AUCTIONS (BIDDING AGREEMENTS) BILL. [H.L.] (Hansard, 20 July 1926)

§ LORD DARLING
My Lords, in asking you to accord a Second Reading to this Bill I cannot but think it is of somewhat happy augury that the Government also have noticed that people who attempt to dispose of their property are met by some persons with means to prevent their receiving the full value of it. This Bill is designed to do for another class of people very much what is being done by the Bill which the noble Lord, Lord Bledisloe, has just asked your Lordships to read a second time, and which has obtained the blessing of the noble Marquess opposite, which I venture to hope I also may share.
This Bill is suggested by the fact that a short time ago an action was brought in the Courts by a person who had exposed for sale some valuable furniture. It was knocked down to a person who bid for it, and the auctioneer refused to deliver the goods to him. It may be that this happened because the goods were in that instance the goods of the auctioneer himself, but he refused to deliver the goods on the ground that the ostensible buyer of them was simply one of a gang or ring, who bought the goods for less than they were worth by means of an agreement with the other members of the gang that they would not bid. It was then an understood thing that, one of them having got the goods, they would have what is called a "knock-out" among themselves, so that the vendor should receive far less than the value of the goods, and that the person who ultimately became entitled to the property should share with the others on whose behalf he was acting. Thus, the goods would be obtained at less than their real value, and all these persons in the ring would receive some sort of benefit or consideration.
86 This case having come before a learned Judge quite lately, he held that what was done was not against the law. He said: Although I find in the defendant's favour on this point of fact yet it seems to be reasonably clear in law that the existence of a? knock-out? does not of itself afford any answer to this action by the plaintiff. For some time lawyers were of the contrary opinion, and some very excellent lawyers are of that opinion still. It was decided long ago by Baron Gurney in the case of Levi versus Levi that this practice, against which this Bill is directed, was already an illegal and, indeed, a criminal practice; and Baron Gurney, in a case which was tried at Nisi Prius—it, was not a decision of a court sitting in bane—it was a mere Nisi Prius decision—gave his judgment, and I ask permission to read that decision to your Lordships because it shows not merely what the law was or was not, but it shows the reason why it should be what it has lately been said it ought to be, and what this Bill will make it. He said:— Owners of goods have a right to expect at an auction that there will be an open competition from the public, and if a knot of men go to an auction upon an agreement among themselves of the kind that has been described they are guilty of an indictable offence and may be tried for a conspiracy. That was thought to be the law for a good many years, but at length came a case in which it was held that the law was not what Baron Gurney had supposed and pronounced it to be.
Some little time ago a case was tried before Mr. Justice Shearman. It went to the Court of Appeal and was heard before Lord Justice Bankes, Lord Justice Scrutton and Lord Justice Atkin. It is case called Rowlings's case. In that case Lord Justice Bankes and Lord Justice Atkin held that this system of a ring bidding at an auction and then a "knock-out," by which the whole object of the auction was frustrated and the seller did not receive the real value of his goods, which went into the pockets of those who were described by Baron Gurney as having been guilty of criminal conspiracy, was not illegal. I make no doubt that that is the law, because that is the reason why lay before your Lordships this Bill. But, those two Lords Justices having held that, Lord Justice Scrutton 87 differed from them. If either of them had agreed with Lord Justice Scrutton I should not have needed to trouble you with this Bill; but as there were two of them who pronounced that the law is what I would have it not be, and Lord Justice Scrutton gave judgment to the contrary effect, I desire to make the law what Lord Justice Scrutton said—vainly and ineffectively said—that it is.
What he said was this—I quote from the Law Reports: The effect on the public or the community (of such agreements) was that free competition at auctions, affording a ready market for realizing goods, was restrained, and the property of any member of the public selling goods might be sold below its true value. Lord Justice Scrutton continued:— I cannot believe that, if the parties to an agreement for a 'knock-out' came to the Court for an injunction to restrain one of their members from bidding at the auction contrary to his agreement, the Court would grant the injunction. The Court would refuse it in my view, because the agreement was contrary to public policy, as a restraint of trade contrary to the interests of the public. That is the argument which I would ask your Lordships to adopt in order to give a Second Reading to this Bill.
This case came before Mr. Justice Shearman and the learned Judge gave a judgment in which he first of all referred to a section in the Sale of Goods Act, 1893. I would venture to trouble your Lordships with that section because it is in order to have clarity as to the right both of buyer and seller that I submit this Bill to your Lordship. Section 58 of the Sale of Goods Act, 1893, is as follows:— Where a sale by auction is not notified to be subject to a right to bid on behalf of a seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer. … Where a right to bid is expressly reserved, but not otherwise, the seller, or any person on his behalf, may bid at the auction. Your Lordships know what the object of the seller is. He wants to get the best price for his goods. These people who go to auctions wish to give the lowest price they can for them. The seller is not allowed to employ someone else to bid on his behalf. He may put a reserve 88 upon the articles, but that section carefully regulates how that may be done.
Having referred to that section, Mr. Justice Shearman made the following remarks in the course of his judgment in the case to which I have referred:— If the employment of a puffer for the purpose of raising the price without disclosing the fact will render a contract of sale unenforceable it is difficult to see why a combination by purchasers to keep the price down should not equally be illegal. That is all I ask your Lordships to say that it is. The Sale of Goods Act deprives the seller of any outside means of raising the price of his goods by making those at the auction think that more people want them than is actually the fact, and I would ask your Lordships to allow this Bill to be read at any rate a second time so that there may be a full discussion as to whether the seller at an auction should be put in any worse position than the purchaser is in.
Since I gave notice of my wish to introduce this Bill I have received a good many letters from people who tell me that in almost every auction in the big rooms in London, where very valuable articles are sold, as well as in smaller auctions up and down the country, this pernicious system of swindling is rife and is well known to large numbers of people. I dare say it is not unknown to your Lordships that it goes on. But I would only trouble your Lordships with two of the letters I have received. One is from the Secretary of the Auctioneers' and Estate Agents' Institute of the United Kingdom whose offices are in Lincoln's Inn Fields. Writing on behalf of the society, he says:ߞ I think I may say without the slightest hesitation that the principle underlying the proposed Bill is one which will have the whole-hearted support of all reputable members of the auctioneering profession, but I thought I would take the liberty of drawing your Lordship's attention to the reason, namely, the difficulty of proof which has always debarred the Council of this Institute from promoting such legislation as is contemplated. Possibly your Lordship may see some way round this difficulty. The other letter is from the Secretary of the Incorporated Society of Auctioneers and Landed Property Agents, whose offices are at 26, Finsbury Square. He writes thoroughly approving of the introduction of this Bill, and making some suggestions as to how it might be 89 improved. I am conscious that it can be improved, and I hope it will be improved. He says this particularly:— To the above suggestions I would add that this society strongly approves of your Lordship's efforts to do away with these 'knock-outs' and 'rings' which are alike harmful to producer and consumer. The Bill as I have ventured to introduce it to your Lordships says this, in Clause 1:— Any agreement made with reference to a sale by auction not to bid at the sale in competition with any other person with intent that the property offered for sale shall be afterwards acquired by the person making the agreement or some other person from the purchaser of the property at the sale shall be void, and the sale of property in pursuance of any such agreement shall also he void. That would render void agreements between members of the ring to buy property so purchased. It would certainly render void subsequent purchase at what is called the "knock-out" by persons who have acquired it with the object that one of them should get it and the others should share in what may be made. Perhaps it does not render void the sale at the auction to a member of the ring so that the property would not pass. I think that it does, though it might not. Therefore, the Bill might be amended in Committee if your Lordships allow it to go forward.
I think it would render the sale void, for the reason that Clause 1 concludes in the following manner— Any person who enters into any such agreement shall be liable on summary conviction to a fine not exceeding fifty pounds"— that is to say, he might be brought before a magistrate and, upon proof that he had entered into a contract of this kind, which Baron Gurney said was illegal and indictable, he might be fined anything up to £50 at the discretion of the magistrate. But the clause goes on to say— and on conviction on indictment"— one contemplates that some of these people make a regular business of this practice and if they are convicted once or twice before a magistrate it might be well to have them tried at Sessions or Assizes— shall be liable to a fine not exceeding one hundred pounds or to imprisonment not exceeding six months or to both such fine and imprisonment. 90 If your Lordships allow this Bill to go before a Committee those matters would be entirely in the hands of the Committee and need not have anything like the shape they have in the Bill as it stands.
But I cannot help thinking that we are in the presence of a cruel wrong done to people who are unable at present to, protect themselves. The law it seems to me should be what great lawyers in the past imagined it to be and declared it to be. When one thinks of the kind of people who suffer at the hands of these combinations, I cannot help thinking that your Lordships will be anxious to do something to protect them. A sale by auction is not like a sale in a shop where newly manufactured goods are laid before people to take them or leave them at the price which is asked. A sale by auction often comes to a family which has just suffered by the death of some member of it who has been its support, or it comes at the end of some disaster which has compelled the sale. It may be the sale of an ancestral property, it may be the very home in which people have been born and have lived; or it may be that they have to part with a number of things to pay Death Duties, or to find money that the family greatly needs at the moment. Sometimes the sales take place in a large auction room in London and sometimes at some little country village where, perhaps, the Rectory contents or something of that kind are sold.
These sales often take place in order to provide the necessary sum of money to send some member of the family out into the world or to put the family on its legs. It does appear to me that people in these cruel circumstances should be protected from being set upon, as it is well known they are, by organised gangs who live by these illicit transactions. I think that this House would be well occupied, therefore, in protecting people against that kind of thing and I beg to move the Second Reading of this Bill.

§ LORD DESBOROUGH
My Lords, I rise to express to your Lordships in a few words the opinion of the Home Office on this Bill. They realise as fully as does the noble Lord who has moved the Second Reading that a very great evil does exist with regard to what is called 91 "knock-outs" at auctions. I dare say many of your Lordships have experienced it yourselves. Cases have come frequently before the Courts in which it appeared that dealers had combined together not to give more than a certain sum for valuable articles and then that they had sold those articles at a good price and divided the proceeds among themselves—exactly how, no one quite knows. The Home Office have had several cases brought to their notice and they have had inquiries made through the police, but not in one single instance have they been able to get anything in the nature of legal evidence that would enable them to secure a conviction. At the same time the Home Office have no objections to offer from their point of view to the Second Reading of this Bill and they only hope that its provisions may prove successful.

§ VISCOUNT HALDANE
My Lords, the noble Lord has given a somewhat doleful account of the prospects of proceedings under this Bill and I do not differ from him. I think convictions will be extremely difficult to obtain because the proof of these agreements is itself a matter of great difficulty. I would remind him, however, that Sir Edward Fry's Act for the prevention of corruption by giving illegal commissions and taking them has produced some effect. There, again, the proof of the offence has always been the great difficulty, but the fact that it is on the Statute Book that such proceedings are contrary to law has been in itself beneficial and has done something towards restraining the evil. Therefore I am very glad that the noble Lord, Lord Desborough, proposes to offer no difficulty in the way of the passing of the Bill brought in by the noble and learned Lord opposite. I am sure it cannot but be to the public advantage that the law should be declared and put on the Statute Book in the sense argued by the noble and learned Lord. I am sure also that it is well to get rid of those decisions which have said that "knock-outs" are not contrary to the law. For those reasons I am glad the Government have taken the course they have and I wish a safe passage to the Bill.