We now turn to the evidence which, in our opinion, leads to that conclusion.
First, as the trial Judge found, Mr Ensor knew of the Longstone Agreement. That agreement was referred to in recital E of the draft Cost Sharing Agreement which Mr Ensor caused to be sent to Mr Inglis in March 1992. At about the same time Mr Ensor was sent a copy of the First Purchase Agreement. The Judge further found that Mr Ensor was also aware of some arrangement between Mr Morales and Mr Inglis for the sale of 100 alpacas. But the Judge rejected the contention that Mr Ensor had actual notice of the ACL/Inglis Agreement for reasons expressed as follows:
"However, to the extent that at one time he [Mr Ensor] had some knowledge of a sale by Morales to Inglis, that knowledge was dispelled when Morales told him on about 5 May 1992 that he did not have any agreement with Inglis. This information was confirmed by Morales letter to Ensor of 12 May 1992 rejecting Ensor's offer to purchase the 100 alpaca."
On this aspect of the matter, the appellants pointed to the following passage in a letter dated 7 May 1992 from Mr Ensor to Mr Morales in which, after referring to Mr Morales proposed departure from Chile, Mr Ensor wrote the following:
"I appreciate that your travel plans related to Ron Inglis' doubtful contract for alpaca but if Ron has regard for this export he would not expect the captain to leave his ship in Chile and would indeed come to Chile himself. Andrew Forest (sic) I am sure would have respect for you staying in Chile to facilitate your current commitments and would not expect you to travel to Australia when you are in the middle of a vital export process."
A few days later, on 10 May 1992, Mr Ensor wrote to ACL as follows:
"I write with regard to the remaining 100 Alpaca upon permit 5 C.A.M. -
1. I have made an offer of $2600 US per head F.O.B. for these Alpaca subject to satisfactory proof of clear title. As I have two parties ready with money for this there would be minimal delay.
You could have money deposited in Banco Santander Sydney in the week of 18-22 May 1992 - 60% balance F.O.B. ..."
At the trial, IAM submitted that a letter dated 12 May 1992 from Mr Forrest to Mr Morales (which Mr Ensor admitted he read after attending a dinner in Melbourne with Messrs Morales Forrest and Harrison in late May 1992) put Mr Ensor on notice of the ACL/Inglis Agreement. The opening paragraph of that letter read:
"I confirm that the contract between Ron Ingles [sic] and my company remains totally on foot' and enforceable and that his contract with you, on which my contract relies, also remains totally on foot' and enforceable."
The Judge was of the view that there was nothing in this letter to indicate that Mr Morales had agreed to sell the alpacas to IAM. Rather, the Judge read it as referring to a sale from ACL to Inglis and from Inglis to IAM. But, in our view, the letter of 12 May 1992 was sufficient in itself to constitute "notice" to Mr Ensor of the fact that there had been a previous sale from ACL to Mr Inglis. Failing that, it was sufficient, at the very least, to require Mr Ensor to make
further inquiry of the three principals involved in order that it could be said that, in all the circumstances, Mr Ensor, who bore the onus in this regard, acted in "good faith", that is, honestly.
The primary Judge concluded that it was reasonable, in the circumstances, for Mr Ensor to treat Mr Forrest's letter as a mere assertion of a contract between ACL and Mr Inglis and that there was no cause for Mr Ensor to make any inquiry at that time, that is, when he read the letter after the dinner in Melbourne in late May 1992. (The circumstances in which Mr Ensor came to read the letter were themselves unusual. He and Mr Morales were sharing a bedroom and Mr Morales left the letter on his bed. Mr Ensor noticed it, picked it up and read it.) The Judge said that, so far as inquiries to Mr Inglis were concerned, Mr Inglis had demonstrated himself to be ruthless and, on his own admission, dishonest in his dealings with Mr Ensor. Accordingly, it was held, this was hardly the type of relationship in which a person could be confident of receiving accurate information from a commercial opponent. For similar reasons, the Judge did not think it was unreasonable on Mr Ensor's part to mistrust Mr Forrest and thus not make further inquiries of him. Accordingly, a statement by Mr Forrest at the dinner in late May 1992 to the effect that he had paid for the animals was characterised by the Judge as not being accurate. Just days prior to that statement, Mr Forrest had executed the
Second Purchase Agreement which confirmed IAM's title to the 100 alpacas. In those circumstances, particularly given the presence of Mr Morales at the time, the conversation was, we think, further notice to Mr Ensor that title in the 100 alpacas had passed to Mr Forrest. As Mr Hely submitted, whether title had passed by one, or more than one contract, is, in our view, irrelevant.
On 28 July 1992 Mr Forrest wrote to Mr Wren, and Mr Ensor received a copy of the letter on 5 August. That letter referred to IAM's interest as purchaser of the alpacas, drew attention to the fact that Mr Morales no longer owned them (as had been recorded at a previous meeting), recounted the reciprocity of obligations of Mr Ensor and Mr Morales with respect to the permits, identified a contractual relationship between Mr Forrest and Mr Morales, warned against interference with it and recorded a "sale agreement" between Mr Morales and Mr Forrest under which the latter had title. The Judge accepted the foregoing as a correct summation of the contents of that letter, but could not see how that evidence was of any assistance to the appellants, "... given that the letter alleged a contract between ACL and IAM, for the sale of the alpaca which Forrest admitted was false ...". In the course of oral submissions, the appellants challenged the existence of any evidence of Mr Forrest admitting that his allegation in the letter concerning a contract between ACL and IAM was false. In this connection, Mr Conti QC, senior counsel for
the respondents, referred us to certain passages in the transcript of evidence; but we are unable to accept that evidence as an admission of the falsity suggested.
In a letter dated 19 July 1992 sent by Mr Ensor to Mr Harrison, Mr Ensor referred to "... the Inglis/Morales lack of ground upon my permit ...". This is another, albeit small, piece of evidence which is consistent only with the recognition on Mr Ensor's part of Mr Inglis' interest in some alpacas.
Another relevant factor in our opinion was the requirement that the Reserved Contract be kept so secret. Mr Harrison was to be its custodian and he was not to release a copy even to Mr Morales or Mr Ensor without the consent of the other. In the Reserved Contract there is provision for indemnity to Mr Morales and ACL in the event that either of them should encounter legal difficulties in Australia arising from the original contract. When read with the reference, in the eleventh clause of the Reserved Contract, to cl.8.1 of the original contract, it is clear that the parties were concerned about the commitment in cl.8.1 of the Ensor Purchase Agreement to allow another 100 alpacas share "the facilities". It was common ground that the Reserved Contract was drawn up by Mr Tapia, Mr Ensor's lawyer.
The Reserved Contract was the result of two days of intense,
indeed pressurised, negotiations in which Mr Ensor was threatening to load his 200 alpacas onto the aircraft and leave the remaining 100 alpacas in Chile.
In our opinion all of the above circumstances warrant the inference that Mr Ensor had notice not only of the sale from ACL to Mr Inglis, but also of the sale by Mr Inglis to IAM. Even if he did not have full and explicit notice, he was certainly in a position where it was reasonable to expect him to make further inquiry of Messrs Inglis and Forrest in order to ascertain the true position. To borrow the language of Nourse L.J. in Woodchester Equipment Leasing Company Limited v Capital Belts Limited (Court of Appeal, 12 April 1995, unreported), we are satisfied that "it was, objectively judged, obvious to the [respondents] that something had gone seriously wrong and that the [respondents], having closed [their] eyes to the obvious, [are] unable to enforce [their] rights against the [appellants]." The "something ... gone seriously wrong" in the present matter was a situation in which ACL were endeavouring to sell 45 of the 100 alpacas twice.
It should, in our view, be borne in mind, as Lord Pearce pointed out in Pacific Motor Auctions Pty. Ltd. v Motor Credits (Hire Finance) Ltd. [1965] AC 867 (at 886) that:
"The object of [s.28] is to protect an innocent purchaser who is deceived by the vendor's physical possession of goods or documents and who is
inevitably unaware of legal rights which fetter the apparent power to dispose."
In our view, the respondents did not fall within the ambit of the protection sought to be provided by s.28. They were by no means "innocent purchasers". To the contrary, they actively sought to reverse the status quo over a sustained period. Although the trial Judge made findings as to the relative credibility of the witnesses, to which we have referred, we believe that, in the ultimate analysis, this is not of substantial significance in the determination of the proceedings, since the resolution of the dispute depends, in large part, upon the documentation brought into existence by the parties. That documentation, particularly the written contracts and the records evidencing the substantial payments made by IAM prior to the respondents' entry into the Reserved Contract, could not be seriously challenged.
It is true that there is no doctrine of constructive notice in this area. Authorities such as Jared, dealing with the conveyancing position, need, as Mr Conti pointed out, to be treated with caution for our purposes (and see, generally, on the question of constructive notice in the Australian context Robinson Motors Pty. Ltd. v Fowler (1982) Qd.R. 374 at 378-9; Sutton, op. cit. at pp.505-6; as to the English position, see the discussion in Benjamin's Sale of Goods, 4th ed. (1992) at 316-318, but see now Royal Brunei, below).
It is also to be borne in mind, as previously noted, that a thing is deemed to be done "in good faith" within the meaning of the Sale of Goods Act when it is in fact done honestly.
At the same time, as Lord Nicholls observed recently in Royal Brunei Airlines v Tan (P.C.) [1995] 2 AC 378, there is, in a civil context, an objective standard by which a person is judged to have acted dishonestly or not. His Lordship said (at 389):
"Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour. (Emphasis added)
In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless."
His Lordship went on to say (at 389):
"Imprudence is not dishonesty, although imprudence