 37; sed vide Regina v. Musect, 10 Mod. 193]  The Judge allowed the notes to stand, on the ground, that as the defendant had reserved the objection until after he took the chance of cross-examination, it was then too late to urge an objection which is usually made on the voir dire; but he saved the point.  There was other evidence however, in the cause, to sustain a verdict upon the merits.  It was contended on the part of the defendant, that the sale was void for fraud, on two grounds:  First, that by reasons of the representations made by the owner of the cattle, or by his son, as his agent, as to the goodness of the cattle as milkers he was induced to give a higher price than he would otherwise have done; and secondly, that the employment of puffers, without notice to the defendant, to screw up the price, vitiated the sale, and entitled the defendant to return the cattle.  The Judge directed the Assessors, that although the maxim of "caveat emptor" applied to a sale by auction, and although, the defendant had a full opportunity of inspecting the cattle before he purchased, yet, if the conduct of the vendor was tainted with a fraud, a sale even in the open market would not bind the vendee.  If, therefore the defendant was induced by fraudulent and deceitful recommendations on the part of the owner, and by being put off his guard thereby, was induced to give higher prices than he otherwise would have done, if left to his own judgment, the sale would be fraudulent, and the vendee not bound by it.  So also, he ruled, that if the vendor at an auction employed puffers to screw up the prices beyond the fair value of the goods sold, the like consequences would follow; but aliter if the puffers were employed bonâ fide to prevent a sacrifice of the property.  The Assessors found a verdict for the plaintiff - damages, £54 upon a quantum meruit.  On a former day in the late Term a motion was made for a new trial; first, on the ground of the inadmissibility of the evidence of the witness objected to at the trial; and secondly, that notwithstanding the direction of the Judge, the employment secretly of puffers to raise the price of cattle, was itself fraudulent, and released the vendee from his contract.  The first point was disposed of at the time the motion was made, for without deciding whether the evidence of the witness in question ought to have been struck out of the Judge's notes, yet, we thought there was other evidence quite sufficient to sustain the verdict, if it could be retained by the plaintiff, on the other point made in the case.  The other point we reserved for consideration, not from any doubt or difficulty, but on account of its great general importance to the public of this Colony.

The true general question for our decision is, whether the employment, without notice, of one or more unreal bidders, by the owner of property, whether real or personal, put up for sale by auction, for the purpose of enhancing the price of a bonâ fide bidder, is or is not fraudulent.  Upon this question, there are conflicting dicta and decisions in the books.  In Bowell v. Christie [Cowp. 395.] Lord Mansfield and the other Judges of the King's Bench treated a private bidding, by or on behalf of a vendor, as a fraud, and Lord Kenyon and the other Judges in Howard v. Castle [6 T. R. 642] where the purchaser was the only real bidder, and there were several puffers, clearly coincided with Lord Mansfield; and held that unless it was publicly known that the owner intended to bid, it was a fraud upon the purchaser, and consequently no action would lie against him for non-performance of his agreement.  In Crowder v. Austin [3 Bingle 368] both these cases were considered, and all the Judges of the Common Pleas expressed their entire concurrence in the opinion delivered by Lord Mansfield; but that decision having been once objected to by Lord Rosslyn in Connolly v. Parsons [3 Ves. In 628] by reason that the Acts of Parliament imposing Auction Duties, went upon its being an usual thing, and a fair thing for the owner to bid they granted a rule Nisi for a new trial, but the Counsel making the motion on a subsequent day, finding the Court still of the same opinion, consented to have the rule discharged, and the case was carried no further.  In Wheeler v. Collier [Moody and Malkin 123] which is the last reported case we can find, Lord Tenterden founded his decision on the same principle.  In that case it was proved that there were only two other bidders beside the purchaser, at the auction, and that those two were employed by the Auctioneers to bid up to the sum of £1,600.  The estate was knocked down to the defendant at £1,610.  No communication was made to the public of there being and puffer, nor of their being any reserve.  Both puffers made several biddings, and it was contended that this was such a fraud as to vitiate the sale.  On the other hand it was contended, that the persons employed being authorized to bid up to a certain sum only, could not be considered as general puffers, and as the Legislature [42 geo. III. c. 93. § 1.] had expressly sanctioned such a bidding by one person, there being two, could make no difference.  But Lord Tenterden, Chief Justice, said, "I am clearly of opinion, that this ale is void in point of law. I am not called upon to decide the case of one person only being employed to bid; here are two, and it certainly makes a material difference, whether a person wishing to purchase, sees one or two persons bidding against him.  But, that I may not be understood to decide in this case on that ground, I will add, that the strong inclination of my opinion is, that if only one person be employed to bid, with a view to save the Auction duty, the sale is void, unless it be announced that there is a person bidding for the owner, the act itself is fraudulent.  The statute alluded to was made for a different purpose, with a view to the duty only, and cannot be made to sanction what is in itself fraudulent."

As far therefore as common law decisions go, it seems to be the strong inclination of the Judges in the cases referred to, to hold, that the employment by the vendor of even one person to bid, without notice to the public, would be such as act of fraud as to vitiate a sale by auction under such circumstances.  The decisions in Equity seem to be adverse to this principle, because the Acts of Parliament relating to the auction duty, treat it as a fair thing for the owner at all events to bid, and did not require an open notice, therefore a secret bidding on behalf of the owner merely to protect his interest and prevent a sacrifice of his property, was not fraudulent or unlawful.  This is to be collected from Lord Rosslyn's judgment in Connolly v. Parsons, [3 Ves. J. 625;] Lord Anvanley's as Master of the Rolls, in Bramby v. Alt, [Id. 620,] and Sir C. Grant's as Master of the Rolls in Smith v. Clarke, [12 Ves. 477.]  But none of the decisions even in Equity, uphold the practice of employing more than one person is employed, not for the defensive precautions with a view to prevent a sale at an undervalue; but to take advantage of the eagerness of bidders to screw up the price, that would be a fraud.  Even the employment of more than one under any circumstances, they treat as a badge of fraud.  The common law decisions, however, seem to determine, that the sanction of the Auction Duty Acts, for employment by the owner of one secret bidder, does not vary or control the general principle - but that those acts left the civil rights of mankind to be judged of, as they were before.  This was the opinion of Lord Kenyon, Chief Justice, and Grose Judge, in Howard v. Castle, and of Lord Tenterden in Wheeler v. Collier.  It is true that these decisions have not been carried to the last resort, but we may fairly conclude from them, what would probably be the opinion of the House of Lords upon this question.  In the absence of any certain guide, of such high authority, it is competent however for us, as Judges of the King's Supreme Court in this Colony, to lay down such principles as are plainly consistent with law and equity and sound morality, and adjudicate in like manner as if sitting in the court of last resort.  Is it lawful then for the owner of property, whether real or personal, after he has advertised it for public sale by auction to the highest bidder, secretly to reserve to himself the right of bidding against a bonâ fide purchaser, or to employ another with that view.  There can be no reason in morals, in law or in common equity, why a sale by public auction should not be conducted in the same spirit of honesty and integrity as a sale by private contract.  All transactions between man and man, whether public or private, should be conducted in the same spirit of good faith.  This principle should no doubt be mutual.  A vendor ought not secretly to appoint a puffer to raise the price, nor ought a purchaser to appoint a person to depreciate the value of the property intended to be sold.  There is no doubt that a vendor has a right to protect his property against sacrifice, but let the measures he takes for this purpose be fair, open, and without fraud.  This may be done by one or other of two ways, either to instruct the auctioneer to fix an upset price, or to cause it to be notified publicly, that there is a person present attending on his behalf to exercise the right of bidding last.  If the vendor does not resort to either of these steps, the property must be considered as sold to the last bonâ fide bidder.

In the present case, it was proved that there was more than one person employed by the vendor as puffers to bid at the auction without notice to the defendant.  We hold that to be unlawful and fraudulent - and we should have come to the like conclusion had there been but one person so employed.  It was also proved that the vendor stood by, and not only bid himself but employed his son to praise the merits of the cattle.  This, it was sworn, had some influence on the defendant's bidding a higher price than he otherwise would have done for property, which, from its very nature, he could not, by mere inspection, exercise his own judgment upon.  If, by these representations, he was induced to think they were good milkers, and bid accordingly, and it turned out, as the fact was, that they were not, why, we can have no hesitation in determining that to be fraud.  In laying down broad principles founded upon equity and fairness in the conduct of sales of this description, we trust that it will have the effect of giving public confidence in a mode of transferring property, which is of such frequent and extensive occurrence in this colony.  Whilst however the Court is anxious to protect bonâ fide vendor against the machinations of those who may conspire to deprive him of the fair value of his property.  If it by unlawful for the vendor to employ puffers for the purpose of screwing up property beyond its real value, we hold it to be no less so for persons attending auctions (to buy cheap bargains) to combine together not to bid against each other so as to deprive the vendor of the real value of his property.  If one says to another, "I will not bid against you for that, if you will not bid against me for this," - we hold that not only be a fraudulent but a criminal act, if done for the purpose of preventing a fair and bonâ fide sale to the highest bidder.  It is as unlawful in a bidder to cry down the value of the property as it is unlawful for the vendor to cry it up.  Both practices are equally criminal, and when made out to have existed are no doubt liable to punishment.  In the present case we have no hesitation in holding broadly, that if the vendor of property advertised to be sold by auction to the highest bidder is desirous of guarding himself against a sacrifice of the price at which he is disposed to sell, he must either fix an upset price, or give public notice that he reserves to himself the right of a last bid.  If  he fails to do either, then the last bonâ fide bidder, without collusion with others, shall be deemed the purchaser.  On these grounds we think the verdict in the present case is wrong, and there must be a new trial granted.  The costs of the first must abide the event of the second trial. - Rule absolute.

 

Burton J., 9 October 1837

Source: Sydney Gazette, 10 October 1837[4 ]

Fennell v. Graham. - In this case notice of a trial by proviso had been given, and the plaintiff not appearing when called on, the Attorney-General moved that he be non-suited.  Non-suit entered.

Notes

[ 1] See also Dowling, Proceedings of the Supreme Court, Vol. 133, State Records of New South Wales, 2/3317, p. 105.  See the related case of R. v. Kerr, 1837.

[2 ] See also Australian, 31 March 1837; Sydney Gazette, 30 March 1837.

[ 3] After making its own ``brief report" of this case on 13 April 1837, on 17 April 1837 the Sydney Herald reproduced this report from the Australian, noting that its accuracy ``cannot be questioned."  See also Sydney Gazette, 11 April 1837, for a very brief report, followed by its publication of a longer one on 15 April 1837.

The accuracy of this report is confirmed by its original, handwritten form in Dowling, Proceedings of the Supreme Court, Vol. 135, State Records of New South Wales, 2/3319, p. 58.

[4 ] See also Sydney Herald, 12 October 1837.

Published by the Division of Law, Macquarie University