1 C.L.R. 1982 October 22 [HADJUNASTASSIOU, A. Loizou AND MALACHTOS, JJ.] NICOS POURIKKOU, Appellant-Defendant, v. PAMBOS SOTERIOU AND ANOTHER, Respondents-Plaintiffs. (CivilAppeal No. 5899). Contract—Auction—Agreementfor a "knock-out" between intending bidders—Not illegal. Thesoleissueinthisappealwaswhetheranagreementbetween two bidders not to compete at an auction was illegal. 5 10 Held, that anagieementfor a"knock-out" (i.e.a combination between intending bidders to refrain from bidding against each other) was not illegal. Appeal dismissed. Cases referred to: Rowlingsv. GeneralTrading Company[1921] 1 K.B. 635 at pp. 640, 641; Harrop v. Thompson andAnother [1975]2 All E.R. 94 at p.97. Appeal. Appeal by defendant against the judgment of the District 15 Court of Limassol (Fr. Nicolaides, D J . ) dated the 1st November, 1978, (Action No. 201/77) whereby he was adjudged to pay to each one of the plaintiffs the sum of £333.333 mils as damages for breach of an agreement. P. Soteriou, for the appellant. 20 N. Nicolaou, for the respondent. Cur. adv. vult. HADJIANASTASSIOU, J. read the following judgment of the Court. On 21st June, 1978, Pambos Soteriou in giving evi- 599 Hadjianastassiou J. Pourlkkou v. Soteriou & Another
(1982)dence in Court, said that on the 21st October, 1976, he was informed that the factory of the Oil Seed Company at Zyyi was offered for sale by public auction on 24th October,
- He referred the matter to plaintiff No. 2 Demetris (Mitsios) Stylianou, and both decided to find another person for bidding 5 together. On 22nd October, 1976, they met the defendant in the latter's office, and the three of them agreed for bidding in that sale and to share the profits and/or the losses at one third each. On the same day, together with plaintiff No. 2, they visited the factory, as well as the mukhtar of Zyyi. As they 10 werenot able to agree as to the price of the factory, they went together in the afternoon with Nicos Vashiotis, an expert, in order to estimatt the value of the building materials of the factory. They further,decided to appoint the defendant Nicos Pourikkou as their representative for bidding at the 15 auction. They also had agreed that if during the bidding at the auction there were other people bidding, either to offer them a certain amount in order to abandon the bidding, or to accept themselves a certain sum in order to withdraw from the bidding. This procedure, he added, is usual in biddings. 20 In addition, they agreed that any payments or collections of money made would have been divided by one third each. On 22nd October, 1976,theyvisited the place in question by car andpresent werehimself,thedefendant andNicosVashiotis. Whilst in the car Vashiotis wasinformed by him as to the facts 25 of the case. Indeed, he added, they estimated the value of the materials of the factory which was built on the said building site at £17,500 and the land was assessed between £8,000 and £10,
- During the journey towards Zyyi, they repeated the provisions of their agreement in the presence of Vashiotis. 30 On 24th October, 1976, he went to 7yyi for the purpose of bidding, accompanied by Mr. Andreas Kyprianou and a lawyer Andreas Konnaris. The defendant was also present, as well as Mr. Pattichis, the representative of the Archbishopric, the representative of Hellenic Mining Company and Andreas 35 Constantinides who arrived therewhen the bidding had started. The defendant continued bidding regularly, and at a certain point he intervened and exchanged certain viewsfor settlement, viz.,whether Mr. Pattichis would take the land in question and thedefendant thematerials orviseversa. Finally,it wasagreed 40 600 1 C.L.R. Pourikkou v. Soteriou & Another Hadjianastassiou J. that the defendant would withdraw from bidding on condition that he would be paid the sum of £1,000, which amount was paid to the defendant by a certain Andreas Constantinides by cheques of £1,200, from which amount £200 would have been 5 paid toMr.A.Kyprianou whowasinterested inbuying another piece of land and he withdrew from the bidding. Theplaintiff further complained that thedefendant, in breach oftheiragreement kept thewholeamount of£1,000and did not pay any amount to him or to plaintiff 2in accordance with the 10 relevant agreement made between them. However, on the following day, the defendant offered to him the sum of £100 only which he rejected. In addition, plaintiff 2 Demetris Stylianousupported thestatementoftheplaintiff 1 andrepeated that he, plaintiff 1and the defendant would bid in the public 15 auction and would share the profits and/or damages by one third each. He further said that they agreed that the plaintiff 1 would represent them and take part in the bidding. Finally, this witness said that although the defendant was expected at hisoffice, hedid not arrivethereand later onthe 25th October, 20 1976,he went in the shop of Mr. Akapniti who offered to him the sum of £100.-, but he rejected it. There was further evidence by Mr. Andreas Constantinides, P.W. 4, who supported the statement of the two witnesses and said that the defendant together with plaintiff 1and Mr, Ky25 prianou approached him in order to agree and to withdraw from the bidding. Indeed, he added, there were certain negotiations and an agreement was reached with Mr. Pattichis to pay to Mr. Kyprianou £200, and to the plaintiff 1and defendant £1,000 in order to withdraw from the bidding. 30 The defendant, in giving evidence, agreed that he visited the property in question together with plaintiff No. 1 and on the followingdaytheyvisitedtheplaceagainintheafternoon taking Mr. Nicos Vashiotis with them. Furthermore, he said that having heard the evidence of Mr. Nicos Vashiotis, he denied 35 that such an agreement as alleged did take place. Indeed, he said that he told the plaintiffs that if and when he would buy the site they would collect 3 per cent. On Sunday he added, he went to Zyyi and took part in the bidding together with Mr. Pattichis. He further denied that there was an agreement 601 Hadjiaoartaesiou J. Pourikkoa τ. Sottrioa & Another between the plaintiff and himself to share between them the amount of £1,
- He further stated that when the value of the land was fetching £17,500, Mr. Kyprianou called him and told him togivehim£1,000towithdraw from thebidding. Ho accepted, he said, and Mr. Constantimdesgave him a cheque for £1,
- Hefurther added that he does not deny to pay 3 per cent. Finally,he said herefused to give onethird shareto the others. (198J) 5 The learned Judge having listened to the addresses of both counsel reserved hisjudgment and on 1st November, 1978,had 10 this to say delivering his judgment: "From the material before me it is clear that the present case would be based mainly onthecredibility of thewitnes ses because the plaintiffs were alleging in the statementof claim that there was an agreement between the parties in 15 both taking part in the bidding and that the defendant collectedthesum of£1,000for theaccount ofall theparties, but thedefendant inhis statementof defence besides taking part in the bidding he denies all the allegations of the plaintiffs. Besides that and much to my surprise the 20 defendant during the proceedings alleged that hecollected the sum of £1,000 for his own account and that, in any event, that agreement was null and void." Then the learned Judge had this to say: "I had the occasion to follow theevidence of theplaintiffs 25 and their witnesses, as well as, the defendant in giving evidence before the Court. I had followed them with great attention and having studied the totality of the evi denceandtheway theygavetheirevidenceIhave no doubt at all to accept the evidence of the plaintiffs 30 On the contrary, the evidence given by the defendantin most points goes outside the pleadings and he has not given me the impression of being a witness of truth." Finally the Court accepted the evidence of the plaintiffs and that the plaintiffs and the defendant had agreed in a joint- 35 venture for bidding in the public auction and said: "In thelight of all whichhasbeensaid Iamoftheview that 602 1 C.L.R. Pourikkou τ. Soterloa & Another HedjIanastAESlou J. the plaintiffs have succeeded to prove their statement of claim, and for all these I issuejudgment in favour of the plaintiffs and against thedefendant for the sum of £333.333 mils in favour of each of the plaintiffs with costs." 5 On appeal counsel for the appellant-respondent argued that the decision of the learned trial Judge that the agreement be tween the respondents and his client was not illegal is wrong in law and that the said decision between the parties is an agree ment between the parties and/or partners is contrary to the 10 evidence adduced and is wrong in law. The learned Judge quoted a passage from Chalmers on Sale of Goods 17th Edition from p. 269 which reads:- 15 "After much doubt it was settled that an agreement for a 'knock-out, (i.e. a combination between intending bidders to refrain from bidding against each other)was notillegal. The seller could protect himself by fixing a reserve price." See also the case of Rawlingsv. GeneralTrading Company, [1921] 1 K.B. 635 at pp. 640, 641, where Bankes L.J. had this to say:- 20 25 30 35 "This is an appeal from a judgment of Shearman J., who held that an agreement for what is popularly known as a 'knock-out' at an auction was against public policy and unenforceable. It appears to me that this case is covered in principle by the decision in Galton v. Emms 1 Coll. 243, decided in
- No one in that case desired to contest the legality of the contract, and Knight Bruce V.C. held thecontract to be legal and founded on valuable consideration. In the later case of Heffer v. Martyn, 36 L.J. (Ch.) 372,373, decided in 1867, the facts were somewhat different, but the Master of the Rolls, in commenting on Galton v. Emuss 1 Coll. 243 and a previous decision of his own in In re Carew's Estate26 Beav. 187, says this: 'The question is whether this circumstance invalidates the sale. I had to consider this in thematter of Inre Carew's Estate26 Beav. 187,and Icametotheconclusion thatsuch anarrangement is not illegal; that the intending buyers may arrange between themselves which lots they w^ll bid for and which 603 Hadjianastassiou J. Pourikkou v. Soteriou & Another
(1982)not, and agree not to compete with each other; and if they may do so in that case I think also they may take money for abstaining to compete as well as arrange to take one lot against another. This also was considered to be legal by Sir J. Knight BruceV.C. in Galton v. Emuss, 5 1 Coll.
- I am of the opinion that I must follow these cases.* So far as I am aware these decisions have never been questioned. A dictum by Gurney B. in Leviv. Levi, 6 C. & P. 239 at nisi prius to the effect that an agreement several not to bid at an auction was an indictable offence 10 was expressly disapproved of by Parke B. when delivering judgment in Doolubdass v. Ramloll, 5 Moo. Ind. App.
- Having regard to the state of the authorities in the Chancery Courts for over 70 years, I do not think that it was open to the learnedjudge to take theview he did, nor 15 do I think that this Court should after the lapse of time overrule those authorities, even if this Court considered that they were wrong, which I am far from suggesting that they were." In Harrop v. Thompsonand another [1975] 2 All E.R. 94, 20 Templeman J. in raising the question whether an agreement not to bid invalidated an auction contracted, and having re viewed the authorities had this to say at p. 97: "Counsel for the first defendant submits that in the light of the observations of Shearman J. and Scrutton L.J. and 25 the hint in the observations of Atkin L.J., it is open to a judge of first instancetohold thatan agreement notto bid is against public policy, being in restraint of trade andthat a vendor who complainsofsuchanagreementis not bound by his contract with the purchaser. I do not consider 30 that there is anything in the Rawlings case [1921] 1 K.B. 635 which overrules the earlier authorities or enables me to ignore them. Counsel relies on observations in the Rawlings case as pointing in the direction in which he submits the law should develop. Whether he is right or 35 wrong, Iamnotatliberty totwist thewheel inthe direction he wishes. In Cohenv. Roche[192η 1K.B. 169at 173it wasaccepted by McCardieJ. that it seemed reasonably clear in law that Ihe existence of an agreement not to bid does not of itself 40 -604 1 C.L.R. 5 Pourikkou τ. Soteriou & Another HadjUnastassiou J. afford any answer to an action. In Pallant v. Morgan [1952] 2 All E.R. 951, there was a formidable array of distinguished counsel and it did not occur to them or to Harman J., who decided the case, that there was anything wrong with an agreement between two bidders not to compete at an auction." In the light of the authorities quoted we have reached the conclusion that an agreement for.a "knock out" between the intending bidders to refrain from bidding against each other 10 is not illegal and we are not prepared to upset or overrule the judgment of the trial Judge both as to thefacts in issue, as well as, with regard to thelegal aspect of the case. Forthis reason we would, therefore, dismiss the appeal. Appeal dismissed with costs~nTfavour of the respondents. 15 Appeal dismissedwith costs. 605