Appeal Court sets precedent on auction reserve

If they do not do so, as provincial auctioneers Heathcote Ball have now discovered, they could find themselves facing a hefty bill.

The case, which has been published in The Times Law Reports, concerned a dispute between the claimant, Paul Barry, and Heathcote Ball over the sale at auction of two new engine analysers for which Mr Barry had bid £200 each.

The analysers had been put up for sale without reserve only to be withdrawn by the auctioneer because he considered that the one bid received was too low. Their market value was deemed to be £14,000 each and the court ruled that Mr Barry was entitled to recover against the auctioneer the difference between the contract price (a total of £400 in this case) and the market value of the goods (a total of £28,000 in this case).

Sir Murray Stuart-Smith, sitting with Lord Justice Pill, said that withdrawing a lot from sale on these grounds was tantamount to bidding on behalf of the seller, which was unlawful unless section 57(4) of the Sale of Goods Act was complied with. The highest bid could not be rejected simply because it was not high enough. The judge based his decision on the majority reasoning given in the case of Warlow v. Harrison (1859) in the Court of Exchequer Chamber.

It was ruled that although there was no contract between the purchaser and vendor, this did not prevent a collateral agreement existing between the auctioneer and bidder. The measure of damages was based on a similar measure for where a seller wrongfully refuses to deliver goods to a buyer under the sale of Goods Act 1979.