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Promises to the Future: Goods and Services.

When is a statement or description incapable of being false because it does not relate to existing fact, but is a mere promise as to what is intended to happen in the future? First Published in the Justice of the Peace (1997) 161 JPN 956.

The Trade Descriptions Act 1968 ("the Act") makes it an offence for misleading or false statements as to services, accommodation or facilities to be made in the course of trade or business (s 14).  It is also an offence, in the course of trade or business, to apply a false trade description to goods or to supply or offer to supply such goods (s 1).  What is the position, however, if the person who makes the statement or applies the description is not making reference to an existing fact but is merely representing what he thinks will happen in the future?

S 14 and promises to the future

For a statement to have the characteristic of being false it must be capable  of  being false at the time it is made.  In Beckett v Cohen (1973) 137 JP 116; [1972] 1 WLR 1593 a builder had made a statement that he would build a garage and "complete the work within about ten days".  The builder "set about building this garage with a will, but he ran out of money before he finished it" and hence did not complete it within the estimated ten days.  The builder was charged under s 14(1)(b) of the Act with recklessly making a statement which was false.  The justices decided that there was no case to answer.  In upholding that decision on appeal, Widgery LCJ said that s 14 "specifically refers to the reckless making of a statement which is false.  That means that if at the end of the contract a person giving the service recklessly makes a false statement as to what he has done, the matter may well fall within s 14, but if before the contract has been worked out, the person who provides the service makes a promise as to what he will do, and that promise does not relate to an existing fact, nobody can say at the date when that statement is made that it is either true or false.  In my judgment Parliament never intended or contemplated for a moment that the Act should be used in this way, to make a criminal offence out of what is really a breach of warranty".

Beckett v Cohen was distinguished by the House of Lords in British Airways Board v Taylor (1976) 140 JP 96; [1976] 1 WLR 13 (HL).  In that case British Airways' predecessor, BOAC, had sold an airline ticket to a customer knowing that, because of its overbooking policy, there was a possibility that the customer would not in fact be able to use his ticket.  The Law Lords considered that because BOAC and British Airways were separate legal entities the latter could not be criminally responsible for the acts of the former.  Furthermore, as BOAC knew of their overbooking policy, the offence charged should have been brought under s 14(1)(a) i.e. "to make a false statement which he knows to be false" rather than, as it was, under s 14(1)(b) i.e. "recklessly to make a statement which is false".  Nonetheless the Court dealt with the question of whether the ticket was a mere promise to the future and decided that it was not.  Lord Wilberforce said:

"There may be inherent in a promise an implied statement of fact, and where this is really the case, the court can attach appropriate consequences to any falsity in, or recklessness in the making of, that statement.  Everyone is familiar with the proposition that a statement of intention may of itself be a statement of fact and so capable of being true or false".  He also pointed out that "it is an essential feature of the Act that, when it has to be considered whether descriptions or statements are misleading, it is the meaning which they are likely to bear to the persons to whom they are addressed that matters, and not the meaning which they might, on analysis, bear to a trained legal mind."  Lord Edmund-Davies summed the matter up succinctly:  "The appeal itself raises in a neat form the difference between an assertion of existing fact and a promise as to future conduct. Section 14 of the 1968 Act relates only to the former, and Lord Widgery CJ was undoubtedly correct in saying in Beckett v Cohen : 'S 14(1) ... has no application to statements which amount to a promise with regard to the future, and which therefore at the time when they are made cannot have the character of being either true or false.'  But, the facts of this case illustrate yet again that an assertion of existing fact and a promise of future conduct may both be found in one and the same statement.  As MacKenna J said in the course of his admirable judgment in R v Sunair Holidays Ltd [1973] 1 WLR 1105:

'A promise or forecast may contain by implication a statement of present fact.  The person who makes the promise may be implying that his present intention is to keep it or that he has at present the power to perform it.  The person who makes the forecast may be implying that he now believes that his prediction will come true or that he has the means of bringing it to pass.  Such implied statements of present intention, means or belief, when they are made, may well be within s 14 and therefore punishable if they were false and were made knowingly or recklessly.  But if they are punishable, the offence is not the breaking of a promise or the failure to make a prediction come true.  It is the making of a false statement of an existing fact, somebody's present state of mind or present means'."

A statement, therefore, comes out of the realms of being a mere promise to the future if by implication it contains a statement of an existing fact or present state of mind or means.  It follows that if, in the case of Beckett v Cohen, the prosecution could have demonstrated that at the time of his promise Mr Cohen knew that he did not or might not have the means to do the job within ten days then there would have been a case to answer.  Had there been evidence that Mr Cohen had a history of making similar unfulfilled promises then that would have been strong evidence as to his (reckless) state of mind and means.

That there can be a correlation between state of mind and fact is well established.  In Edgington v Fitzmaurice [1885] 29 Ch 459, Bowen LJ had to consider whether there could be a civil action of deceit where money was lent to a company on the false assertion that it would be used to develop its trade, whereas in fact it was to be used to pay off pressing debts.  "A mere suggestion of possible purposes to which a portion of the money might be applied would not have formed a basis for an action of deceit.  There must be a misstatement of an existing fact:  but the state of a man's mind is as much a fact as the state of his digestion.  It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else.  A misrepresentation as to the state of a man's mind is, therefore, a misstatement of fact".

It is not unique to the Act that a person can be criminally liable dependent upon his state of mind.  S 15(4) of the Theft Act 1968, for example, defines "deception", for the purposes of that section, as "any deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including a deception as to the present intentions of the person using the deception or any other person".

Promises to the future: applicability to goods

The s 14 concept of  a promise to the future was considered, in terms of its applicability to s 1 and goods, in Cavendish Woodhouse Limited v Wright (1985) 149 JP 497.  That case concerned a number of matters but it is only necessary to refer to two of them in order to illustrate the contrasting decisions made in respect of them.

1) Miss Crawley saw some bedroom furniture at the appellants shop with a label indicating that it already been sold.  She was told, however, that she could be supplied with an "identical" unit from stock.  The unit actually supplied was not identical.  The appellants contended that they had not applied a false trade description as to an existing fact but had merely made an unfulfilled promise to the future.  Watkins LJ, upholding the conviction, said; "the set of furniture delivered carried with it the description given to it at the time of the agreement for sale.  That is the inevitable implication, in the absence of anything said by the appellants to the contrary - and nothing was. ... It cannot, I think, be gainsaid that in circumstances such as these, where suppliers of goods have made such representations ... and made no attempt whatsoever to inform the customer that they have, for no matter what reason, had to make some alteration in what it is they have promised to supply, the trade description which they have attached to the goods at the time of the agreement for sale will be carried along with them as they are supplied by the seller to the customer".

2) Mr Stewart saw some furniture at the appellants shop which was missing one of its components, namely a glass table top.  He was told, however, that a glass top was intended to be part of the furniture and that there was one in the warehouse (i.e. in stock).  The furniture actually supplied did not have a glass top.  Again it was argued that there had been a mere promise to the future.  This time Watkins LJ agreed: "The error made in the course of supply was by failure of someone employed by the appellants, or more than one, to ensure that that component part of this particular set of furniture was sent along with the remainder of the unit.  It seems to me that in no sense, in those circumstances, was a false description applied to anything.  There had never been any attempt by the appellants to misdescribe that which (a) was seen by the prospective purchaser and (b) that which was ultimately received by him.  There was merely a failure to comply fully with the order."

The distinction between the promise made to Miss Crawley and that made to Mr Stewart is not easy to see.  In each case the appellant put the broken promise down to an error.  Offences under s 1 of the Act are absolute offences (see e.g. Wings v Ellis [1985] 1 AC 272 at 287) and whether there was a mistake is immaterial save to the extent that it may be relevant to whether a statutory defence can be made out under s 24 of the Act.  In each case the customer was told they would get goods which currently existed. In each case they did not. Neither customer was told, in so far as can be determined from the judgment, before the goods were supplied, that the order would not be fulfilled.

Watkins LJ had the opportunity to clarify his decision in Cavendish Woodhouse when the case of Denard v Smith and Dixons Limited (1991) 155 JP 253 came before him. Unfortunately the judgment in the latter case was delivered by Hutchinson J and Watkins LJ simply agreed with it.  Dixons had advertised a computer package as including five listed items.  A customer, Mrs Grover, agreed to buy the package and it was only when she got it home that she found three of the items had not been provided.  The justices dismissed the information having found that Dixons had at all times intended to supply the three missing items, but had ran out; and the fact that they could not supply them immediately "amounted to a breach of contract and not a false trade description".  Hutchinson J, in accepting the appellant's submissions, distinguished the topless table scenario (Mr Stewart's purchase) in Cavendish on the basis that in the instant case it was "not ... a simple failure to deliver one or more of the elements contracted for, because during the relevant five days the respondents, in the knowledge that they had no stocks [of the three items] were offering and supplying a package which customers understood contained everything described".  Although one can see the distinction being made, it is not a very real one given that knowledge is not an element of the offence and given that Mr Stewart, just like Mrs Grover, understood that he would be getting the complete package.

The current view

The most recent ruling on promises to the future in respect of goods came in Shropshire County Council v Simon Dudley Limited (1997) 161 JP 224.  In that case a fire authority ordered a fire engine from the respondents in accordance with an agreed specification.  At the time the order was placed the engine did not yet exist.  In this case, therefore, there was not simply a promise that existing goods would be delivered in the future but that goods would be manufactured and delivered in the future.  The engine which was delivered did not comply with the specifications which had, by agreement, been subsequently modified.  The magistrate found that there was an error in the course of supply and that it amounted to a contractual issue not a false trade description.  The appeal against the magistrate's dismissal of the case was successful on two separate bases.  Firstly by the application of the provisions of s 4(3) of the Act (which will be considered infra) and secondly by distinguishing Cavendish in relation to Mr Stewart's purchase.

Distinguishing Cavendish

Hooper J did not consider the fact that the goods were not in existence at the time the promise was made to be material to whether an offence had been committed:  "The relevant time for deciding whether a trade description is applied for the purposes of s 1(1)(b) is the moment of supply.  The prosecution must prove that earlier representations about the goods have been 'carried along' (to use the words of Watkins LJ [in the Miss Crawley scenario in Cavendish]) that they are trade descriptions and that they are false.  It matters not whether, at the time that the representations were made, the goods existed or were to be acquired or manufactured at some time in the future".  Dealing with the Mr Stewart scenario from Cavendish and the way that Hutchison J, in the Dixons case, had distinguished Watkins LJ's judgment, Hooper J said:  With all respect to Hutchinson J, I cannot agree with his method of distinguishing Cavendish Woodhouse.  There is no requirement in the statute of 'knowledge'.  In my judgment the words 'error' in the course of supply' in that case should be treated with caution.  There seems to me a far easier way of reaching the conclusion that no false trade description was applied insofar as the supply of the topless table was concerned.  As Watkins LJ made it clear in the other passages in the case, the representations continue unless the customer is informed to the contrary.  It was obvious to Mr Stewart that the table which was being delivered did not have a top.  It thus could not be said that the earlier representations that the table would be delivered with a top were 'continuing'.  In the Dixons case Mrs Grover was not told when she took delivery of the goods that three of the software packages were missing".  Hooper J is to be congratulated for finding a sound way to in effect distinguish the scenarios of Miss Crawley and Mr Stewart within Cavendish in a way which is readily understandable.  The only difficulty with Hutchinson J's reasoning is that it assumes that "it was obvious" to Mr Stewart at the time he took delivery that the table did not have a top and hence that at the time of supply the description that it would have a top was no longer applied.  Unfortunately, however, there is nothing explicit to be found in the judgments in Cavendish to say that it was obvious to Mr Stewart, at the time of delivery, that the top was not included.  We are not told for example whether the table was delivered in a box or otherwise.  It may be that Hutchinson J assumes it was obvious that the top was missing at the time of delivery from Watkins LJ's finding that "there had never been any attempt by the appellants to misdescribe that which ... was ultimately received by [Mr Stewart]".

It is to be hoped that Hooper J's reconciliation of the Cavendish and Dixons cases will prevail.  It has the advantage of clarity and common sense.  It would be somewhat strange if a trader, who on delivering part of an order for goods, declared that the rest of the order would follow, could be said to have supplied falsely described goods.  It is necessary in adopting Hooper J's rationalisation to be clear as to at what point goods are supplied for the purposes of the Act.  This was set out by Widgery LCJ in Rees v Munday [1974] 3 All ER 506, where he said:  "The proper construction of this Act requires supply to be treated here as the date of delivery ... The proper meaning of supply in this context is the delivery of the goods as delivered by the seller, or notification that they are available for delivery if they are to be collected by the buyer".

Applying his reasoning to the fire engine in the Simon Dudley case, Hooper J concluded that: "The representations made by the respondents when they agreed to build the fire engine to these particular specifications and agreed to make the necessary modifications continued in force and were applicable at the time moment of delivery.  It is not necessary for there to have been in the delivery note some formal representation that there had been compliance with the specifications and requirements".

Section 4(3)

S 4(3) of the Act provides:  "Where goods are supplied in pursuance of a request in which a trade description is used and the circumstances are such as to make it reasonable to infer that the goods are supplied as goods corresponding to that trade description, the person supplying the goods shall be deemed to have applied that trade description to the goods".    Hooper J held in Simon Dudley that, by virtue of s 4(3), on supplying the fire engine a trade description used in the request made by the fire authority was deemed to have been applied and it was reasonable to infer that the goods supplied were supplied as goods corresponding to that description. Hence on the basis of s 4(3) alone the respondent should have been convicted.  Phillips LJ agreed:  "S 4(3) is designed to cover the situation where a supplier makes no express application of a trade description to the goods, but makes an implicit trade description by supplying them pursuant to a request for goods of that description".

No reference to s 4(3) was made in Cavendish but even if it had, on the basis of Hooper J's synopsis, the result would have been the same so far as Mr Stewart's purchase was concerned.  There was, in effect, a "request" by Mr Stewart for a table with a glass top.  On the assumption, however, that it was "obvious" to Mr Stewart at the time of delivery that the top was not included in the delivery, it was not "reasonable to infer that the goods [were] supplied as goods corresponding to that trade description".

So, at least until the next time the Divisional Court tries to reinterpret Cavendish, all is now clear.

Breach of contract or criminal offence?

The basis of the promise to the future argument is that where a statement is in reality no more than a promise to do something, a breach of such promise is only a breach of contract and should be regarded as a civil wrong and not a criminal one.  The notion that there can be such a thing as a mere promise to the future, so far as the supply of goods is concerned, cannot survive after Simon Dudley.  The question is whether at the time of delivery a false trade description is applied or continues to be applied to the goods.  Supplying offences, therefore, always relate to the present and not to the future.

A sting in the tail

Although Shropshire County Council's appeal against Simon Dudley was successful, Phillips LJ ended his judgment by urging enforcement authorities to exercise discretion in deciding whether a prosecution was warranted for "technical offences".  The instant case involved a breach of a "one -off contract for a specialist vehicle concluded between a supplier and a local authority, trading on an equal footing.  The council had identified faults in the fire engine, rejected it and initiated proceedings for breach of contract, well before the informations were laid.  No further remedy was called for".

 VICTOR SMITH

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